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REVISED March 23, 2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 16-20146 FILED
March 17, 2017
UNITED STATES OF AMERICA, Lyle W. Cayce
Clerk
Plaintiff–Appellee,
v.
SERGIO FERNANDO LAGOS,
Defendant–Appellant.
Appeal from the United States District Court
for the Southern District of Texas
Before PRADO and HIGGINSON, Circuit Judges. ∗
EDWARD C. PRADO, Circuit Judge:
Sergio Fernando Lagos challenges the district court’s order of restitution
imposed following his guilty plea to one count of conspiracy to commit wire
fraud and to five counts of wire fraud. See 18 U.S.C. §§ 2, 1343, 1349. He
contends that the Mandatory Victims Restitution Act (“MVRA”) does not
authorize restitution for the legal, expert, and consulting fees incurred by the
victim-lender, General Electric Capital Corporation (“GECC”), in investigating
the fraud or its legal fees from the bankruptcy proceedings caused by the fraud.
∗
This opinion is being entered by a quorum of this court pursuant to 28 U.S.C. § 46(d).
No. 16-20146
Because the restitution ordered in this case is consistent with payments upheld
in our past cases, we affirm.
I.
A
The legality of a restitution award is reviewed de novo. United States v.
Espinoza, 677 F.3d 730, 732 (5th Cir. 2012). The MVRA instructs a sentencing
court to order restitution for a victim’s “actual loss directly and proximately
caused by the defendant’s offense of conviction.” United States v. Sharma, 703
F.3d 318, 323 (5th Cir. 2012); 18 U.S.C. § 3663A(a)(2). This includes “lost
income and necessary child care, transportation, and other expenses incurred
during participation in the investigation or prosecution of the offense or
attendance at proceedings related to the offense.” 18 U.S.C. § 3663A(b)(4).
According to Lagos, the forensic expert fees, legal fees, and consulting
fees incurred by GECC should not have been included because they are
“consequential damages.” His reliance on United States v. Schinnell, 80 F.3d
1064, 1070 (5th Cir. 1996), however, is misplaced because the basis for the
restitution award in that case was the Victim and Witness Protection Act
(“VWPA”), 18 U.S.C. § 3663(b)(1), not § 3663A(b)(4) and the MVRA.
In our Circuit, the scope of restitution under subsection 3663A(b)(4) is
controlled by United States v. Phillips, 477 F.3d 215 (5th Cir. 2007). In
upholding an award of restitution to the University of Texas imposed on a
computer hacker, this Court in Phillips cited § 3663A(b)(4), which authorizes
restitution of expenses incurred while participating in the investigation or
prosecution of the offense. 477 F.3d at 224. It concluded that the University of
Texas “was a victim, and it collaborated with the investigation and incurred
costs to notify other victims of [the hacker’s] data theft in order to determine
whether they had suffered further damage.” Id. As the Court explained, while
2
No. 16-20146
“consequential damages” are not properly recoverable under Schinnell, that
case did not involve the application of § 3663A(b)(4). Id. In distinguishing
Schinnell, this Court gave a broad reading to § 3663A(b)(4), allowing not only
the cost of the investigation but also the cost of contacting those whose
information was compromised to be included in the restitution award. 1
In unpublished decisions following Phillips, this Court has upheld
restitution awards that encompassed attorneys’ fees and other expenses
stemming from the investigation and prosecution of the offense. United States
v. Herrera, 606 F. App’x 748, 752–53 (5th Cir. 2015) (per curiam) (affirming
investigative audit costs as part of restitution where investigative audit was a
fundamental component of investigation of defendant’s theft of federal funds);
United States v. Dwyer, 275 F. App’x 269, 271–72 (5th Cir. 2008) (affirming in
the restitution award costs of margin calls, attorneys’ fees, and accounting fees
arising from defendant’s bank fraud under plain error standard of review).
Lagos admitted that for two years, he and his co-conspirators misled
GECC about the value of their accounts receivable to induce GECC to increase
the amount of the revolving loan and to provide him and his co-defendants with
uncollateralized funds. Their wire fraud scheme caused GECC to employ
forensic experts to secure and preserve electronic data as well as lawyers and
consultants to investigate the full extent and magnitude of the fraud and to
provide legal advice relating to the fraud. Fees incurred by GECC during the
investigation of the fraud were necessary and compensable in the restitution
award. See 18 U.S.C. § 3663A(b)(4).
1 Notably, the opinion in Phillips provided a second reason for upholding the award:
the hacker violated the Computer Fraud and Abuse Act (“CFAA”), which contains its own
definition of “loss” that encompasses the “cost of responding to an offense.” 477 F.3d at 224–
25. However, the unpublished decisions that have followed Phillips did not arise from
convictions under the CFAA.
3
No. 16-20146
Likewise, the district court correctly included GECC’s legal fees incurred
in the related bankruptcy proceedings in the restitution award under
subsections 3663A(a)(2) and (b)(4). In its victim impact statements, GECC
described how the defendants’ fraudulent scheme directly caused the
defendants’ companies (the GECC borrowers) to file for bankruptcy. The
bankruptcy court ordered GECC to continue to make advances to the
defendants’ companies during the bankruptcy proceedings. Thus, the district
court correctly determined that the legal fees incurred by GECC during the
related bankruptcy proceedings were directly caused by the defendants’ fraud
for purposes of restitution. See 18 U.S.C. § 3663A(a)(2), (b)(4); Sharma, 703
F.3d at 323 (authorizing restitution for losses “directly and proximately caused
by the defendant’s offense[s] of conviction”).
We note that the D.C. Circuit takes a narrower view of restitution under
subsection 3663A(b)(4). United States v. Papagno, 639 F.3d 1093 (D.C. Cir.
2011). 2 Whatever the merits of the contrary reasoning in Papagno, this panel
is bound by this Court’s prior decision in Phillips and will follow it here.
B
In the alternative, Lagos argues that even if the MVRA authorizes
restitution for GECC’s legal, expert, and consulting fees, the district court
improperly relied upon unsigned, unverified victim-impact statements
submitted by GECC to calculate the restitution award. But Lagos never
challenged the fee amounts alleged in the victim-impact statements on these
grounds. The district court was entitled to rely on the unrebutted victim-
2This restrictive reading, however, is unique among the circuits, several of which have
come to the opposite conclusion, although without the benefit of Papagno’s reasoning
regarding internal investigations. See United States v. Elson, 577 F.3d 713, 726–29 (6th Cir.
2009); United States v. Hosking, 567 F.3d 329, 331–32 (7th Cir. 2009); United States v.
Stennis-Williams, 557 F.3d 927, 930 (8th Cir. 2009); United States v. Amato, 540 F.3d 153,
159–63 (2d Cir. 2008); United States v. Gordon, 393 F.3d 1044, 1056–57 (9th Cir. 2004); see
also United States v. Gupta, 925 F. Supp. 2d 581, 584 (S.D.N.Y. 2013).
4
No. 16-20146
impact statements to support the restitution award. See Sharma, 703 F.3d at
324 n.21. GECC submitted to the district court an accounting of the names of
the law firms and consultants retained and the nature of the work performed
in support of its investigative fees and its fees incurred from the bankruptcy
proceedings directly caused by Lagos’s wire fraud scheme. Lagos’s claim that
the district court failed to subject the victim-impact statements to the
appropriate level of scrutiny is without merit.
II.
Finally, the Government urges the court to remand this case for the
district court to correct a mathematical error in the restitution total. The
district court adopted a restitution total of $15,970,517.37, an amount urged
by the Government at sentencing, but the restitution amount supported by the
itemization in the victim-impact statements is actually $104.62 lower than the
amount imposed by the district court. Lagos does not address the issue at all,
and, as stated, he never challenged the specific fee amounts listed in the
victim-impact statements before the district court. While this court requires
that every dollar included in a restitution award be supported by record
evidence, see Sharma, 703 F.3d at 323, by failing to challenge the fee amounts
before the district court or here, Lagos has waived the issue, see United States
v. Scroggins, 599 F.3d 433, 446 (5th Cir. 2010).
***
Based on the foregoing, the judgment of the district court is AFFIRMED.
5
No. 16-20146
STEPHEN A. HIGGINSON, Circuit Judge, concurring:
I join Judge Prado’s opinion and write separately only to suggest that we
may be interpreting Section 3663A(b)(4) too broadly.
As always, statutory interpretation begins “with the plain language and
structure of the statute.” Coserv Ltd. Liab. Corp. v. Sw. Bell Tel. Co., 350 F.3d
482, 486 (5th Cir. 2003). I agree with the D.C. Circuit’s persuasive
interpretation of the statutory terms “participation” and “necessary” in
Papagno, see 639 F.3d at 1098–1101, and specifically, that “participating” in a
government investigation does not embrace an internal investigation, “at least
one that has not been required or requested by criminal investigators or
prosecutors.” Id. at 1098–99.
I think three additional points support the D.C. Circuit’s narrow reading
of the statute. First, the noscitur a sociis canon of statutory interpretation
suggests a narrow reading of the phrase “participation in the investigation . . .
of the offense.” The noscitur a sociis canon provides that “a word is known by
the company it keeps[.]” Yates v. United States, 135 S.Ct. 1074, 1085 (2015);
see also United States v. Williams, 553 U.S. 285, 294 (2008). Section
3663A(b)(4) contains a list enumerating the types of conduct allowing for
reimbursement. It provides that reimbursement is available for certain
expenses “incurred during participation in the investigation or prosecution of
the offense or attendance at proceedings related to the offense.” 18 U.S.C. §
3663A. The statute therefore allows reimbursement for expenses incurred in
the course of three types of conduct: (1) participation in the investigation of the
offense, (2) participation in the prosecution of the offense, and (3) attendance
at proceedings related to the offense. Both participation in the prosecution of
the offense and attendance at proceedings related to the offense must take
place within the context of the government’s criminal enforcement. The
6
No. 16-20146
question is whether participation in the investigation of the offense is also
limited to the government’s criminal enforcement. The noscitur a sociis canon
suggests to me that it is.
Second, a broad reading of Section 3663A(b)(4) is difficult to administer.
Indeed, the courts that read Section 3663A(b)(4) to allow recovery of fees
incurred during an internal investigation are divided over what, if anything,
limits the reach of “other expenses.” For example, the Ninth Circuit allows
recovery for “investigation costs—including attorneys’ fees—incurred by
private parties as a ‘direct and foreseeable result’ of the defendant’s wrongful
conduct.” United States v. Gordon, 393 F.3d 1044, 1057 (9th Cir. 2004). The
Second Circuit has questioned this approach, noting that the statute “seems to
focus more on the link between these expenses and the victim’s participation
in the investigation and prosecution than on the offense itself.” Amato, 540
F.3d at 162.
Even if agreement could be reached on a limiting principle in theory, a
broad view of Section 3663A(b)(4) requires district courts to undertake difficult
analyses to determine which investigation costs were “necessary” to “the
investigation.” See, e.g., United States v. Waknine, 543 F.3d 546, 559 (9th Cir.
2008) (remanding a case to the district court to consider more thoroughly
whether investigation expenses were reasonably necessary). I do not envy
district courts faced with this task. To begin, it will often be difficult to
determine the scope of “the investigation.” For example, imagine that a
hospital discovers that its drug inventory is vanishing. Hoping to prevent
further losses, the hospital launches a full internal investigation. During the
course of the hospital’s investigation, it discovers that an employee is stealing
drugs. The hospital fires the employee and turns over the evidence it
uncovered to the federal prosecutors. The prosecutors had never heard of the
7
No. 16-20146
employee before and had not been investigating the theft. Nonetheless,
charges are eventually brought and the employee is convicted of possession
with intent to distribute narcotics. The hospital seeks restitution for its
investigation costs. Did the hospital participate in the investigation even
though the federal prosecutors were not investigating at all when the hospital
conducted its internal investigation? And the hypotheticals can get more
difficult. Imagine that, unbeknownst to the hospital, federal prosecutors were
investigating a string of drug sales at the time the hospital’s internal
investigation began. However, the prosecutors still had no reason to suspect
the employee of being the drug supplier, and accordingly, had no reason to
subpoena the hospital to aid in the investigation. Nonetheless, when the
hospital turns over the results of its internal investigation, the prosecutors
realize that they can link the employee’s thefts to the string of drug sales. The
employee is prosecuted for and convicted of drug sales. Can the hospital
recover its investigation costs because it provided key evidence to an ongoing
investigation even though it was never asked to do so? One more example.
Imagine that the hospital has insurance that covers employee theft. The
hospital’s legal department drafts and files a claim with its insurance provider
to recover the value of the stolen drugs. At the employee’s trial, the
government introduces the claim form as evidence of the breadth of the drug
conspiracy. Can the hospital recover the entire cost of filing the insurance
claim?
And even if the district judge can determine the scope of the
investigation, he or she still must determine which expenses were “necessary.”
I recognize that this question is more familiar to district courts, who are often
tasked with calculating attorneys’ fees. But familiarity does not make the task
easier. See, e.g., Court Awarded Attorney Fees: Report of the Third Circuit
8
No. 16-20146
Task Force, 108 F.R.D. 237, 262 (1986) (“[D]istrict judges find it difficult,
indeed, in most instances, impossible, to police [hours and rates of attorneys]
by looking over the shoulders of lawyers to monitor the way they handle their
cases. To impose that obligation on the Bench is unrealistic, unduly time-
consuming, and typically will amount to little more than an exercise in
hindsight.”); Hon. John F. Grady, Reasonable Fees: A Suggested Value-Based
Analysis for Judges, 184 F.R.D. 131, 131 (1999) (“Most federal district judges
would agree that the determination of reasonable attorneys’ fees is among the
most challenging tasks they are called upon to perform.”). Moreover, I think
that the necessity inquiry is likely to be even more difficult than usual in the
context of Section 3663(A)(b)(4). Usually, a district judge evaluating a fee
request has overseen the entirety of the litigation subject to the dispute and
therefore can decide on their own experience which expenses were reasonable
and necessary. Not so under a broad reading of Section 3663(A)(b)(4). Instead,
the district court will have only seen the criminal prosecution that ends the
Government’s investigation. Of course, Congress is free to require, and wise
policy may dictate, that courts answer difficult questions. But I am
uncomfortable requiring sentencing judges to undertake challenging
restitution calculations when, in my view, the statute does not require the
inquiry.
Third, and finally, limiting the reach of Section 3663A(b)(4) does not
prevent victims from fully recovering their losses. Preliminarily, there are a
number of other more explicit and specific criminal restitution provisions that
may allow for recovery. For example, Section 3663A(b)(1) allows for victims of
property offenses to recover the value of their lost property. Likewise, in the
context of identity theft crimes, Congress allows for victims to recover
investigation costs unrelated to any government request. See Papagno, 639
9
No. 16-20146
F.3d at 1099–100; 18 U.S.C. § 3663(b)(6). And where criminal restitution
statutes fall short, victims may bring their own civil actions to recover their
losses.
10
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629 So.2d 60 (1993)
Samuel James NICKERSON
v.
STATE.
CR-91-1566.
Court of Criminal Appeals of Alabama.
May 28, 1993.
Rehearing Denied August 13, 1993.
Certiorari Denied October 29, 1993.
*61 L. Dan Turberville, Birmingham, for appellant.
James H. Evans, Atty. Gen., and Jack Willis, Asst. Atty. Gen., for appellee.
Alabama Supreme Court 1921829.
McMILLAN, Judge.
On September 12, 1984, the appellant, Samuel James Nickerson, after a jury trial, was convicted on two counts of robbery in the first degree, in violation of § 13A-8-41, Code of Alabama 1975. On September 21, 1984, the appellant pleaded guilty to and was subsequently convicted on two counts of robbery in the second degree, in violation of § 13A-8-42, Code of Alabama 1975. The appellant was sentenced to life imprisonment on each conviction, pursuant to the Habitual Felony Offender Act.
The appellant appealed his September 12, 1984, convictions for first degree robbery. On May 28, 1987, this Court remanded the appellant's case concerning those convictions to the trial court for that court to conduct an evidentiary hearing to determine whether the State had exercised its peremptory challenges in a racially nondiscriminatory manner. Batson v. Kentucky, 476 U.S. 79, 106 S.Ct. 1712, 90 L.Ed.2d 69 (1986). At the hearing held on October 13, 1987, the trial court found that the State had failed to supply race-neutral reasons for its peremptory strikes and ordered that the appellant be granted a new trial. On October 26, 1989, the trial judge made the following notation in the appellant's file: "Close this file, no further action necessary. Def. in pen on other cases."
On March 6, 1992, the appellant filed a petition for a writ of mandamus with the Alabama Supreme Court, requesting that the trial court be ordered to schedule a new trial. On March 10, 1992, the appellant filed a petition for a writ of mandamus with this court. The Alabama Supreme Court granted the writ and trial was set for May 11, 1992. This court, in an order issued on March 16, 1992, instructed the State, pursuant to Rule 21, A.R.Cr.P., to answer and to show cause why the appellant had not been retried. The State's answer was not made a part of the record.
On May 11, 1992, the appellant pleaded guilty to both counts of robbery in the first degree and was sentenced to 20 years' imprisonment on each count. The sentences were to run concurrently with the sentence imposed in the appellant's second degree robbery convictions received on September 21, 1984. When he entered his guilty pleas, the appellant reserved the right to appeal the issue of the denial of a speedy trial.
The issue in this case is whether a defendant has a constitutional right to a speedy trial when he is seeking a retrial and, if so, whether in this case that right was violated.
In other jurisdictions, where a defendant has claimed that he was denied his right to a speedy trial on retrial or on appeal and the claim was not based on an existing statute or on the federal Speedy Trial Act but rather on constitutional grounds, courts have consistently analyzed such claims pursuant to the *62 guidelines in Barker v. Wingo, 407 U.S. 514, 92 S.Ct. 2182, 33 L.Ed.2d 101 (1972). See e.g., United States v. Bizzard, 674 F.2d 1382; Millard v. Lynaugh, 810 F.2d 1403 (5th Cir. 1987), cert. denied, 484 U.S. 838, 108 S.Ct. 122, 98 L.Ed.2d 81 (1987); United States v. Johnson, 732 F.2d 379, 381-82 (4th Cir.1984), cert. denied, 469 U.S. 1033, 105 S.Ct. 505, 83 L.Ed.2d 396 (1984); United States v. Antoine, 906 F.2d 1379, 1382 (9th Cir.1990), cert. denied, 498 U.S. 963, 111 S.Ct. 398, 112 L.Ed.2d 407 (1990); Coe v. Thurman, 922 F.2d 528, 532 (9th Cir.1990); Roundtree v. State, 192 Ga.App. 803, 386 S.E.2d 548 (Ga. App.1989); Ake v. State, 778 P.2d 460 (Okl. Cr.App.1989); Mitchell v. State, 572 So.2d 865 (Miss.1990); Lukehart v. State, 32 Ark. App. 152, 798 S.W.2d 117 (1990); State v. Ferguson, 576 So.2d 1252 (Miss.1991); Harrison v. State, 843 S.W.2d 157 (Tex.App. 1992).
This Court, in State v. Clay, 577 So.2d 561 (Ala.Cr.App.1991), considered an issue analogous to the one presented here. Clay initially pleaded guilty to and was convicted of theft of services in the second degree, in violation of § 13A-8-10.2, Code of Alabama 1975. This Court affirmed that conviction in an unpublished memorandum. See Clay v. State, 553 So.2d 137 (Ala.Cr.App.1989). The Alabama Supreme Court reversed this court's judgment and remanded the cause with instructions that this court remand to cause to the trial court. See Ex parte Clay, 562 So.2d 1307 (Ala.1990). Pursuant to the Supreme Court's instructions, this court remanded the cause to the trial court for that court to determine whether there had been a plea agreement between Clay and the State that had not been honored at Clay's sentencing hearing. The trial court found, based on facts stipulated to by the State and Clay, that a plea agreement between the parties existed and that that agreement had not been followed at sentencing. Thereafter, Clay was allowed to withdraw her initial plea of guilty. Approximately three months later, the trial court dismissed the case, stating that Clay had been denied her right to a speedy trial. The State appealed the dismissal. On appeal, this Court, after reviewing the trial court's dismissal of Clay's case on speedy trial grounds, held that Clay had not been denied the right to a speedy trial because there was "no one delay which was presumptively prejudicial." That decision was based on Barker v. Wingo, 407 U.S. 514, 92 S.Ct. 2182, 33 L.Ed.2d 101 (1972). This Court reversed the judgment and remanded the cause to the trial court with instructions that that court reinstate the charge against Clay. In reaching this decision, this Court divided the time from the date of the indictment until the date of dismissal into the following four periods for the purpose of analyzing whether the delay during any particular period was presumptively prejudicial: (1) the time from the indictment until Clay entered her guilty plea; (2) the time from the guilty plea until Clay was sentenced; (3) the time between the notice of appeal until the date the final judgment of remand was issued; and (4) the time the final judgment of remand was issued until the date the trial was scheduled and the case was dismissed.
For purposes of addressing the issue presented here, however, only the fourth time period considered in Clay is germane. In this case, like in Clay, this Court must determine whether the delay that occurred from the time the judgment in the appellant's original case was reversed on appeal until he entered his guilty plea (i.e., May 11, 1992) was presumptively prejudicial. See Judge Bowen's special concurrence in State v. Clay, wherein he stated:
"[T]he only period of time relevant in this case is the period of time from the date the appellant's case was reversed on appeal until the date on which she would have been tried had the circuit court not dismissed the cause for denial of a speedy trial. That is clearly the period of time considered under the Federal Speedy Trial Act when a case is retried after appeal. See 18 U.S.C. § 3161(e) (1988). See generally Project: Nineteenth Annual Review of Criminal Procedure: United States Supreme Court and Courts of Appeals 1988-1989, 78 Geo.L.J. 699, 991 (1990)."
577 So.2d at 564.
Under the Speedy Trial Act, the period that is to be measured in cases involving a retrial begins with the "`action occasioning the retrial.'" United States v. Rivera, 844 *63 F.2d 916, 919 (2d Cir.1988). The Speedy Trial Act provides:
"`If the defendant is to be tried again following a declaration by the trial judge of a mistrial or following an order of such judge for a new trial, the trial shall commence within seventy days from the date the action occasioning the retrial becomes final. If the defendant is to be tried again following an appeal or a collateral attack, the trial shall commence within seventy days from the date the action occasioning the retrial becomes final.'"
Id. Thus, where an appellate court's action requires a retrial, the time period begins when the appellate court issues its mandate. U.S. v. Kington, 875 F.2d 1091, 1109 (5th Cir.1989).
Moreover, "[t]he time between a conviction and a reversal which requires retrial is clearly not counted for speedy trial purposes. See United States v. Ewell, 383 U.S. 116, 86 S.Ct. 773, 15 L.Ed.2d 627 (1966)." United States v. Bizzard, 674 F.2d 1382 (11th Cir.1982), cert. denied, 459 U.S. 973, 103 S.Ct. 305, 74 L.Ed.2d 286 (1982). Other states that base their analysis of the speedy trial issue in situation on the constitutional standards set forth in Barker v. Wingo, 407 U.S. 514, 92 S.Ct. 2182, 33 L.Ed.2d 101 (1972), also begin the period on the date of reversal, where appellate action requires the retrial. State v. Ferguson, 576 So.2d 1252 (Miss.1991).
However, in this case, it was not the appellate court's remand that constituted the action requiring retrial and triggered the beginning of that period for speedy trial purposes, but rather the trial court's determination that the State had failed to supply race-neutral reasons for its peremptory challenges and that the appellant was entitled to a new trial (October 13, 1987).
Furthermore, in this case, the appellant was clearly faced with a pending charge after the remand, despite the notation by the trial court in the appellant's file. Cf. United States v. Mize, 820 F.2d 118, 121 (5th Cir. 1987), cert. denied, 484 U.S. 943, 108 S.Ct. 328, 98 L.Ed.2d 355 (1987). In United States v. Mize, supra, the appellant's conviction was reversed on appeal, the appellate court noting that a retrial was prohibited by the Double Jeopardy Clause of the Fifth Amendment. The retrial did not begin until 330 days after the appellate court's decision, well outside the 70-day limit provided for in the Speedy Trial Act. The court, in that case, held that the purpose of the Speedy Trial Act was to ensure that a defendant's constitutional right to a speedy trial is upheld and that "[t]his right is implicated only when a defendant is facing pending and live charges, whether by an indictment, an information, or a complaint." The court further stated, "[I]f the indictment is dismissed or the charges are otherwise dropped, the defendant is no longer protected by the Speedy Trial Clause, nor does the Speedy Trial Clause protect the defendant threatened with reindictment and retrial, even if that threat is a matter of public record and virtually certain to materialize." United States v. Mize, supra, at 121 (footnotes omitted). In this case, despite the trial court's notation in the appellant's file, the charge remained pending by virtue of the trial court's ruling that the appellant was entitled to a new trial. Thus, in the present case, the action requiring the retrial occurred on October 13, 1987, when the trial court granted the appellant a new trial.
Next, it must be determined if the delay of approximately four and one half years between the trial court's ordering a new trial and the entry of the appellant's guilty plea violated his constitutional right to a speedy trial. In Barker v. Wingo, 407 U.S. 514, 521, 92 S.Ct. 2182, 33 L.Ed.2d 101 (1972), the United States Supreme Court stated:
"`[T]he right to speedy trial is a more vague concept than other procedural rights. It is, for example, impossible to determine with precision when the right has been denied. We cannot definitely say how long is too long in a system where justice is supposed to be swift but deliberate.' (Footnote omitted.)
"Thus, an `inquiry into a speedy trial claim necessitates a functional analysis of the right in the particular context of the case....' [Barker, at 522] ... 92 S.Ct. at 2188. In adopting `a balancing test, in *64 which the conduct of both the prosecution and the defendant are weighed,' id. at 530, 92 S.Ct. at 2192, the Barker court identified `some of the factors' which courts should assess in determining whether a particular defendant has been denied his right to a speedy trial: (a) length of delay; (b) the reasons for the delay; (c) the defendant's assertion of his right; and (d) prejudice to the defendant. Id."
Hayes v. State, 487 So.2d 987, 991 (Ala.Cr. App.1986).
(I) Length of Delay
In United States v. Marion, 404 U.S. 307, 313, 92 S.Ct. 455, 459, 30 L.Ed.2d 468 (1971), the Supreme Court held: "The protection of the Sixth Amendment is triggered when a criminal prosecution has begun and extends only to those persons who have been `accused' in the course of that prosecution." The court, in Marion, further held: "`[I]t is either a formal indictment or information or else the actual restraints imposed by arrest and holding to answer a criminal charge that engage the particular protections of the speedy trial provision of the Sixth Amendment.'" Id. at 320, 92 S.Ct. at 463. Moreover, it is well settled that whether the length of delay is presumptively prejudicial is "necessarily dependent upon the peculiar circumstances of the case." Barker v. Wingo, supra, 407 U.S. at 531, 92 S.Ct. at 2192. See also Kelley v. State, 568 So.2d 405 (Ala.Cr. App.1990); Ex parte Carrell, 565 So.2d 104, 107-08 (Ala.1990), cert. denied, 498 U.S. 1040, 111 S.Ct. 712, 112 L.Ed.2d 701 (1991).
Although Barker acknowledged that the seriousness and complexity of the offense should be considered in determining whether the delay was reasonable, here, the delay of over four and one-half years is clearly excessive, given the offense charged. This was not a case that ordinarily could require extra time to prepare for trial. Moreover, the State had previously been prepared to go to trial in this case and was thus familiar with the appellant's case. Because we conclude that the delay was presumptively prejudicial, this factor must weigh against the prosecution.
(II) Reasons for Delay
Because of the "peculiar circumstances" surrounding this case, we must inquire as to why the appellant was not tried earlier. The State offered no explanation to the trial court for the delay, other than to say that the trial judge who presided over the original trial and the subsequent remand closed the appellant's file on October 26, 1989. However, there remained a period of two years during which the State could have tried the appellant (between October 13, 1987, and October 26, 1989). The record indicates that the appellant was incarcerated for other convictions that had occurred on September 21, 1984. The State has presented no legitimate reason for the delay, and none of the delay appears attributable to the appellant. See State v. Woods, 600 So.2d 425, 427 (Ala.Cr. App.1992).
(III) Assertion of the Right
"In determining this factor, we are guided by the following observations of the former Fifth Circuit Court of Appeals in Prince v. Alabama, 507 F.2d 693, 702-03 (5th Cir.1975), cert. denied, 423 U.S. 876, 96 S.Ct. 147, 46 L.Ed.2d 108 (1975):
"`While the Court [in Barker] indicated that the absolute failure of the defendant to assert his right would "make it difficult for [him] to prove that he was denied a speedy trial," the Court emphasized that the burden was upon the prosecution to show that the failure of the defendant to assert his right was a knowing failure:
"`"In ruling that a defendant has some responsibility to assert a speedy trial claim, we do not depart from our holdings in other cases concerning the waiver of fundamental rights, in which we have placed the entire responsibility on the prosecution to show that the claimed waiver was knowingly and voluntarily made. 407 U.S. at 526 [92 S.Ct. at 2191]...."
"`... [W]e are further guided by Barker and by the Court's subsequent decision in Strunk v. United States, 1973, 412 U.S. 434 [93 S.Ct. 2260, 37 L.Ed.2d 56 (1973) ].... In Barker, the Court noted that a flexible approach to determin[ing] *65 whether the defendant had asserted his speedy trial right
"`"would permit ... a court to attach a different weight to a situation in which the defendant knowingly fails to object from a situation in which his attorney acquiesces in long delay without adequately informing his client, or from a situation in which no counsel is appointed. 407 U.S. at 526 [92 S.Ct. at 2191]...."
"`In Strunk, the Court gave an implicit indication that the focus of the assertion inquiry might properly be directed toward the question whether the prosecution is put "on notice" of the defendant's speedy trial claim....
"`We interpret these rulings as an indication that the courts should take a liberal view of convict-defendant's attempts to contact the prosecutors and courts in other jurisdictions regarding charges pending against them there. Such an approach would be consistent both with the concept that chargeable failure to assert a constitutional right must be knowing and intelligent, Johnson v. Zerbst [304 U.S. 458, 58 S.Ct. 1019, 82 L.Ed. 1461 (1938)], and with the realities of a defendant's incarceration, often distant from the prosecuting state and without the effective assistance of counsel.'"
Hayes, 487 So.2d at 993-94 (emphasis added).
Although the appellant did not assert his right until over four years after the trial court had granted him a new trial, the State presented no evidence that the appellant's failure to assert his right earlier was a "knowing failure." The State contends that this factor should be weighed heavily against the appellant because, it says, "had he invoked this right as he eventually did in 1992, then he would have had his trial within two months of his filing of the mandamus."
"We recognize that a defendant has `some responsibility to assert a speedy trial claim.' Barker, 407 U.S. at 529, 92 S.Ct. at 2191. However, we also recognize that `[a] defendant has no duty to bring himself to trial; the State has that duty....' Id. at 527, 92 S.Ct. at 2190 (footnote omitted). This responsibility is `out of fairness to the accused and to protect the community interests in a speedy trial.' Dickey v. Florida, 398 U.S. 30, 50, 90 S.Ct. 1564, 1575, 26 L.Ed.2d 26 (1970) (Brennan, J., concurring). [Defendant's] silence, under the circumstances, does not render his position less viable. We think that the response of the State must be considered and, in fact, overshadows all else."
Hayes, supra, at 994.
Because the State has failed to prove a "knowing failure" by the appellant to assert his right, we do not consider this factor to weigh heavily against the appellant.
(IV) Prejudice
The appellant, at the hearing on his motion to dismiss based on speedy trial grounds argued that, although a transcript had been made of his previous trial, his memory had weakened because of the passage of time. The State argued that the appellant had suffered no prejudice because, it notes, he was incarcerated on two other terms of life imprisonment. On appeal, the appellant contends that "[p]rior to his new sentence, his parole date was September 1, 1992. Now it has been changed to May 1, 1998." In effect, he maintained that he lost six years due to the government's delay." The appellant further argues that he lost the right to serve his sentences concurrently. We consider these allegations on appeal, although they were not presented to the trial court, because in all likelihood these were facts not in existence at the time of the motion hearing.
"The Alabama Court of Criminal Appeals has adopted the delineation by the former United States Court of Appeals, Fifth Circuit, of the circumstances in which no showing of prejudice is required. See, e.g., Wilson v. State, 407 So.2d [584] at 588; Turner v. State, 378 So.2d [1173] at 1179. See also Prince v. State, 354 So.2d 1186, 1192 (Ala.Cr.App.1977), cert. denied, 354 So.2d 1193 (Ala.1978). The former Fifth Circuit held that `there must be some point of coalescence of the other three factors in a movant's favor, at which prejudiceeither actual or presumedbecomes totally *66 irrelevant.' Hoskins v. Wainwright, 485 F.2d 1186, 1192 (1973). See also United States v. Dennard, 722 F.2d 1510, 1513 (11th Cir.1984); United States v. Avalos, 541 F.2d [1100] at 1116; Prince v. Alabama, 507 F.2d at 706-07. The rationale for dispensing with the prejudice requirement is set forth in Turner v. Estelle, 515 F.2d 853, 858-59 (5th Cir.1975), cert. denied, 424 U.S. 955, 98 S.Ct. 1431, 47 L.Ed.2d 361 (1976), as follows:
"`The reason for dispensing with the prejudice requirement entirely when the other three factors point heavily toward a violation of speedy trial is deterrence: the prosecution should not be permitted to engage in inexcusable misconduct on the hope that the defendant will not be able to make out a case of prejudice. Where such misconduct has occurred, the state cannot complain that the legitimate interests of its criminal justice system, being pursued in good faith, are being sacrificed because of an honest mistake in a case in which no ultimate harm has been done.'"
Hayes, supra, at 995-96.
Additionally, in Aaron v. State, 497 So.2d 603, 604 (Ala.Cr.App.1986), this Court held:
"An accused's right to speedy trial remains undiminished even when he is already serving a prison sentence. Smith v. Hooey, 393 U.S. 374, 89 S.Ct. 575, 21 L.Ed.2d 607 (1969); Byrd v. Martin, 754 F.2d 963 (11th Cir.1985); Smith v. State, 409 So.2d 958 (Ala.Cr.App.1981).
"`At first blush it might appear that a man already in prison under a lawful sentence is hardly in a position to suffer from "undue and oppressive incarceration prior to trial." But the fact is that delay in bringing such a person to trial on a pending charge may ultimately result in as much oppression as is suffered by one who is jailed without bail upon an untried charge. First, the possibility that the defendant already in prison might receive a sentence at least partially concurrent with the one he is serving may be forever lost if trial of the pending charge is postponed. Secondly, under procedures now widely practiced, the duration of his present imprisonment may be increased, and the conditions under which he must serve his sentence greatly worsened, by the pendency of another criminal charge outstanding against him.
"`And while it might be argued that a person already in prison would be less likely than others to be affected by "anxiety and concern accompanying public accusation," there is reason to believe that an outstanding untried charge (of which even a convict may, of course, be innocent) can have fully as depressive an effect upon a prisoner as upon a person who is at large. Cf. Klopfer v. North Carolina, supra, 386 U.S. [213] at 221-222, 87 S.Ct. [988] at 992-993 [18 L.Ed.2d 1 (1967)]....
"`... And, while "evidence and witnesses disappear, memories fade, and events lose their perspective," a man isolated in prison is powerless to exert his own investigative efforts to mitigate these erosive effects of the passage of time.' Smith, 393 U.S. at 378-80, 89 S.Ct. at 577-78, 21 L.Ed.2d at 611-12."
Additionally, in Ex parte Carrell, supra, the Alabama Supreme Court held:
"Although ordinarily a mere assertion of a loss of memory is not enough of a showing of prejudice to support a finding that a defendant has been denied due process, where the delay is excessive and is the result of unexcused inaction by the State, the delay is prima facie prejudicial."
Id. at 108.
In the instant case, the appellant has suffered prejudice by the loss of an opportunity to serve his sentence concurrently with a sentence he was serving for his prior convictions. Moreover, he is now subjected to a delayed parole date because of the State's inaction in bringing him to trial.
"Article I, § 6, of the Alabama Constitution and the Sixth Amendment to the United States Constitution, will not sanction such prosecutorial conduct." Turner v. State, 378 So.2d 1173, 1178 (Ala.Cr.App. 1979).
Under similar circumstances, other jurisdictions have held that defendants' rights to a speedy trial were violated on retrial. In *67 State v. Ferguson, 576 So.2d 1252 (Miss. 1991), a defendant's constitutional right to a speedy trial was held to have been denied by a presumptively prejudicial delay of 288 days between an appellate reversal and retrial. In that case, the prosecution offered only a circuit court's docket as a basis for the delay and the Court held that no evidence in the record justified that delay or rebutted the presumption of prejudice. Moreover, in that case the defendant had made a demand for speedy retrial, but the prosecution did nothing until the defendant moved to dismiss four months later. See also Lukehart v. State, 32 Ark.App. 152, 798 S.W.2d 117 (1990) (13-month delay in bringing a defendant to trial in municipal court for driving while intoxicated violated his right to a speedy trial, where the delay was caused by the transfer of the charge from circuit court to municipal court upon the charge's being reduced from felony to misdemeanor.) Cf. Millard v. Lynaugh, 810 F.2d 1403 (5th Cir.1987), cert. denied, 484 U.S. 838, 108 S.Ct. 122, 98 L.Ed.2d 81 (1987) (where defendant's retrial was delayed 18 months, he was not denied of his right to speedy trial on constitutional grounds, because he had waived his rights under the state's speedy trial statute, had engaged in extended plea negotiations, and had shown no prejudice to his defense because of the delay); Roundtree v. State, 192 Ga.App. 803, 386 S.E.2d 548 (1989) (20 months passed after filing of remittitur following defective first trial and retrial, because case files had inexplicably been put into the "closed" section and misfiling was not discovered until almost that long; however the appellant did not demand speedy trial during that period and was free on bond until he was convicted for another offense); Ake v. State, 778 P.2d 460 (Okla.Cr.1989) (one-year delay between reversal of conviction and retrial did not constitute denial of speedy trial, because delay was largely due to defendant's hospitalization while undergoing testing to evaluate competency); Mitchell v. State, 572 So.2d 865 (Miss.1990) (delay of 383 days between reversal of the original conviction and retrial was not denial of defendant's constitutional right to speedy trial, even though the person whose services the defendant allegedly engaged to commit murder was not available to testify at the retrial, because the court found that the record indicated no prejudice to the defendant, and it was in the defendant's best interest that the retrial be delayed so that both sides could attempt to secure the attendance of the missing witness); Harrison v. State, 843 S.W.2d 157 (Tex.App.1992) (six and one-half-year delay in the retrial of the defendant following reversal was held not to violate the appellant's constitutional right to a speedy trial because the appellate court's mandate of reversal was inexplicably lost upon its transfer to the district clerk and this "purely juridical-clerical" error could not be assigned to the prosecution; moreover, the defendant had been released on bond shortly after the reversal); United States v. Holley, 986 F.2d 100 (5th Cir.1993) (where defendant, who brought claim pursuant to Speedy Trial Act for denial of his right to speedy trial because of 180-day delay between conviction and reversal, was found not to have been denied his rights because the delay resulted from one judge's recusal, the subsequent judge's involvement in a lengthy trial, and the fact that the district court bench was 4 judges short of the necessary 10 judges).
Based on the foregoing, we hold that the appellant's right to a speedy trial was violated. The judgment of the trial court is reversed and a judgment rendered for the appellant.
REVERSED AND JUDGMENT RENDERED.
All Judges concur.
| {
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Filed 10/2/19; Certified for Publication 10/30/19 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
TAE SEOG LEE, B287923
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC673852)
v.
JONG YUN KIM,
Defendant and Respondent.
B289837
GRIP SMART PRINTING, INC.,
(Los Angeles County
Plaintiff and Respondent, Super. Ct. No. BC692010)
v.
JONG YUN KIM,
Defendant and Appellant.
APPEALS from orders of the Superior Court of Los Angeles
County, Dalila Corral Lyons and Richard E. Rico, Judges.
Affirmed.
Employment Rights Attorneys and Richard D. Schramm for
Plaintiff and Appellant Tae Seog Lee and Plaintiff and
Respondent Grip Smart Printing, Inc.
Lim Law Group and Preston H. Lim for Defendant,
Appellant and Respondent Jong Yun Kim.
________________________
INTRODUCTION
These consolidated appeals arise out of two separate orders
under the anti-SLAPP statute addressing special motions to
strike malicious prosecution claims.1 Our chronicle begins when
attorney Jong Jun Kim commenced a lawsuit against
businessman Tag Seog Lee in federal court for alleged violations
of the Americans with Disabilities Act (ADA; 42 U.S.C. § 12101 et
seq.) and the Unruh Civil Rights Act (Unruh Act; Civ. Code, § 51
et seq.). Kim alleged his client, who used a wheelchair for
mobility, was denied access to Lee’s business Grip Smart
Printing, Inc. (Grip Smart) because the adjacent parking lot did
not have a handicapped accessible spot.
1 “SLAPP stands for ‘Strategic Lawsuit Against Public
Participation.’ ” (Lam v. Ngo (2001) 91 Cal.App.4th 832, 835,
fn. 1.) For clarity, we refer hereafter to an “anti-SLAPP” motion
as a “special motion to strike”—the language used in the statute
(Code Civ. Proc., § 425.16, subd. (b)(1)). While the actions below
were pursued separately, we consolidated the appeals as they
share common facts and related parties.
2
After the complaint was filed, Lee’s attorney provided
information suggesting the lawsuit was meritless because Grip
Smart was a corporate tenant on a commercial lease, and the
landlord (and not Grip Smart or any other tenant) controlled the
parking lot. Lee’s attorney followed up shortly thereafter by
providing a copy of the lease that verified his representations.
Kim then voluntarily dropped the claims against Lee in favor of
pursuing Grip Smart as well as its landlord. The federal district
court eventually entered summary judgment in Grip Smart’s
favor, finding the alleged injury to Kim’s client was not traceable
to Grip Smart’s conduct because, as a tenant, Grip Smart had no
control over the parking lot. The landlord settled for a modest
$3,000 payment without any agreement to remedy the alleged
accessibility issues.
Lee thereafter sued Kim for malicious prosecution. Kim
responded with a special motion to strike pursuant to Code of
Civil Procedure section 425.16.2 The trial court (the Honorable
Dalila Corral Lyons) granted Kim’s motion, finding that Kim’s
filing of the underlying lawsuit was protected conduct, and Lee
had failed to establish a probability of prevailing on his malicious
prosecution claim. After this ruling, Grip Smart filed a separate
action against Kim for malicious prosecution, which was assigned
to a different judicial officer (the Honorable Richard E. Rico).
Kim again filed a special motion to strike. This time, the trial
court denied the motion, determining that Grip Smart had
established a probability of prevailing on its malicious
prosecution claim.
2 All unspecified statutory references are to the Code of
Civil Procedure.
3
Lee now appeals the grant of Kim’s special motion to strike
Lee’s claim. Kim appeals the denial of his special motion to
strike Grip Smart’s claim. Finding no reversible error in either
ruling, we affirm.
BACKGROUND
A. Grip Smart’s Business Premises
In 2008, Lee and his wife purchased an existing printing
business called “Smart Printing.” They incorporated the business
as Grip Smart in 2009. At the time, the business was one of 12
tenants in a commercial building owned by Yong O. Hwang
(Hwang) and his company, Yongo America, Inc. (Yongo). Yongo
and Hwang also owned the building’s parking lot. Lee entered
into a series of oral and written leases with Yongo for the shop
premises. Lee and his wife have never had an ownership interest
in Yongo, the building, or the parking lot.
The leases define “common areas” as the “parking lots,
sidewalks, driveways and other areas used in common by the
Tenants of the Shopping Center.” Lee alleged that, throughout
his tenancy, Yongo never gave him permission, either orally or in
writing, to make changes or additions to any of the common
areas. The leases gave Yongo the exclusive authority to
“supervise and administer” the common areas, including the
parking lot, and to charge the tenants for associated costs.
Yongo reserved the right to make changes to the
“entrances, exits, traffic lanes and the boundaries and locations
of such parking area or areas,” including “the right to designate
up to twenty-five percent (25%) of such parking area for the
exclusive use of any . . . future tenant or tenants.” Lee alleged
that, as a tenant, he never had the right to control the parking
lot.
4
Yongo was further responsible for causing the “common
and parking areas” “to be graded, surfaced, marked and
landscaped,” and for keeping these areas “in a neat, clean[,]
orderly” and repaired condition. Yongo reserved the right to
determine whether anyone other than customers of the building
were permitted to park their vehicles in the parking lot. The
building’s tenants, including Lee, agreed to comply with “rules,
regulations and charges for parking” as established by Yongo.
B. The Underlying Action
On September 18, 2016, Kim filed a complaint in federal
court on behalf of Patricia Sue Williams against Taesik Yoon,
doing business as “Smart Printing.” The lawsuit (the Underlying
Action) sought damages, injunctive relief, and attorneys’ fees for
violations of the ADA and the Unruh Act.3 Williams is a
paraplegic who uses a wheelchair for mobility. On behalf of
Williams, Kim alleged Yoon was the owner of Smart Printing.
Kim alleged Williams attempted to patronize the business in
September 2016 but was unable to do so because the parking lot
lacked an accessible parking space. Kim alleged that, on
information and belief, a fully compliant parking space for
persons with disabilities once existed in the lot, but Yoon failed to
maintain the space and allowed the paint markings for the access
aisle to fade beyond visibility. The complaint alleged the
inaccessible parking lot denied Williams “full and equal access” to
the printing business. Despite the fact that Williams did not
enter the business, Kim alleged Williams “belie[ved]” there were
additional “barriers” to access at the property and would amend
3
Although it is not clear from the record, it appears Yoon
may have previously owned the printing business.
5
the complaint once Williams was able to access Smart Printing’s
premises and conduct an inspection.
Kim filed an amended complaint in October 2016, adding
Lee as a defendant. The amended pleading was substantially
similar to the original complaint, but alleged Yoon and Lee were
both doing business as Smart Printing.
On November 2, 2016, counsel for Lee and Grip Smart sent
a letter to Kim advising that Grip Smart had no control over the
parking lot and the claims in the Underlying Action were
meritless. Counsel advised Kim that Yongo owned the building
and parking lot where Williams allegedly encountered her
disability access issues, and offered to provide Kim with the lease
agreement applicable to the property. Kim declined to amend the
complaint to name Yongo and instead demanded payment from
Grip Smart.
On November 4, 2016, counsel sent another letter to Kim
advising Kim of the following: (1) Grip Smart had no custody or
control over the property giving rise to Williams’s claims; (2) Kim
needed to sue Yongo, the actual owner of the parking lot; (3) Grip
Smart was not liable to Williams simply by virtue of its tenancy
in the building next to the parking lot; (4) federal law excluded
tenants from disability access liability in cases like Williams’s;
(5) Kim’s refusal to name the property owner was evidence of his
malicious intent to pursue the lawsuit solely to exact a monetary
settlement; and (6) photographs of the parking lot at issue
showed properly marked handicap parking, evidencing the lack of
merit to the claims. Counsel also sent Kim a copy of Grip Smart’s
6
lease.4 Counsel asked Kim to dismiss Lee from the lawsuit and
warned that his clients would seek sanctions under rule 11 of the
Federal Rules of Civil Procedure if Kim continued to pursue
claims against them.
Pursuant to a stipulation signed by Lee, in January 2017
Kim again amended the complaint in the Underlying Action to
add Grip Smart and Yongo as defendants. The second amended
complaint did not include Yoon and Lee as defendants, and the
stipulation stated that Williams would seek to dismiss Yoon and
Lee without prejudice.5 The second amended complaint
identified Grip Smart as the operator of the printing business
and Yongo as the owner of the property at which the business
was located.
On February 21, 2017, counsel for Lee and Grip Smart
again wrote to Kim to request that Williams dismiss her ADA
and Unruh Act claims. Counsel’s letter reiterated the position
that Williams lacked standing to sue Grip Smart because, as
evidenced by the lease agreements, Grip Smart did not control
the parking lot.
4 Although counsel’s transmittal of the lease is not part of
the record and it is unclear whether he included the lease with
his November 4, 2016 letter to Kim or sent it separately, Kim
admits that “[o]n or around November 4, 2016, [he] received a
copy of the lease from [counsel], indicating that the tenant was in
fact [Grip Smart], rather than Tae Seog Lee.”
5 The record does not contain the federal court’s ruling on
the stipulation, nor does it reflect any attempts by Williams to
dismiss Yoon or Lee. We note Grip Smart represented in its
motion to dismiss, discussed below, that Williams dismissed Yoon
and Lee at the time she filed her second amended complaint.
7
When Kim failed to dismiss Grip Smart, counsel for Grip
Smart moved for judgment on the pleadings pursuant to the
Federal Rules of Civil Procedure, rule 12(c) or, in the alternative,
for summary judgment under the Federal Rules of Civil
Procedure, rule 56. The federal court considered the motion as
one for summary judgment and, after considering extrinsic
materials submitted by the parties, granted summary judgment
in Grip Smart’s favor. The federal court found uncontroverted
evidence demonstrated Grip Smart did not own or control the
parking lot where Williams alleged she suffered injury. It held
that “because Williams’ injury is not traceable to Grip Smart’s
actions, she lacks standing to bring disability discrimination
claims against Grip Smart based on the parking lot injuries.”
(Fn. omitted.) On May 19, 2017, the federal court entered
judgment in favor of Grip Smart. Williams settled her claims
against Yongo for a payment of $3,000 and a mutual release.
C. The Malicious Prosecution Actions
1. Lee v. Kim
(a) The Complaint
A few months after entry of judgment in the Underlying
Action, Lee filed a complaint against Kim for malicious
prosecution. Lee alleged Kim filed the Underlying Action without
investigating who owned the parking lot, then asserted claims
against Lee’s business in the second amended complaint after
having been advised Yongo owned, and was in control of, the
parking lot. Lee alleged Kim continued to prosecute claims
against Grip Smart after learning Grip Smart had no control over
the parking lot, and after admitting in each iteration of the
complaint that Williams observed no accessibility violations
inside Grip Smart’s facility. Lee alleged the ownership of the
8
relevant land, parking lot, and buildings was easily discoverable
by a search of the records of the Los Angeles County Recorder’s
Office, yet Kim never conducted this simple research.
Lee also alleged that the settlement agreement with Yongo
did not address any correction of the disability access issues in
the parking lot, but rather provided for only monetary
compensation. As a further indication of improper purpose in
filing and maintaining the Underlying Action, Lee alleged Kim
and Williams filed 46 separate disability access lawsuits in
federal court between March 30 and August 7, 2016, 34 of which
settled. Lee alleged on information and belief that “very few or
none” of the settled cases included “resolution of the disability
access issues via inspections by a Certified Access Specialist,
repairs to illegal parking areas, or establishment of accessible
parking areas.” Instead, Lee alleged, the lawsuits were filed
solely to extract monetary settlements, “the lion’s share” of which
would be retained by Kim, not Williams.
(b) The Special Motion to Strike
Kim responded by filing a special motion to strike, arguing
Lee’s malicious prosecution complaint arose from Kim’s protected
activity of representing Williams in the Underlying Action and
petitioning on her behalf. Kim argued Lee had no probability of
prevailing on his malicious prosecution claim because Lee did not
receive a favorable determination on the merits of the Underlying
Action, and the lawsuit was brought with probable cause and
without malice. Specifically, Kim contended his voluntary
dismissal of Lee from the Underlying Action—which occurred
when Kim dismissed Lee in favor of adding Grip Smart as a
defendant—was not a favorable determination on the merits
because including Lee had “merely [been] a technical error.”
9
Kim further argued he had probable cause to file and
maintain the Underlying Action because the lease with Yongo
was “insufficient” to determine who was liable and, even after a
settlement was reached, Yongo continued to assert Grip Smart
should be responsible for 50 percent of the liability. With respect
to the element of malice, Kim contended his only motive for filing
the Underlying Action was to seek compensation for Williams,
and there was no evidence he had any improper purpose for
pursuing Lee.
In his opposition, Lee argued that he had prevailed on the
merits, as Kim had initially sought individual liability against
the owner of the business, and ultimately dismissed Lee. Lee
further argued that Kim lacked probable cause to pursue Lee, as
Kim knew as early as November 2016 that neither Lee nor his
business owned the building or parking lot where Williams
allegedly encountered access barriers. Finally, Lee argued Kim’s
pursuit of individual liability and demands for monetary
settlement supported a finding of malice.
(c) Court Ruling on the Special Motion to Strike
On November 6, 2017, Judge Lyons granted Kim’s special
motion to strike. The court determined the complaint arose from
protected activity, but that Lee failed to establish a probability of
prevailing on his complaint because he could not demonstrate the
Underlying Action was terminated in his favor on the merits:
“[Kim] chose not to proceed [against Lee] because of a technical
defect—namely that [Kim] had asserted the action against [Lee]
in his individual capacity, but now sought to sue [Lee’s]
corporation as the proper party. This did not reflect on the
substantive merits.” Since it found Lee could not establish one of
the prima facie elements of his malicious prosecution claim, the
10
trial court did not reach the remaining elements of probable
cause or malice. Pursuant to section 425.16, subdivision (c), the
court awarded Kim his attorney fees and costs incurred on the
special motion to strike in the amount of $18,172.50. Lee timely
appealed.6
2. Grip Smart v. Kim
(a) The Complaint
On January 29, 2018, after Lee’s complaint was struck,
Grip Smart filed a separate complaint against Kim for malicious
prosecution. Grip Smart’s complaint was nearly identical to Lee’s
complaint, but added as additional evidence of Kim’s improper
purpose an allegation that, following entry of judgment against
his client, Kim entered Grip Smart’s facility and demanded Lee
and his wife pay him $18,000 to settle “all” remaining legal
6 “[A] notice of appeal must be filed on or before the earliest
of: (A) 60 days after the superior court clerk serves on the party
filing the notice of appeal a document entitled ‘Notice of Entry’ of
judgment or a filed-endorsed copy of the judgment, showing the
date either was served; (B) 60 days after the party filing the
notice of appeal serves or is served by a party with a document
entitled ‘Notice of Entry’ of judgment or a filed-endorsed copy of
the judgment, accompanied by proof of service; or (C) 180 days
after entry of judgment.” (Cal. Rules of Court, rule 8.104(a)(1)
(rule 8.104).) The record indicates no document complaint with
rule 8.104(a)(1)(A) or (a)(1)(B) was served on Lee, and he
therefore had 180 days from the date of the judgment or order to
file its notice of appeal. (Rule 8.104(a)(1)(C).) The trial court
issued its order granting Kim’s motion to strike Lee’s complaint
on November 6, 2017. Lee’s notice of appeal was filed on
January 31, 2018.
11
issues. Kim knew Grip Smart was still represented by counsel at
that time.
(b) The Special Motion to Strike
As he had with regard to Lee’s complaint, Kim responded
by filing a special motion to strike. Kim made the same
arguments he made in the motion to strike Lee’s claim regarding
probable cause and malice, but proffered a different theory as to
why Grip Smart did not obtain a favorable termination on the
merits in the Underlying Action. Kim asserted that the federal
court’s dismissal of Williams’s claims against Grip Smart for lack
of standing under article III of the Constitution was not “ ‘on the
merits’ ” of the ADA and Unruh Act claims asserted in the
Underlying Action.
In opposition, Grip Smart argued it had prevailed on the
merits in the Underlying Action through the grant of summary
judgment, Kim lacked probable cause to pursue Grip Smart
because Kim knew by November 2016 that Grip Smart did not
own the building or parking lot, and Kim’s continued pursuit of
monetary settlement without any legal basis supported a finding
of malice. Grip Smart provided a declaration from Grip Smart’s
counsel containing evidence in support of its arguments, and
identifying pertinent pleadings and orders in the Underlying
Action attached to Kim’s request for judicial notice.
(c) Court Ruling on the Special Motion to Strike
On April 17, 2018, Judge Rico denied Kim’s special motion
to strike. The court found the malicious prosecution claim arose
from protected activity, but that Grip Smart had made the
requisite showing that it would probably prevail. The court
rejected Kim’s argument that the dismissal of the Underlying
Action for lack of article III standing was purely jurisdictional,
12
noting “the summary judgment ruling makes clear that this was
not a mere technical dismissal for lack of jurisdiction. Having
considered the evidence, the [federal] court made the
determination that [Grip Smart] did not ‘own or control the
parking lot where Williams alleged she encountered barriers to
her disability . . . .’ ” Further, the trial court determined the
lease “ma[de] no . . . provision” for Grip Smart’s ability to operate
or control the parking lot, so “there was no basis for believing
that [Grip Smart] was in any way responsible for the alleged
ADA violation” and the lawsuit lacked probable cause.
The trial court was particularly troubled by Kim’s
continued prosecution of the Underlying Action against Grip
Smart even after he was made aware of the terms of the lease. In
response to Kim’s contention that Grip Smart provided him with
no evidence other than the lease to show a lack of ownership or
control, and did not provide “ ‘sworn statements or declarations’ ”
regarding the control issue until the motion for summary
judgment, the trial court noted, “[i]t was not [Grip Smart’s
counsel’s] obligation to prove a negative, it was Kim’s obligation
to establish probable cause to continue the law suit for which
apparently none existed.”
Lastly, the court found that Kim’s prosecution of the
Underlying Action despite the lack of probable cause, along with
the proffered evidence Kim demanded money from Grip Smart
after learning the suit lacked merit, were sufficient to support a
conclusion the matter was pursued with malice. Kim timely
appealed.7
7 Grip Smart asserts Kim’s notice of appeal was premature,
as it was filed after entry of the minute order for the hearing
granting the special motion to strike, but before written notice
13
DISCUSSION
A. Applicable Law and Standard of Review
“ ‘ “The Legislature enacted the anti-SLAPP statute to
protect defendants . . . from interference with the valid exercise of
their constitutional rights, particularly the right of freedom of
speech and the right to petition the government for the redress of
grievances.” ’ ” (Bleavins v. Demarest (2011) 196 Cal.App.4th
1533, 1539.) The statute provides that “[a] cause of action
against a person arising from any act of that person in
furtherance of the person’s right of petition or free speech under
the United States Constitution or the California Constitution in
connection with a public issue shall be subject to a special motion
to strike, unless the court determines that the plaintiff has
established that there is a probability that the plaintiff will
prevail on the claim.” (§ 425.16, subd. (b)(1).) “The statute is to
‘be broadly construed to encourage continued participation in free
speech and petition activities.’ ” (Bleavins, supra, at p. 1539;
§ 425.16, subd. (a).)
“In evaluating an anti-SLAPP motion, the court conducts a
potentially two-step inquiry. [Citation.] First, the court must
decide whether the defendant has made a threshold showing that
the plaintiff’s claim arises from protected activity. [Citation.] To
was given of the order or judgment entered. Given that the court
adopted its written tentative order at the conclusion of the
hearing, so there is no doubt regarding the ruling to be reviewed,
and Grip Smart identifies no prejudice from the premature notice
of appeal, “we do not believe any purpose would be served by
penalizing [Kim] for taking a premature appeal” and exercise our
discretion in favor of hearing the matter on the merits. (Boyer v.
Jensen (2005) 129 Cal.App.4th 62, 69.)
14
meet its burden under the first prong of the anti-SLAPP test, the
defendant must demonstrate that its act underlying the
plaintiff’s claim fits one of the categories spelled out in
subdivision (e) of the anti-SLAPP statute.” (Bonni v. St. Joseph
Health System (2017) 13 Cal.App.5th 851, 859, disapproved on
another ground in Wilson v. Cable News Network, Inc. (2019) 7
Cal.5th 871, 892.)
“Second—if the defendant meets its burden of showing all
or part of its activity was protected—then the court proceeds to
the next step of the inquiry. At this stage—applying the second
prong of the anti-SLAPP test—the court asks ‘whether the
plaintiff has demonstrated a probability of prevailing on the
claim.’ ” (Bonni v. St. Joseph Health System, supra, 13
Cal.App.5th at pp. 859-860.) The Supreme Court has “described
this second step as a ‘summary-judgment-like procedure.’
[Citation.] The court does not weigh evidence or resolve
conflicting factual claims. Its inquiry is limited to whether the
plaintiff has stated a legally sufficient claim and made a prima
facie factual showing sufficient to sustain a favorable judgment.
It accepts the plaintiff’s evidence as true, and evaluates the
defendant’s showing only to determine if it defeats the plaintiff’s
claim as a matter of law. [Citation.] ‘[C]laims with the requisite
minimal merit may proceed.’ ” (Baral v. Schnitt (2016) 1 Cal.5th
376, 384-385, fn. omitted.)
An appeal from an order granting or denying a special
motion to strike is reviewed de novo. (Soukup v. Law Offices of
Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3.) In considering
the pleadings and supporting and opposing declarations, we do
not make credibility determinations or compare the weight of the
evidence. Instead, we accept the opposing party’s evidence as
15
true and evaluate the moving party’s evidence only to determine
if it has defeated the opposing party’s evidence as a matter of
law. (Ibid.)
B. Both Malicious Prosecution Claims Involved
Protected Conduct
The first step of the anti-SLAPP inquiry, whether Kim
made a threshold showing that the claims of Lee and Grip Smart
for malicious prosecution arose from protected activity, is not
disputed here. The anti-SLAPP statute defines an “ ‘act in
furtherance of a person’s right of petition or free speech’ ” to
include “any written or oral statement or writing made before a
. . . judicial proceeding . . . .” (§ 425.16, subd. (e)(1).) The plain
language of the anti-SLAPP statute dictates that every claim of
malicious prosecution is a cause of action arising from protected
activity, because every such claim necessarily depends upon
written and oral statements in a prior judicial proceeding.
(Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 734-
735.) Accordingly, our inquiry shifts to whether Lee and Grip
Smart satisfied their respective burdens to demonstrate a
probability of prevailing on the merits of their claims for
malicious prosecution. (Id. at p. 733; accord, § 425.16,
subd. (b)(1).)
C. Lee Did Not Demonstrate a Probability of Prevailing
on the Merits
“To prevail on a malicious prosecution claim, the plaintiff
must show that the prior action (1) was commenced by or at the
direction of the defendant and was pursued to a legal termination
favorable to the plaintiff; (2) was brought without probable cause;
and (3) was initiated with malice.” (Soukup v. Law Offices of
Herbert Hafif, supra, 39 Cal.4th at p. 292.)
16
The claims against Lee terminated when Kim, on behalf of
his client, voluntarily filed a second amended complaint that
dropped Lee as a defendant.8 “In order for a termination of a
lawsuit to be considered favorable with regard to a malicious
prosecution claim, the termination must reflect on the merits of
the action and the plaintiff’s innocence of the misconduct alleged
in the lawsuit.” (Contemporary Services Corp. v. Staff Pro Inc.
(2007) 152 Cal.App.4th 1043, 1056.) While Kim acknowledges a
voluntary dismissal is presumed to be a favorable termination on
the merits (Sycamore Ridge Apartments LLC v. Naumann (2007)
157 Cal.App.4th 1385, 1400), he argues Lee’s dismissal was
purely for technical reasons that did not reflect on the merits of
the Underlying Action. Specifically, Kim asserts that he dropped
Lee solely to “replace him with Grip Smart, who was the proper
tenant and the real party-in-interest.”
Kim initially filed suit seeking to hold Lee individually
liable. Kim dismissed Lee from the Underlying Action after
being provided information showing Lee was not a proper
defendant because he was not individually liable. It is plausible
to conclude, as the trial court did, that Kim dismissed Lee
because he believed liability still existed and rather than
pursuing alter ego or other claims to pierce the corporate veil and
hold Lee individually liable he decided instead to pursue Grip
Smart. It is also plausible to conclude, however, that Kim
dismissed Lee because the information Lee’s counsel provided
8 “ ‘[I]t has long been the rule that an amended complaint
that omits defendants named in the original complaint operates
as a dismissal . . . as to them.’ ” (Dye v. Caterpillar, Inc. (2011)
195 Cal.App.4th 1366, 1382, fn. 11.)
17
showed Lee was not liable under any circumstances. While the
trial court’s inference that Lee’s dismissal did not reflect the
substantive merits was plausible, in the “summary-judgment-like
procedure” of a special motion to strike we do not weigh evidence
or resolve conflicting factual claims. (Varian Medical Systems,
Inc. v. Delfino (2005) 35 Cal.4th 180, 192.) We further must draw
all reasonable inferences from the evidence in favor of Lee as the
plaintiff. (Tuchscher Development Enterprises, Inc. v. San Diego
Unified Port Dist. (2003) 106 Cal.App.4th 1219, 1238-1239.)
Accordingly, Lee made the required prima facie showing that the
Underlying Action terminated in his favor on the merits.
While we part ways with the trial court on whether there
was prima facie evidence the Underlying Action was terminated
favorably on the merits, we agree with the end result of striking
Lee’s claim. To demonstrate a probability of prevailing on the
second prong of the anti-SLAPP analysis, Lee was required to
produce admissible evidence from which a trier of fact could find
in his favor, as to every element Lee needed to prove at trial to
establish malicious prosecution. (§ 426.16, subd. (b)(1); Jarrow
Formulas, Inc. v. La Marche, supra, 31 Cal.4th at p. 739.)
Lee takes the unfounded position that because the trial
court did not discuss either the lack of probable cause or malice
elements, he is likewise excused from addressing them. Although
we examine the trial court’s decision independently, the scope of
our review is limited to those issues that have been adequately
raised and supported in the appellant’s brief. (Reyes v. Kosha
(1998) 65 Cal.App.4th 451, 466, fn. 6.) Lee’s burden on appeal
“includes the obligation to present argument and legal authority
on each point raised. This requires more than simply stating a
bare assertion that the judgment, or part of it, is erroneous and
18
leaving it to the appellate court to figure out why; it is not the
appellate court’s role to construct theories or arguments that
would undermine the judgment . . . .” (Eisenberg et al., Cal.
Practice Guide: Civil Appeals and Writs (The Rutter Group 2018)
¶ 8:17.1, p. 8-6.) “ ‘When an appellant fails to raise a point, or
asserts it but fails to support it with reasoned argument and
citations to authority, we treat the point as [forfeited].’ ” (In re
A.C. (2017) 13 Cal.App.5th 661, 672; accord, Stoll v. Shuff (1994)
22 Cal.App.4th 22, 25, fn. 1.)
Lee’s briefing fails to address Kim’s alleged lack of probable
cause or malice, and contains no record cites or authorities
supporting any claim that he satisfied the required showing on
those elements. He has therefore forfeited any argument that he
made the requisite prima facie showing on the remaining two
elements of his malicious prosecution claim. At oral argument,
Lee contended Kim continued to prosecute claims lacking
probable cause after the lease was provided. Specifically, counsel
for Lee argued that, after the lease was provided but before Lee
was dismissed, Kim prepared and filed a report in the Underlying
Action in compliance with rule 26 of the Federal Rules of Civil
Procedure in which Kim continued to contend Lee was
individually liable. Even if we overlooked that this argument
was not raised in Lee’s briefing, neither the joint report itself nor
any evidence regarding the date it was prepared or filed is part of
the record on appeal. Accordingly, we cannot consider it. (See
Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th
434, 444, fn. 3.)9
9In light of Lee’s failure to make a prima facie showing he
would probably prevail on the merits of his claim, we need not
address Lee’s argument that the trial court erred in overruling
19
D. The Denial of Kim’s Motion to Strike Grip Smart’s
Complaint Was Proper
Kim makes the following claims of error with regard to the
denial of his special motion to strike Grip Smart’s malicious
prosecution claim: (1) the trial court improperly shifted the
burden to him to show probable cause for filing and maintaining
the Underlying Action; (2) the trial court erred in ruling Grip
Smart achieved a favorable termination on the merits; (3) Grip
Smart failed to demonstrate Kim lacked probable cause; and
(4) no evidence existed to support the trial court’s finding that
Kim pursued the Underlying Action with malice.
1. Burden of Proof
Kim contends the court “misapplied the burden shifting
provision” in section 425.16 by imposing upon him the obligation
to establish probable cause for Grip Smart’s malicious
prosecution claim. Kim points to the following statement in the
court’s order as evidencing this alleged error: “It was not [Grip
Smart’s counsel’s] obligation to prove a negative, it was Kim’s
obligation to establish probable cause to continue the law suit for
which apparently none existed.”
Kim has plucked this sentence from the court’s order
without context, and when the order is reviewed holistically it is
Lee’s objections to the evidence Kim submitted in support of his
special motion to strike. It was Lee, not Kim, that was required
to make the prima facie showing on the second prong. Given
Lee’s failure of proof, any error with regard to consideration of
evidence from the opposing party would not be prejudicial error
because it would not lead to a more favorable result. (People ex
rel. City of Santa Monica v. Gabriel (2010) 186 Cal.App.4th 882,
887.)
20
plain there was no improper burden shifting. First, elsewhere in
its order the trial court correctly stated “[t]he second prong of the
anti-SLAPP analysis is to determine whether the plaintiff has
shown a probability of succeeding on his claim. [Citation.] The
plaintiff bears the burden, but need make only a prima facie
showing, ‘ “akin to that of a party opposing a motion for summary
judgment.” ’ ” Second, in making the statement cited by Kim, the
trial court was responding to Kim’s argument that counsel for
Grip Smart did not provide any evidence other than the lease
(such as sworn statements or declarations) until the time of
summary judgment. Read in context, the trial court’s statement
was responding to this argument from Kim about his conduct
after having been presented with the lease, and Kim’s obligation
to have probable cause to continue prosecuting a lawsuit. We see
no indication the court misunderstood who bore the burden on
the second prong of the anti-SLAPP analysis.
2. Favorable Termination on the Merits
To meet its prima facie burden, Grip Smart was first
required to show the Underlying Action terminated favorably in a
manner that reflected on the merits of the claim. The action
against Grip Smart terminated when the federal court granted
Grip Smart’s motion for summary judgment, finding Williams
lacked standing under article III of the United States
Constitution to pursue accessibility claims against Grip Smart.
The federal court found the evidence undisputed “that neither
Grip Smart nor its two shareholders have ever ‘been owners or
part owners of . . . the building in which [the Grip Smart] store is
located, or the parking lot in front of [the] store.’ [Citation.] In
fact, for all the years that Grip Smart has been a tenant at the
shopping center, ‘the Landlord/Owner (Mr. Yong O. Hwang, who
21
has the company, Yongo America, Inc.) has always controlled
exclusively the parking lots, sidewalks, driveways, and other
areas used in common by the tenants in that shopping center.’
[Citation.]” Because “the uncontroverted evidence demonstrates
Grip Smart does not own or control the parking lot where
Williams alleges she encountered barriers to her disability,” the
federal court found Williams’s injury was not traceable to Grip
Smart’s actions and she therefore lacked article III standing to
bring disability discrimination claims against Grip Smart.
Kim argued to the court below, as he does on appeal, that
the federal court’s ruling was a finding on jurisdictional grounds,
and was therefore not on the merits. The trial court disagreed,
noting “the summary judgment ruling makes clear that this was
not a mere technical dismissal for lack of jurisdiction,” and that
“[r]eading the ruling as a whole, ‘standing’ was not the only
problem and was used as [a] means to test causation and
damages.”
We agree with the trial court’s analysis. While California
law on standing generally asks only whether the plaintiff is the
“real party in interest,”10 standing in federal court involves
different considerations. Specifically, to establish a case or
controversy within the meaning of article III of the United States
Constitution, a plaintiff “must establish a ‘line of causation’
between [a] defendant[’s] action and [the plaintiff’s] alleged harm
10 See, e.g., Blumhorst v. Jewish Family Services of Los
Angeles (2005) 126 Cal.App.4th 993, 1001 [person invoking
judicial process must have a real interest in the ultimate
adjudication, having suffered or about to suffer “ ‘ “[an] injury of
sufficient magnitude reasonably to assure that all of the relevant
facts and issues will be adequately presented” ’ ”].
22
that is more than ‘attenuated.’ ” (Maya v. Centex Corp. (9th Cir.
2011) 658 F.3d 1060, 1070.) In ADA cases like the Underlying
Action, this required Kim to demonstrate that his client suffered
an injury-in-fact, that the injury was traceable to Grip Smart’s
actions, and that the injury can be redressed by a favorable
decision. (Chapman v. Pier 1 Imports (U.S.) Inc. (9th Cir. 2011)
631 F.3d 939, 946.)
Kim cites federal authority noting that when a party lacks
article III standing a court cannot reach the merits of the dispute
(Fleck and Associates v. Phoenix, City (9th Cir. 2006) 471 F.3d
1100, 1106, fn. 4), such that a dismissal for lack of article III
standing is not a disposition on the merits for purposes of things
like claim preclusion (Media Technologies Licensing, LLC v.
Upper Deck (Fed. Cir. 2003) 334 F.3d 1366, 1369-1370), or an
award of prevailing party attorneys’ fees under certain federal
statutes. (Molski v. Mandarin Touch Restaurant (C.D. Cal.,
Dec. 9, 2005, No. CV04-0450 ER) 2005 WL 3719631 at *1.) These
cases do not mean, however, that a dismissal for lack of article III
standing can never be a favorable termination on the merits for
purposes of a malicious prosecution claim. After all, voluntary
dismissal precludes litigation on the ultimate merits in the same
way as a dismissal for lack of article III standing and the law is
well-established such voluntary dismissals can, in some
circumstances, reflect on the substantive merits of the underlying
claim. It is therefore not the type of dismissal, but the reasons
for it, that must be examined to determine whether the dismissal
reflects on the merits. (Robbins v. Blecher (1997) 52 Cal.App.4th
886, 892-894.)
Here, the article III standing test necessarily required the
federal court to assess the merits of the claims in the Underlying
23
Action, at least at the level necessary to determine if there was
evidence the alleged injury was traceable to Grip Smart’s actions.
The federal court found the alleged injury was not traceable to
Grip Smart’s actions because it was undisputed Grip Smart did
not own or control the parking lot where the alleged injury-in-fact
occurred. Because the Underlying Action terminated based on
the lack of any causal link between Grip Smart’s actions and the
alleged injury, the Underlying Action terminated in favor of Grip
Smart in a manner that reflected on the merits of the claim.
3. Probable Cause
Grip Smart was required next to show Kim lacked probable
cause to bring and maintain the Underlying Action. “The
question of probable cause is ‘whether, as an objective matter, the
prior action was legally tenable or not.’ [Citation.]” (Soukup v.
Law Offices of Herbert Hafif, supra, 39 Cal.4th at p. 292.) The
resolution of that question requires an objective determination of
the reasonableness of the underlying lawsuit based on the facts
known to the party bringing the suit. (Sheldon Appel Co. v.
Albert & Oliker (1989) 47 Cal.3d 863, 878.) “ ‘A litigant will lack
probable cause for his action either if he relies upon facts which
he has no reasonable cause to believe to be true, or if he seeks
recovery upon a legal theory which is untenable under the facts
known to him.’ [Citation.]” (Soukup, supra, at p. 292.) The test
to be applied in evaluating the existence of probable cause is
“whether any reasonable attorney would have thought the claim
tenable.” (Sheldon Appel Co., supra, at p. 886.)
Probable cause may exist even where the underlying
lawsuit lacks merit. (Jarrow Formulas, Inc. v. LaMarche, supra,
31 Cal.4th at p. 743, fn. 13.) “ ‘Counsel and their clients have a
right to present issues that are arguably correct, even if it is
24
extremely unlikely that they will win . . . .’ ” (Sheldon Appel Co.
v. Albert & Oliker, supra, 47 Cal.3d at p. 885.) “Reasonable
lawyers [also] ‘can differ, some seeing as meritless suits which
others believe have merit, and some seeing as totally and
completely without merit suits which others see as only
marginally meritless.’ ” (Jarrow Formulas, Inc., supra, at p. 743,
fn. 13.) “Only those actions that any reasonable attorney would
agree are totally and completely without merit may form the
basis for a malicious prosecution suit. [Citations.]” (Zamos v.
Stroud (2004) 32 Cal.4th 958, 970.)
In making an initial assessment of tenability, an attorney
is entitled to rely on the information provided by the client,
unless the attorney is on notice of specific factual errors in the
client’s version of events that render the claim untenable. (Swat-
Fame, Inc. v. Goldstein (2002) 101 Cal.App.4th 613, 625-627,
disapproved on other grounds in Reid v. Google, Inc. (2010) 50
Cal.4th 512, 532, fn. 7 and Zamos v. Stroud, supra, 32 Cal.4th at
p. 973.) Even when an attorney receives evidence that appears to
present a complete defense, the attorney may act reasonably in
going forward with the lawsuit if there is a possibility that the
defense will, on further evidence or examination, “prove less than
solid.” (Zamos, supra, at p. 970, fn. 9.) However, an attorney
who has probable cause to commence a lawsuit may be liable for
malicious prosecution if he or she continues to prosecute the
action after learning it is not supported by probable cause. (Id. at
p. 973.)
Grip Smart does not contend that Kim lacked probable
cause to initiate the action. Instead, Grip Smart takes issue with
Kim’s continued prosecution of the Underlying Action after
November 2016, when Grip Smart’s counsel notified Kim “of the
25
proper names of the proper defendants, along with the actual
terms identifying who controlled the parking lot where
Williams’[s] alleged discrimination occurred.”
Kim admits he received a copy of Grip Smart’s lease on
November 4, 2016, and does not dispute that the lease placed all
responsibility for upkeep and maintenance of common areas—
including the parking lot where Williams allegedly encountered a
lack of accessible parking—on Yongo. Kim also acknowledges, by
citing to them in his brief, that the Code of Federal Regulations
provide that “[b]oth the landlord who owns the building that
houses a place of public accommodation and the tenant who owns
or operates the place of public accommodation are public
accommodations subject to the requirements of [the ADA]. As
between the parties, allocation of responsibility for complying with
the obligations of [the ADA] may be determined by lease or other
contract.” (28 C.F.R. § 36.201(b) (2016), italics added.)
Nonetheless, citing Botosan v. Paul McNally Realty (9th
Cir. 2000) 216 F.3d 827 (Botosan) as well as an earlier district
court case (Botosan v. Fitzhugh (S.D.Cal. 1998) 13 F.Supp.2d
1047), Kim argues the terms of the lease had no bearing on the
question of probable cause since “the allocation of responsibility
between the landlord and a tenant by the lease is effective only
‘[a]s between the parties’ and has no effect on the rights of third
parties.” In Botosan, a landlord argued it could not be held liable
for ADA violations on leased property because responsibility for
all ADA compliance had been shifted to its tenants vis-à-vis their
leases. (Botosan, supra, at p. 832.) The Ninth Circuit examined
the language and history of the ADA, and concluded the ADA
imposes concurrent obligations on landlords and tenants, and
that the landlord, as an owner of the property, should be liable
26
for ADA compliance even on property leased to, and controlled by,
a tenant. (Id. at pp. 832-834.)
The problem with Kim’s reliance on Botosan is that it
focuses on landlord responsibilities, and ignores a later Ninth
Circuit opinion relieving tenants like Grip Smart from liability
under the ADA in cases exactly like the present one. In Kohler v.
Bed Bath & Beyond of California, LLC (9th Cir. 2015) 780 F.3d
1260, the plaintiff, a paraplegic who required the use of a
wheelchair, alleged he encountered architectural barriers both
inside the defendant’s store and in the parking lot of the
shopping center in which the store was located. (Id. at p. 1262.)
The district court granted summary judgment in favor of the
defendant, concluding the store “did not ‘own, lease or operate’
the shopping center parking lot, and therefore was not liable for
any ADA barriers occurring there.” (Ibid.) On appeal, the
plaintiff argued the defendant’s lease, which defined the parking
lot as a “ ‘Common Area’ ” and further stated that the “ ‘Landlord
shall operate, maintain, repair and replace the Common Areas
. . . [and] shall comply with all applicable Legal Requirements,’
was an attempt to contract away its ADA liability in violation of
[the Ninth Circuit’s] decision in [Botosan].” (Id. at p. 1264.)
The appellate court characterized the plaintiff’s reliance on
Botosan as “misplaced . . . . The ADA imposes compliance
obligations on ‘any person who owns, leases (or leases to), or
operates a place of public accommodation.’ (42 U.S.C.
§ 12182(a).) The existence of a lease that delegates control of
parts of that property to a tenant has no effect on the landlord’s
preexisting obligation, because under the ADA, a party is
prevented from doing anything ‘through contractual, licensing, or
other arrangements’ that it is prevented from doing ‘directly.’
27
[Citation.] Here, in contrast, [the defendant store], like any
tenant, has no preexisting control of a property. Absent a lease,
it lacks any legal relationship at all to the property. That it takes
control of a part of the property, subject to a lease, imposes ADA
compliance obligations on it [only] for that part of the property it
controls . . . .” (Kohler v. Bed Bath & Beyond of California, LLC,
supra, 780 F.3d at p. 1264.) The Ninth Circuit expressed concern
that the plaintiff’s reading of Botosan would create the very
situation in which Grip Smart found itself, and “would impose
upon a single tenant—e.g., the cell phone kiosk operating in a
shopping center’s lobby—liability for ADA violations occurring at
the far end of the shopping center’s parking lot; such an outcome
serves no purpose other than to magnify the potential targets for
an ADA lawsuit.” (Ibid.)
While Kim’s belief regarding Grip Smart’s potential
liability may have been tenable at the inception of the
Underlying Action, Grip Smart introduced sufficient evidence for
purposes of a special motion to strike that Kim’s belief was no
longer defensible in November 2016 after Kim was provided a
copy of the operative lease. Other than his inapposite citation to
Botosan, Kim points to nothing else that would defeat Grip
Smart’s claim as a matter of law. Grip Smart therefore made the
requisite showing that continued prosecution after November
2016 was done without probable cause. (Soukup v. Law Offices of
Herbert Hafif, supra, 39 Cal.4th at p. 292; accord, Arcaro v. Silva
& Silva Enterprises Corp. (1999) 77 Cal.App.4th 152, 158-159
[“when a party is put on notice a fundamental element of its case
is disputed, it should not proceed without evidence sufficient to
support a favorable judgment on that element or at least
28
information affording an inference such evidence can be
obtained”].)
4. Malice
Grip Smart was finally required to make a showing
sufficient to support the element of malice. (Sheldon Appel Co. v.
Albert & Oliker, supra, 47 Cal.3d at p. 874.) “ ‘The “malice”
element . . . relates to the subjective intent or purpose with which
the defendant acted in initiating the prior action. [Citation.] The
motive of the defendant must have been something other than
that of . . . the satisfaction in a civil action of some personal or
financial purpose. [Citation.] The plaintiff must plead and prove
actual ill will or some improper ulterior motive.’ [Citations.]
Malice ‘may range anywhere from open hostility to indifference.
[Citations.] Malice may also be inferred from the facts
establishing lack of probable cause.’ [Citation.]” (Soukup v. Law
Offices of Herbert Hafif, supra, 39 Cal.4th at p. 292.)
“[M]alice can be inferred when a party continues to
prosecute an action after becoming aware that the action lacks
probable cause.” (Daniels v. Robbins (2010) 182 Cal.App.4th 204,
226.) The Daniels court concluded malice formed after the filing
of a complaint is actionable. “ ‘Continuing an action one
discovers to be baseless harms the defendant and burdens the
court system just as much as initiating an action known to be
baseless from the outset.’ [Citation.]” (Ibid.)
Kim contends the trial court made no finding regarding
malice. He appears to have overlooked the trial court’s express
finding that Kim had no probable cause to continue prosecuting
the action, “and given the allegations by [Grip Smart] that when
it confronted Kim with the facts [Grip Smart] was only
29
threatened with a further demand for money, the court can reach
but on[e] conclusion, the matter was pursued with malice.”
We agree that Grip Smart met its burden to show malice.
In determining whether malice exists, we must accept as true the
evidence favorable to the plaintiff. (Barker v. Fox & Associates
(2015) 240 Cal.App.4th 333, 348.) Further, a reviewing court
may consider not only facts supported by direct evidence, but also
facts reasonably inferable from the evidence. (Oasis West Realty,
LLC v. Goldman (2011) 51 Cal.4th 811, 822.) The facts on which
the trial court relied to find malice were sufficient to meet the
showing required to defeat a special motion to strike.
DISPOSITION
The order granting Kim’s special motion to strike Lee’s
complaint in case No. B287923 is affirmed. The parties are to
bear their own costs in that appeal.
The order denying Kim’s special motion to strike Grip
Smart’s complaint in case No. B289837 is affirmed. Grip Smart
is awarded its costs on appeal.
WEINGART, J.*
We concur:
ROTHSCHILD, P. J. CHANEY, J.
*Judge of the Los Angeles Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
30
Filed 10/30/19
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
TAE SEOG LEE, B287923
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC673852)
v.
JONG YUN KIM,
Defendant and Respondent. ORDER CERTIFYING
OPINION FOR PUBLICATION
GRIP SMART PRINTING, INC., B289837
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BC692010)
v.
JONG YUN KIM,
Defendant and Appellant.
THE COURT*:
Good cause appearing, it is ordered that the opinion in the above
entitled matter, filed October 2, 2019, be published in the official reports.
________________________ _____________________ _____________________
*ROTHSCHILD, P. J. CHANEY, J. WEINGART, J.**
** Judge of the Los Angeles Superior Court assigned by the Chief Justice pursuant
to article VI, section 6 of the California Constitution.
2
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461 F.Supp. 328 (1978)
In re Joseph Wesley HART, Debtor.
WORTHEN BANK & TRUST COMPANY, N. A., Appellant,
v.
Joseph Wesley HART, Debtor-Appellee.
No. LR-B-75-213.
United States District Court, E. D. Arkansas, W. D.
December 12, 1978.
*329 Isaac Scott, John R. Tisdale, Little Rock, Ark., for appellant Worthen Bank.
Jack Sims, Little Rock, Ark., for appellee-debtor Joseph Wesley Hart.
MEMORANDUM OPINION
ARNOLD, District Judge.
Worthen Bank & Trust Company filed a complaint objecting to the discharge of the debtor. Under Bankruptcy Rule 703, this complaint commenced an adversary proceeding. The complaint alleged four objections to discharge, based upon four separate subsections of Section 14c of the Bankruptcy Act, 11 U.S.C. Section 32(c). In addition to these four objections, which would prevent a discharge altogether, the complaint alleged that the particular debt owed to Worthen Bank was non-dischargeable. Except as to the first objection to discharge (failure to preserve satisfactory books of account), the Bankruptcy Court granted judgment on the pleadings for the debtor. The three other objections to discharge, it held, had not been pleaded with sufficient particularity. The contention that the debt owed to Worthen Bank was not dischargeable was also rejected, on the ground of res judicata. This Court affirms.
The three objections to discharge that are at issue on this appeal were alleged in the following words:
3. Defendant is not entitled to a discharge for the reason that he: * * *
(B) While engaged in business as a sole proprietor, partnership, and executive of a corporation, obtained for his business enterprises money on credit or an extension or renewal of credit by making or publishing or causing to be made or published a materially false statement in writing respecting his financial condition;
(C) At a time subsequent to the first day of the 12 months immediately preceding the filing of the petition in bankruptcy, transferred his property with the intent to hinder, delay and defraud his creditors; and
(D) Has failed to explain satisfactorily his losses of assets and deficiency of assets to meet his liabilities.
The complaint also alleged:
4. The debts due and owing plaintiff, as reflected in the judgment [the reference is apparently to a judgment recovered by the bank against Hart in a state court], are the result of liabilities for obtaining the loan of money and extensions and renewals of credit by plaintiff in reliance upon a materially false statement in writing respecting the financial condition of defendant which was made or published or caused to be made or published with intent to deceive.
This complaint was filed on August 4, 1975. On September 11, 1975, the debtor moved for judgment on the pleadings. This motion was granted on April 13, 1976, nine months later. At no time did the bank ask leave to amend its complaint.
The objections to discharge were pleaded simply in the words of the statute. The same is true of the contention that the debt *330 owed the bank was not dischargeable. It is clear that this pleading would have been insufficient, and the complaint subject to dismissal, under General Order 32, which governed matters of this kind before the new Bankruptcy Rules were adopted in 1973. In re Leach, 197 F.Supp. 32 (W.D. Ark.1960), is directly in point. The bank argues that Bankruptcy Rule 708 has changed this state of the law. That rule incorporates by reference Rule 8 of the Federal Rules of Civil Procedure, which requires only that a pleading shall contain a "short and plain statement of the claim showing that the pleader is entitled to relief."
To this contention there are two answers. First, with respect to the objections to discharge lettered (B) and (C), Rule 9(b) of the Federal Rules of Civil Procedure, which is adopted by Bankruptcy Rule 709, requires that the circumstances constituting an alleged fraud be pleaded with particularity. The same is true of the contention that the debt owed the bank is not dischargeable. That contention, too, is based on a claim of fraud. Second, all of the claims in the complaint, including those based on fraud as well as the argument that the debtor failed to explain losses of assets satisfactorily, are pleaded merely in the words of the statute. According to 1A Collier, Bankruptcy (14th ed. rev. 1978), ¶ 1407[2], at 1286-87.
The decisions prior to the 1973 Bankruptcy Rules to the effect that averments should be more specific than the general language of the statute except in the case of failure to keep books of account are still sound and should be controlling under the new procedure decreed by the Bankruptcy Rules. If the averments are vague or general, . . . the complaint will be susceptible to a motion to dismiss pursuant to Federal Civil Rule 12(b).
It is unnecessary to consider the question of res judicata, because even if this doctrine is not a bar to the bank's claim that the debt owed it was non-dischargeable, the failure to plead fraud with particularity on this issue would be such a bar.
The courts do not favor dispositions on the pleadings. Ordinarily the ends of justice are better served by a trial on the merits. Even under modern rules, however, the pleadings have an important office. Their function is to give notice to the opposing party of the contentions he will have to meet. Fair notice requires something more than a quotation from the statute. The bank argues that the vagueness of its allegations can be cured by reference to the transcript of a hearing held at the first meeting of creditors on April 22, 1975. At this hearing counsel for the bank cross-examined the debtor at some length. This Court has read the relevant portions of the transcript of this hearing and is still left with a feeling of uncertainty as to the grounds intended to be asserted by the bank against the discharge. This uncertainty could have been dispelled at any time by a motion for leave to amend the complaint. It was not.
The judgment of the court below will be affirmed, and the cause remanded for further proceedings. One ground of objection to discharge failure to keep satisfactory books and records remains to be tried.
JUDGMENT
In accordance with the memorandum opinion entered herein, it is by the Court this 11th day of December, 1978, ORDERED
That the judgment of the Bankruptcy Court be, and it is hereby, affirmed, and the cause remanded for further proceedings not inconsistent with this opinion.
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
No. 02-4781
RAMERE ELLIS, a/k/a Ray, a/k/a
Slim,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of West Virginia, at Huntington.
Robert C. Chambers, District Judge.
(CR-02-69)
Submitted: November 19, 2003
Decided: December 8, 2003
Before WILKINSON and GREGORY, Circuit Judges, and
HAMILTON, Senior Circuit Judge.
Affirmed by unpublished per curiam opinion.
COUNSEL
Sol Z. Rosen, Washington, D.C., for Appellant. Kasey Warner,
United States Attorney, Miller A. Bushong, III, Assistant United
States Attorney, Charleston, West Virginia, for Appellee.
2 UNITED STATES v. ELLIS
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
Ramere Ellis appeals his conviction, pursuant to a guilty plea, for
aiding and abetting the distribution of crack cocaine, in violation of
21 U.S.C. § 841(a)(1) (2000), and 18 U.S.C. § 2 (2000), and his 160-
month sentence. Counsel has filed a brief in accordance with Anders
v. California, 386 U.S. 738 (1967), raising two potential issues but
stating that, in his view, there are no meritorious grounds for appeal.
Ellis has filed a pro se supplemental brief. We affirm.
Counsel questions whether the district court properly conducted the
plea colloquy pursuant to Fed. R. Crim. P. 11, and Ellis asserts that
he was coerced into pleading guilty. However, Ellis’ assertion is
belied by his sworn statements to the contrary at the plea hearing.
United States v. DeFusco, 949 F.2d 114, 119 (4th Cir. 1991) (stating
that defendant’s statement at Rule 11 hearing that he was not coerced
or threatened constitutes "strong evidence of the voluntariness of his
plea"). Because the district court fully complied with the mandates of
Rule 11, we find no plain error in the district court’s acceptance of
Ellis’ guilty plea. See United States v. Martinez, 277 F.3d 517, 524-
25 (4th Cir.) (discussing standard of review), cert. denied, 537 U.S.
899 (2002).
Next, counsel raises as a potential issue whether the district court
properly established a base offense level of thirty-six under U.S. Sen-
tencing Guidelines Manual § 2D1.1 (2001), and Ellis claims that he
should have been held accountable only for the amount of crack
involved in the controlled buys. Our review of the record leads us to
conclude that there is no clear error in the calculation of Ellis’ offense
level. See United States v. Pauley, 289 F.3d 254, 258 (4th Cir. 2002)
(stating standard of review), cert. denied, 123 S. Ct. 1007 (2003).
Finally, Ellis’ claim of ineffective assistance of counsel should be
brought, if at all, in a proceeding under 28 U.S.C. § 2255 (2000). The
UNITED STATES v. ELLIS 3
record in this appeal does not conclusively establish ineffective assis-
tance of counsel. United States v. Mohr, 318 F.3d 613, 616 n.1 (4th
Cir. 2003) (providing standard).
As required by Anders, we have examined the entire record and
find no meritorious issues for appeal. Accordingly, we affirm Ellis’
conviction and sentence. This court requires that counsel inform his
client, in writing, of his right to petition the Supreme Court of the
United States for further review. If the client requests that a petition
be filed, but counsel believes that such a petition would be frivolous,
then counsel may move in this court for leave to withdraw from repre-
sentation. Counsel’s motion must state that a copy thereof was served
on the client. We dispense with oral argument because the facts and
legal contentions are adequately presented in the materials before the
court and argument would not aid the decisional process.
AFFIRMED
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978 F.Supp. 514 (1997)
Mary V. PATTERSON, Plaintiff,
v.
Shirley S. CHATER, Commissioner of Social Security,[1] Defendant.
No. 94 Civ. 9223(JES).
United States District Court, S.D. New York.
September 24, 1997.
*515 James M. Baker, Bronx Legal Services, Bronx, NY, for Plaintiff,
Mary Jo White, U.S. Atty. for the Southern District of New York, New York City (Susan D. Baird, Asst. U.S. Atty., of counsel), for Defendant.
MEMORANDUM OPINION AND ORDER
SPRIZZO, District Judge.
Plaintiff Mary V. Patterson brings the instant action challenging a decision of defendant Commissioner of Social Security (the "Commissioner") denying her application for Social Security disability benefits under Title II of the Social Security Act. Pursuant to Federal Rule of Civil Procedure 12(c), Patterson and the Commissioner cross-move for judgment on the pleadings. For the reasons set forth below, Patterson's motion is granted and the Commissioner's final decision denying Patterson disability benefits is reversed.
BACKGROUND
Plaintiff Mary V. Patterson was born on March 24, 1941, and currently lives in an apartment in the Bronx with custody of her ten year old granddaughter. See Transcript *516 of Administrative Record ("Tr.") at 35, 58, 60. In 1966, Patterson was married, but lived with her husband for only three weeks. Tr. at 60. Since that time, she has been by herself and considers herself single. Tr. at 35. Patterson graduated from Freeman High School in Lenoir, North Carolina, in 1959. Tr. at 102. With the exception of a three day, nine hour computer course, she has not had any college or vocational training. Tr. at 36, 102.
From 1974 to 1980, Patterson was employed as a secretary for the Hertz Corporation in Manhattan. Tr. at 37, 102. From late 1980 until mid-1992, Patterson held a similar secretarial position with Memorial Sloan Kettering, where she was terminated from her job because of her poor vision and inability to work effectively in front of a computer screen. Tr. at 36, 37, 49, 102. Shortly thereafter, Patterson found work as a secretary for Thomas William Partners, a law firm in Manhattan, which lasted for only eight days because of Patterson's continued difficulties with eye strain from the computer screen and headaches. Tr. at 54.
In November 1992, Patterson received a general physical examination from Dr. Peter Graham, who noted decreased visual acuity on Patterson's left side, and a history of asthma and arthritis pain. Tr. at 115, 117. Dr. Graham observed that Patterson had full range of motion, and opined that Patterson could perform work that included sitting, bending, lifting, carrying, hearing and speaking. Tr. at 115, 117-18.
That same month Patterson was examined by Dr. Nirenberg, a consulting ophthalmologist. Tr. at 122. Dr. Nirenberg noted that Patterson had a history of high blood pressure, a heart murmur, asthma and arthritis. Tr. at 122. He further noted that Patterson complained of pressure pain in her left eye, headaches on her left side, and decreased vision in the left eye since childhood. Id. Dr. Nirenberg found Patterson's visual acuity to be 20/25 corrected in the right eye but that she was essentially blind in the left eye with a lens trace nuclear sclerotic cataract, slight exotropia, and a choroidal scar due to "old toxoplasmosis." Tr. at 122-23. Dr. Nirenberg advised Patterson to see an Ear, Nose & Throat doctor and have sinus workup, and also prescribed new glasses. Id. He further noted that Patterson had no difficulty navigating in the patient lounge. Id.
On March 30, 1993, Patterson underwent a second physical examination which had been arranged by the Commissioner. The examining physician, Dr. Myron Seidman, found osteoarthritis in Patterson's knees and shoulders, and recorded her virtual blindness in the left eye along with her complaints of throbbing headaches behind the left eye and forehead. Tr. 130-32. He noted the history of asthma but found Patterson to be asymptomatic on the day of the exam and all other pulmonary functions were normal. Tr. 132, 149-50. Dr. Seidman concluded based on the objective findings of his examination, that he would limit Patterson to "light to moderate lifting and carrying with limitation from extensive standing, walking, pushing, pulling leg controls." Tr. at 132. He further concluded that Patterson had slight limitation sitting, no limitation handling objects, and "has eye problems." Id.[2]
On October 9, 1992, Patterson filed an application for disability insurance benefits, alleging disability as of May 29, 1992, her last day of work at Sloan Kettering. Tr. at 58, 102. Her claim was denied initially and after reconsideration. Tr. at 62, 76. Patterson then requested a hearing before an Administrative Law Judge ("ALJ"), which was held on April 25, 1994. Tr. at 32-57. At the hearing, the ALJ received into evidence the *517 above mentioned medical reports concerning Patterson's physical condition and testimony from Patterson who was represented by counsel.
Patterson testified that her work at Sloan Kettering consisted of typing, filing, answering the telephones and acting as a receptionist. Tr. at 36. Moreover, when asked by the ALJ whether she was a secretary or an office clerk, Patterson testified that she was a secretary. Id. After working eleven years at Sloan Kettering, Patterson further stated that her employer told her that she would have to learn to use a computer, and sent her to a computer class. Tr. at 49. Because Patterson's eyes teared repeatedly and she suffered headaches behind her eyes, she was unable to keep up with the pace of the class, and did not complete the course. Tr. at 49-50. Furthermore, Patterson stated that she began to receive poor evaluations at work and made mistakes in her typing due to her poor vision. Tr. at 50.
Patterson testified that her afflictions have never required hospitalization. Tr. at 37. However, she stated that she did go to the emergency room six or seven times between May 1992, and April 1994, because of shoulder pain and situations where she could not see anything other than black spots. Id. Patterson further stated that she has visited doctors about eight times over this same two year period for her eyes and asthma, that they have given her oxygen for her severe asthma flare ups which occur about twice a week, and that if she could not make it to the emergency room, she would drink water and sit up with a pillow behind her back. Id. Patterson estimated that she can remain seated for one hour and a half, can remain standing for an hour at a time, can walk a maximum of eight blocks, that bending is a problem because of her sore knees and shoulders, and estimated that she can lift twenty-five pounds or the contents of her shopping cart. Tr. at 42. However, when examined by her attorney, Patterson testified that she would not be able to repeatedly lift certain large file folders at Sloan Kettering, which weigh approximately eight pounds each. Tr. at 48. Patterson stated that she performs a full range of household chores, does volunteer work two days a week by serving coffee and reading the newspaper to nursing home residents, and has looked for work since May 1992, but has been repeatedly turned down because of her poor vision. Tr. at 43-44.
On May 25, 1994, the ALJ rendered an unfavorable decision to Patterson finding her not to be under a disability as defined in the Social Security Act, at any time through the date of his decision. Tr. at 20. Specifically, the ALJ stated that "the claimant cannot return to her last job, because of the use of a computer requirement, which she is unable to fulfill, but claimant can still do general clerical work where the use of a computer would not be necessary." Tr. at 19. On June 15, 1994, Patterson filed for a review of the ALJ's unfavorable decision. Tr. at 10. Patterson provided the Appeals Council with an additional medical evaluation;[3] however, her appeal was denied on October 28, 1994. Tr. at 3, 10.
On October 17, 1994, Patterson filed the instant action alleging that she became disabled and unable to perform any work due to impaired vision, headaches, asthma and arthritic pain as of May 29, 1992, and that the ALJ's decision denying social security disability benefits was not supported by substantial evidence and was contrary to law and regulation. Pursuant to Federal Rule of Civil Procedure 12(c), the parties cross-move for judgment on the pleadings.
DISCUSSION
The findings of the Commissioner as to any fact, if supported by substantial evidence, are conclusive. See 42 U.S.C. *518 § 405(g) (1991); Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971); Rutherford v. Schweiker, 685 F.2d 60, 62 (2d Cir.1982); see also Rivera v. Harris, 623 F.2d 212, 216 (2d Cir.1980). Substantial evidence has been defined as "`more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.'" Richardson, 402 U.S. at 401, 91 S.Ct. at 1427, quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126 (1938). If a court finds that there is substantial evidence supporting the Commissioner's decision, the decision must be upheld, even if there is also substantial evidence for the plaintiff's position. See Alston v. Sullivan, 904 F.2d 122, 126 (2d Cir.1990).
In order to be found disabled, a claimant must be unable to do any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months. See 42 U.S.C. § 423(d)(1) (1991); 20 C.F.R. § 404.1527 (1996). The Second Circuit has summarized the Commissioner's five-step sequential evaluation process for evaluating disability claims as follows:
First, the [Commissioner] considers whether the claimant is currently engaged in substantial gainful activity. If he is not, the [Commissioner] next considers whether the claimant has a "severe impairment" which significantly limits his physical or mental ability to do basic work activities. If the claimant suffers such an impairment, the third inquiry is whether, based solely on medical evidence, the claimant has an impairment which is listed in Appendix 1 of the regulations. If the claimant has such an impairment, the [Commissioner] will consider him disabled without considering vocational factors such as age, education, and work experience; the [Commissioner] presumes that a claimant who is afflicted with a "listed" impairment is unable to perform substantial gainful activity. Assuming the claimant does not have a listed impairment, the fourth inquiry is whether, despite the claimant's severe impairment, he has the residual functional capacity to perform his past work. Finally, if the claimant is unable to perform his past work, the [Commissioner] then determines whether there is other work which the claimant could perform.
Berry v. Schweiker, 675 F.2d 464, 467 (2d Cir.1982); see also 20 C.F.R. § 404.1520. The claimant bears the burden of proof as to the first four steps. If the claimant establishes that he or she is unable to perform his or her past relevant work, the Commissioner bears the burden as to determining the claimant's ability to perform other work available in the national economy. See Berry, 675 F.2d at 467.
In this case, the Court is unable to determine whether the ALJ's decision denying benefits is supported by substantial evidence since his findings are ambiguous.[4] First, the ALJ found that Patterson is unable to use a computer due to her visual impairment. That finding is overwhelmingly supported by substantial evidence. In addition to her own testimony and the fact that she was terminated from her employment because she could not learn to use the computer, the objective medical evidence shows that Patterson is virtually blind in one eye, which can lead to eye strain, and has mild blepharitis, which causes tearing.
At the same time, the ALJ also found that Patterson can return to her past relevant work as a clerk. Patterson testified, however, that she performed secretarial, not clerical work in the past, and that she was terminated from her job because of her inability to use the computer, which the ALJ found credible. That being so, the Court cannot determine whether the ALJ found under step IV that Patterson's past relevant work was clerical, and that clerical jobs exist which do not require the use of a computer; whether he found under step IV that Patterson's past relevant work was secretarial, and that secretarial *519 jobs exist which do not require the use of a computer; or whether he found under step V that her past relevant work was secretarial, but that clerical jobs exist in the national economy which do not require the use of a computer. These distinctions are critical because they affect which party bears the burden of proof with respect to that issue.
There is absolutely no evidence in the record whether, at the time of Patterson's application for benefits, there existed either secretarial or clerical jobs which did not require the use of a computer. At Oral Argument, the Commissioner argued that the Court could take judicial notice under Jock v. Harris, 651 F.2d 133, 135 (2d Cir.1981), that such jobs exist. However, if anything, Jock cuts against the Commissioner. In Jock, the Second Circuit held that it is a claimant's burden to show an inability to return to her "previous work" as a cashier, not simply to her former job as a "supermarket cashier." Jock, at 134. Moreover, the Court stated that it was proper for the ALJ to take administrative notice that the occupation of "cashier" encompasses sedentary jobs as well as jobs that may require extended periods of standing or occasional supplemental work requiring greater amounts of exertion. Id.
Here, it is entirely less clear whether secretarial or clerical jobs existed in the early 1990's which did not require the use of a computer. In today's computer age, five-year old children are becoming computer literate and computer use pervades almost every aspect of our lives. In addition, the fact that Patterson was terminated because her job now required the use of a computer further evidences the changing job market. While the Court is aware that non-computer secretarial and clerical jobs may exist, such an assertion in today's computer age must be supported by proof through evidence, and may not be established by judicial or administrative notice.
Therefore, the only question left for the Court to resolve is whether the case should be remanded to the Commissioner for further factual findings on that issue, or whether the ALJ's decision should be reversed and benefits be granted outright. Because the Commissioner failed to respond to the issue of remand in its brief, which was addressed by Patterson in her brief, and because the Commissioner indicated at Oral Argument that she desired affirmance only, the Court deems the Commissioner to have waived her right to a remand. In any event, the Commissioner has failed to demonstrate good cause under Carroll v. Secretary, 705 F.2d 638, 643-44 (2d Cir.1983), for not incorporating evidence of secretarial or clerical jobs which do not require the use of a computer into the record, or making the appropriate and specific factual findings necessary for a step V denial of benefits if that was what was intended by the ALJ. In conclusion, the Court finds that the Commissioner made a strategic choice not to pursue that evidence.
That being so, the Court must reverse in view of the lack of substantial evidence here with respect to that issue. See Rivera v. Sullivan, 771 F.Supp. 1339, 1358-59 (S.D.N.Y.1991) (payment of benefits can be ordered "when the record provides persuasive proof of disability and a remand for further evidentiary proceedings would serve no purpose."); see also DeJesus v. Chater, 899 F.Supp. 1171, 1179 (S.D.N.Y.1995). This is especially true since the overwhelming evidence in the record demonstrates that Patterson is an individual who has worked and supported herself her entire life, and continues to volunteer her time for charitable purposes. She is not the type of claimant who appears to be feigning disability. It is thus fair to assume that were Patterson able to secure a job which she could perform, she would do so, and that it is therefore appropriate to award benefits in this case. See Rivera v. Schweiker, 717 F.2d 719, 725 (2d Cir.1983) (courts must give any claimant with good work history "substantial credibility" when claiming that they are no longer able to work due to a disability).
CONCLUSION
For the reasons set forth above, Patterson's motion for judgment on the pleadings is granted, the Commissioner's motion for judgment on the pleadings is denied and the Commissioner's decision to deny Patterson *520 disability benefits, which was not supported by substantial evidence, is reversed. The Clerk of Court is directed to enter judgment accordingly and to close the above-captioned action.
It is SO ORDERED.
NOTES
[1] Pursuant to the Social Security Independence and Program Improvements Act of 1994, Pub.L. No. 103-296, the functions of the Secretary of Health and Human Services in Social Security cases were transferred to the Commissioner of Social Security effective March 31, 1995. In accordance with section 106(d) of Pub.L. 103-296, the Court deems the complaint amended to substitute Shirley S. Chater, Commissioner of Social Security, for Donna E. Shalala, Secretary of Health and Human Services, as defendant.
[2] In addition, the Administrative Record contains two disability evaluation forms completed by physicians who treated Patterson for eye problems at North Central Bronx Hospital two to three times per year since 1990. Tr. at 124-27, 155-57. Dr. Rosen's March 31, 1993 evaluation form recorded blindness in Patterson's left eye due to toxoplasmosis. Tr. at 124-127. Dr. Mathiessen's July 14, 1993 form noted that Patterson's corrected vision in the right eye is 20/20 which should remain stable. Tr. at 156. He further reported that Patterson's right eye tears intermittently and was diagnosed as myopic and presbyopic. Id. However, he wrote that Patterson is essentially blind in the left eye with 20/1000 vision and will remain so. Id. He further noted that monocular patients can have eye strain problems after reading for extended periods. Id.
[3] On April 28, 1994, a doctor for the State Office of Vocational Rehabilitation examined Patterson at the Montefiore Hospital Eye Clinic and found her to have 20/25 corrected vision in her right eye but a 98% deficiency in her left eye. Tr. at 175. He diagnosed her as having "mild blepharitis" (caused by blocked pores around the eye lashes) in the right eye which, in turn, caused the tearing. Tr. at 176. The recommended treatment was warm soaks and the doctor prescribed artificial tears and eye drops for Patterson. Tr. at 176, 179. The doctor further advised Patterson to avoid working conditions where there is a risk of flying particles or foreign materials harming her because of her poor depth perception in her left eye. Tr. at 176.
[4] Patterson directly challenges the ALJ's findings with respect to whether her vision impaired her ability to work, and has not pressed her other claims that her asthma, arthritis, and high blood pressure impose limits on her ability to sit, stand, and walk.
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FILED
NOT FOR PUBLICATION JUN 6 2011
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
RENE CAZARES, No. 09-16493
Petitioner - Appellant, D.C. No. 2:05-cv-00625-FCD-
DAD
v.
W. J. SULLIVAN, et al., MEMORANDUM *
Respondents - Appellees.
Appeal from the United States District Court
for the Eastern District of California
Frank C. Damrell, Jr., District Judge, Presiding
Submitted May 24, 2011 **
Before: PREGERSON, THOMAS, and PAEZ, Circuit Judges.
California state prisoner Rene Cazares appeals pro se from the district
court’s order denying his 28 U.S.C. § 2254 habeas petition. We have jurisdiction
under 28 U.S.C. § 2253 and we affirm.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Cazares contends that his trial counsel was ineffective. The California Court
of Appeal’s determination that Cazares did not demonstrate that his attorney failed
to investigate his case or that he was prejudiced by his attorney’s actions was not
an unreasonable application of Strickland v. Washington, 466 U.S. 668 (1984). See
28 U.S.C. § 2254(d); Harrinton v. Richter, 131 S. Ct. 770, 785-87 (2011).
Cazares also contends that the trial court erroneously denied his motion to
represent himself, made after jury selection had began. The California Court of
Appeal’s determination that Cazares’ motion was untimely rested on a reasonable
determination of the facts and was not contrary to Faretta v. California, 422 U.S.
806 (1975). See 28 U.S.C. § 2254(d); Marshall v. Taylor, 395 F.3d 1058, 1061-62
(9th Cir. 2005).
Cazares’ motion for appointment of appellate counsel and accompanying
requests are denied.
AFFIRMED.
2 09-16493
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9 F.3d 1555
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.STATE OF WASHINGTON, et al., Defendants,and26 Upland and Tideland Private Property Owners, Dan Buehler,Robert L. Davis, Bruce I. Fielding, et al.,Intervenors-Appellants.
No. 93-35324.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted Aug. 30, 1993.Decided Nov. 2, 1993.
Before: WALLACE, BOOCHEVER and NOONAN, Circuit Judges.
1
MEMORANDUM*
2
A group of twenty-six Tideland and Upland Property Owners (the Property Owners) moved to intervene in a sub-proceeding in United States v. Washington. The district court denied the motion. The Property Owners appealed. We reverse and remand to the district court.
PROCEEDINGS
3
In September 1970 the United States as trustee for several Indian tribes brought suit against the State of Washington seeking a declaratory judgment and injunctive relief in relation to rights secured to the tribes by treaties with the United States. In the course of the long ensuing litigation, sixteen Indian tribes with reservations on Puget Sound were permitted to bring a sub-proceeding seeking a right to harvest shellfish on all tidelands in western Washington, together with the right of access to the tidelands over upland property.
4
The district court permitted the intervention in the shellfish suit by forty-two Puget Sound commercial shellfish growers and by two owners of tideland property, Carter and Oldham, represented by title companies. The Puget Sound shellfish growers moved to compel joinder of all private tideland owners as necessary and indispensable parties. This motion was denied by the district court.
5
On April 23, 1991 the Property Owners made their motion to intervene in the case. On January 27, 1993 the district court ruled from the bench, denying this motion on the ground that Carter and Oldham adequately represented the Property Owners. The district court stated: "They appear to share identical interests with the applicant intervenors and can adequately represent the position of the applicants for intervention."
6
The Property Owners appeal.
ANALYSIS
7
The tidelands and uplands affected by the shellfish suit are broadly dispersed throughout Puget Sound. The property of Carter and Oldham is adjacent to the reservation of one of the tribes but is not close to the reservations of the other tribes seeking redress in the shellfish suit. Carter and Oldham are not in a position to raise defenses that may be available to the Property Owners in other parts of Puget Sound, in particular defenses that may be made on the basis of the alleged extinguishment of the claims of particular tribes or on the basis that a particular tribe is able to make a moderate living from its fishing rights. Washington v. Washington State Commercial Passenger Vessel Association, 443 U.S. 658, 686-687 (1979). Consequently, Carter and Oldham cannot be said to represent adequately the position of the Property Owners.
8
Opposing the appeal, the sixteen tribes argue that this court can affirm the district court on the basis that the State of Washington adequately represents the property owners. We decline to do so because the district court did not rule on the proposition, and the record is not developed as to the relation of the State of Washington's interests as they overlap or do not overlap with those of the Property Owners.
9
On remand it will be open to the district court, if it so chooses, to take evidence as to the coincidence of interest between the state and the Property Owners and also the extent to which the Property Owners' interests overlap among themselves. To the extent that the Property Owners represent distinct interests, either as to tidelands or uplands or as to other land in relation to particular Indian tribes, involving different relevant treaty rights or the ability to make a moderate living, each of the Property Owners should be admitted as an intervenor, unless the district court finds that the state does, in fact, adequately represent all Property Owners as to their particular interests in shellfish rights and access over their property.
10
We note the concession made in open court before us by counsel for the Property Owners that they will not delay the trial if they are admitted as intervenors.
11
REVERSED and REMANDED for consideration in accordance with this disposition.
*
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Cir.R. 36-3
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SECOND DIVISION
ANDREWS, P. J.,
MCFADDEN and RAY, 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/
September 3, 2014
In the Court of Appeals of Georgia
A14A0863. FRASER v. THE STATE.
MCFADDEN, Judge.
After a jury trial, Raoul Fraser was convicted of simple battery/family violence.
He appeals, claiming that the trial court erred in admitting testimony concerning prior
difficulties. However, Fraser did not object to the testimony and has not shown plain
error. Accordingly, we affirm.
Construed in favor of the verdict, evidence presented at trial showed that on
January 10, 2013, Fraser assaulted his former live-in girlfriend. He cursed at her,
pushed her, grabbed her throat, shoved her to the ground, got on top of her, and
choked her. When a neighbor arrived at the scene, Fraser fled.
A police officer who was dispatched to the scene testified that while questioning the
victim, she said that on a prior occasion she and Fraser had gotten into an argument
and Fraser had attempted to kill her. Although Fraser had raised an earlier hearsay
objection to other testimony, he did not object to this testimony by the officer about
the prior incident.
“Georgia ‘has long followed the contemporaneous objection rule, which
provides that counsel must make a proper objection on the record at the earliest
possible time to preserve for review the point of error.’ [Cit.]” Stacey v. State, 292 Ga.
838, 843 (4) (741 SE2d 881) (2013). As noted above, Fraser did not make a
contemporaneous objection to the prior incident testimony by the officer.
Nevertheless, because the trial in this case occurred after January 1, 2013, we may
review the purportedly improper testimony for plain error. See Rembert v. State, 324
Ga. App. 146, 152 (2) n. 8 (749 SE2d 744) (2013) (“Georgia’s new Evidence Code,
which applies to cases tried after January 1, 2013, allows a court to consider ‘plain
errors affecting substantial rights although such errors were not brought to the
attention of the court.’ OCGA § 24-1-103 (d).”).
“A finding of plain error requires a clear or obvious legal error or defect not
affirmatively waived by the appellant that must have affected the appellant’s
substantial rights, i.e., it affected the outcome of the trial-court proceedings.” Taylor
v. State, ___ Ga. App. ___ (8) (Case No. A14A0497, decided July 7, 2014). Here,
2
even assuming, without deciding, that the officer’s testimony about the prior incident
was improper, such error did not affect Fraser’s substantial rights since the victim
also testified, without objection, about the prior incident and having told the officer
about it. Thus, the officer’s “testimony on this point was [merely] cumulative and its
admission did not in reasonable probability affect the outcome of the trial.” Johnson
v. State, ___ Ga. ___ (3) (Case No. S14A0558, decided June 30, 2014). Because
Fraser did not object to the testimony and there was no plain error in its admission,
we affirm.
Judgment affirmed. Andrews, P. J., and Ray, J., concur.
3
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T.C. Memo. 2016-80
UNITED STATES TAX COURT
RP GOLF, LLC, SB GOLF, LLC, TAX MATTERS PARTNER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 27873-08. Filed April 28, 2016.
Lisa J. Hansen and Michael J. Abrams, for petitioner.
Shaina E. Boatright and David L. Zoss, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
PARIS, Judge: This case involves a noncash charitable contribution
deduction. In a notice of final partnership administrative adjustment (FPAA) for
2003 respondent disallowed a $16,400,000 charitable contribution deduction on
the partnership return of RP Golf, LLC (RP Golf). The deduction was claimed for
the donation of a conservation easement on real property currently operating as a
-2-
[*2] golf course and conveyed by the National Golf Club of Kansas City LLC
(National Golf), a single-member limited liability company (LLC) whose sole
member was RP Golf.1
The issues for decision are as follows: (1) whether the requirements of
section 170(h) for a qualified conservation easement are met;2 (2) whether RP Golf
is entitled to a charitable contribution deduction with respect to a donation of a
conservation easement to a charitable organization by its single-member LLC; and
(3) if the Court determines that RP Golf is entitled to a charitable contribution
deduction, then what is the value of the conservation easement.
FINDINGS OF FACT
Some of the facts are stipulated and are so found. The stipulation of facts,
the amended first supplemental stipulation of facts, and the exhibits attached
thereto are incorporated herein by this reference. At the time the petition was
filed, RP Golf’s principal place of business was in Missouri. RP Golf is a
1
Although National Golf is identified as a Missouri corporation in the
conservation easement agreement, National Golf is actually a single-member LLC
organized in Missouri and disregarded for Federal income tax purposes. The
easement filed of record was not corrected before trial to reflect National Golf’s
correct entity identification.
2
Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect for the year in issue, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
-3-
[*3] Missouri LLC and was formerly referred to as River Park Golf, LLC.3 SB
Golf, LLC, is RP Golf’s tax matters partner and petitioner in this case. See sec.
6226.
I. Property Ownership History
In June 1997 RP Golf acquired a substantial portion of the land that makes
up the current golf course development on which the conservation easement at
issue is located. The golf course property formerly known as Windbrook
Properties (Windbrook Properties) was conveyed to RP Golf by a trustee’s deed
that included disclosures from a bankruptcy estate. The trustee’s deed conveyed
multiple tracts of land in Platte County, Missouri, to RP Golf.
In October 1998 RP Golf conveyed certain property, including a portion,
but not all, of the Windbrook Properties, without disclosures by special warranty
deed to its wholly owned subsidiary, National Golf. The special warranty deed
was recorded in the Platte County Recorder’s Office on October 30, 1998.
RP Golf developed two private golf courses on the Windbrook Properties,
known as the National and the Deuce at the National (Deuce), respectively.4 The
3
River Park Golf, LLC, was the entity’s prior legal name, but for
consistency all references will be to the entity’s current name, RP Golf.
4
RP Golf’s tax return and the attached appraisal described the National as
(continued...)
-4-
[*4] National was completed and placed into service in 2000. The first nine holes
of the Deuce were completed and placed into service in 2002. The remaining nine
holes of the Deuce were completed and placed into service in 2003.
Each golf course organized private clubs, and during 2003 National Golf
operated both of the for-profit private golf clubs. One club was associated with
the National course, and the other club was associated with the Deuce course.
II. Development Financing Agreements
Hillcrest Bank financed RP Golf’s original 1997 purchase of the Windbrook
Properties. Then in January 2001 Hillcrest Bank made a development loan of
$12,500,000 to RP Golf (Hillcrest loan). RP Golf, National Golf, and another
related entity granted a security interest in all of the Windbrook Properties, among
others, and as security to the indebtedness executed a deed of trust dated January
24, 2001, which was recorded in the Platte County Recorder’s Office on February
5, 2001 (2001 deed of trust). The 2001 deed of trust contains standard provisions
prohibiting any transfer of any interest in the property without the consent of the
4
(...continued)
the National I and the Deuce as the National II. The Court will refer to the first
golf course as the National I and the second golf course as the National II
throughout for consistency when discussing legal descriptions or appraisals.
-5-
[*5] Hillcrest Bank and states that a violation of the transfer prohibition would
result in an event of default.
The Hillcrest loan amount was subsequently modified, and the principal was
reduced to $9,900,000. The 2001 deed of trust was amended accordingly. In an
agreement dated April 8, 2003, the Hillcrest loan was further modified to extend
the maturity date to February 7, 2004, and the 2001 deed of trust was further
amended by a modification agreement dated April 8, 2003, and recorded on
February 11, 2004. The Hillcrest loan was modified again to increase the
principal to $10,900,000 and to extend the maturity date to February 7, 2005. The
2001 deed of trust was further amended to reflect the changes by a modification
agreement dated February 7, 2004, and recorded on March 16, 2004 (2004
Hillcrest modification). Each of the above-described modifications contained the
following disclosure:
Statutory Notice. Oral agreements or commitments to loan money,
extend credit or to forbear from enforcing repayment of a debt,
including promises to extend or renew such debt, are not enforceable.
To protect you (borrower(s)) and us (creditor) from misunderstanding
or disappointment, any agreements we reach covering such matters
are contained in this writing, which is the complete and exclusive
statement of the agreement between us, except as we may later agree
in writing to modify it. * * *
-6-
[*6] Both RP Golf and National Golf, the grantor of the easement, executed the
original 2001 Hillcrest loan and the 2004 Hillcrest modification.5
Earlier development financing was also obtained from Great Southern Bank,
which made four loans to National Golf and/or RP Golf. Great Southern Bank
held the following deeds of trust on the Windbrook Properties: (1) RP Golf in the
principal amount of $4,200,000 secured by a deed of trust dated May 27, 1998; (2)
National Golf in the principal amount of $8 million secured by a deed of trust
dated October 27, 1998; (3) RP Golf in the principal amount of $3,800,000
secured by a deed of trust dated January 25, 2000; and (4) National Golf in the
principal amount of $10 million secured by a deed of trust dated September 25,
2002. The promissory notes securing the deeds of trust contained a limitation on
oral agreements that was substantially similar to the limitation contained in the
Hillcrest documents.
Both Hillcrest Bank and Great Southern Bank had extensive financing
agreements and senior deeds of trust recorded in the Platte County Recorder’s
Office before National Golf’s grant of easement described infra.
5
The April 8, 2003, modification agreement was executed by RP Golf, but
was not executed by National Golf.
-7-
[*7] III. The Conservation Easement
On December 29, 2003, National Golf, as grantor, executed an agreement
entitled “Grant of Permanent Conservation Easement” purporting to grant a
conservation easement to the Platte County Land Trust (PLT), a Missouri not-for-
profit corporation (PLT agreement).6 National Golf expressly reserved the right
for itself, and its successors or assigns, to use the property as a golf course, and it
continues to operate two private golf clubs on the property.
The PLT agreement includes, inter alia, the following statement about the
transfer of the conservation easement:
WHEREAS, the Grantor is the owner in fee of certain real
property located in Platte County, Missouri, which has aesthetic, open
space, scenic, recreational, and natural resource values in its present
state; * * *
The property underlying the PLT agreement is in the City of Parkville, Platte
County, Missouri. The legal description attached to the PLT agreement conveyed
portions of multiple sections of land, including a part of the northwest quarter of
section 26. National Golf has never been the owner in fee of the northwest
6
PLT is a Missouri not-for-profit corporation qualified under sec. 501(c)(3)
to receive charitable contributions described in sec. 170(c).
-8-
[*8] quarter of section 26.7 The PLT agreement also included the following
declarations:
WHEREAS, the Grantor desires to protect and preserve the
natural values of the property by making permanent arrangements for
the conservation of the open space, scenic natural resources, natural
habitat and aesthetic qualities of the Property and to limit the future
use thereof to such purposes;[8] * * *
* * * * * * *
NOW, THEREFORE, for and in consideration of the covenants
and representations contained herein and for other good and valuable
7
The extensive legal description attached to the conservation easement,
referred to as schedule A, is a 10-page metes and bounds survey with an additional
16 pages of survey describing exceptions to the conservation easement. The
survey describes the property in a series of golf tracts with subtracts described to
identify the exclusions from the PLT agreement. The series of golf tracts is the
National I, golf tracts A through D, and the National II, golf tracts E through I.
Golf tracts G and H appear to include some portion of section 26 in the legal
description.
8
The original trustee’s deed conveying Windbrook Properties to RP Golf
included the following disclosure that National Golf did not include in the PLT
agreement:
Grantee further acknowledges and understands that there may be
harmful, hazardous or toxic substances or solid wastes on or released
from the premises and except for the limited statement of Grantor’s
knowledge herein set forth, Grantor makes no representations
whatsoever concerning the extent, location or nature of the same.
* * * Grantee * * * expressly waives any right or claim against
Grantor, * * * . The waiver * * * shall be deemed to be covenants
running with the land and binding upon successors and assigns of
grantee and all operators of the premises.
-9-
[*9] consideration, the receipt and legal sufficiency of which are
hereby acknowledged, Grantor [National Golf] on behalf of itself and
its heirs, successors and assigns, in consideration of the premises
contained herein and other valuable consideration paid to its full
satisfaction, does freely give, grant, sell, transfer, convey and confirm
forever unto [PLT] * * * a perpetual conservation easement (as more
particularly set forth below) in that certain tract of land containing
approximately three hundred (300) acres, more or less,[9] being more
particularly described in Schedule A * * * attached hereto and
incorporated herein * * *
* * * * * * *
This instrument sets forth the entire agreement of the parties
with respect to the Easement and supersedes all prior discussions,
negotiations, understandings, or agreements relating to the Easement,
all of which are merged herein.
The easement’s purpose, according to the PLT agreement, is primarily to
“further the policies of the State of Missouri designed to foster the preservation of
open space or open areas, conservation of the state’s forest, soil, water, plant and
wildlife habitats, and other natural and scenic resources” and “to implement the
objectives set forth in 67.870 to 67.910 R.S.M.O.” The objectives outlined in the
Missouri statutes aim to preserve and maintain open areas and spaces in the light
9
The appraisal dated December 15, 2003, supporting RP Golf’s charitable
contribution valuation reflected a donation of 277.86 acres. The appraisal
included a description of property located in section 26, even though National
Golf was not the owner of that property. See supra p. 7.
- 10 -
[*10] of encroaching urban and metropolitan development. Mo. Ann. Stat. sec.
67.870 (West 2007).
Missouri law governs the interpretation and performance of the easement,
which, per the PLT agreement, “shall be liberally construed to implement
Missouri’s open areas policy.” To ensure National Golf’s compliance with the
statutory objectives and the PLT agreement terms, PLT agreed to inspect and, if
necessary, enforce the easement for an annual fee of approximately $15,000.
Additionally, the grantor, National Golf, agreed to incorporate the terms of the
easement by reference in any deed or other legal instrument by which it divests
itself of any interest in all or a portion of the property.
PLT’s vice president executed a separate agreement entitled “Acceptance”,
accepting the easement and agreeing to its covenants and restrictions. The PLT
agreement and the acceptance were recorded in the Platte County Recorder’s
Office on December 30, 2003.
IV. Consents To Subordinate
When National Golf executed the PLT agreement on December 29, 2003,
the property was subject to senior deeds of trust held by Hillcrest Bank and Great
Southern Bank that predated the PLT agreement. Consents subordinating the
interests of the two banks were executed by bank officers on April 14, 2004,
- 11 -
[*11] approximately 100 days after the PLT agreement, and recorded in the Platte
County Recorder’s Office on April 15, 2004. Each consent states that the
subordination was made effective as of December 31, 2003, even though National
Golf executed the PLT agreement on December 29, 2003, and recorded it on
December 30, 2003.
Hillcrest Bank’s consent to subordinate recites the following: “Hillcrest
hereby consents to the Conservation Easement, [sic] and subordinates its rights in
the Property to the right of the Land Trust to enforce the conservation purposes set
forth in the Conservation Easement in perpetuity.” Hillcrest Bank’s consent to
subordinate did not recite the exchange of any consideration nor did it identify the
debt it intended to subordinate or any of its recorded deeds of trust.
Great Southern Bank’s consent to subordinate also did not recite the
exchange of any consideration but it specifically identified the following loans:
(1) RP Golf in the principal amount of $4,200,000 secured by a deed of trust dated
May 27, 1998; (2) National Golf in the amount of $8 million secured by a deed of
trust dated October 27, 1998; (3) RP Golf in the principal amount of $3,800,000
secured by a deed of trust dated January 25, 2000; and (4) National Golf in the
principal amount of $10 million secured by a deed of trust dated September 25,
2002.
- 12 -
[*12] V. The Appraisal
A complete appraisal in a summary report was dated April 13, 2004. The
appraisal was addressed to the chief executive office of National Golf in regard to
a conservation easement on the National I and the National II10 with an effective
date of December 15, 2003. The appraisal commitment letter stated that the sole
intended users of the appraisal were the principals of National Golf and the
Internal Revenue Service in regard to a permanent conservation easement.
The property description was for 277.86 acres, and the appraisal reflected
ownership by National Golf and the “National II, LLC”.11 The appraisal of the
National I and the National II reflected a before valuation of $17,400,000, an after
valuation of $1 million, and an easement valuation of $16,400,000.
The appraisal included several assumptions and limitations. One was that
the title to the property interest appraised as good and marketable. Another was
that the property was free and clear of any liens or encumbrances unless stated
otherwise. Although a copy of the PLT agreement, reflecting National Golf as the
grantor, was included in the appraisal there was no discussion or documentation
10
See supra notes 4 and 7.
11
There is no evidence in the record that the “National II, LLC”, ever owned
any of the 277.86 acres reflected in the appraisal, nor did National Golf own any
of section 26 reflected in the appraisal.
- 13 -
[*13] on the apparent deviation of the assumption of ownership.12 Additionally,
the appraisal does not reflect any disclosure of the deeds of trust liens or the
consents to subordinate described supra sections II and IV.
VI. Tax Return
On its Federal income tax return for 2003, Form 1065, U.S. Return of
Partnership Income, timely filed on April 14, 2004, RP Golf claimed a charitable
contribution deduction of $16,400,000 and attached to the return a Form 8283,
Noncash Charitable Contributions. RP Golf reported on Form 8283 the
easement’s value and a basis of $23,930,612 in the donated property and also
included an appraiser’s declaration that described the donated property as a
conservation easement on two golf courses that were identified as the National
Golf Club of Kansas City and the National II. The declaration stated the
easement’s appraised fair market value as $16,400,000. RP Golf did not identify
the transaction as a bargain sale and reported that no amount was received. PLT’s
vice president signed the form under “Donee Acknowledgment” attesting to PLT’s
status as a qualified organization under section 170(c) and its receipt of the
easement on December 29, 2003.
12
See supra note 11.
- 14 -
[*14] Even though RP Golf claimed a conservation easement contribution
deduction on its 2003 tax return, it did not reduce the basis of the depreciable
assets on the property included in the PLT agreement. RP Golf reduced only the
basis of its real property subject to the provisions of the easement.
In 2006, 2007, and 2008 the parties executed Forms 872-P, Consent to
Extend the Time to Assess Tax Attributable to Partnership Items, extending the
assessment period of RP Golf’s 2003 Federal tax return to December 31, 2008.
On August 22, 2008, respondent issued a FPAA to the tax matters partner of
RP Golf. Respondent disallowed the entire charitable contribution deduction for
the conservation easement on the ground that it failed to satisfy the requirements
of section 170, or alternatively, it failed to establish that the easement’s value was
$16,400,000 and it failed to reduce the depreciable basis of the asset appropriately.
Petitioner timely filed a petition with the Court.
VII. Motion For Summary Judgment
Respondent filed a motion for summary judgment asking the Court to
sustain respondent’s determination disallowing petitioner’s charitable contribution
deduction for the conservation easement. At issue was whether RP Golf had
satisfied the substantiation requirements of section 170 with respect to the
conservation easement contribution. Respondent also claimed that the
- 15 -
[*15] conservation easement did not: (1) protect a relatively natural habitat of
fish, wildlife, or plants, or a similar ecosystem under section 170(h)(4)(A)(ii) or
(2) preserve open space pursuant to a clearly delineated Federal, State, or local
governmental conservation policy under section 170(h)(4)(A)(iii)(II).
The PLT agreement relied upon the Missouri statutory conservation policy,
limited to open spaces and areas within counties having a population of more than
200,000 residents or in any county adjoining, or city not within but adjoining such
county. Mo. Ann. Stat. sec. 67.870. There was no evidence on the date of the
grant that Platte County had a population that exceeded 200,000 residents, nor was
there evidence that the county adjacent to Platte County had a population that
exceeded 200,000 residents. In its response in opposition to respondent’s motion
for summary judgment, petitioner conceded that the easement was not made
pursuant to a clearly delineated governmental conservation policy within the
meaning of section 170(h)(4)(A)(iii)(II). Therefore, the easement’s conservation
purpose, as defined in section 170(h)(4), must hinge on a purpose other than a
clearly delineated government conservation policy.
In RP Golf, LLC v. Commissioner, T.C. Memo. 2012-282, the Court held
that the charitable contribution did not have a charitable purpose within the
meaning of section 170(h)(4)(A)(iii)(II) requiring a clearly delineated Federal,
- 16 -
[*16] State, or local governmental conservation policy and that genuine issues of
material fact remained concerning whether the requirements for a charitable
contribution deduction under section 170 had been met for 2003. The parties
proceeded to trial on the remaining issues.
OPINION
I. Burden of Proof
Generally, the Commissioner’s determination of a deficiency is presumed
correct, and the taxpayer bears the burden of proving it incorrect. See Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Moreover, deductions are
a matter of legislative grace, and the taxpayer bears the burden of proving his
entitlement to any deductions claimed. INDOPCO, Inc. v. Commissioner, 503
U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Under section 7491(a), the burden of proof may shift to the Commissioner if the
taxpayer produces credible evidence with respect to any relevant factual issue and
meets other requirements. Petitioner has not argued that section 7491(a) applies
and has not shown that it meets the requirements to shift the burden of proof;
therefore, the burden of proof remains on petitioner.
- 17 -
[*17] II. National Golf’s Property Ownership
National Golf as grantor executed a conservation easement agreement that
encumbered approximately 277 acres purportedly in perpetuity to PLT, a not-for-
profit corporation qualified to receive contributions under section 501(c)(3).
Whether the contribution to PLT constituted a transfer for the purposes of section
170 is ultimately a question of Federal law. See United States v. Craft, 535 U.S.
274, 278 (2002). The answer to this Federal question, however, depends in part
upon State law, which creates and governs the nature of interests in property. See
id.; United States v. Nat’l Bank of Commerce, 472 U.S. 713, 722 (1985); see also
United States v. Mitchell, 403 U.S. 190, 197 (1971); Commissioner v. Estate of
Bosch, 387 U.S. 456, 465 (1967).
“A common idiom describes property as a ‘bundle of sticks’--a collection of
individual rights which, in certain combinations, constitute property.” Craft, 535
U.S. at 278-279. “Likewise, ownership of property is not a single indivisible
concept but rather an aggregate or bundle of rights pertaining to the property
involved.” Molbreak v. Commissioner, 61 T.C. 382, 389 (1973), aff’d, 509 F.2d
616 (7th Cir. 1975). Once property rights are determined under State law, as
announced by the highest court of the State, the Federal tax consequences are
decided under Federal law. Nat’l Bank of Commerce, 472 U.S. at 722; Mitchell,
- 18 -
[*18] 403 U.S. at 197; Aquilino v. United States, 363 U.S. 509, 512-513 (1960);
Morgan v. Commissioner, 309 U.S. 78, 80 (1940).
In the PLT agreement National Golf purported to convey an interest in
section 26 of the former Windbrook Properties, which was property that had never
been conveyed to National Golf. Missouri common law corresponds with
Missouri’s statute of frauds and requires a written contract on any transfer of real
property. See McDaniel v. Park Place Care Ctr., Inc., 918 S.W.2d 820, 826 (Mo.
Ct. App. 1996) (“A transfer of an interest in real property must be memorialized in
writing.”); see also Gegg v. Kiefer, 655 S.W.2d 834, 837 (Mo. Ct. App. 1983)
(citing Jones v. Linder, 247 S.W.2d 817 (Mo. 1952) (“An oral contract to convey
land falls within the literal ambit of the Statute of Frauds and so will not be
enforced at law.”).
Missouri law also requires that deeds transferring property be written and
subscribed, i.e., signed by the grantor, which in this case is RP Golf. Mo. Ann.
Stat. sec. 442.130 (West 2000); Gregg v. Georgacopoulos, 990 S.W.2d 120, 124
(Mo. Ct. App. 1999). Additionally, the validity of the easement must be judged at
the time of the grant. See Wachter v. Commissioner, 142 T.C. 140, 148 (2014)
(“[A] conservation easement fails to be ‘in perpetuity’ * * * if, on the date of the
donation, the possibility that the charity may be divested of its interest in the
- 19 -
[*19] easement is not so remote as to be neglible.” (alteration in original)
(emphasis added) (quoting Graev v. Commissioner, 140 T.C. 377, 393 (2013)));
Graev v. Commissioner, 140 T.C. at 393 (“[W]hether a charitable contribution was
effectively ‘made’, whether it consisted of an ‘entire interest’, and whether it was a
‘qualified conservation contribution’--essentially turns on the same question: At
the time of * * * contributions, was the possibility that * * * the easement would
be defeated ‘so remote as to be negligible’?” (emphasis added)); see also
Carpenter v. Commissioner, T.C. Memo. 2012-1, slip op. at 11 (“To determine
whether the conservation easement deeds comply with requirements for the
conservation easement deduction under Federal tax law, we must look to State law
to determine the effect of the deeds. * * * Specifically, we must look to State law
to determine how conservation easements may be extinguished.”).
RP Golf claimed a deduction for the value of 277.86 acres. RP Golf may
have intended for the entire property described in the PLT agreement executed by
National Golf to be a valid charitable contribution, but neither RP Golf nor any
other entity ever conveyed ownership of section 26 to National Golf. National
Golf thus had no legal title to convey tracts of land in section 26 by easement or
otherwise. Indeed, PLT as the donee never acquired a legal interest in an
easement on any of the golf tracts in section 26 pursuant to the PLT agreement
- 20 -
[*20] granted by National Golf. Thus, the grantee, PLT, had no power or
authority to enforce the conservation purposes of the easement granted by
National Golf for golf tracts in section 26.13
Therefore, the property described in the PLT agreement and located in
section 26 was not a charitable contribution to PLT. The acres in section 26 are
not a valid qualified conservation contribution, and the value of those acres shall
be removed from any potential charitable donation value.14 Whether the balance
of the legal description conveyed by the PLT agreement is a qualified conservation
contribution under section 170(h) is considered below.
13
The property described on the survey as the National II golf tracts G and H
appears to include section 26 in the easement. See supra notes 4 and 7.
14
See supra note 11. Petitioner has argued that, where the grantor did not
yet own the land described in a deed, he may rely on chapter 5 of the Missouri title
examination standards (MTES) to cure the defect, but not so in this case. The title
exam standard described cannot be relied upon to make a current donation of an
easement in property the donor does not yet own. 1 Mo. Prac., Methods of Prac.:
Transact. Guide sec. 5.14 (4th ed. 2016). First, the cure period provided in chapter
5 of the MTES is 10 years from recording. A cure after donation is inconsistent
with the requirements in section 170 that both the easement grant and the
conservation purpose protection be perpetual from the time the easement is
granted, not at a time 10 years after the grant.
Second, reliance on chapter 5 of the MTES requires that the Court inquire
into actual events after the grant of the easement. Even if chapter 5 of the MTES
can be relied upon to cure a defect in title under State law, chapter 5 of the MTES
cure period cannot be used to cure a defective charitable contribution for purposes
of Federal income tax law.
- 21 -
[*21] III. Noncash Charitable Contributions and the Balance of the Easement
A taxpayer is generally allowed a deduction for any charitable contribution
made during the taxable year. Sec. 170(a)(1). A charitable contribution includes a
gift of property to a charitable organization, made with charitable intent and
without receiving or expecting to receive adequate consideration. See Hernandez
v. Commissioner, 490 U.S. 680, 690 (1989); United States v. Am. Bar
Endowment, 477 U.S. 105, 116-118 (1986); see also sec. 1.170A-1(h)(1) and (2),
Income Tax Regs. The term “charitable contribution” as used in section 170 has
been generally held synonymous with the term “gift.” Considine v.
Commissioner, 74 T.C. 955, 967 (1980); Sutton v. Commissioner, 57 T.C. 239,
242 (1971); DeJong v. Commissioner, 36 T.C. 896, 899 (1961), aff’d, 309 F.2d
373 (9th Cir. 1962). “A gift is generally defined as a voluntary transfer of
property by the owner to another without consideration therefor.” Considine v.
Commissioner, 74 T.C. at 967 (emphasis added) (quoting DeJong v.
Commissioner, 36 T.C. at 899). While a taxpayer is generally not allowed a
charitable contribution deduction for a gift of property consisting of less than an
entire interest in that property, an exception is made for a “qualified conservation
contribution.” See sec. 170(f)(3)(A), (B)(iii).
- 22 -
[*22] Under section 170(h)(1), a “qualified conservation contribution” is a
contribution (1) of a “qualified real property interest,” (2) to a “qualified
organization,” (3) which is made “exclusively for conservation purposes.” See
also sec. 1.170A-14(a), Income Tax Regs. The Court will focus on the third
requirement; i.e., whether National Golf’s contribution of the donated property
was exclusively for conservation purposes. A contribution is made exclusively for
conservation purposes only if it meets the requirements of section 170(h)(4) and
(5). Glass v. Commissioner, 124 T.C. 258, 277 (2005), aff’d, 471 F.3d 698 (6th
Cir. 2006). The Court will begin the analysis with the requirements of section
170(h)(5).
Section 170(h)(5)(A) provides that “[a] contribution shall not be treated as
exclusively for conservation purposes unless the conservation purpose is protected
in perpetuity.” The parties disagree on whether the conservation purpose of the
donated property is protected in perpetuity. Respondent argues that the
donated property is not protected in perpetuity by virtue of Great Southern Bank’s
and Hillcrest Bank’s recorded deeds of trust on the subject property. Petitioner
argues that the conservation purpose of the donated property is protected in
perpetuity because Great Southern Bank and Hillcrest Bank had orally agreed to
the conveyance at the time of the easement. The banks then subordinated their
- 23 -
[*23] interests in the subject property to PLT’s right to enforce the terms of the
easement in documents executed and recorded after the grant of the easement and
recordation of the PLT agreement.
The perpetuity requirement of section 170(h)(5)(A) has its origins in the
Tax Reduction and Simplification Act of 1977 (TRSA 1977), Pub. L. No. 95-30,
sec. 309(a), 91 Stat. at 154.15 In TRSA 1977 sec. 309, Congress temporarily
allowed a charitable contribution deduction for an “easement with respect to real
property granted in perpetuity to * * * [a governmental unit or qualifying
charitable organization] exclusively for conservation purposes”. The House
conference report on TRSA 1977 explained:
While it is intended that the term “conservation purposes” be
liberally construed with regard to the types of property with respect to
which deductible conservation easements * * * may be granted, it is
also intended that contributions of perpetual easements * * * qualify
for the deduction only in situations where the conservation purposes
of protecting or preserving the property will in practice be carried out.
Thus, it is intended that a contribution of a conservation easement
15
The Tax Reform Act of 1976, Pub. L. No. 94-455, sec. 2124(e), 90 Stat. at
1919, authorized a deduction for the donation of an “easement with respect to real
property * * * exclusively for conservation purposes”. See Glass v.
Commissioner, 124 T.C. 258, 277-280 (2005) (examining the legislative history of
the requirement that a qualified contribution of a conservation easement be
exclusively for conservation purposes), aff’d, 471 F.3d 698 (6th Cir. 2006).
Congress amended sec. 170(f)(3) to require that the easement be granted in
perpetuity in the Tax Reduction and Simplification Act of 1977 (TRSA 1977),
Pub. L. No. 95-30, sec. 309(a), 91 Stat. at 154.
- 24 -
[*24] * * * qualify for a deduction only if the holding of the easement * * *
is related to the purpose or function constituting the donee’s purpose
for exemption (organizations such as nature conservancies,
environmental, and historic trusts, State and local governments, etc.)
and the donee is able to enforce its rights as holder of the easement
* * * and protect the conservation purposes which the contribution is
intended to advance. The requirement that the contribution be
exclusively for conservation purposes is also intended to limit
deductible contributions to those transfers which require that the
donee hold the easement * * * exclusively for conservation purposes
(i.e., that they not be transferable by the donee in exchange for
money, other property, or services). [H.R. Conf. Rept. No. 95-263, at
30-31 (1977), 1977-1 C.B. 519, 523.]
Congress again drew attention to the protection of a contributed conservation
easement in the Act of Dec. 17, 1980 (1980 Act), Pub. L. No. 96-541, sec. 6(b), 94
Stat. at 3206, which extended permanently the deduction for a charitable
contribution of a qualified conservation easement.16 The Senate report
accompanying the enactment stated:
The bill retains the present law requirement that contributions
be made “exclusively for conservation purposes.” Moreover, the bill
explicitly provides that this requirement is not satisfied unless the
conservation purpose is protected in perpetuity. The contribution
must involve legally enforceable restrictions on the interest in the
property retained by the donor that would prevent uses of the retained
interest inconsistent with the conservation purposes. * * *
* * * * * * *
16
In the Act of Dec. 17, 1980, sec. 6(c), 94 Stat. at 3207, Congress
effectively made permanent the deduction for such a partial interest contribution
of a qualified conservation easement.
- 25 -
[*25] By requiring that the conservation purpose be protected in
perpetuity, the committee intends that the perpetual restrictions must
be enforceable by the donee organization (and successors in interest)
against all other parties in interest (including successors in interest).
***
[S. Rept. No. 96-1007, at 13-14 (1980), 1980-2 C.B. 599, 605.]
The Secretary published final regulations interpreting section 170(h)(5) on January
14, 1986. See T.D. 8069, 1986-1 C.B. 89. These regulations in relevant part
interpret section 170(h)(5)(A) as follows:
§1.170A-14. Qualified conservation contributions.--
(g) Enforceable in perpetuity.--(1) In general.--In the case of
any donation under this section, any interest in the property retained
by the donor (and the donor’s successors in interest) must be subject
to legally enforceable restrictions (for example, by recordation in the
land records of the jurisdiction in which the property is located) that
will prevent uses of the retained interest inconsistent with the
conservation purposes of the donation. * * *
(2) Protection of a conservation purpose in case of donation of
property subject to a mortgage.--In the case of conservation
contributions made after February 13, 1986, no deduction will be
permitted under this section for an interest in property which is
subject to a mortgage unless the mortgagee subordinates its rights
in the property to the right of the qualified organization to enforce the
conservation purposes of the gift in perpetuity. * * *
With the origins of section 170(h)(5)(A) and its relevant legislative history
and regulatory interpretation in mind, the Court now returns to the question of
whether the donated property was protected in perpetuity.
- 26 -
[*26] On December 29, 2003, when National Golf executed the PLT agreement
purporting to grant the conservation easement to PLT, the property was subject to
senior deeds of trust held by Great Southern Bank and Hillcrest Bank, and neither
bank joined or acknowledged the PLT agreement. Consents to subordinate the
interests of the two banks were not executed by bank officers until April 14, 2004,
over 100 days after the PLT agreement and on the same date as RP Golf’s 2003
tax return reported the contribution. The consents to subordinate were recorded in
the Platte County Recorder’s Office on April 15, 2004. Although the PLT
agreement was executed by National Golf on December 29, 2003, and recorded on
December 30, 2003, each consent states that the subordination was made effective
as of December 31, 2003.
The Hillcrest loan of $12,500,000 was made to RP Golf in January 2001.
The 2001 deed of trust, granted by RP Golf, National Golf, and the related entity,
included the property described in the PLT agreement as security for the 2001
Hillcrest loan. Section 15.1 of the 2001 deed of trust contains standard provisions
that any transfer of any interest in the property was prohibited without the consent
of Hillcrest Bank and that a violation of the transfer prohibition would result in an
event of default. The 2001 deed of trust also requires any amendment to be in
writing.
- 27 -
[*27] Through a series of modifications, the Hillcrest loan was modified to extend
the maturity date to February 7, 2004, and the 2001 deed of trust was amended by
a modification agreement dated April 8, 2003, and recorded on February 11, 2004.
Additionally, the 2004 Hillcrest modification increased the Hillcrest loan principal
to $10,900,000 and extended the maturity date to February 7, 2005, and the 2001
deed of trust modification was dated February 7, 2004, and recorded on March 16,
2004. RP Golf and the grantor of the easement, National Golf, executed the
modification to extend the maturity date from February 7, 2004, to February 7,
2005; none of the modifications disclosed the conveyance of the easement to PLT.
On December 29, 2003, when National Golf conveyed the easement to PLT, the
Hillcrest loan and deed of trust had been previously recorded and the maturity date
of the debt was February 7, 2004.
On April 14, 2004, Hillcrest Bank executed a consent to subordinate that
recited the following: “Hillcrest hereby consents to the Conservation Easement,
and subordinates its rights in the Property to the right of the Land Trust to enforce
the conservation purpose set forth in the Conservation Easement in perpetuity.”
The document did not include descriptions of any loan debt or deed of trust
information that it might be subordinating.
- 28 -
[*28] Great Southern Bank made four loans to National Golf and/or RP Golf.
Great Southern Bank’s consent to subordinate specifically recited the following
loans: (1) RP Golf in the principal amount of $4,200,000 secured by a deed of
trust dated May 27, 1998; (2) National Golf in the amount of $8 million secured
by a deed of trust dated October 27, 1998; (3) RP Golf in the principal amount of
$3,800,000 secured by a deed of trust dated January 25, 2000; and (4) National
Golf in the principal amount of $10 million secured by a deed of trust dated
September 25, 2002. All of these deeds of trust predated the PLT agreement.
Under Missouri law, a deed of trust is a form of mortgage consisting of an
instrument that uses an interest in real property as security for performance of an
obligation. Bob DeGeorge Associates, Inc. v. Hawthorn Bank, 377 S.W.3d 592,
597 (Mo. 2012). A deed of trust is subject to the recording statutes and may be
foreclosed. Id. Such foreclosure conveys title as it existed “on the date the
foreclosed deed of trust was recorded.” Golden Delta Enters., L.L.C. v. US Bank,
213 S.W.3d 171, 175 (Mo. Ct. App. 2007). Foreclosure extinguishes any junior
encumbrance, including an easement. See Monterey Dev. Corp. v. Lawyer’s Title
Ins. Corp., 4 F.3d 605, 609 (8th Cir. 1993) (referencing a junior mortgage); S.S.
Kresge Co. v. Shankman, 212 S.W.2d 794, 801-802 (Mo. Ct. App. 1948)
(referencing a junior easement).
- 29 -
[*29] In Missouri every written instrument that conveys or affects real estate must
be recorded in the office of the recorder of the county in which such real estate is
situated. Mo. Ann. Stat. sec. 442.380. Further, no such written instrument is
valid, except between the parties thereto and those who have actual notice thereof,
until the instrument is deposited with the recorder for record. Id. Generally, the
first recorded instrument has seniority and priority over later recorded property
instruments. Golden Delta Enters., 213 S.W.3d at 175.
The final regulations interpreting section 170(h)(5) in regard to the
protection of a conservation purpose of a donated property subject to a mortgage
was not the topic of a Court decision before the December 2003 PLT agreement.
The issue was first considered in Mitchell v. Commissioner (Mitchell I), 138 T.C.
324 (2012), supplemented by T.C. Memo. 2013-204 (Mitchell II), aff’d, 775 F.3d
1243 (10th Cir. 2015), where a 2003 conveyance failed as a qualified conservation
easement when a subordination agreement was not signed until almost two years
after the grant of the conservation easement. The Court held that “[t]hough the
subordination regulation is silent as to when a taxpayer must subordinate a
preexisting mortgage on donated property, we find that the regulation requires that
a subordination agreement must be in place at the time of the gift.” Mitchell I, 138
T.C. at 332; see also Minnick v. Commissioner, T.C. Memo. 2012-345, at *7,
- 30 -
[*30] aff’d, 796 F.3d 1156 (9th Cir. 2015). The Court also held that the mortgage
was not subordianted to the conservation easement when it was granted in 2006
and no deduction was permitted.
In Mitchell II, the Court denied the taxpayer’s motion to reconsider its
Opinion in Mitchell I. In Mitchell II the Court, relying on Carpenter v.
Commissioner, T.C. Memo. 2013-172, at *21, stated that the specific provisions of
section 1.170A-14(g), Income Tax Regs., are mandatory and may not be ignored.
Mitchell II, at *22. The Court upheld the requirement that the subordination
agreement be in place at the time of the gift. Id.
Like the facts in Mitchell I, the facts in this case focus on the requirements
of section 170(h) and the underlying regulations, including the requirement that
the deed of trust be subordinate to the conservation easement agreement. See sec.
1.170A-14(g)(2), Income Tax Regs. The consents to subordinate from Hillcrest
Bank and Great Southern Bank were not recorded on the date National Golf
granted the easement. In order for RP Golf to be eligible for a charitable
contribution deduction for 2003, it had to meet all the requirements of section
170(h).
Petitioner argues that the facts of this case are distinguishable from the facts
in Mitchell I. Specifically, petitioner argues that in Mitchell I the taxpayer
- 31 -
[*31] obtained the required subordinations two years after the grant of easement
and that the taxpayer had no prior oral consent from the lender. However, the
Court’s Opinion in Mitchell I considered the taxpayer’s position that an oral
agreement with the lender not to develop the property was in place that would
satisfy the perpetuity requirement of section 170(h)(5). See Mitchell I, 138 T.C. at
331, 338. Petitioner is now making the argument that the prior oral agreement to
subordinate the deed of trust satisfied the pertinent perpetuity requirements. The
Court in Mitchell I held that the oral agreement not to develop the property had no
effect on the mortgagee’s ability to foreclose on the property and extinguish the
conservation easement had the taxpayer defaulted on her promissory note. Id. at
338. The Court ultimately concluded that an oral agreement failed to meet the
perpetuity requirements of section 1.170A-14(g)(2), Income Tax Regs. See also
Minnick v. Commissioner, at *7-*8 (Finding that when subordinating a mortgage,
intention and willingness are not what matters at the time of granting a
conservation easement.).
In addition, RP Golf argues that it entered into enforceable oral agreements
with Great Southern Bank and Hillcrest Bank to subordinate the lenders’ interests
and that these agreements were confirmed in writing after the PLT agreement was
recorded. RP Golf claims that the oral agreements to subordinate were
- 32 -
[*32] enforceable against the lenders under Missouri law and thereby satisfied the
requirements of section 1.170A-14(g)(2), Income Tax Regs. Petitioner cites
Loewen v. Forsee, 38 S.W. 712 (Mo. 1897) (holding oral agreement regarding
priority of liens was not subject to statute of frauds), and Comty. Title Co. v.
Crow, 728 S.W.2d 652 (Mo. Ct. App. 1987) (holding mortgagee was estopped
from asserting priority of his deed of trust), as precedent to support RP Golf’s
claim that its alleged oral agreements with Great Southern Bank and Hillcrest
Bank were enforceable. However, Loewen does not apply to a contract
concerning an interest in land, which is addressed in and subject to the Missouri
statute of frauds. In addition, in Comty. Title Co. the mortgagee had actually
executed the contract of sale agreeing to subordinate his purchase money
mortgage to the construction lender, even though the mortgagee claimed he just
signed for his corporation. Comty. Title Co., 728 S.W.2d at 654. The Court
rejected the mortgagee’s argument and estopped his priority assertion. Id. at 655.
The parties disagree over the enforceability of oral agreements regarding
real estate under Missouri law and its statute of frauds. The Missouri statute of
frauds provides, in pertinent part:
No action shall be brought * * * upon any contract made for
the sale of lands, tenements, hereditaments, or an interest in or
concerning them * * * unless the agreement upon which the action
- 33 -
[*33] shall be brought, or some memorandum or note thereof, shall be
in writing and signed by the party to be charged therewith, or some
other person by him thereto lawfully authorized * * * [Mo. Ann. Stat.
sec. 432.010 (West 2010).]
Missouri common law corresponds with Missouri’s statute of frauds and
requires a written contract on any transfer of real property. See Gegg v. Kiefer,
655 S.W.2d at 837 (citing Jones, 247 S.W.2d 817 (“An oral contract to convey
land falls within the literal ambit of the Statute of Frauds and so will not be
enforced at law.”); see also McDaniel, 918 S.W.2d at 826 (“A transfer of an
interest in real property must be memorialized in writing.”). Further, no such
written instrument is valid, except between the parties thereto and those who have
actual notice thereof, until the instrument is deposited with the recorder for record.
Mo. Ann. Stat. sec. 442.400.
Generally, the first recorded instrument has seniority and priority over later
recorded property instruments. Golden Delta Enters., 213 S.W.3d at 175.
However, a bona fide purchaser takes free of adverse claims to title of unrecorded
interests. City of Branson v. Branson Hills Master Ass’n, Inc., 292 S.W.3d 467,
473 (Mo. Ct. App. 2009) (citing In re Idella M. Fee Revocable Trust, 142 S.W.3d
837, 842 (Mo. Ct. App. 2004)); Golden Delta Enters., 213 S.W.3d at 175. A bona
fide purchaser is someone who pays valuable consideration, has no notice of
- 34 -
[*34] encumbrances, and acts in good faith. McAboy v. Parker, 353 Mo. 1219,
1224 (1945). A person who obtains title by gift cannot be a bona fide purchaser
because he does not give valuable consideration. See Greer v. Orchard, 161 S.W.
875, 876 (Mo. Ct. App. 1913).
But the evidence does not establish the oral consent agreements that RP
Golf claims to have reached with Great Southern Bank and Hillcrest Bank
regarding subordination of their interests in the easement property. The record
contains no testimony or documentation from either of the banks that is dated on
or before the date National Golf executed the PLT agreement to convey the
easement to PLT and that corroborates RP Golf’s claim of an oral agreement to
subordinate.17 Neither of the consents to subordinate signed by Great Southern
Bank and Hillcrest Bank recites the exchange of any consideration for the
respective consents to subordinate. Even though RP Golf’s representative testified
that he was “sure” he talked with Great Southern Bank and Hillcrest Bank about
subordinating their interests to the easement before December 29, 2003, he did not
remember who he talked to at the banks. In addition, the Hillcrest loan and
17
During the audit and before the notice of deficiency was issued, Hillcrest
Bank provided a letter stating that Hillcrest Bank had a security interest in the golf
courses although the golf courses were not the primary collateral. An oral
agreement to subordinate was not addressed in the correspondence.
- 35 -
[*35] modification agreements specifically included an oral agreement statutory
notice prohibition as follows:
Statutory Notice. Oral agreements or commitments to loan money,
extend credit or to forbear from enforcing repayment of a debt,
including promises to extend or renew such debt, are not enforceable.
To protect you (borrower(s)) and us (creditor) from misunderstanding
or disappointment, any agreements we reach covering such matters
are contained in this writing, which is the complete and exclusive
statement of the agreement between us, except as we may later agree
in writing to modify it. * * *
The Great Southern Bank promissory notes contained a substantially similar
prohibition on oral agreements. RP Golf’s representative signed each of the
modification agreements and promissory notes. Neither of the consents to
subordinate signed by Great Southern Bank and Hillcrest Bank was signed before
April 14, 2004, or recorded before April 15, 2004. The evidence establishes that
both Great Southern Bank and Hillcrest Bank eventually consented to, and did,
subordinate their respective interests in the easement property. However, the
evidence fails to establish that RP Golf and Great Southern Bank and Hillcrest
Bank entered into any agreements, oral or written, binding under Missouri law,
regarding subordination to the easement on or before December 29, 2003, the date
of the PLT agreement.18
18
Both banks’ financing documents prohibited any transfer of interest in the
(continued...)
- 36 -
[*36] The property described in the PLT agreement purporting to grant a
conservation easement was subject to preexisting, unsubordinated mortgages on
the date of the grant. Because the easement granted by National Golf could have
been extinguished by foreclosure between December 29, 2003, and April 15,
2004, it was not protected in perpetuity and, therefore, was not a qualified
conservation contribution. The potential for foreclosure of the easement was not
illusory; at the time of the grant Hillcrest Bank held a senior deed of trust of
$9,900,000 that matured and was due and payable on February 7, 2004. The
senior deed of trust had priority over any enforceable right of PLT under the PLT
agreement. In addition, when the party principals executed documents to increase
the principal amount of the indebtedness to $10,900,000 and extend the maturity
date from February 7, 2004, to February 7, 2005, those documents failed to
disclose PLT’s interest in the underlying property. National Golf had pledged, in
the grant of the easement, to disclose the easement by reference in any legal
instrument that divests itself of any interest in all or a portion of the land. The
parties did not secure a consent to subordinate from Hillcrest before the loan and
deed of trust maturity date of February 7, 2004. RP Golf, through its single
18
(...continued)
property without consent of the bank, and failure to obtain consent would result in
a default.
- 37 -
[*37] member LLC, had potentially reduced the value of 277 acres of the
underlying security interest held by the banks from $17,400,000 to $1 million (see
appraisal discussion supra p. 12) and had failed to disclose or protect PLT, which
held the purported conservation easement, before increasing the liability. As a
result, the easement could have been extinguished by foreclosure and, therefore,
petitioner did not satisfy the requirements of section 170(h)(5) and section
1.170A-14(g)(2), Income Tax Regs.
Because it has not been established that all of the requirements of section
170 have been satisfied for the noncash charitable contribution of a qualified
conservation contribution, the balance of those requirements, the conservation
purposes, and the purported value of the charitable contribution will not be
discussed. Accordingly, the charitable contribution deduction is decreased by
$16,400,000 for the tax year ended December 31, 2003.
The Court has considered all arguments the parties have made, and to the
extent not discussed herein, finds that they are moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered
for respondent.
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989 F.2d 500
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.Kenneth A. MCCREADY, Plaintiff-Appellant,v.Claude R. THOMAS; Jill Eaton Weathers; Elaine Stocking;Ronald Retzloff, Defendants-Appellees.
No. 92-2019.
United States Court of Appeals, Sixth Circuit.
March 23, 1993.
Before MERRITT, Chief Judge, and BOGGS and BATCHELDER, Circuit Judges.
ORDER
1
Kenneth A. McCready, a pro se Michigan resident, appeals a district court judgment dismissing his civil rights action filed under multiple statutes. 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).
2
Seeking monetary and injunctive relief, McCready sued Claude R. Thomas, a judge for the State of Michigan; Jill Weathers, Judge Thomas's law clerk; Elaine Stocking, Judge Thomas's court reporter; and Ronald Retzloff, a deputy sheriff responsible for security in Judge Thomas's court. McCready alleged that defendants violated his civil rights on February 27, 1991, when Judge Thomas found him in contempt of court for failing to comply with an earlier court order. McCready was jailed for a short period of time until his fine was paid.
3
McCready filed his complaint alleging that the defendants violated his civil rights under 42 U.S.C. §§ 1983 and 1985, and raising state tort claims of false imprisonment, assault, battery, intentional infliction of emotional distress, liable, and slander. The defendants moved to dismiss the complaint for failing to state a cause of action and for summary judgment. The district court granted defendants' motions. McCready filed this timely appeal essentially arguing that the district court erred by concluding that Thomas was entitled to absolute judicial immunity. He requests oral argument.
4
All defendants except Retzloff moved to dismiss the complaint under Fed.R.Civ.P. 12(b)(6). Retzloff moved for summary judgment under Fed.R.Civ.P. 56(c). The district court did not state under which rule it was dismissing the complaint. Because the parties filed evidence outside the pleadings which was not excluded from the district court's consideration, the motion to dismiss under Rule 12(b)(6) must be treated as a motion for summary judgment. See Monks v. Marlinga, 923 F.2d 423, 425 (6th Cir.1991) (per curiam). Furthermore, it is noted that McCready has not raised any issues as to defendants Weathers, Stocking, and Retzloff. McCready's claims as to these defendants are therefore abandoned and are not reviewable on appeal. See McMurphy v. City of Flushing, 802 F.2d 191, 198-99 (6th Cir.1986).
5
Upon de novo review, we conclude that there are no genuine issues of material fact and that Thomas is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); EEOC v. University of Detroit, 904 F.2d 331, 334 (6th Cir.1990). Thomas is entitled to absolute judicial immunity. King v. Love, 766 F.2d 962, 965 (6th Cir.1985). The district court properly dismissed McCready's state tort claims without prejudice and denied his request for injunctive relief. See Vandiver v. Hardin County Bd. of Educ., 925 F.2d 927, 935 (6th Cir.1991).
6
Accordingly, we deny the request for oral argument and affirm the district court's judgment. Rule 9(b)(3), Rules of the Sixth Circuit.
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269 S.C. 581 (1977)
239 S.E.2d 75
ELLETT BROTHERS, INC., Appellant,
v.
Angelo B. MANOS, fd/b/a Art's Gun Shop d/b/a Lesco, Respondent.
20542
Supreme Court of South Carolina.
November 16, 1977.
*582 Leo A. Dryer, of Columbia, for Appellant.
Harvey I. Golden, of Columbia, for Respondent.
*583 November 16, 1977.
GREGORY, Justice:
This appeal is from the order of the lower court sustaining respondent's demurrer to appellant's complaint on the ground the complaint does not state facts sufficient to constitute a cause of action against Angelo B. Manos individually. We reverse.
On appeal from an order sustaining a demurrer, this Court's review is limited to the allegations stated in the complaint, which are assumed to be true. Herndon v. Wright, 257 S.C. 98, 184 S.E. (2d) 444 (1971). This excludes from consideration respondent's right to relief from liability on grounds which are in the nature of an affirmative defense. Lanham v. Jennings, 122 S.C. 461, 113 S.E. 791 (1922). A demurrer to a complaint cannot be sustained in facts sufficient to constitute a cause of action are stated in or can be fairly gathered from the complaint. Meadors v. South Carolina Medical Association, 266 S.C. 391, 223 S.E. (2d) 600 (1976), Baldwin v. Sanders, 266 S.C. 394, 223 S.E. (2d) 602 (1976).
Ellett Brothers, Inc., brought this action against Angelo B. Manos formerly doing business as Art's Gun Shop doing business as Lesco. The complaint alleges that plaintiff is a corporation; that defendant is a resident of Richland County; that plaintiff sold and delivered certain goods to defendant; and that defendant has not paid for a portion of those goods. An itemized statement of account is attached to the complaint.
The allegations in this complaint clearly state facts sufficient to constitute a cause of action against the named defendant. Thus, the lower court was in error in sustaining respondent's demurrer.
Reversed.
LEWIS, C.J., and LITTLEJOHN, NESS and RHODES, JJ,. concur.
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Mrs. Violet S. Greenhill, Chief
Division of Child Welfare
State Department of Publia Welfare
Austin, Texas
Dear Madam: Opinion No. O-3379
Re: Does Artiole 604, Penal Code,
authorize the following pro-
cedure; filing a complaint h
the justice oourt and immediately
thereafter filing an application
in the district oourt for the
defendant to appear on a certain
date and show oause why he should
not be ordered to provide for the
support of his wife and children,
and hearing the application and
the court make this order there-
on, this prooeeding in the dis-
triot court being taken without
the issuance of a warrant from the
justioeoourt, hearing in that court
or aation by the grand jury.
We acknowledge receipt of your request for the opinion
of this department wherein you enolosa a letter peoeived by you
from Mr. Fred Ward, Chief Probation Officer, Juvenile Court, Hall
of Hsoords, Dallas, Texas, in which the following question is
raised: Does Artlole 604, Penal Code of the State of Texas,
authorize the following prooedurer filing a aomplaint in the
justioe oourt, and immediately thereafter flllng an applioation
in the diatriot court for the defendant to appear on a certain
data and show oause why he should not be ordered to provide for
the support of his wife and ohlldren, and hearing the applica-
tion and the oourt maktng its order thereon, this prooeedlng in
the distrdot oourt being taken without the ieeuanoe of a warrant
from the justioe oourt, hearing in that oourt or aotlon by the
grand jury? If suoh action is authorized by statute, is the
statute oonstitutional?
Artiole 604 of the Penal Code, whioh Is inquired about,
provides as follows I
UThe Court during ,Its term, or Judge thereof in
Mrs. Violet S. Greenhill, page 2, O-3379
vacation after the filing of complaint against or after
the return of indictment of any person for the crime of
wife, or of child, or of wife and child desertion shall
upon application of the complainant give notice to the
defendant of such application and may upon hearing thereof
enter such temporary orders as may seem just, providing
,forthe support of deserted wives and children or both,
pende~ntelite, and may punish for the violation or refusal
to obey such order as for aontempt."
We have given this matter our careful consideration
and you may be advised that it is the opinion of thLs department
that Article 604 of the Penal Code of the State of Texas contem-
plates that after the filing of the complaint against or after
the return of indictment of any person for the crime of wife,
or of child, or of wife and child desertion, that thereafter,
at any time before the trial, upon application of the complain-
ant, after notice to the defendant, the court may upon hearing
thereof enter such temporary orders as may seem just, providing
for the support of deserted wives and children or ~both, pen-
dente lite, and may punish for the violation or refusal to obey
such order as for contempt.
It is the further opinion of this department that the
actual issuance of a warrant for the arrest of the person
against whom the oomplaint is instituted is not a prerequisite
to the validity of the complainantrs application for support of
deserted wives and chjldren or both. However, we are of the
opinion that the Code of CrLminal Procedure contemplates that
in the due order of proceeding upon the filing of a complaint
that a warrarxt~
for~the arrest of tk8 person against whom the
complaint is made shall be issued forthwith.
The order of the court providing for the support of
deserted wives and Children or both, pendente lite, is not a
criminal proceeding, but same is an ancillary action to a
criminal prosecution, See Gregory v. Sta;e, 41 S. W. (2d) 838,
Russell v. State, 37 Tex. Crim. Rep. 503. Suoh an action is
not appealable from the district court to the Court of Criminal
Appeals for same is only an interlocutory order from which no
appeal will lie.
However, Ff the person against whom suoh oomplaint
has been instituted and who is ordered by the court to comply
with the order of said court and to contribute to the support
of a child or wife or both, refuses to abide and comply with
such order and is oomoitted to jail in contempt of the CoUrt’S
order, the courts have held that such person can seek relief
by habeas corpus prooeedings and in the event that relief is
denied that the aotion of the distriot court oould be reviewed
in the Court of Criminal Appeals. See 8x parts McWhorter, 45
5. W. (26) 977.
ma. Violet S. Greenhill, page 3, O-3379
Over a long period of time the courts of this State
have issued orders requiring in cases of child desertion or
wife desertion or both, that the person or party against whom
a complaint has been filed or sn indictment returned contribute
to the support of said wife and/or children. We find no cases
holding this statute unconstitutional, nor do we know of any
provisions of the Constitution which it violates. We are,
therefore, of the opinion that the statute as above construed
is valid and enforceable.
Trusting that this satisfactorily answers your
request, we remain
Yours very truly
ATTORNEY GENERAL OF TEXAS
s/ Edgar W. Cale
BY Edgar W. Cale
APPROVED MAY 8, 1941 Assistant
s/ Grover Sellers
FIRST ASSISTANT
ATTORNEY GENERAL
APPROVED opinion committee
By BWB, Chairman
Ewc:EP/cg
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FILED
NOT FOR PUBLICATION MAY 23 2013
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
BAILEY CREDO WITT, No. 12-35129
Plaintiff - Appellant, D.C. No. 2:11-cv-00566-BAT
v.
MEMORANDUM *
SNOHOMISH COUNTY
WASHINGTON; et al.,
Defendants - Appellees.
Appeal from the United States District Court
for the Western District of Washington
Brian A. Tsuchida, Magistrate Judge, Presiding **
Submitted May 14, 2013 ***
Before: LEAVY, THOMAS, and MURGUIA, Circuit Judges.
Bailey Credo Witt appeals pro se from the district court’s summary
judgment in his 42 U.S.C. § 1983 action alleging excessive force and illegal search
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The parties consented to proceed before a magistrate judge. See 28
U.S.C. § 636(c).
***
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
and seizure. We have jurisdiction under 28 U.S.C. § 1291. We review de novo a
grant of summary judgment, Toguchi v. Chung, 391 F.3d 1051, 1056 (9th Cir.
2004), and for an abuse of discretion the district court’s decision whether to
exclude evidence as a discovery sanction, Yeti by Molly Ltd. v. Deckers Outdoor
Corp., 259 F.3d 1101, 1105-06 (9th Cir. 2001). We affirm.
The district court did not abuse its discretion in refusing to impose discovery
sanctions on defendants, as any alleged failure to disclose under Fed. R. Civ. P.
26(a) or (e) was harmless. See Yeti by Molly Ltd., 259 F.3at 1105-06 (explaining
that Fed. R. Civ. P. 37 requires the exclusion of evidence unless the failure to
disclose was substantially justified or is harmless). Witt’s contention that the
failure to exclude the challenged evidence violated his due process rights is
unavailing, as the alleged discovery violations had no bearing on Witt’s ability to
provide the district court with evidence within his personal knowledge to oppose
summary judgment.
Witt’s contention that the district court erred by not granting his request for
oral argument is unpersuasive, as the district court was not required to do so under
the local rules and, in any event, there is no showing of prejudice. See Houston v.
Bryan, 725 F.2d 516, 518 (9th Cir. 1984).
AFFIRMED.
2 12-35129
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151 F.Supp. 901 (1957)
Herman KIMMEL and Murray Walker, Plaintiffs,
v.
Laurie W. TOMLINSON, District Director of Internal Revenue, and Ralph Maxwell, Collection Officer, Internal Revenue Service, District of Florida, Defendants.
No. 7443-M-Civ.
United States District Court S. D. Florida, Miami Division.
April 24, 1957.
Arthur Cunningham, Cunningham & Weinstein, Miami, Fla., for plaintiffs.
*902 E. David Rosen, Asst. U. S. Atty., Miami, Fla., for defendants.
CHOATE, District Judge.
This cause having come on to be heard on March 8, 22, and 28, 1957, upon the relief prayed for by the Plaintiffs in Paragraph Numbered 3, page 6, of the Complaint filed March 5, 1957, that this Court:
"enter its temporary injunction or restraining order, restraining or preventing the defendants or any other representatives of the Internal Revenue Service from seizing or levying upon the assets of the plaintiffs, prior to final determination of the amount of taxes due, if any, according to the proper and usual procedures (sic) wherein no jeopardy exists, and at the same time enter its order ordering the release and return to the plaintiff of all of their merchandise, property assets, bank accounts, etc., previously seized by the defendants."
and the Court having heard extensive testimony and having considered the evidence received, the other matters of record herein, and the memoranda of law submitted by both sides, does hereby find that the plaintiffs have failed to show that the circumstances of this case are such that would permit this Court to issue a preliminary injunction against the District Director of Internal Revenue, and, therefore, the above relief, for which the Plaintiffs pray, should be, and is denied (Section 7421(a), Internal Revenue Code 1954, 26 U.S.C.A. § 7421(a). See also Lloyd v. Patterson, 5 Cir., 1957, 242 F.2d 742.
The plaintiffs have not directly questioned the constitutionality of the jeopardy assessment provisions of the Internal Revenue Code but the Court is of the opinion that if this were a case of first impression this Court would be inclined to hold these provisions unconstitutional. The case of Phillips v. Commissioner, 1931, 283 U.S. 589, 51 S.Ct. 608, 75 L.Ed. 1289, has been cited and followed by the Courts as authority for the proposition that the jeopardy assessment statutes are constitutional. Continental Products Co. v. Commissioner, 1 Cir., 1933, 66 F.2d 434; Dyer v. Gallagher, 6 Cir., 1953, 203 F.2d 477.
This Court feels that it is bound to follow the law as it has been so long established but at the same time the Court does take this opportunity to point out that the reasoning in those cases to the effect that the taxpayer is amply protected under the law against any unjust summary seizure of his property (and the attendant destruction and bankruptcy of his business) is against all practical experience when applied to this and most other cases where going businesses are seized. In the instant case every bit of property (inclusive of bank accounts) of both taxpayers (and their wives) has been seized; it would seem to be mere mockery to say they, after they have been stripped of all assets, are protected in that they may either post a bond or pay the three hundred odd thousand dollars of taxes and penalties assessed in order to stay the waste of a forced sale of their assets and the certain destruction of their business. It would seem that in such cases as these common sense dictates that the Courts should be given some leeway in protecting and preserving the assets of a going business and preventing the waste of a forced sale pending the determination of the tax question by a competent tribunal, and that a prompt hearing should be afforded, instead of no provision for such a hearing. Such action by a court, if permitted, would not only preserve the taxpayer's property for the benefit of the Government but, in addition: (1) assure a greater return from the sale of the property by not selling it under forced sale conditions, and (2) would in most cases avoid certain bankruptcy and a needless and wasteful destruction of a taxpayer's going businessindeed his means of livelihood. However, for the first above recited reasons, it is, with considerable reluctance,
*903 Ordered And Adjudged that the prayer for relief contained in Paragraph No. 3 of Page 6 of the Complaint, be and the same is hereby denied.
Done And Ordered in Chambers at Miami, Florida, this 24th day of April, 1957.
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518 F.2d 899
Marjorie GLASSON, Plaintiff-Appellant,v.CITY OF LOUISVILLE et al., Defendants-Appellees.
No 73-1509.
United States Court of Appeals,Sixth Circuit.
June 13, 1975.
Thomas L. Hogan, Phillip Grauman, Louisville, Ky., for plaintiff-appellant.
James E. Thornberry, Herbert Van Arsdale, II, Frank A. Logan, Asst. Director of Law, City of Louisville, Louisville, Ky., for defendants-appellees.
Before PHILLIPS, Chief Judge, McCREE, Circuit Judge, and McALLISTER, Senior Circuit Judge.
McCREE, Circuit Judge.
1
On July 14, 1970, in Louisville, Kentucky, a police officer forcibly took a poster from a young woman peacefully standing on a public sidewalk and destroyed it. Although not every encounter between a citizen and a policeman warrants extended judicial scrutiny and review, the implications of this apparently inconsequential incident raise important questions about the constitutional guaranty of freedom of expression, and require us to determine the circumstances in which police officers may be required to respond in damages in an action brought under the Civil Rights Acts, 42 U.S.C. §§ 1983, 1985(3), for abridgement of rights guaranteed by the First and Fourteenth Amendments.1
2
The district court, sitting without a jury, determined, after trial, that appellant could not recover damages under section 1983 because the police had acted reasonably in destroying her poster and that she could not recover damages under section 1985(3) because she had failed to prove that the destruction of her poster was motivated by an impermissible discriminatory animus. We reverse.
3
On July 14, 1970, the former President of the United States, Richard M. Nixon, was scheduled to ride in a motorcade in Louisville, Kentucky, before attending the Appalachian Governors' Conference. In anticipation of this procession, appellant Glasson, a young Caucasian woman, had prepared to display to the President a poster on which she had printed, "Lead us to hate and kill poverty, disease and ignorance, not each other." By displaying this poster, she hoped to express to the President and to anyone else who might read it, her concern about the divisive issues of American racism and the Vietnam War, and her wish that the President would channel the energies of his administration to heal the divisions created by these issues, and to eliminate poverty, disease, and ignorance. These problems were on the agenda of the Governors' Conference.
4
Early that morning, Louisville police officers to whom had been assigned the duty of safeguarding the President during the motorcade by monitoring the crowd and keeping it orderly, were given their general orders of the day by Lt. Colonel Edgar Mulligan, Assistant Chief of Police of Louisville. Appellee Colonel Hyde, the Chief of Police, was also present. Appellees Johnson and Medley, police officers with approximately 25 years of experience, attended the meeting and were instructed to destroy any sign or poster that was "detrimental" or "injurious" to the President of the United States.
5
Both Johnson and Medley had previously received instruction in crowd control methods and in handling demonstrations and protests against important public officials. According to Chief of Police Hyde, "we always planned in generalities to use whatever force was necessary (to preserve peace) and have faith in the people . . . assigned out there to exercise their best judgment based upon their training . . . that (they) heretofore had had regarding crowd control." Individuals were to be permitted to demonstrate peacefully "(a)s long as they didn't incite others that might cause trouble . . .." Should other persons be incited or provoked by a sign, police officers were directed to take whatever action was necessary, including the use of force to maintain or restore order.
6
It is undisputed that on the day in question, appellant Glasson was standing peacefully against a building holding her sign as she awaited the motorcade. Several other persons were also displaying signs and posters, all of which bore salutations like "Welcome to the President." According to Johnson and Medley, a group of persons located across the street from Glasson noticed her poster and were provoked by it into grumbling and muttering threats. Officer Medley testified that this group was "hollering" and that his attention was drawn by this boisterous conduct to appellant's poster on which, he testified, was printed in large letters "Murderer, teach us to hate and kill" and then in smaller letters "Poverty, ignorance and so forth", a message that he determined was detrimental to the President.2 He then conferred with Officer Johnson and informed him that the poster was "pretty bad because the crowd across the street is going to go over and get her maybe hurt her." Officer Johnson agreed that the poster was detrimental to the President and directed Medley to follow the general orders given that day to destroy all signs detrimental to the President. Officer Medley then approached appellant and, according to his testimony, asked her "Would you please take this sign down Lady; it's detrimental to the United States of America." When Miss Glasson refused, and replied that she had a right to display it, Medley took it from her and tore it up. The hecklers across the street cheered and then immediately quieted down and began to disperse.
7
At trial, Johnson and Medley testified that the boisterous group that had spurred them into action consisted of twenty-five to thirty persons and that there were approximately seven to twelve police officers stationed on the block where the demonstrators stood. When asked whether the police force at hand was sufficient to handle a possible disorder in a crowd that size, Officer Johnson responded that the answer depended upon the number of people who became involved, but that "if it got so bad that we had to have reinforcements we could have done that also." Moreover, even though Johnson testified that the disturbance "was reaching the stage of a riot," the record shows that not one heckler crossed, or even attempted to cross the street, no reinforcements were ever summoned, and the secret service, the federal agency assigned the duty of safeguarding the President, 18 U.S.C. § 3056, was not alerted. Neither officer told the crowd to quiet down or attempted to calm its members except to assure them that the police would take care of appellant's poster. When Officer Medley was asked what he would have done had members of the boisterous group begun to cross the street, he replied, and Johnson agreed, that no crime would have been committed had they crossed the street and taken appellant's poster because it was "inflammatory anyway." A permissible sign, according to Medley, was "(a)ny sign welcoming the President," and, he observed, that he saw "no other signs with . . . derogatory remarks about the President . . .." When Johnson was asked, "If there were a group of school children holding a sign saying Welcome, President Nixon, and twenty-five or thirty people across the street were booing them and saying that they didn't like President Nixon and they were going over to get that sign, would you take that sign away from those school children, he replied, "No." He qualified this answer later in his testimony when he stated that he would not have taken it unless "trouble engulfed or started or was created."
8
Appellant and a law professor who was standing across the street from her near the crowd, both testified that they heard no boisterous heckling but that, on the contrary, because the motorcade had been delayed, the crowd had become subdued and bored at the time Medley grabbed the poster. They also testified that the reaction of the crowd to the police officer's action against appellant was mixed some persons applauded and cheered while other persons booed and hissed.
9
Miss Glasson testified that this was the first time that she had ever engaged in a political demonstration; that she was shocked and frightened by Officer Medley's conduct; and that since that time she has been fearful of participating in any other demonstrations.
10
As a result of this encounter, she filed this action in the United States District Court for the Western District of Kentucky under sections 1983 and 1985(3) of the Civil Rights Acts, 42 U.S.C. §§ 1983, 1985(3). Her complaint charged that Officers Johnson and Medley, acting under color of law, deprived her of rights guaranteed by the First and Fourteenth Amendments to the United States Constitution, and that they, acting with appellee Hyde, conspired to deprive her of the equal protection of the laws and of equal privileges and immunities under the laws of the United States. She requested compensatory and punitive damages.
11
The district court, after trial without a jury, made the following findings of fact: (1) that before the President's motorcade had arrived, a group of persons became angered by the message on appellant's poster and began "pointing and calling across the street . . ."; (2) that Officers Johnson and Medley determined "that the message was inflammatory and (that) it was creating rancor and resentment in the crowd which could impede the progress of the motorcade and jeopardize the safety of the President, other members of the motorcade and the onlookers in the crowd;" and (3) that Officer Medley asked appellant to take her poster down and then took it away from her and destroyed it when she refused to comply with his request. The district court determined, as a matter of law, that Officers Medley and Johnson had not violated section 1983 of the Civil Rights Acts because they "acted in good faith and upon reasonable grounds, and their decision and action in removing the sign from the plaintiff and destroying it were within the ambit of permissible discretion as it appeared at the time," citing Pierson v. Ray, 386 U.S. 547, 87 S.Ct. 1213, 18 L.Ed.2d 288 (1967), and Notaras v. Ramon, 383 F.2d 403 (9th Cir. 1967). It also concluded, citing Griffin v. Breckenridge, 403 U.S. 88, 91 S.Ct. 1790, 29 L.Ed.2d 338 (1971), that none of the three appellees had violated section 1985(3) of the Civil Rights Act because there was "no evidence" that their action was motivated by a " 'class-based invidious discriminatory animus.' "
12
On appeal it is contended that the district court erred in holding that the officers acted reasonably and in good faith in seizing and destroying appellant's poster, and in determining that there was no evidence of an impermissible invidious discriminatory animus. We agree and reverse. Although generally findings of fact by a trial court must be accepted by an appellate court unless they are clearly erroneous, F.R.Civ.P. 52(b), determinations, whether called ultimate findings or conclusions of law, that attach legal significance to historical facts may be reversed if upon examination of the record they are found to be erroneous. E. g., United States v. Weingarden, 473 F.2d 454, 460 (6th Cir. 1973), Guzick v. Drebus, 431 F.2d 594, 599 (6th Cir. 1970), cert. denied, 401 U.S. 948, 91 S.Ct. 941, 28 L.Ed.2d 231 (1971), Ashland Oil & Refining Co. v. Kenny Construction Co., 395 F.2d 683, 684 (6th Cir. 1968), Cordovan Associates, Inc. v. Dayton Rubber Co., 290 F.2d 858, 859 (6th Cir. 1961). See Edwards v. South Carolina, 372 U.S. 229, 235, 83 S.Ct. 680, 9 L.Ed.2d 697 (1963). We hold that when Officer Medley destroyed Miss Glasson's poster, she was engaged in activity protected by the First and Fourteenth Amendments; that his action, directed by Officer Johnson and authorized by Chief of Police Hyde, was unreasonable and not taken in good faith; and that it violated her constitutional rights and was actionable under section 1983 of the Civil Rights Acts. Moreover, since appellees agreed to destroy all placards that were critical of the President and offensive to the community, the destruction of the poster was pursuant to an impermissibly invidious discrimination remediable under section 1985(3) of the Civil Rights Acts.
13
No state may agreeably to the Constitution intercept a message and remove it from the channels of communication or punish its dissemination solely because of its content unless it is obscene, e. g., Miller v. California,413 U.S. 15, 93 S.Ct. 2607, 37 L.Ed.2d 419 (1973), Roth v. United States,354 U.S. 476, 77 S.Ct. 1304, 1 L.Ed.2d 1498 (1957), defamatory, e. g., New York Times v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), constitutes "fighting words," e. g., Lewis v. City of New Orleans, 415 U.S. 130, 94 S.Ct. 970, 39 L.Ed.2d 214 (1974), Chaplinsky v. New Hampshire, 315 U.S. 568, 62 S.Ct. 766, 86 L.Ed. 1031 (1942), or substantially and directly imperils national security, see New York Times Co. v. United States, 403 U.S. 713, 91 S.Ct. 2140, 29 L.Ed.2d 822 (1971). Moreover, the Constitution protects not only the substance of an expression but also the use of words selected for their emotive quality even though they may offend the tastes of the community. E. g., Papish v. Board of Curators of the University of Missouri, 410 U.S. 667, 93 S.Ct. 1197, 35 L.Ed.2d 618 (1973), Cohen v. California, 403 U.S. 15, 91 S.Ct. 1780, 29 L.Ed.2d 284 (1971), Thonen v. Jenkins, 491 F.2d 722 (4th Cir. 1973). Inherent in suppressing the use of particular words is the grave risk of inhibiting the expression of ideas, particularly unpopular ones.
14
The message that Miss Glasson sought to communicate was an expression of her views about important public questions and policies. This kind of expression is entitled to the greatest constitutional protection. As the Supreme Court stated in New York Times Co. v. Sullivan, supra, 376 U.S. at 269, 84 S.Ct. at 720:
15
The general proposition that freedom of expression upon public questions is secured by the First Amendment has long been settled by our decisions. The constitutional safeguard, we have said, "was fashioned to assure unfettered interchange of ideas for the bringing about of political and social changes desired by the people."
16
Accordingly, even if the appellation "Murderer" appeared on Miss Glasson's placard, and her message was expressly critical of the Nixon administration, it was constitutionally protected. The right of an American citizen to criticize public officials and policies and to advocate peacefully ideas for change is "the central meaning of the First Amendment." 376 U.S. at 273, 84 S.Ct. at 722. See generally A. Meiklejohn, Political Freedom: The Constitutional Powers of the People (1948), Kalven, The New York Times Case: A note on "The Central Meaning of the First Amendment," 1964 Sup.Ct.Rev. 191.
17
Although the content of a communication may be protected, the state may, in some circumstances, regulate the time, place and manner of expressing it. See, e. g., Grayned v. City of Rockford, 408 U.S. 104, 115-17, 92 S.Ct. 2294, 33 L.Ed.2d 222 (1972). For example, it may determine not to permit two parades to proceed along the same street at the same time, or two rallies to be held simultaneously in the same part of a public park. Moreover, the state may in appropriate circumstances prohibit rallies in jail yards, Adderley v. Florida, 385 U.S. 39, 87 S.Ct. 242, 17 L.Ed.2d 149 (1966), in public libraries, see Brown v. Louisiana, 383 U.S. 131, 86 S.Ct. 719, 15 L.Ed.2d 637 (1966), and near courthouses, Cox v. Louisiana, 379 U.S. 559, 85 S.Ct. 476, 13 L.Ed.2d 487 (1965). See generally Kalven, The Concept of the Public Forum: Cox v. Louisiana, 1965 Sup.Ct.Rev. 1. Yet, at the same time, our public streets and parks
18
have immemorially been held in trust for the use of the public and, time out of mind, have been used for purposes of assembly, communicating thoughts between citizens, and discussing public questions. Such use of the streets and public places has, from ancient times, been a part of the privileges, immunities, rights, and liberties of citizens. The privilege of a citizen of the United States to use the streets and parks for communication of views on national questions may be regulated in the interest of all; it is not absolute, but relative, and must be exercised in subordination to the general comfort and convenience, and in consonance with peace and good order; but it must not, in the guise of regulation, be abridged or denied.
19
Hague v. CIO, 307 U.S. 496, 515-16, 59 S.Ct. 954, 964, 83 L.Ed. 1423 (1939).
20
In this case, Miss Glasson was in a place where she had a right to be, at a time that was appropriate, and was conducting herself peacefully and lawfully. She, like many other persons, had taken the opportunity to express her ideas to the President from a place designated by the state for onlookers and in a manner often used by persons who do not have access to the print or broadcast media.
21
Moreover, we do not believe that Miss Glasson somehow forfeited the protection afforded her message by the Constitution because it unintentionally evoked a hostile reaction from others. We reach this conclusion after considering this case "against the background of a profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open, and that it may well include vehement, caustic, and sometimes unpleasantly sharp attacks on government and public officials." New York Times Co. v. Sullivan, 376 U.S. at 270, 84 S.Ct. at 721. The purpose of the First Amendment is to encourage discussion, and it is intended to protect the expression of unpopular as well as popular ideas. Accordingly, hostile public reaction does not cause the forfeiture of the constitutional protection afforded a speaker's message so long as the speaker does not go beyond mere persuasion and advocacy of ideas and attempts to incite to riot. See, e. g., Gooding v. Wilson, 405 U.S. 518, 92 S.Ct. 1103, 31 L.Ed.2d 408 (1972); Brandenburg v. Ohio, 395 U.S. 444, 89 S.Ct. 1827, 23 L.Ed.2d 430 (1969); Ashton v. Kentucky, 384 U.S. 195, 86 S.Ct. 1407, 16 L.Ed.2d 469 (1966); Edwards v. South Carolina, supra; Feiner v. New York, 340 U.S. 315, 321, 71 S.Ct. 303, 95 L.Ed. 295 (1951).3
22
To permit police officers to prohibit the expression of ideas which they believe to be "detrimental" or "injurious" to the President of the United States or to punish for incitement or breach of the peace the peaceful communication of such messages because other persons are provoked and seek to take violent action against the speaker would subvert the First Amendment, and would incorporate into that constitutional guarantee a "heckler's veto"4 which would empower an audience to cut off the expression of a speaker with whom it disagreed. The state may not rely on community hostility and threats of violence to justify censorship.
23
The record before us demonstrates that Miss Glasson, in displaying her placard which contained a constitutionally protected message, in a peaceful manner, from an appropriate place, was engaged in activity protected by the First Amendment and that the destruction of the sign by Louisville police officers Johnson and Medley deprived her of that right. She thus made out a prima facie case for damages under section 1983. This section of the Civil Rights Act provides, in relevant part:
24
Every person who, under color of any statute, 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 the laws shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.
25
This statute imposes on the states and their agents certain obligations and responsibilities. A police officer has the duty not to ratify and effectuate a heckler's veto nor may he join a moiling mob intent on suppressing ideas. Instead, he must take reasonable action to protect from violence persons exercising their constitutional rights. E. g., Sellers v. Johnson,163 F.2d 877 (8th Cir. 1947), Cottonreader v. Johnson, 252 F.Supp. 492 (M.D.Ala.1966). And, in the absence of a speaker's exhortation to violence, in carefully defined circumstances, "state officials are not entitled to rely on community hostility as an excuse not to protect, by inaction or affirmative conduct, the exercise of fundamental rights." Smith v. Ross, 482 F.2d 33, 37 (6th Cir. 1973). Accord, e. g., Gregory v. Chicago, 394 U.S. 111, 119, 89 S.Ct. 946, 22 L.Ed.2d 134 (1969) (Black, J., concurring) and cases cited therein.5
26
The duty of police officers to protect persons exercising the constitutional right of expression is illustrated by the case of Cottonreader v. Johnson, supra. In that case, the court, on behalf of demonstrators for racial equality, issued an injunction that ordered police officers to protect them from violent actions threatened by persons opposed to their cause. In explaining the basis for its order, the court observed that the police officers had stood by idly while hostile whites attacked the demonstrators and that they had engaged in acts of brutality themselves. It determined that the police officers had failed to discharge the duties the law imposed on them by "failing to maintain and keep order, generally, when these marches and protests were taking place," and it rejected "the claim that they did not have an adequate police force to cope with such situations" when this claim was "made without any effort on the part of the defendants to seek and obtain assistance from other authorities." 252 F.Supp. at 496. The court concluded that
27
(u)nder such circumstances suppression by public officials or police of the rights of free speech and assembly cannot be made an easy substitute for the performance of their duty to maintain order by taking such steps as may be reasonably necessary and feasible to protect peaceable, orderly speakers, marchers or demonstrators in the exercise of their rights against violent or disorderly retaliation or attack at the hands of those who may disagree and object.
28
Id. at 497.
29
If this were a case requiring us to review a criminal conviction of Miss Glasson for displaying her sign or to review the denial of an injunction prohibiting appellees from engaging in activity like that challenged here (assuming that the other prerequisites for injunctive relief were satisfied), our inquiry would be ended. See, e. g., Gregory v. Chicago, supra. In this appeal, however, we review not a criminal conviction nor a denial of injunctive relief, but a civil action for damages based upon state deprivation of constitutional rights by means short of an arrest.
30
In determining the circumstances under which a police officer must respond in damages for the tortious interference with a person's right to express ideas, we do not write upon a blank slate. In Pierson v. Ray, 386 U.S. 547, 87 S.Ct. 1213, 18 L.Ed.2d 288 (1967), the Supreme Court announced that reasonableness and good faith was an affirmative defense to an action brought under 42 U.S.C. § 1983. The Court recognized that police officers acting in good faith should be accorded an area of discretion when their actions are the subject of a suit for damages for unlawful or wrongful conduct ostensibly within the scope of their duties. And, when a police officer is accused of false arrest, "good faith and probable cause" affords a defense to a section 1983 action brought against him. Id. at 557, 87 S.Ct. 1213. See also Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974).
31
This affirmative defense was recently reconsidered by the Supreme Court in Wood v. Strickland, --- U.S. ---, 95 S.Ct. 992, 43 L.Ed.2d 214 (1975), an action brought by high school students who claimed that they had been suspended from school in violation of their constitutional rights and sought appropriate damages. In its discussion of the affirmative defense available to the school board members who had ordered the suspension, the Court stated:
32
The official must himself be acting sincerely and with a belief that he is doing right but an act violating a student's constitutional rights can be no more justified by ignorance or disregard of settled, indisputable law on the part of one entrusted with supervision of students' daily lives than by the presence of actual malice. To be entitled to a special exemption from the categorical remedial language of § 1983 in a case in which his action violated a student's constitutional rights, a school board member, who has voluntarily undertaken the task of supervising the operation of the school and the activities of the students, must be held to a standard of conduct based not only on permissible intentions, but also on knowledge of the basic, unquestioned constitutional rights of his charges. Such a standard neither imposes an unfair burden upon a person assuming a responsible public office requiring a high degree of intelligence and judgment for the proper fulfillment of its duties, nor an unwarranted burden in light of the value which civil rights have in our legal system. Any lesser standard would deny much of the promise of § 1983. Therefore, in the specific context of school discipline, we hold that a school board member is not immune from liability for damages under § 1983 if he knew or reasonably should have known that the action he took within his sphere of official responsibility would violate the constitutional rights of the student affected, or if he took the action with the malicious intention to cause a deprivation of constitutional rights or other injury to the student. (Emphasis supplied).
33
Id. at ---, 95 S.Ct. at 1000.
34
Although only Pierson specifically concerns the liability of police officers for invasion of constitutional rights, both Scheuer v. Rhodes and Wood v. Strickland are helpful in determining the conditions under which an affirmative defense of reasonableness and good faith has been established. From an examination of all three cases, we conclude that the factors to be considered in determining whether the defense has been established are whether the police officers knew or should have known that the complainant was engaged in the exercise of constitutionally protected activity, and if they knew (or should have known), whether they acted out of an honest and reasonable belief that their interference with the exercise of those rights was required to avoid imminent and serious injury to persons or property. Every asserted justification must be considered carefully on a case by case basis, and due regard must be given to the fact that the officers may be acting in the urgency of a street confrontation and not in the contemplative atmosphere of judicial chambers.
35
These factors, in one form or another, have been considered by federal courts for a number of years in cases in which police officers who suppressed the peaceful expression of ideas have been asked to respond in damages to the speaker. In Downie v. Powers, 193 F.2d 760 (10th Cir. 1951), a group of Jehovah's Witnesses were attacked by a mob, and police officers, although aware of threats of violence, did nothing to prevent the formation of the mob or to restore order after violence broke out. In holding that because of a procedural error the members of this sect were entitled to a new trial of their action against the officers for damages brought under section 1983, the court stated:
36
One charged with the duty of keeping the peace cannot be an innocent bystander where the constitutionally protected rights of persons are being invaded. He must stand on the side of law and order or be counted among the mob. (Citations omitted). But the officials are the keepers, not the insurers of the peace in the community. Diligent and conscientious effort is all that is required. Otherwise, officers would be civilly and criminally liable under Federal law for every breach of a constitutionally protected right of a citizen a result which the framers of the Civil Rights Act never intended.
37
Id. at 764.
38
Other courts have recognized a defense of reasonableness and good faith to actions brought for damages under section 1983 even when the justification asserted for the challenged police behavior was security of the President. E. g., Scherer v. Brennan, 379 F.2d 609 (7th Cir.), cert. denied, 389 U.S. 1021, 88 S.Ct. 592, 19 L.Ed.2d 666 (1967); Butler v. United States, 365 F.Supp. 1035 (D.Haw.1973); Sparrow v. Goodman, 361 F.Supp. 566 (W.D.N.C.1973), aff'd sub nom. Rowley v. McMillan, 502 F.2d 1326 (4th Cir. 1974). In Scherer the court affirmed a determination that Secret Service agents were not required to respond in damages for trespass and for interfering with a plaintiff's use of his home, when the home, in which he kept military rifles, rounds of ammunition, and cannon, capable of penetrating a concrete wall was located within three hundred yards of an inn where the President was staying. Although this case was decided before the Supreme Court decision in Pierson, the court took into account the fact that plaintiff had previously been arrested for illegal possession of a dangerous weapon, a cannon, and that the agents' action was reasonably related to their statutory duty of protecting the President. The facts of that case are, of course, a far cry from those before us in which there is no suggestion that Miss Glasson herself posed any threat to the safety of the President.
39
In Butler, supra, the court refused to grant defendants' motion to dismiss or for summary judgment in an action for damages brought under section 1983 against military security personnel. Plaintiffs had been excluded from a public reception for the President, and were detained for fingerprinting, photographing and other purposes because they wished to express peacefully their opposition to the President's policies and to his reelection. In ordering the case to be tried, the court observed, and we agree, that "(w)here the occasion for exercising First Amendment rights has passed, a private action for damages affords the only practicable means of redressing the wrong alleged." Id. at 1040. "But," the court stated, "a law enforcement officer may allege and prove in defense his subjective good faith belief that his conduct was lawful and the objective reasonableness of this belief under the circumstances." Id. at 1045.
40
Finally, in Sparrow v. Goodman, supra, plaintiffs, who were excluded from a public gathering at which the President appeared, brought an action for injunctive relief and for damages for false arrest and assault under section 1983. The court ordered the case for damages to be set for trial and observed that the evidence adduced at the hearing in connection with the issuance of an injunction indicated that plaintiffs had been excluded solely because they had opposed, or because their appearance had suggested that they opposed, the President. The court determined that the reason for exclusion was plaintiffs' political beliefs, and that there was no evidence to suggest that plaintiffs presented a threat to the President's safety. Moreover, in rejecting the asserted justification of presidential security, the court stated that it was unwilling to assume, without proof, that the asserted justification was valid. 361 F.Supp. at 586.
41
Ideally, police officers will always protect to the extent of their ability the rights of persons to engage in First Amendment activity. Yet, the law does not expect or require them to defend the right of a speaker to address a hostile audience, however large and intemperate, when to do so would unreasonably subject them to violent retaliation and physical injury. In such circumstances, they may discharge their duty of preserving the peace by intercepting his message or by removing the speaker for his own protection without having to respond in damages. Accordingly, whether a police officer must respond in damages for his actions is judged by whether his conduct was reasonable, considering all the circumstances, and by whether he acted in good faith. A police officer's stated good faith belief in the necessity or wisdom of his action is not dispositive of that element of the defense, but must be supported by objective evidence. See, e. g., Pierson v. Ray, supra; Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961); Scott v. Vandiver, 476 F.2d 238 (4th Cir. 1973); Rodriguez v. Jones, 473 F.2d 599 (5th Cir. 1973); Dowsey v. Wilkins, 467 F.2d 1022 (5th Cir. 1972). To hold that a police officer is exonerated from liability if he merely acts in subjective good faith might foster ignorance of the law or, at least, encourage feigned ignorance of the law. This we are unwilling to do. The law does not expect police officers to be sophisticated constitutional or criminal lawyers, but because they are charged with the responsibility of enforcing the law, it is not unreasonable to expect them to have some knowledge of it. We cannot permit a police officer to avoid liability for damages by pleading ignorance of the law when he unreasonably or in bad faith oversteps the bounds of his authority and invades the constitutional rights of others. At the same time, courts should not "second guess" police officers who are often required to assess a potentially dangerous situation and respond to it without studied reflection. Thus, even though a police officer may not have chosen the wisest or most reasonable course of action, he will not be civilly liable if his conduct is based on a reasonable and good faith belief that it was necessary under the circumstances. See, e. g., Smith v. Ross, 482 F.2d 33, 37 (6th Cir. 1973), where this court stated, in affirming the dismissal of a complaint in a section 1983 action after trial, "We do not condone the actions of the deputy, who would have served his office more honorably by unequivocally protecting appellants regardless of the local unpopularity his actions might have evoked."
42
In examining whether appellees Johnson and Medley acted in good faith and whether their asserted belief that their actions were necessary to protect the President was reasonable under the circumstances, it is "our duty . . . to make an independent examination of the whole record." Edwards v. South Carolina, 372 U.S. at 235, 83 S.Ct. at 683. There is no evidence that Miss Glasson's placard posed any threat to the safety of the President, to his motorcade, or to onlookers. If any danger to public order existed, it was posed by the persons who were offended by her message. Yet, these persons were located across the street from appellant, were only twenty-five to thirty in number, and never even stepped off the curb on their side of the street in the direction of Miss Glasson. In addition, there were approximately eight to twelve police officers on duty in close proximity to this moderately sized crowd and, although Johnson testified that he was not sure whether this force would have been adequate to maintain order, he also testified that reinforcements could have been obtained rapidly had that been necessary. Although Officers Medley and Johnson characterized the hecklers as "near to riot", at no time did they admonish the crowd, call for reinforcements, or even alert the Secret Service despite the claimed danger to the President. Moreover, the disturbance did not attract the attention of any other police officers stationed nearby. These circumstances, taken together, demonstrate that their asserted belief that the destruction of appellant's poster was necessary to presidential security and to public order was not reasonable.
43
Our examination of the record also convinces us that the destruction of appellant's poster was not done in good faith. The general order of the day was to destroy all posters "detrimental" or "injurious" to the President. When Officer Medley first noticed Miss Glasson's poster he determined that it was detrimental to the President, a judgment in which Officer Johnson concurred before ordering its destruction. When Officer Medley took the poster from Miss Glasson he informed her that the reason for his action was that the poster was "detrimental to the United States," not that she, the President, or any other person was endangered by it. Both officers testified that only posters favorable to the President were permissible. Moreover, Officer Johnson unequivocally testified that had this same crowd under the same circumstances been outraged by a poster favorable to the President he would not have ordered its destruction. Although he later qualified his answer, his testimony still demonstrates that a different standard would have been applied had the crowd been provoked by a poster favorable to the President. The actions of Officers Medley and Johnson were the result of an official determination not to permit dissent and of their failure to accord to appellant the right to engage in activity protected by the First Amendment. Also, they failed to recognize her right to be protected from criminal assault and battery. They testified that they had no obligation to protect appellant, and that had any member of the crowd proceeded against her they would not have arrested the aggressor because in their judgment appellant's poster was "inflammatory." The actions and attitudes of appellees Medley and Johnson thus bespeak a callous disregard of Miss Glasson's right to express and to advocate peacefully her ideas and exhibit shocking disregard of her right to have her person and property protected by the state from violence at the hands of persons in disagreement with her ideas. Compare Gregory v. Chicago, supra.
44
Accordingly, we hold that these police officers are required to respond in damages under section 1983 of the Civil Rights Act because they suppressed appellant's peaceful communication of ideas protected by the First Amendment. When other persons became hostile because of disagreement with the content of her communication, the police officers were not authorized to suppress the offending speech. They may not defend against a section 1983 action on the ground that her message "could impede the progress of the motorcade and jeopardize the safety of the President, other members of the motorcade and the onlookers in the crowd," when they made no attempt to calm the crowd whose unruliness was limited to muttering threats unaccompanied by action; when they admit that they, either alone or with available reinforcements, could have handled a potential disturbance; when they did not contact the Secret Service or call for reinforcements; and when they admit that had the same crowd been provoked by a poster favorable to the President, they would not have destroyed it.
45
We also determine, after a careful examination of the entire record, that Miss Glasson's poster was taken from her pursuant to a "class-based invidiously discriminatory animus," Griffin v. Breckenridge, 403 U.S. 88, 102, 91 S.Ct. 1790, 29 L.Ed.2d 338 (1972) and that, unless there exists some other basis for excusing appellees Hyde, Johnson and Medley, appellant proved a violation of section 1985(3) of the Civil Rights Act, 42 U.S.C. § 1985(3). Section 1985(3) provides in relevant part:
46
If two or more persons in any State . . . conspire . . . for the purpose of depriving, either directly or indirectly, any person or class of persons of the equal protection of the laws, or of equal privileges and immunities under the laws; . . . 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.
47
The United States Supreme Court, in a recent interpretation of this statute, stated: "The language requiring intent to deprive a person of equal protection, or equal privileges and immunities, means that there must be some racial, or perhaps otherwise, class-based, invidiously discriminatory animus behind the conspirators' action." Griffin v. Breckenridge, supra at 102, 91 S.Ct. at 1798. Although the Court, in that case, refused to decide whether discrimination based on a criterion other than race would be sufficient to establish a cause of action under the Act, its earlier decisions have suggested that this is so. E. g., Snowden v. Hughes, 321 U.S. 1, 64 S.Ct. 397, 88 L.Ed. 497 (1944). Accordingly, this court, in construing the statute, has held that the statutory language does not require that the discrimination be based on race. E. g., Cameron v. Brock, 473 F.2d 608 (6th Cir. 1973); Azar v. Conley, 456 F.2d 1382 (6th Cir. 1972). Accord, e. g., Richardson v. Miller, 446 F.2d 1247 (3d Cir. 1971). In the Cameron case, we affirmed a judgment for plaintiffs in an action brought by a supporter of an incumbent sheriff's opponent who was arrested while distributing campaign leaflets and who charged that his arrest was a part of a conspiracy to deprive him and other supporters of the sheriff's opponent of the equal protection of the laws. In affirming, we held "that § 1985(3)'s protection reaches clearly defined classes, such as supporters of a political candidate. If a plaintiff can show that he was denied the protection of the law because of the class of which he was a member, he has an actionable claim under § 1985(3)." 473 F.2d at 610.
48
In the case before us, the district court found that the action of the police officers was not based upon an invidious criterion. Whether that conclusion is one of fact, or law, or mixed, makes no difference because we hold that the conclusion was not merely wrong but clearly erroneous. The record shows indisputably that the Louisville police officers established as a guideline for monitoring the crowd during the President's motorcade an invidious discrimination between persons displaying posters or signs critical of the President and those with posters or signs favorable to him. First, during the general orders on the morning of July 14, Chief of Police Hyde was present when Officers Medley and Johnson were instructed to destroy any sign "detrimental" or "injurious" to the President. When Officer Medley's attention was attracted to appellant's poster he determined that it was detrimental, and Johnson agreed, referring to the general orders of the day. Although there was some conversation between Johnson and Medley concerning the opposition of some members of the crowd to the poster, the record discloses that this consideration was only a minor factor in their decision to proceed against Miss Glasson. At the time of the unrest, it is undisputed that neither Johnson nor Medley did anything to calm the crowd except to express assurances that they would accede to and carry out its wishes. Moreover, when Officer Medley destroyed appellant's poster, his justification expressed to her was not that her personal safety or that of the President was endangered, but that her message was detrimental to the President or to the United States.
49
At trial, when Officer Medley was asked what kind of poster would have been permissible that day, he replied that only those that had "Welcome President Nixon" or similar messages would have been permitted. When Officer Johnson was asked whether he would have ordered the destruction of a poster favorable to the President, he answered, "No." Moreover, both officers testified that they had no obligation to protect Miss Glasson in the event the crowd assaulted her because her poster was "inflammatory."
50
The record is thus unmistakably clear that appellees intended to permit no criticism of the President that day. A more invidious classification than that between persons who support government officials and their policies and those who are critical of them is difficult to imagine. Appellees drew a line that was not merely invidious but one that also struck at the very heart of the protection afforded all persons by the First and Fourteenth Amendments. See New York Times, Inc. v. Sullivan, supra.
51
We hold that the district court erred in entering a judgment for appellees in the section 1983 action on the grounds that Officers Johnson and Medley acted reasonably and in good faith in destroying appellant's poster and in the section 1985(3) action on the ground that appellant had failed to prove that the destruction of her poster resulted from an invidiously discriminatory animus. Accordingly, we reverse and remand for further proceedings consistent with this opinion and for a determination of the damages Miss Glasson sustained. In so doing, we observe that appellant may recover not only for out-of-pocket expenses but also for emotional and mental distress. Donovan v. Reinbold, 433 F.2d 738 (9th Cir. 1970).
52
Reversed and remanded.
1
In the brief that appellant submitted to this court she conceded that she had no claim against the City of Louisville and stated that she did not wish to pursue her claims against Frank W. Burke and George Burton
2
The district court made no finding that the poster contained the epithet, "Murderer," even though Officers Medley and Johnson testified that it did and Miss Glasson testified that it did not
3
Feiner used a loudspeaker to address an interracial crowd of seventy-five to eighty persons and urged them to attend a meeting to discuss racial discrimination. During the course of his exhortation, he made derogatory remarks about President Truman, the Marshall Plan, and local officials, and urged the Negroes in the crowd to "rise up in arms" against white people and "fight for equal rights." The crowd blocked sidewalks, forcing pedestrians to walk in the street, and became angry and threatened to attack Feiner if the police failed to act. The police requested Feiner to stop speaking three times before arresting him for disorderly conduct. In upholding the conviction, the Supreme Court determined that the police "in making the arrest were motivated solely by a proper concern for the preservation of order and protection of the general welfare, and that there was no evidence which could lend color to a claim that the acts of the police were a cover for suppression of petitioner's views and opinions." 340 U.S. at 319, 71 S.Ct. at 306
For over twenty years the Supreme Court has confined the rule in Feiner to a situation where the speaker in urging his opinion upon an audience intends to incite it to take action that the state has a right to prevent.
4
For a discussion of the concept of a "heckler's veto," see generally H. Kalven, The Negro and the First Amendment 140-60 (1966)
5
In Terminiello v. Chicago, 337 U.S. 1, 69 S.Ct. 894, 93 L.Ed. 1131 (1949), for example a speaker, whose ideas had caused a violent reaction from some members of his audience, was convicted of violating an ordinance that prohibited any activity that " 'stirs the public to anger, invites dispute, brings about a condition of unrest, or creates a disturbance, or if it molests the inhabitants in the enjoyment of peace and quiet by arousing alarm.' " Id. at 3. In reversing the conviction, the Court observed that " . . . a function of free speech under our system of government is to invite dispute. It may indeed serve its highest purpose when it induces a condition of unrest, creates dissatisfaction with conditions as they are, or even stirs people to anger." Id. at 4
In view of this high purpose of the First Amendment, the Supreme Court has become increasingly reluctant to affirm convictions of speakers for disorderly conduct or breach of the peace when their expression of ideas protected by the First Amendment has unintentionally provoked reaction from a hostile crowd. E. g., Street v. New York, 394 U.S. 576, 89 S.Ct. 1354, 22 L.Ed.2d 572 (1969); Gregory v. Chicago, supra; Cox v. Louisiana, 379 U.S. 536, 559, 85 S.Ct. 453, 13 L.Ed.2d 471 (1965); Edwards v. South Carolina, supra; Niemotko v. Maryland, 340 U.S. 268, 273-89, 71 S.Ct. 325, 95 L.Ed. 267 (1951) (Frankfurter, J. concurring); Cantwell v. Connecticut, 310 U.S. 296, 60 S.Ct. 900, 84 L.Ed. 1213 (1940).
In Street, the Supreme Court, in reversing a conviction for burning an American flag and for publicly speaking contemptuous words about it, stated:
Nor could such a conviction be justified on the second ground mentioned above: the possible tendency of appellant's words to provoke violent retaliation. Though it is conceivable that some listeners might have been moved to retaliate upon hearing appellant's disrespectful words, we cannot say that appellant's remarks were so inherently inflammatory as to come within that small class of "fighting words" which are "likely to provoke the average person to retaliation, and thereby cause a breach of the peace." Chaplinsky v. New Hampshire, 315 U.S. 568, 574, 62 S.Ct. 766, 770, 86 L.Ed. 1031 (1942). . . .
Again, such a conviction could not be sustained on the ground that appellant's words were likely to shock passers-by. Except perhaps for appellant's incidental use of the word "damn," upon which no emphasis was placed at trial, any shock effect of appellant's speech must be attributed to the content of the ideas expressed. It is firmly settled that under our Constitution the public expression of ideas may not be prohibited merely because the ideas are themselves offensive to some of their hearers. (Citations omitted).
394 U.S. at 592, 89 S.Ct. at 1366.
| {
"pile_set_name": "FreeLaw"
} |
State of New York
Supreme Court, Appellate Division
Third Judicial Department
Decided and Entered: July 17, 2014 518219
_________________________________
In the Matter of SUSAN M.
KENT, as President of the
NEW YORK STATE PUBLIC
EMPLOYEES FEDERATION,
AFL-CIO,
Appellant,
v
JEROME LEFKOWITZ, as MEMORANDUM AND ORDER
Chair of the NEW YORK STATE
PUBLIC EMPLOYMENT RELATIONS
BOARD, et al.,
Respondents,
et al.,
Respondents.
________________________________
Calendar Date: June 6, 2014
Before: Lahtinen, J.P., Stein, Egan Jr., Devine and Clark, JJ.
__________
Lisa M. King, New York State Public Employees Federation,
AFL-CIO, Albany (Steven M. Klein of counsel), for appellant.
David P. Quinn, New York State Public Employment Relations
Board, Albany (Alicia L. McNally of counsel), for New York State
Public Employment Relations Board and another, respondents.
__________
Egan Jr., J.
Appeal from a judgment of the Supreme Court (McNamara, J.),
entered April 3, 2013 in Albany County, which dismissed
-2- 518219
petitioner's application, in a proceeding pursuant to CPLR
article 78, to review a determination of respondent Public
Employment Relations Board dismissing an improper practice charge
filed by petitioner against respondent New York State Racing and
Wagering Board.
Petitioner is the president of the Public Employees
Federation, AFL-CIO (hereinafter PEF), which is the duly
certified collective bargaining representative of various state
employees, including – insofar as is relevant here – seasonal
personnel employed at the state's race tracks. These seasonal
employees are exempt from civil service classification pursuant
to Civil Service Law § 41 and are appointed by the chair of
respondent New York State Racing and Wagering Board (hereinafter
the Board)1 to work during a specific track meet. Such employees
are not allocated to a statutory salary grade and, as such, their
compensation is set each year by the Board's chair – subject to
the approval of the Director of the Budget (see State Finance Law
§§ 44, 49).
Effective January 1, 1996, the Board's then chair announced
a 25% reduction in the per diem pay rates of seasonal track
employees, prompting PEF to file both a class action grievance
under the collective bargaining agreement then in effect and an
improper practice charge with respondent Public Employment
Relations Board (hereinafter PERB), alleging – as to the latter –
that the unilateral reduction in per diem wages for the affected
track workers violated Civil Service Law § 209-a (1) (d). The
improper practice charge was conditionally dismissed pending
resolution of the related grievance but, after an arbitrator
ruled, among other things, that the subject employees were not
covered by the collective bargaining agreement, PEF successfully
moved to reopen the improper practice charge. In response, the
1
Effective February 1, 2013, the Board merged into a
newly-created entity known as the New York State Gaming
Commission (see Racing, Pari-Mutuel Wagering and Breeding Law
§ 102).
-3- 518219
Board answered and raised the affirmative defense of waiver.
Administrative hearings ensued in 2005 and, in January
2010, PERB's Assistant Director found that the wages for seasonal
track employees were "a mandatory subject of bargaining" and,
therefore, the unilateral pay reduction imposed by the Board
violated Civil Service Law § 209-a (1) (d). Both PEF and the
Board filed exceptions to this decision – with PEF's exceptions
limited to the extent of the relief awarded. In September 2012,
PERB dismissed the improper practice charge finding, among other
things, that although the Board indeed had an obligation to
negotiate wages for the seasonal workers, its duty in this regard
was satisfied through the execution of a side letter agreement
entered into between PEF and the state in October 1995.
Petitioner thereafter commenced this CPLR article 78 proceeding
to challenge PERB's determination. Supreme Court dismissed
petitioner's application, prompting this appeal.
Petitioner initially contends that the Board failed to
assert "duty satisfaction" as an affirmative defense in its
answer to the improper practice charge and, therefore, PERB erred
in considering this defense on the merits. We disagree.
Although PERB has now drawn a distinction between the concept of
"waiver" and "duty satisfaction," a review of PERB's decisions
reveals that, prior to 1998, such terms often were used
interchangeably to designate any defense based upon a prior
fulfillment of the duty to negotiate (see Matter of Nassau County
Sheriff's Corr. Officers Benevolent Assn., Inc. [County of
Nassau], 46 PERB ¶ 3002 [2013], citing Matter of Police
Benevolent Assn. of Police Dept. of County of Nassau [County of
Nassau Police Dept.], 31 PERB ¶ 3064 [1998]; see also Matter of
Civil Serv. Empls. Assn., Inc., Local 1000, AFSCME, AFL-CIO,
Livingston County Local 826, Livingston County Empl. Unit [County
of Livingston], 26 PERB ¶ 3074 [1993]). As the Board's answer,
which raised the affirmative defense of waiver, was interposed in
1997, i.e., at a point in time when waiver and duty satisfaction
still were regarded as essentially one and the same defense, we
deem the Board's answer to have properly raised the duty
satisfaction defense.
-4- 518219
As to the merits, "[a] duty satisfaction defense . . . is
grounded upon a claim that the subject sought to be bargained has
already been negotiated to completion, that the employer and the
union have bargained and reached agreement on a subject and the
employer is thereafter privileged to act in conformance with that
agreement" (Matter of Amalgamated Tr. Union Local 1342 [Niagara
Frontier Tr. Metro Sys., Inc.], 41 PERB ¶ 4566 [2008]). Although
the agreement under review need not expressly reference the
contested subject matter in order to come within the scope of the
duty satisfaction defense (see id.), the party asserting the
defense bears "the burden of proving that the parties have
negotiated terms in an agreement that are reasonably clear on the
specific subject at issue" (Matter of Nassau County Sheriff's
Corr. Officers Benevolent Assn., Inc. [County of Nassau], 46 PERB
¶ 3002, supra [emphasis added]; see Matter of Transport Workers
Union of Greater N.Y., Local 100 [New York City Tr. Auth.], 41
PERB ¶ 3014 [2008]). Stated another way, it must be reasonably
clear – reading the relevant agreement as a whole – that the
parties intended for it to encompass the specific subject matter
under review, even if the agreement itself did not directly speak
to that now contested issue.
Here, there is no question that the Board was under a duty
to negotiate in good faith with PEF regarding compensation for
the affected seasonal employees (see Civil Service Law §§ 200,
201 [4]; 203, 204 [3]; 209-a [1] [d]; State Finance Law §§ 44,
49) and, further, that the 25% reduction in such employees' wages
was not in fact negotiated. There also is no dispute that the
side letter agreement made no express reference to the
circumstances under which the seasonal employees' compensation
could be reduced. Hence, the only question remaining is whether
the side letter agreement entered into between PEF and the state
makes it reasonably clear that such document was intended to
represent the parties' full agreement as to the compensation to
be afforded to the seasonal track employees – including the 25%
reduction in wages. In this regard, the side letter agreement
covered discrete compensation issues, including seasonal
employees' eligibility for certain lump-sum payments (paragraph
A), salary increases (paragraph B) and holiday compensation
(paragraph D). Paragraph C of the agreement, entitled "Effect of
Minimum Wage Level," provided as follows: "If during the term of
-5- 518219
this [a]greement the rate of compensation of any employee in a
seasonal position is increased at the discretion of the Director
of the Budget for the purpose of making such rate equal to the
[f]ederal minimum wage level, the provisions of [p]aragraphs A
and B . . . shall be applied to such seasonal employees in the
following manner: 1. The seasonal employee's rate of compensation
shall remain at the adjusted rate established by the Director of
the Budget from the effective date established by the Director of
the Budget until the date of the next general salary increase
provided for in [p]aragraphs A or B. 2. Effective on the
effective date of the next general salary increase provided for
in [p]aragraphs A or B such employee's rate of compensation shall
be either the adjusted rate established by the Director of the
Budget; or his/her rate prior to the adjustment, increased by the
percentage provided for in the applicable paragraph, whichever is
higher." Pursuant to paragraph D of the agreement, all of these
provisions applied on a pro rata basis to seasonal employees paid
on an hourly or per diem basis.
According to respondents, the foregoing language evidences
the parties' intent to resolve any and all compensation issues
relative to seasonal track employees – including a unilateral 25%
reduction in their salaries. Although we are mindful that PERB
is to be afforded a measure of deference with respect to the
interpretation of collective bargaining agreements and similar
binding contracts between the state and its workers (see Matter
of Monroe County v New York State Pub. Empl. Relations Bd., 85
AD3d 1439, 1441 [2011]), we simply do not believe that the side
letter agreement at issue here is amenable to the expansive
construction adopted by PERB and urged by respondents. To be
sure, the side letter agreement did not have to expressly address
the circumstances under which the affected employees' salaries
could be reduced in order to satisfy the state's duty to
negotiate in good faith. The terms set forth and the language
utilized in the side letter agreement did, however, have to make
it reasonably clear that PEF and the Board "bargained and reached
[an] agreement" on this subject, thus demonstrating that the
subject that formed the basis for the improper practice charge
"already [was] negotiated to completion" (Matter of Amalgamated
Tr. Union Local 1342 [Niagara Frontier Tr. Metro. Sys., Inc.], 41
PERB ¶ 4566, supra). To our analysis, the provision in the side
-6- 518219
letter agreement addressing the discretion afforded to the
Director of the Budget to increase the rate of compensation to be
paid to seasonal track employees in order to comply with federal
minimum wage requirements does not evidence the intent of the
parties thereto to address any and all situations under which the
Director of the Budget could unilaterally adjust wage rates for
the affected employees. In other words, the side letter
agreement is not, to our reading, sufficiently broad to
demonstrate that the subject matter that formed the basis for the
improper practice charge, i.e., the unilateral 25% reduction in
wages, was negotiated to completion, and PERB's determination to
the contrary was arbitrary and capricious. Accordingly, the
underlying determination is annulled, and this matter is remitted
to PERB for further proceedings not inconsistent with this
Court's decision. In light of our resolution of this matter, we
need not address petitioner's remaining contentions.
Devine and Clark, JJ., concur.
Stein, J. (dissenting).
We agree with the majority that respondent New York State
Racing and Wagering Board (hereinafter the Board) properly raised
the duty satisfaction defense in its answer in response to the
improper practice charge filed by the Public Employees
Federation, AFL-CIO (hereinafter PEF). However, we are of the
view that respondent Public Employment Relations Board
(hereinafter PERB) correctly determined that the Board satisfied
its obligation to negotiate wages for seasonal employees and
dismissed the improper practice charge. Thus, we disagree with
the majority's conclusion to the contrary and, therefore,
respectfully dissent.
The Board's chair is authorized to set the compensation of
seasonal employees, which is then subject to approval by the
Director of the Budget (see State Finance Law §§ 44, 49). In
1996, the chair exercised that discretionary authority and set a
per diem compensation rate for seasonal personnel that was 25%
lower than the prior year. While there is no disagreement that
the Board was under a duty to negotiate in good faith with
-7- 518219
respect to the rate of compensation (see Civil Service Law
§§ 200, 204 [3]; 209-a [1] [d]), we hold the view that it
satisfied such obligation by means of its negotiations with PEF,
which resulted in the execution of the October 1995 side letter
agreement.
A review of such agreement – titled "MEMORANDUM OF
INTERPRETATION BETWEEN THE STATE OF NEW YORK AND THE PUBLIC
EMPLOYEES FEDERATION CONCERNING SEASONAL EMPLOYEES" – reveals
that it was comprehensive and covered a broad range of issues
regarding the compensation to be paid to seasonal personnel from
1995 through 1999. In fact, the agreement not only encompassed
matters pertaining to specific compensation issues, it also
incorporated more than 50 articles from the 1995-1999 collective
bargaining agreement between PEF and the state regarding
employees in the Professional, Scientific and Technical Services
Units relating to a variety of employment and benefit related
issues, such as health insurance, vacation credit, accidental
death benefits and sick and personal leave. Viewed in this
context, we disagree with the majority's characterization of the
agreement as merely covering "discrete compensation issues."
Further, that portion of the side letter agreement that
deals specifically with compensation covers lump-sum payments to
be paid to seasonal employees for the 1996-1997 and 1997-1998
fiscal years, salary increases for 1997-1998 and 1998-1999
(including the effect of any increase in the federal minimum wage
on the employees' next scheduled pay increase), holiday
compensation and workers' compensation leave with pay. Notably,
aside from the negotiated raises for 1997-1998 and 1998-1999, the
agreement neither sets forth any limitation on the chair's
discretion to set the seasonal employees' per diem compensation
rates nor indicates that it was intended to be anything less than
a comprehensive agreement as to such employees. Thus, despite
the absence of any express reference to the exact compensation
rates to be paid to such employees (see Matter of Amalgamated Tr.
Union Local 1342 [Niagara Frontier Tr. Metro Sys., Inc.,], 41
PERB ¶ 4566 [2008]), it was reasonable for PERB to determine that
the side letter agreement constituted the full agreement between
the Board and PEF as to any limitations on the Board's wage-
setting discretion. Indeed, when read in its entirety, the only
-8- 518219
"practical interpretation" (Matter of United Pub. Serv. Empl.
Union [Inc. Vil. of Mineola], 47 PERB ¶ 4540 [2014]) that can be
applied to the language of the side letter agreement is that the
parties reached an accord on the subject at issue in PEF's
improper practice charge.
Accordingly, when PERB's interpretation of the side letter
agreement is afforded the deference it is due (see Matter of Town
of Islip v New York State Pub. Empl. Relations Bd., ___ NY3d ___,
___, 2014 NY Slip Op 04043, *7 [2014]; Matter of Professional
Staff Congress-City Univ. of N.Y. v New York State Pub. Empl.
Relations Bd., 7 NY3d 458, 465 [2006]; Matter of Incorporated
Vil. of Lynbrook v New York State Pub. Empl. Relations Bd., 48
NY2d 398, 404 [1979]; Matter of Monroe County v New York State
Pub. Empl. Relations Bd., 85 AD3d 1439, 1441 [2011]), its
determination that the Board met its burden of establishing that
it satisfied its duty to negotiate with petitioner is rational
and not arbitrary and capricious (see Matter of Town of Islip v
New York State Pub. Empl. Relations Bd., 2014 NY Slip Op 04043 at
*7; Matter of Chenango Forks Cent. Sch. Dist. v New York State
Pub. Empl. Relations Bd., 21 NY3d 255, 265 [2013]; Matter of
Monroe County v New York State Pub. Empl. Relations Bd., 85 AD3d
at 1441).2 We would, therefore, affirm Supreme Court's dismissal
of the CPLR article 78 petition.
Lahtinen, J.P., concurs.
2
Nor are we persuaded by petitioner's argument that
application of the duty satisfaction defense is contrary to
public policy under the circumstances here.
-9- 518219
ORDERED that the judgment is reversed, on the law, without
costs, determination annulled and matter remitted to respondent
Public Employment Relations Board for further proceedings not
inconsistent with this Court's decision.
ENTER:
Robert D. Mayberger
Clerk of the Court
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MEMORANDUM OPINION
No. 04-10-00756-CV
SOUTHWEST CONCRETE PRODUCTS, L.P.,
Appellant/Cross-Appellee
v.
A. HANSEN MASONRY, INC.,
Appellee/Cross-Appellant
From the 150th Judicial District Court, Bexar County, Texas
Trial Court No. 2004-CI-09384
Honorable Gloria Saldaña, Judge Presiding
PER CURIAM
Sitting: Phylis J. Speedlin, Justice
Rebecca Simmons, Justice
Steven C. Hilbig, Justice
Delivered and Filed: December 22, 2010
DISMISSED
The parties have filed an agreed motion to dismiss this appeal, including the cross-appeal.
Therefore, the motion is granted and the appeal is dismissed. See TEX. R. APP. P. 42.1(a)(1),
43.2(f). Costs of the appeal are taxed against the parties who incurred them.
PER CURIAM
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240 F.Supp.2d 708 (2002)
Ruben BARKLEY, Petitioner,
v.
Kelleh KONTEH, Warden, Respondent.
No. 5:02-CV-969.
United States District Court, N.D. Ohio, Eastern Division.
December 13, 2002.
Paul A. Mancino, Jr., Cleveland, OH, for Petitioner.
*709 M. Scott Criss, Office of the Attorney General, Columbus, OH, for Respondent.
OPINION AND ORDER,
GWIN, District Judge.
On May 23, 2002, Petitioner Ruben Barkley filed a petition for a writ of habeas corpus. The Court assigned the case to Magistrate Judge David S. Perelman under Local Rule 72.1 for a report and recommendation. On October 29, 2002, Magistrate Judge Perelman issued his report and recommendation. In that report and recommendation, Magistrate Judge David S. Perelman recommended dismissing Barkley's petition because Barkley procedurally defaulted his habeas claim. In the alternative, the Magistrate Judge found that Barkley's claim failed on the merits. [Doc. 20.] Petitioner Barkley timely objected to the Magistrate Judge's report. After conducting an independent review of the petition, the Court finds no merit in Barkley's objections and dismisses Barkley's petition for a writ of habeas corpus.
I. Procedural Background
a. Criminal Conviction & Direct Appeal
On September 6, 2000, and after a bench trial, the Summit County Court of Common Pleas ("Summit County Court"), convicted Barkley of abduction with a firearm specification and one count of aggravated robbery also with a firearm specification and a specification that he was a repeat offender. On September 21, 2000, Barkley timely appealed to the Ohio Ninth District Court of Appeals. He raised the following assignments of error:
I. The conviction of the Appellant for the charge of aggravated robbery and abduction in this case is against the manifest weight of the evidence and should be reversed.
II. The trial court incorrectly denied Appellant's motion for acquittal inviolation of Criminal 1 Rule 29; specifically, there was not sufficient evidence to prove the offense of aggravated robbery and abduction beyond a reasonable doubt.
III. It was prejudicial error for the trial court to convict Appellant of repeat violent offender specification absent proof beyond a reasonable doubt.
On May 23, 2001, the Summit County Court of Appeals affirmed the judgment in part and reversed it in part. Specifically, the appellate court reversed the aggravated robbery conviction and the application of the repeat violent offender specification on the abduction conviction. On June 29, 2001, following remand, the Summit County Court resentenced Barkley to three years imprisonment for the abduction conviction and three years for the firearm specification. The Court ordered Barkley to serve the sentences consecutively.
b. Motion for Delayed Appeal
On August 29, 2001, Barkley filed both a notice of appeal and a motion for delayed appeal with the Ohio Supreme Court. With that filing, Barkley argued that "he was unavoidably prevented from filing an appeal because he was never notified of the decision by the Court of Appeals by his court-appointed appellate counsel." On October 10, 2001, the Ohio Supreme Court denied the motion and dismissed the case.
c. Petition for a Federal Writ of Habeas Corpus
On May 23, 2002, pursuant to 28 U.S.C. § 2254, Barkley filed a petition for a writ of habeas corpus with this court. With his petition, Barkley seeks habeas corpus relief to overturn his abduction conviction.
Having set forth the procedural background of the case, the Court now summarizes the legal arguments.
*710 II. Summary of Legal Arguments
With his habeas petition, Barkley makes one claim for habeas relief. He alleges that Ohio violated the Fourteenth Amendment. Specifically, he says that since the Ninth District Court overturned the robbery conviction, no sufficient evidence exists for a rational fact finder to find him guilty of abduction. He claims that the reversal of the robbery conviction bars the abduction conviction.
In his report, the Magistrate Judge recommends dismissing Petitioner Barkley's writ of habeas corpus because Barkley procedurally defaulted his habeas claim. He further concluded that Barkley does not show cause sufficient to excuse the procedural default. Alternatively, the Magistrate Judge recommends that the Court dismiss Barkley's petition on the merits. Specifically, he found that the state appellate court's ruling on the sufficiency of the evidence supporting the abduction conviction did not involve an unreasonable application of clearly established federal law. The Magistrate Judge also concluded that the state appellate court did not unreasonably determine the facts in light of the evidence presented.
Barkley timely objected to the Magistrate Judge's report on several grounds. First, he says that he did not procedurally default his habeas claim. As support for this contention, he alleges that the Ohio Supreme Court did not state in its entry that it was denying Barkley's motion for a delayed appeal on procedural grounds. Barkley further claims that his motion for a delayed appeal was a discretionary appeal. Therefore, he says that the Ohio Supreme Court, in denying the motion, had to determine its jurisdiction and reach the merits of the claim. Next, Barkley argues that Ohio courts do not consistently apply the denial of a motion for delayed appeal as a procedural bar. Therefore, he contends that the state procedural ground is not adequate.
In the alternative, Barkley asserts that even if he procedurally defaulted his claim, cause exists to overcome the default. Specifically, he alleges that his ineffective assistance of appellate counsel claim is sufficient cause to excuse the default. Finally, he claims that a miscarriage of justice would result if the Court found that he had procedurally defaulted his claim.
Barkley also challenges Judge Perelman's finding that the Court of Appeals' decision neither was contrary to nor involved an unreasonable application of established federal law. Specifically, he says that the Court of Appeals based its decision on an unreasonable determination of the facts because it relied on the testimony of Daniel Burch after it expressly discounted Burch's credibility. Barkley also claims that the trial court violated his constitutional rights when it found that the privilege doctrine did not excuse his actions. Therefore, he says that his actions did not constitute abduction.
The Court now reviews Magistrate Judge Perelman's report and recommendation de novo. Flournoy v. Marshall, 842 F.2d 875, 875-76 (6th Cir.1988).
III. Discussion
Petitioner Barkley bases his opposition to the Magistrate Judge's report and recommendation on six grounds. First, he claims that he did not procedurally default his habeas claim because the Ohio Supreme Court did not base its denial of his motion for a delayed appeal on procedural grounds. Barkley next argues that even if the Ohio Supreme Court did base its decision on a procedural ground, the ground is not adequate because Ohio courts do not consistently apply it as a procedural bar. In the alternative, he alleges that cause exists to overcome the procedural default. As a final objection to the procedural default *711 finding, Barkley asserts that a miscarriage of justice would occur if the Court concludes that he procedurally defaulted his claim.
Barkley also objects to the Magistrate Judge's finding that absent the procedural default, his petition fails on the merits. Specifically, he disagrees with Judge Perelman's conclusion that the Ohio appellate court did not base its decision on an unreasonable determination of the facts. Finally, he contends that he is not guilty of abduction because the privilege doctrine applies to his actions.
For the following reasons, the Court agrees with the Magistrate Judge's recommendation and rejects petitioner's arguments.
A. Procedural Default
Before a federal court may review a federal claim raised in a habeas petition, it must first determine whether the petitioner has exhausted the remedies available to him in state court. See 28 U.S.C. § 2254(b)(1). If a petitioner does not present a federal habeas claim to a state court for adjudication, then he has not exhausted the claim and it may not properly serve as the basis of a federal habeas petition. See Wainwright v. Sykes, 433 U.S. 72, 87, 97 S.Ct. 2497, 53 L.Ed.2d 594 (1977).
As explained above, Barkley has pursued all opportunities for relief at the state level. Barkley has thus exhausted all state remedies.
The procedural default doctrine is distinct from the exhaustion doctrine. Where one presents a claim to a state court, and the state court rejects the claim on an adequate and independent state ground without an adjudication on the merits, the petitioner has procedurally defaulted the claim. Wainwright, 433 U.S. at 87, 97 S.Ct. 2497. Under the procedural default rule, a federal court may not hear an issue to which the state appellate court applied a procedural bar absent a showing of cause and prejudice. Id.
The Sixth Circuit uses a four-step analysis to determine whether a claim is procedurally defaulted. Maupin v. Smith, 785 F.2d 135 (6th Cir.1986). Under this test, the Court decides (1) whether the petitioner failed to comply with an applicable state procedural rule, (2) whether the state courts actually enforced the state procedural sanction, (3) whether the state procedural bar is an "independent and adequate" state ground on which the state can foreclose federal review, and (4) whether the petitioner has demonstrated "cause" and "prejudice." Id. at 138-39.
The Court now examines whether Barkley procedurally defaulted his habeas claim.
1. Failure to Comply With Applicable State Procedural Rule
Under the first element of the Maupin analysis, the Court determines whether the petitioner failed to comply with an applicable state procedural rule. Here, Barkley failed to timely appeal the decision of the Summit County Court of Appeals to the Ohio Supreme Court. Under Rule II, Section 2(A)(1)(a) of the Ohio Supreme Court Rules, a party has 45 days from the entry of the judgment appealed from to file a notice of appeal with the Ohio Supreme Court. Ohio S.Ct. R. II § 2(A)(1)(a). Unless otherwise excused, Barkley's failure to appeal to the Ohio Supreme Court results in a failure to exhaust available state remedies. Under Ohio law, the Ohio Supreme Court allows delayed appeals in some cases. If a party does not file a timely appeal, he may file a motion for a delayed appeal under Supreme Court Rule II, Section 2(A)(4)(a). Ohio S.Ct. R. II § 2(A)(4)(a). On May 23, 2001, the appellate court issued its decision *712 Barkley failed to file a timely notice of appeal with the Ohio Supreme Court. On August 29, 2001, he instead filed a motion for a delayed appeal with the Ohio Supreme Court. Therefore, Barkley did not comply with the Ohio procedural rule governing the filing of a timely appeal.
2. State Court Enforcement of State Procedural Sanction
The second prong of the procedural default analysis is to determine if the state courts actually enforced the state procedural sanction. Barkley argues that the Ohio Supreme Court did not enforce the procedural bar for two reasons. First, he says that the Ohio Supreme Court did not enforce the procedural rule because it did not expressly state in its denial of his motion for a delayed appeal that a procedural bar applied to the claim. Second, Barkley argues that the Ohio Supreme Court reached the merits of his claim instead of relying on the procedural bar. For the reasons discussed below, both arguments fail.
a. No Express Statement that Claim Barred by Procedural Default
On October 10, 2001, the Ohio Supreme Court denied Barkley's motion for a delayed appeal. In its entry denying Barkley leave to file a delayed appeal, the Ohio Supreme Court said:
This cause is pending before the court as a discretionary appeal and a claimed appeal of right. Upon consideration of appellant's motion for delayed appeal, IT IS ORDERED by the Court that the motion for delayed appeal be, and hereby is, denied. ACCORDINGLY, IT IS FURTHER ORDERED by the Court that this cause be and hereby is, dismissed.
State v. Barkley, 93 Ohio St.3d 1450, 756 N.E.2d 114 (2001). Barkley argues that he did not procedurally default his claim because the Ohio Supreme Court did not expressly say that he did. The Court disagrees.
First, the Ohio Supreme Court Rules of Practice show that a denial of a request for a delayed appeal is based on procedural grounds. Rule II, Section 2(A)(4) of the Rules of Practice of the Ohio Supreme Court provides:
In a felony case, when the time has expired for filing a notice of appeal in the Supreme Court, the appellant may seek to file a delayed appeal by filing a motion for delayed appeal and a notice of appeal. The motion shall state the date of entry of the judgment being appealed and adequate reasons for the delay. Facts supporting the motion shall be set forth in an affidavit. A copy of the decision being appealed shall be attached to the motion.
Ohio S.Ct. R. II § 2(A)(4). Further, Rule II, Section 2(A)(c) states: "If the Supreme Court grants a motion for delayed appeal, the appellant shall file a memorandum in support of jurisdiction within 30 days after the motion for delayed appeal is granted." Conversely, one filing a timely notice of appeal must accompany it with a memorandum in support of jurisdiction. Ohio S.Ct. R. II § 2(A)(1). By its very nature, a denial of a motion for leave to file a delayed appeal is a denial solely on procedural grounds even if the court does not expressly cite the procedural bar in its denial. Second, courts have held that a denial of a request for a delayed appeal is a procedural default without merits review. See, e.g., Coleman v. Thompson, 501 U.S. 722, 750, 111 S.Ct. 2546, 115 L.Ed.2d 640 (1991) (holding that a state prisoner fails to comply with an independent and adequate state procedural rule when he fails to file a timely appeal); Hall v. Huffman, 234 F.3d 1268 (6th Cir.2000), unpublished; Shabazz v. Ohio, 149 F.3d 1184, 1998 WL 384559, *1 (6th Cir.1998); Ginyard v. *713 Leonard, No. C-3-01-343 (S.D.Ohio Jan. 22, 2002). Therefore, in Ohio, a denial of a motion for delayed appeal constitutes a procedural default without merits review,
b. Ohio Supreme Court Did Not Reach Merits of Claim
Beyond arguing that the Ohio Supreme Court did not expressly base its denial on procedural grounds, Barkley also argues that the Ohio Supreme Court reached the merits of his claim in denying his motion. As support for this assertion, he says that his appeal was discretionary. Therefore, he claims that the Ohio Supreme Court had to reach the merits of his claim to determine its jurisdiction.
The Court disagrees. First, the Ohio Supreme Court only treats a motion for a delayed appeal as a discretionary appeal if it grants the motion. Further, the Supreme Court decides whether to allow the appeal pursuant to Ohio S.Ct. R. III. Section six of this rule says that the Court will "decide [a] case on the merits" only after it has allowed the appeal. Ohio S.Ct. R. Ill § 6. The Rule further states that if the appeal is a discretionary appeal involving a felony, the Court will do one of the following:
(B) (1) Deny leave to appeal, refusing jurisdiction to hear the case on the merits;
(2) Grant leave to appeal, allowing the appeal, and either order the case or limited issues in the case to be briefed and heard on the merits or enter judgment summarily.
Ohio S.Ct. R. III. § 6 (emphasis added). Therefore, when the Ohio Supreme Court denies a motion for a delayed appeal, it does not reach the merits.
3. Independent and Adequate Ground
The third prong of the Maupin analysis is determining whether the state procedural bar is an adequate and independent ground on which the state can rely to foreclose review of a federal constitutional claim. Barkley's failure to file a timely appeal is an adequate and independent ground on which the state can rely to foreclose review. County Court of Ulster County, New York v. Allen, 442 U.S. 140, 148, 99 S.Ct. 2213, 60 L.Ed.2d 777 (1979). Barkley, however, argues that the denial of his motion for leave to file an appeal is not an adequate state ground because he says that Ohio courts do not consistently apply a denial of this type as a procedural bar.
The argument fails. The Ohio Supreme Court Rules of Practice clearly show that a denial of a motion for delayed appeal is a procedural denial. Further, Ohio cases appear to have consistently held such a denial to be a procedural bar. See, e.g., Hall, 234 F.3d 1268; Shabazz, 149 F.3d 1184, 1998 WL 384559 at *1; Ginyard, No. C-3-01-343 (S.D.Ohio Jan. 22, 2002). Barkley cites no case law or other legal authority to the contrary.
4. Cause and Prejudice
Since all three prongs of the procedural default analysis exist here, the procedural default rule bars this claim from federal habeas review unless Barkley can show cause and prejudice to excuse the procedural default. Reed v. Farley, 512 U.S. 339, 354, 114 S.Ct. 2291, 129 L.Ed.2d 277 (1994).
a. Cause
Barkley argues that his ineffective assistance of appellate counsel claim is cause for the procedural default of his other claim. For Barkley's ineffective assistance of counsel claim to serve as cause to overcome his procedural default of another claim, the ineffective assistance claim itself must not be subject to procedural default." `A claim of ineffective assistance'... generally must `be presented to the state courts as an independent claim before it may be used to establish cause *714 for a procedural default.'" Edwards v. Carpenter, 529 U.S. 446, 453, 120 S.Ct. 1587, 146 L.Ed.2d 518 (2000) (quoting Murray v. Carrier, 477 U.S. 478, 489, 106 S.Ct. 2639, 91 L.Ed.2d 397 (1986)).
Attorney error amounting to ineffective assistance of counsel does constitute cause within the cause and prejudice doctrine. Murray v. Carrier, 477 U.S. 478, 488, 106 S.Ct. 2639, 91 L.Ed.2d 397 (1986). However, attorney error cannot constitute cause where the error caused a petitioner to default in a proceeding in which the petitioner was not constitutionally entitled to counsel, including a discretionary appeal. Coleman, 501 U.S. at 751-53, 111 S.Ct. 2546. The constitutional right to appointed counsel extends to the first appeal of right and no further. Pennsylvania v. Finley, 481 U.S. 551, 555, 107 S.Ct. 1990, 95 L.Ed.2d 539 (1987) (stating "Our cases establish that the right to appointed counsel extends to the first appeal of right, and no further. Thus, we have rejected suggestions that we establish a right to counsel on discretionary appeals.... Ineffective assistance on a discretionary appeal or in a post-conviction proceeding, both of which are proceedings in which there is no constitutional right to counsel, cannot constitute cause for a procedural default.") (citations omitted); Ross v. Moffitt, 417 U.S. 600, 609-10, 94 S.Ct. 2437, 2443-44, 41 L.Ed.2d 341 (1974); State v. Mapson, 41 Ohio App.3d 390, 391, 535 N.E.2d 729, 730 (1987). Barkley had no constitutional or state right to counsel on his discretionary appeal to the Ohio Supreme Court. Consequently, at the time Barkley's counsel failed third-party to file an appeal to the Ohio Supreme Court, he was not entitled to counsel. Therefore, ineffective assistance of counsel cannot excuse the procedural default.
Barkley's ineffective assistance of counsel claim also fails to establish cause for the default because Barkley failed to properly present this claim as an independent claim to the state courts. In State v. Murnahan, 63 Ohio St.3d 60, 584 N.E.2d 1204 (1992), the Ohio Supreme court held that claims of ineffective assistance of appellate counsel should be raised in a motion for reconsideration before the Ohio Court of Appeals. Id. at 65, 584 N.E.2d at 1208. The court stated that if "the time periods for reconsideration in courts of appeals and direct appeal to [the Ohio Supreme Court] have expired, [a defendant] must ... apply for delayed reconsideration in the court of appeals where the alleged error took place pursuant to App. R. 26 and 14(B)." Id. at 1209. Barkley never raised his claim of ineffective assistance of counsel claim to the Summit County Court of Appeals. Having failed to utilize state remedies, he has not exhausted available state remedies and has not established cause for this failure.
Because Barkley failed to present this claim as an independent claim to the state courts, it cannot constitute cause for Barkley's procedural default of his habeas claim. Edwards, 529 U.S. at 453, 120 S.Ct. 1587.
b. Prejudice
When a petitioner fails to show cause "for not asserting his ineffective assistance of appellate counsel claim properly in the Ohio courts, a federal court may not reach the merits of the habeas claim." Coleman v. Mitchell, 244 F.3d at 540. Therefore, because Barkley fails to show cause, the Court does not consider whether prejudice exists.
c. Miscarriage of Justice
Beyond asserting that his ineffective assistance of counsel constitutes cause for his procedural default, Barkley says that the miscarriage of justice exception to procedural default applies. Under this exception, "where a constitutional violation has probably resulted in the conviction of one who is actually innocent, a federal *715 habeas corpus court may grant the writ even in the absence of a showing of cause for the procedural default." Murray, 477 U.S. at 496, 106 S.Ct. 2639. A petitioner asserting his actual innocence of the underlying crime must show "it is more likely than not that no reasonable juror would have convicted him in light of the new evidence" presented in his habeas petition. Schlup v. Delo, 513 U.S. 298, 327, 115 S.Ct. 851, 867,130 L.Ed.2d 808.
A review of the record shows that the evidence sufficiently supports the state courts' determination of Barkley's guilt. Barkley acknowledges that he sufficiently detained victim Burch to sustain a conviction of abduction. However, Barkley says his handcuffing of Burch was privileged. He says Burch attacked him and he handcuffed Burch in self-defense. But while Burch's testimony was somewhat inconsistent, it was sufficient to support Barkley's guilt. Specifically, Burch testified that Barkley handcuffed him because he "wanted the [gambling] money" that Burch owed Barkley. Barkley admits that Burch owed him money.
Further, Melissa Hargrove's testimony supported Barkley's guilt. She stated that she had been at Burch's house with Burch, Barkley, and Herring while they were gambling. She left to go to the store. While out, she called Burch on the telephone. During the conversation, Hargrove became alarmed because she heard "fear in his [Burch's] voice." Therefore, she called the police. Burch's testified similarly about the phone call, adding that he was handcuffed at the time of the call. This testimony is sufficient for a reasonable juror to convict Barkley. Therefore, Barkley's miscarriage of justice claim fails.
B. Contrary to or Unreasonable Application of Established Federal Law
Besides objecting to the procedural default finding, Barkley also contends that the Magistrate Judge erred in his conclusion that the Court of Appeals' decision was not contrary to or involved an unreasonable application of established federal law. This argument relates to the Magistrate Judge's findings on the merits of the habeas petition. This Court, however, does not reach the merits of the petition because it finds that Barkley procedurally defaulted his habeas claim.
In sum, this Court finds that Barkley procedurally defaulted his habeas claim. The petition is therefore subject to dismissal. Accordingly, the Court does not reach the merits of the petition and does not address the Magistrate Judge's findings on the merits.
IV. Conclusion
For the reasons discussed above, the Court adopts the Magistrate Judge's recommendation and denies Petitioner Barkley's petition for habeas corpus.
IT IS SO ORDERED.
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291 S.E.2d 828 (1982)
Marie R. LEONARD, Administratrix of the Estate of Samuel L. Leonard, Deceased
v.
JOHNS-MANVILLE SALES CORPORATION, A Delaware Corporation; Unarco Industries, Inc., An Illinois Corporation; GAF Corporation, A Delaware Corporation; Armstrong Cork Company, A Pennsylvania Corporation; Raybestos-Manhattan, Inc., A Connecticut Corporation; Owens-Corning Fiberglass Corporation, A Delaware Corporation; Pittsburgh Corning Corporation, A Pennsylvania Corporation; the Celotex Corporation, A Delaware Corporation; Nicolet Industries, A Pennsylvania Corporation; Forty-Eight Insulation, Inc., An Illinois Corporation; Eagle-Picher Industries, Inc., An Ohio Corporation; Standard Asbestos & Insulation Co., A Missouri Corporation; Owens-Illinois, Inc., An Ohio Corporation; H. K. Porter, A Pennsylvania Corporation; National Gypsum Co., A Delaware Corporation; Fibreboard Corporation, A Delaware Corporation; Garlock, Inc., A Foreign Corporation; Keene Corporation, A New Jersey Corporation; North American Asbestos Corporation, A Foreign Corporation; Carey Canadian Mines, Ltd., A Foreign Corporation; Lake Asbestos of Quebec, Ltd., A Foreign Corporation; Amatex Corporation, A Pennsylvania Corporation; Southern Asbestos Company.
No. 8114SC1020.
Court of Appeals of North Carolina.
June 1, 1982.
*829 Haywood, Denny & Miller by George W. Miller, Jr. and Michael W. Patrick, Durham, for plaintiff.
Crossley & Johnson by John F. Crossley, Wilmington, for defendant Johns-Manville Sales Corp.
Smith, Moore, Smith, Schell & Hunter by McNeill Smith and Gerard H. Davidson, Jr., Greensboro, for defendant Raybestos-Manhattan, Inc.
Poisson, Barnhill & Britt by Donald E. Britt, Jr., Wilmington, for defendant Owens-Corning Fiberglas Corp.
C. K. Brown, Jr., Raleigh, for defendant The Celotex Corp.
Maupin, Taylor & Ellis by Armistead J. Maupin and Richard M. Lewis, Raleigh, for defendant Eagle-Picher Industries, Inc.
HARRY C. MARTIN, Judge.
Although plaintiff argues that on 26 May 1981 Judge Braswell again denied attorney Motley's motion for admission pro hac vice, the record on appeal does not sustain that contention. It is clear that Judge Braswell only denied plaintiff's alternative motion to reconsider the order of 4 March 1981. Plaintiff did not except to the order of 4 March 1981, and plaintiff's notice of appeal is only directed to the order of 26 May 1981.
The order of Judge Braswell denying plaintiff's motion to reconsider the order of 4 March 1981 is an interlocutory order and is not immediately appealable. Stanback v. Stanback, 287 N.C. 448, 215 S.E.2d 30 (1975); Veazey v. Durham, 231 N.C. 357, 57 S.E.2d 377 (1950); Pack v. Jarvis, 40 N.C. App. 769, 253 S.E.2d 496 (1979). It does not come within the statutory appeals in N.C. G.S. 1-277(a) or 7A-27(d).
The court's ruling did not affect a substantial right of plaintiff. The motion to reconsider the prior order of the court was addressed solely to the discretion of the court and is not reviewable unless there has been an abuse of discretion. Veazey, supra; Dworsky v. Insurance Co., 49 N.C.App. 446, 271 S.E.2d 522 (1980). No such abuse appears in the record on appeal. We note that plaintiff is represented by the able law firm of Haywood, Denny & Miller of Durham, North Carolina. Moreover, three members of Mr. Motley's South Carolina firm of Blatt and Fales have already been admitted pro hac vice as counsel for plaintiff in this case. It appears that plaintiff has a plethora of distinguished counsel representing her.
Furthermore, where the court in its discretion denies a motion for admission of counsel pro hac vice, as Judge Braswell did here, such order does not involve a substantial right and is not appealable as a matter of right. This is so because parties do not have a right to be represented in the courts of North Carolina by counsel who are not duly licensed to practice in this state. Admission of counsel in North Carolina pro hac vice is not a right but a discretionary privilege. N.C.Gen.Stat. § 84-4.1 (1981); In re Smith, 301 N.C. 621, 272 S.E.2d 834 (1981). "It is permissive and subject to the sound discretion of the Court." State v. Hunter, 290 N.C. 556, 568, 227 S.E.2d 535, 542 (1976), cert. denied, 429 U.S. 1093, 97 S.Ct. 1106, 51 L.Ed.2d 539 (1977).
*830 We are not inadvertent to Holley v. Burroughs Wellcome Co., 56 N.C.App. 259, 289 S.E.2d 393 (1982). In Holley, the Court did not consider whether the appeal was interlocutory, and it is not precedent establishing a right of appeal from an order denying a petition for admission of counsel pro hac vice.
The statement in Hagins v. Redevelopment Comm., 275 N.C. 90, 102, 165 S.E.2d 490, 498 (1969), that "[n]ormally, a litigant has a fundamental right to select the attorney who will represent him in his lawsuit...." was not made in the context of a proceeding pursuant to N.C.G.S. 84-4.1. In Hagins plaintiff contested the appointment of a guardian ad litem to represent her, alleging that as a result she was deprived of the control of her lawsuit. The Hagins statement (referred to in Holley) is not authority for the proposition that a litigant has a right to be represented in the courts of North Carolina by counsel who are not duly licensed to practice in this state.
The United States Constitution does not protect pro hac vice proceedings. Procedural due process is not required in the granting or denial of petitions to practice pro hac vice in the courts of another state. Leis v. Flynt, 439 U.S. 438, 99 S.Ct. 698, 58 L.Ed.2d 717, rehearing denied, 441 U.S. 956, 99 S.Ct. 2185, 60 L.Ed.2d 1060 (1979). Mr. Motley is not duly licensed as an attorney by the State of North Carolina. Plaintiff has no right to be represented by Mr. Motley in this case. This being so, it follows that no substantial right of plaintiff was involved in the court's ruling on 26 May 1981. This also applies to plaintiff's objections to the orders allowing counsel to appear pro hac vice for defendants.
Appeal dismissed.
MORRIS, C. J., and CLARK, J., concur.
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371 F.2d 646
Leona DUNCAN, joined pro forma by her husband, Doyle Duncan,Appellants,v.The FIDELITY & CASUALTY COMPANY OF NEW YORK, Appellee.
No. 23833.
United States Court of Appeals Fifth Circuit.
Jan. 23, 1967.
Roger C. Bulter, Francis I Gandy, Jr., and Butler, Schraub & Gandy, Corpus Christi, Tex., for appellants.
James W. Wray, Jr., and Lewright, Dyer & Redford, Corpus Christi, Tex., for appellee.
Before TUTTLE, Chief Judge, and AINSWORTH and DYER, Circuit Judges.
TUTTLE, Chief Judge.
1
This is an appeal in a Texas Workmen's Compensation case. On appeal the appellant, the original plaintiff, seeks to recast the issues from those which were presented to the jury in the trial court. Stated briefly, the issues formed for presentation to the trial court arose in the following manner. Mrs. Duncan, a waitress, was injured under circumstances that caused the appellee, the defendant insurance carrier, to admit liability and to pay compensation for approximately one year, after which time appellee tendered an operation for the employee's back injury. Thereupon, the Texas Industrial Accident Board, upon having the plaintiff examined, ordered surgery by unanimous vote of the Board as required by Article 8306, Rev.Civ.Stat. of Tex. The plaintiff refused surgery, whereupon the Board entered its final order on June 2, 1964, which order was appealed from by the filing of suit in the United States District Court for the Southern District of Texas.1
2
Because of the issues now sought to be raised in this court, it is necessary to reproduce the order of the Commission, dated April 30, 1964, by which the surgery was required. The essential part of this order was as follows:
3
'The Board finds that Demand for Surgical Operation was filed by The Fidelity & Casualty Company of New York, and the Board caused to be made by Dr. Herbert V. Burns of Corpus Christi, Texas, a report in writing as to advisability of performance of surgical operation. This report, dated April 24, 1964, states, and the Board unanimously finds, that a surgical operation should be performed on Leona Duncan, injured employee, that such operation is not ordinarily unsafe and will materially benefit and will improve claimant's condition. Therefore, the Board unanimously directs the said Leona Duncan to submit herself to a surgical operation on her back at the hands of Dr. Stephen A. Williams of Corpus Christi, Texas, assisted by Dr. Herbert V. Burns of Corpus Christi, Texas, if necessary, within the next 20 days from the date of this order in a hospital to be chosen by Dr. Stephen A. Williams. The expense of said operation and hospital expense in a reasonable value thereof is to be provided and paid for by the Fidelity & Casualty Company of New York. 'This is not a final award. When employee has reached maximum recovery or if either party fails or refuses to accept this order, upon notfication, the Board will reschedule the claim for a hearing at a later date to be heard on merits and final award. Unanimously ordered by the Board, this the 30th day of April, 1964.'
4
As has been noted above, mrs. Duncan declined to submit to the operation, whereupon a subsequent order was issued on June 2nd, in the following language: 'On date of hearing after due notice to all parties, came the above numbered and described claim for compensation to be considered by the Industrial Accident Board, and the Board finds and orders: * * * (7) Special findings and Orders; On review of Order of the Board dated April 30, 1964, the Board finds that for reasons unknown to this Board, the Claimant has refused and failed to undergo surgery as ordered by this Board on April 30, 1964. Therefore, final award entered this date, June 2, 1964, supercedes order entered April 30, 1964. That following infliction and injury, named insurer assumed liability and made payments of compensation. The Board finds that the evidence submitted fails to establish that the claimant suffered further disability than that for which compensation has heretofore been paid. Therefore, claim for additional compensation is denied. * * * This is the final award of the Board. * * *'
5
The parties are agreed that under the Texas law, upon a unanimous determination by the Board that surgery is to be ordered, that surgery will materially benefit and improve the employee and that such surgical operation is not more than ordinarily unsafe, a refusal of such tendered surgery limits the period of compensation to 52 weeks.2 Thus it is, when the suit was filed and the pre-trial hearings were held, the parties entered into a stipulation, agreeing to all of the essential facts and also agreeing to the 'issues in controversy.' These issues in controversy were as follows:
6
(1) Will surgery upon Leona Duncan materially benefit and improve her condition? (2) Is such surgical operation more than ordinarily unsafe? (3) Did Leona Duncan have any total disability from and after 58 weeks of the date of her alleged injury? (4) Did Leona Duncan have any partial disability from and after 58 weeks from the date of her alleged injury? (5) What is Leona Duncan's average weekly wage?
7
The jury, upon charges not objected to in any area material to this appeal, found the issue stated in Number (1) above in the affirmative, and the second issue in the negative.
8
Upon the further interrogatories submitted, the jury found that there was total disability following May 21st, 1964, the date of the last compensation payment, and that such total disability would be permanent.
9
Both parties moved for a directed verdict in light of the answers to the interrogatories. The plaintiff, having made an effort during the trial to prove that the operation would not have materially benefited and improved her condition, and that it would have been more than ordinarily unsafe, and having lost the verdict as to these two factors, now sought for the first time to contend that these issues were irrelevant, since, as she contended, the final order of June 2 superseded the earlier order requiring submission to surgery and such final order should be treated merly as denial by the Board of any added compensation because of the lack of any further impairment in Mrs. Duncan's earning capacity. The defendant, on the other hand, moved for a directed verdict on the ground that, the jury having found the necessary facts to support the Board's issuing of the order for surgery, and compensation having been paid for more than 52 weeks prior to the suit, it was entitled to be discharged from all further liability.
10
We share the trial court's reluctance to give serious consideration to the new contention made by the plaintiff after the jury had decided the issues that the two parties agreed were before it for decision. It was not until after the jury found that the tendered operation would materially benefit Mrs. Duncan and that such operation was not more than ordinarily unsafe that she, for the first time, took the position that the Board's order of April 24th requiring the operation had been revoked and cancelled out by the order of June 2. However, we are also reluctant, as was the trial court, to ignore the contention if it can be properly noticed on the record as it stands.
11
The appellant takes the position that the use of the words 'Therefore, final award entered this date, June 2, 1964, supercedes order entered April 30, 1964' has the effect of destroying the effectiveness of the part of the April 30th order requiring submission to surgery and leaving only an adjudication as of June 2, that no further compensation was to be allowed, thus leaving an appealable order to be reviewed de novo in the trial court on the simple issue of whether the Board correctly found that, as of June 2, 1964, Mrs. Duncan was suffering from no compensable injury.
12
The appellee takes the position that the word 'supercedes' denotes merely a suplanting of the earlier order to the extent of making it a final order, which is required in order that an appeal can be prosecuted; that, since the maximum of 52 weeks had been paid under circumstances where an operation had been refused, the rest of the order denying any further compensation followed as a matter of course.
13
It is settled law that the remedy afforded by the Texas Workmen's Compensation statutes is exclusive; that the jurisdiction of the District Court is a special jurisdiction and that in Workmen's Compensation case every step provided in the statutes must be taken as there prescribed. Heard v. Texas Compensation Insurance Co., 5 Cir., 87 F.2d 30, citing Mingus v. Wadley, 115 Tex. 551, 285 S.W. 1084. As contended by the appellant here, the Texas courts have held that it would be inappropriate to submit to the trial court jury an issue of the tender of surgery unless such surgery had been ordered by an effective order of the Board. Moreover, the Texas Supreme Court has held in Truck Insurance Exchange v. Seelbach, 161 Tex. 250, 339 S.W.2d 521, that it is error to permit testimony to be introduced upon the trial de novo tending to prove that an operation, if submitted, to would have been beneficial to the injured employee.
14
These cases, however, do not assist us in determining the effect of the June 2nd final order of the Board. We think this order must be construed in the light of the Texas statute which provides for the tender of an operation, such as was clearly and unequivocally done by the earlier order. As we have noted above, Section 12b of Article 8306, which is applicable here, provides that upon the findings that were made by the Board here, 'then if the employee, with the knowledge of the result of such examination, such report, such opinions and such findings, thereafter refuses to submit within a reasonable time, * * * to such operation, he shall be entitled to compensation for incapacity under the general provisions of this law for a period not exceeding one year.' Thus, unless the order of June 2nd expressly withdrew and made nugatory the order directing Mrs. Duncan to sumbit to surgery, is unimportant what form the order took in terminating compensation payments because the Board had no statutory power to extend the payments beyond the date of the order, 52 payments having already been made by the insurance carrier. Not only did the June 2nd order not expressly nullify the earlier order requiring surgery, it referred to it, obviously for some reason, in the following manner: 'The Board finds that for reasons unknown to this Board, the claimant has refused and failed to undergo surgery as ordered by this Board on April 30th, 1964. Therefore, final award, etc.' Far from indicating that the Board intended to revoke its order that Mrs. Duncan undergo surgery, the Board clearly was positing its June 2nd action upon the failure of Mrs Duncan to submit. Under these circumstances, the Board had no power to enter any other order relating to compensation than to deny further compensation. The fact that the Board did so by using language that might more appropriately be used to express a finding that there was to further disability being suffered by the claimant is not material because the effect is the same. The use of this language does not, of itself, work a nullification of the earlier order requiring Mrs. Duncan to submit to the operation.
15
The fact that counsel for the appellant, both by stipulation and by counduct throughout the submission of the issues to the jury, recognized the continuing effectiveness of the order requiring surgery, confirms our conclusion, and that of the trial court, that the jury's answers to the first two interrogatories required a termination of the case by the entry of a judgment for the appellee insurance carrier.
16
The judgment is affirmed.
1
The only species of appeal from the findings of the Industrial Accident Board of Texas is by a suit de novo. Such a suit can, of course, be filed in the appropriate Texas court or, if diversity and the jurisdictional amount exists, in the appropriate United States district court
2
The applicable language is to be found in Art. 8306, Section 12b, Rev.Civ.Stat. of Tex. This section relates to hernia, but, by reference in Section 12e, the following language is made applicable to other surgical procedures: 'If the examination and the written report thereof and the expert opinions thereon then on file before the board do not show to the board the existence of disease or other physical condition rendering the operation more than ordinarily unsafe and the board shall unanimously so find and so reduce its findings to writing and file the same in the case and furnish the employee and the association (insurance carrier) with a copy of its findings, then if the employee with the knowledge of the result of such examination, such report, such opinions and such findings, thereafter refuses to submit within a reasonable time, which time shall be fixed in the findings of the board, to such operation, he shall be entitled to compensation for incapacity under the general provisions of this law for a period not exceeding one year.'
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-4946
UNITED STATES OF AMERICA,
Plaintiff – Appellee,
v.
PAUL STARNER,
Defendant – Appellant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Leonie M. Brinkema,
District Judge. (1:14-cr-00008-LMB-1)
Submitted: July 21, 2015 Decided: August 18, 2015
Before GREGORY, DUNCAN, and KEENAN, Circuit Judges.
Affirmed by unpublished per curiam opinion.
Peter L. Goldman, O’REILLY & MARK, P.C., Alexandria, Virginia,
for Appellant. Dana J. Boente, United States Attorney,
Christopher Catizone, Assistant United States Attorney, OFFICE
OF THE UNITED STATES ATTORNEY, Alexandria, Virginia, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
On September 24, 2014, a federal jury convicted Paul
Starner of conspiracy to distribute cocaine and cocaine base in
violation of 21 U.S.C. §§ 841 (a)(1) and 846. Before trial,
Starner filed two motions to suppress: one concerning wiretap
evidence and one concerning statements Starner made in a post-
arrest interview. The district court denied both motions.
Starner now appeals those denials. He also appeals his
conviction, contending there was insufficient evidence for the
jury to find him guilty of conspiracy to distribute cocaine.
For the reasons that follow, we affirm.
I.
A.
In February 2013, as part of its investigation of a drug-
trafficking organization operating in Prince William County,
Virginia, the Federal Bureau of Investigation (“FBI”) obtained
authorization from the district court to wiretap the telephone
communications of a suspected cocaine distributer. The wiretap
revealed that the distributer’s name was Johnnie Hill and that
Hill frequently communicated with Starner. The FBI obtained
four subsequent authorizations to tap Hill’s phone but never
tapped Starner’s phone.
2
The information the FBI gathered over the wiretaps between
February and June 2013, led the FBI to believe Starner was a
low-level player in the conspiracy, purchasing small quantities
of powder and crack cocaine to redistribute to other buyers.
Starner was arrested on October 17, 2013.
Following his arrest, Starner was taken to the FBI’s field
office in Manassas, Virginia, where two Prince William County
detectives interviewed him. The detectives testified that
Starner was offered use of the restroom, and a bottle of water
and a granola bar prior to his interview. They also testified
that Starner was handcuffed with his hands in front of him,
rather than behind his back, so that he would be more
comfortable.
Before the interview, the detectives sought to obtain a
written waiver of Starner’s Miranda rights. Starner was unable
to read the waiver form because he did not have his glasses, so
the detectives read Starner’s Miranda rights aloud to him.
After the detectives finished reading, Starner verbally
acknowledged he understood his Miranda rights, and signed the
written waiver.
During the interview, Starner informed the detectives that
he had sustained a brain injury during a car accident in the
1970s and suffered from memory loss as a result. Starner claims
that because of his injury he cannot remember anything about the
3
interview, including whether he was offered food and beverage,
or whether he was informed of and waived his Miranda rights.
Starner states that he does remember, however, that the
detectives informed him he could receive up to 30 years in
prison if he did not answer their questions.
B.
In support of his motion to suppress the wiretap evidence,
Starner argued that the affidavits the government submitted in
support of its application for wiretap authorization did not
satisfy 18 U.S.C. § 2518(3), which requires the government to
demonstrate probable cause for a wiretap and exhaust less
intrusive measures before applying for a wiretap. Starner also
claimed that the government failed to minimize its interception
of phone calls unrelated to the suspected criminal activity. In
support of his motion to suppress his post-arrest statements,
Starner argued that his Miranda rights waiver was involuntary.
The district court denied both motions after a hearing on
September 22, 2014. The court found that the government had
established probable cause to authorize the wiretap of Hill’s
phone and noted that Starner could not identify any
investigative procedures the FBI should have, but failed to, try
prior to applying for a wiretap, nor any phone calls or portions
of phone calls the FBI listened to impermissibly. The court
also noted that it did not find Starner’s claims regarding his
4
mental state at the time of his interview to be credible and
could find no evidence demonstrating police intimidation or
failure to properly administer his Miranda rights. Thus, the
district court admitted at trial evidence from the wiretaps and
Starner’s post-arrest interview. On September 24, 2014 after a
one-day trial, the jury convicted Starner of conspiracy to
distribute cocaine and cocaine base.
II.
We turn first to Starner’s contention that the district
court erred in denying his motions to suppress. “We review
factual findings regarding [a] motion to suppress for clear
error and legal conclusions de novo.” United States v.
Williams, 740 F.3d 308, 311 (4th Cir. 2014). We construe the
evidence in the light most favorable to the prevailing party in
the district court. United States v. Foster, 634 F.3d. 243, 246
(4th Cir. 2011). Because the district court denied Starner’s
motions, we construe the evidence in the light most favorable to
the government. In examining the sufficiency of a wiretap
affidavit, “we review for abuse of discretion determinations of
necessity under § 2518, United States v. Wilson, 484 F.3d 267,
280 (4th Cir. 2007), and give great deference to the issuing
judge’s determination of probable cause, United States v. Depew,
932 F.2d 324, 327 (4th Cir. 1991).
5
A.
Starner argues that the district court should have
suppressed the evidence the government obtained from tapping
Hill’s telephone. Starner contends here, as he did before the
district court, that the government failed to demonstrate
probable cause for the wiretap, failed to exhaust less intrusive
investigative measures before applying for the wiretaps, and
failed to minimize its interception of phone calls unrelated to
the suspected criminal activity. Starner also contends that the
district court erred in failing to hold an evidentiary hearing
concerning his motion to suppress. We address each contention
in turn.
1.
18 U.S.C. § 2518 sets out three probable-cause requirements
the government must meet before a judge may authorize the
interception of a individual’s telephone communications:
“probable cause for belief that [the] individual is committing,
has committed, or is about to commit a particular offense
enumerated in [18 U.S.C. § 2516]”; “probable cause for belief
that particular communications concerning that offense will be
obtained through such interception”; and probable cause that the
telephone to be tapped is “leased to, listed in the name of, or
commonly used by [the individual].”
6
The government must establish such probable cause only with
respect to the individual whose phone is to be tapped; not for
every individual with whom the wiretap subject might exchange
phone calls during the authorized period. If “recordings of [a]
defendant’s conversations [a]re . . . made incident to a lawful
wiretap, . . . it [is] not error to allow the introduction of
the taped telephone calls simply because defendant was not named
in the application or order as one whose conversations would
possibly be intercepted.” United States v. Smith, 565 F.2d 292,
294 (4th Cir. 1977). Thus, the government’s interception of
telephone conversations between Hill and Starner was proper so
long as the government had sufficient probable cause to tap
Hill’s telephone.
The district court found that the government’s wiretap
affidavits contained “tons of evidence” to support tapping
Hill’s phone, and that “any fair reading of the affidavits
establishes adequate probable cause to justify” tapping Hill’s
telephone. J.A. 48, 50. Although Starner correctly points out
that Hill was not mentioned by name in the government’s initial
wiretap affidavit, the wiretap statute does not require that the
government identify a target individual’s name. Rather, it only
requires probable cause that the target individual is committing
an offense, that the government will obtain information about
the offense by listening to the target individual’s telephone
7
calls, and that the telephone identified by the government does
indeed belong to the target individual. Starner has offered no
argument that the government failed to meet those requirements.
Thus, we defer to the district court’s finding that the
requisite probable cause existed to justify the wiretap.
2.
Starner next argues that the government failed to exhaust
normal investigative procedures before applying for the wiretap.
The wiretap statute requires the government to show that “normal
investigative procedures have been tried and have failed or
reasonably appear to be unlikely to succeed if tried or to be
too dangerous.” 18 U.S.C. § 2518(3)(c). To meet this
exhaustion requirement, the government must provide more than “a
mere boilerplate recitation of the difficulties of gathering
usable evidence,” but “the adequacy of [the government’s]
showing is to be tested in a practical and commonsense fashion
that does not hamper unduly the investigative powers of law
enforcement agents.” United States v. Oriakhi, 57 F.3d 1290,
1298 (4th Cir. 1995) (quotation and alteration omitted).
Here, the government’s affidavits discussed over
20 investigative tactics the government had tried prior to
applying for the wiretap. Appellee’s Br. at 17. Starner does
not point to any alternative tactics the government could have
utilized. Thus, we defer to the district court’s finding that
8
the government adequately exhausted normal investigative
procedures before applying for the wiretap.
3.
Starner next argues that the government did not
sufficiently minimize its collection of wiretap evidence. The
wiretap statute provides that wiretaps “shall be conducted in
such a way as to minimize the interception of communications not
otherwise subject to interception . . . , and must terminate
upon attainment of the authorized objective.” 28 U.S.C.
§ 2518(5). “The wiretapping statute does not require that all
innocent communications be left untouched,” and “[i]n
determining whether the minimization requirements of § 2518(5)
have been met, courts apply a standard of reasonableness on a
case-by-case basis.” Oriakhi, 57 F.3d at 1300. Here, the
government followed proper procedures to ensure it did not
record innocent communications any more than necessary,
Appellee’s Br. at 18-19, and Starner fails to identify any
particular telephone conversation that he believes the
government intercepted improperly. Thus, he fails to establish
a failure to comply with the wiretap statute’s minimization
requirement.
4.
Finally, Starner claims that the district court erred by
failing to conduct an evidentiary hearing concerning Starner’s
9
motion to suppress wiretap evidence. We have already held that
the government’s wiretap affidavits established sufficient
probable cause to justify intercepting Hill’s telephone
conversations with Starner. To the extent Starner is
contending that the district court should have held an
evidentiary hearing concerning the accuracy of the government’s
statements in its wiretap affidavits, see Franks v. Delaware,
438 U.S. 154 (1978), that argument fails. In Franks, the
Supreme Court held that the Fourth Amendment requires an
evidentiary hearing be held at a defendant’s request if the
defendant has offered proof that an affidavit contains
indications of deliberate falsehood or reckless disregard for
the truth. 438 U.S. at 155 - 56, 171. Starner offered no such
proof in the district court and has offered none here.
B.
We turn next to Starner’s argument that evidence from his
post-arrest interview should be suppressed because he was
mentally unable to voluntarily waive his Miranda rights. To
determine whether a confession was given involuntarily, “[t]he
proper inquiry is whether the defendant’s will has been
overborne or his capacity for self-determination critically
impaired” by “threats, violence, implied promises, improper
influence, or other coercive police activity.” United States v.
Holmes, 670 F.3d 586, 591 (4th Cir. 2012) (quotation omitted).
10
In thus considering, we review the totality of the
circumstances, including not just whether there was coercive
police activity, but also “the characteristics of the defendant,
the setting of the interview, and the details of the
interrogation.” Id.
Here, Starner claims that he was mentally incapacitated at
the time of the interview due to a brain injury he claims
impairs his short- and long-term memory, and that the police
coerced him by informing him that if he did not answer their
questions, he could be subject to 30 years in prison. In
support, he cites only his own testimony, which the district
court did not find credible. See J.A. 123. Even if the police
did inform Starner that he potentially faced 30 years in prison,
“statements by law enforcement officers that are merely
uncomfortable or create a predicament for a defendant are not
ipso factor coercive.” Holmes, 670 F.3d at 592–93. Further,
the totality of the circumstances does not indicate police
coercion. Starner was offered access to the restroom, food and
beverage, and was placed in handcuffs with his arms in front of
him, rather than behind his back. The police read Starner’s
Miranda rights aloud to him, and saw no indication that Starner
did not comprehend their communications. Based on this record,
we cannot overturn the district court’s finding that Starner
voluntarily waived his Miranda rights.
11
III.
We turn finally to Starner’s claim that there was
insufficient evidence in the record to support his conviction.
We review the sufficiency of the evidence in the light most
favorable to the government as well, and the jury verdict must
be sustained if there is substantial evidence to support the
conviction. United States v. Jaensch, 665 F.3d 83, 93 (4th Cir.
2011). In determining the sufficiency of the evidence, “we do
not weigh the evidence or assess the credibility of witnesses,
but assume that the jury resolved any discrepancies in favor of
the government.” United States v. Kelly, 510 F.3d 433, 440 (4th
Cir. 2007). “Reversal for insufficient evidence is reserved for
the rare case where the prosecution's failure is clear.” United
States v. Ashley, 606 F.3d 135, 138 (4th Cir. 2010).
“Conspiracy is an inchoate offense, the essence of which is
an agreement to commit an unlawful act.” United States v.
Edmonds, 679 F.3d 169, 173 (4th Cir. 2012). “To prove
conspiracy, the government need not prove an explicit agreement.
It may rely upon indirect evidence from which the conspiracy
agreement may be inferred.” Id. at 174. Such indirect evidence
may include the amount of cocaine involved in the distribution,
the regularity of distribution transactions, and distributions
involving a credit agreement known as “fronting.” Id.
12
The government presented all three examples of indirect
evidence at Starner’s trial. First, Starner admitted to buying
over $200 of cocaine at one time, which one of the lead FBI
agents on the case testified was an amount inconsistent with
purely personal use. Second, transcripts of tapped calls
indicate the regularity of Starner and Hill’s transactions.
During one call, after Starner told Hill he didn’t have his
“stuff” or his money, Hill told Starner “we been through this
10 times man.” Later in the conversation, Hill said, “this
ain’t the first or second or third time you did this to me.”
Finally, in a separate conversation, after establishing Starner
had taken some of Hill’s product, Starner said, “I apologize
Bush I got a hundred right now but I’ll have the rest of it
tomorrow or the next day,” indicating Starner paid Hill on
credit. In reviewing this evidence in the light most favorable
to the government, we find sufficient evidence to sustain
Starner’s conviction.
IV.
For the foregoing reasons, we affirm the judgment of the
district court. We dispense with oral argument because the
facts and legal contentions are adequately presented in the
materials before this court and argument would not aid the
decisional process.
AFFIRMED
13
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159 F.3d 1354
U.S.v.William Richman
NO. 97-5676
United States Court of Appeals,Third Circuit.
July 10, 1998
Appeal From: D.N.J. ,No.96cr00452
1
Affirmed.
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988 F.2d 1210
U.S.v.Smith**
NO. 92-5605
United States Court of Appeals,Fifth Circuit.
Mar 16, 1993
1
Appeal From: W.D.Tex.
2
AFFIRMED.
**
Conference Calendar
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395 F.3d 861
UNITED STATES of America, Appellee,v.Arthur VESEY, Appellant.
No. 04-1026.
United States Court of Appeals, Eighth Circuit.
Submitted: November 18, 2004.
Filed: January 21, 2005.
Rehearing Denied February 14, 2005.
Wallace L. Taylor, argued, Cedar Rapids, IA, for appellant.
Daniel C. Tvedt, argued, Asst. U.S. Attorney, Cedar Rapids, IA, for appellee.
Before WOLLMAN and HEANEY, Circuit Judges, and HOLMES,1 District Judge.
WOLLMAN, Circuit Judge.
1
Arthur Vesey appeals from the district court's2 denial of his motion for new trial. We affirm.
I.
2
Vesey originally was charged with four counts of distribution of cocaine base, in violation of 21 U.S.C. § 841(a)(1). After his first trial resulted in a hung jury, Vesey was retried and was convicted on three counts and acquitted on one count. We reversed that conviction and remanded for a third trial, holding that Vesey had been prejudiced by the district court's denial of a continuance at the second trial. United States v. Vesey, 330 F.3d 1070 (8th Cir.2003).
3
Following another mistrial, the government tried Vesey for the fourth time on a single count of distributing more than 5 grams of cocaine base. See 21 U.S.C. § 841(a)(1). At the fourth trial, police informant Susan Zieser-Perkins testified that she purchased 14 rocks of crack cocaine from Vesey in a controlled drug buy on July 31, 2003, in Bever Park in Cedar Rapids, Iowa. Perkins wore a recording device during the controlled buy, and the government introduced a tape recording of the alleged deal to supplement Perkins's testimony. The government also introduced the testimony of Wilson Wade, an inmate who claimed that Vesey had admitted to him that he disposed of both the container in which he transported the drugs to the controlled buy and the sequentially marked bills that Perkins used to buy the drugs. In response, Vesey presented various witnesses who claimed that the testimony of both Perkins and Wade was unreliable. The jury subsequently returned a guilty verdict.
4
Following the verdict, Vesey moved for a new trial on the ground that the evidence adduced at the fourth trial was insufficient to support the jury's verdict.
II.
5
"The decision to grant or deny a motion for a new trial based upon the weight of the evidence is within the sound discretion of the trial court." United States v. Campos, 306 F.3d 577, 579 (8th Cir.2002). In making its decision, the district court "need not view the evidence in the light most favorable to the government, but may instead weigh the evidence and evaluate for itself the credibility of the witnesses." United States v. Lacey, 219 F.3d 779, 783-84 (8th Cir.2000). The district court need not grant a motion for a new trial unless the evidence "weighs heavily enough against the verdict that a miscarriage of justice may have occurred." Id. at 783 (citation omitted). We review the district court's denial of a motion for a new trial "with great deference, reversing only if the district court abused its discretion." United States v. Leonos-Marquez, 323 F.3d 679, 682 (8th Cir.2003) (quoting Jones v. TEK Indus., 319 F.3d 355, 358 (8th Cir.2003)).
6
In order to prove that Vesey distributed cocaine base in violation of 21 U.S.C. § 841(a)(1), the government was required to establish that: (1) Vesey distributed cocaine base on or about July 31, 2003; and (2) he did so knowingly and intentionally. See United States v. Johnson, 934 F.2d 936, 939 n. 5 (8th Cir.1991) (elements of distribution of a controlled substance under 21 U.S.C. § 841(a)(1)). The government presented a recording of the dialogue between Perkins and Vesey at the controlled buy. The recording clearly indicates that Vesey gave Perkins what he believed to be twelve or thirteen individual units of drugs in exchange for cash. After the deal was concluded, Perkins returned fourteen rocks of crack cocaine to the police officers with whom she was cooperating. Although neither the sequentially marked bills that Perkins used to pay for the crack cocaine nor the container in which Vesey allegedly transported the drugs to the deal was ever retrieved by police, the recording of the controlled buy and the record as a whole convince us that sufficient evidence existed to support Vesey's conviction. See also United States v. Copple, 827 F.2d 1182, 1187 (8th Cir.1987) (citing United States v. Coronel-Quintana, 752 F.2d 1284, 1292 (8th Cir.1985)) (government may prove its case through circumstantial evidence). We are thus satisfied that no miscarriage of justice occurred and that the district court did not abuse its discretion in denying Vesey's motion for a new trial.
7
The order denying a new trial is affirmed.
Notes:
1
The Honorable J. Leon Holmes, United States District Judge for the Eastern District of Arkansas, sitting by designation
2
The Honorable Mark W. Bennett, Chief Judge, United States District Court for the Northern District of Iowa
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820 F.2d 259
Johnnie Miles CHESTER, Appellant,v.ST. LOUIS HOUSING AUTHORITY, Appellee.
No. 87-1352.
United States Court of Appeals,Eighth Circuit.
Submitted May 4, 1987.Decided May 28, 1987.
Before McMILLIAN, JOHN R. GIBSON and WOLLMAN, Circuit Judges.
PER CURIAM.
1
Johnnie Miles Chester appeals, pro se, from the district court's1 order denying his motion for reconsideration. We affirm.
2
This case arises out of Chester's attempts to regain his position as a Sergeant of Security Operations with defendant St. Louis Housing Authority. In July 1985, following his voluntary resignation, Chester filed a 42 U.S.C. Sec. 1983 action against the Housing Authority charging it with violating his due process right to a timely pretermination hearing. In his complaint, Chester sought reinstatement and backpay damages.
3
A jury returned a verdict in favor of Chester and awarded him $10,000 in damages on April 8, 1986. The jury did not, however, award Chester reinstatement as he had requested. On May 13, 1986, the Housing Authority paid Chester $10,000 in full satisfaction of the judgment and Chester signed a statement to that effect.
4
Chester never appealed the jury's verdict. Instead, on October 21, 1986, more than six months after the entry of judgment, Chester filed a "Motion for Reinstatement and Backpay" with the district court. The district court construed Chester's motion as one for relief under Rule 60(b) of the Federal Rules of Civil Procedure. Judge Hungate then denied the motion holding that no relief was available because 1) the April 8th judgment was fully satisfied; 2) the relief sought in the motion--reinstatement and backpay--was beyond that awarded in the judgment; and, 3) no power existed otherwise to reinstate Chester after he voluntarily resigned from his position.
5
On appeal, Chester apparently argues that the court failed to properly instruct the jury on the issues of reinstatement and backpay and should have, therefore, granted his motion for reconsideration. This court's decision in Fox v. Brewer, 620 F.2d 177 (8th Cir.1980), controls and requires affirmance of the district court's order.
6
Rule 60(b) "provides for extraordinary relief which may be granted only upon an adequate showing of exceptional circumstances." Hoffman v. Celebrezze, 405 F.2d 833, 835 (8th Cir.1969). "An appeal from a Rule 60(b) decision does not bring the original judgment up for review, but only the decision on the request for relief from the judgment under Rule 60(b)." Fox v. Brewer, 620 F.2d at 179-80. The rule, then, "is not intended as a substitute for a timely appeal." Hoffman, 405 F.2d at 836. Thus, where the "alleged error could have been corrected by appeal, the motion must be within the time period allowed for appeal, so as to prevent its use as a substitute for timely appeal." C.R.I., Inc. v. Watson, 608 F.2d 1137, 1143 (8th Cir.1979).
7
Chester filed his motion on October 21, 1986, well beyond the time period for filing a notice of appeal from the April 8, 1986 verdict. Although the court construed the motion as one for Rule 60(b) relief, it is clear that, like the situation in Fox, Chester attempted here to challenge the very issues litigated at his trial, i.e. whether he was entitled to backpay and reinstatement. Moreover, Chester did not present any considerations, either in his motion or on appeal, not already addressed by the district court. Under those circumstances, the district court did not abuse its discretion in denying Chester's motion for relief. See Fox, 620 F.2d at 180.
8
Accordingly, we affirm the district court's order denying Chester's motion for reinstatement and backpay. See 8th Cir.R. 12(a).
1
The Honorable William L. Hungate, United States District Judge for the Eastern District of Missouri
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368 So.2d 1 (1979)
McKESSON ROBBINS, A Division of Foremost-McKesson, Inc.
v.
BRUNO'S, INC., d/b/a Big B Discount Store and First Alabama Bank of Birmingham.
77-391.
Supreme Court of Alabama.
January 26, 1979.
Rehearing Denied March 2, 1979.
W. B. Hairston of Engel, Hairston, Moses & Johanson, Leonard M. Schwartz, Birmingham, for appellant.
Thomas H. Brown of Sirote, Permutt, Friend, Friedman, Held & Apolinsky, Birmingham, for appellee, Bruno's, Inc., d/b/a Big B Discount Store.
Joseph W. Mathews, Jr., Birmingham, for appellee, First Alabama Bank of Birmingham.
MADDOX, Justice.
This case comes upon the pleadings. The substance of the allegations in the pleadings, in narrative and conclusionary form, are as follows:
Sav-On Drugs operated a drugstore in Clanton, Alabama. It owed First Alabama Bank of Birmingham a substantial debt for a loan of money which was personally guaranteed by its president, Donald R. Dennis. Dennis had obligations to First Alabama other than this guaranty. Except for the personal guarantee, these debts were not secured.
At the request of First Alabama Bank, Sav-On Drugs sold all, or a major portion of, its inventory to Bruno's, Inc. d/b/a Big B Discount Store for $82,500.00. The proceeds from this sale were by endorsement, paid to the First Alabama Bank in the form received. These proceeds were applied by the bank to the debts due the bank by the Sav-On Drugs and to the debts due the bank by Donald R. Dennis.
Prior to the sale of the inventory, Sav-On Drugs did not give Bruno's a list of the names and addresses of its creditors.
Prior to the sale, Bruno's did not cause a notice of the sale to be sent to the creditors of Sav-On Drugs.
At the time of the transfer, McKesson Robbins was a creditor of Sav-On Drugs, having an obligation of $11,260.44 due by account for the sale and purchase of inventory.
The trial judge granted a motion to dismiss by the defendants. The record does not show that the trial judge considered matters outside the motion in dismissing *2 the cause. He entered a Rule 54(b) judgment. Plaintiff appealed.
Plaintiff McKesson Robbins claims these questions are presented:
(1) Does the complaint as last amended state a cause of action against Bruno's Inc., d/b/a Big B Discount?
(2) Does the complaint, as last amended, state a cause of action against First Alabama Bank of Birmingham?
(3) Where there is a bulk transfer of inventory, does the creditor of the transferor have any action against the transferee where the transferee has failed to comply with the provisions of Article 6 of the UCC of Alabama on Bulk Transfers (§ 7-6-101 through 7-6-111, Code 1975)?
Plaintiff's main argument is that the trial judge considered only the allegations of the complaint, as amended, and the motions to dismiss, and did not consider anything outside the pleadings, and that its complaint, as amended, alleges facts that give rise to the conclusion that the appellees, along with those defendants who were not dismissed as defendants, participated in a scheme, artifice or device to hinder or delay the appellant in the collection of its debt by a secret conversion of Sav-On Drugs' assets into proceeds that were placed beyond the reach of the ordinary processes of law.
Appellees claim that the complaint was due to be dismissed because it failed to allege fraud, much less with particularity, and that there was a failure to state a claim for relief for damages for violation of the Commercial Code's Bulk Sale requirement.
We reverse and remand.
Rule 8 provides that all pleadings shall be so construed as to do substantial justice. We conclude that plaintiff, McKesson-Robbins' allegations are "more than bare bones pleadings. The meat thereon more than satisfies Rule 8." Brunswick Corp. v. Vineberg, 370 F.2d 605 (5 Cir., 1967), at page 610; Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).
REVERSED AND REMANDED.
TORBERT, C. J., and JONES, SHORES and BEATTY, JJ., concur.
ON REHEARING
MADDOX, Justice.
On application for rehearing, First Alabama Bank contends that the original opinion claims the bank violated the Bulk Sales Act. The opinion does nothing of the kind. The holding of the original opinion is quite simple.
A complaint which alleges, in substance, that a party or parties "participated in a scheme, artifice or device to hinder or delay [a creditor] in the collection of a debt," is more than "bare bones pleading." The trial judge was faced with a motion to dismiss which alleges (1) that the complaint fails to state a claim and (2) that the complaint does not allege fraud with particularity. He considered nothing outside the pleading; therefore, he should not have dismissed the complaint.
The original opinion deals with a question of law relative to pleading, not liability. We expressed no opinion on whether the plaintiff could or could not succeed on its complaint, or at what stage the action might be correctly terminated, only that the plaintiff, under our new rules of procedure, should not have been thrown out of court by a mere motion to dismiss its complaint.
The original opinion is extended and the application for rehearing is denied.
OPINION EXTENDED; APPLICATION FOR REHEARING DENIED.
TORBERT, C. J., and JONES, SHORES and BEATTY, JJ., concur.
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341 F.Supp.2d 1 (2004)
John DOE # 1, et al, Plaintiffs,
v.
Donald H. RUMSFELD, et al., Defendants.
No. CIV.A.03-707(EGS).
United States District Court, District of Columbia.
October 27, 2004.
*2 *3 Mark S. Zaid, Krieger & Zaid, PLLC, Washington, DC, for Plaintiffs.
MEMORANDUM OPINION
SULLIVAN, District Judge.
I. Introduction
Six plaintiffs, known as John and Jane Doe # 1 through # 6, bring this action to challenge the lawfulness of the government's Anthrax Vaccination Immunization Program ("AVIP"). Specifically, plaintiffs, who are members of the active duty or National Guardsmen components of the Armed Forces and civilian contract employees of the Department of Defense ("DoD") who have submitted or have been instructed to submit to anthrax vaccinations without their consent pursuant to AVIP, have filed a Motion for Summary Judgment challenging the Food & Drug Administration's ("FDA") determination that anthrax vaccine adsorbed ("AVA") is licensed for the purposes of combating inhalation anthrax (also known as aerosolized or weaponized anthrax). Defendants, the Secretary of Defense (Donald Rumsfeld), the Secretary of Health and Human Services (Tommy Thompson), and the Commissioner of the Food and Drug Administration (Mark McClellan) have filed a Cross Motion for Summary Judgment asking this Court to declare that FDA's Final Rule and Order determining that AVA is licensed for anthrax regardless of the route of exposure is not arbitrary and capricious.
In 1997, the Department of Defense ("DoD") instituted AVIP and began inoculating service members with AVA to prevent the harmful effects caused by exposure to anthrax.[1] Compl. ¶ 33. Anthrax is an acute bacterial disease caused by infection with spores of Bacillus anthracis, which can enter the body in three ways: by skin contact (cutaneous), by ingestion (gastrointestinal), and by breathing (inhalation). See 50 Fed.Reg. at 51,058.
The AVIP is a multi-service vaccination program for active duty, Reserve and National Guard service members. Compl. ¶ 33. Under AVIP, military personnel are ordered to submit to a series of AVA inoculations over the course of eighteen months, followed by an annual booster vaccine. Compl. ¶ 47. If military personnel refuse to submit to the AVA inoculations, plaintiffs claim that they will be subject to military disciplinary actions, including court-martial convictions, forfeitures of pay, incarceration and other sanctions. Compl. ¶ 35. Civilian plaintiffs who refuse to comply with AVIP are subject to dismissal as DoD employees or defense contractors. Id.
II. Statutory & Regulatory Framework
A. The Public Health Service Act & The Food, Drug, and Cosmetic Act
The Public Health Service Act ("PHSA"), 42 U.S.C. §§ 201 et seq., and the Federal Food, Drug, and Cosmetic Act *4 ("FDCA"), 21 U.S.C. §§ 301, et seq., govern the regulation of biological products in the United States. The FDCA charges FDA with approving drugs, including vaccines, that are safe, effective, and not misbranded. 21 U.S.C. § 355(d). The PHSA grants FDA authority to issue licenses for products that are "safe, pure, and potent." 42 U.S.C. § 262(a)(2)(C)(i)(I).
Prior to 1972, the National Institute of Health ("NIH") was charged with implementing the PHSA's licensing requirement. In 1972, this authority was transferred to FDA. See Statement of Organization, Functions, and Delegations of Authority, 37 Fed.Reg. 12,865 (June 19, 1972). Upon the transfer of responsibility, FDA promulgated regulations establishing procedures for reviewing the safety, effectiveness, and labeling of all biological products previously licensed by the NIH. See Procedures for Review of Safety, Effectiveness and Labeling, 37 Fed.Reg. at 16,679. These regulations are codified in 21 C.F.R. § 601.25.
B. 21 C.F.R. § 601.25
21 C.F.R. § 601.25 established a two-stage process for reviewing biological products licensed prior to July 1, 1972. It directs FDA's Commissioner ("Commissioner") to appoint an advisory panel (1) to evaluate the safety and effectiveness of the previously licensed product, (2) to review the labeling of the product, and (3) to advise the Commissioner "on which of the biological products under review are safe, effective, and not misbranded." See 21 C.F.R. § 601.25(a).
Each panel must submit a report. See § 601.25(e). The report must contain a "statement ... designat[ing] those biological products determined by the panel to be safe and effective and not misbranded" and this statement "may include any conditions relating to active components, labeling, tests required prior to release of lots, product standard, or other conditions necessary or appropriate for their safety and effectiveness." § 601.25(e)(1).
After reviewing the recommendation, the Commissioner must publish the panel report and a proposed order. See 21 C.F.R. § 601.25(f). After reviewing comments on the proposed order, the Commissioner "shall publish ... a final order on the matters covered" therein, which shall "constitute final agency action from which appeal lies to the courts." See §§ 601.25(g), 601.25(i).
C. Expert Panel Review
In 1973, FDA announced the Section 601.25 safety and effectiveness review of several "bacterial vaccine[s]" previously licensed under PHSA, including AVA, and solicited relevant data and information from manufacturers in order to determine whether the drugs were "safe, effective, and not misbranded." See Safety, Effectiveness and Labeling Review; Request for Data Information, 38 Fed.Reg. 5,358 (Feb. 28, 1973).
A scientific Advisory Panel was convened, and in 1980, after considering the relevant data and information, the Panel submitted its report. See A.R. 1-600. The Panel observed that AVA "appears to offer significant protection against cutaneous anthrax." The Panel noted that "there is sufficient evidence to conclude that anthrax vaccine is safe and effective under the limited circumstances for which [it] is employed." See A.R. at 338, 342. Therefore, the Report recommended that AVA "be placed in Category I" (safe, effective, and not misbranded) and that the appropriate licenses be continued because there is substantial evidence of safety and effectiveness for this product." Id. at 342. In the Panel's review of "recommended use," it found that "this product is intended solely for immunization of high-risk of exposure industrial populations such as individuals *5 who contact imported animal hides, furs, bone meal, wool, hair (especially goathair) and bristles" along with "laboratory investigators handling the organism." Id. at 340.
In arriving at this decision, the Panel considered two sets of data: (1) a human field trial conducted by Drs. Brachman, Glod, Plotkin, Fekety, Werrin, and Ingraham in the 1950's ("Brachman study"), A.R. 3732-45, and (2) surveillance data collected and summarized by the Center for Disease Control ("CDC"). See A.R. at 337-38.
The Brachman study involved 1,249 workers in four textile mills that processed imported goat hair. See A.R. 3732-33. A portion of the workers received the anthrax vaccine, a portion received a placebo vaccine, and a portion received no treatment. See A.R. 3737 (Table 2), A.R. 3736 (Table 4); 50 Fed.Reg. at 51,058 (Panel). During the evaluation period, which included an "outbreak" of inhalation anthrax, twenty-six cases of anthrax occurred. See A.R. 3733. The results can best be summarized as follows:
-------------------------------------------------------------------------------
Total Anthrax No
Cases (26) Vaccine Placebo vaccine
-------------------------------------------------------------------------------
Inhalation 5 0 2 3
-------------------------------------------------------------------------------
Cutaneous 21 3 15 3
(2 incomplete (2 incomplete
vaccine) vaccine)
-------------------------------------------------------------------------------
A.R. 3733-36. The Brachman study calculated the effectiveness of the anthrax vaccine at 92.5 percent. See A.R. 3737. The authors of the study based their calculations on a comparison between the placebo and the anthrax vaccine group regardless of the route of exposure.
While relying on the Brachman study for its recommendation of effectiveness, the Panel stated that the study demonstrates "93 percent ... protection" against only cutaneous anthrax and that "[i]nhalation anthrax occurred too infrequently to assess the protective effect of vaccine against this form of the disease." 50 Fed.Reg. at 51,058 (Panel).
The Panel also considered surveillance data collected by the CDC "on the occurrence of anthrax in at-risk industrial settings." 50 Fed.Reg. at 51,058 (Panel). While twenty-seven cases were observed, no cases occurred in persons who were fully vaccinated. Id.
D. FDA's Proposed Rule and Order
In 1985, citing Section 601.25's procedural requirements, FDA published notice of a Proposed Rule to reclassify bacterial vaccines and toxoids covered by the Panel Report. See Bio. Prods; Bacterial Vaccines & Toxoids; Implementation of Efficacy Review; Proposed Rule, 50 Fed.Reg. 51,002 (Dec. 13, 1985) ("Proposed Rule").[2] The Proposed Rule adopted the Panel Report verbatim with respect to AVA, including the Panel's recommendation to classify AVA as Category I and the Panel's note that "[i]mmunization with this vaccine is indicated only for certain occupational groups with risk of uncontrollable or unavoidable exposure to the organism." See 50 Fed.Reg. at 51,058. The Proposed Rule found that "the benefit-to-risk assessment is satisfactory" for this "limited high-risk population." 50 Fed.Reg. at 51,059.
The Proposed Rule required comments "on the proposed classification of products *6 into Category I ... be submitted by March 13, 1986." 50 Fed.Reg. at 51,002. Four total comments were received, none of them specifically addressing the proposal to reclassify AVA. See 69 Fed.Reg. 255, 256-259 ("Final Rule and Order"). FDA took no further action until December 30, 2003 eighteen years after the Proposed Rule, but only eight days after this Court's Order enjoining DoD's AVIP.
E. The Law Regarding Unapproved Drugs and Military Personnel
In 1998, in response to concerns about the use of investigational new drugs during the 1991 Gulf War that may have led to unexplained illnesses among veterans, Congress enacted 10 U.S.C. § 1107. This provision prohibits the administration of investigational new drugs, or drugs unapproved for their intended use, to service members without their informed consent. The consent requirement may be waived only by the President. In 1999, the President signed Executive Order 13,139, pursuant to which DoD must obtain informed consent from each individual member of the armed forces before administering investigational drugs and under which waivers of informed consent are granted only "when absolutely necessary." Exec. Order No. 13,139, 64 Fed.Reg. 54,175 (Sept. 30, 1999). In August 2000, DoD formally adopted these requirements in DoD Directive 6200.2.
F. Citizen Petition
On October 12, 2001, a group of individuals filed a citizen petition requesting that FDA declare that AVA is ineffective for use against inhalation anthrax and issue a final order classifying AVA as a Category II product. See A.R. 1313-75. The petitioners argued that the Panel had erred in concluding that the Brachman study qualified as a well-controlled field trial for purposes of 21 C.F.R. § 601.25(d)(2). See A.R. 1316-17 & n. 6. In its August 28, 2002 response, FDA explained that it was "working to complete this rulemaking as soon as possible," and that given "the pendency of this rulemaking," it could not "evaluate the adequacy of the Panel recommendation."[3] A.R. 1378.
G. The Preliminary Injunction
In March 2003, plaintiffs filed suit in this Court, alleging that the AVIP violates federal law because AVA had never been approved as a safe and effective drug for protection against inhalation anthrax. Plaintiffs asked this Court to enjoin DoD from inoculating them without their informed consent.
On December 22, 2003, this Court issued a Preliminary Injunction enjoining inoculations under the AVIP in the absence of informed consent or a Presidential waiver. Because the record was devoid of an FDA final decision on the investigational status of AVA, the Court was persuaded that AVA was an investigational drug being used for an unapproved purpose in violation of 10 U.S.C. § 1107, Executive Order 13,139, and DoD Directive 6200.2. See Doe v. Rumsfeld, 297 F.Supp.2d 119, 135 (D.D.C.2003).
H. Final Rule and Order
Eight days after this Court's Preliminary Injunction and eighteen years after FDA proposed to reclassify AVA, the agency announced a Final Rule and Order classifying AVA as a Category I drug. See Bio. Prods; Bacterial Vaccines & Toxoids; Implementation of Efficacy Review; 69 Fed.Reg. 255, 265-66 (Jan. 5, 2004) ("Final Rule and Order"). The Final Rule and Order stated that AVA was safe and effective "independent of the route of exposure." See id. at 257-59. At the same *7 time, FDA issued a press release noting that a
recent ruling by a United States District Court for the District of Columbia gave the opinion that the anthrax vaccine should be classified as `investigational' with regard to protecting against inhalation anthrax. Today's final rule and order make clear that FDA does not regard the approved anthrax vaccine as `investigational' for protection against inhalation anthrax. FDA's final determination of the safety and effectiveness of the anthrax vaccine, independent of route of exposure, as well as its conclusions regarding the Expert Panel's report, being announced today in the final order are relevant and should be considered in any further litigation in this matter.
See http://www.fda.gov/bbs/topics/NEWS/2003/NEW01001.html.
The Final Rule and Order relied on several sources of data to support its finding of safety and efficacy, including the Brachman Study, the CDC surveillance data, the results of a "small randomized clinical study of the safety and immunogenicity of AVA" conducted by the DoD, "post licensure adverse event surveillance data available from the Vaccine Adverse Event Reporting System (VAERS)," and an independent examination by the Institute of Medicine ("IOM"). See Final Rule and Order at 260.
In its discussion, FDA explained, for the first time, certain "points of disagreement with statements in the Panel Report." See id. at 259. Specifically, FDA disagreed with the Expert Panel's interpretation of the Brachman Study. FDA concluded:
because the Brachman comparison of anthrax cases between the placebo and vaccine groups included both inhalation and cutaneous cases, FDA has determined that the calculated efficacy of the vaccine to prevent all types of anthrax disease combined was, in fact, 92.5 percent.... The efficacy analysis in the Brachman study includes all cases of anthrax disease regardless of the route of exposure or manifestation of disease.
Id. at 259-60.
FDA did note that the five cases of inhalation anthrax were "too few to support an independent statistical analysis." Id. at 260. However, FDA explained that:
of these [five] cases, two occurred in the placebo group, three occurred in the observation group, and no cases occurred in the vaccine group. Therefore, the indication section of the labeling for AVA does not specify the route of exposure, and the vaccine is indicated for active immunization against Bacillus anthracis [anthrax], independent of the route of exposure.
Id.
Moreover, FDA noted that the surveillance data was "supportive of the effectiveness of AVA." Id. at 260. FDA also discussed the independent examination by IOM of AVA's safety and effectiveness, during which the IOM Committee "reviewed all available data, both published and unpublished, [and] heard from Federal agencies, the manufacturer and researchers." Id. Noting that the abstract of the IOM's Report stated "that AVA, as licensed, is an effective vaccine to protect humans against anthrax including inhalation anthrax," FDA stated it
agrees with the report's finding that studies in human and animal models support the conclusion that AVA is effective against B. Anthracis strains that are dependant upon the anthrax toxin as mechanism or virulence, regardless of the route of exposure.
Id. at 260 & n. 5.
I. The Present Case
Following the announcement of FDA's Final Rule and Order, the Court granted *8 defendants' request to stay the Court's earlier Preliminary Injunction except as it applied to the six Doe plaintiffs.[4]See Order dated January 7, 2004, at 1-2.
Plaintiffs now ask this Court to vacate FDA's recent Final Rule and Order and to remand the matter to FDA for proper consideration and a determination of the licensing status of AVA. In addition, plaintiffs request that the Court reinstate the injunctive relief, albeit now on a permanent basis, that was granted in its initial ruling of December 22, 2003, because absent a valid final rule and/or order, the Court's conclusion that the vaccine is improperly licensed for inhalation anthrax remains in effect. Alternatively, plaintiffs ask that summary judgment not be granted to defendants and ask that they be permitted to conduct discovery in order to ensure that the administrative record is complete and was not improperly influenced by DoD. Defendants ask this Court to grant summary judgment in their favor.
III. Standard of Review
Pending before this Court are cross motions for summary judgment. Summary judgment is granted pursuant to Federal Rule of Civil Procedure 56 only when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Court views the evidence in the light most favorable to the nonmoving party, according the party the benefit of all reasonable inferences. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Thus, in ruling on cross motions for summary judgment, the Court will grant summary judgment only if one of the moving parties is entitled to judgment as a matter of law upon material facts that are not in dispute. See Rhoads v. McFerran, 517 F.2d 66, 67 (2d Cir.1975).
There are no genuine material facts that preclude judgment in this matter. If the FDA's Final Rule and Order categorizing AVA as safe and effective for protection against inhalation anthrax was issued in accordance with the relevant law, then DoD's AVIP is lawful; conversely, if FDA's Final Rule and Order is invalid, the AVIP is unlawful absent informed consent or a Presidential waiver.
Under the Administrative Procedure Act, a reviewing court may hold unlawful and set aside final agency action found to be "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law," or "without observance of procedure required by law." 5 U.S.C. § 706(2).
This Court is mindful that the standard of review for agency action is highly deferential. See American Public Communications Council v. FCC, 215 F.3d 51 (D.C.Cir.2000); Bristol-Myers Squibb Co. v. Shalala, 923 F.Supp. 212, 216 (D.D.C.1996). Ordinary deference may be heightened even further in cases involving scientific or technical decisions. See Serono Labs., Inc., v. Shalala, 158 F.3d 1313, 1320 (D.C.Cir.1998) (noting that an agency is entitled to a "high level of deference" when its regulatory determination rests on its "evaluation [] of scientific data within its area of expertise"). The "determination whether a drug is generally recognized as safe and effective within *9 the meaning of [the FDCA] necessarily implicates complex chemical and pharmacological considerations." Weinberger v. Bentex Pharms., Inc., 412 U.S. 645, 654, 93 S.Ct. 2488, 37 L.Ed.2d 235 (1973). FDA's "judgment as to what is required to ascertain the safety and efficacy of drugs" thus falls "`squarely within the ambit of FDA's expertise and merit[s] deference from' the courts." Bristol-Myers, 923 F.Supp. at 220 (quoting Schering Corp. v. FDA, 51 F.3d 390, 399 (3d Cir.), cert denied, 516 U.S. 907, 116 S.Ct. 274, 133 L.Ed.2d 195 (1995)).
Although FDA's scientific expertise is due great deference, it is well within this Court's scope of authority to ensure that the agency adheres to its own procedural requirements. See Service v. Dulles, 354 U.S. 363, 77 S.Ct. 1152, 1 L.Ed.2d 1403 (1957) (seminal case standing for the proposition that judicial review is available to ensure that agencies comply with their own voluntarily-promulgated regulations, even where Congress has given the agency "absolute discretion" over the administrative action in question). See also Rodway v. United States Dept. of Agric., 514 F.2d 809, 813-14 (D.C.Cir.1975) (requiring the agency to comply with its own regulations "making the procedural requirements of [the APA] applicable" because "it is, of course, well settled that validly issued administrative regulations have the force and effect of law") (citing Morton v. Ruiz, 415 U.S. 199, 235, 94 S.Ct. 1055, 39 L.Ed.2d 270 (1974); Vitarelli v. Seaton, 359 U.S. 535, 539-540, 79 S.Ct. 968, 3 L.Ed.2d 1012 (1959); Service, 354 U.S. at 388, 77 S.Ct. 1152). In this case, the Court focuses not on FDA's substantive and highly technical determinations regarding the safety of AVA, but rather on whether or not the Agency observed the relevant "procedure required by law."
IV. Discussion
A. Standing
The party asserting jurisdiction always has the burden to prove standing. FW/PBS Inc. v. City of Dallas, 493 U.S. 215, 110 S.Ct. 596, 107 L.Ed.2d 603 (1990). To have standing, a plaintiff must allege: (1) an "actual or imminent" injury-in-fact; (2) "fairly ... trace[able] to the challenged action of the defendant"; and (3) "likely" to be "redressed by a favorable decision." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). At the summary judgment stage, "the plaintiff can no longer rest on ... `mere allegations'," but must "`set forth' by affidavit or other evidence `specific facts'" establishing standing. Lujan, 504 U.S. at 561, 112 S.Ct. 2130 (quoting Fed.R.Civ.P. 56(e)).
The Court has recognized that in order to establish injury plaintiffs must demonstrate that they have taken, or have been ordered imminently to take, the anthrax vaccine. See Doe, 297 F.Supp.2d at 130-31. While defendants argue that plaintiffs have presented no "specific facts" in support of these claims, the Court accepts and credits the sworn affidavit of plaintiffs' counsel. Thus, plaintiffs have standing to challenge the FDA's actions.
B. The Status of FDA's December 30, 2003 Issuance
At the outset, the parties dispute whether the FDA's December 30, 2003 issuance, labeled a "Final Rule and Order," was in fact a Final Rule or a Final Order.[5] The *10 Court will address this issue in the first instance.
The APA defines two broad, normally mutually exclusive categories of agency action rules and orders. See Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 216, 109 S.Ct. 468, 102 L.Ed.2d 493 (1988) (Scalia, J., concurring) (distinction between rules and orders is "the entire dichotomy upon which the most significant portions of the APA are based"). The APA defines a "rule" as:
the whole or a part of an agency statement of general or partial applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval or prescription for the future of rates, wages, corporate or financial structures or reorganization thereof, prices, facilities, appliances, services, or allowance therefor or of valuation, costs, or accounting, or practices bearing on any of the foregoing.
5 U.S.C. § 551(4). "[R]ule making," which can be formal or informal, is the "agency process for formulating, amending, or repealing a rule." Id. at § 551(5).
When promulgating a substantive rule, an agency must comply with the notice-and-comment requirements of 5 U.S.C. § 553. See 5 U.S.C. § 553(b). Notice and comment requires that an agency provide notice of a proposed rulemaking, and that notice must include "either the terms or substance of the proposed rule or a description of the subjects and issues involved." 5 U.S.C. § 553(b). Once a proposed rule is issued, the agency must "give interested persons an opportunity to participate in the rulemaking through submissions of written data, views, or arguments." 5 U.S.C. § 553(c).
The APA defines an "order" as:
the whole or a part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other then rule making but including licensing.
Id. at § 551(6). "Adjudication," which can also be formal or informal, is the "agency process for the formulation of an order." Id. at § 551(7).
Plaintiffs claim that in conducting its review of AVA, FDA acted in a manner consistent with the exercise of rulemaking and that it was not until the present litigation that defendants sought to recast the AVA certification process.[6] Plaintiffs allege that FDA's rulemaking denied affected parties the opportunity to effectively participate in the process, and that the Final Rule should be invalidated and remanded to the agency.
Defendants argue that a decision by FDA to place a biological product in Category I, thereby confirming its license, falls squarely within the definition of an "order" for purposes of the APA. See 5 U.S.C. § 551(6). Defendants note that Section 601.25 itself refers to FDA's determination as an "order." See 21 C.F.R. § 601.25(f). Defendants observe that FDA's process for licensing biological products is not itself subject to rulemaking requirements. See, e.g., 42 U.S.C. § 262(a)(2)(A) ("[t]he Secretary shall establish, by regulation, requirements for approval, suspension, and revocation of biologics licenses"); 21 *11 C.F.R. §§ 601.2 601.9. Thus, defendants note that were AVA a new biological product for which the manufacturer was seeking an initial license, FDA would not be required by the APA's rulemaking provision to publish its licensing decision for notice and comment.
Moreover, defendants allege that FDA's decision placing AVA in Category I bears none of the hallmarks of a "rule." It does not "implement, interpret, or prescribe law or policy." 5 U.S.C. § 551(4). Instead, defendants claim, the decision merely applies already-existing legal standards to specific facts the hallmark of adjudication. Defendants note that the decision has no "future effect" (5 U.S.C. § 551(4)); it merely determines the "past and present rights and liabilities" of AVA's manufacturer with respect to an already-issued license. See Bowen, 488 U.S. at 219, 109 S.Ct. 468 (Scalia, J., concurring); see also Goodman v. FCC, 182 F.3d 987, 994 (D.C.Cir.1999). Defendants submit that consistent with Section 601.25(g), FDA referred to its licensing decision as a "Final Order" in several places. See Final Rule and Order at 257.
Plaintiffs claim that FDA has considered determinations like the one issued regarding AVA as rulemaking subject to judicial review. In Contact Lens Manufacturers Ass'n v. FDA, a commercial association sued FDA over its decision to classify contact lenses according to the product's safety and effectiveness. 766 F.2d 592, 594 (D.C.Cir.1985). In describing the safety and effectiveness of the lenses, FDA utilized a three class categorization system. Contact lens manufacturers whose products had been placed in Class III lobbied to reverse FDA's proposal to stop a transfer of a category of lenses from Class III to Class I. Plaintiffs claim that the determination made by FDA with regard to the products' status are virtually identical to the determination at issue here. Nevertheless, FDA provided extensive comment periods, and even a public hearing. Id. at 596-7.
In Cutler v. Hayes FDA engaged in a comprehensive review of the safety and effectiveness of all over-the-counter drugs. 818 F.2d 879 (D.C.Cir.1987). In doing so, FDA used a process, again, virtually identical to the one at issue here. To start, advisory review panels of experts were appointed to analyze existing test data and make recommendations in the form of monographs. Id. at 884. FDA reviewed the monographs, published them in the Federal Register, opened the period for public comment, and made a final recommendation, which was also open for public comment. Id. FDA then promulgated a determination classifying the drug as either Category I (safe and effective), Category II (not generally recognized as safe and effective), or Category III (data is insufficient to classify as I or II). In making its determination, FDA invited public comment twice.
Defendants acknowledge that FDA did provide interested parties an opportunity to comment on its Proposed Order categorizing AVA as a Category I product. Defendants argue that while agencies have discretion to employ "extra procedural devices," the court may not second guess the agency's decision not to do so. See Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519, 545, 98 S.Ct. 1197, 55 L.Ed.2d 460 (1978).
The D.C. Circuit has explained that when determining whether agency action is rulemaking or adjudicating:
the focus is not on whether the particular proceeding involved trial-type devices but instead turns on the nature of the decision to be reached in the proceeding. Rulemaking is prospective in *12 scope and nonaccusatory in form, directed to the implementation of general policy concerns into legal standards. Adjudication, on the other hand, is "individual in impact and condemnatory in purpose," directed to the determination of the legal status of a particular person or practices through the application of preexisting legal standards.
FTC v. Brigadier Industries Corp., 613 F.2d 1110, 1117 (D.C.Cir.1979).
It appears to the Court that the agency held AVA up to a pre-determined standard and made a judgment as to whether to classify AVA as safe and effective or otherwise. This suggests to this Court that FDA has issued an order. However, Section 601.25(g) and (i) instruct the agency to take comments for 90 days. While orders typically fall outside the confines of APA rulemaking, see 5 U.S.C. § 553, here, the Court is confronted with a situation where the agency decided that notice and comment regarding the proposed order was the correct course of action. This procedure is not without precedent.[7]
In Contact Lens Manufacturers, the FDA reviewed products for safety and efficacy, provided opportunity for public input through the notice-and-comment process and public hearings, and published an Order as is evidenced by the D.C. Circuit's labeling of its review as a "Petition for Review of an Order of the Food and Drug Administration." 766 F.2d at 593 (emphasis added). Cutler also provided an opportunity for the public to submit comments following the publication of a proposed order. See 818 F.2d at 884. Thus, the Court is persuaded that the December 30, 2003 issuance was an order. While orders do not ordinarily require notice and comment, the plain meaning of Section 601.25 of FDA's regulations requires notice and comment on the classification of the biologics in question:
(4) The full report or reports of the panel to the Commissioner of Food and Drug. The summary minutes of the panel meeting or meetings shall be made available to interested persons upon request. Any interested person may within 90 days after publication of the proposed order in the Federal Register, file with the Hearing Clerk of the Food and Drug Administration written comments in quintuplicate....
(g) Final order. After reviewing the comments, the Commissioner of Food and Drugs shall publish in the Federal Register a final order on the matters covered in the proposed order.
21 C.F.R. § 601.25(f)(4) & (g). This requirement is also reflected in FDA's Final Rule and Order:
In accordance with § 601.25, after reviewing the conclusions and recommendations of the review panel, FDA would publish in the Federal Register a proposed order ... After reviewing public comments, FDA would publish a final order on the matters covered in the proposed order.
69 Fed.Reg. 255.
Notice and comment gives interested parties an opportunity to participate *13 through the submission of data, views and arguments.[8] See Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519, 98 S.Ct. 1197, 55 L.Ed.2d 460 (1978). Notice and comment also ensures fairness to all parties and provides a well-developed record something this case is severely lacking. See Sprint Corp. v. FCC, 315 F.3d 369 (D.C.Cir.2003); see also Tr. 5/25/04 at 2 (by the Court "Let me just say at the outset that the administrative record in this case is one of the most confusing, jumbled records this Court has ever seen. Indeed, the only thing that is clear is that confusion abounds.").
Although defendants are correct that the courts may not compel an agency to employ "extra procedural devices," this Court shall compel an agency to follow the procedures set forth in its own regulations. In this case, FDA's regulations require it to: (1) publish a proposed order in the Federal Register after considering the expert panel's recommendations; (2) provide 90 days for interested persons to file written comments on the proposal; and (3) publish a final order on the matters covered in the proposed order. See 21 C.F.R. § 601.25(f)(4) & (g). Thus, this Court will concentrate its review on the sufficiency of FDA's compliance with these procedures. To guide its analysis, the Court will look to the substantial body of existing case law that gives meaning to what is meant by "notice and comment" under the APA.
C. Procedural Challenges to FDA's Final Rule and Order
1. Studies Outside the Comment Period
The public was invited to submit comments on the Proposed Order for 90 days, from December 13, 1985, until the period closed on March 13, 1986. However, eighteen years later when the Final Rule and Order was published, FDA relied on studies and data that were not in existence at the conclusion of the comment period. Plaintiffs argue that the D.C. Circuit has frowned on this practice, noting that "[a]n agency commits serious procedural error when it fails to reveal portions of the technical basis for a proposed rule in time to allow for meaningful commentary." Conn. Light & Power Co. v. Nuclear Regulatory Comm'n, 673 F.2d 525, 530-31 (D.C.Cir.1982). It is clear that when an agency relies on studies or data after the comment period has ended, no meaningful commentary on such data is possible. See American Iron & Steel Inst. v. OSHA, 939 F.2d 975, 1009-10 (D.C.Cir.1991); Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506, 540-41 (D.C.Cir.1983); Sierra Club v. Costle, 657 F.2d 298, 398 (D.C.Cir.1981).
In American Iron & Steel, OSHA relied on a professional industry analysis that was completed after the comment period had ended in evaluating the economic feasibility of certain workplace exposure levels. The D.C. Circuit held that "reliance on the [post-comment period data] without providing an opportunity for comment was improper," and the court vacated the portion of the regulation that relied on the late data. See 939 F.2d at 1010.
Here, plaintiffs argue that FDA relied on at least four extensive studies that commenced and concluded after the comment period ended. See 69 Fed.Reg. at 265-66. *14 For example, FDA cites and relies on a report on the anthrax vaccine issued by the Institute of Medicine ("IOM") in 2002 sixteen years after the comment period ended. Id. at 259-60. In issuing its report, the IOM evaluated "all available data, both published and unpublished" on the anthrax vaccine, specifically focusing on three studies from 1996, 1998, and 2001. Id. at 260 & n. 5.
Moreover, plaintiffs note that of the 4,209 pages in the administrative record, approximately 2,653 (63%) post-date 1986. Plaintiffs allege that persons who submitted comments in late 1985 and early 1986 were deprived of the opportunity to comment on these studies. Plaintiffs argue that this procedural flaw is so fundamental as to require the invalidation of FDA's Final Rule and Order.
2. Deviations From The Proposed Rule
While "a final rule need not be identical to the original proposed rule," when the final rule "deviates too sharply from the proposal, affected parties will be deprived of notice and an opportunity to respond to the proposal." AFL-CIO v. Donovan, 757 F.2d 330, 338 (D.C.Cir.1985). The test is whether the final rule is a "logical outgrowth" of the proposed rule. If "a new round of notice and comment would provide the first opportunity for interested parties to offer comments that could persuade the agency to modify its rule," then the final rule is not a "logical outgrowth." American Water Works Assoc. v. EPA, 40 F.3d 1266, 1274 (D.C.Cir.1994). See also Nat'l Mining Assoc. v. Mine Safety & Health Admin., 116 F.3d 520, 531 (D.C.Cir.1997).
In Shell Oil Co. v. EPA plaintiffs asserted that the EPA's Final Rule contained a definition of "hazardous waste" that was much broader than the definition contained in the proposed rule and, as a result, they claimed not to have notice of the definition that was finally adopted. 950 F.2d 741, 748 (D.C.Cir.1991). EPA argued that it intended to include the broader aspects of the definition, and that interested parties should have anticipated the substance of the final rule. Id. at 749-50. In setting aside the rule and remanding it to the EPA, the D.C. Circuit held that an agency's "unexpressed intention cannot convert a final rule into a `logical outgrowth' that the public should have anticipated. Interested parties cannot be expected to divine the EPA's unspoken thoughts." Id. at 751-52.
Defendants argue that FDA's Final Rule and Order is identical to what it proposed in 1985 to place AVA in Category I. Compare Biological Products; Bacterial Vaccines and Toxoids; Implementation of Efficacy Review, 50 Fed.Reg. 51,002, 51,104 (Dec. 13, 1985) with Final Rule and Order at 259. They claim that plaintiffs' position is based on a misunderstanding of the Expert Panel's recommendation. Defendants state that when the Panel issued its report, AVA was indicated for persons at risk to exposure to the anthrax bacterium and its label did not specify a route of exposure. See 50 Fed.Reg. at 51,059.
Moreover, defendants contend that the Panel recommended Category I notwithstanding the Panel's alleged erroneous belief that the Brachman study did not assess the protective effect of the vaccine against inhalation anthrax. Defendants claim that this "framed ... for discussion" whether AVA should be placed in Category I for use against inhalation anthrax. See Omnipoint Corp. v. FCC, 78 F.3d 620, 631 (D.C.Cir.1996). Thus, defendants argue that FDA provided adequate "opportunities for interested parties to offer comments that could persuade the agency to *15 modify its rule." See American Water Works, 40 F.3d at 1274.
However, the Court finds that the public has never been afforded an opportunity to comment on the safety and efficacy of AVA as it pertains to inhalation anthrax. FDA's Proposed Order (though called a "Proposed Rule" when published) only contained the Panel's assessment of AVA. It found that the anthrax vaccine was safe and effective in "the limited circumstances for which this vaccine is employed." 50 Fed.Reg. at 51,059. At that time, the vaccine was employed for use by "certain occupational groups," mainly "individuals in industrial settings" who worked with animal furs, hides and hairs. 50 Fed.Reg. at 51,058. The vaccine's use was intended to be for "protection against cutaneous anthrax in fully immunized subjects." 50 Fed.Reg. at 51,059. The Panel concluded that, "no meaningful assessment of the [the vaccine's] value against inhalation anthrax is possible." Id. It was under this premise that the public was on notice to submit comments.
Interested parties in 1985 could not have anticipated that FDA would permit the vaccine to be used for inhalation anthrax as a result of exposure through a biological attack.[9] In 1985 there would have been no reason to submit comments on the vaccine's use against other routes of exposure for the population at large; indeed, not a single comment was received on anthrax in response to the Proposed Rule.
Now, for the first time, eighteen years later, FDA's Final Rule and Order asserts that FDA "does not agree with the Panel report," and believes that "the vaccine is indicated for active immunization against [anthrax], independent of the route of exposure," and that the vaccine will "protect humans against... inhalation anthrax." 69 Fed.Reg. at 259-60.
The Court finds that this significant post-comment expansion of the scope of FDA's inquiry deprived the public of a meaningful opportunity to submit comments and participate in the administrative process mandated by law. Because "a new round of notice and comment would provide the first opportunity for interested parties to offer comments that could persuade" the FDA to change its position with regard to the use of AVA against inhalation anthrax, the Agency's Final Rule and Order is by no means a "logical outgrowth" of the 1985 Proposed Rule. See American Water Works, 40 F.3d at 1274. This failure to provide for a meaningful opportunity to comment, as required by FDA's own regulations, violates the APA. See 5 U.S.C. § 706(2).
While vacatur is the normal remedy for an APA violation, a plaintiff must "show prejudice from an agency's procedural violation." City of Waukesha v. EPA, 320 F.3d 228, 246 (D.C.Cir.2003). For a plaintiff to establish prejudice on the *16 basis of a "logical outgrowth" argument, a plaintiff generally must show (1) that, "had proper notice been provided, they would have submitted additional, different comments that could have invalidated the rationale for the revised rule;" or (2) that "the agency has entirely failed to comply with the notice-and-comment requirements, and the agency has offered no persuasive evidence that possible objections to its final rules have been given sufficient consideration." Id.
Defendants argue that plaintiffs cannot make the first showing because FDA did consider and reject arguments against the rationale for its effectiveness determination in the course of responding to the citizen petition. See, e.g., A.R. 1376-85. In its Final Rule and Order, FDA expressly referred to the citizen petition and its response. See FDA Rule and Order at 259 n. 2. Further, defendants claim that FDA's citizen petition response provides "persuasive evidence" that it considered fully "possible objections" to the Order. See City of Waukesha, 320 F.3d at 246.
However, the Court is not persuaded. While some individuals may have submitted comments as part of a citizen petition, it is clear to this Court that if the status of the anthrax vaccine were open for public comment today, the agency would receive a deluge of comments and analysis that might inform an open-minded agency. Airborne exposure to anthrax was not an indication under the licensing contemplated by the 1985 Proposed Rule and a new notice-and-comment period would be the first opportunity that interested parties would have to challenge the vaccine's efficacy against such exposure.
Thus, the Final Rule and Order shall be vacated and remanded to the agency for reconsideration following an appropriate notice-and-comment period in accordance with the APA, the Agency's own regulations, and this Memorandum Opinion and Order.[10]
V. Scope of Injunction
Having vacated and remanded FDA's Final Rule and Order, the posture of this case reverts back to where it was on December 22, 2003, when this Court granted plaintiffs' Motion for a Preliminary Injunction. Thus, for all the reasons stated in this Court's December 22, 2003 opinion, including Congress's prohibition on forced inoculations with "investigational" drugs, see 10 U.S.C. § 1107, the Court shall now issue a permanent injunction. Unless and until FDA follows the correct procedures to certify AVA as a safe and effective drug for its intended use, defendant DoD may no longer subject military personnel to involuntary anthrax vaccinations absent informed consent or a Presidential waiver.
In the days after the Court issued its injunction, there was much discussion concerning whether the injunction applied to the six Doe plaintiffs or whether the injunction applied to all persons affected by the DoD's involuntary anthrax program. Because it is inevitable that this concern will be raised again, the Court shall address it now.[11]
*17 Traditionally, "[l]itigation is conducted by and on behalf of the individual named parties only." Califano v. Yamasaki, 442 U.S. 682, 700-01, 99 S.Ct. 2545, 61 L.Ed.2d 176 (1979). This general rule is based on the fundamental principles of due process and prudential standing. See, e.g., Allen v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984) (noting "the general prohibition on a litigant's raising another person's legal rights"); Singleton v. Wulff, 428 U.S. 106, 113-14, 96 S.Ct. 2868, 49 L.Ed.2d 826 (1976) ("[C]ourts should not adjudicate [the] rights [of third persons] unnecessarily, and it may be that in fact the holders of those rights either do not wish to assert them, or will be able to enjoy them regardless of whether the in-court litigant is successful or not.").
However, the Court notes that this litigation concerns the lawful status of the anthrax vaccine. Having found that the vaccine's use without informed consent or a Presidential waiver is unlawful, this Court would be remiss to find that a conflict exists between service members who think that the DoD should be required to follow the law and those service members who think otherwise.
The Fourth, Fifth, Ninth, and D.C. Circuits have held that an injunction can benefit parties other than the parties to the litigation. See, e.g., National Mining Ass'n, et. al., v. U.S. Army Corps of Engineers, et. al., 145 F.3d 1399 (D.C.Cir.1998); Bresgal v. Brock, 843 F.2d 1163 (9th Cir.1987); Evans v. Harnett County Bd. of Educ., 684 F.2d 304 (4th Cir.1982); Meyer v. Brown & Root Construction Co., 661 F.2d 369 (5th Cir.1981). The Supreme Court has implicitly agreed with this proposition. Lujan v. National Wildlife Federation, 497 U.S. 871, 913, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990).
"There is no general requirement that an injunction affect only the parties in the suit. Where, as here, an injunction is warranted by a finding of defendants' outrageous unlawful practices, the injunction is not prohibited merely because it confers benefits upon individuals who were not named plaintiffs or members of a formally certified class." McCargo v. Vaughn, 778 F.Supp. 1341, 1342 (E.D.Pa.1991). A district court has "broad power to restrain acts which are of the same type or class as unlawful acts which the court has found to have been committed or whose commission in the future, unless enjoined, may fairly be anticipated from the defendant's conduct in the past." N.L.R.B. v. Express Publ'g Co., 312 U.S. 426, 435, 61 S.Ct. 693, 85 L.Ed. 930 (1941).
The D.C. Circuit has found that when agency "regulations are unlawful, the ordinary result is that the rules are vacated not that their application to the individual petitioner is proscribed." National Mining Ass'n, 145 F.3d at 1409 (citation omitted). In National Mining Ass'n, the district court invalidated a Corps of Engineers regulation and entered an injunction prohibiting the Corps and the Environmental Protection Agency from enforcing the regulation nationwide. 145 F.3d at 1408. The D.C. Circuit upheld that nationwide application, notwithstanding the fact that non-parties to the litigation would specifically be affected. Id. at 1409-10.
Government-wide injunctive relief for plaintiffs and all individuals similarly situated can be entirely appropriate and it is "well-supported by precedent, as courts frequently enjoin enforcement of regulations ultimately held to be invalid." Sanjour v. United States EPA, 7 F.Supp.2d 14, 17 (D.D.C.1998). See, e.g., Harmon v. *18 Thornburgh, 878 F.2d 484, 495 n. 21 (D.C.Cir.1989) (court decision invalidating unlawful agency regulation applies beyond just individual petitioners); Planned Parenthood Fed'n of Amer., Inc., v. Heckler, 712 F.2d 650 (D.C.Cir.1983) (affirming final injunction prohibiting enforcement of invalidated regulations); Dimension Fin. Corp. v. Board of Governors of the Fed. Reserve Sys., 744 F.2d 1402 (10th Cir.1984) (enjoining Board from enforcing or implementing invalid regulations) aff'd, 474 U.S. 361, 106 S.Ct. 681, 88 L.Ed.2d 691 (1986); Service Employees Int'l Union v. General Servs. Admin., 830 F.Supp. 5 (D.D.C.1993) (invalidating GSA regulation and enjoining further enforcement of the rule).
The Supreme Court has also embraced this view. Although written as part of a dissent, the D.C. Circuit has noted that it expressed the views of all nine Justices. Justice Blackmun wrote:
The Administrative Procedure Act permits suit to be brought by any person `adversely affected or aggrieved by agency action.' In some cases, the `agency action' will consist of a rule of broad applicability; and if the plaintiff prevails, the result is that the rule is invalidated, not simply that the court forbids its application to a particular individual. Under these circumstances, a single plaintiff, so long as he is injured by the rule, may obtain `programmatic' relief that affects the rights of parties not before the court. On the other hand, if a generally lawful policy is applied in an illegal manner on a particular occasion, one who is injured is not thereby entitled to challenge other applications of the rule.
Lujan, 497 U.S. at 913, 110 S.Ct. 3177 (Blackmum, J. dissenting) (citation omitted). See also id. at 890 n. 2, 110 S.Ct. 3177 (majority opinion) (noting that under the APA, successful challenge by aggrieved individual can affect the entire agency program) (as cited in National Mining Ass'n, 145 F.3d at 1409).
However, defendants are correct in asserting that National Mining Ass'n did not address a mandatory rule that requires district courts to issue nationwide injunctions as a matter of law in all cases where agency regulations are invalidated. Rather, the appropriate scope is in the court's discretion. See 145 F.3d at 1408-09 (noting the district court's "discretion in awarding injunctive relief" and holding that when "a reviewing court determines that agency regulations are unlawful, the ordinary result is that the rules are vacated"). Courts retain discretion to decline granting an injunction even where there is a conceded violation of law. See Weinberger v. Romero-Barcelo, 456 U.S. 305, 312-13, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982).
Defendants attempt to distinguish National Mining Ass'n from the present case by noting that the injunction there prohibited the enforcement by an agency of its own broadly applicable regulation deemed by the court to be facially invalid. See 145 F.3d at 1408. Here, plaintiffs seek an injunction that would prohibit DoD from taking action with respect to individual members of the military. Defendants claims that this is much broader than the injunction in National Mining Ass'n.[12]
*19 Defendants note that the relief in National Mining Ass'n was also understandable in light of the broad representation of the plaintiffs before the court there. That case involved a challenge brought by several trade associations on behalf of their members. 145 F.3d at 1401. Defendants claim that the trade associations represented a much broader cross-section of affected parties than the six Doe plaintiffs.
However, it appears to this Court that the Court is faced with precisely the circumstances described by Justice Blackmun in his discussion of "programmatic relief." See also Purepac Pharm. Co. v. Thompson, 238 F.Supp.2d 191, 212 (D.D.C.2002) (noting that National Mining Ass'n stands for the "proposition that a nationwide injunction invalidating an agency rule of broad applicability is appropriate even where a single plaintiff has challenged the legality of the rule"). Thus, the injunction issued today shall apply to all persons subject to DoD's involuntary anthrax inoculation program and not just the six Doe plaintiffs.
VI. Conclusion
This Court has an obligation to ensure that FDA follow the law in order to carry out its vital role in protecting the public's health and safety. By refusing to give the American public an opportunity to submit meaningful comments on the anthrax vaccine's classification, the agency violated the Administrative Procedure Act. While the policy of submitting comments on an agency's proposed order may be unusual, it is the course the agency chose to take and this Court shall ensure that the agency follows through on its commitment to the public.
Congress has prohibited the administration of investigational drugs to service members without their consent. This Court will not permit the government to circumvent this requirement. The men and women of our armed forces deserve the assurance that the vaccines our government compels them to take into their bodies have been tested by the greatest scrutiny of all public scrutiny. This is the process the FDA in its expert judgment has outlined, and this is the course this Court shall compel FDA to follow.
Accordingly, it is by the Court hereby
ORDERED that Plaintiff's Motion for Summary Judgment is GRANTED. The FDA's Final Rule and Order is vacated and shall be remanded to the agency for reconsideration in accordance with this Memorandum Opinion and Order. Unless and until FDA properly classifies AVA as a safe and effective drug for its intended use, an injunction shall remain in effect prohibiting defendants' use of AVA on the basis that the vaccine is either a drug unapproved for its intended use or an investigational new drug within the meaning of 10 U.S.C. § 1107. Accordingly, the involuntary anthrax vaccination program, as applied to all persons, is rendered illegal absent informed consent or a Presidential waiver; and it is further
ORDERED that, in light of the finding with regard to Plaintiffs' Motion for Summary Judgment, Defendants' Motion for Summary Judgment is DENIED.
*20 A separate Order and Judgment accompanies this Memorandum Opinion.
NOTES
[1] For manufacturing-related reasons, the vaccine program was reduced and later suspended beginning in July 2000. DoD formally resumed the program in June 2002.
[2] Although 21 C.F.R. § 601.25 contemplates the publication of the report and proposed order, FDA called its issuance a "proposed rule."
[3] Again, although 21 C.F.R. § 601.25 contemplates the publication of a report and proposed order, FDA called its issuance a "proposed rule."
[4] The parties consented to keeping the Preliminary Injunction in place with regard to the six Doe plaintiffs. Subsequently, at a Motions Hearing on March 15, 2004, the Court vacated its injunction as to the six Doe plaintiffs though the parties agreed that the six Doe plaintiffs would not be required to submit to the vaccination while this lawsuit was pending.
[5] Defendants claim that while part of the issuance is a Rule, the part that is relevant to AVA is an Order. Tr. 5/25/04 at 38.
[6] Plaintiffs note that the original notice of final agency action that appeared in the Federal Register on January 5, 2004 described FDA's actions as a "Final Rule." The words "and Order" were added by hand. Until that final agency action, FDA and DoD spokespersons have consistently referred to this determination concerning AVA as a "Final Rule." See Pls.' Reply Brief 6-7.
[7] The Court is perplexed by the fact that both parties have looked at Contact Lens Manufacturers and Cutler and asserted that rulemaking took place. See Tr.5/25/04 (by counsel for defendants "Let me cut to the chase, Contact Lens involved what was a rule. It wasn't an order because it dealt with a broad category." The Court: "So it's the government view that it was a rule that was being challenged?" Counsel: "That was a rule." The Court: "And not an Order?" Counsel: "And unquestionably not an order."); see also Pls.' Reply at 4 ("A review of comparable FDA determinations [alluding to Contact Lens Manufactures and Cutler] demonstrates that this type of FDA action constitutes rulemaking subject to public comment.")
[8] It appears to the Court that the FDA was concerned about representation of divergent views as section 601.25(a) notes that the advisory review panels "shall include persons from lists submitted by organizations representing professional, consumer, and industry interests. Such persons shall represent a wide divergence of responsible medical and scientific opinion."
[9] Defendants' counsel conceded as much in response to a question by the Court: "But it's absolutely right, Your Honor, that the possibility of weaponized anthrax was not in the minds of the advisory panel and probably not in the minds of the FDA." Tr. 5/25/04 at 69.
Lending further support to the notion that the Expert Panel did not consider mass inhalational anthrax exposure is the Panel's own comment:
Anthrax vaccine poses no serious special problems other than the fact that its efficacy against inhalation anthrax is not well documented. This question is not amenable to study due to the low incidence and sporadic occurrence of the disease. In fact, the industrial setting in which the studies above were conducted is vanishing, precluding any further clinical studies. In any event, further studies on this vaccine would receive low priority for available funding.
50 Fed.Reg. 51,058.
[10] Because the Court is granting plaintiffs' Motion for Summary Judgment, this Memorandum Opinion does not address plaintiffs' alternative argument for discovery or defendants' Motion for Summary Judgment. Moreover, since the Court's holding is based on procedural grounds, the Court does not reach plaintiffs' numerous substantive challenges to FDA's Final Rule and Order.
[11] The parties briefed this issue in early 2004 which culminated in a Motions Hearing on March 15, 2004. At that time, the Court expressed its concern that a finding on this issue would have resulted in an advisory opinion. Thus, the Court denied the motion without prejudice.
[12] Defendants also challenge the stability of National Mining Ass'n in the D.C. Circuit. Defendants note that the D.C. Circuit has recently questioned the viability of National Mining Ass'n for overlooking a key Supreme Court case in considering which test to apply to determine the merits of plaintiff's facial challenge. See Amfac Resorts v. United States Dep't of Interior, 282 F.3d 818, 826-27 (D.C.Cir.2002) rev'd on other grounds, 538 U.S. 803, 123 S.Ct. 2026, 155 L.Ed.2d 1017 (2003); National Mining Ass'n v. United States Dep't of Interior, 251 F.3d 1007, 1010 (D.C.Cir.2001). However, in Amfac Resorts, the D.C. Circuit "called into question its holding regarding the dredging regulation." Id. at 826-27. Thus, the D.C. Circuit reconsideration of the standard it applied in its analysis of a constitutional challenge to the dredging regulation does not suggest that program-wide relief cannot be extended to non-plaintiffs.
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Matter of Brier (2019 NY Slip Op 02516)
Matter of Brier
2019 NY Slip Op 02516
Decided on April 3, 2019
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on April 3, 2019
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
ALAN D. SCHEINKMAN, P.J.
HECTOR D. LASALLE
BETSY BARROS
ANGELA G. IANNACCI, JJ.
2017-11587
[*1]In the Matter of Howard Brier, deceased. Marcel A. Sager, etc., appellant; Office of the Kings County Public Administrator, respondent.
(File No. 4824/13)
Goldberg Sager & Associates, Brooklyn, NY (Marcel A. Sager pro se of counsel), for appellant.
Letitia James, Attorney General, New York, NY (Judith N. Vale and Linda Fang of counsel), for respondent.
DECISION & ORDER
In a probate proceeding, the petitioner appeals from a decree of the Surrogate's Court, Kings County (John G. Ingram, A.S.), dated January 19, 2018. The decree, insofar as appealed from, upon an order of the same court (Diane A. Johnson, S.) dated April 12, 2017, granting that branch of the petition which sought a statutory commission for the petitioner's services as executor of the decedent's estate only to the extent of granting to the petitioner one-half of the statutory commissions for such services, awarded the petitioner the sum of only $900.
ORDERED that the notice of appeal from the order dated April 12, 2017, is deemed to be a premature notice of appeal from the decree (see CPLR 5520[c]); and it is further,
ORDERED that the decree is affirmed insofar as appealed from, with costs.
On December 12, 2005, Howard Brier (hereinafter the testator) executed his last will and testament. On that same date, the testator also executed an "Attorney/Executor Acknowledgment." In that document, the testator acknowledged that he had designated the attorney who drafted the will to serve as executor and that, prior to signing the will, he had been informed that: (1) subject to limited exceptions, any person was eligible to serve as the executor; (2) absent an agreement to the contrary the executor would be entitled to statutory commissions; and (3) an attorney executor would also be entitled to reasonable legal fees.
The testator died in 2013, and the attorney-drafter of the will and proposed executor (hereinafter the petitioner) petitioned for probate of the will, dated December 18, 2013. In a report submitted by counsel to the Public Administrator it was contended that the petitioner should be limited to one-half of the otherwise allowable statutory commissions because of a perceived defect in the form of the acknowledgment signed by the testator. The Surrogate's Court, in an order dated April 12, 2017, determined that the petitioner was entitled to only one-half of the statutory executor's commission. On appeal, the petitioner contends that he should have been granted a full commission.
SCPA 2307-a requires that, where a will has been drafted by an attorney, the testator [*2]must be given certain information, prior to the execution of the will, relating to who may be designated as executor and the payment of commissions and legal fees (see SCPA 2307-a[1]). The statute was enacted in 1995 in order to assure that the designation of the attorney-drafter as executor was the client's knowing choice rather than the product of an attorney's self-serving drafting (see Assembly Memorandum in Support of Assembly Bill [A5491-A]). The statute stipulates that, unless the testator executes an acknowledgment that the required disclosures were made, an attorney-executor is entitled to only one-half of the commissions otherwise payable (see SCPA 2307-a[5]).
As originally enacted, SCPA 2307-a contained, in its first subdivision, the requirement that the testator be informed by the attorney-drafter, prior to the execution of the will, that: (1) subject to limited statutory exceptions, any person, including the testator's spouse, child, friend or associate, or an attorney, is eligible to serve as an executor; (2) absent an agreement to the contrary, any person, including an attorney, who serves as an executor is entitled to receive statutory commissions; and (3) if an attorney renders legal services in connection with the executor's official duties, the attorney is entitled to reasonable compensation for such services, in addition to statutory commissions.
The statute, in its second subdivision, provides that the testator has to acknowledge in writing that the required disclosures were made. The third subdivision of the statute provides model forms of the testator's written acknowledgment of disclosures. The statute stipulates that a testator's written acknowledgment of disclosure that substantially conforms to these models shall be deemed to be compliant with the statutory requirement for a written acknowledgment by the testator (see SCPA 2307-a[4]).
The statute further provides, in its fifth subdivision, that absent compliance with the requirement for the giving of the written acknowledgments required by the first subdivision, an attorney-drafter who serves as executor is limited to one-half of the otherwise payable statutory commissions.
The model forms set forth in the original statute provided for the testator's acknowledgment that the three required written disclosures had been provided. In 2004, SCPA 2307-a was amended to add to the model forms of acknowledgment a fourth statement that the testator acknowledges that he or she had been advised that where an attorney-executor failed to make the required disclosures, that attorney-executor would be entitled to only one-half of the statutory executor's commissions (see SCPA 2307-a[3]). While adding this fourth acknowledgment to the model forms set forth in the third subdivision, the 2004 amendment failed to include a corresponding disclosure requirement in the first subdivision, thus leaving that subdivision requiring only the three original mandates for the information to be disclosed to the testator. This oversight was corrected in 2007 (see L 2007, ch 488, § 1). The legislative history of the 2007 amendment reflects the intention to harmonize the statute by clarifying that the fourth acknowledgment set forth in the model forms is, in fact, a mandatory subject of disclosure as required in the first subdivision (see Senate Introducer's Mem, Bill Jacket, L 2007 Senate Bill S5967, ch 488).
This appeal presents the question as to whether, where a will was executed in between the 2004 and 2007 legislative amendments to SCPA 2307-a, an attorney-executor is limited to one-half of the statutory commissions when the testator's written acknowledgment does not contain the fourth acknowledgment specified in the statutory model forms. The Surrogate's Courts have divided on this point. In addition to the Surrogate's Court in this case, at least two Surrogate's Courts have held that the attorney-executor is so limited (see e.g. Matter of Tackley, 13 Misc 3d 818 [Sur Ct, NY County]; see also Matter of Fullen, 2007 WL 7665986 [Sur Ct, Westchester County]). At least one Surrogate's Court has held to the contrary (see Matter of Riley [Buckley], 29 Misc 3d 1059 [Sur Ct, Oneida County]). We, like the Surrogate's Court below in this case, conclude that the attorney-executor's commissions should be so limited.
The 2004 amendment was intended, as reflected in both its text and in its legislative history, to require that the testator be informed that, absent the testator's acknowledgment of receipt of the required disclosures, the attorney-executor would receive only one-half of the commissions [*3]otherwise payable. That the Legislature inadvertently included this fourth disclosure requirement only in model forms and not in the subdivision dealing directly with the required disclosures was an oversight, as is confirmed by the 2007 amendment and its legislative history (see Itri Brick & Concrete Corp v Aetna Cas. & Sur. Co., 89 NY2d 786, 796). Thus, we disagree with the view expressed in Matter of Riley (29 Misc 3d 1059) that the courts should treat the omission of the fourth disclosure from subdivision one as reflecting a deliberate legislative intention.
Construing the statute to require the limitation of executor's commissions where the required disclosure is absent comports with the underlying policy of the statute, which is to ensure that a testator is fully informed of the financial consequences of appointing an attorney drafter as executor (see Matter of Tackley, 13 Misc 3d at 821; see also DeFrancisco Letter in Support of 2004 amendment, Bill Jacket, L 2004 Senate Bill S6986, ch 709). The legislative intention was to provide for the testator's informed understanding that but for the required disclosure, the commissions payable to the attorney-drafter-executor would be significantly less. Further, if the 2004 amendment were to be construed as merely adding suggested or optional language to the model forms, the 2004 amendment would be rendered largely superfluous. Construing the addition of the fourth disclosure in the model form as merely a suggestion would permit attorney-drafters to simply delete that disclosure, leaving the testator uninformed on an issue where the personal interests of the testator and the attorney-drafter-prospective executor differ. Indeed, to the extent that the petitioner argues that he was entitled to rely upon the precise wording of the statute, we note that the petitioner would have avoided the limitation on his commissions had he simply utilized the model form provided by the statute.
Therefore, we conclude that the statute as amended in 2004 required a testator to acknowledge that he or she had been advised that where an attorney-drafter failed to make the required disclosures, that attorney as executor is entitled to only one-half of the statutory executor's commissions, and that absent such disclosure, the attorney-executor will be entitled to only one-half of the statutory executor's commissions (see SCPA 2307-a[3], [5]).
At bar, the instrument signed by the testator in 2005 did not include an acknowledgment that he had been informed that the failure to comply with the disclosure requirements would result in the attorney-executor being entitled to only one-half of the statutory executor's commissions. Therefore, we agree with the Surrogate's Court's determination that the petitioner is entitled to only one-half of the statutory executor's commissions (see SCPA 2307-a[1], [2], [3], [5]; see also Matter of Tackley, 13 Misc 3d 818).
SCHEINKMAN, P.J., LASALLE, BARROS and IANNACCI, JJ., concur.
ENTER:
Aprilanne Agostino
Clerk of the Court
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561 F.Supp. 1014 (1983)
RAILROAD SALVAGE OF CONN., INC.
v.
RAILROAD SALVAGE, INC. and Geraldine Lemme.
No. 81-0365 S.
United States District Court, D. Rhode Island.
April 11, 1983.
*1015 Fish & Richardson by William W. Rymer, John M. Skenyon, Providence, R.I., for plaintiff.
Richard A. Ciccone, Dennis S. Baluch, Providence, R.I., for defendants.
OPINION
SELYA, District Judge.
The plaintiff, spurred by a desire to salvage the good repute of its corporate name, instituted this action, pursuant to § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and *1016 under common law trademark and trade name infringement, attempting thereby to punch the defendant's ticket, as it were. The complaint seeks injunctive and ancillary relief only; the plaintiff wants defendant to scrap the use of the name "Railroad Salvage". No claim is made for money damages or loss of profits. The matter is presently before the Court on the plaintiff's motion for summary judgment. Tracking this motion requires that the Court traverse the junkyard[1] of trademark and trade name law. Before essaying this task, however, some description of the litigants and of their relative stations in life appears warranted.[2] All aboard!
ON THE TRAIN TO SUCCESS
The story of the plaintiff is as American as Casey Jones.[3] Some thirty-five years ago, the plaintiff's founder, Reuben W. Vine, borrowed one hundred dollars and began selling items out of a storefront emblazoned with the appellation "Freight Salvage." In those early years, Vine purchased undeliverable goods from railroads and trucking companies and sold this excess baggage to consumers at fares representing simultaneously a substantial discount to the purchaser and a substantial profit to the vendor. The venture proved sufficiently remunerative that Vine, several years hence but well before the defendant left the depot, rechristened the business "Railroad Salvage" and incorporated it in Connecticut as "Railroad Salvage of Conn., Inc." This took place in 1965; its headquarters was then located in Meriden, Connecticut. Affidavit of Reuben W. Vine ¶¶ 2, 4 (hereinafter "Vine Affidavit").
From these humble beginnings, Vine built up a head of steam and the corporation grew into a multi-million dollar business. As the train of events continued, the company no longer limited itself to purchasing undeliverable goods, but actively sought out merchandise sold in bankruptcy liquidations and discontinued or overstocked merchandise from more conventional sources. In pursuit of appropriate wares, the plaintiff now contacts possible suppliers throughout the United States; in turn, firms will contact the plaintiff when they believe they have merchandise suitable for the plaintiff's distribution requirements. Exhibit B, Vine Affidavit.
Vine has also expanded the retail portion of the business well beyond the storefront. Plaintiff operates a freight warehouse in Connecticut which supplies goods to four company stores (East Windsor, West Haven, and Groton, Connecticut and Turners Falls, Massachusetts). First Affidavit of Donald Roberge, ¶ 4 (hereinafter "Roberge I").
The focal point of this litigation is the Groton emporium, which is conveniently located only a few miles from the Rhode Island state line. To maximize sales and to take advantage of the Rhode Island market, the plaintiff advertises heavily in Rhode Island media.[4] This promotion includes advertisements placed in daily newspapers of essentially statewide circulation within Rhode Island; and also includes the airing of television commercials on local Providence-area television stations, with sometimes exasperating echolalia. Plaintiff's exploitation of both print and electronic media prominently features the name "Railroad Salvage." Roberge I ¶ 5 and Exhibit *1017 A attached thereto. This media blitz has generated an impressive track record; sales were recorded of approximately four million dollars for the Groton store in fiscal year 1980. The plaintiff estimates that 40% of its customers at Groton are Rhode Islanders. Roberge I ¶ 7.
THE OTHER SIDE OF THE TRACKS
Bernard Werther, on the other hand, seemingly wanted to take the short ride down the main line to success. To this end, Werther became an entrepreneur and opened his own business. As compared to the conductor of plaintiff's enterprises, he can only be characterized as a mere trainee. In December of 1980, not more than a few weeks after a story about the plaintiff's swift rise from rags to riches was prominently displayed in the Providence Sunday Journal, Werther (his hopes apparently hoisted by plaintiff's accelerated time-table) incorporated "Railroad Salvage, Inc." in Rhode Island. He was sole shareholder and its general manager.[5] Defendant's Answers to Plaintiff's Interrogatories (hereinafter "Interrogatories"), No. 5. The defendant's original railhead was located at 893 Post Road, Warwick, Rhode Island; later, the defendant chugged along to its present address, 22 Roseland Avenue, Warwick, Rhode Island. Id.
The defendant has three main lines of enterprise. As gauged by the Court, approximately 30%-40% of its business involves the assembling and jobbing of jewelry products. The sale of general merchandise at wholesale to flea market operators accounts for another 20% of the business. The remainder involves acting as a sales agent and wholesaler. As a spur line, the defendant generates approximately 1%-2% of its business from retail sales of pocket T-shirts and paint.[6] Interrogatories, Nos. 1, 2, 3, 10 and 13.
In contradistinction to the plaintiff, the defendant has done only minimal advertising. The defendant did, however, place an advertisement in "Women's Wear Daily" announcing that it would purchase closeouts. Its other ties to media advertising are scant, and are detailed in discovery. Interrogatories, Nos. 8, 9. Although the record is not a model of clarity, this Court will assume arguendo that only the defendant's offer to purchase close-outs prominently displayed the name "Railroad Salvage". Interrogatories, Exhibit A.
The defendant has operated in a much more geographically limited area than does the plaintiff. The defendant has, however, used the name "Railroad Salvage" in business transactions in New York, Rhode Island, New Jersey, California, Massachusetts, Maryland, and Ohio. Interrogatories, No. 17. All of its retail sales took place in Rhode Island; it has not done business in Connecticut. Id.; see also Interrogatories, No. 2.
A DOWN-THE-LINE SYNOPSIS
The plaintiff is a large, successful retailer which has ridden the monorail to prosperity. Its tracks are found throughout the United States. It is apparently well-known by companies desiring to liquidate inventories of goods not merchantable in more commonplace ways. While plaintiff does not conduct a retail business within Rhode Island, it has received extensive exposure therein and does a significant amount of traffic with Rhode Islanders.
In the jargon of the switchyard, the plaintiff is a locomotive, while the defendant is a dolley. The defendant's business *1018 appears to be moderately successful; it has some interstate contact. Given the paucity of the defendant's advertising budget and the narrow gauge of its endeavors, it seems inevitable that the general commercial and consumer public is far more aware of the plaintiff than of the defendant.
CLEARING THE TRACKS: THE SUMMARY JUDGMENT STANDARD
The plaintiff, having obtained relief pendente lite,[7] has now moved for plenary summary judgment pursuant to Fed.R.Civ.P. 56. Plaintiff has filed a statement of undisputed facts, a memorandum of law in support of its motion for terminal relief, and has tendered several supporting affidavits (which, together with the discovery of record, comprises the platform upon which the motion is predicated). In its motion, the plaintiff seeks to make the injunction permanent and to secure an award of costs and attorneys' fees. The defendant has objected and has filed a brief.[8]
It is well settled that summary judgment can be engineered only where there is no genuine issue as to any material fact and where the movant is entitled to judgment as a matter of law. Emery v. Merrimack Valley Wood Products, Inc., 701 F.2d 985, at 986 (1st Cir.1983); Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976); United Nuclear Corp. v. Cannon, 553 F.Supp. 1220, 1226 (D.R.I.1982); Milene Music, Inc. v. Gotauco, 551 F.Supp. 1288, 1292 (D.R.I.1982). In short, relief under Rule 56 is available only if the movant has demonstrated that the tracks are clear and that they run only in one direction. In determining whether such a trunk line to brevis disposition exists, this Court must view the record in the light most favorable to the party opposing the motion, Emery v. Merrimack Valley Wood Products, Inc., at 986; John Sanderson & Co. (WOOL) Pty. Ltd. v. Ludlow Jute Co., 569 F.2d 696, 698 (1st Cir.1978), indulging all inferences favorable to that party. Santoni v. Federal Deposit Insurance Corp., 677 F.2d 174, 177 (1st Cir.1982); O'Neill v. Dell Publishing Corp., 630 F.2d 685, 686 (1st Cir.1980). After a careful review of the record, the Court is persuaded that this is a case where the switch should be thrown and the summary judgment engine activated.
WHAT'S IN A NAME?
The plaintiff alleges that the defendant's utilization of the words "Railroad Salvage" infringes upon the service mark and trade name used by the plaintiff.[9] A trade name describes the manufacturer or dealer, and applies not to vendible goods *1019 but to the business and its goodwill. New West Corp. v. NYM Co., 595 F.2d 1194, 1201 (9th Cir.1979); American Optical Corp. v. North American Optical Corp., 489 F.Supp. 443, 447 (N.D.N.Y.1979); Southwestern Bell Telephone Co. v. Nationwide Independent Directory Service, Inc., 371 F.Supp. 900, 907 (W.D.Ark.1974). Although trade names are not registrable under the Lanham Act, see note 9 supra, they are nonetheless protected under the Act. Section 43(a) of the Act, 15 U.S.C. § 1125(a), provides:
Any person who shall affix, apply, or annex, or use in connection with any goods or services, or any container or containers for goods, a false designation of origin, or any false description or representation, including words or other symbols tending falsely to describe or represent the same, and shall cause such goods or services to enter into commerce, and any person who shall with knowledge of the falsity of such designation of origin or description or representation cause or procure the same to be transported or used in commerce or deliver the same to any carrier to be transported or used, shall be liable to a civil action by any person doing business in the locality falsely indicated as that of origin or in the region in which said locality is situated, or by any person who believes that he is or is likely to be damaged by the use of any such false description or representation.
This provision has authoritatively been interpreted as creating a right to maintain an action for trade name infringement. WaltWest Enterprises, Inc. v. Gannett Co., 695 F.2d 1050, 1054 n. 6 (7th Cir.1982); Finance Co. of America v. Bankamerica Corp., 493 F.Supp. 895, 903 (D.Md.1980); American Optical Corp. v. North American Optical Corp., 489 F.Supp. at 450; Pizitz, Inc. v. Pizitz Mercantile Co., 467 F.Supp. 1089, 1095 (N.D.Ala.1979); Geisel v. Poynter Products, Inc., 283 F.Supp. 261, 267 (S.D.N. Y.1968); see Metric & Multistandard Components Corp. v. Metric's Inc., 635 F.2d 710, 713-14 (8th Cir.1980); New West Corp. v. NYM Co., 595 F.2d at 1201. Under this statute, trade name infringement occurs when the unsanctioned use of one's distinctive name in interstate commerce by another will create a probability of confoundment or deception as to the source of the goods or service. See, e.g., Carson v. Here's Johnny Portable Toilets, Inc., 698 F.2d 831, 833 (6th Cir.1983); New West Corp. v. NYM Co., 595 F.2d at 1201; Quabaug Rubber Co. v. Fabiano Shoe Co., 567 F.2d 154, 160 (1st Cir. 1977); National Lampoon, Inc. v. American Broadcasting Cos., 376 F.Supp. 733, 746 (S.D.N.Y.), aff'd per curiam, 497 F.2d 1343 (2d Cir.1974). This definition implicitly requires the plaintiff to prove the following three elements to succeed in an infringement suit: (i) the ownership of a distinctive name; (ii) the use of that name in interstate commerce; and (iii) its use by another in a manner likely to cause confusion as to the origin of the goods or services. In applying this tripartite test to the facts at bar, plaintiff's prior ownership and use of its name is undisputed; but the defendant claims that plaintiff's case goes up in smoke because that name does not qualify as distinctive. Perscrutation is, therefore, requisite to see how that line of defense fares.
EN ROUTE TO PROTECTION: FOUR WAY STATIONS
Trade names are divided into four categories which, in scandent order of the protection afforded, may be labelled (i) generic; (ii) descriptive; (iii) suggestive; and (iv) arbitrary and fanciful. S.S. Kresge Co. v. United Factory Outlet, Inc., 598 F.2d 694, 696 (1st Cir.1979).
Generic names are those which refer to the basic nature of the wares or services provided rather than to the more idiosyncratic characteristics of a particular product. American Heritage Life Insurance Co. v. Heritage Life Insurance Co., 494 F.2d 3, 11 (5th Cir.1974); see, e.g., Miller Brewing Co. v. Falstaff Brewing Corp., 655 F.2d 5, 7 (1st Cir.1981); Miller Brewing Co. v. G. Heileman Brewing Co., 561 F.2d 75, 79 (7th Cir. 1977), cert. denied, 434 U.S. 1025, 98 S.Ct. 751, 54 L.Ed.2d 772 (1978); CES Publishing Corp. v. St. Regis Publications, Inc., 531 F.2d 11, 13 (2d Cir.1975). Thus, courts have *1020 categorized terms such as "mart", S.S. Kresge Co. v. United Factory Outlet, Inc., 634 F.2d 1, 2 (1st Cir.1980), "multistate bar examination", National Conference of Bar Examiners v. Multistate Legal Studies, Inc., 692 F.2d 478, 487-88 (7th Cir.1982), and "cola", Coca-Cola Co. v. Snow Crest Beverages, Inc., 162 F.2d 280, 283 (1st Cir.), cert. denied, 332 U.S. 809, 68 S.Ct. 110, 92 L.Ed. 386 (1947), as generic because each does no more than describe a class of product or service without distinguishing the source or origin. Such marks are not protectable. See, e.g., Kresge, National Conference, and Coca-Cola Co., all supra.
A descriptive term is one which portrays a characteristic of the article or service to which it refers. Keebler Co. v. Rovira Biscuit Corp., 624 F.2d 366, 374 n. 8 (1st Cir. 1980). Under this paradigm, a name must clearly denote what goods or services are provided in such a way that the consumer does not have to exercise powers of perception or imagination. Purolator, Inc. v. EFRA Distributors, 524 F.Supp. 471, 477 (D.P.R.1981), aff'd 687 F.2d 554 (1st Cir. 1982); 1 J. McCarthy, Trademarks and Unfair Competition § 11:18, at 382 (1973). Examples of descriptive marks would include the "Vision Center" in reference to a place where one purchases eyeglasses, Vision Center v. Opticks, Inc., 596 F.2d 111, 117 (5th Cir.1979), cert. denied, 444 U.S. 1016, 100 S.Ct. 668, 62 L.Ed.2d 646 (1980), "EVERREADY" with reference to batteries or light bulbs, Union Carbide Corp. v. Ever-ready, Inc., 531 F.2d 366, 380-81 (7th Cir.), cert. denied, 429 U.S. 830, 97 S.Ct. 91, 50 L.Ed.2d 94 (1976), or "HOTRAY" in reference to electric food warmers. Salton, Inc. v. Cornwall Corp., 477 F.Supp. 975, 986-87 (D.N.J.1979). These terms are entitled to protection of the Lanham Act only if they have acquired a secondary meaning. Purolator, Inc. v. EFRA Distributors, 687 F.2d at 562; Keebler Co. v. Rovira Biscuit Corp., 624 F.2d at 374 n. 8; Valmor Products Corp. v. Standard Products Corp., 464 F.2d 200, 202 (1st Cir.1972).
The next whistle-stop on this funicular is the category of suggestive terms. These connote, rather than describe, some particular product(s) or service(s); it requires use of the consumer's ingenuity to envisage the nature of the product or service. Courts have classified the following names as suggestive: "ULTRASUEDE" when used in describing suede-like fabrics, Spring Mills, Inc. v. Ultracashmere House, Ltd., 689 F.2d 1127, 1129-30 (2d Cir.1982); "NATIVE TAN" when referring to a suntan lotion, Sun-Fun Products, Inc. v. Suntan Research & Development Inc., 656 F.2d 186, 191 n. 5 (5th Cir.1981); and "BEETLE" when used in describing a plastic fishing lure, Bass Buster, Inc. v. Gapen Manufacturing Co., 420 F.Supp. 144, 157-58 (W.D.Mo.1976). Such terms need not have acquired secondary meaning to be eligible for protection. Zatarains, Inc. v. Oak Grove Smokehouse, Inc., 698 F.2d 786, 791 (5th Cir.1983); Keebler Co. v. Rovira Biscuit Corp., 624 F.2d at 374 n. 8. The line between descriptive and suggestive terms is often blurred, and the categorization of a name as "descriptive" or "suggestive" cannot be divined by the application of any hard and fast rules, but must be decided on a case-by-case basis. See 1 J. McCarthy, Trademarks and Unfair Competition, § 11:23, at 395.
The last remaining grouping arbitrary or fanciful terms need not be discussed at length here, as plaintiff has conceded that there is a nexus between the name in question in this case and the service provided. Plaintiff's Brief at 1-2. Once such a junction exists, pigeon-holing of a name as either arbitrary or fanciful is sidetracked. Cf. AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 349-50 (9th Cir.1979); Information Clearing House, Inc. v. Find Magazine, 492 F.Supp. 147, 155-56 (S.D.N.Y.1980). In any event, given the facts as elucidated above, the Court would so find as a matter of law. See Keebler Co. v. Rovira Biscuit Corp., 624 F.2d at 374 n. 8.
With these principles in mind, this Court now must decide whether the trade name and service mark "Railroad Salvage" is generic, suggestive or descriptive. The word "railroad", standing alone, is defined as a "permanent road having a line of rails *1021 fixed to ties on a level or graded roadbed and providing a track for ... cars." Webster's Third New International Dictionary 1876 (1981).[10] "Salvage" is defined as "something extracted (as from wreckage, ruins, or rubbish) as valuable or having further usefulness." Id. at 2006.
The plain meaning of these words, when coupled, does not denote basic services provided by the plaintiff, nor do they accurately describe such services without resort to the use of some ratiocination by the consumer. Although the name depicts, in a general manner, the source of some of the goods sold by the plaintiff, it does not fully or precisely limn the services provided by the plaintiff. See, e.g., Playboy Enterprises, Inc. v. Chuckleberry Publishing, Inc., 687 F.2d 563, 566-67 (2d Cir.1982). The plaintiff does not extract usable goods from railroads; rather, it purveys wares which could not be sold through traditional channels (only a portion of which could, even with the greatest of liberties, be described as "salvage").
The Court believes that the nomenclature here at issue necessitates some use of the consumer's imagination in order to determine the nature of the plaintiff's services, and is distinctive. Consequently, the appellation is entitled to trade name protection, as a suggestive name or mark, without proof of secondary meaning. Id.; Keebler Co. v. Rovira Biscuit Corp., 624 F.2d at 374 n. 8.[11]
THE RAILBED OF INTERSTATE COMMERCE
This stated, the journey now approaches the next crossing. The plaintiff, having established the distinctiveness of its name, must prove that the defendant caused goods or services bearing the name or some facsimile thereof to enter into the stream of interstate commerce. This burden can be met by showing an adverse effect on the sales or goodwill of one whose trade name or mark is used in interstate commerce, even if the defendant's activities are wholly intrastate.[12]Purolator, Inc. v. *1022 EFRA Distributors, Inc., 687 F.2d at 559; see, e.g., Coca-Cola Co. v. Stewart, 621 F.2d 287, 290-91 (8th Cir.1980); Maier Brewing Co. v. Fleischmann Distilling Corp., 390 F.2d 117, 120 (9th Cir.), cert. denied, 391 U.S. 966, 88 S.Ct. 2037, 20 L.Ed.2d 879 (1968); Kampgrounds of America, Inc. v. North Delaware A-OK Campground, Inc., 415 F.Supp. 1288, 1290-91 (D.Del.1976), aff'd mem., 556 F.2d 566 (3rd Cir.1977); Burger King of Florida, Inc. v. Brewer, 244 F.Supp. 293, 297-98 (W.D.Tenn.1965). There is massive uncontroverted evidence here that the plaintiff has made abundant use of its name in interstate commerce. It has stores in two states. It spends significant sums of money advertising in Rhode Island to bring customers through the turnstiles by the trainload. It operates a fleet of trucks which transport goods throughout the United States. In addition, the plaintiff contacts possible suppliers nation-wide. In support of these functions, the plaintiff maintains an office in Omaha, Nebraska. The defendant rails against the plaintiff's thrust for protection, but does not deny that it seeks, to some extent, the same suppliers and types of goods which the plaintiff covets. The possible diversion of goods to the defendant, standing alone, has a potential braking effect which clearly meets the benchmark of adverse impact in interstate commerce. It is an inescapable inference from the evidence that the continued actions of the defendant in preying upon plaintiff's name denigrate the plaintiff's goodwill. The record illustrates, for example, that merchandise intended for the defendant has been shipped to the plaintiff and that the plaintiff has been dunned for payment. The potential damage to the relationship built up between the plaintiff and its suppliers and to plaintiff's hard-earned credit standing is self-evident. Thus, this Court finds sufficient uncontradicted evidence to traverse the second spur of the infringement test.
THE MERCHANT'S LIMITED
While businessmen are not free blithely to consign another's suggestive trade name to their endeavors, mere use will not per se warrant judicial intervention. Cf. Armstrong Cork Co. v. World Carpets, Inc., 597 F.2d 496, 500-02, 505 (5th Cir.), cert. denied, 444 U.S. 932, 100 S.Ct. 277, 62 L.Ed.2d 190 (1979); Allen Homes, Inc. v. Weersing, 510 F.2d 360, 361 (8th Cir.), cert. denied, 421 U.S. 998, 95 S.Ct. 2395, 44 L.Ed.2d 665 (1975).
If it is not to be flagged down in its summary judgment excursion, the plaintiff must also show that defendant's use of the phrase "Railroad Salvage" is likely to cause confusion. In assessing whether or not the plaintiff has rolled past this track marker, the Court has considered the following factors: (i) the similarity of the marks; (ii) the similarity of the goods or services; (iii) the relationship between the parties' channels of trade; (iv) the relationship between the parties' advertising; (v) the classes of prospective purchasers or suppliers; (vi) the evidence of actual confusion; (vii) the defendant's intent in adopting its mark; (viii) the potency of the plaintiff's mark; and (ix) the strength of the defendant's mark. Pignons S.A. deMecanique v. Polaroid Corp., 657 F.2d 482, 487 (1st Cir.1981); accord Leathersmith of London, Ltd. v. Alleyn, 695 F.2d 27, 29-30 (1st Cir.1982); Amstar Corp. *1023 v. Domino's Pizza, Inc., 615 F.2d 252, 259 (5th Cir.), cert. denied, 449 U.S. 899, 101 S.Ct. 268, 66 L.Ed.2d 129 (1980); Alpha Industries, Inc. v. Alpha Steel Tube & Shapes, Inc., 616 F.2d 440, 444 (9th Cir. 1980). Let us now proceed to track these factors.
The marks are, to all intents and purposes, identical in spelling and in pronunciation.[13] This synonymity is not necessarily issue-determinative; the presentation of the name or mark may be such as to eliminate possible confusion. Pignons S.A. deMecanique v. Polaroid Corp., 657 F.2d 487. There is, however, no evidence in this case that the names used by these parties are presented to either purchasers or suppliers in a manner which would serve to reduce the possibility of confusion.
Both the plaintiff and defendant deal, at least in part, in merchandise which went unclaimed through the milk run of more stereotypical wholesale and retail channels. The plaintiff maintains a constant look-out for potential caches of unsold merchandise. The defendant has taken at least one roundhouse swing at this market by placing an advertisement (in "Women's Wear Daily") soliciting unsold women's clothing. Although the plaintiff does not cater to flea marketeers (as does the defendant), the plaintiff's merchandise and prices could very well be attractive to those customers. Thus, the essential service provided both by the plaintiff and by the defendant acting as "middlemen" of surplus merchandise is similar. And, even though clientele of the plaintiff and of the defendant are somewhat different, the parties' sources of supply tend to be the same. The record is replete with examples such as the defendant's purchases of ladies jackets, watches and the like under circumstances falling squarely within the plaintiff's wonted modus operandi. This Court finds that the channels of trade and advertising for the parties are sufficiently similar so as to require an inference of probable confusion.
The strongest evidence of a likelihood of confusion is, of course, a showing of actual confusion. While one misdirected order for a camera may be weak evidence on this issue, Pignons S.A. deMecanique v. Polaroid Corp., 657 F.2d at 490, the proof of confusion in the instant case has much more locomotive force. Within the first two months of the time when defendant fired up its engine, the plaintiff received a freight invoice for goods trans-shipped to the defendant. Roberge Affidavit ¶ 8 and Exhibit B attached thereto. Again, in March of 1981, the plaintiff was the recipient of a freight invoice for goods delivered to the defendant. This evidence is especially potent, as vendors are, on the whole, far better trained than the general public to differentiate between commercial entities. The Court finds these incidents to be persuasive of the existence of actual confusion on the part of suppliers.
The defendant's intent in adopting the name "Railroad Salvage" also is suspect. Hijacking aside, there is no readily apparent tie between the defendant's business activities and the name conferred upon it by its founder. While the defendant asseverates that it was wholly unfamiliar with the plaintiff prior to the institution of this litigation, Interrogatories, No. 14, this Court is not blind to the fact that the defendant was dispatched into the world of commerce under its present corporate name approximately one month after a success story of the Horatio Alger genre appeared in the "Providence Sunday Journal" detailing the heroics and the attainments of Vine and of the plaintiff. The disingenuous allegation that defendant had never heard of the plaintiff is, even on a motion for summary judgment, insufficient to rebut the presumption that a junior user borrowing the name of a senior user intends to switch mercantile loyalties by creating confusion in *1024 the marketplace.[14]See Chart House, Inc. v. Bornstein, 636 F.2d 9, 10 (1st Cir.1980).
To drive the final spike, there can be, on this record, little or no dispute as to the strength of the plaintiff's mark; nor any room for legitimate doubt that defendant's mark, as applied exclusively to its enterprises, is anything but frail.
In sum, the plaintiff has amply demonstrated that there is a clear and present likelihood of confusion created by defendant's use of the plaintiff's name and mark.
THE END OF THE LINE
The plaintiff's express has run precisely on schedule, and has successfully traversed each grade, bridge and tunnel en route to summary redress. The Court is satisfied that, on the instant record, there is no genuine issue as to any material fact; and that the plaintiff is entitled to judgment as a matter of law. The corporate defendant should not be permitted to continue or to resume business operations under the offending title; its corporate name must, for purposes of commerce, be consigned to the scrap heap. The "Railroad Salvage" stops here!
Accordingly, the Court will grant a permanent injunction as prayed for against both defendants and will assess court costs and attorney's fees[15] against the corporate defendant.[16] Counsel for the plaintiff are directed to present a form of order to the Court for entry consonant with the topography of this opinion. Plaintiff shall thereafter, within ten days next following the entry of such order, submit its application for counsel fees and disbursements, and the defendant shall file its assent or opposition thereto (as the case may be) within ten days next following.[17]
NOTES
[1] Although the term "junkyard" may be somewhat pejorative, it is nonetheless apt. The Ninth Circuit has described this area of the law thusly: "[i]ts hallmarks are doctrinal confusion, conflicting results, and judicial prolixity." HHM Publishing Co. v. Brincat, 504 F.2d 713, 716 (9th Cir.1974).
[2] The facts, as set forth ante, are in all cases taken from affidavits and the like which, of record, stand uncontradicted before the Court.
[3] The storied engineer of the Cannonball Express, Casey gave his life in a calamitous train wreck to save passengers and crew. Had this folk-hero not kept his hand on the brake handle at the cost of his own life, hundreds would have perished.
[4] The plaintiff's controller, Donald Roberge, estimates that the bulk of the $390,000 spent on advertising for the Groton store in fiscal year 1980 was tendered in the Rhode Island media. Roberge I ¶ 6.
[5] All other corporate offices were held by Geraldine Lemme. While she is named as a defendant, the plaintiff seeks only injunctive relief against her. Plaintiff's Brief at 6 n. 5. Thus, references to the "defendant" in this opinion refer only to Railroad Salvage, Inc. unless the lay of the tracks clearly signals otherwise.
[6] This sideline is not economically significant: pocket T-shirts accounted for $1,800 in annual sales and paint accounted for $2,000 in annual sales. Interrogatories, No. 1. While the record is less than precise as to the total volume of business transacted during the defendant's first year of operations, it is plain that sales were no less than $380,000 and no greater than $760,000.
[7] On July 7, 1981, the whistle was blown, and a preliminary injunction was issued by the Court restraining the defendant from doing business under the trade name "Railroad Salvage".
[8] The defendant did not file counter-affidavits as suggested by Fed.R.Civ.P. 56(e). It appears to be relying on the answers to interrogatories to establish the existence of a genuine issue of material fact. See, e.g. Simmons v. Union News Co., 341 F.2d 531, 533 (6th Cir.),* United States v. Kansas Gas & Elec. Co., 287 F.2d 601, 603 (10th Cir.1961); Young v. South Side Packing Co., 369 F.Supp. 59, 60 (E.D.Wis.1973); 10A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 2738, at 465-67 (1983). Defendant also filed a counter-statement of material facts, see Local Rule 12.1(a)(2), which has been duly considered. The defendant did not, however, request oral argument pursuant to Local Rule 12.1(b). In the absence of such a request, the Court has exercised its discretion in determining that such a presentation would be superfluous. Cf. United States v. One 1974 Porsche 911-S, 682 F.2d 283, 286-87 (1st Cir.1982).
* Cert. denied, 382 U.S. 884, 86 S.Ct. 165, 15 L.Ed.2d 125 (1965).
[9] The Lanham Act draws a distinction between trade names and service marks. Under the Act, service marks are registrable while trade names are not. 15 U.S.C. § 1127; 1 J. McCarthy, Trademarks and Unfair Competition, § 9.6, at 257-58 (1973). The plaintiff, not having registered the words "Railroad Salvage" with the United States Patent and Trademark Office, acquires no benefit from this Court's alternative characterization of "Railroad Salvage" as a service mark or trade name. See text infra. Having recognized the technical distinction, the Court will lapse into what has come to be the accepted judicial vernacular and will employ the designations service mark (or mark) and trade name (or name) interchangeably. WaltWest Enterprises, Inc. v. Gannett Co., 695 F.2d 1050, 1054 n. 6 (7th Cir.1982).
[10] It is true, of course, that the word has acquired a second meaning when used as a verb, being roughly equated with accomplishing a goal (often a nefarious one) with undue haste and without the benefit of adequate consideration or evidence; while of passing semantic interest, perhaps, it is clear to the Court that the trade name in question prescinds solely from the accepted usage of the word as a noun, with the meaning ascribed ante.
[11] Even if proof of secondary meaning were required, the Court is of the opinion that this plaintiff would be entitled to relief because the term "Railroad Salvage" has, by plaintiff's activities, acquired a secondary meaning.
Secondary meaning is the bridge comprising the consumer's association between the trade name and the singular provider of the product or service. See, e.g., President & Trustees of Colby College v. Colby College-New Hampshire, 508 F.2d 804, 807 (1st Cir.1975); Puritan Furniture Corp. v. Comarc, Inc., 519 F.Supp. 56, 59 (D.N.H.1981). Divers considerations may be relevant in signaling the existence of secondary meaning, e.g.: (i) long and exclusive use; (ii) size and-or prominence of an enterprise, and its success; and (iii) extensive promotion. President & Trustees of Colby College v. Colby College-New Hampshire, 508 F.2d at 807-08. Upon consideration of these and kindred factors, this plaintiff has built up a formidable head of entrepreneurial steam, and has plainly established the existence of a secondary meaning. The plaintiff's assertion that it has used the name "Railroad Salvage" for many years, Vine Affidavit ¶ 1, is undisputed, as is the fact that such use long pre-dates the defendant's initial attempt to board the gravy train. Plaintiff's stature in the marketplace and its prominence in the purchase and sale of surplus and special-situation merchandise is likewise uncontroverted. Vine Affidavit, Exhibit B. The plaintiff has been demonstrably successful in its endeavors. Id. Finally, plaintiff has expended (and continues to expend) substantial sums of money on advertising (such that plaintiff's founder has become something of a regional celebrity). Vine Affidavit, Exhibit A; Roberge Affidavit ¶ 6. Collectively, these factors withstand the searchlight of defendant's scrutiny, and document the existence of secondary meaning beyond peradventure of doubt. This, in turn, entitles the plaintiff to the safe passage of the Lanham Act.
[12] The defendant, in its brief, urges that the Court be guided by a set of artificial territorial limits, urging in effect that so long as the businesses are located in different cities, or at most, different states, there should be a mandatory finding of the absence of competitive effect. Defendant's Brief at 4, citing, e.g., Nisley Shoe Co. v. Nisley Co., 72 F.2d 118 (6th Cir.1934). This argument is so spurious as to be deserving of the same characterization accorded by this Court to an eleventh hour constitutional challenge derailed in Beberian v. National Railroad Passenger Corporation, 550 F.Supp. 592 (D.R.I. 1982): "It is, as it were, the caboose bringing up the rear of [the defendant's] train of thought". Id. at 595. Neither plaintiff's broad business endeavors nor defendant's newly-emergent venture are comparable in any relevant aspect to the neighborhood bootery strapped figuratively to the tracks in Nisely. The courts are consentient in holding that state lines do not define commercial markets because neither the reach of advertising, nor the peregrinations of the consumer public, nor the service areas of suppliers, nor secondary meaning itself, are fenced in by political boundaries. Food Fair Stores, Inc. v. Square Deal Market Co., 206 F.2d 482, 485 (D.C.Cir.1953), cert. denied, 346 U.S. 937, 74 S.Ct. 377, 98 L.Ed. 426 (1954); 2 J. McCarthy, Trademarks and Unfair Competition § 26: 12 at 224; see Huber Baking Co. v. Stroehmann Bros. Co., 252 F.2d 945, 955 (2d Cir.1958).
[13] Although the defendant contends that its name is different from the corporate name of the plaintiff, there is no dispute that the plaintiff only uses the words "Railroad Salvage" in its advertising. See Roberge I, Exhibit A. To the extent that there is a difference in onomastics, it is a difference without a distinction as regards this action.
[14] This is particularly so in this case, where there are no affidavits filed in opposition to the motion, and where there is no proffered explanation either of a cogent rationale or a discernible right-of-way for the defendant's choice of its name. The plausibility of sheer coincidence cannot be swallowed whole; if raillery might be permitted, a willingness to ingest such an argument would require chug-a-lugging to a degree which far exceeds either this Court's capacity or its fatuousness.
[15] 15 U.S.C. § 1117; see RCA Records, Inc. v. Kory Records, Inc., 197 U.S.P.Q. 908 (S.D.N.Y. 1978).
[16] Counsel fees have been waived by the plaintiff as to the individual defendant. See note 5, supra.
[17] With apologies to Watty Piper, this is the end of the line for the little engine that couldn't. Cf. Piper, The Little Engine That Could, The Book House for Children (1951). While Werther, having spied an opportunity, may well have whispered "I think I can", this Court thinks he cannot.
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543 U.S. 845
MATA-ESPINOZAv.UNITED STATES.
No. 03-10685.
Supreme Court of United States.
October 4, 2004.
1
C. A. 11th Cir. Certiorari denied. Reported below: 99 Fed. Appx. 881.
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384 F.Supp. 1394 (1974)
UNITED STATES of America, Plaintiff,
v.
Theodore W. KELLY, Defendant.
No. 74 CR 87 W 4.
United States District Court, W. D. Missouri, W. D.
November 13, 1974.
*1395 *1396 Robert G. Ulrich, Asst. U. S. Atty., Kansas City, Mo., for plaintiff.
Thomas M. Bradshaw, Asst. Federal Public Defender, Kansas City, Mo., for defendant.
MEMORANDUM AND ORDER
ELMO, B. HUNTER, District Judge.
On April 4, 1974, a federal grand jury returned a two count indictment against this defendant charging in each count the receipt of a firearm by a convicted felon in violation of Section 1202(a)(1), Title 18 Appendix, United States Code, on or about November 14, 1972, and February 3, 1974, respectively. Full jury trial commenced on July 11, 1974, and a verdict of guilty on each count was returned by the jury on the afternoon of July 12, 1974. Defendant's post-trial motion for a judgment of acquittal was denied by the undersigned Judge on July 25, 1974. At all proceedings before this Court in this cause the defendant has been represented by his court appointed counsel.
On July 3, 1974, the Assistant United States Attorney charged with the prosecution of this cause filed under seal with the Hon. William H. Becker, Chief Judge of this Court, a notice under 18 U.S.C. § 3575(a) that this defendant is a dangerous special offender warranting the increased maximum punishment provided by that section. On August 16, 1974, defendant Kelly moved to strike that notice. On October 25, 1974, this Court took defendant's motion to strike the notice under advisement and set November 8, 1974, for the full evidentiary hearing contemplated by 18 U.S.C. § 3575(b). The hearing having been completed, the Court must first consider defendant's motion to strike.
The notice states as follows:
"Comes now the United States, By Bert C. Hurn, United States Attorney for the Western District of Missouri, and by Robert G. Ulrich, Assistant United States Attorney for the Western District of Missouri, charged with the prosecution of the above-named defendant before the United States District Court for the Western District of Missouri, said defendant charged in two counts with the violation of Title 18 Appendix, United States Code, Section 1202(a)(1) which are felonies committed when the defendant was over the age of 21 years, and does hereby file with the Court, in compliance with the provisions of 18 United States Code, Section 3575(a) notice that upon the conviction of the said felonies, this defendant is subject to the imposition of sentence pursuant to 18 United States Code, Section 3575(b) as a dangerous special offender.
"The defendant is a special offender for the purposes of 18 United States Code, Section 3575 and within the meaning of 18 United States Code, Section 3575(e), having been convicted in Courts of the State of Missouri of two felonies, the first felony conviction for stealing from the person on September 23, 1963, in the Circuit Court of Jackson County, and sentenced to two years confinement; and the second felony conviction for robbery in the first degree occurring in the Circuit Court of the State of Missouri for the City of St. Louis, on the 7th day of July, 1969, and sentenced to eight years confinement. The defendant was confined in the Missouri State Prison, Jefferson City, Missouri, as a result of both convictions and was released from the Missouri State Penitentiary on the second felony conviction on or about the 17th day of August, 1972, within five years from the dates of the commission of the offenses charged in the above-styled cause.
"The defendant is dangerous within the meaning of Title 18, United States Code, Section 3575(f) requiring that a period of confinement longer than *1397 that provided for the offense for which he was convicted, Title 18 Appendix, United States Code, Section 1202(a)(1), to protect the public from further criminal conduct by said defendant.
"In conclusion, the United States by its attorneys does herein give notice to the Court that the defendant is a dangerous special offender within the meaning of Title 18, United States Code, Section 3575."
Defendant Kelly has moved to strike the above notice, and thereby escape the imposition of sentence under the dangerous special offender provisions, on several grounds. He contends: 1) that the notice is not sufficient under the statute as it does not state with particularity the reasons the United States believes this defendant is "dangerous" within the meaning of the statute; 2) that the notice does not give sufficient notice of the allegations against this defendant in this statutory proceeding, and thereby is violative of the Due Process clause of the Fifth Amendment; 3) that the application of Section 3575 to this defendant is illegal and unconstitutional for the reason that Title XII of the Organized Crime Control Act of 1970 has not been complied with; 4) that the term "dangerous" as used and defined in Section 3575 is unconstitutionally vague and provides no standard upon which a trial judge could properly make a finding that an individual is "dangerous" within the meaning of the statute; and 5) that a number of the procedural steps outlined in Section 3575 for the hearing contemplated by that statute are violative of the Due Process clause of the fifth amendment. The United States has filed its brief in opposition to defendant's motion, and in its brief takes a contrary position with regard to each contention of defendant.
For the reasons set forth below, this Court has concluded that the notice filed by the United States is insufficient, and accordingly the defendant's motion to strike the notice will be sustained.[1]
Section 3575 of Title 18, U.S.C. sets forth a procedure by which an attorney for the United States, should he determine to file a notice as mandated by the statute, can institute a proceeding by which the Court, should it make the required findings under Section 3575(b), may impose a sentence of up to twenty-five years confinement. Section 3575(a) sets forth the method by which the attorney for the government shall file the notice that the defendant, he believes, is a dangerous special offender, and indicates what is to be included in such notice. Section 3575(b) sets forth the procedure by which the Court shall conduct the hearing to determine if the defendant is a dangerous special offender. Sections 3575(c) and (d) provide that this statute shall not be construed to prevent the imposition of a sentence greater than twenty-five years if the statute upon which the defendant was convicted provides for a greater sentence, and that the Court shall not sentence a dangerous special offender to any term less than any mandatory minimum term provided by the statute for which the defendant was convicted. Section 3575(e) defines a "special offender" for purposes of this section, and Section 3575(f) defines "dangerous" for purposes of this section.
The relevant sections for purposes of the instant motion are Sections 3575(a), 3575(e)(1), and 3575(f). In pertinent part, those sections read as follows:
"(a) Whenever an attorney charged with the prosecution of a defendant in a court of the United States for an alleged felony committed when the defendant *1398 was over the age of twenty-one years has reason to believe that the defendant is a dangerous special offender such attorney, a reasonable time before trial or acceptance by the court of a plea of guilty or nolo contender, may sign and file with the court, and may amend, a notice (1) specifying that the defendant is a dangerous special offender who upon conviction for such felony is subject to the imposition of a sentence under subsection (b) of this section, and (2) setting out with particularity the reasons why such attorney believes the defendant to be a dangerous special offender. . . . ." (emphasis added)
"(e) A defendant is a special offender for purposes of this section if
(1) the defendant has previously been convicted in courts of the United States, a State, the District of Columbia, the Commonwealth of Puerto Rico, a territory or possession of the United States, any political subdivision, or any department, agency, or instrumentality thereof for two or more offenses committed on occasions different from one another and from such felony and punishable in such courts by death or imprisonment in excess of one year, for one or more of such convictions the defendant has been imprisoned prior to the commission of such felony, and less than five years have elapsed between the commission of such felony and either the defendant's release, on parole or otherwise, from imprisonment for one such conviction or his commission of the last previous offense or another offense punishable by death or imprisonment in excess of one year under applicable laws of the United States, a State, the District of Columbia, the Commonwealth of Puerto Rico, a territory or possession of the United States, any political subdivision, or any department, agency or instrumentality thereof; . . ."
"(f) A defendant is dangerous for purposes of this section if a period of confinement longer than that provided for such felony is required for the protection of the public from further criminal conduct by the defendant."
It is clear from the plain, unambiguous language of Section 3575 that before the Court may impose sentence pursuant to Section 3575(b), two separate and distinct tests must be satisfied. First, the Court must find the defendant to be a "special offender" within the meaning of Section 3575(e) (1, 2, 3), and second, the defendant must be found to be "dangerous" within the definition of Section 3575(f). It is apparent under the definitions of this section that an individual may be found to be a "special offender" under one of the three sub-parts of Section 3575(e) without necessarily being found to be "dangerous" as defined in Section 3575(f). Further, pursuant to Section 3575(a) a notice filed under this section must (1) include a statement specifying that the defendant is a "dangerous special offender" who upon conviction is subject to the imposition of sentence under Section 3575(b), and (2) set forth "with particularity the reasons why the attorney for the United States believes the defendant to be a "dangerous special offender".
The notice in this case first states that this defendant was over the age of twenty-one years at the time of the commission of the offenses charged in the indictment, and that the attorney for the United States filing the notice is charged with the prosecution of this defendant in this Court. It then further states that this defendant is a "dangerous special offender" subject to imposition of sentence, upon conviction, under Section 3575(b).
The notice then sets forth with particularity the reasons why the attorney filing the notice believes this defendant to be a special offender, alleging that this defendant has at least two prior felony convictions in Missouri State courts, carrying a maximum penalty of confinement in excess of one year. The convictions referred to are alleged to be a 1963 conviction for stealing from the person *1399 and a 1969 conviction for first degree robbery. The notice states that this defendant was released from state custody in connection with these offenses in 1972, less than five years prior to the dates of the offenses charged in the instant indictment. These allegations, if later proved at the hearing contemplated by Section 3575(b), would clearly support a finding by this Court that this defendant is a "special offender" as that term is defined by Section 3575(e)(1).
However, the notice filed in this case does not set forth any reasons why the Assistant United States Attorney who filed the notice believes this defendant to be "dangerous" as defined in Section 3575(f). Defendant Kelly was charged in this case with two violations of Section 1202(a)(1), Title 18 Appendix, United States Code. Under Section 1202(a)(1), the maximum period of confinement provided for each violation is two years. A proper notice in this case would require a statement of the reasons why a period of confinement in excess of two years on each count "is required for the protection of the public from further criminal conduct by the defendant". The notice filed in this case merely makes the following unsupported conclusory allegation:
"The defendant is dangerous within the meaning of Title 18, United States Code, Section 3575(f) requiring that a period of confinement longer than that provided for the offense for which he was convicted, Title 18 Appendix, United States Code, Section 1202(a)(1), to protect the public from further criminal conduct by said defendant."
No statement of any reasons why the United States believes a period of confinement longer than two years is necessary to protect the public is present in this notice. Accordingly, it does appear that the notice filed in this case fails to satisfy the requirements of Section 3575(a) requiring the "setting out with particularity the reasons . . .."
The United States contends, however, that the legislative history of Section 3575 demonstrates that Congress intended for proof of Section 3575(e)(3) to constitute a prima facie showing that a defendant is "dangerous" within the meaning of Section 3575(f). This Court is somewhat puzzled as to the relevancy of this argument. Section 3575(e)(3) states that a defendant is a "special offender" within the meaning of this statute if the felony charged in the case is, or was committed in furtherance of
"a conspiracy with three or more other persons to engage in a pattern of conduct criminal under applicable laws of any jurisdiction, and the defendant did, or agreed that he would, initiate, organize, plan, finance, direct, manage or supervise all or part of such conspiracy or conduct, or give or receive a bribe or use force as all or part of such conduct."
Neither the indictment nor the notice herein contain any allegation of activity by this defendant of the type outlined in Section 3575(e)(3).
However, even assuming arguendo the relevancy of this contention, and applying this rationale to each of the three subsections of Section 3575(e), this position cannot be sustained. This court has carefully reviewed the legislative history of Section 3575. That review convinces this Court that the construction of this section as outlined above is consistent with the clear, plain language of Section 3575, and with the intent of Congress. A notice under Section 3575(a) must set forth with particularity why the United States believes a defendant is a "special offender" under Section 3575(e) and why the United States believes he is "dangerous" as defined by Section 3575(f).[2]
*1400 Further, this Court has been unable to find any support in the legislative history of Section 3575 for the assertion that allegations sufficient to support a finding that a defendant is a "special offender" as defined in Section 3575(e)(1) constitute a prima facie showing of dangerousness as defined in Section 3575(f). In the absence of a clear showing of contrary legislative intent, the general rule of statutory construction requires this Court to ascertain the congressional intent with regard to a particular statute from the language used by Congress in the statute, if that language is clear and plain, and if the statute is internally cohesive. United States v. Mirabile, 503 F.2d 1065 (8th Cir. 1974). The clear and plain language of Section 3575 mandates the construction given that language by this Court. Certainly the government has made no clear showing of any contrary legislative intent. Section 3575 is internally cohesive.
II.
The question remaining, although not specifically raised by either plaintiff or defendant, is whether the United States may after trial and conviction, amend its notice to comply with Section 3575(a) or to conform to the evidence submitted at the hearing. Section 3575(a) does state that the attorney for the United States
"a reasonable time before trial or acceptance by the court of a plea of guilty or nolo contendere, may sign and file with the court, and may amend, a notice . . .."
This Court is of the opinion that the notice may be amended only before trial or acceptance by the Court of a plea of guilty or nolo contendere, and not subsequent thereto. The procedure set forth in Section 3575(a) clearly contemplates that the defendant will be advised before trial or the entrance of a plea of guilty or nolo contendere of the intention of the United States to proceed under Section 3575, and of all matters required to be included in such notice. To allow the notice to be modified after trial, or after the entrance of a plea of guilty or of nolo contendere, would obviously contravene the procedural scheme of Section 3575.
The maximum punishment to which Section 3575 subjects a defendant is very severe. In this case, were the statute to be applied to this defendant, and were the Court to find him to be a "dangerous special offender", the maximum punishment would increase from two years confinement on each count to twenty-five years confinement on each count. In proceeding under this section, the United States must precisely follow the procedural safeguards and requirements which this section mandates. See United States v. Tramunti, 377 F.Supp. 6 (S.D.N.Y.1974) regarding a similar statute, 21 U.S.C. § 849. The United States will not be permitted to amend its notice at this time after defendant Kelly has been fully tried and convicted.
In addition to the reasons stated above, it is worth note that in a case in which a Section 3575(a) notice has been filed, should a defendant enter a plea of guilty or nolo contendere in reliance upon the contents of the notice, and the United States thereafter be permitted to amend the original notice, the defendant would then have grounds to withdraw or set aside his plea for the reason that the plea of guilty or nolo contendere was not knowledgeably made in the absence of the additional, derogatory information contained in the amended notice. It would therefore appear that the government should not be permitted to amend its notice following a plea of guilty or nolo contendere. It follows, then, that to allow the United States to amend the notice in a case in which the defendant has been previously tried and convicted after a plea of not guilty would be to impose a double standard tending to penalize individuals who exercise their right to a full jury *1401 trial.[3] Such double standards have in the past been held violative of Due Process. See United States v. Jackson, 390 U.S. 570, 88 S.Ct. 1209, 20 L.Ed.2d 138 (1968).[4]
For the reasons stated, defendant's motion to strike the "Notice to the court Pursuant to Title 18, United States Code, Section 3575 That The Above-Named Defendant Is A Dangerous Special Offender" filed July 3, 1974, is hereby sustained. The notice is therefore dismissed.
It is so ordered.
NOTES
[1] Hence, this Court does not reach defendant's remaining contentions, and therefore, expresses no opinion as to the substantive constitutional questions raised concerning the remainder of Section 3575. See United States v. Tramunti, 377 F.Supp. 6 (S.D.N. Y.1974).
[2] With regard to the legislative history in this context, see the "Memorandum Opinion and Order Directing Further Proceedings issued by the Hon. John W. Oliver, Judge of this Court, in United States v. Duardi, et al., 384 F.Supp. 861 (W.D.Mo.1974).
[3] For example, the double standard would place a defendant, who is faced with a notice that is insufficient on its face to trigger the application of Section 3575, in the precarious position of entering a plea of guilty and being exposed to the maximum punishment provided for the offense charged or going to trial and thereafter being exposed to the entire range of punishment under Section 3575(b) should the government after trial file an amended notice sufficient to trigger Section 3575.
[4] Compare United States v. Noland, 495 F.2d 529 (5th Cir., 1974) and United States v. Edwards, 379 F.Supp. 617 (M.D.Fla.1974).
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269 B.R. 124 (2001)
In re CONTEMPRI HOMES, INC., Debtor.
Official Committee of Unsecured Creditors of Contempri Homes, Inc. on behalf of the Ch. 11 Estate of Contempri Homes, Inc., Plaintiff,
v.
Seven D Wholesale and Seven D. Wholesale, Inc., Defendants.
Bankruptcy No. 5-97-00496. Adversary No. 5-98-00286A.
United States Bankruptcy Court, M.D. Pennsylvania.
October 17, 2001.
*125 William Burnett, Earl Forte, Blank, Rome, Comisky & McCauley, Philadelphia, PA, for plaintiff.
Eugene C. Kelley, Hoegen, Hoegen & Kelley, Wilkes-Barre, PA, for defendants.
OPINION[1]
JOHN J. THOMAS, Bankruptcy Judge.
The above-captioned adversary[2] was initiated by a Complaint of the Official Committee of Unsecured Creditors of the Debtor (hereinafter "Plaintiff") seeking to avoid certain transfers pursuant to both 11 U.S.C. §§ 547 and 549. The Defendants deny the transfers were preferential under the dictates of Section 547(b)[3], but, alternatively *126 argue to the extent the court finds any preferential transfers, they are protected by the "safe harbor" provisions articulated in Section 547(c)(1), (2), and (4)[4].
By Joint Exhibit No. 1 (Stipulation of Facts), the parties stipulated the Plaintiff established elements of proof under Section 547(b)(1), (3), (4), and (5). Left for resolution was whether the Plaintiff met its burden under Section 547(b)(2), proving that the transfers in question were for or on account of an antecedent debt owed by the Debtor before such transfers were made. 11 U.S.C. § 547(b)(2).
Joint Exhibit No. 1 also provided the date of the filing of the bankruptcy and the date the parties agreed was the 90th day before the filing date. Paragraph 4 contains a list of the pre-petition checks including the date, number, amount, and honor date of each check. Paragraph 7 sets forth three separate checks the parties agreed were transferred after the commencement of the Debtor's case without Bankruptcy Court authorization. Again, the parties stipulated to the date, number, amount, and honor date of the checks.
The Plaintiff has the burden of proving the avoidability of transfers under subsection (b) of Section 547 and the Defendants, against whom recovery is sought, have the burden of proving the non-avoidability of any transfer under subsection (c) of Section 547. 11 U.S.C. § 547(g).
The Plaintiff's main witness was Karen Anderline. She testified she worked in the accounts payable department of the Debtor for a twelve year period and was so employed in that position during the preferential period prior to the bankruptcy. Ms. Anderline testified as to the mechanics of writing checks and matching the amount of those checks with particular invoices paid by an identifiable check. In other words, Ms. Anderline testified to the date of each check, the amount of each check, the check numbers, the honor date, and the invoices paid by each check. The exhibit listing the checks together with the invoice numbers are found in Plaintiff's Exhibit No. 18.
On cross-examination, Ms. Anderline testified the Debtor had a credit limit with the Defendants of $250,000.00 and once the credit limit was reached, the Defendants would not deliver goods to the Debtor unless a payment approximating the amount of the newly shipped goods was made at or near the time of delivery. She testified that while the amounts of the checks approximated the amount of material being delivered, the check was credited to old invoices and not current invoices.
This payment arrangement between the parties was more detailed by the Defendants' *127 primary witness, Mr. Richard Frusciante, the general manager for Seven D Wholesale's Scranton office. Mr. Frusciante's testimony emphasized the longstanding terms of payment established between the parties. He testified that when the parties reached their credit limit, they would work out an arrangement where the Debtor would pay the oldest outstanding invoices first to keep their overdue balance manageable so that once the spring weather broke, the Debtor would be able to get current within a short period of time. (Transcript of 01/18/2000 at 67 (Doc. # 23A).) The determining factor as to the amount of each payment was the dollar amount of the current materials shipped by the Defendants to the Debtor. (Transcript of 01/18/2000 at 69 (Doc. # 23A).) The internal bookkeeping procedure of the Defendants was to apply the check to pay oldest invoices first. "We [Seven D. Wholesale] would come up with the dollar amount and we would try to match the oldest invoices to that dollar amount as best we could, to keep them within a manageable days [sic]." (Transcript of 01/18/2000 at 69 (Doc. # 23A).) "The checks basically matched up with material that we shipped over. We couldn't get an exact amount because we were paying invoices that had been invoiced prior to that but we came as close to the amount of what we shipped over to the amount that they were paying every week." (Transcript of 01/18/2000 at 78 (Doc. # 23A).) This arrangement was characterized by Mr. Frusciante as a "modified C.O.D. basis in order to keep their days as close as possible." (Transcript of 01/18/2000 at 89 (Doc. # 23A).)
This "modified C.O.D." arrangement was one that was practiced between the Debtor and the Defendants for several years prior to the bankruptcy. Apparently, the Debtor's business would become slow during winter months but, when the weather broke in the springtime, business would increase. It was during the slow winter months that the parties agreed to the "modified C.O.D." arrangement. Checks would approximate the amount of the materials shipped to the Debtor. Some of the checks were for amounts greater than the value of materials shipped and some were in amounts less than materials shipped. Most of the checks paid invoices which were several months old.
When questioned about the range of terms typical in the type of industry engaged by the Defendants, Mr. Frusciante said, "Well we used those kind of terms before when I was at North Branch, and we have the same type of terms at Seven D Wholesale. I can't tell you for sure what everybody else does out there, but I do talk to a lot of sales people and I know on different accounts they work special arrangements and so on and so forth." (Transcript of 01/18/2000 at 64 (Doc. # 23A).)
The Plaintiff argues all the payments during the ninety days prior to the bankruptcy were payments to the Defendants on account of antecedent debts. In response, the Defendants argue the Plaintiff's entire case rests only on the fact the payments were credited to aged invoices. Furthermore, Defendants assert payment of the aged invoices was by specific design and the only inference drawn is that this was the normal routine practiced between the parties. Furthermore, the Court only needs to look to the amount of each check and compare them to the amount of materials transferred to determine the payments were for materials currently delivered and not for antecedent debt.
The term "antecedent debt" is not defined by the Bankruptcy Code. But a debt is antecedent if it is incurred before the transfer. In other words, the debt *128 must have preceded the transfer. See 5 Lawrence P. King Collier on Bankruptcy, ¶ 547.03[4] at 547-33 (15th ed. rev.2001). The testimony clearly reveals that the Defendants did not even apply the payments made by the Debtor in the order of the old invoices. In other words, the Defendants would pick and choose aged invoices in order to approximate or equal the amount of the material delivered to the Debtor. The clear intent was always that the current payment would be applied to aged, existing invoices. If the payments were applied to satisfy current invoices with any remaining amount being applied to aged invoices, then perhaps an argument could be made by the Defendants that the amount over and above the payment of the current invoice could be considered a preference. This argument was made and accepted by the court in the Matter of Advance Glove Manufacturing Co., 42 B.R. 489 (Bankr.E.D.Mich.1984). In Advance Glove, the parties also had a long-running business relationship. The debtor would call the creditor and inform the creditor how much money the debtor had available to spend. Shipment would be made only if the debtor could assure payment for not only the current shipment but also if payments were made on existing indebtedness. In that case, the value of the material shipped did not always correspond with the amount of the payment. Often the payments exceeded the value of the materials shipped. While the bookkeeping plan between the parties shifted to a running outstanding balance, the court found that the treatment of the funds received in excess of the value of the goods shipped was to reduce some of the existing indebtedness.
Based upon the testimony that all of the payments made were posted to aged invoices and that none of the payments made were applied to the current invoices for current materials shipped, the Court is compelled to find all payments during the pre-petition period were made for or on account of antecedent debt between the parties. The Court further finds that the Plaintiff has met its burden under 11 U.S.C. § 547(g).
Because the evidence established the preferential nature of all the pre-petition payments, the burden shifts to the Defendants to prove one of the enumerated exceptions to preferential transfers found in Section 547(c). As indicated earlier, the Defendant has asserted the exceptions under Section 547(c)(1), (2), and (4) and the Court will address those seriatim.
Under 11 U.S.C. § 547(c)(1), three requirements must be met. First, the creditor must have extended new value to the debtor. Secondly, the parties must have intended that the new value and the transfer by the debtor be contemporaneous. Finally, the exchange must be, in fact, a substantially contemporaneous exchange. The Defendants did provide new value to the Debtor. An argument can also be made that the exchange for new value was substantially contemporaneous. The issue, however, is whether the parties intended the transfers to be contemporaneous exchanges for new value.
The evidence is irrefutable that the intention of the parties was that the checks transferred during the preferential period were earmarked and applied to old invoices. Attached to each check is a list of the old invoices to which that check was applied. (Plaintiff's Exhibit 18) The evidence further reflects that the new value exchanged was not paid for by the Debtor during the preference period. To the contrary, the evidence shows that transfers were made on dated invoices which the Court has earlier determined were antecedent debt. In re Ajayem Lumber Corp. (Sapir v. Keener Lumber Company), 143 *129 B.R. 347 (Bankr.S.D.N.Y.1992). Furthermore, payments made to a supplier of goods as a prerequisite to the shipping of more goods to the debtor are not intended by the parties as a contemporaneous exchange for new value even though the payments roughly correspond to the value of the new goods shipped. See In re Fasano/Harriss Pie Company (Remes v. Acme Carton Corporation), 71 B.R. 287 (W.D.Mich.1987).
In addressing Section 547(c)(2), the payment arrangements testified to by a representative of the accounts payable department of the Debtor and the general manager of the Defendants reflect the payments were made in the ordinary course of business transactions between those two entities. The evidence was undisputed that the Debtor, for several winters prior to the filing of the bankruptcy, fell behind in payments because of the seasonal sensitivity of the business. Once a credit limit was met, the parties went into this "modified C.O.D." payment plan. The evidence supports a finding that the elements of Section 547(c)(2)(A) were established. Lacking, however, is evidence the transfer was made according to ordinary business terms. The Third Circuit has addressed the Section 547(c)(2) exception several times. See J.P. Fyfe, Inc. of Florida v. Bradco Supply Corporation, 891 F.2d 66 (3rd Cir.1989) and In re Molded Acoustical Products (Fiber Lite Corp. v. Molded Acoustical Products), 18 F.3d 217 (3rd Cir.1994). In the Molded Acoustical Products case, Judge Becker does an excellent job of articulating what is contemplated by the term "ordinary business terms".
We believe that the Court of Appeals for the Seventh Circuit
delivered the best rendering of the text of § 547(c)(2)(C) when it held that "`ordinary business terms' refers to the range of terms that encompasses the practices in which firms similar in some general way to the creditor in question engage, and that only dealings so idiosyncratic as to fall outside that broad range should be deemed extraordinary and therefore outside the scope of subsection C." In re Tolona Pizza Prods. Corp., 3 F.3d 1029, 1033 (7th Cir.1993) (emphasis in original). We will embellish the Seventh Circuit test, however, with a rule that subsection C countenances a greater departure from that range of terms the longer the pre-insolvency relationship between the debtor and creditor was solidified.
Id. at 220.
The Third Circuit expanded on some of the factors this Court should examine in making this determination, such as the duration of the pre-insolvency relationship between a debtor and a creditor, and whether that relationship, in terms of payment and credit history, changed during the period prior to the slide into bankruptcy.
Similarities between the Molded Acoustical Products case and the instant case are more than relevant to final resolution. The Court earlier cited testimony from the manager of the Defendants which capsulized the only evidence concerning industry standards presented in this case. (See quote of Defendants' manager, Mr. Frusciante, cited above on page 127.) This is sparse evidence of industry standards. The same held true in the Molded Acoustical Products case where the creditor proffered a comparison of a debtor's payment history with two other firms to whom it had sold goods. The Circuit found that this evidence was insufficient.
While the testimony here indicates how the Defendants dealt with several of their customers, they presented little evidence *130 to support industry-wide practices and, for this reason, I find that the creditor has not met its burden under Section 547(c)(2).
The last exception called into play by the Defendants is that under Section 547(c)(4). Three requirements must be met to bring a preferential transfer within this exception.
First, the creditor must have received a transfer that is otherwise voidable as a preference under § 547(b). Second, after receiving the preferential transfer, the preferred creditor must advance "new value" to the debtor on an unsecured basis. Third, the debtor must not have fully compensated the creditor for the "new value" as of the date that it filed its bankruptcy petition. See In re Almarc Manufacturing, Inc., 62 B.R. 684, 686 (Bankr.N.D.Ill.1986). If a creditor satisfies these elements, it is entitled to set off the amount of the "new value" which remains unpaid on the date of the petition against the amount which the creditor is required to return to the trustee on account of the preferential transfer it received. Id.
In re New York City Shoes, Inc., 880 F.2d 679, 680 (3rd Cir.1989).
Mechanically, how does the Court apply these requirements to the facts in issue here? Initially, the Court must address when a transfer takes place. Here the transfers were made by currently-dated checks not subsequently dishonored. While not a part of the holding in the Third Circuit case of In re New York City Shoes, Inc., the Third Circuit wrote that the date of transfer of a currently-dated check is the date the check is delivered to the creditor. The court reasoned that permitting creditors to rely on the receipt of the check as the transfer date, as opposed to requiring them to wait until the check is honored by the bank, serves the purposes of Section 547(c)(4) because this encourages creditors to continue to do business with troubled enterprises and it allows the debtor to continue to conduct its business in its ordinary manner. Id. at 683.
Holding that the transfer occurs upon receipt of the check for these purposes furthers the goal of § 547(c)(4) and leads to a more appropriate result in policy terms. In most cases, absent a postdated check or a request to hold the check, parties in a normal business transaction would, as the parties did here, treat a check as a cash transaction and extend new credit immediately upon receiving a check in payment of a prior debt rather than waiting until the check has cleared to send new goods. . . . There is no policy reason why a creditor who waits for a check to clear before shipping should get the benefit of the § 547(c)(4) setoff while a creditor who, doing what most business people do, ships on receipt of a check should be denied a setoff.
In re Almarc Mfg., Inc., 62 B.R. 684, 688. Cf. Braniff Airways, Inc. v. Midwest Corp., 873 F.2d 805, 806-08 (5th Cir.1989). See also, In re Thomas W. Garland, Inc. (Garland v. Union Electric Co.), 19 B.R. 920 (Bankr.Mo.1982).
I hold the date of transfer within the context of Section 547(c)(4) occurs on the date that a payment by check is received by the creditor. Those dates of receipt are found in Plaintiff's Exhibit No. 18. The initial transfer within the preference period was by a check dated 11/21/96 and delivered to the Defendants on 11/25/96.
The Plaintiff argues the new value defense only gives a partial defense to the Defendants. Under the Plaintiff's view, the Defendants are still liable for approximately $190,000.00. The Plaintiff's approach is a transactional approach. In other words, the Court is to take the new *131 value given by a creditor and offset it only against immediately preceding preferences. This is an approach which was followed in the case of Leathers v. Prime Leather Finishes Co., 40 B.R. 248 (D.Maine 1984). This minority rule allows an extension of new credit to be applied only to the immediately preceding preference. In the Matter of Micro Innovations Corp. (Williams v. Agama Systems, Inc.), 185 F.3d 329 (5th Cir.1999).
The better approach and the one which is adopted by this Court is that of the approach derived from the case of In re Thomas W. Garland, Inc., 19 B.R. 920 (Bankr.E.D.Mo.1982). "Under this method, subsequent advances of new value may be used to offset prior (although not immediately prior) preferences. A creditor is permitted to carry forward preferences until they are exhausted by subsequent advances of new value." In re IRFM, Inc., 52 F.3d 228 (9th Cir.1995). See, also Crichton v. Wheeling National Bank, 902 F.2d 257, 259 (4th Cir.1990); In the Matter of Micro Innovations Corporation, 185 F.3d 329 (5th Cir.1999); In re R.M.L., Inc., 195 B.R. 602, 616 (Bankr.M.D.Pa. 1996).
The Court will apply the Garland approach to calculate the extent, if any, the Defendants gave new value to the benefit of the Debtor. The total amount of the checks transferred by the Debtor to the Defendants, as more fully set forth on the Joint Stipulation of Facts (Joint Exhibit No. 1), totals $230,792.13. The new value transferred from the Defendants to the Debtor totals $186,100.38[5]. Based upon the foregoing numbers, the Court finds that the total amount of transfers from the Debtor to the creditor, which are not protected by the exception provided by Section 547(c)(4), amount to $44,691.75.
Finally, the Court must address three post-petition transfers which the Plaintiff asserts are avoidable transfers under 11 U.S.C. § 549(a). These checks are represented in Plaintiff's Exhibit No. 18 under tabs 14, 16 and 17 and total $14,834.98. All three transfers are represented by checks dated and delivered to the Defendants prior to bankruptcy but honored post-bankruptcy.
Section 549(a) provides as follows: (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)(A) that is authorized only under section 303(f) or 542(c) of this title; or (B) that is not authorized under this title or by the court. The Defendants argue these are not post-petition transfers because they were C.O.D. deliveries.
For purposes of determining when a transfer takes place under Section 549, the date on which a check is honored, rather than the delivery of the check, is the date of the transfer. In re Mora, 218 B.R. 71 (9th Cir. BAP 1998); In re Mills, 176 B.R. 924 (D.Kan.1994); In re Williams, 1997 WL 252649 (Bankr. W.D.Tenn.1997) citing In re Wilson, 56 *132 B.R. 74 (Bankr.E.D.Tenn.1985); In re Rainbow Music, Inc., 154 B.R. 559 (Bankr. N.D.Ca.1993); and In re Bellamah Community Development, 139 B.R. 29 (Bankr. D.N.M.1992). The Court finds the three transfers set forth in paragraph 7 of the Joint Stipulation of Facts are unauthorized post-petition transfers under the dictates of 11 U.S.C. § 549(a).
Based upon the foregoing, judgment will be entered in favor of the Plaintiff and against the Defendants in the total amount of $59,526.73, said amount representing the total of preferential payments not falling within the exceptions provided by 11 U.S.C. § 547(c) and the post-petition avoided transfers under 11 U.S.C. § 549.
NOTES
[1] Drafted with the assistance of Richard P. Rogers, Law Clerk.
[2] By Stipulation dated March 23, 2000 and filed with the Court April 13, 2000, the caption was amended to reflect the addition of Seven D Wholesale, Inc. as a Defendant.
[3] 11 U.S.C. § 547(b)
(b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of an interest of the debtor in property
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made
(A) on or within 90 days before the date of the filing of the petition; or
(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and
(5) that enables such creditor to receive more than such creditor would receive if
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
[4] 11 U.S.C. § 547(c)(1), (2) & (4)
(c) The trustee may not avoid under this section a transfer
(1) to the extent that such transfer was
(A) intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous exchange for new value given to the debtor; and
(B) in fact a substantially contemporaneous exchange;
(2) to the extent that such transfer was
(A) in payment of a debt incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee;
(B) made in the ordinary course of business or financial affairs of the debtor and the transferee; and
(C) made according to ordinary business terms; . . .
(4) to or for the benefit of a creditor, to the extent that, after such transfer, such creditor gave new value to or for the benefit of the debtor
(A) not secured by an otherwise unavoidable security interest; and
(B) on account of which new value the debtor did not make an otherwise unavoidable transfer to or for the benefit of such creditor.
[5] The Court makes the calculation of new value by totaling the invoices which were presented to the Court by way of Exhibits D-3 and D-4. Exhibit D-3 reflects the invoices for new materials shipped by the Seven D Wholesale of Scranton office to the Debtor. The invoices which were added are reflected on page 2 beginning with the transaction date of 11/26/96, Invoice no. 00033972, and continuing seriatim through the bottom of page 3 of the Exhibit ending with the transaction date of 2/14/97, Invoice no. 00035452. Exhibit D-4 is a list of invoices from the Seven D. Industries, Inc. of Tyrone, Pennsylvania office which also made transfers to the Debtor. The calculations there start with invoices for transaction date 12/03/96, Invoice no. T00007786, through and including transaction dated 02/13/97, Invoice no. T00008042.
| {
"pile_set_name": "FreeLaw"
} |
317 B.R. 738 (2004)
In re ORIGINAL IFPC SHAREHOLDERS, INC., Debtor.
No. 04 B 13843.
United States Bankruptcy Court, N.D. Illinois, Eastern Division.
November 19, 2004.
*741 Kathryn Gleason, for Movant/U.S. Trustee.
Michael J. Chmiel, for Respondent/Debtor.
Charles H.R. Peters, Chicago, IL, for Cre
MEMORANDUM OPINION
JACQUELINE P. COX, Bankruptcy Judge.
The procedural history of this matter is relatively straightforward. The debtor-inpossession, Original IFPC Shareholders, Inc. ("IFPC"), incorporated under Illinois law in 1995 for the sole purpose of prosecuting a trade-secret-misappropriation claim against AT & T Wireless Devices, Inc. ("AT & T") and Hughes Network Systems, Inc. in the Circuit Court of Du-Page County, Illinois (Case No. 93 CH 1065). The decade-old claim became one of two bankruptcy-estate assets after IFPC filed a Chapter 11 bankruptcy case on April 7, 2004. By that time two state court judgments had been entered in favor of the defendants. The first judgment resulting from a bench trial was reversed on appeal after the Appellate Court of Illinois found that the plaintiff had a right to trial by jury. The second trial was by jury; it produced the same result after a six-week trial in 2003, a verdict in favor of the defendants.
By means of its July 6, 2004 Chapter 11 Plan of Reorganization, IFPC intends to use the second estate asset, a bank account worth approximately $17,000, and expected post-petition investments of approximately $1,750,000 (given priority repayment status under the plan) to finance both an appeal seeking a third trial and the third trial, should the second adverse verdict get reversed on appeal. The proceeds from an IFPC triumph in a third trial would fund 100% payment of all allowed prepetition and postpetition claims plus interest under the proposed plan, with equity security holders retaining their ownership interests in the debtor corporation.
IFPC totaled the nonpriority unsecured claims in this case at $14,828,444, an amount which can be broken down into three groups: 1) a group of investors holding a "Promissory Note and Equiditor. *742 Interest;"[1] 2) a group of professionals providing legal, expert-witness, and other litigation-support services for the trial of the trade secret claim;[2] and 3) AT & T's and Hughes' contingent, unliquidated, and disputed claims for costs as prevailing defendants in the state court litigation claims which will ultimately be valid only if IFPC continues to lose in state court. The listings for the first group do not reveal whether one portion of each scheduled dollar amount is attributable to a promissory note and the other portion to an equity interest or, alternatively, whether each dollar represents both types of interests.
The U.S. Trustee filed a "Motion to Convert or Dismiss Case" pursuant to 11 U.S.C. § 1112(b), arguing that IFPC did not file this Chapter 11 case in good faith, that it has no real need for business-reorganization bankruptcy relief, that its plan is both unconfirmable and unfeasible, and that the true creditor body (as opposed to shareholders) will not be well served by continued prosecution of the trade-secretmisappropriation claim in state court.
Discussion and Analysis
A. Continuing Loss and Inability to Rehabilitate under § 1112(b(1)
As the first basis for dismissal or conversion to Chapter 7, the U.S. Trustee relies on § 1112(b)(1), which provides in pertinent part as follows:
(b) Except as provided in subsection (c) of this section, on request of a party in interest or the United States trustee..., and after notice and a hearing, the court may convert a case under this chapter to a case under chapter 7 of this title or may dismiss a case under this chapter, whichever is in the best interest of creditors and the estate, for cause, including
(1) continuing loss to or diminution of the estate and absence of a reasonable likelihood of rehabilitation....
11 U.S.C. § 1112(b). Each of the two elements in subsection (1) must be present for this ground to apply. 7 Lawrence P. King et al. Collier On Bankruptcy ¶ 1112.04[5][a], at 1112-30 (15th ed. rev. 2004)
In this case, the debtor IFPC has continued to incur post-petition quarterly U.S. Trustee fees and administrative costs, primarily for legal representation in this bankruptcy case, and will continue to incur costs of up to $1,750,000 for legal representation in the state court litigation (assuming it wins the first of at least two rounds) if IFPC concurrently remains in Chapter 11. It is undisputed that IFPC sells no goods or services to produce a cash flow to raise this amount; IFPC would be required to gather post-petition investors to either lend this amount and/or buy additional stock. The U.S. Trustee, furthermore, has established the "continuing loss" element of § 1112(b)(1): IFPC has an ongoing negative cash flow resulting in a net decrease in value and no definite source of income. See In re Citi-Toledo Partners, 170 B.R. 602, 606-07 (Bankr.N.D.Ohio 1994); 7 King et al, supra, ¶ 1112.04[5][a][I], at 1112-31.
The second "standard under section 1112(b)(1) is not the technical one of whether the debtor can confirm a plan, but, rather, whether the debtor's business prospects justify continuance of the reorganization effort." 7 King et al, supra, ¶ 1112.04[5][a][ii], at 1112-33. In a traditional Chapter 11 case, the second element, whether the debtor has a "reasonable *743 likelihood of rehabilitation," would not turn on the anticipated future outcome of a single lawsuit, because cash flow from another valuable activity would provide the means for paying at least a portion of prepetition debt from post-confirmation profits. In this unusual case, however, the "reasonable likelihood of rehabilitation" test must be conflated with the anticipated future outcome of a single lawsuit. This would be a difficult task were the cause of action at the discovery stage, having never been tried once. In this case, however, two neutral triers of fact, a judge and a jury, have independently evaluated the debtor's claim on the merits and found its primary asset to be worth zero. While the third time might indeed be a charm (assuming that the appellate court or trial court first orders a new trial), this information is simply too much to ignore and must be given substantial weight in an evaluation of the totality of the circumstances under both subsections 1112(b)(1) and (b)(2). Aside from the unwieldy task of acquiring and then taking a third bite at the apple, the debtor has no other "business plan" that would reverse the negative cash flow. Cf. Quarles v. U.S. Trustee, 194 B.R. 94, 98 (W.D.Va.), affirmed, Quarles v. Miller, 86 F.3d 55 (4th Cir.1996). Its "premise that outcomes in pending litigation favorable to him will cure [its] financial ills is pure speculation." Id. at 96-97; see also Matter of Imperial Heights Apartments, 18 B.R. 858, 863-64 (Bankr. S.D.Ohio 1982); In re Citi-Toledo Partners, 170 B.R. 602, 606-07 (Bankr. N.D.Ohio 1994); In re N.R. Guaranteed Retirement, 112 B.R. 263, 278-79 (Bankr. N.D.I11.1990),[3]affirmed, 119 B.R. 149 (N.D.I11.1990). "When visionary schemes for rehabilitation entail significant risk to creditors without any reasonable probability that the debtor can successfully rehabilitate, conversion or dismissal is generally in order." In re Great American Pyramid Joint Venture, 144 B.R. 780, 790-91 (Bankr.W.D.Tenn.1992).
The Court concludes that cause for conversion or dismissal has been established under § 1112(b)(1).
B. Inability to Effectuate a Plan under § 1112(b)(2)
The U.S. Trustee similarly requests conversion or dismissal due to the debtor-in-possession's "inability to effectuate a plan." 11 U.S.C. § 1112(b)(2). Other courts have focused on two different types of issues in applying this standard: the existence of a viable business enterprise as well as the more technical Chapter 11 plan-confirmation standards. See 7 King et al., supra, ¶ 1112.04[5][b], at 1112-34 to -39.
1. Feasibility Issues
As to the first type of issue, it overlaps with the plan-confirmation requirement of § 1129(a)(ll), which mandates that "[c]onfirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor or any successor to the debtor under the plan, unless such liquidation or reorganization is proposed in the plan." 11 U.S.C. § 1129(a)(ll). On either account, it is significant that the debtor has no marketable goods or services and no other types of income-producing investments that would sustain payments to prepetition and post-petition creditors if any *744 one of its uphill litigation battles does not resolve in its favor. See 7 King et al, supra, ¶ 1112.04[5][b][ii], at 1112-35. As discussed, the two prior losses against AT & T and Hughes indicate at the very least that the evidence is not overwhelmingly in IFPC's favor, and other than the cause of action, no means of satisfying claims (aside from liquidating the bank account) are available. By its own estimation, IFPC must raise at least $250,000 to prosecute its appeal and $1,500,000 to prevail in a new trial; not discussed at the hearing is the further cost of defending a judgment on a third appeal that would probably be filed by AT & T or Hughes should IFPC prevail on the second appeal and at the third trial. IFPC has submitted a chart dated July 21, 2004, listing sixteen individuals who have purportedly committed the $250,000 for the appeal. Because no testimony was presented corroborating the information summarized in the chart, and because no accompanying contracts or other documents indicate whether any of the listed individuals are actually legally bound to the commitments, the evidentiary weight of the chart is limited. Cf. In re Great American Pyramid Joint Venture, 144 B.R. 780, 786-87 (Bankr.W.D.Tenn. 1992). Even if the Court were to give it full weight, still lingering is the question of how the $1,500,000 in attorneys' fees for the third trial will be funded (not to mention the costs of a potential third appeal). Cf. Tennessee Pub. Co. v. American Nat'l Bank, 299 U.S. 18, 22, 57 S.Ct. 85, 87, 81 L.Ed. 13 (1936)[4]; Matter of Woodbrook Associates, 19 F.3d 312, 322 (7th Cir.1994); Great American Pyramid, 144 B.R. at 792.[5] IFPC has not produced enough evidence to give the Court any confidence that this funding will materialize, particularly in light of the fact that an accurate disclosure of the investment risk would have to discount the likelihood of success as a result of the two prior fact finders' neutral evaluation of the claim at zero after full evidentiary presentations. Cf. Matter of Imperial Heights Apartments, 18 B.R. 858, 863-64 (Bankr.S.D.Ohio 1982).[6] "'Creditors are entitled to a prompt determination of efficacy.'" 7 King et al, supra, f 1112.04[5][b][ii], at 1112-36 (quoting In re Timbers of Inwood Forest Assocs., 808 F.2d 363, 374 (5th Cir. 1987) (concurring opinion)).
To prevail, the U.S. Trustee must meet his burden of proof by a preponderance *745 of the evidence. See In re Citi-Toledo Partners, 170 B.R. 602, 606 (Bankr.N.D.Ohio 1994). Nonetheless, practical considerations such as the difficulty of proving a negative require that the debtor-in-possession bear the burden of production on issues of post-petition financing once the U.S. Trustee has adequately raised the issue under § 1112(b)(2); that is, the debtor-in-possession must produce information to which it has the best access. See also Matter of Woodbrook Associates, 19 F.3d 312, 317 (7th Cir.1994) ("That HUD bears the burden of persuasion, however, does not eviscerate Woodbrook's obligation to produce evidence in opposition to a well-supported motion."); Matter of King, 83 B.R. 843, 847 (Bankr.M.D.Ga.1988) (once creditor establishes prima facie bad-faith filing, burden of establishing legitimate reorganizational purpose shifts to debtor).
2. Plan-Confirmation Obstacles
The second type of issues under § 1112(b)(2) is the kind relating to Chapter 11 plan-confirmation standards that could not reasonably be satisfied by the debtor-in-possession's proposed reorganization plan. See Matter of Woodbrook Associates, 19 F.3d 312, 316 (7th Cir.1994); In re Great American Pyramid Joint Venture, 144 B.R. 780, 791 (Bankr.W.D.Tenn. 1992). The "Plan of Reorganization" in this case suffers several infirmities that are obstacles to confirmation.
For instance, under the plan, "Class 4-Priority Claims of Post-Petition Investors" consists of those who will be funding the aforementioned $1,750,000 ($250,000 plus $1,500,000) and will be repaid 100% plus interest before Class 5, consisting of general unsecured pre-petition creditors, will be paid.[7] Class 6 and Class 7 consist of two other types of pre-petition general unsecured creditors, including certain promissory note holders and AT & T's and Hughes' contingent and unliquidated claims for prevailing-defendant court costs. Most critically, the plan goes on to provide that after the Class 5 creditors are paid in fullbut not after the Classes 6 and 7 creditors are paid in fullthe Class 4 claimants will receive an additional 2000% payment on their claims, for a total payment of 2100%. Although the plan is not clear in this respect, the extra 2000% payment either trumps Class 6's and Class 7's right to full payment, or it dilutes the pool of money that (the debtor-in-possession assumes) will be available to pay the unsecured creditors of Class 6 and Class 7. This arrangement is problematic for either of two reasons. According to § 1129(a)(7), each Chapter 11 plan claimant under Class 6 and Class 7 is entitled at least to an amount, in present value terms, that is equal to what it would receive had IFPC been liquidated under Chapter 7. Because the fate of the debtor's primary asset, the cause of action, is highly speculative, this *746 amount might be very low or nothing at all; a Chapter 7 trustee could choose to either pursue it or abandon it to the debtor and liquidate the $17,000 bank account. Suffice it to say, though, that whatever funds would be available in a hypothetical Chapter 7 liquidation, the amount of such recovery will be more than under a Chapter 11 plan under which a higher or equally situated class receives a 2100% dividend. See 11 U.S.C. § 726(a). Thus, the Chapter 11 plan could not be confirmed over the objection of an affected creditor.
Further, if any one of Classes 5, 6, and 7 votes to reject the plan, § 1129(a)(8) will not be satisfied, and § 1129(b)(1) will be brought into play before the Court may confirm the plan. The latter provision prevents unfair discrimination between classes of unsecured claimants, especially where the disparity between the recovery percentages of those classes is large. See, e.g., In re Aztec Co., 107 B.R. 585, 588-91 (Bankr.M.D.Tenn.1989). Paying one class of unsecured claimants a 2100% claim dividend [8] that either trumps or dilutes other unsecured creditors' claims is unfair discrimination where, outside of bankruptcy, the creditors would have an equal right to pursue and utilize judicial liens to collect from unencumbered assets based on 100% of the loan amount, court judgment, or other type of unsecured debt.[9] If what the debtor-in-possession needs to do is fund a risky venture by promising potentially lucrative returns, an issuance of securities in conjunction with Chapter 11 plan confirmation would potentially be the correct way to implement that goal. See also supra note 7. However, under Chapter 11 plans, such security holders could not be administrative claimants and do not have superior legal rights to pre-petition creditors and post-petition administrative-expense claimants. See 11 U.S.C. §§ 101(10)(A), 501(a), 726(a), 1129(a)(4), (7), & (9).
Another significant obstacle to plan confirmation is section "XIII. Discharge," which provides as follows:
Upon satisfaction of the allowed claims in this case, the Debtor, along with any and all co-debtors of the Debtor, shall be discharged of any and all obligations owed any such claimant, creditor, or other party in interest, providing any such claimant, creditor, or other party in interest votes affirmatively on the Plan, irrespective of whether any such claimant, creditor, or party in interest filed a proof of claim. Upon confirmation of the Debtor's Plan in this case, with said affirmative vote of those voting on the plan, any such claimant, creditor, or other party in interest shall be stayed from proceeding against any and all co-debtors of the Debtor, irrespective of whether any such claimant, creditor, or party in interest filed a proof of claim.
(IFPC Plan of Reorg. at 8.) This provision is difficult to reconcile with the Bankruptcy Code in a couple of respects and additionally creates an ambiguity with regard to those voting to reject the plan. The first sentence could be read to imply that the extremely broad discharge injunction will not issue with respect to rejecting *747 creditors, while the second sentence appears to say that any creditor (whether rejecting or accepting the plan) is subject to an extremely broad injunction protecting unidentified nondebtor entities. The provision conflicts with § 524(e), which states that the "discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt." 11 U.S.C. § 524(e). Furthermore, federal courts have refused to enforce plan provisions creating super-discharge injunctions extending to nondebtor obligors, guarantors, insurers, or indemnitors for claims against the debtor. See Union Carbide Corp. v. Newboles, 686 F.2d 593, 595 (7th Cir.1982) (construing 1898 Bankruptcy Act; subsequently limited by Specialty Equipment, infra); Matter of Zale Corp., 62 F.3d 746, 760 (5th Cir.1995); In re Western Real Estate Fund, 922 F.2d 592, 600-01 (10th Cir.1990); In re Elsinore Shore Associates, 91 B.R. 238, 250-51 (Bankr.D.N.J. 1988); cf. Zerand-Bernal Group v. Cox, 23 F.3d 159, 163 (7th Cir.1994) (dicta). When Congress desires to have a statutory injunction extend to nondebtors, it makes that intent clear. See, e.g., 11 U.S.C. § 524(a)(3) (discharge injunction extended to community claims against debtor's spouse if community property is acquired post-petition) & § 1301 (automatic stay extended to certain co-debtors in Chapter 13 cases).
To be sure, the Seventh Circuit has distinguished third-party releases in Chapter 11 plans from the limitations on the discharge injunction in § 524(e), refusing to adopt a per se rule against the former. See Matter of Specialty Equipment Companies, 3 F.3d 1043, 1046-47 (7th Cir. 1993). Instead, in Specialty Equipment, it permitted "consensual and non-coercive" releases where the plan explicitly provided that each creditor who abstained or voted against the plan was "deemed not to have granted the [r]eleases," even if the class to which such individual creditor belonged voted in favor of the plan. Id. at 1045, 1047. Other federal courts have gone so far as to allow confirmation of independent plan injunctions prohibiting nonconsenting creditors from collecting against nondebtors by utilizing other broad provisions of the Bankruptcy Code to effectively run around § 524(e): they either permit thirdparty releases as part of a settlement embodied in a plan under § 1123(b)(6) or issue an independent permanent injunction protecting third parties pursuant to § 105(a). These courts protect third parties from nonconsenting creditors, however, only after the bankruptcy court makes specific factual findings of "unusual circumstances," namely that the following seven criteria all exist:
(1) There is an identity of interests between the debtor and the third party, usually an indemnity relationship, such that a suit against the non-debtor is, in essence, a suit against the debtor or will deplete the assets of the estate; (2) The non-debtor has contributed substantial assets to the reorganization; (3) The injunction is essential to reorganization, namely, the reorganization hinges on the debtor being free from indirect suits against parties who would have indemnity or contribution claims against the debtor; (4) The impacted class, or classes, has overwhelmingly voted to accept the plan; (5) The plan provides a mechanism to pay for all, or substantially all, of the class or classes affected by the injunction; (6) The plan provides an opportunity for those claimants who choose not to settle to recover in full....
In re Dow Corning Corp., 280 F.3d 648, 658 (6th Cir.2002); see also In re Master *748 Mortg. Inv. Fund, 168 B.R. 930, 934-37 (Bankr.W.D.Mo.1994).[10]
Even under the unsettled, more permissive views of third-party Chapter 11 plan injunctions, the plan injunction here does not pass muster. The second sentence of section XIII is so broad as to enjoin all nonconsenting creditors from seeking outside monetary relief against "any and all co-debtors of the Debtor," who remain unidentified. Thus, the third-party injunction is nonconsensual as to AT & T, Hughes, and any other creditor voting against the plan. Further, under the Dow Corning and Master Mortgage criteria, the plan injunction against nondebtors could not be approved inasmuch as no disclosed information would permit a favorable finding on any of the first three required elements. Cf. Matter of Woodbrook Associates, 19 F.3d 312, 322 (7th Cir.1994). Moreover, Class 7, AT & T and Hughes, has already indicated that it will not vote as a class to accept the plan, thereby negating the required finding under element number four. Finally, the plan and the circumstances of this case combine to make impossible "an opportunity for those claimants who choose not to settle to recover in full," Dow Corning, 280 F.3d at 658, because Class 7 will have a claim only if it is the prevailing state court defendant holding an award of costs, in which case the primary asset of the estate will necessarily be worthless, and no assets from which the costs could otherwise be collected will likely exist.
The discharge of nondebtors is just the first of two infirmities in paragraph XIII of the plan. Regarding the other infirmity, the Bankruptcy Code provides as follows:
The confirmation of a plan does not discharge a debtor if
(A) the plan provides for the liquidation of all or substantially all of the property of the estate;
(B) the debtor does not engage in business after consummation of the plan; and
(C) the debtor would be denied a discharge under section 727(a) of this title if the case were a case under chapter 7 of this title.
11 U.S.C. § 1141(d)(3); see also Great American Pyramid, 144 B.R. at 794 n. 10. Under § 727(a)(1), corporate Chapter 7 debtors never receive discharges.
IFPC's plan violates § 1141(d) of the Bankruptcy Code by granting the debtorin-possession a discharge to which it is not entitled and, therefore, is facially unconfirmable. See 11 U.S.C. § 1129(a)(l)-(2). All that remains to be done, regardless of the Code chapter, is to prosecute a third trial (if and when the same is awarded and the necessary funds materialize) and then close shop and distribute the cash proceeds (if any) of the suit. Such an operation is a liquidation; it does not entail "engagfing] in business after consummation of the plan." § 1141(d)(3). This determination is a federal statutory question; whether the activity is legal under Illinois corporate law is irrelevant.
On one last minor matter, the Court does not agree with AT & T that IFPC's plan violates the "absolute priority rule" by allowing all shareholders to retain their equity interests. The feasibility and likelihood of IFPC's future payment of AT & T's contingent debt has been rightly called in doubt, but such considerations are separate *749 from § 1129(b)(2)(B)'s narrower requirement that a class of creditors be legally entitled to full payment in presentvalue terms if shareholders are to retain any property interests. According to the Chapter 11 plan in the case at bar, all classes of creditors are legally entitled to 100% payment of their allowed claims plus interest, thereby satisfying the "absolute priority rule." Nonetheless, this consideration does not remedy the various other defects that render IFPC's Chapter 11 plan unconfirmable.
IFPC did not defend against the U.S. Trustee's motion and AT & T Wireless's support thereof by offering any amendments to the filed Chapter 11 plan; the Court has no other plans to consider in this case. Also, "[a] Chapter 11 case can be dismissed at any time. Creditors need not wait until a debtor proposes a plan or until the debtor's exclusive right to file a plan has expired.... The very purpose of § 1112(b) is to cut short this plan and confirmation process where it is pointless." Matter of Woodbrook Associates, 19 F.3d 312, 317, 320 n. 9 (7th Cir.1994); see Citi-Toledo, 170 B.R. at 606; Great American Pyramid, 144 B.R. at 792; 7 King et al., supra, ¶¶ 112.04[4][c], at 1112-29.
3. Conclusion
As an alternative to its ruling under § 1112(b)(1), the Court finds that the U.S. Trustee has established grounds for dismissal or conversion under § 1112(b)(2), as the debtor-in-possession is unable to effectuate its Chapter 11 plan.
C. Unenumerated Grounds Establishing "Cause" for Conversion or Dismissal, Including Lack of Good Faith in Filing a Chapter 11 Case
The U.S. Trustee argued in his reply brief and at the hearing on the motion that the circumstances of the present case demonstrate that the debtor has not met the good-faith filing requirement, because IFPC has no legitimate need for reorganization under Chapter 11, only a need to prevent itself from being sued for collection of prior litigation expenses.
While § 1112(b) permits involuntary dismissal or conversion for a nonexhaustive list of ten grounds, its general authority to dismiss "for cause" has engendered the development of common-law grounds for dismissal. Accordingly, federal courts have created a good-faith filing requirement for debtors opposing dismissal or conversion under § 1112(b). See In re Marsch, 36 F.3d 825, 828 (9th Cir.1994); In re Laguna Associates Ltd. Partnership, 30 F.3d 734, 737-38 (6th Cir.1994); In re Integrated Telecom Express, 384 F.3d 108, 118 (3d Cir.2004); In re International Oriental Rug Center, 165 B.R. 436, 442 (Bankr.N.D.I11.1994); In re N.R. Guaranteed Retirement, 112 B.R. 263, 270-71, 279 (Bankr.N.D.I11.1990) (quoting In re Madison Hotel Associates, 749 F.2d 410, 426 (7th Cir.1984)); In re Gleason, 2002 WL 570647, at *1 (N.D.I11.2002); Quarles v. U.S. Trustee, 194 B.R. 94, 96 (W.D.Va. 1996); In re Citi-Toledo Partners, 170 Great American Pyramid, 144 B.R. at 790; 7 King et al., supra, II 1112.07[5]; cf. Matter of Love, 957 F.2d 1350, 1354 (7th Cir.1992) (same for Chapter 13 cases); Matter of Little Creek Development Co., 779 F.2d 1068, 1071-72 (5th Cir.1986). To make the requisite showing, the movant need not show, though it would be relevant, that the debtor had any sort of fraudulent or malicious intent or scheme in mind when filing; "malfeasance is not a prerequisite to bad faith." In re Leavitt, 209 B.R. 935, 940-41 (9th Cir. BAP 1997), affirmed 171 F.3d 1219 (9th Cir.1999); cf. Matter of Love, 957 F.2d 1350, 1360-61 (7th Cir.1992) (same for Chapter 13 cases). Some courts have noted that focusing on terms such as good or bad faith in filing is *750 misleading to some degree, see, e.g., In re Huckfeldt, 39 F.3d 829, 832 (8th Cir.1994), as the question is really whether the debtor has presented a legitimate reorganizational objective within the scope of the Bankruptcy Code or rather has presented "tactical reasons unrelated to reorganization," In re Marsch, 36 F.3d 825, 828 (9th Cir.1994); see In re Integrated Telecom Express, 384 F.3d 108, 119-20 (3rd Cir. 2004); In re N.R. Guaranteed Retirement, 112 B.R. 263, 271 (Bankr.N.D.I11.1990); 7 King et al, supra, ¶ 1112.07[2], at 1112-65. Thus, the "good faith" doctrine of § 1112(b) is not concerned only with sanctioning the filer's subjective intent but also considers whether the Chapter 11 remedy is being utilized for the limited purposes intended. See Integrated Telecom Express, 384 F.3d at 122-29; N.R. Guaranteed Retirement, 112 B.R. at 271; 7 King et al, supra, ¶ 112.07[2], at 1112-65 to -67 (listing examples of illegitimate objectives). In fact, the good-faith filing requirement has been described as a term of art used to limit reorganizational filings to those cases that are within the legitimate objectives of a specialized statute. See In re Liberate Technologies, 314 B.R. 206, 211 (Bankr.N.D.Cal.2004).
Courts generally consider the totality of circumstances surrounding a variety of objective and subjective indicators. See, e.g., In re Stump, 280 B.R. 208, 214 n. 2 (Bankr.S.D.Ohio 2002); see also In re Laguna Associates Ltd. Partnership, 30 F.3d 734, 738 (6th Cir.1994); Integrated Telecom Express, 384 F.3d at 118; 7 King et al, supra, MI 1112.07[l]-[3] & [6][b][iii], at 1112-77 (noting the relevance of the fact that the debtor should have known that reorganization was impracticable). The inquiry often centers around the debtor's bona fide need for a breathing spell to reorganize, see Liberate Technologies, 314 B.R. at 211; N.R. Guaranteed Retirement, 112 B.R. at 272-73, and this need must be related to the dual purposes of " 'preserving going concerns' " and " 'maximizing property available to satisfy creditors,'" Integrated Telecom Express, 384 F.3d at 119-20, 128-29 (quoting Bank of Am. Nat'l Trust & Sav. Ass'n v. 203 N. LaSalle St. P'ship, 526 U.S. 434, 453, 119 S.Ct. 1411, 143 L.Ed.2d 607 (1999)). The Fifth Circuit discussed a typical set of circumstances that exemplifies bad-faith filings:
Several, but not all, of the following conditions usually exist. The debtor has one asset, such as a tract of undeveloped or developed real property. The secured creditors' liens encumber this tract. There are generally no employees except for the principals, little or no cash flow, and no available sources of income to sustain a plan of reorganization or to make adequate protection payments pursuant to 11 U.S.C. §§ 361, 362(d)(1), 363(e), or 364(d)(1). Typically, there are only a few, if any, unsecured creditors whose claims are relatively small.... Alternatively, the debtor and one creditor may have proceeded to a stand-still in state court litigation, and the debtor has lost or has been required to post a bond which it cannot afford. Bankruptcy offers the only possibility of forestalling loss of the property....
Resort to the protection of the bankruptcy laws is not proper under these circumstances because there is no going concern to preserve, there are no employees to protect, and there is no hope of rehabilitation, except according to the debtor's "terminal euphoria." The Sixth Circuit in [In re] Winshall Settlor's Trust, 758 F.2d [1136] at 1137 [(6th Cir. 1985)], aptly noted that [t]he purpose of Chapter 11 reorganization is to assist financially distressed business enterprises by providing them with breathing space in which to return to a viable state. See hi re Dolton Lodge Trust *751 No. 35188, 22 B.R. 918, 922 (Bankr. N.D.I11.1982). "[I]f there is not a potentially viable business in place worthy of protection and rehabilitation, the Chapter 11 effort has lost its raison d'etre. ..." In re Ironsides, Inc., 34 B.R. 337, 339 (Bankr.W.D.Ky.1983).
Matter of Little Creek Development Co., 779 F.2d 1068, 1072-1073 (5th Cir.1986). Other courts have described similar indicia of bad-faith filings as part of a list of factors, which include the following considerations:
(1) the debtor has only one asset;
(2) the debtor has an ongoing business to reorganize;
(3) there are any unsecured creditors;
(4) the debtor has any cash flow or sources of income to sustain a plan of reorganization or to make adequate protection payments; and
(5) the case is essentially a two party dispute capable of prompt adjudication in state court.
In re St. Paul Self Storage Ltd. Partnership, 185 B.R. 580, 582-83 (9th Cir. BAP 1995); see also Laguna Associates, 30 F.3d at 738. The Court has already discussed how factors one, two, and four weigh in favor of a finding against the debtor under § 1112(b)(l)-(2), and they have the same impact under the bad-faith inquiry. Factor five additionally weighs in favor of finding that this Chapter 11 was filed in bad faith, since this case is essentially a litigation maneuver to improve IFPC's chances of proceeding uninterrupted against contingent creditors AT & T and Hughes in the post-trial phases of the adjudicated trade-secret suit. Factor three is inconclusive on the present record. The St. Paul Self Storage court noted the "Debtor's lack of creditors, other than insiders and its own professionals," St. Paul, 185 B.R. at 583, a condition that may be present in the case at bar. Many of the creditors here are the debtor's "own professionals" retained to provide legal services, expert testimony, and other types of litigation-support services related to the state court action. The rest of the creditor body in this case appears to consist primarily of investors who may also be unsecured claimants. However, as discussed throughout this decision, the number of bona fide creditors (as opposed to equity security holders) is currently indeterminate and may in fact be much lower.[11] Finally, consistent with Little Creek Development, the Court notes the lack of employees other than principals in finding that the debtor filed this Chapter 11 case in bad faith, i.e., without any true need for imposing the Chapter 11 process on creditors.
While IFPC is correct that a debtor is eligible for Chapter 11 relief even though it does not maintain an ongoing business,[12] the Supreme Court's acknowledgment *752 of this proposition in Toibb v. Radloff, 501 U.S. 157, 164, 111 S.Ct. 2197, 2201, 115 L.Ed.2d 145 (1991), pertained to the initial filing requirements under 11 U.S.C. § 109(b) and (d); it did not similarly narrowly construe the statutory limits to a debtor-in-possession's ongoing prerogative to utilize the provisions of Chapter 11, limits derived from the broad considerations embodied in § 1112(b) and distinct from § 109. See id. at 2201-02; In re Trident Associates Ltd. Partnership, 52 F.3d 127, 130-31 (6th Cir.1995) (distinguishing explicit language of § 109 from the much broader statutory language of § 362(d)(1) and § 1112(b)).
The Supreme Court also recognized that under various circumstances the "estate will be worth more if reorganized under Chapter 11 than if liquidated under Chapter 7." Toibb, 501 U.S. at 164, 111 S.Ct. at 2201. IFPC's contention that this condition is met in this case is based entirely on its assumption that its primary asset, the cause of action, will ultimately be meritorious and generate sufficient funds to pay all pre-petition and post-petition claims; it never factors into its analysis the substantial possibility that the creditor body as a whole will be worse off if it pursues a third trial and loses either in the Appellate Court of Illinois or in the Circuit Court of DuPage County. The debtor-in-possession's plan fails to take into consideration the very real possibility that it will not ultimately prevail at either level, leaving the estate with no assets and an even greater mountain of litigation debt than existed on the filing date.
IFPC is more optimistic about its prospect for "rehabilitation," maintaining that new investors have committed $250,000 to permit pursuit of the second appeal in state court. However, the "rehabilitation" label could be loosely attached to virtually any type of activity in a bankruptcy case, even though the absence of any true business activity would not warrant a traditional reorganization analysis of preserving going-concern value to benefit creditors and employees in the long run. Cf. Integrated Telecom Express, 384 F.3d at 120 (noting how one of two bankruptcy purposes, preservation of going-concern value, was not implicated where such value did not exist on the filing date anyway). It is true that a liquidation may require postpetition financing in certain situations such as the one at bar, where further funding is needed pursuant to § 364 for a trustee's attempt to realize the full potential value of an asset. The need for financing to maximize the value of the estate, though, does not equate with a need for "rehabilitation" or "reorganization" under Chapter 11. Here, a single intangible asset of speculative value may require re-liquidation, and no need for reorganization exists per se.
Liquidation under the present circumstances is nothing more than what would have occurred outside bankruptcy: litigating a cause of action through to judgment and, if any proceeds exist at the end of the day, distributing the proceeds according to nonbankruptcy law. As this Court recognized in the Chapter 7 context of In re American Telecom Corp., 304 B.R. 867 (Bankr.N.D.I11.2004) (Cox, J.), the claim will either fail on the merits, meaning that no creditor of the debtor/plaintiff receives any distribution, or the claim will produce a pot of money to satisfy the claims.[13] What is significant is the fact that this outcome will normally hold true regardless of whether the suit is conducted in the *753 context of a Chapter 11 case, of a Chapter 7 case, or of state-court litigation that is free from any pending bankruptcy case. The costly and complex provisions of Chapter 11 are neither beneficial nor necessary for accomplishing this task. See generally Integrated Telecom Express, 384 F.3d at 127; King et al, supra, ¶ 1112.04[4], at 1112-25 to -28. In other words, one of the valid purposes of a liquidating Chapter 11, maximizing a company's value for creditors, does not exist for a case in which the amount available for distribution does not hinge on the existence of the bankruptcy case. See Integrated Telecom Express, 384 F.3d at 126-29 & n. 4. Obtaining further investments to continue attempting to realize speculative value from the trade-secret claim is necessary both inside and outside of bankruptcy, and the bankruptcy framework does not likely make persuading new investors to join in any easier than the nonbankruptcy one. Cf. Integrated Telecom Express, 384 F.3d at 126 n. 7.[14]
Although its practical import is unclear, IFPC's best argument is that a few of the litigation-consultant creditors will sue, execute, and have a sheriff's sale of the primary asset to satisfy their debts, leaving the other creditors no assets from which to collect and no pro rata share of the asset that did exist (whatever it is worth). The Court acknowledges in this case-and has acknowledged the same in the Chapter 7 context, see American Telecom, 304 B.R. at 874 (Cox, J.)-that technically speaking, a creditor may use a "supplementary proceeding" under Illinois law to execute on a "chose in action" in satisfaction of a judgment, see 735 111. Comp. Stat. Ann. 5/2-1402(c)(5), although Illinois courts have discretion to deny turnover where practical and legal considerations counsel against such transfers, see American Telecom, 304 B.R. at 874. Nevertheless, as discussed infra, this type of bankruptcy law issue can be effectively addressed in a Chapter 7 case. In and of itself, it does not present any legitimate reason why a debtor-in-possession is entitled to proceed with a Chapter 11 case instead of a Chapter 7 case.
As an alternative to its rulings under § 1112(b)(1) and (b)(2), the Court finds that "cause" for conversion or dismissal has been established in that this Chapter 11 case was filed in bad faith, as an understanding of that term has developed under the Bankruptcy Code.
D. Choosing Between Conversion and Dismissal of Chapter 11 Cases Under § 1112(b)
Once "cause" is established under § 1112(b), the choice between dismissal and conversion to Chapter 7 is based on the best interests of creditors and of the estate. See Quarles v. U.S. Trustee, 194 B.R. 94, 97 (W.D.Va.1996); Great American Pyramid, 144 B.R. at 791-93. Where the estate is not generating revenue but value exists to be maximized for creditors' benefit, and where the creditor body will have more enhanced protection in the federal bankruptcy forum than in noncollective state-court proceedings, conversion to Chapter 7 rather than dismissal may be appropriate. See Great American Pyramid, 144 B.R. at 786-87; In re Citi-Toledo Partners, 170 B.R. 602, 609 (Bankr'. N.D.Ohio 1994).
The Court has considered conversion to Chapter 7 but has concluded that at the present time, a Chapter 7 case would not serve any substantial purpose. One of *754 two assets of the estate is a bank account that is a liquid asset with value realizable for the benefit of priority or nonpriority claimants. The amount of debt in this case is such that division of the $17,000 account fails to produce more than a de minis benefit. Investment data that AT & T has produced in an exhibit indicates that 10% of the original investments created debt, not equity. Thus, even a conservative estimate of 10% would produce $1,400,000 in loan debt in addition to the $750,000 in unpaid litigation expenses and legal fees, for a grand total of $2,150,000. Pro rata distribution of the $17,000 bank account in a Chapter 7 case would produce a dividend of less than 1%. Cf. American Telecom, 304 B.R. 867 (Bankr.N.D.I11.2004) (Cox, J.) (dismissing Chapter 7 case because debtor corporation had no other significant assets to liquidate apart from the debtor's antitrust counterclaim previously adjudged in favor of the primary creditor/counterdefendant and pending on appeal).
As for the other asset, the trade-secret claim, it is technically property of the estate available for the benefit of creditors in a Chapter 7 forum, see 11 U.S.C. § 541, and the preexisting trial and appellate attorneys could be retained by the estate under § 327(e) for the limited, special purpose of prosecuting the claim in state court. Although the estate may abandon to the debtor burdensome assets of inconsequential value in the bankruptcy scenario, see 11 U.S.C. §§ 554(a)-(c) § 362(c)(1); Great American Pyramid, 144 B.R. at 794, the claim does not completely evaporate as long as the debtor is willing to pursue the litigation independently. This far into the state court litigation there appears to be no advantage to adding a Chapter 7 trustee to the process and requiring him to evaluate the debtor's claim. To decide otherwise would have the Bankruptcy Court delay indefinitely the administration of a Chapter 7 case as the state court litigation of the debtor's only potential asset proceeds, perhaps for many years. (The litigation has proceeded for 11 years to date.) Instead, the debtor can independently proceed with the suit and thereby attempt to maximize the speculative value of its asset if it can obtain the necessary future investments.
Finally, one other problem identified above must be considered here: namely, that all creditors may be worse off if a few creditors begin suing and executing on the bank account and/or the trade-secret cause of action, leaving other creditors no possibility of recovery. At least right now, the Court is not aware that this dilemma exists, and it is unlikely to exist as most of those creditors are case professionals who have an interest in maintaining the status quo. Should this true bankruptcy concern come to pass, though, IFPC may still choose to file a voluntary Chapter 7 case in spite of the Court's dismissal of its Chapter 11 case; alternatively, affected creditors may initiate an involuntary Chapter 7 case to protect their interests. In these scenarios, even if the trustee abandons the cause of action, he could still be persuaded by concerned creditors to delay dismissing or closing the bankruptcy case until the state court litigation is finally resolved, thereby preserving the automatic stay to protect the creditor body from the acts of individual creditors who might sue IFPC to the detriment of all creditors. See 11 U.S.C. § 362(c)(2) & (a)(l)-(2) (defining the temporal scope of that portion of the automatic stay protecting the debtor personally rather than the estate property); cf. § 362(c)(1) & (a)(3)-(4) (temporal scope of the automatic stay protecting estate property). Similarly, if IFPC's primary asset ever produces any proceeds, but such proceeds are inadequate to pay all debts in full, a voluntary or involuntary Chapter 7 *755 case could be filed at that time to fairly apportion the money in the event creditors cannot agree to a nonbankruptcy workout.
Conclusion
For the foregoing reasons, the U.S. Trustee's motion to dismiss this Chapter 11 case is granted. This opinion constitutes findings of fact and conclusions of law under Bankruptcy Rule 7052. A separate order consistent with the opinion will be entered in compliance with Bankruptcy Rule 9021.
NOTES
[1] Approximately 87 persons invested around $14,000,000.
[2] Approximately 18 creditors hold around $750,000 in litigation-related claims.
[3] "In the argument that followed the hearing in this case, counsel for N.R. suggested that this apparent shortfall would be made up from the proceeds of N.R.'s state court action against the title company, but no evidence was presented [by the debtor-in-possession] to allow for any valuation of that lawsuit."
In re N.R. Guaranteed Retirement, 112 B.R. 263, 278-79 (Bankr.N.D.I11.1990).
[4] "However honest in its efforts the debtor may be, and however sincere its motives, the District Court is not bound to clog its docket with visionary or impracticable schemes for resuscitation." Tennessee Pub. Co. v. American Nat. Bank, 299 U.S. 18, 22, 57 S.Ct. 85, 87, 81 L.Ed. 13 (1936).
[5] A reorganization plan under chapter 11 must be more than a nebulous speculative venture and must have a realistic chance of success which would lead to rehabilitation, and if outside financing is needed, it must be clearly in sight. In re K.C. Marsh Co., Inc., 12 B.R. 401 (Bankr.D.Mass.1981). The Bankruptcy Code does not guarantee successful reorganization, nor does it provide a framework within which the debtor may indefinitely operate; rather, it only provides a breathing period for the debtor to seek to reponderance organize. In re Jones, 115 B.R. 351 (Bankr. N.D.Fla.1990).
In re Great American Pyramid Joint Venture, 144 B.R. 780, 792 (Bankr.W.D.Tenn. 1992).
[6] As the court in Imperial Heights Apartments so aptly stated:
At best, the estate consists only of an alleged cause of action for a lawsuit claiming a tenuous equity in an apartment complex. There is not even an insinuation that capital is available to fund a viable plan of reorganization, nor even to bear typical administrative expenses. Such absence of an economic entity reflects both upon "the reasonable likelihood of rehabilitation" and the "inability to effectuate a plan."
Matter of Imperial Heights Apartments, Ltd., 18 B.R. 858, 864 (Bankr.S.D.Ohio 1982).
[7] In different contexts, this Chapter 11 case has presented confusing questions of what is debt and what is equity. Here, Chapter 11 plan Class 4 appears to provide treatment for some sort of administrative claims entitled to priority payments under the plan, meaning that the class claimants do or will presumably hold some sort of postpetition, pre-confirmation debt instrument. However, the aforementioned July 21, 2004 chart lists the individuals contributing the $250,000 for the appeal costs as the "New Capitol [sic] List," implying that these investors are purchasing stock in the debtor-in-possession rather than loaning money.
Corporate debtors can issue new securities upon confirmation of a Chapter 11 plan, 11 U.S.C. §§ 1123(a)(5)(J) & 1129(a)(4), but that type of new interest is completely different from a priority administrative expense claim in a bankruptcy casea claim that could never accrue after Chapter 11 plan confirmation, see 11 U.S.C. §§ 503(b), 364(a)-(c), 507(a)(1), & 1129(a)(9)(A).
[8] There is no question that as far as true administrative claims are concerned, 100% of the claim amount would have priority over the claims of general unsecured pre-petition creditors. See 11 U.S.C. §§ 503(b), 507(a)(1), 1129(a)(7)(A) & (a)(9)(A). Here, we are dealing with 2100% of the claim amount.
[9] If, outside of bankruptcy, Class 4 would actually be considered to consist of shareholders under Illinois corporate law, then the right to such a dividend would, of course, come behind the creditors' claims of Classes 5, 6, and 7, and the payment scheme under this Chapter 11 plan would be even more unfairly discriminatory than just described.
[10] "The Court cautions the Gentle Reader that a permanent injunction is a rare thing, indeed, and only upon a showing of exceptional circumstances in which the factors outlined above are present will this Court even entertain the possibility of a permanent injunction." In re Master Mortg. Inv. Fund, 168 B.R. 930, 934-37 (Bankr.W.D.Mo. 1994).
[11] The inquiry is important as a result of the very different legal rights that creditors and equity security holders have under the Code. See 11 U.S.C. § 101(10), (16), & (17); § 726(a)(2) & (6); § 1129(a)(7)(A). While a bankruptcy trustee owes a fiduciary duty both to creditors and shareholders, the duty to creditors takes precedence over the duty to shareholders as a result of creditors' legally superior interests under federal bankruptcy law. See Commodity Futures Trading Com'n v. Weintraub, 471 U.S. 343, 355, 105 S.Ct. 1986, 1994, 85 L.Ed.2d 372 (1985); In re Weber, 99 B.R. 1001, 1010 (Bankr.D.Utah 1989).
[12] Whether an entity such as IFPC is a lawful corporation existing in good standing under the State of Illinois (as stressed by IFPC) is a separate legal question from whether its reorganizational objectives are entitled to continuing protection under Chapter 11. Whether pursuit of a cause of action is a legitimate activity in and of itself is beside the main point of the federal law embodied in § 1112.
[13] During a later post-trial stage of the game, a Chapter 7 case or a nonbankruptcy workout/settlement could ration out the funds if the proceeds of the lawsuit were insufficient to satisfy the aggregate amount of claims.
[14] "The fact that these insiders were willing to purchase the assets outside of bankruptcy undercuts any argument that the protections of the Code affected the purchase price." Integrated Telecom Express, 384 F.3d at 126 n. 7.
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FILED
NOT FOR PUBLICATION
OCT 30 2015
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
GURDIAL SINGH; SUKHWINDER No. 10-72315
KAUR,
Agency Nos. A094-998-070
Petitioners, A094-998-071
v.
MEMORANDUM*
LORETTA E. LYNCH, Attorney General,
Respondent.
GURDIAL SINGH; SUKHWINDER No. 11-70509
KAUR,
Agency Nos. A094-998-070
Petitioners, A094-998-071
v.
LORETTA E. LYNCH, Attorney General,
Respondent.
On Petition for Review of an Order of the
Board of Immigration Appeals
Argued and Submitted October 19, 2015
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
San Francisco, California
Before: PAEZ, MURGUIA, and HURWITZ, Circuit Judges.
Gurdial Singh, a native and citizen of India, petitions for review of a Board
of Immigration Appeals (BIA) order dismissing his appeal from the immigration
judge’s (IJ) denial of his application for asylum, withholding of removal, and relief
under the Convention Against Torture (CAT). He also petitions for review of the
BIA’s denial of his motion to reopen. We grant in part and deny in part Singh’s
petition for review.
1. Substantial evidence supports the IJ’s adverse credibility determination.
Under the REAL ID Act, an IJ may, after considering the “totality of the
circumstances, and all relevant factors,” base an adverse credibility determination
on a witness’s inconsistent statements. Shrestha v. Holder, 590 F.3d 1034,
1039–40 (9th Cir. 2010) (citations omitted). The IJ noted, among other
inconsistencies, that Singh wrote in his application for asylum that he was beaten
following his 2003 arrest but later testified that he was not beaten during that
incident. Because this inconsistency is borne out in the record, substantial
evidence supports the IJ’s adverse credibility determination. See id. at 1043 & n.4.
2. Substantial evidence also supports the IJ’s and BIA’s determination that,
even assuming Singh was credible, any presumption of future persecution was
2
rebutted by evidence of changed country conditions. The country reports support
the IJ’s and BIA’s conclusion that conditions had changed in India such that it is
now safe for Singh to live there. See Jagtar Singh v. Holder, 753 F.3d 826,
834–35 (9th Cir. 2014) (explaining that country conditions reports may rebut the
presumption of future persecution as long as the agency engages in an
individualized analysis of how those reports impact the specific applicant’s
claimed fear of future persecution).
3. The BIA abused its discretion in denying Singh’s motion to reopen. The
BIA faulted Singh for not providing original copies of the affidavits supporting his
motion to reopen, remarking that it was troubled by the lack of originals in light of
the previous adverse credibility determination.1 However, “[w]e have long held
that credibility determinations on motions to reopen are inappropriate. Indeed,
facts presented in affidavits supporting a motion to reopen must be accepted as true
unless inherently unbelievable.” Bhasin v. Gonzales, 423 F.3d 977, 986–87 (9th
Cir. 2005) (citation omitted). Because the BIA questioned the veracity of the facts
alleged in Singh’s affidavits without finding them inherently unbelievable, we
remand for the BIA to treat the allegations as true and then determine whether “the
1
The BIA’s Practice Manual “strongly recommends that parties submit
copies of supporting documents, not originals, unless instructed otherwise.” Board
of Immigration Appeals Practice Manual § 3.3(d)(iv) (emphasis added).
3
new evidence, when considered together with the evidence presented at the original
hearing, would establish prima facie eligibility for the relief sought.” Id. at 984.
PETITION FOR REVIEW GRANTED IN PART, DENIED IN PART. Each
party shall bear their own costs and fees.
4
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563 F.3d 743 (2009)
IOWA TELECOMMUNICATIONS SERVICES, INC., doing business as Iowa Telecom, Plaintiff/Appellant,
Citizens Mutual Telephone Cooperative; Clear Lake Independent Telephone Company; Farmers Mutual Cooperative Telephone Co. of Shelby; Farmers Telephone Company; Grand River Mutual Telephone Corporation; Heart of Iowa Communications Cooperative; Huxley Communications; Kalona Cooperative Telephone; Lost Nation-Elwood Telephone Company; *744 Mabel Cooperative Telephone Company; Minburn Telecommunications, Inc.; North English Cooperative Telephone Company; Sharon Telephone; Shell Rock Telephone Company, doing business as Bevcomm c/o Blue Earth Valley Telephone Company; South Central Communications, Inc.; South Slope Cooperative Telephone Company; Sully Telephone Association; Titonka Telephone Company; Ventura Telephone Company, Inc.; Webster Calhoun Cooperative Telephone Association; Wellman Cooperative Telephone Association; West Liberty Telephone Company, doing business as Liberty Communications; Winnebago Cooperative Telephone Association; Rockwell Cooperative Telephone Association, Plaintiffs,
v.
IOWA UTILITIES BOARD, Utilities Division, Department of Commerce; John Norris, In his official capacity as a member of the Iowa Utilities Board and not as an Individual; Diane Munns, In her Official Capacity as a member of the Iowa Utilities Board and not as an Individual; Curtis Stamp, In his Official Capacity as a member of the Iowa Utilities Board and not as an Individual; Sprint Communications LP, doing business as Sprint Communications Company, L.P., Defendants/Appellees.
No. 08-2140.
United States Court of Appeals, Eighth Circuit.
Submitted: December 12, 2008.
Filed: April 28, 2009.
*745 Deborah Marie Tharnish, argued, Robert F. Holz, Jr., Steven Lowell Nelson, Des Moines, IA, on the brief, for appellant.
Raymond A. Cardozo, argued, Kirsten J. Daru, on the brief, San Francisco, CA, for appellee Sprint.
David Lynch, argued, Des Moines, IA, for appellee IA Utilities, et al.
Before WOLLMAN, BYE, and RILEY, Circuit Judges.
WOLLMAN, Circuit Judge.
Iowa Telecommunications Services, Inc. (Iowa Telecom) appeals from the district court's[1] order affirming the Iowa Utilities Board's ruling that Sprint Communications LP (Sprint) is a telecommunications carrier under the Telecommunications Act of 1996(Act) and thus entitled to interconnect with the local exchange carriers' networks. We affirm.
I. Background
The issue on appeal is whether Sprint is a telecommunications carrier under the Act, and we limit our background discussion accordingly. We borrow heavily from the district court's thorough presentation of the statutory, factual, and procedural background. See Iowa Telecomm. Servs., Inc. v. Iowa Utils. Bd., 545 F.Supp.2d 869 (S.D.Iowa 2008).
A. Statutory Background
The Telecommunications Act of 1996 was enacted to promote competition, reduce regulation, and encourage the development of new technologies within the telecommunications industry. Before the Act was passed, incumbent local exchange carriers[2] served as the exclusive providers *746 of local telephone service, which was considered a natural monopoly. To facilitate the market entry of competitors, the Act imposed certain duties upon the incumbent carriers, including the duty to provide interconnection with their networks to any requesting telecommunications carrier. 47 U.S.C. § 251(c)(2); see also id. § 251(b)(1)-(6) (obligations of all local exchange carriers); id. § 251(c)(1)-(6) (additional obligations of incumbent local exchange carriers). The Act also provided the procedures for negotiation, arbitration, and approval of interconnection agreements between the telecommunications carrier and the incumbent local exchange carrier. Id. § 252.
Interconnection allows multiple carriers to exchange telephone traffic. Without it, a new-to-the-market carrier "would not be able to connect its customers to a customer served by the ILEC [incumbent local exchange carrier] without building its own infrastructure to serve both customers." Iowa Network Servs., Inc.v. Qwest Corp., 363 F.3d 683, 686 (8th Cir.2004). Only telecommunications carriers have the right to compel interconnection with a local exchange carrier. 47 U.S.C. § 251(c)(2). The Act defines "telecommunications carrier" as "any provider of telecommunications services," and defines "telecommunications service" as "the offering of telecommunications for a fee directly to the public, or such classes of users as to be effectively available directly to the public, regardless of the facilities used." Id. § 153(44), (46).
The Federal Communications Commission (FCC) has held that the term "telecommunications carrier" has essentially the same meaning as the term "common carrier" under the Communications Act of 1934. AT & T Submarine Sys., Inc., 13 F.C.C.R. 21585, 21587-88 ¶ 6 (1998); Cable & Wireless, PLC, 12 F.C.C.R. 8516, 8522 ¶ 13 (1997); see also V.I. Tel. Corp. v. F.C.C., 198 F.3d 921, 925 (D.C.Cir.1999). The Communications Act defines "common carrier" as "any person engaged as a common carrier for hire, in interstate or foreign communication by wire" and imposed upon local telephone companies certain common carrier obligations.[3] 47 U.S.C. § 153(10); Time Warner Telecom, Inc. v. F.C.C., 507 F.3d 205, 210 (3d Cir.2007). "The primary sine qua non of common carrier status is a quasi-public character, which arises out of the undertaking to carry for all people indifferently." Nat'l Ass'n of Regulatory Util. Comm'rs v. F.C.C., 533 F.2d 601, 608 (D.C.Cir.1976) (NARUC II) (internal quotations omitted).
A two-prong test has emerged to determine whether a carrier is a common carrier under the Communications Act: "(1) whether the carrier holds himself out to serve indifferently all potential users; and (2) whether the carrier allows customers to transmit intelligence of their own design and choosing." United States Telecom Ass'n v. F.C.C., 295 F.3d 1326, 1329 (D.C.Cir.2002) (internal quotations omitted); see also Sw. Bell Tel. Co. v. F.C.C., 19 F.3d 1475, 1481 (D.C.Cir.1994); NARUC II, 533 F.2d at 608-09; NARUC I, 525 F.2d at 641-42. The key factor in determining common carriage is whether the carrier offers "indiscriminate services to whatever public its service may legally and practically be of use." United States Telecom Ass'n, 295 F.3d at 1334 (quoting NARUC I, 525 F.2d at 642). Iowa Telecom concedes on appeal that Sprint meets *747 the second prong of the test and that Sprint holds itself out to serve all potential users. It contends, however, that Sprint does not or will not serve those users indifferently or indiscriminately because its contracts are confidential and individually negotiated and its rates are not public.
B. Sprint's Business Model
Sprint has developed a business model in which it partners with local cable companies to provide local telephone services. Sprint provides the facility to interconnect calls to and from other carriers, the switch that gathers and distributes the telephone traffic, and various back-office functions. The local cable company provides the system of wires and cables which takes a phone call from the user's premises to the connection point. This system is known as "last-mile" or "loop" services, and it carries calls to and from the switch and the end user.
In Iowa, Sprint has partnered with MCC Telephony of Iowa, L.L.C. (MCC), the local cable company and an affiliate of Mediacom. Under their arrangement, Sprint provides the wholesale telecommunications services described above, which MCC retails. MCC provides last-mile facilities and is in charge of all sales, billing, and customer service. Sprint has no direct relationship with the customers and does not provide any retail services. Sprint believes this model is advantageous to both companies, allowing them to enter the market quickly, efficiently, and without duplicating resources. The terms, conditions, and prices of Sprint's contract with MCC are considered confidential, and its rates are not available to the public.
C. Procedural Background
In October 2004, Sprint sent a request for interconnection to various local exchange carriers in Iowa, including Iowa Telecom.[4] Sprint sought an interconnection agreement to use for its business with MCC, as well as for potential business with other similarly situated cable providers. Iowa Telecom refused to execute an interconnection agreement directly with Sprint because it believed that Sprint was not the proper party to the agreement. Instead, Iowa Telecom indicated its willingness to negotiate with MCC or with Sprint acting as MCC's agent. Sprint made clear that it was not acting as MCC's agent or legal partner; it sought interconnection in its own right, albeit in connection with its relationship with MCC.
Sprint filed a petition for arbitration with the Iowa Utilities Board (Board) in March 2005. See 47 U.S.C. § 252(b)(1). Iowa Telecom moved to dismiss, arguing that Sprint did not meet the Act's definition of "telecommunications carrier." The Board agreed and dismissed the petition because Sprint "[was] not, in this context, holding itself out as a common carrier." Sprint Comm. Co., L.P. v. Ace Comm. Group, et al., Docket No. ARB-05-2, at 12, Order Granting Motions To Dismiss, 2005 WL 1415230 (Iowa Utils.Bd. May 26, 2005). Sprint had not asserted that it would make its proposed services available on a common carrier basis, and the Board determined that Sprint did not intend to offer its proposed services "to any party other than its private business partners, pursuant to individually-negotiated contracts." Id. at 13. Without status as a telecommunications carrier, Sprint was not entitled to interconnect with the local exchange carriers' networks.
Sprint appealed the Board's decision to the district court. During the course of those proceedings, it became apparent that there were unresolved evidentiary and legal issues relevant to the Board's order of *748 dismissal. Accordingly, Sprint and the Board sought a limited stay of proceedings and a remand to the Board for further consideration, which the district court granted.
Following a hearing, the Board rescinded its order of dismissal and issued its order on rehearing, holding that Sprint met the definition of "telecommunications carrier" under the Act because it "indiscriminately offer[ed] its services to a class of users so as to be effectively available to the public." Sprint Comm. Co., L.P. v. Ace Comm. Group, et al., Docket No. ARB-05-2, at 14, Order on Rehearing, 2005 WL 3624405 (Iowa Utils.Bd. Nov. 28, 2005). The Board defined the class of users as "entities capable of offering their own last-mile facilities." Id. The Board also found it immaterial that Sprint tailored its contracts to each individual customer. In addressing the local exchange carriers' concern that Sprint's business model might result in a denial of their rights or some unidentified advantage, the Board noted that it would "not reject Sprint's preferred business model on the basis of unspecified concerns, but the Board emphasize[d] that if any anti-competitive problems develop as a result of this approach, the RLECs [rural local exchange carriers] may file an appropriate complaint with the Board." Id. at 17. As a telecommunications carrier, Sprint was then able to demand interconnection negotiations and compel arbitration of any open issues.
After the order on rehearing was filed with the district court, general jurisdiction was returned to the Board. The Board later issued its arbitration order and approved the parties' interconnection agreements.
Iowa Telecom filed suit in district court in June 2006, seeking declaratory and injunctive relief and raising many of the same arguments it had raised before the Board. Iowa Telecom alleged, among other things, that the Board's order on rehearing violated federal law because Sprint did not meet the definition of "telecommunications carrier" and was not engaged in providing "telecommunications services." Affirming the Board's order, the district court concluded that Sprint qualified as a telecommunications carrier because "Sprint offers service indiscriminately to MCC and other cable companies with last-mile capabilities." Iowa Telecomm. Servs., Inc., 545 F.Supp.2d at 878. The district court also found that individually negotiated, confidential contracts did not violate the Act.
Iowa Telecom appeals, contending that Sprint does not hold itself out indifferently to all potential users because its contracts are confidential and individually negotiated and its rates are not publicly available. Accordingly, the argument goes, Sprint is not a telecommunications carrier and not entitled to interconnection with Iowa Telecom's network.
II. Analysis
We apply the same standard of review to the Board's decision as did the district court. WWC License, L.L.C. v. Boyle, 459 F.3d 880, 889 (8th Cir.2006). We review the Board's interpretation and application of federal law de novo and will set aside its findings of fact only if they are arbitrary and capricious. Sw. Bell Tel., L.P. v. Mo. Publ. Serv. Comm'n., 530 F.3d 676, 682 (8th Cir.2008); WWC License, L.L.C., 459 F.3d at 889. We owe deference to the FCC's interpretation of the Act because the FCC is charged with the duty to promulgate regulations to interpret and carry out the Act. WWC License, L.L.C., 459 F.3d at 890.
The question, then, is whether Sprint must make publicly available its contracts and rates for it to "hold itself out to serve indifferently all potential users." *749 United States Telecom Ass'n, 295 F.3d at 1332 (internal quotations omitted); see also NARUC I, 525 F.2d at 640-42. Iowa Telecom has directed us to no case that holds that a carrier must publicize its rates and contracts in order to be deemed a telecommunications carrier, and thus a common carrier. We do not read the Telecommunications Act and related case law to be so restrictive. As a matter of law, a carrier's confidential contracts and rates do not automatically result in the carrier being classified as a private or non-common carrier. See Sw. Bell Tel. Co., 19 F.3d at 1481 (recognizing that "a carrier cannot vitiate its common carrier status merely by entering into private contractual relationships with its customers").
Having found no error of law, we turn to the question whether the Board's finding of common carriage was arbitrary and capricious. The key factor in finding common carriage is the offering of "indiscriminate service to whatever public [the carrier's] service may legally and practically be of use." NARUC I, 525 F.2d at 642. In reviewing the Board's decision, we find instructive Verizon California, Inc. v. F.C.C., 555 F.3d 270, 275-76 (D.C.Cir. 2009).
In Verizon California, Inc., the District of Columbia Circuit upheld the FCC's finding of common carriage in light of the fact that: (1) the carriers self-certified that they operated as common carriers, (2) the carriers gave public notice of their intent to act as common carriers, and (3) the carriers entered into publicly available interconnection agreements with the local exchange carrier. Id. at 275. The FCC gave significant weight to the carriers' self-certification "because being deemed a `common carrier' (i.e., being deemed to be providing `telecommunication services') confers substantial responsibilities as well as privilege." Bright House Networks, LLC v. Verizon Cal., Inc., 23 F.C.C.R. 10704, 10718 ¶ 39. The District of Columbia Circuit concluded that "[w]hile none of the three facts by itself seems compelling, in the aggregate they appear enough to render the Commission's conclusion reasonable." Verizon Cal., Inc., 555 F.3d at 275.
The record in this case supports the Board's finding of common carriage because it reflects that Sprint has self-certified that it is a common carrier, that Sprint is making public its intent to act as a common carrier, and that Sprint has entered into a public interconnection agreement. First, Sprint is holding itself out to be a common carrier, willing to provide wholesale services to any last-mile retail service provider in Iowa. James Burt, Director of Regulatory Policy for Sprint, testified repeatedly that Sprint will offer its services to any last-mile provider similarly situated to MCC: "Sprint intends to provide the interconnection services to all entities who desire to take them and who have comparable `last mile' facilities to the cable companies." Moreover, Sprint markets its telecommunications services to cable companies with last-mile facilities, giving notice to the relevant public of its intent to provide services. Burt described Sprint's marketing efforts, including a marketing brochure that introduces cable companies (or other similarly situated providers) to the breadth of services that Sprint can provide. Burt also testified that Sprint sends company representatives to trade shows to "convey to as many cable companies as possible that Sprint [is] interested in forming relationships to provide competitive voice services." Finally, Sprint entered into a publicly available interconnection agreement with Iowa Telecom.[5]
*750 Iowa Telecom has directed us to several cases in which individually negotiated, private contracts have supported a finding of non-common, or private, carriage. E.g. V.I. Tel. Corp. v. F.C.C., 198 F.3d at 925; Sw. Bell Tel. Co. v. F.C.C., 19 F.3d at 1481; NARUC I, 525 F.2d at 643; Norlight, 2 F.C.C.R. 5167, 5168 ¶ 12 (1993). In each of those cases, however, the carrier was trying to maintain its private status over objections from its opponents. As evidence of private carriage, the courts and the FCC found persuasive that the carriers entered into individually negotiated, customer-specific contracts with limited, long-term clientele. With private or non-common status, the carriers were thus entitled to choose their clients on an individual basis, were not compelled to serve indifferently all potential users, and were able to avoid common carrier regulation.
Unlike the cases Iowa Telecom cites, Sprint seeks common carrier status by holding itself out to be a common carrier and representing that it will serve all potential users. Its individually negotiated, private contracts do not outweigh the evidence of common carriage recited above. There is no evidence in the record that Sprint discriminates or will discriminate in providing telecommunication services. Instead, Iowa Telecom has asked us to assume that Sprint does not offer its services indiscriminately because the terms and rates of Sprint's contract with MCC are individually negotiated and confidential.[6] We recognize that Sprint's contracts with last-mile providers will vary depending on the services the last-mile provider chooses and that the terms and rates included in those contracts will be confidential. Those facts alone, however, do not overcome the evidence that Sprint is acting as a common carrier and certainly do not render the Board's decision arbitrary and capricious.
Conclusion
The district court's order is affirmed.
NOTES
[1] The Honorable John A. Jarvey, United States District Judge for the Southern District of Iowa.
[2] "Incumbent" means that the local exchange carrier "was a telephone company in possession of its area at the time that the Act opened up local service to competition." Alma Comm. Co. v. Mo. Pub. Serv. Comm'n, 490 F.3d 619, 620 (8th Cir.2007).
[3] The common carrier doctrine arose from common law rules which historically "impose[d] a greater standard of care upon carriers who held themselves out as offering to serve the public in general." Nat'l Ass'n of Regulatory Util. Comm'rs v. F.C.C., 525 F.2d 630, 640 (D.C.Cir.1976) (NARUC I).
[4] Several rural local exchange carriers were party to the action below, but only Iowa Telecom appeals from the district court's judgment.
[5] This fact is arguably less compelling here than it was in Verizon California, Inc. There, the incumbent local exchange carrier had entered into a publicly available interconnection agreement before challenging the carrier's status as a common carrier and its right to interconnect. Verizon Cal., Inc., 555 F.3d at 275. Here, Iowa Telecom did not enter into an interconnection agreement with Sprint until ordered to do so.
[6] We are not troubled by the fact that Sprint currently serves only MCC. If a similarly situated last-mile provider were looking for the wholesale services Sprint provides, Sprint would be an obvious choice. See Verizon Cal., Inc. v. F.C.C., 555 F.3d at 276 (upholding FCC's finding of common carriage even though the carriers served only their affiliates).
| {
"pile_set_name": "FreeLaw"
} |
518 F.Supp. 1238 (1981)
CABLE NEWS NETWORK, INC., Plaintiff,
v.
AMERICAN BROADCASTING COMPANIES, INC., CBS, Inc., and National Broadcasting Company, Inc., and Ronald W. Reagan, as President of the United States of America, James A. Baker, III, as Chief of Staff for the President of the United States of America, Larry Speakes, as Deputy Press Secretary, and as Apparent Acting Press Secretary, to the President of the United States of America, and Alexander M. Haig, as Secretary of State of the United States of America, Defendants.
CBS, INC., Plaintiff,
v.
Ronald W. REAGAN, as President of the United States of America and Larry Speakes, as Principal Deputy Press Secretary, and as Apparent Acting Press Secretary to the President of the United States of America, Defendants.
Civ. A. Nos. 81-871A, 81-1329A.
United States District Court, N. D. Georgia, Atlanta Division.
July 28, 1981.
*1239 John J. Dalton, Robert L. Mote, Ralph H. Greil, Steven W. Korn, Troutman, Sanders, Lockerman & Ashmore, Atlanta, Ga., for Cable News Network, Inc.
D. Robert Cumming, Carey DeDyne, Sutherland, Asbell & Brennan, Atlanta, Ga., James Loftis, Bergson, Borkland, Margolis & Adler, Washington, D. C., for American Broadcasting Companies, Inc.
David Aufdenspring, Eugene Partain, Powell, Goldstein, Frazer & Murphy, Atlanta, Ga., David Boies, Cravath, Swaine & Moore, New York City, for CBS, Inc.
Matt Patton, Kilpatrick & Cody, Atlanta, Ga., William Hegarty, Cahill, Gordon & Reiniel, New York City, for National Broadcasting Co., Inc.
Robert Castellani, Nina Hunt, Asst. U. S. Attys., Atlanta, Ga., William G. Cole, Dept. of Justice, Washington, D. C., for Ronald W. Reagan, James A. Baker, III, Larry Speakes and Alexander M. Haig.
ORDER
ORINDA D. EVANS, District Judge.
This consolidated action is now before the Court on the Motion for Preliminary Injunction of American Broadcasting Companies, Inc. ("ABC") and National Broadcasting Company, Inc. ("NBC"), Defendants in Civil Action No. C81-871A, and the Motion for Preliminary Injunction of CBS, Inc. ("CBS"), Plaintiff in Civil Action No. C81-1329A. Both Motions seek injunctive relief from recent action of the White House Press Office excluding all television media representatives from covering certain White House and presidential events. Based on the evidence presented at a hearing on July 17, 1981, and the briefs and arguments of counsel, the Court makes the following findings of fact and conclusions of law:
A. FINDINGS OF FACT
The instant litigation began in May, 1981, when Cable News Network filed suit in Civil Action No. C81-871A, alleging that the White House Press Office and the three network Defendants had acted in violation of CNN's constitutional rights in allegedly giving ABC, CBS, and NBC favored status in the coverage of certain White House events denominated as "limited coverage" events by the litigants herein.
Digressing briefly to explain background facts and terminology pertinent to the within Order: the announced policy of the Reagan administration is to permit the fullest press coverage of White House and presidential activities possible under the circumstances. To that end, the Press Office permits "open coverage" of most of such events. Where coverage is open any properly accredited member of the media may attend.
Sometimes, however, space limitations or other considerations require limiting the number of media representatives who may cover a given event, to wit, "limited coverage." The Reagan administration, as well as prior administrations, has handled these situations by designating a pool of media representatives who may attend. The obligation of those in the pool is to share their material with those media representatives *1240 not included. Traditionally, a very small pool, called a "tight pool" has been used when it has been deemed necessary to restrict media attendance to no more than thirteen persons (which includes one television crew of five persons; the television representation in the tight pool has been rotated among CBS, ABC, and NBC). Also, a so-called "expanded pool" consisting of more than thirteen media representatives, has been used when some numerical limitation has been deemed necessary, but where more than thirteen persons can be accommodated. Both the "tight pool" and the "expanded pool" include representatives of the print and the television media.
Returning to the chronological sequence of events: CNN's lawsuit triggered an immediate change in the Press Office's method of selecting television representatives for White House press pools. On June 4, 1981, the Press Office announced that effective July 10, 1981, for all limited coverage events, "This office will post the total number of spaces available for television media representatives. The television media representatives themselves will determine who will occupy the available spaces and so inform this office by the time designated."
On July 2, 1981, a notice was posted at the White House Press Office indicating that five spaces[1] for television media representatives would be available in the July 10, 1981 White House press pool. It stated that the television media representatives should make the selection called for by the June 4 announcement and supply the names to the Press Office by Noon, July 1.
The next development occurred on July 8, 1981, when counsel for the White House Press Office stated at an in-chambers hearing (see Transcript of Chambers Conference July 8, 1981, at 17) that
It, by the way, is not a situation where a majority can out-vote a minority. It is a request for a consensus with the implied threat that if such a consensus cannot be agreed to, then there may be no coverage of the President by the television media until they arrive at that consensus. (Transcript of Chambers Conference, July 8, 1981, at 17).
No consensus was reached.[2] On July 9 the Press Office announced the press pool assignments for July 10, 1981, which included eight representatives of the print media only. The announcement concluded, "NOTE: Since the television media representatives have not complied with the notices posted on June 4 and July 2, 1981, this pool does not include the television media representatives."
The Court finds that the Press Office's sole purpose in excluding television media representatives from limited coverage events was to attempt to force them to work out among themselves a satisfactory method for selecting which representatives will cover various limited coverage events, so as to reduce or minimize the White House Press Office's involvement in making the individual selections.
On July 9 the Court granted ABC and NBC's motion for a temporary restraining order against implementation of the July 9 policy of exclusion of television media from limited coverage White House events. Immediately *1241 thereafter, CBS filed Civil Action No. C81-1329A asking for essentially[3] the same relief as that sought by ABC and NBC on their cross-claims in the companion case. The preliminary injunction hearing was held on July 17, 1981. The facts were presented to the Court by stipulation.
The instant order does not deal with CNN's claims for injunctive relief against the White House Press Office and ABC, NBC, and CBS. These claims have been set for hearing on CNN's Motion for a Preliminary Injunction on August 3, 1981.
B. CONCLUSIONS OF LAW
In order to grant the preliminary injunction sought by ABC, NBC, and CBS, the following four requirements must first be satisfied: (1) a substantial likelihood that the movant(s) will succeed on the merits; (2) the movant(s) will suffer irreparable injury if the injunction is not granted; (3) the threatened injury to the movant(s) outweighs whatever damage the granting of the proposed injunction might cause the party opposed to the injunction; and (4) the granting of the proposed injunction will not harm or be adverse to the public interest. See Dallas Cowboys Cheerleaders v. Scoreboard Posters, 600 F.2d 1184 (5th Cir. 1979); Canal Authority of the State of Florida v. Callaway, 489 F.2d 569 (5th Cir. 1974). As the court in Canal Authority stated, "In considering these four prerequisites, the court must remember that a preliminary injunction is an extraordinary and drastic remedy which should not be granted unless the movant clearly carries the burden of persuasion." Id. at 573. Therefore, ABC, NBC, and CBS have the burden of persuasion and must clearly show that each of the four prerequisites have been satisfied before this Court will grant the preliminary injunction which they have sought. The Court will now address each of these requirements in the order set out above.
1. Substantial likelihood of success on the merits
These Movants contend that the decision by the White House Defendants to totally exclude television representatives from participating in the press pool coverage of presidential activities and other White House events, while continuing to allow pool participation by representatives of other forms of news media, constitutes a violation of two amendments to the United States Constitution: the First Amendment, by interfering with the rights of access of the press to coverage of news events and by interfering with the right of the public to receive information covering the activities and operation of the government; and the Fifth Amendment, by interfering with the rights of the press in an arbitrary and unreasonable manner in violation of due process *1242 and by treating the television media in a different manner than other forms of news media in violation of equal protection. The issues raised by the constitutional claims of the Movants are interrelated, as are the defenses put forth by the White House, and the Court will begin its analysis by discussing the rights which have been asserted by both sides.
The Court recognizes that there is lacking a clarity and consensus of thought concerning the right of the public and the press to access to information about the workings of government. However, from the different views expressed on this issue there can be discerned a generally held opinion that there does exist a limited right of the public and the press to access to information concerning governmental activity. In Richmond Newspapers, Inc. v. Virginia, 448 U.S. 555, 100 S.Ct. 2814, 65 L.Ed.2d 973 (1980), Chief Justice Burger, in announcing the judgment of the Court in an opinion joined by Justices White and Stevens, said:
The First Amendment, in conjunction with the Fourteenth, prohibits governments from "abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances." These expressly guaranteed freedoms share a common core purpose of assuring freedom of communication on matters relating to the functioning of government. (448 U.S. at 574, 100 S.Ct. at 2826, 65 L.Ed.2d at 988)
He then recognized that "[F]ree speech carries with it some freedom to listen." Id. 448 U.S. at 576, 100 S.Ct. at 2827, 65 L.Ed.2d at 989. In his concurring opinion in Richmond Newspapers, Justice Stevens went further, saying:
Twice before, the Court has implied that any governmental restriction on access to information, no matter how severe and no matter how unjustified, would be constitutionally acceptable so long as it did not single out the press for special disabilities not applicable to the public at large .... Today, however, for the first time, the Court unequivocally holds that an arbitrary interference with access to important information is an abridgment of the freedoms of speech and of the press protected by the First Amendment .... I agree that the First Amendment protects the public and the press from abridgment of their rights of access to information about the operation of their government, ... (448 U.S. at 582-83, 100 S.Ct. at 2830-31, 65 L.Ed.2d at 993-94)
However, Justice Brennan, joined by Justice Marshall, was more restrained in his concurring opinion, wherein he said:
While freedom of expression is made inviolate by the First Amendment, and, with only rare and stringent exceptions, may not be suppressed, (cites omitted), the First Amendment has not been viewed by the Court in all settings as providing an equally categorical assurance of the correlative freedom of access to information (cites omitted). Yet the Court has not ruled out a public access component to the First Amendment in every circumstance. Read with care and in context, our decisions must therefore be understood as holding only that any privilege of access to governmental information is subject to a degree of restraint dictated by the nature of the information and countervailing interests in security and confidentiality. (cites omitted). These cases neither comprehensively nor absolutely deny that public access to information may at times be implied by the First Amendment and the principles which animate it. (448 U.S. at 585-86, 100 S.Ct. at 2832-33, 65 L.Ed.2d at 995-96)
The Supreme Court appeared to take a more restrictive view of the First Amendment in several earlier cases. In Zemel v. Rusk, 381 U.S. 1, 17, 85 S.Ct. 1271, 1281, 14 L.Ed.2d 179 (1965), the Court said:
For example, the prohibition of unauthorized entry into the White House diminishes the citizen's opportunities to gather information he might find relevant to his opinion of the way the country is being run, but that does not make entry into the White House a First Amendment *1243 right. The right to speak and publish does not carry with it the unrestricted right to gather information.
Citing Zemel and other cases, the Court in Branzburg v. Hayes, 408 U.S. 665, 684, 92 S.Ct. 2646, 2658, 33 L.Ed.2d 626 (1972), stated:
It has generally been held that the First Amendment does not guarantee the press a constitutional right of special access to information not available to the public generally.
However, the Court did recognize that "news gathering" qualifies for some First Amendment protection, and said "without some protection for seeking out the news, freedom of the press could be eviscerated." Id. at 681, 92 S.Ct. at 2656. In discussing a press/general public distinction, the Court in Pell v. Procunier, 417 U.S. 817, 834-35, 94 S.Ct. 2800, 2810, 41 L.Ed.2d 495 (1974), said:
The First and Fourteenth Amendments bar government from interfering in any way with a free press. The Constitution does not, however, require government to accord the press special access to information not shared by members of the public generally. It is one thing to say that a journalist is free to seek out sources of information not available to members of the general public, .... It is quite another thing to suggest that the Constitution imposes upon government the affirmative duty to make available to journalists sources of information not available to members of the public generally. That proposition finds no support in the words of the Constitution or in any decision of this Court.
In his dissent in Saxbe v. Washington Post Co., 417 U.S. 843, 860, 94 S.Ct. 2811, 2819, 41 L.Ed.2d 514 (1974), a companion case to Pell, supra, Justice Powell expressed his view as follows:
It goes too far to suggest that the government must justify under the stringent standards of First Amendment review every regulation that might affect in some tangential way the availability of information to the news media. But to my mind it is equally impermissible to conclude that no governmental inhibition of press access to newsworthy information warrants constitutional scrutiny. At some point official restraints on access to new sources, even though not directed solely at the press, may so undermine the function of the First Amendment that it is both appropriate and necessary to require the government to justify such regulations in terms more compelling than discretionary authority and administrative convenience.
The right of access asserted by the press is identical, in purpose, to the right of access of the public in general. Justice Powell recognized this in Saxbe, supra at 863, 94 S.Ct. 2811 at 2821, saying in his decision:
An informed public depends on accurate and effective reporting by the news media. No individual can obtain for himself the information needed for the intelligent discharge of his political responsibilities. For most citizens the prospect of personal familiarity with newsworthy events is hopelessly unrealistic. In seeking out the news the press therefore acts as an agent of the public at large. It is the news by which the people receive that free flow of information and ideas essential to intelligent self-government. By enabling the public to assert meaningful control over the political process, the press performs a crucial function in effecting the societal purpose of the First Amendment.
Justice Brennan, in his concurrence in Richmond Newspapers, supra, shared this view, saying:
... the media's right of access is at least equal to that of the general public, ... As a practical matter, however, the institutional press is the likely, and fitting, chief beneficiary of a right of access because it serves as the "agent" of the interested citizens, ... (448 U.S. at 584, n. 2, 100 S.Ct. at 2831, n. 2, 65 L.Ed.2d at 994, n. 2)
In Sherrill v. Knight, 569 F.2d 124 (D.C. Cir.1977), the court apparently recognized a limited right of access of the public, saying:
The first amendment's protection of a citizen's right to obtain information concerning *1244 "the way the country is being run" does not extend to every conceivable avenue a citizen may wish to employ in pursuing this right. (at 129)
The Fifth Circuit, in Garrett v. Estelle, 556 F.2d 1274, 1277 (5th Cir. 1977), stated, "News gathering is protected by the first amendment, ... [t]his protection is not absolute, however." The court in Garrett followed the principle enunciated in Pell, supra, and Saxbe, supra, that the press does not have a constitutional right of special access to information not available to the public generally. In Lewis v. Baxley, 368 F.Supp. 768 (N.D.Ala.1973), a three-judge court found that newsmen have a First Amendment right to "reasonable access" to "certain items" of news, saying:
Nevertheless, inherent in the First Amendment right of freedom of the press is a limited right of reasonable access to certain kinds of news. It is apparent that the First Amendment right to publish must logically include to some degree a right to gather news fit for publication. Freedom to publish news, without some protected ability to gather it, would render freedom of the press an unduly gossamer right. (at 775) (emphasis in original)
Having carefully reviewed the few cases relevant to this issue, this Court finds that the rights guaranteed and protected by the First Amendment include a right of access to news or information concerning the operations and activities of government. This right is held by both the general public and the press, with the press acting as a representative or agent of the public as well as on its own behalf. Without such a right, the goals and purposes of the First Amendment would be meaningless. However, such a right of access is qualified, rather than absolute, and is subject to limiting considerations such as confidentiality, security, orderly process, spatial limitation, and doubtless many others.
Having determined that there does exist a limited right of the public and the press, under the First Amendment, to access to information concerning governmental activities, this Court must now address the existence and alleged violation of such a right in the present case. In order to best pursue this analysis, some comments by Justice Brennan in Richmond Newspapers, supra, are helpful:
... An assertion of the prerogative to gather information must accordingly be assayed by considering the information sought and the opposing interests invaded.
This judicial task is as much a matter of sensitivity to practical necessities as it is of abstract reasoning. But at least two helpful principles may be sketched. First, the case for a right of access has special force when drawn from an enduring and vital tradition of public entree to particular proceedings or information.... Second, the value of access must be measured in specifics .... what is crucial in individual cases is whether access to a particular government process is important in terms of that very process. (448 U.S. at 588, 100 S.Ct. at 2834, 65 L.Ed.2d at 997)
The specific information sought in this case is nonexistent at this time; it is whatever information is disclosed or revealed during the pool coverage of presidential activities, as well as the visual depiction of such presidential activities. In simple terms, the Movants seek to show and tell the general public what the President and his staff are saying and doing during periods of pool coverage. It is undisputed that there is a history of pool coverage of presidential activities going back through several past Administrations in which television news representatives took part. In this sense there is an "enduring and vital tradition of public entree" (through the press as agents) to the presidential activities covered by press pools. It is also clear that pool coverage of presidential activities is important to the President. A public awareness and understanding of the President's behavior facilitates his effectiveness as President. Such public insight is also necessary for a determination by the public of the adequacy of the President's performance.
*1245 The television media has had access to White House pool coverage for many years. This Court finds that under the First Amendment, they have a limited right of access to White House pool coverage in their capacity as representatives of the public and on their own behalf as members of the press. This does not, however, end the Court's inquiry. It is necessary that the Court balance the interest to be served by the sought-for newsgathering activity against the interest served by the governmental restraint. See Borreca v. Fasi, 369 F.Supp. 906 (D.Haw.1974).
The Court finds that the interest of the public in having the television media present at "limited coverage" White House events, while not overwhelming, cannot be denominated as insubstantial. On the one hand, since the print media are present at all such events, the public has access to pertinent information through the print media; there is no total blockage of the free flow of information.[4] On the other hand, it cannot be denied that television news coverage plays an increasingly prominent part in informing the public at large of the workings of government. Many citizens likely rely on television as their sole source of news. Further, visual impressions can and sometimes do add a material dimension to one's impression of particular news events. Television film coverage of the news provides a comprehensive visual element and an immediacy, or simultaneous aspect, not found in print media. Finally, the importance of conveying the fullest information possible increases as the importance of the particular news event or news setting increases. To most Americans, presidential activities rank higher in importance than those of any other public official. Therefore, the Court concludes that the public has a significant interest in continued television participation in White House pool coverage.
The Court now turns to an evaluation of the interest served by the governmental restraint involved here, namely, the total exclusion of television media from limited coverage White House events. The Court is at a loss to find any direct governmental interest served by this policy.[5] No facts or argument have been presented to the Court suggesting that the administration actually desires cessation of television coverage. Nor has the Press Office advanced any reason such as considerations of security or space limitation for refusing television coverage. Rather, the Press Office appears to rest its argument on the legal premise that since there is no right of access, no justification for exclusion is required. As the Court has already determined that there is a limited right of access, the argument cannot be factored into the balancing of interests.
Having applied the proper balancing test, the Court finds that the total exclusion of television representatives from White House pool coverage denies the public and the press their limited right of access, guaranteed by the First Amendment of the Constitution of the United States. Therefore, the Court concludes that Movants have shown a substantial likelihood of success on the merits of their First Amendment claim.
2. Irreparable injury to the Movants
In Elrod v. Burns, 427 U.S. 347, 373, 96 S.Ct. 2673, 2689, 49 L.Ed.2d 547 (1976), the Court said, "The loss of First Amendment freedoms, for even minimal periods of time, unquestionably constitutes irreparable injury." This Court finds that the movants in this case will suffer irreparable injury if the injunction is not granted. If television *1246 crews are totally excluded from White House pool coverage, the unique continuous visual element of television news coverage will be denied to the public and the press. Such film imagery which is so vital to television reporting cannot meaningfully be replaced by still photographs provided by the non-television participants in pool coverage. By totally excluding television participants, a complete visual record of the Presidential activities covered by the press pools is lost forever. This clearly constitutes irreparable injury to ABC, NBC, and CBS, as well as the public.
3. Balancing of the injuries
The Court finds that the threatened irreparable injury to the movants substantially outweighs any minimal damage likely to be suffered by the White House if the proposed injunction is granted. The injury to the First Amendment rights of the public and the press threatened by total exclusion of television representatives has already been described. Any potential injury to the White House Defendants resulting from a prohibition of total exclusion of television representatives would merely involve some minor inconvenience to the White House press staff. The proposed injunctive relief would not require the White House to create a particular type of pool system, it would merely prohibit the threatened total exclusion.
4. The effect on the public interest
The pending analysis should clearly indicate that the public interest will be significantly benefitted, and in no way harmed, by the granting of the injunctive relief sought. Television participation in White House pool coverage benefits the public by informing it of the activities of its government.
The Court hereby finds that all four prerequisites for granting a preliminary injunction have been satisfied by the Movants. Therefore, the Joint Motion for a Preliminary Injunction of ABC and NBC and the Motion for a Preliminary Injunction of CBS are hereby GRANTED. The White House Defendants are hereby ENJOINED from totally excluding television news representatives from participating in pool coverage of Presidential activities and White House events until a trial on the merits can be held in this case. This preliminary injunction does not prohibit the White House Defendants from placing some burden or responsibility on television news representatives to formulate an appropriate system of pool participation or implement the policy set forth in the notice of June 4, 1981, in some manner other than total exclusion.
NOTES
[1] It was explained at the hearing that "five spaces" refers to a sufficient number of spaces for one television crew consisting of five persons.
[2] No evidence was introduced at the July 17 hearing concerning any attempt of the television media to reach the agreement called for by the June 4 announcement, although there are some references in the record herein (see First Stipulation of Fact, paragraphs 29 and 30, filed July 28, 1981; ABC's Motion for Joinder of National Association of Broadcast Employees and Technicians, filed July 9, 1981) to a possible impediment which might arise from a provision in NBC and ABC's respective contracts with their technicians' union, which prohibits these networks from accepting non-union material such as would be produced by CNN's non-union personnel. Also, some counsel opined that the self-selection policy was "inherently unworkable." Some expressed the opinion that it was not workable because it was impossible to determine from the face of the policy who constituted the "television media." Counsel for the White House Defendants stated, however, that he felt the four networks (ABC, CBS, NBC, and CNN) before the Court were those directly affected by the policy.
[3] The relief sought by ABC and NBC in their Motion is as follows:
For a preliminary injunction to restrain and enjoin Ronald W. Reagan, as President of the United States of America, James A. Baker, III, as Chief of Staff for the President of the United States of America, and Larry Speakes, as Deputy Press Secretary, and apparent Acting Press Secretary (the "White House Defendants"), their agents, servants, employees, attorneys and all other persons in active concert or participation with them from putting into effect the self-selection policy announced in the June 4, 1981 memorandum to "All Television Media Representatives" from the Office of the Press Secretary, The White House, and from otherwise changing in any way the present practice with respect to the participation by television media representatives in the coverage of Presidential events pending further order of this Court.
The specific remedy sought by CBS in its Motion is as follows:
Enjoining defendants Ronald W. Reagan and Larry Speakes, and any other persons acting under their direction or supervision or otherwise in concert with them, pending trial herein or further order of the Court, from excluding CBS and other television news organizations from access to limited coverage White House events and presidential activities to which other news organizations are admitted; and
Enjoining defendants Ronald W. Reagan and Larry Speakes, and any other person acting under their direction or supervision or otherwise in concert with them, pending trial herein or further order of the Court, from changing in any way the present practice with respect to the participation by television media representatives in the coverage of presidential events.
[4] Indeed, some might argue that print media news coverage provides more in-depth analysis than does television news coverage.
[5] It could be argued that since the reason for the exclusion was to induce the television media to arrive at a "self-selection" agreement, which would reduce the Press Office's administrative tasks relative to pool selection, that the governmental interest is an interest in cutting red tape a valid interest. However, it is not at all clear at least not from this record that exclusion of television from White House pools can be reasonably expected to achieve a self-selection policy. Therefore this interest is, in the Court's view, too attenuated to be deemed significant.
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COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
§
MICHAEL KENNETH BARRON, No. 08-18-00178-CR
§
APPELLANT, Appeal from the
§
V. County Court at Law No. 1
§
THE STATE OF TEXAS, of El Paso County, Texas
§
APPELLEE. (TC# 20150C09163)
§
MEMORANDUM OPINION
Appellant, Michael Kenneth Barron, has filed a motion to dismiss his appeal pursuant to
Rule 42.2. This rule permits an appellate court to dismiss a criminal appeal on the appellant's
motion at any time before the court’s decision. TEX.R.APP.P. 42.2(a). Finding that Appellant's
motion complies with the requirements of Rule 42.2(a), we grant the motion and dismiss the
appeal.
January 11, 2019 YVONNE T. RODRIGUEZ, Justice
Before McClure, C.J., Rodriguez, and Palafox, JJ.
(Do Not Publish)
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885 F.2d 1485
Dwight DURAN, Lonnie Duran, Sharon Towers, and all otherssimilarly situated, Plaintiffs-Appellees,v.Garrey CARRUTHERS, Governor of The State of New Mexico, O.L.McCotter, Secretary of Corrections, and Robert J.Tansy, Warden of the Penitentiary of NewMexico, Defendants-Appellants.Mountain States Legal Foundation, Amici Curiae, on behalf ofits members, the State of Kansas, and the State of Utah.Amici Curiae of the States of Hawaii, Oregon, Utah,Washington, and Wyoming, in support of Appellants.
No. 88-1442.
United States Court of Appeals,Tenth Circuit.
Sept. 15, 1989.
Joel I. Klein of Onek, Klein & Farr, Washington, D.C. (Hal Stratton, Atty. Gen., Henry M. Bohnhoff, Deputy Atty. Gen., James Bieg, Asst. Atty. Gen., Santa Fe, N.M., Norman S. Thayer, Saul Cohen, and Stephany S. Wilson of Sutin, Thayer & Browne, Albuquerque, N.M., and Paul M. Smith of Onek, Klein & Farr, Washington, D.C., with him on the brief), for defendants-appellants.
Elizabeth Alexander, Washington, D.C. (Mark J. Lopez and Alvin J. Bronstein, National Prison Project of the ACLUF, Inc., Washington, D.C., Ray Twohig, P.C., Albuquerque, N.M., and Mark H. Donatelli of Rothstein, Bailey, Bennett, Daly & Donatelli, Santa Fe, N.M., with her on the brief), for plaintiffs-appellees.
Paul Farley, Mountain States Legal Foundation, Denver, Colo., Robert T. Stephan, Atty. Gen., State of Kan., Topeka, Kan., and David L. Wilkinson, Atty. Gen., State of Utah, Salt Lake City, Utah, for the amici curiae, on behalf of the Mountain States Legal Foundation, its members, the State of Kan., and the State of Utah.
Warren Price, III, Atty. Gen., State of Hawaii, and Steven S. Michaels, Deputy Atty. Gen., Honolulu, Hawaii, Dave Frohnmayer, Atty. Gen., State of Or., David L. Wilkinson, Atty. Gen., State of Utah, Kenneth O. Eikenberry, Atty. Gen., State of Wash., and Joseph B. Meyer, Atty. Gen., State of Wyo., for the amici curiae States of Hawaii, Oregon, Utah, Wash., and Wyo.
Before SEYMOUR, EBEL and McWILLIAMS, Circuit Judges.
McWILLIAMS, Circuit Judge.
This appeal is from an order of the United States District Court for the District of New Mexico denying the defendants' motion to vacate certain parts of a consent decree.1 Our study of the matter convinces us that the district court did not err in denying defendants' motion to vacate. Accordingly, we affirm.
By a first amended complaint filed July 6, 1978, Dwight Duran, and others, all inmates of the Penitentiary of New Mexico ("PNM"), instituted a class action charging that conditions in the penitentiary violated rights guaranteed them by the United States Constitution and by federal statutes.2 Jurisdiction was based on 28 U.S.C. Sec. 1331. Named as defendants were the following:
1. Hon. Jerry Apodaca, Governor of the State of New Mexico;
2. Charles Becknell, Secretary of Criminal Justice for the State of New Mexico;3
1
3. Edwin Mahr, Director of the Corrections Division for the State of New Mexico;
2
4. Levi Romero, Warden of the Penitentiary of New Mexico;
3
5. Robert Montoya, a Deputy Warden of the Penitentiary of New Mexico; and
4
6. Joseph Lujan, a Deputy Warden of the Penitentiary of New Mexico.4
5
Partial consent agreements, covering visitation, access to legal services, and food services, were signed by the parties in 1979, and orders reflecting the agreements were entered by the court. Those partial consent decrees are not the subject of this appeal. In February, 1980, a bloody riot occurred in the Penitentiary of New Mexico in which twelve correctional officers were taken hostage, thirty-three inmates were killed, at least ninety were seriously injured, and damage to the prison facilities measured in the millions of dollars.
6
In this general setting the parties entered into a consent decree which was approved by the district court on July 14, 1980. This negotiated decree was elaborate, extending well over 100 printed pages, and by its provisions regulated many aspects of the prison operation. In provisions not challenged in the present proceeding, the decree comprehensively regulates the defendants' conduct in the penitentiary in the area of (1) food services, (2) physical facilities, including clothing and personal hygiene items provided to inmates, (3) medical care, (4) mental health care, (5) correspondence between inmates and outsiders, (6) access to legal resources, and (7) attorney-client visitations.
7
On June 12, 1987, the Attorney General for the State of New Mexico filed a motion to vacate seven parts of the 1980 consent decree.5 The motion was filed on behalf of the Hon. Garrey Carruthers, who was then the Governor of New Mexico, and on behalf of the other individuals named as defendants in the amended complaint, or their successors. The motion to vacate was signed not only by the state's Attorney General, but also by private counsel located in Albuquerque, New Mexico and Washington, D.C.
8
Specifically, the defendants moved to vacate the following portions of the 1980 consent decree:
9
1. Paragraph 6 in the July 14, 1980 Agreement, except for the first sentence.6
10
2. Paragraphs 1 through 15 in the "Classification" section of the consent decree.
11
3. Paragraphs 1 through 10, except for the first sentence of paragraph 7 and the second sentence of paragraph 10 and paragraph 11(f) in the "Maximum Security" section of the decree.
12
4. Paragraphs 1 through 11 and 14 through 18 of the "Inmate Discipline" section of the decree.
13
5. Paragraphs 1 through 7, 9 through 12, 14 through 18 and the prologue of the "Inmate Activity" section of the decree.
14
6. Paragraphs 1, 2, 4(A) and 4(M), except as they apply to inmates housed in the PNM-Main, or facilities operated for specialized mental-health care, maximum security or disciplinary segregation, paragraph 8, as it applies to provision of cigarettes and tobacco, and paragraph 11 as such appears in the "Living Conditions" section of the decree.
15
7. Paragraphs 1 through 10, 11(E), 13 through 15, plus the probable cause provision in paragraph 11(D) and the probable cause and reasonable suspicion requirements in paragraph 12 in the "Visitation" section of the decree.7
16
Defendants' basic position is that the portions of the consent decree which they seek to vacate are not directly related to federally created rights nor do they tend to vindicate federal rights. Rather, the defendants argue that at best they may relate to, and vindicate, rights created by the State of New Mexico, and that some others relate only to better penological practices. Such remedies, according to the defendants, are beyond the reach of a federal district court, and should therefore be removed from the consent decree. In this argument, defendants place considerable reliance on Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984), where the Supreme Court held that the Eleventh Amendment prohibited a federal district court from ordering state officials to conform their conduct to state law.
17
At the outset it should be remembered that in the instant case there was no trial. We have a first amended complaint filed July 6, 1978, followed by several partial consent decrees in 1979, culminating in an elaborate and all-encompassing final consent decree on July 14, 1980. Consequently, the first amended complaint should be our starting point.
18
In a "preliminary statement" to the first amended complaint the plaintiffs contend that "the totality of the overcrowding and other conditions at PNM fall beneath standards of human decency, inflict needless suffering on prisoners and create an environment which threatens prisoners' mental and physical well-being and results in physical and mental deterioration and dehabilitation of the prisoners confined therein, which is both unnecessary and penologically unjustifiable." By further prefatory statement, the plaintiffs asked the district court, after hearing, to declare that the totality of prison conditions are unconstitutional under the Constitutions of the United States and New Mexico and in violation of the statutes of the United States and New Mexico.
19
The plaintiffs' first claim for relief was filed under 42 U.S.C. Sec. 1983 to redress injuries suffered by the plaintiffs, and the class they sought to represent, for deprivation by the defendants of rights secured the plaintiffs by the first, sixth, eighth, ninth and fourteenth amendments to the United States Constitution. Specific constitutional rights allegedly violated by the defendant were the rights to be free from cruel and unusual punishment, to due process, to religious freedom, to freedom of expression and association, to have access to courts, to privacy, and to equal protection.
20
A second claim for relief was based on Article II, section 13 of the New Mexico Constitution prohibiting cruel and unusual punishment. It was also alleged in the second claim for relief that the conditions at the penitentiary violated plaintiffs' rights to freedom of speech, religion, equal protection, due process, and other rights guaranteed by Article II, sections 11, 17, and 18 of the New Mexico Constitution.
21
In their third claim for relief, the plaintiffs alleged that the several defendants had failed to exercise their duties to operate the penitentiary in accord with Article II, section 4 of the New Mexico Constitution and N.M.Stat.Ann. Secs. 44-1-38, 42-1-1.1, 42-1-31.2, 42-9-6(G), and 42-9-6(H).
22
The fourth claim for relief was based on provisions of the United States Law Enforcement Assistance Administration, 42 U.S.C. Sec. 3750b, with the plaintiffs claiming that they were third party beneficiaries under contractual arrangements between the Administration and the defendants.
23
Under the section heading "Factual Allegations," the plaintiffs set forth in the first amended complaint the facts underlying all of their several claims for relief. Specifically, plaintiffs alleged that the penitentiary was "grossly and inhumanely overcrowded." According to the first amended complaint, some of the prisoners were forced to live in cells which were approximately 6' X 9' in size, with two or more persons being housed in one cell, and that the majority of the prisoners were housed in dormitories which were overcrowded, filthy and impossible to keep clean. Such overcrowding, plaintiffs alleged, destroyed any possibility of privacy and rendered the quarters unfit for human habitation because of mice, roaches, vermin, clogged toilets, and the like.
24
The plaintiffs also complained about food service, physical and sexual assaults by other prisoners, understaffed professional, educational and security personnel, improper classification of inmates according to their educational, vocational and health needs, lack of meaningful industrial or institutional employment, inadequate recreational activities, unduly restrictive visitation rights and correspondence policies, inadequate medical and dental care, lack of access to legal books and resources, and disciplinary proceedings that were devoid of due process.
25
Based upon the factual allegations, the plaintiffs sought class action certification, a declaratory judgment that the "totality of the conditions" at the penitentiary violated the rights of the plaintiffs established by the constitutions of the United States and of New Mexico and by both federal and local state statutes, and a preliminary and permanent injunction directing the defendants to comply with the various constitutional and statutory mandates. The plaintiffs also sought to require the defendants to pay the costs of the action, including attorneys' fees pursuant to 42 U.S.C. Sec. 1988.
26
As above stated, the parties submitted several partial consent decrees to the district court in 1979, and orders were entered in accord with the matters agreed to by the parties. And on July 14, 1980, a final consent decree was entered by the court reflecting the agreements between the parties. These orders covered such items as correspondence policies and practices, attorney-prisoner visitations, food service, inmate legal access, visitation rights, classification of inmates, living conditions, inmate activity, medical care, mental health care, staffing and training of prison personnel, maximum security classification, and inmate discipline procedure.
27
A prefatory statement in the final consent decree stated that the agreement was voluntarily and mutually agreed upon as a compromise settlement of the dispute between the parties. Another statement in the final agreement between the parties read as follows:
28
Those policy statements and the partial consent decrees on file herein may include specific requirements and procedures beyond what is required by the Constitution of the United States, the Constitution of the State of New Mexico, the federal Civil Rights Act, the New Mexico Torts Claim Act, or any other constitutional, statutory or common law requirement.
29
Article XI of the United States Constitution8 provides as follows:
30
The Judicial power of the United States shall not be construed to extend to any suit in law or in equity, commenced or prosecuted against one of the United States by Citizens of another state or by Citizens or Subjects of any Foreign State.
31
A literal reading of the eleventh amendment would appear to bar only suits against a state by a citizen of another state. However, it has been interpreted to also bar suits against a state brought by its own citizens. Hans v. Louisiana, 134 U.S. 1, 10 S.Ct. 504, 33 L.Ed. 842 (1890). In the instant case, the plaintiffs are citizens of New Mexico, and the State of New Mexico, as such, is not named as a defendant. The defendants are, however, various state officials, and the immunity granted in the eleventh amendment to the state bars a suit against a state official when the suit is one which, in essence, would operate against the state. Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974). However the eleventh amendment does not bar a suit in federal district court against a state official seeking injunctive relief where the state official has allegedly violated federal law. Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908). The Eleventh Amendment does, however, prohibit a federal district court from granting injunctive relief against a state official who has allegedly violated only state law, as opposed to federal law. Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984).
32
In the instant case, the plaintiffs instituted a suit against state officials alleging that they violated, inter alia, the federal constitution and federal statutes. Under Ex parte Young, supra, the defendants under the eleventh amendment are not immune from such a suit. Counsel agrees that those parts of the consent decree setting forth rules and regulations for prison conduct which are directly related to federally protected rights, or tend to vindicate those rights, are proper, and are not here challenged. However, it is counsel's further position that those parts of the consent decrees which defendants seek to have vacated represent remedies that are not directly related to federally protected rights, nor do they tend to vindicate such rights. With the latter proposition, we disagree.
33
Arguably, the provisions which the defendants seek to vacate do relate to, or tend to vindicate, federally protected rights. In addition, the defendants, by the consent decrees, waived their right to make plaintiffs establish at trial that they were entitled to all the relief afforded them by the consent decrees. In this latter connection, the Supreme Court, in Swift & Co. v. United States, 276 U.S. 311, 329, 48 S.Ct. 311, 316, 72 L.Ed. 587 (1928), commented as follows:
34
Here again, the defendants ignore the fact that by consenting to the entry of the decree, "without any findings of fact," they left to the Court the power to construe the pleadings, and in so doing, to find in them the existence of circumstances of danger which justified compelling the defendants to abandon all participation in these businesses, and to abstain from acquiring any interest hereafter.
35
The defendants' first request in their motion to vacate was that paragraph six in the 1980 consent decree be vacated, except for the first sentence thereof. See n. 3 supra. We regard paragraph six to concern procedure, rather than substance. It provides that no change which will lessen the benefits provided by the agreement and decree may be made, and then goes on to outline the procedure to be followed when the defendants proposed to "implement" the decree, namely, 30 days notice to plaintiffs prior to any implementation, granting plaintiffs 15 days to file any objection to a proposed change, requiring the parties to attempt to informally resolve any dispute, and providing for unresolved matters to be resolved by the district court after a hearing wherein the defendants have the burden of showing that the proposed change is just and will not lessen the benefits provided by the decree. These procedural safeguards for the plaintiffs, which the defendants in the consent decree saw fit to grant, attach to all the remedies provided in the decree, many of which defendants concede have a direct relationship to federal rights and which are not challenged in this case. Such being the case, the district court, in our view, did not err in refusing to vacate paragraph six, as requested by the defendants.
36
The other parts of the consent decree which the defendants seek to have vacated relate to classification of inmates, maximum security, inmate discipline, inmate activity, living conditions, and inmate visitation rights. As indicated, it was, and is, the plaintiffs' position that it was the "totality" of the prison conditions, not necessarily any one condition, which violated their federally protected rights. In our view, each of the matters which form the basis of this case is a part of that "totality" and does bear on, or tend to vindicate, federal rights. Further, by the 1980 agreement and the consent decree based thereon, the defendants waived their right to trial. Quite conceivably, if the case had gone to trial plaintiffs' evidence might well have established that the remedies now complained about are indeed tied to federal rights, or at least tend to vindicate such rights.9 But the defendants voluntarily waived their right to insist that the plaintiffs prove their case in open court.
37
We reject the defendants' argument that the Eleventh Amendment dictates the granting of their motion to vacate. As indicated, counsel concedes that the district court had the jurisdiction and authority to grant relief to these plaintiffs against these defendants where prison conditions violated federal rights, be they constitutional or statutory. That concession wipes out much of the defendants' Eleventh Amendment argument.10 In Local No. 93 v. City of Cleveland, 478 U.S. 501, 106 S.Ct. 3063, 92 L.Ed.2d 405 (1986), the Supreme Court in a Title VII case, where a consent decree was entered, spoke as follows:
38
Accordingly, a consent decree must spring from and serve to resolve a dispute within the court's subject matter jurisdiction. Furthermore, consistent with this requirement, the consent decree must "com[e] within the general scope of the case made by the plaintiff ... and must further the objectives of the law upon which the complaint was based.... However, in addition to the law which forms the basis for the claim, the parties' consent animates the legal force of a consent decree...." Therefore, a federal court is not necessarily barred from entering a consent decree merely because the decree provides broader relief than the court could have awarded after trial (citations omitted).
39
As stated, central to defendants' argument is Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984). Such reliance is in our view misplaced. The Supreme Court in Pennhurst held that the Eleventh Amendment prohibited a federal district court from ordering state officials to conform their conduct to state law.11 That is not our case. Here, the district court ordered state officials to conform their conduct to federal law, and the provisions of the decree which the defendants seek to vacate tend to vindicate those rights. And even if they didn't bear directly on federal rights, the provisions sought to be vacated come within the rule of Local No. 93 v. City of Cleveland, supra, i.e., (1) the consent decree springs from and serves to resolve a dispute within the district court's subject matter jurisdiction; (2) the consent decree comes within the "general scope" of the case made by plaintiffs in the first amended complaint; and (3) furthers the objectives upon which the complaint is based, in which event "the parties' consent animates the legal force of a consent decree" and a district court is not barred from entering a consent decree providing broader relief than the court might possibly have been empowered to enter after trial.
40
Kozlowski v. Coughlin, 871 F.2d 241 (2d Cir.1989), resembles our case. In that case state officials appealed from a consent decree which established procedures and sanctions governing the suspension and termination of prison visitation rights, arguing that the sanctions, unlike the procedures, in the decree were unrelated to the underlying due process violation, and that accordingly the Eleventh Amendment barred subject matter jurisdiction. A divided panel of the Second Circuit rejected that argument and spoke as follows:
41
Before entering a consent judgment, the district court must be certain that the decree 1) "spring[s] from and serve[s] to resolve a dispute within the court's subject matter jurisdiction," 2) "come[s] within the general scope of the case made by the pleading," and 3) "further[s] the objectives of the law upon which the complaint was based." Firefighters, 478 U.S. at 525 [106 S.Ct. at 3077] (other citations omitted). These three conditions are sufficient even if the decree contains broader relief than the court could have awarded after trial.
Judgment affirmed.12
1
The district court's Memorandum Opinion and Order was published and appears as Duran v. Carruthers, 678 F.Supp. 839 (D.N.M.1988). The background chronology is fully set forth therein and will not be repeated in great detail here
2
The first amended complaint also set forth in a second and third claim violations of the New Mexico state constitution, and New Mexico state statute. A fourth claim for relief alleged violations of the United States Law Enforcement Assistance Administration, 42 U.S.C. Sec. 3750b. However, none of these claims plays any role in the present proceeding
3
The Secretary of Criminal Justice is appointed by the Governor
4
All defendants were represented in the district court by the Attorney General for New Mexico
5
An earlier motion to vacate the 1980 consent decree in its entirety was withdrawn
6
6. Other than in times of emergency, changed circumstances may, in the future, justify some changes in this agreement and the policies attached hereto and the partial consent decrees on file herein. No change or changes may be made which will lessen the benefits provided by the agreement and the policies attached hereto and the partial consent decrees on file herein. Notice will be given to the lawyers for the Plaintiffs at least thirty (30) days prior to the proposed implementation date. Said notice will contain the proposed change or changes and the reasons therefore. Counsel for the Plaintiffs will ascertain whether, in their opinion, the proposed change or changes in any way lessen the benefits provided by this agreement or the policies attached hereto and the partial consent decrees on file herein. If so, they will notify Defendants of their objections and the reasons therefore within fifteen (15) days. Efforts will be made to informally resolve the matter. If the dispute cannot be resolved, it will be submitted to the court. The burden will then be on the Defendants to justify that the change or changes should be made and will not lessen the benefits provided by the agreement and the policies attached hereto and the partial consent decrees on file herein before the change or changes will be allowed
7
In greater detail, the contested provisions (1) requires appellants to follow specified procedures and criteria in classifying inmates to different security levels, and severely restricts both the amount of time and the circumstances in which they may use the "maximum security" classification; (2) sets out the exclusive list of actions that may form the basis for inmate discipline, as well as the maximum penalties; (3) mandates that eight hours of vocational or educational activity per day be made available to each inmate; (4) prohibits, in all prisons and under all circumstances, the housing of two inmates in the same cell; and (5) comprehensively regulates the prison policies on visitations, including the types of searches that may be made in relation to such visits
8
The eleventh amendment was adopted in response to Chisholm v. Georgia, 2 U.S. 4A (1793) which allowed a suit by two South Carolinians, on behalf of a British subject, against the State of Georgia
9
Such a "totality of the circumstances" approach was approved by the Supreme Court in Hutto v. Finney, 437 U.S. 678, 685-89, 98 S.Ct. 2565, 2570-73, 57 L.Ed.2d 522 (1978)
10
Indeed, there is ample authority for finding that each of the contested sections vindicates a federal right. In Ramos v. Lamm, 639 F.2d 559 (10th Cir.1980), cert. denied, 450 U.S. 1041, 101 S.Ct. 1759, 68 L.Ed.2d 239 (1981), this court reaffirmed that there is a constitutional right to be reasonably protected from constant threats of violence and sexual assaults from other prisoners. More specifically, this court indicated that, although such a remedy was not warranted under the facts in Ramos, there may be a point where motility, classification, and idleness could constitute an actual violation of the eighth amendment. Id. at 566-67
Similarly, the provisions regarding inmate visitation do not go beyond what could be ordered by a court. See Pell v. Procunier, 417 U.S. 817, 94 S.Ct. 2800, 41 L.Ed.2d 495 (1974). Indeed, in 1984 the Department of Corrections' own analysis of the visitation provisions reached the conclusion that the decree did not go beyond those visitation rights that could be constitutionally imposed in its absence. Attachment A to Plaintiff's Supplemental Response to Defendant's Motion to Vacate or Modify the Judgment, filed 1/6/86.
All of the other contested provisions may be similarly justified. See Rhodes v. Chapman, 452 U.S. 337, 101 S.Ct. 2392, 69 L.Ed.2d 59 (1981) (overcrowding may be a constitutional violation); Ruiz v. Estelle, 679 F.2d 1115 (5th Cir.1952) (court may impose prophylactic rules to prevent repetition of constitutional violations).
However, it must be noted that the contested provisions should not be viewed in isolation, but rather as part of the "totality of the circumstances" existing at PNM. Hutto v. Finney, 437 U.S. 678, 98 S.Ct. 2565, 57 L.Ed.2d 522 (1978).
11
In Pennhurst, judgment was entered after a "lengthy trial" and did not, as here, involve a consent decree
12
The present appeal concerns only the propriety of the district court's order denying defendants' motion to vacate parts of the 1980 consent decree. We are not here concerned with defendants' right, if any, to have "equitable modification" of that decree
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94 F.3d 732w
Michael D. VEILLEUX, Plaintiff, Appellant,v.Jeffrey PERSCHAU, Detective for the Manchester PoliceDepartment, Defendant, Appellee.
No. 95-2297.
United States Court of Appeals,First Circuit.
Heard May 6, 1996.Decided Aug. 30, 1996.
NOTE: THE COURT HAS WITHDRAWN THIS OPINION
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386 S.C. 393 (2000)
688 S.E.2d 136
NORMANDY CORPORATION, Respondent,
v.
SOUTH CAROLINA DEPARTMENT OF TRANSPORTATION, Appellant.
No. 4640.
Court of Appeals of South Carolina.
Heard October 13, 2009.
Decided December 17, 2009.
Rehearing Denied January 20, 2010.
*398 Clifford O. Koon, Jr., Paul D. de Holczer, and Robert L. Brown, all of Columbia, for Appellant.
Howell V. Bellamy, Jr., and Robert S. Shelton, both of Myrtle Beach, for Respondent.
GEATHERS, J.
This declaratory judgment action stems from a condemnation action instituted by the South Carolina Department of Transportation (Department) to acquire approximately six acres of land from the Normandy Corporation (Normandy) for the construction of the Carolina Bays Parkway in Horry County. After concluding that the Department was undervaluing the condemned property on the basis that the property was located on a parcel containing wetlands, Normandy sought an order declaring whether any of the wetlands on the parcel fell within the jurisdiction of the Clean Water Act, 33 U.S.C. § 1251 et seq. (CWA), and the impact, if any, of the CWA on the parcel as of October 13, 2000, the date the condemnation action was filed. The master-in-equity ruled that, as of October 13, 2000, none of the wetlands on the parcel fell within the jurisdiction of the CWA and that the wetlands could legally be drained. The Department now seeks review of the master's order. We affirm.
FACTUAL/PROCEDURAL BACKGROUND
The parcel of property at issue in this case is located in Horry County near the intersection of Highway 9 and Highway 57. It consists of approximately 88.59 acres. Normandy acquired the parcel in 1996 in a bankruptcy proceeding.
In 1997, Loris Hospital expressed some interest in purchasing a portion of the parcel from Normandy. In connection with the proposed sale, Normandy hired Dr. Paul Booth to *399 perform a wetlands delineation. Dr. Booth delineated seventy-two acres of the parcel and concluded that approximately forty-six of those acres were wetlands. According to Marguerite McClam, a licensed civil engineer who was hired by the Department in connection with the Carolina Bays Parkway project, the United States Army Corps of Engineers (Corps) subsequently "certified" Dr. Booth's delineation and the certification was valid for five years.
At the time that Dr. Booth performed his delineation, Normandy had done nothing significant to the parcel. Ditches around the perimeter of the parcel existed, but they had not been maintained and their flow was blocked by beaver dams.
Ultimately the proposed sale to Loris Hospital was not completed, and, sometime after Dr. Booth's delineation, Normandy cut the timber on the parcel, raked the parcel, "cleared it up," and planted a pine plantation thereon. Additionally, in 1998, Normandy installed Christmas tree ditches on the parcel. Normandy then began the process of having the parcel rezoned from mobile home residential to planned unit development for commercial purposes. A redelineation was not required, and was not performed, in connection with that process, which was completed in April 2000.
On October 13, 2000, the Department filed a Condemnation Notice with respect to Normandy's parcel. According to Normandy's declaratory judgment complaint, the Department sought to acquire approximately six acres of the parcel.[1] The portion of the parcel condemned by the Department provided all of the parcel's frontage and access to Highway 9.[2]
In connection with the condemnation action, the Department retained Gordon Murphy of the LPA Group to prepare a "wetland delineation package request" for the Corps. Murphy visited the site in 2001. Murphy's delineation was limited to the "study corridor," which consisted of 2.7 acres.
Sometime in 2001, the Department submitted an offer to Normandy for the portion of the parcel subject to the condemnation action. The offer was based upon the Department's *400 appraisal, which estimated that 50% to 75% of the parcel was comprised of wetlands. After receiving the Department's appraisal, Normandy asked Norman Boatwright to perform a study to determine the amount of wetlands existing on the parcel. Boatwright's study was completed in 2001.
Normandy subsequently asked Craig Turner to perform a more comprehensive wetlands study. Turner installed eight groundwater monitoring wells across the parcel to document water levels and rates of drainage. The wells were automated to read water levels once daily. Turner's study, which began in December 2003 and lasted until October 2004, found that in addition to the approximately 26 acres that had been delineated uplands by Dr. Booth, another 47.46 acres of the parcel had been converted to uplands as a result of "the drainage system installed in 1998." Thus, Turner's study concluded that roughly 73.5 acres of the 88.59 acres he delineated were uplands (approximately 83%). According to Michael Todd Smith, a partial owner of Normandy, Turner's study was "almost identical" to Boatwright's.
In December 2003, Normandy filed its declaratory judgment action in circuit court. In its complaint, Normandy argued that the Department was undervaluing the condemned portion of the parcel based upon its erroneous assumption that 50% to 75% of the parcel was comprised of wetlands falling within the jurisdiction of the CWA. Specifically, Normandy contended that "the prior accumulation of water" relied upon by the Department in making its appraisal was largely corrected when the parcel was timbered and drainage ditches were installed thereon. Normandy therefore sought a declaration by the court as to whether any wetlands existing on the parcel were jurisdictional (i.e., within the jurisdiction of the CWA) and the impact, if any, of the CWA on the parcel as of October 13, 2000, the condemnation date.
In February 2004, the Department filed a motion to dismiss pursuant to Rule 12(b)(7), SCRCP, seeking dismissal of the declaratory judgment action on the grounds that Normandy had failed to join the South Carolina Department of Health and Environmental Control (DHEC) and the Corps as parties to the action.[3] After conducting a hearing on the matter, *401 Judge B. Hicks Harwell denied the Department's motion in an order issued October 27, 2004. Judge Harwell concluded that the circuit court did not have jurisdiction over DHEC or the Corps because neither entity had taken any type of final agency action with respect to the parcel. Moreover, with regard to DHEC, Judge Harwell ruled that "[b]asically, the only ability DHEC has to regulate wetlands derives from its review power of a Federal permit application under the CWA."
On January 25, 2006, by mutual agreement of the parties, the declaratory judgment action was stricken from the circuit court's docket with leave to restore pursuant to Rule 40(j), SCRCP. That very same day, the matter was restored and referred to the master pursuant to a Consent Order to Restore and Refer (Order of Reference) issued by the circuit court. A trial was subsequently held before the master on August 27, 2007.
At trial, Normandy introduced the results of Turner's wetlands study. Additionally, Turner, who was qualified as an expert in the fields of soil science and wetland delineation, testified that it was "reasonable and probable" that his study accurately reflected the wetlands status of the parcel as of the condemnation date. He explained that the Christmas tree ditches, which were installed prior to the condemnation date, were "very effective" at pulling water out of wetlands. Turner further testified that the approximately fifteen acres of wetlands remaining on the parcel were not, in his opinion, jurisdictional.
In an order dated November 27, 2007, the master found that Turner's study correctly stated the status of the property as of October 13, 2000. He further held that, as of October 13, 2000, the parcel "contained 73.5 acres of uplands; contained no wetlands within the jurisdiction of the Clean Water Act; and contained 15 acres of wetlands that could be legally drained." The Department subsequently filed a motion to *402 alter or amend pursuant to Rule 59(e), SCRCP. The master denied the motion, and this appeal followed.
ISSUES ON APPEAL
1. Did the master lack subject matter jurisdiction to determine the amount of jurisdictional wetlands existing on the parcel?
2. Did the master err by concluding that the parcel contained no wetlands within the jurisdiction of the CWA?
3. Did the master err by concluding that the parcel contained fifteen acres of wetlands that could legally be drained?
STANDARD OF REVIEW
"A suit for declaratory judgment is neither legal nor equitable, but is determined by the nature of the underlying issue." City of Hartsville v. S.C. Mun. Ins. & Risk Fin. Fund, 382 S.C. 535, 543, 677 S.E.2d 574, 578 (2009) (quoting Felts v. Richland County, 303 S.C. 354, 356, 400 S.E.2d 781, 782 (1991)). Condemnation actions are actions at law. S.C. Pub. Serv. Auth. v. Arnold, 287 S.C. 584, 586, 340 S.E.2d 535, 537 (1986). Actions involving the interpretation of statutes, such as the CWA, are also actions at law. See Auto Owners Ins. Co. v. Rollison, 378 S.C. 600, 606-07, 663 S.E.2d 484, 487 (2008) ("[B]ecause this action involves the interpretation of a contract and statutes, it is an action at law."); In re Estate of Timmerman, 331 S.C. 455, 458-59, 502 S.E.2d 920, 921 (Ct. App.1998) (holding that an action concerning the application of the omitted spouse statute was an action at law). In an action at law tried without a jury, the trial court's findings will not be disturbed on appeal unless they are found to be without evidence reasonably supporting them. Stanley v. Atlantic Title Ins. Co., 377 S.C. 405, 409, 661 S.E.2d 62, 64 (2008).
LAW/ANALYSIS
I. Subject Matter Jurisdiction
The Department contends that the master lacked subject matter jurisdiction to issue a ruling as to the amount of *403 jurisdictional wetlands existing on the parcel as of the condemnation date. We disagree.
"Subject matter jurisdiction is the power to hear and determine cases of the general class to which the proceedings in question belong." Dema v. Tenet Physician Services-Hilton Head, Inc., 383 S.C. 115, 120, 678 S.E.2d 430, 433 (2009). The jurisdiction of a court over the subject matter of a proceeding is determined by the Constitution and the laws of the state. Duckett v. Goforth, 374 S.C. 446, 456, 649 S.E.2d 72, 77 (Ct.App.2007). Issues involving subject matter jurisdiction may be raised at any time, including on appeal. Arnal v. Fraser, 371 S.C. 512, 517 n. 2, 641 S.E.2d 419, 421 n. 2 (2007).
A. Master's Authority to Issue Ruling
Under the Eminent Domain Procedure Act, S.C.Code Ann. §§ 28-2-10 to 28-2-510 (2007), a circuit court has the power to hear a condemnation action. See, e.g., S.C.Code Ann. § 28-2-30(8) (2007) (defining "court" as "a circuit court of this State"). Additionally, pursuant to the Uniform Declaratory Judgments Act, a circuit court has the authority to preside over a declaratory judgment action. See S.C.Code Ann. § 15-53-20 (2005) ("Courts of record within their respective jurisdictions shall have power to declare rights, status and other legal relations whether or not further relief is or could be claimed."). Equity courts are considered divisions of the circuit court. S.C.Code Ann. § 14-11-15 (Supp. 2008). The circuit court may, upon application of any party or upon its own motion, "direct a reference" of some or all of the causes of action in a case to a master-in-equity. Rule 53(b), SCRCP. When a reference is made, the master must enter final judgment as to the causes of action referred. S.C.Code Ann. § 14-11-85 (Supp. 2008). Once an action is referred, the master possesses all power and authority that a circuit judge sitting without a jury would have in a similar matter. Rule 53(c), SCRCP.
Here, the present case is a declaratory judgment action that was commenced in connection with a condemnation action.[4] In its complaint for declaratory judgment, Normandy *404 sought a declaration regarding, inter alia, "whether the wetlands, if any, are jurisdictional or nonjurisdictional as of the date of the filing of the condemnation action." The Order of Reference did not limit the issues to be addressed by the master; rather, it referred "the case" to him. Moreover, the Order of Reference authorized the master to "take such testimony and make such findings [of] fact and conclusion[s] of law" as he deemed appropriate and to "enter a final judgment."
Based on the foregoing, we conclude that the issue of the amount of jurisdictional wetlands existing on the parcel as of the condemnation date was properly before the master. The issue was plainly pled by Normandy in its declaratory judgment complaint. Additionally, the circuit court, acting within its statutory authority, referred the entire declaratory judgment action to the master without any limitations.
Furthermore, we find that the master was authorized to make a ruling regarding the amount of jurisdictional wetlands existing on the parcel as of the condemnation date. Under South Carolina's Constitution, private property shall not be taken for public use without "just compensation" first being made for the property. S.C. Const. art. I, § 13. For the purpose of fixing just compensation, evidence which is relevant, material and competent may be considered. S.C.Code Ann. § 28-2-340(A) (2007). In addition to the value of the property to be taken, any diminution in the value of the landowner's remaining property and any benefits derived from the proposed project may be taken into account in determining just compensation. S.C.Code Ann. § 28-2-370 (2007).
Also, "[i]t is well settled that compensation is not limited to the value of the property as used by the owner at the time of condemnation." City of North Charleston v. Claxton, 315 S.C. 56, 60-61, 431 S.E.2d 610, 613 (Ct.App.1993). "Rather, the owner is entitled to the value of the property under its most advantageous or profitable use, including any use reasonably anticipated in the near future." Id. at 61, 431 S.E.2d at 613. Thus, the potential of property may be considered as an element affecting value, so long as the potential is "reasonably probable." Carolina Power & Light Co. v. Copeland, 258 S.C. 206, 215, 188 S.E.2d 188, 192 (1972).
*405 Importantly, the value of real property is "commonly limited both by physical factors and by legal or governmentally imposed restrictions." 19 Am.Jur. Proof of Facts 3d 613 § 1 (1993). "Legal or governmentally imposed restrictions include covenants, easements, zoning restrictions, environmental regulations, subdivision ordinances, licenses and permits, floodplain restrictions, coastal and wetland restrictions, and other laws, statutes, and ordinances." Id. (emphasis added).
Without a doubt, the amount of jurisdictional wetlands existing on a parcel of property can have a considerable impact on the value of that parcel. See id. at § 5 (stating that the impact of wetlands on land valuation is "significant").[5] If a wetland is jurisdictional and thus subject to the CWA, then the property owner is required to obtain a permit from the Corps in order to take certain actions, such as placing fill material into the wetland. See 33 U.S.C. § 1344(a) (2000). Obtaining a permit from the Corps is no small matter. As Justice Scalia has explained:
The burden of federal regulation on those who would deposit fill material in locations denominated "waters of the United States" is not trivial. . . . The average applicant for an individual permit spends 788 days and $271,596 in completing the process, and the average applicant for a nationwide permit spends 313 days and $28,915not counting costs of mitigation or design changes. . . . These costs cannot be avoided, because the Clean Water Act "impose[s] criminal liability," as well as steep civil fines, "on a broad range of ordinary industrial and commercial activities."
Rapanos v. United States, 547 U.S. 715, 721, 126 S.Ct. 2208, 165 L.Ed.2d 159 (2006) (internal citations omitted).
Therefore, because the amount of jurisdictional wetlands existing on a tract of land has a significant impact on the value of that tract, evidence regarding jurisdictional wetland amounts is relevant and material to fixing just compensation. Accordingly, we conclude that the master was authorized to make a ruling as to the amount of jurisdictional wetlands *406 existing on the parcel as of the condemnation date so that the just compensation owed to Normandy could ultimately be determined. Cf. State v. St. Charles Airline Lands, Inc., 871 So.2d 674 (La.Ct.App.2004) (holding that the trial court was allowed to consider, for the purpose of determining just compensation in a condemnation action, expert testimony regarding whether the owner of the condemned property would have received permits to develop wetlands existing on the property).
B. Corps' Authority to Make Jurisdictional Determinations
The Department, however, argues that because federal law vests the Corps with the authority to determine whether land consists of jurisdictional wetlands, the master lacked subject matter jurisdiction to determine the amount of jurisdictional wetlands existing on the parcel. We disagree.
The Department misconstrues the scope of the master's decision. The master's decision, which was precipitated by a condemnation action, was made for the limited purpose of resolving issues that bore on the value of the condemned property as of the condemnation date. Although the Corps has the authority to make jurisdictional wetlands determinations with respect to issuing permits and approved jurisdictional determinations (JDs) under federal law,[6] the master's decision does not purport to grant a permit or an approved JD to Normandy. Therefore, the master's decision does not improperly infringe upon the jurisdiction of the Corps. To hold otherwise would necessitate the Corps' involvement in every condemnation action in which the amount of jurisdictional wetlands on the condemned property was in dispute.
The Department further contends that an approved JD issued by the Corps with respect to Dr. Booth's 1997 delineation was "the final word" regarding the amount of jurisdictional wetlands existing on the parcel and that Normandy's failure to adhere to the appeals process set forth in *407 33 C.F.R. §§ 331.1 to 331.12 precludes it from now utilizing the state court system to "overrule" the Corps determination.
For several reasons, the Department's argument is unpersuasive. First, the Department's argument is at odds with section 28-2-440 of the Eminent Domain Procedure Act, which provides that "[i]n all condemnation actions, the date of valuation is the date of the filing of the Condemnation Notice." S.C.Code Ann. § 28-2-440 (2007) (emphasis added). Here, Normandy presented evidence showing that, between the time of Dr. Booth's delineation and the filing of the Condemnation Notice, Normandy installed Christmas tree ditches on the parcel that reduced the amount of wetlands existing thereon.[7] To simply disregard that evidence, as the Department urges, would be inconsistent with section 28-2-440.
Second, the record provided by the Department does not demonstrate what the Corps' conclusions were with regard to the amount of jurisdictional wetlands existing on the parcel. The approved JD is not in the record. Moreover, while McClam testified that the Corps "certified" Dr. Booth's delineation, Dr. Booth's delineation is not in the record either. Furthermore, although there is evidence that Dr. Booth determined that approximately forty-six acres of the parcel were wetlands, the record does not indicate how many of those acres he found to be jurisdictional under the CWA. Thus, the Department has failed to meet its burden of providing this Court with a sufficient record upon which to make its decision. See Helms Realty, Inc. v. Gibson-Wall Co., 363 S.C. 334, 339, 611 S.E.2d 485, 487-88 (2005) (appellant has burden of providing sufficient record).
Third, to the extent that the Department is arguing that the doctrine of res judicata or collateral estoppel *408 barred the master from making a jurisdictional determination as to the parcel's wetlands, the Court notes that "the application of res judicata and collateral estoppel principles are not matters of subject matter jurisdiction." Mr. T v. Ms. T, 378 S.C. 127, 133, 662 S.E.2d 413, 416 (Ct.App.2008). Rather, "[t]he defense of preclusion by a former judgment is an affirmative defense which ordinarily must be specially pleaded." Wagner v. Wagner, 286 S.C. 489, 491, 335 S.E.2d 246, 247 (Ct.App.1985). Here, the Department did not specifically raise the issue of the preclusive effect of the approved JD, and the master did not rule on the issue. Therefore, the issue cannot be raised on appeal. See Duckett, 374 S.C. at 465, 649 S.E.2d at 82 (party cannot raise defense of collateral estoppel for the first time on appeal); S.C. Dep't of Transp. v. First Carolina Corp. of S.C., 372 S.C. 295, 301-02, 641 S.E.2d 903, 907 (2007) (to be preserved for appellate review, issue must have been: (1) raised to and ruled upon by the trial court, (2) raised by the appellant, (3) raised in a timely manner, and (4) raised to the trial court with sufficient specificity).
Finally, the above-referenced federal regulations cited by the Department did not become effective until March 28, 2000. See Final Rule Establishing an Administrative Appeal Process for the Regulatory Program of the Corps of Engineers, 65 Fed. Reg. 16486 (March 28, 2000).[8] Moreover, the regulations expressly state that "[a]ffected parties . . . may not appeal approved JDs dated on or before March 28, 2000." 33 C.F.R. § 331.6(e) (2000). Although there is nothing in the record that shows when the Corps certified Dr. Booth's delineation, as noted above, Dr. Booth's delineation was completed in 1997. Thus, it is questionable whether the regulations were in effect at the time that Dr. Booth's delineation was certified.[9]
*409 C. Federal preemption
The Department also argues that the CWA preempted the master from making a determination regarding the amount of jurisdictional wetlands existing on the parcel as of the condemnation date. We disagree.
Courts should not lightly infer preemption. Int'l Paper Co. v. Ouellette, 479 U.S. 481, 491, 107 S.Ct. 805, 93 L.Ed.2d 883 (1987). Federal law may preempt state law in three ways: (1) Congress may expressly define the extent to which it preempts state law; (2) Congress may occupy a field of regulation, "impliedly" preempting state law; or (3) a state law may be preempted to the extent it "conflicts" with federal law. Prof'l Samplers, Inc. v. S.C. Employment Sec. Comm'n, 334 S.C. 392, 397, 513 S.E.2d 374, 377 (Ct.App.1999). As to the third method, "conflict arises when either compliance with both laws is impossible or when the state law frustrates the federal purpose and creates an obstacle to the fulfillment of federal objectives." Id.
Here, the Department has not pointed to any provision of the CWA that expressly prohibits state courts from making wetlands jurisdictional determinations for the purpose of valuing a property in a condemnation action. Moreover, the Department has not cited, and we have not found, any cases that hold that the CWA "impliedly" precludes state courts from making such determinations. Although courts have held that the CWA preempts state regulation of certain environmental matters,[10] the master's decision does not regulate conduct; rather, it merely rules on the status of the parcel as of the condemnation date. Likewise, while courts have held *410 that the CWA preempts state nuisance law in certain instances,[11] the present case does not involve a nuisance action.
Furthermore, the Department has failed to establish that the master's decision "conflicts" with the CWA. The Department has not contended that compliance with both the master's order and the CWA is impossible. Moreover, the master's decision would not be binding on the Corps in any future permitting matter given that it ruled on the wetlands status of the parcel as of October 13, 2000 (over 9 years ago) and that the Corps was neither a party to the declaratory judgment action nor in privity with any party.[12] Thus, the master's decision does not frustrate a federal purpose or create an obstacle to the fulfillment of federal objectives.
For these reasons, we conclude that the CWA did not preempt the master from making a determination as the amount of jurisdictional wetlands existing on the parcel as of the condemnation date.
II. Jurisdiction of CWA over Wetlands on Parcel
Next, the Department contends that the master erred by concluding that the parcel consisted of no wetlands within the jurisdiction of the CWA. We disagree.
*411 Section 404(a) of the CWA regulates the discharge of dredged or fill material into "navigable waters." 33 U.S.C. § 1344(a) (2000). Under the CWA, the term "navigable waters" means "the waters of the United States, including the territorial seas." 33 U.S.C. § 1362(7) (2000). In its regulations, the Corps has defined the phrase "waters of the United States" to include, among other things, waters susceptible to use in interstate commerce, tributaries thereto, and wetlands that are "adjacent to" such waters and tributaries. See 33 C.F.R. § 328.3(a) (2000).
Numerous cases have addressed the meaning of the phrase "waters of the United States" and the validity of the Corps' regulatory definition of that term. The U.S. Supreme Court first tackled these issues in United States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 106 S.Ct. 455, 88 L.Ed.2d 419 (1985), a case involving wetlands that abutted a navigable waterway. In that case, the Court upheld the Corps' construction of Section 404 as extending federal jurisdiction to wetlands adjacent to the "waters of the United States." Noting that choosing where "water ends and land begins" was "no easy task,"[13] the Court concluded that it was "reasonable for the Corps to interpret the term `waters' to encompass wetlands adjacent to waters as more conventionally defined." Id. at 133, 106 S.Ct. 455. In making its ruling, the Court did not express any opinion on "the question of the authority of the Corps to regulate discharges of fill material into wetlands that are not adjacent to bodies of open water." Id. at 131 n. 8, 106 S.Ct.455.
Since Riverside Bayview, the U.S. Supreme Court has issued two major decisions construing the phrase "navigable waters," both of which were decided after the Department filed its Condemnation Notice in October of 2000: Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers, 531 U.S. 159, 121 S.Ct. 675, 148 L.Ed.2d 576 (2001) (SWANCC) and Rapanos v. United States, 547 U.S. 715, 126 S.Ct. 2208, 165 L.Ed.2d 159 (2006).
A. SWANCC
In SWANCC, the U.S. Supreme Court considered the issue of whether wholly intrastate ponds are subject to federal *412 jurisdiction under Section 404(a) of the CWA based upon the presence of migratory birds. In that case, the owners of the property containing the ponds contacted the Corps to determine if a federal landfill permit under Section 404(a) of the CWA was required for their proposed use of the property as a disposal site for nonhazardous solid waste. Upon being informed that a number of migratory bird species had been observed at the site, the Corps asserted jurisdiction over the site pursuant to 33 C.F.R. § 328.3(a)(3) (1999) and its "Migratory Bird Rule."[14] Although the petitioner made several proposals to mitigate the likely displacement of the migratory birds, the Corps refused to issue a § 404(a) permit. On appeal of the matter, the U.S. Supreme Court concluded that the "Migratory Bird Rule" was not fairly supported by the CWA and that federal jurisdiction did not extend to "nonnavigable, isolated, intrastate waters." SWANCC, 531 U.S. at 167, 170-72, 121 S.Ct. 675.
B. Rapanos
Rapanos was a consolidation of two Sixth Circuit cases: Rapanos v. United States and Carabell v. United States. In Rapanos, the Supreme Court addressed whether four Michigan wetlands, which were located near ditches or man-made drains that eventually "empt[ied] into" navigable waters, constituted "waters of the United States" within the meaning of the CWA. Rapanos, 547 U.S. at 729, 126 S.Ct. 2208. The Court was unable to reach a consensus in the case; the decision was 4-1-4 and included a plurality opinion by Justice Scalia, a concurring opinion by Justice Kennedy, and a dissenting opinion by Justice Stevens. As noted below, because the plurality's opinion and Justice Kennedy's concurrence each set forth a different test for determining CWA jurisdiction, courts interpreting the Rapanos decision have disagreed as to how to apply it.
1. Plurality's Opinion
The plurality concluded that two findings were required to establish that the wetlands at issue were covered under the *413 CWA. First, it was necessary to find that the channel adjacent to the wetland was a "wate[r] of the United States," which the plurality construed as "a relatively permanent body of water connected to traditional interstate navigable waters." Rapanos, 547 U.S. at 742, 126 S.Ct. 2208.[15] According to the plurality, the phrase "waters of the United States" did not include "channels through which water flows intermittently or ephemerally, or channels that periodically provide drainage for rainfall." Id. at 739, 126 S.Ct. 2208.
Second, it was essential to find that the wetland had a "continuous surface connection" with the adjacent channel, "making it difficult to determine where the `water' ends and the `wetland' begins." Id. at 742, 126 S.Ct. 2208. The plurality explained that "[a]n intermittent, physically remote hydrologic connection" would be inadequate to meet this prong of its test. See id.
2. Justice Kennedy's Concurrence
Justice Kennedy set forth a different test for analyzing whether the wetlands at issue in Rapanos fell under the jurisdiction of the CWA. Seizing upon language contained in SWANCC,[16] he stated that "the Corps' jurisdiction over wetlands depends upon the existence of a significant nexus between the wetlands in question and navigable waters in a traditional sense." Id. at 779, 126 S.Ct. 2208. He further explained that:
[W]etlands possess the requisite nexus, and thus come within the statutory phrase "navigable waters," if the wetlands, either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other covered waters more readily understood as "navigable." When, in contrast, wetlands' effects on water quality are speculative or insubstantial, *414 they fall outside the zone fairly encompassed by the statutory term "navigable waters."
Id. at 780, 126 S.Ct. 2208.
There has been disagreement among courts as to how to apply the fragmented Rapanos decision. Compare N. Cal. River Watch v. City of Healdsburg, 496 F.3d 993, 999-1000 (9th Cir.2007), cert. denied, ___ U.S. ___, 128 S.Ct. 1225, 170 L.Ed.2d 61 (2008) (holding that Justice Kennedy's test provides the controlling rule for determining jurisdiction) with U.S. v. Johnson, 467 F.3d 56, 60-66 (1st Cir.2006), cert denied, 552 U.S. 948, 128 S.Ct. 375, 169 L.Ed.2d 260 (2007) (holding that jurisdiction exists if either the plurality's test or Kennedy's test is met). In the present case, it is unnecessary for us to take a position on this issue because we conclude that, under either the plurality's test or Justice Kennedy's test, the wetlands on the parcel are nonjurisdictional.
C. Evidence Presented at Trial
I. Normandy
At trial, Normandy introduced the results of Turner's study, which found that roughly fifteen acres of the 88.59-acre parcel consisted of wetlands (approximately 17%). The study also concluded that those fifteen acres of wetlands could be converted to uplands through the installation of additional ditching. Although Turner did not begin his study until 2003, he testified that it was "reasonable and probable" that his study accurately reflected the wetlands status of the parcel as of October 13, 2000, the condemnation date. Turner's testimony was buttressed by that of Normandy's owner, Smith, who testified that the findings in Turner's study were "almost identical" to those contained in the study conducted by Boatwright in 2001.
As to whether the wetlands on the parcel were jurisdictional, Turner testified that, in his opinion, none of the wetlands were jurisdictional. As support for his opinion, Turner testified that the closest traditional navigable water to the parcel was the Waccamaw River, which he estimated was five to six miles away. He also testified that the Christmas tree ditches installed on the parcel "dry up quite radically" and that, even in abnormally heavy periods of rainfall, they did not have *415 significant flow for a continuous three-month period but rather were "bone dry." Finally, Turner testified that, in his opinion, neither any of the ditches nor any of the areas that still met the wetlands criteria had a significant nexus with a traditional navigable water.
2. The Department
The Department relied primarily upon the testimony of McClam, who was qualified as an expert in civil engineering and hydrology. In contrast to the evidence presented by Normandy, McClam testified that approximately 56% of the parcel was wetlands. However, she acknowledged that her opinion was based upon Murphy's delineation, which covered only 2.7 acres of the parcel, and Dr. Booth's delineation, which was conducted before Normandy installed the Christmas tree ditches. Moreover, on cross-examination, McClam admitted that she did not personally conduct any tests on the parcel, and that, while others working on the Carolina Bays Parkway project did do some soil borings, their work was limited to the study corridor.
McClam also testified that it was her opinion that the wetlands portion of the parcel was jurisdictional "based upon its connection to canals and tributaries." However, McClam never specifically testified that the wetlands on the parcel had a "continuous surface connection" with any of the canals or tributaries she mentioned. Nor did McClam expressly testify that a "significant nexus" existed between the wetlands on the parcel and a traditional navigable water. Furthermore, while McClam testified that she visited the parcel, she did not testify that she inspected the entire parcel, even when asked by Normandy's counsel.
McClam further testified that "the nearest water course" to the parcel was Bellamy Branch and that Bellamy Branch ultimately led to the Waccamaw River. However, McClam failed to provide specific testimony as to the proximity of Bellamy Branch to the parcel.
D. Analysis
Where an expert's testimony is based upon facts sufficient to form the basis for an opinion, the trier of fact determines its probative value. Small v. Pioneer Machinery, *416 Inc., 329 S.C. 448, 470, 494 S.E.2d 835, 846 (Ct.App.1997). "This Court cannot judge the credibility or weight of the testimony on appeal." Id.
Here, the evidence in the record adequately supports the master's conclusion that, as of October 13, 2000, the parcel contained no wetlands within the jurisdiction of the CWA. Turner's testimony demonstrated that the wetlands did not have a "continuous surface connection" with any "relatively permanent" body of water and that the Rapanos plurality's test for jurisdiction was therefore not met. Turner's testimony also showed that there was not a significant nexus between the wetlands and a traditional navigable water and that Justice Kennedy's jurisdictional test was not met either. Although McClam's testimony contradicted some of the testimony presented by Turner, she did not investigate the parcel as thoroughly as Turner did. Therefore, it was reasonable for the master to rely on Turner's testimony rather than McClam's.
The Department nonetheless contends that Turner's testimony failed to sufficiently establish that the wetlands were nonjurisdictional. Specifically, the Department points to Turner's testimony during cross-examination in which Turner admitted that he did not know whether a certain canal on the parcel connected to the Waccamaw River. The Department claims that this information was crucial to determining whether the wetlands were covered under the CWA.
However, there is no clear evidence in the truncated record that the canal in question had any connection to the wetlands portion of the parcel.[17] Indeed, if anything, the record appears to show that the canal was not connected to the parcel's wetlands. For instance, during direct examination, Turner testified that there was a canal located in the uplands area of the parcel. He also testified that the only ditch on the parcel that kept a substantial nexus with the canal was a ditch coming off the Carolina Bays Parkway (Highway 31) into which the Department had placed water from the Parkway. Turner further testified that none of the areas that still met the wetland criteria were adjacent to that ditch. Thus, even if *417 the canal could be construed as a tributary to the Waccamaw River, Turner's testimony seems to support the conclusion that the canal did not have any sort of connection or nexus to the wetlands on the parcel.
The Department also contends that Turner acknowledged that, on the date of condemnation, the parcel's wetlands may have been connected to tidal waters downstream.[18] Specifically, the Department points to the following exchange between Normandy's counsel and Turner:
Q: And based on that, are any of the areas that still meet the wetland criteria shown on Exhibit 4, in your expert opinion, under the jurisdiction of the federal government?
A: No sir, they're not because I don't believe that any of these have a significant nexus to the tidal waters downstream, so none of them, these areas may meet the criteria right now. They may have met the criteria on the date of the take, but the way the law, case law reads now, you can argue that none of these wetlands have a significant nexus, and are therefore non-jurisdictional.
We disagree with the Department's interpretation of this testimony. In our view, Turner was not conceding that the wetlands may have been connected to tidal waters downstream on the condemnation date. Rather, he was simply acknowledging that, under the case law that existed on the condemnation date, the wetlands might have been considered jurisdictional.[19] Importantly, the Department does not contend that SWANCC and Rapanos, both of which were issued after the condemnation date, are inapplicable to this case.
III. Legality of Wetlands Drainage
Finally, the Department contends that the master erred by concluding that, as of the condemnation date, the *418 parcel contained fifteen acres of wetlands that could legally be drained. Specifically, the Department argues that even if the parcel is not subject to regulation under the CWA, it is subject to state regulation by the Office of Ocean and Coastal Resource Management (OCRM) as an isolated wetland.
We find no reversible error here. In his order, the master held that the issue of "DHEC's alleged jurisdiction" over the wetlands was no longer before the court because it had previously been decided by Judge Harwell in his October 2004 order. The Department has not challenged the master's ruling. Therefore, it is the law of the case, regardless of its correctness. See Buckner v. Preferred Mut. Ins. Co., 255 S.C. 159, 160-61, 177 S.E.2d 544, 544 (1970) (holding that an unappealed ruling, right or wrong, is the law of the case). Accordingly, because OCRM is a part of DHEC,[20] we conclude that the master did not err by failing to consider whether the parcel is subject to state regulation by OCRM as an isolated wetland.
CONCLUSION
For the foregoing reasons, the master's decision is
AFFIRMED.
SHORT, J., and WILLIAMS, J., concur.
NOTES
[1] The Condemnation Notice is not included in the record.
[2] The condemnation action did not affect the parcel's access to Highway 57.
[3] Rule 12(b)(7), SCRCP, provides that "[e]very defense, in law or fact, to a cause of action in any pleading, whether a claim, counterclaim, cross-claim, or third-party claim, shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion: . . . (7) failure to join a party under Rule 19."
[4] The underlying condemnation action is currently pending in Horry County.
[5] Although the appraisal is not in the record, in the present case, the Department does not dispute Normandy's claim that the Department appraised the parcel at a lower value based upon its conclusion that 50% to 75% of the parcel consisted of jurisdictional wetlands.
[6] The term "approved jurisdictional determination" means "a Corps document stating the presence or absence of waters of the United States on a parcel or a written statement and map identifying the limits of waters of the United States on a parcel." 33 C.F.R. § 331.2 (2000).
[7] In his order, the master ruled that the ditching was "indisputably legal." Although the Department has challenged that ruling in its reply brief, this Court will not address the issue of the legality of the ditching given that it was not set forth in the statement of issues on appeal in the Department's initial brief. See Rule 208(b)(1)(B), SCACR ("Ordinarily, no point will be considered which is not set forth in the statement of the issues on appeal."); see also Glasscock, Inc. v. U.S. Fid. and Guar. Co., 348 S.C. 76, 81, 557 S.E.2d 689, 692 (Ct.App.2001) (issue cannot be raised for the first time in a reply brief).
[8] Although a previous version of the regulations was in effect prior to March 28, 2000, it did not apply to approved JDs. See 33 C.F.R. §§ 331.1 to 331.12 (1999).
[9] In fact, even if the regulations were in effect, the preamble to the regulations states that it is the position of the federal government that "jurisdictional determinations are not ripe for [judicial] review until a landowner who disagrees with a JD has gone through the permitting process." Final Rule Establishing an Administrative Appeal Process for the Regulatory Program of the Corps of Engineers, 65 Fed. Reg. at 16488. Additionally, the preamble notes that, because physical circumstances can change over time, "JDs are not necessarily `final' even as an administrative matter." Id. Based on the foregoing, it seems rather doubtful that the Corps' decision to certify Dr. Booth's delineation constituted a final determination entitled to preclusive effect. See Zurcher v. Bilton, 379 S.C. 132, 135, 666 S.E.2d 224, 226 (2008) (issue preclusion applies when an issue has been "actually litigated and determined by a valid and final judgment") (emphasis added).
[10] See Chasm Hydro, Inc. v. N.Y. State Dep't of Envtl. Conservation, 58 A.D.3d 1100, 872 N.Y.S.2d 235 (2009) (holding that Federal Power Act and CWA largely preempted the field of regulating hydroelectric facilities).
[11] See Ouellette, 479 U.S. 481, 107 S.Ct. 805 (holding that CWA preempted Vermont nuisance law to extent that Vermont law sought to impose liability on New York point source).
[12] "Under the doctrine of collateral estoppel, once a final judgment on the merits has been reached in a prior claim, the relitigation of those issues actually and necessarily litigated and determined in the first suit are precluded as to the parties and their privies in any subsequent action based upon a different claim." Roberts v. Recovery Bureau, Inc., 316 S.C. 492, 495-96, 450 S.E.2d 616, 619 (Ct.App.1994). "The term `privy,' when applied to a judgment or decree, means one so identified in interest with another that he represents the same legal right." Id. at 496, 450 S.E.2d at 619. Here, the Department is a state agency whose "functions and purposes" are the "the systematic planning, construction, maintenance, and operation of the state highway system and the development of a statewide mass transit system that is consistent with the needs and desires of the public." S.C.Code Ann. § 57-1-30(A) (Supp. 2008). The Department's primary concern in this case was to pay a fair price for the parcel. In our opinion, the Department was not in privity with the Corps, a federal agency charged specifically with the duties of environmental regulation under the CWA. See 33 U.S.C. §§ 1319(g)(1)(B), 1344 (2000).
[13] Id. at 132, 106 S.Ct. 455.
[14] The "Migratory Bird Rule" is set forth in the Final Rule for Regulatory Programs of the Corps of Engineers, 51 Fed. Reg. 41206, 41217 (November 13, 1986).
[15] As the plurality noted, the traditional definition of the term "navigable waters" required that the waters be navigable in fact or capable of being rendered so. Rapanos, 547 U.S. at 730, 126 S.Ct. 2208 (citing The Daniel Ball, 77 U.S. 557, 10 Wall. 557, 563, 19 L.Ed. 999 (1870)).
[16] In SWANCC, the Court explained its decision in Riverside Bayview by stating that "[i]t was the significant nexus between the wetlands and `navigable waters' that informed our reading of the CWA in Riverside Bayview Homes." SWANCC, 531 U.S. at 167, 121 S.Ct. 675.
[17] Among many other pages, the first few pages of Turner's cross-examination are missing from the trial transcript. As a result, the Court is unable to determine the precise location of the canal.
[18] The Corps' regulatory definition of "waters of the United States" expressly includes "waters which are subject to the ebb and flow of the tide." See 33 C.F.R. § 328.3(a)(1) (2000).
[19] For instance, prior to SWANCC, the Corps relied upon the mere presence of migratory birds to establish federal jurisdiction over wetlands. Moreover, as noted by Justice Scalia in Rapanos, even after SWANCC, courts continued to uphold broad assertions of jurisdiction by the Corps. See Rapanos, 547 U.S. at 726-727, 126 S.Ct. 2208 and the cases cited therein.
[20] See, e.g., S.C.Code Ann. §§ 48-40-20(2), 48-40-40(B) (2008).
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47 F.3d 427
75 A.F.T.R.2d 95-1231, 95-1 USTC P 50,161
Gaughanv.CIR*
NO. 93-05522
United States Court of Appeals,Fifth Circuit.
Feb 03, 1995
Appeal From: D.Tex., No. TC # 150-91
1
REVERSED.
*
Fed.R.App.P. 34(a); 5th Cir.R. 34.2
| {
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212 Or. 522 (1958)
321 P.2d 294
NEWELL
v.
TAYLOR ET AL
Supreme Court of Oregon.
Argued October 10, 1957.
Reversed and remanded January 29, 1958.
*523 Charles E. Boardman, Bend, argued the cause for appellant. With him on the brief was Don Parker, Salem.
R.B. Maxwell and Edwin E. Driscoll, Klamath Falls, argued the cause and filed a brief for respondents.
Ray H. Lafky, Salem, filed a brief as amicus curiae.
Before PERRY, Chief Justice, and LUSK, WARNER and KESTER, Justices.
REVERSED AND REMANDED.
PERRY, C.J.
The plaintiff commenced this action against the defendants for personal injuries claimed to have been suffered by reason of a motor vehicle collision which happened on March 18, 1953.
At the time of the collision the plaintiff was entitled to compensation under and by virtue of the Workmen's Compensation Act of this state. The plaintiff duly notified the Oregon State Industrial Accident Commission of his injuries and received compensation from the fund.
*524 For purposes of convenience the Oregon State Industrial Accident Commission will be designated herein as the commission.
At the time plaintiff's claim was presented to the commission he was requested by letter to elect whether or not he desired to prosecute his tort action against the defendants or assign his cause of action to the commission. This letter informed him that action against the tort-feasor must be commenced within one year from the date of the accident. On April 20, 1953, plaintiff made an assignment of his cause of action against the defendants to the commission. On October 4, 1954, plaintiff filed his complaint against the defendants, and on March 15, 1955, each defendant filed an answer thereto. On May 7, 1955, the defendants each filed a motion designated as "Supplemental Pleadings," wherein each alleged that the plaintiff, pursuant to the requirements of the commission, elected not to seek redress from the defendants, but to receive the compensation provided under the Workmen's Compensation Act, and had duly assigned his cause of action to the commission; that his action in assigning his cause of action against the defendants to the commission effectively barred his present suit against the defendants.
At the time of hearing the plaintiff offered to show that he had given notice of the filing of his cause of action to the commission and the commission had consented to the plaintiff's own prosecution of the action. This offer was rejected and the trial court sustained the defendants' motions and dismissed plaintiff's action.
In their brief the defendants state they filed their supplemental proceedings challenging the right of the plaintiff to maintain his action pursuant to *525 § 102-1729, OCLA, which permits a third party to challenge the right of the injured workman to bring an action.
Briefly, the case is this: An injured workman subject to the act has elected to receive and has received benefits under the Workmen's Compensation Act for injuries sustained as the result of the alleged negligence of third parties not within the act. He has assigned his claim against the third parties to the commission. The question is thus presented: Under these circumstances is the injured workman estopped to maintain his common-law action against such third parties unless the claim is reassigned to him by the commission?
The answer must be found in the act itself. The injury, election, and assignment occurred in the spring of 1953, and we are, therefore, concerned with § 102-1729, OCLA, which reads, so far as applicable, as follows:
"If a workman of an employer, engaged in a hazardous occupation * * * shall receive an accidental injury due to the negligence or wrong of a third person, entitling him, * * * to seek a remedy against such third person, such workman, * * * shall elect whether to take under this act or to recover damages from such employer or third person. * * * An election to take under this act shall operate as an assignment to the commission, for the benefit of the industrial accident fund, of the cause of action, if any, of the beneficiaries and of the legal representative of the deceased workman, against such * * * third person.
"If the workman * * * elect to take under this act, the commission may bring action against such * * * third person in the name of the injured workman * * *. Any sum recovered by *526 the commission in excess of the expenses incurred in making such recovery and the amount expended by the commission for compensation, first aid or other medical, surgical or hospital service, together with the present worth of the monthly payments of compensation to which such workman * * * may be entitled * * * shall be paid such workman * * * as hereinafter provided. Any compromise by the workman * * * of any right of action against * * * third party shall be void unless made with the written approval of the commission. * * *.
"If damages are recovered under the provisions of this act from * * * a third person by the beneficiaries or the legal representative of the deceased workman, the beneficiaries shall have a claim against the sum recovered in an amount equal to their rights under this act, which shall be preferred to all claims except the costs of recovering such damages and the lien of the commission as herein provided.
"If the workman * * * shall elect to recover damages from * * * third party, notice of such election shall be given the commission by personal service or by registered mail of such fact. The commission likewise shall be given notice of the name of the court in which such action is brought, and a return showing service of such notice on the commission shall be filed with the clerk of the court and shall not be a part of the record except to give notice to the defendant of the lien of the commission, as in this section provided. In any third party action brought pursuant to the provisions of this act, the fact that the injured workman or his beneficiaries are entitled to or have received benefits under the provisions of this act shall not be pleaded or admissible in evidence. A challenge of the right to bring such third party action shall be made by supplemental pleadings only and such challenge shall be determined by the court as a matter of law.
*527 "The workman * * * shall be paid the benefits provided by this act in the same manner and to the same extent as if no right of action existed against the * * * third party, until the amount of benefits that the workman or beneficiaries are entitled to under this act can be determined and until damages are recovered from such employer or third party. The commission shall have a lien against the cause of action in the amount of compensation paid to the workman * * *, including the cost of first aid and other medical, surgical and hospital service, which lien shall be preferred to all claims except the cost of recovering such damages. If the sum recovered in such action and actually collected, less reasonable attorneys' fees and costs necessarily incurred, is less than the sum the workman is entitled to under the provisions of this act, the difference shall be paid the workman as provided in the act for the payment of compensation.
"The commission may require the workman or other beneficiaries or the legal representative of a deceased workman to exercise the right of election herein provided by serving a written demand by registered mail or by personal service upon such workman, beneficiaries or legal representative. Unless such election is made within 20 days from the receipt or service of such demand and unless, after making such election, an action against such third person is instituted within such time as is granted by the commission, the workman, beneficiaries or legal representative is deemed to have elected to take under the provisions of this act." (Italics ours.)
1, 2. The Workmen's Compensation Act was enacted to require industry to carry the burden of personal injuries sustained by its employees in their work, Hinkle v. State Industrial Accident Commission, 163 Or 395, 97 P2d 725; and it is now the well-established law of this state, requiring no citation of authority, *528 that the act is remedial in character and should be liberally construed to promote the beneficial results intended.
Section 102-1752, OCLA, now ORS 656.154, grants to and leaves with an injured workman all his common-law right to maintain an action for negligent personal injuries against third parties, with the exception of certain third party employers and fellow servants, which exception is not pertinent to this case it not being contended here that the defendants or any of them come within the exclusion clause of the statute.
For convenience, the words "third parties" as used in this opinion refer to parties not protected by the exclusion clause of the statute from suit by an injured workman.
A literal consideration of the words "an election to take under this act shall operate as an assignment to the commission, for the benefit of the industrial accident fund, of the cause of action, if any, of the beneficiaries and of the legal representative of the deceased workman," would seem to lead to the conclusion that the assignment was a complete assignment to the commission of all the rights of the injured workman in and to his cause of action. This is the result reached in Holmes v. Henry Jenning & Sons, 7 F2d 231, and followed in King v. Union Oil Company, 144 Or 655, 24 P2d 345, 24 P2d 1055, Hicks v. Peninsula Lumber Co., 109 Or 305, 220 P 133, and Senter v. Peninsula Lumber Co., 109 Or 325, 220 P 139. But it should be noted that at the time the decision of Holmes v. Henry Jenning & Sons, supra, was rendered [March 19, 1921] the Workmen's Compensation Act provided that when the injury was occasioned by the negligence of a third party not under the protection of the act, the injured workman was required to elect *529 prior to the commencement of his action whether he desired to pursue his common-law action or receive the benefits of the act, for if he elected to take compensation as provided in the act he was entitled to none of the recovery, for all recovery, if any, from the tort-feasor, regardless of amount, passed to the fund. Oregon Laws 1913, ch 112, § 12, p 191.
If the injured workman could receive none of the proceeds, as such, of a recovery from the wrongdoer if his action was prosecuted by the commission, then truly the injured workman was faced with an election of remedies and his election was binding upon him.
In King v. Union Oil Co., supra, this court, as a further reason for its holding, relied upon the opinion of Judge WOLVERTON in Holmes v. Jenning & Sons, supra, but apparently failed to consider the change wrought by the legislature in amending the act. Section 6616, Oregon Laws, as amended by Oregon Laws 1925, ch 133, p 189, 190, as pertinent hereto, reads as follows:
"* * * If election is made to take under the terms of this act, the commission may bring action against such third party in the name of such injured workman or his dependents and any sum recovered in excess of the costs of such action, together with the amount expended by the commission for compensation and first aid or other medical, surgical or hospital services, together with the present worth of the monthly payments of compensation for death, permanent total disability or permanent partial disability, to which such workman or his dependents may be entitled under the terms of this act, shall be paid such workman or his dependents; * * *."
When we consider that under the present act, which contains language of similar import to that contained *530 in § 6616 Oregon Laws, as amended, supra, the purpose is to preserve to the workman all the beneficial monetary results of his cause of action against the tort-feasor whether the action is brought and prosecuted by the workman or the commission, the words "assignment of his cause of action" take on a new meaning.
3. The liability of industry, under the act, to compensate an injured workman in accordance with schedules therein provided is mandatory and is a separate and distinct liability from the common-law liability of a tort-feasor to respond in damages. Negligence plays no part in the injured workman's right to compensation, Johnson v. Timber Structures, Inc., 203 Or 670, 281 P2d 723, while it is of the essence in tort actions. The remedial results contemplated for the workman by the statute are the same regardless of his selection and are, therefore, not inconsistent so as to compel an election of remedies.
Since compensation to the injured workman under the Workman's Compensation Act is mandatory, no right of recoupment for the benefit of the fund would lie except by provision of statute. Therefore, whenever an action is commenced in the name of the injured workman, either by the workman or the commission, both the workman and the commission have a contingent interest in the subject matter of the action. The assignment creates no new cause of action; each must necessarily rely upon the cause of action of the injured workman.
Thus, the effect of the statute as amended is to give to the commission only a partial interest in the injured workman's cause of action. It assigns to the commission for the benefit of the fund a portion only of the recovery from the cause of action. It is, in *531 effect, a right to a portion thereof which the legislature recognizes the workman, if successful, should, in good conscience and fairness, pay for the benefits received.
While, by assignment of the cause of action, there is granted the commission the right to bring the action for damages in its entirety, not pro tanto, the effect of the entire statute is to recognize that both the workman and the commission have an interest therein.
The act, in providing the commission may prosecute the action in the name of the injured workman, merely recognized the statutory requirement that all suits or actions must be prosecuted in the name of the real party in interest, except when otherwise provided, ORS 13.030, thus protecting a defendant from vexatious harassment by both parties, each having an interest in the same cause of action. Furrer v. Yew Creek Logging Co., 206 Or 382, 292 P2d 499; State v. Swensk et al., 161 Or 281, 89 P2d 587; Sturgis v. Baker, 43 Or 236, 72 P 744; Home Mutual Ins. Co. v. O.R. & N. Co., 20 Or 569, 26 P 857.
The valuable common-law right of an injured workman whose interest in the result of the prosecution of his claim is now expressly recognized in the act should not be abolished in the absence of a clear and concise expression compelling that conclusion.
The Workmen's Compensation Act was not designed to aid a negligent third party tort-feasor to escape his common-law liability. Yet, if we sustain the contention of the defendants, the failure or refusal of the commission, for any reason, to prosecute or formally reassign the workman's claim would grant immunity to the negligent third party.
4. We are of the opinion that the use of the words "assignment of the cause of action," when considered in conjunction with the expressed purposes to be *532 accomplished by the statute, is no more than a bare assignment of a right to institute the action upon failure or refusal of the workman to prosecute his own claim and does not become absolute as an effective assignment of all of the rights of the injured workman to the institution of his own proceedings until acted upon by the bringing of the action by the commission. This becomes apparent when we consider the last paragraph of the act, which provides, in effect, that the workman shall institute his action within such time as the commission shall direct, and provides no penalty for his failure to do so. This shows an intention only to permit the commission to fix the time when its right to commence an action shall take effect so as to prevent the loss of the action by the running of the statute of limitations.
Section 102-1729, OCLA, in speaking of the rights existing between the workman and the commission, does not use the word "subrogation," but only the word "assignment."
5. Should we attempt to construe the statute as a true subrogation of the commission to the rights of the workman we would be faced with the fact that the true doctrine of subrogation lies only where one secondarily liable pays the debt of another and not where one primarily liable pays his own debt. American Surety Co. v. Bank of California, 133 F2d 160, affirming 44 F Supp 81.
By statute, industry, acting through the commission, is primarily liable to the workman under the provisions of the Workmen's Compensation Act, and in paying compensation is but meeting its own obligation, regardless of the fact the injury was due to the negligence of a third party.
6. Also, it should be noted, where a right of subrogation *533 exists, an assignment is unnecessary. American Surety Co. v. Multnomah County, 171 Or 287, 138 P2d 597, 148 ALR 926.
The only interest the defendants can have in the question of assignment is whether or not the result of the trial of the issues or the payment of the judgment will fully protect them from future vexation from the same cause of action.
The statute provides the commission shall be notified of the filing by the workman of his cause of action and the court in which it is filed, and a return made to the clerk of the court in which the action is filed showing the service of this notification. This action gives notice of the commission's claim of lien.
We are of the opinion that the inquiry of the third party tort-feasor into the question of any future harassment is satisfied by the workman's notice to the commission and filing of the return as provided by statute. The rights of the commission and the workman, either by understanding or as they exist by statute, are not of his concern.
The judgment of the trial court is reversed and remanded with instructions for further proceedings not inconsistent with this opinion.
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Filed 4/14/16
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Yolo)
----
CROSSROADS INVESTORS, L.P., C072585
Plaintiff and Respondent, (Super. Ct. No.
CV CV 12-1067)
v.
FEDERAL NATIONAL MORTGAGE
ASSOCIATION,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Yolo County, Daniel P.
Maguire, Judge. Affirmed.
Buchalter Nemer, Jeffrey S. Wruble, Efrat M. Cogan, and Oren Bitan for
Defendant and Appellant.
Law Offices of Melinda Jane Steuer and Melinda Jane Steuer for Plaintiff and
Respondent.
1
This appeal challenges the trial court’s denial of defendant’s special motion to
strike the complaint under Code of Civil Procedure section 425.16, otherwise known as
the anti-SLAPP statute.1 Defendant Federal National Mortgage Association (Fannie
Mae) initiated nonjudicial foreclosure proceedings against property owned by plaintiff
Crossroads Investors, L.P. (Crossroads), but Crossroads filed for bankruptcy protection,
staying the proceedings. Fannie Mae sold the property after it was granted relief from the
bankruptcy stay. Crossroads then sued Fannie Mae for wrongful foreclosure, breach of
contract, fraud, and other tort and contract actions. Fannie Mae filed an anti-SLAPP
motion, contending the actions on which Crossroads based its complaint were Fannie
Mae’s statements in its papers filed in the bankruptcy proceeding. The trial court
disagreed and denied the motion.
We affirm the trial court’s order. The principal thrust of Crossroads’ action was to
recover for violations of state nonjudicial foreclosure law, not for any exercise of speech
or petition rights by Fannie Mae. Even if protected activity was not merely incidental to
the unprotected activity, Crossroads established a prima facie case showing it was likely
to succeed on its causes of action.
FACTS
In 2005, Crossroads borrowed $9 million subject to a promissory note. The note
was secured by a deed of trust recorded against an apartment building Crossroads owned
in Woodland. Defendant Fannie Mae was the beneficiary of the deed.
The note imposed on Crossroads a prepayment premium (sometimes referred to as
yield maintenance) should Crossroads pay the unpaid principal before the note’s maturity
date or should Crossroads default and Fannie Mae accelerate the loan.
1 Except as otherwise stated, further undesignated section references are to the Code
of Civil Procedure.
2
Crossroads defaulted on the note in late 2010 by failing to make the required
payments. Fannie Mae served Crossroads with a notice of default, and it accelerated the
loan. In February 2011, Fannie Mae initiated nonjudicial foreclosure proceedings by
recording a notice of default against the property. The notice stated Crossroads owed in
arrears nearly $287,000 as of December 30, 2010.
As required by Civil Code section 2924c (Section 2924c), the notice of default
informed Crossroads it could reinstate the loan by tendering the amount it owed to bring
its payments current no later than five business days before the date Fannie Mae intended
to sell the property. It informed Crossroads that after the expiration of that time period,
the only way to stop the foreclosure was to pay off the loan. It also informed Crossroads
it could learn how much it owed either by submitting a written request for a written
itemization or by contacting Fannie Mae’s trustee. It provided the trustee’s address and
phone number.
In April 2011, Crossroads entered into a contract to sell the property to Ezralow
Company, LLC (Ezralow) for $10.95 million. A few weeks later, Crossroads and
Ezralow proposed to Fannie Mae that Ezralow would assume Crossroads’ obligations and
pay off the loan on Fannie Mae’s agreeing to waive the prepayment premium. Fannie
Mae refused to waive the prepayment premium and rejected the proposal.
On June 24, 2011, Fannie Mae recorded a notice of trustee’s sale against the
property. The notice stated a sale date for the property had been set for July 19, 2011. It
also stated the total unpaid amount of Crossroad’s obligations was estimated at more than
$10.5 million.
On July 18, 2011, the day before the property was scheduled to be sold,
Crossroads filed for Chapter 11 bankruptcy protection to protect its interest in the
property. In its petition, Crossroads asserted it owed Fannie Mae $8.7 million.
On the following day, July 19, Crossroads entered into an amended contract to sell
the property to Ezralow. This contract again conditioned Ezralow’s obligation to
3
purchase the property on Fannie Mae’s agreeing to waive the prepayment premium. It
also sought to limit the interest rate Fannie Mae could charge Ezralow. These terms were
to be included in Crossroad’s bankruptcy reorganization plan and were subject to the
bankruptcy court’s approval.
While the bankruptcy action was pending from July 2011 to May 2012,
Crossroads verbally informed Fannie Mae many times it was ready, willing, and able to
cure the default or pay the loan in full. It also verbally asked Fannie Mae many times for
a complete accounting of the amount required to cure the default or pay off the loan.
Fannie Mae refused to accept Crossroads’ tenders. It also provided no response to
Crossroads’ requests for an accounting.2
Although it opposed the prepayment premium, Crossroads informed Fannie Mae
that if the bankruptcy court determined Fannie Mae was entitled to the prepayment
premium, Crossroads would pay Fannie Mae’s claim in full upon the close of escrow of
the sale to Ezralow.
The issue of whether Fannie Mae was entitled to recover the prepayment premium
as part of its bankruptcy claim was litigated in the bankruptcy proceeding. Fannie Mae
filed a claim with the bankruptcy court in the amount of $10.45 million, which included
payment of the prepayment premium. In its disclosure statements, Crossroads proposed
to reorganize its debt based on the July 2011 amended contract to sell the property to
Ezralow but without paying the prepayment premium to Fannie Mae.3 Fannie Mae
2 This allegation of fact comes from the verified complaint. Although a plaintiff
opposing an anti-SLAPP motion may not rely solely on the allegations of his complaint
(Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 672-673), verified
allegations based on the personal knowledge of the pleader may be considered in
deciding an anti-SLAPP motion. (Salma v. Capon (2008) 161 Cal.App.4th 1275, 1289-
1290.)
3 In bankruptcy proceedings, a disclosure statement provides detailed information
regarding a proposed reorganization plan. The plan proponent prepares the statement.
The bankruptcy court must approve the statement before it may be sent to all creditors
4
objected to the disclosure statements in part because they did not call for Crossroads to
pay the prepayment premium. The bankruptcy court denied approving Crossroad’s first
three disclosure statements.
Crossroads objected to Fannie Mae’s inclusion of the prepayment premium in its
claim. However, the bankruptcy court ruled Fannie Mae was entitled to claim the
prepayment premium in the bankruptcy proceeding.4 In addition, the court granted
Fannie Mae relief from the bankruptcy stay effective May 15, 2012, if Crossroads had not
obtained confirmation of its reorganization plan by that date.
In February 2012, and after the trial court rejected Crossroad’s objection to the
prepayment premium and granted relief from the stay, Crossroads served an interrogatory
in the bankruptcy action on Fannie Mae that asked for the amount required “under state
law” to cure the loan as of June 1, 2012. Fannie Mae responded in March 2012 by stating
it could not provide an accurate response because the interrogatory sought an amount that
was contingent upon future events; it would provide a response on June 1, 2012.
In April 2012, Crossroads filed its fourth disclosure statement. On the same day it
also filed a motion to continue the stay. The bankruptcy court conditionally approved
Crossroads’ latest disclosure statement subject to Crossroads’ taking action to correct
certain deficiencies in the statement. However, the trial court denied the motion to
continue the stay.
Fannie Mae’s relief from the bankruptcy stay became effective on May 15, 2012,
as Crossroads had not obtained an approved reorganization plan by that date.
and parties in interest along with the reorganization plan. (11 U.S.C. § 1125(b).) “ ‘The
primary purpose of a disclosure statement is to give the creditors the information they
need to decide whether to accept the plan.’ [Citation.]” (In re Diversified Investors Fund
XVII (Bankr. C.D.Cal. 1988) 91 B.R. 559, 561.)
4 Fannie Mae later filed an amended proof of claim for approximately $10.36
million, which included the prepayment premium.
5
On May 17, 2012, Crossroad’s attorney, Kenrick Young, spoke with Fannie Mae’s
attorney, Anthony Napolitano, and asked for a payoff amount to pay the loan in full. He
also asked Napolitano if he would agree to notify Crossroads of any scheduled sale date a
reasonable time prior to its occurrence. The parties dispute whether Napolitano agreed to
this request. Because we must assume the pleadings are correct, for purposes of this
motion, we assume Napolitano agreed to provide notice of a sale.
Later that day, Napolitano by email asked to inspect the property. Young
responded by email that Crossroads wished to sell the property to Ezralow and pay
Fannie Mae in full. He asked if Fannie Mae would agree to a consensual sale of the
property to Ezralow on condition Fannie May received the amount it claimed in its
amended bankruptcy claim. Young said Crossroads was looking at a July or early
August 2012 close of escrow. Napolitano did not respond to this email.
Young contacted Napolitano by telephone on May 22. He asked Napolitano to
provide him with the amount required to cure the default. He also proposed that
Crossroads would dismiss its bankruptcy action to allow for a faster sale to Ezralow and
payment in full to Fannie Mae. He stated Crossroads was ready, willing, and able to cure
the default or pay Fannie Mae in full upon receiving the amount of its demand.
Napolitano told Young he would check with Fannie Mae and get back to him.
On May 24, the trustee sold the apartment complex at a nonjudicial foreclosure
sale. The sale took Crossroads by surprise. Young believed Napolitano would have
honored his promise to notify him of any scheduled sale prior to the sale date.
Crossroads objected to the trustee’s sale and asked the trustee to set aside the sale
and not record a new deed. It also dismissed its bankruptcy action, filed this action
against Fannie Mae and the trustee, and recorded a lis pendens. However, the trustee
recorded a trustee’s deed upon sale.
6
PROCEDURAL HISTORY
Crossroads’ first amended complaint alleges seven causes of action against Fannie
Mae: wrongful foreclosure, breach of contract, breach of the implied covenant of good
faith and fair dealing, negligence, fraud, promissory estoppel, and intentional interference
with a contractual relationship.5 Crossroads alleges the conduct by Fannie Mae from
which its causes of action arise consists of: (1) Fannie Mae’s repeated failure to provide,
in response to Crossroads’ requests and its interrogatory, a timely and accurate
accounting of the amount needed to reinstate the loan or pay the loan in full, in violation
of Section 2924c; (2) its refusal to accept Crossroads’ tenders of the amount required to
cure the default or pay the loan in full, in violation of Section 2924c; and (3) its falsely
stating it would provide Crossroads with advance notice of a trustee’s sale, and its actual
failure to provide that notice.
Fannie Mae filed an anti-SLAPP motion and a demurrer against the complaint. In
its anti-SLAPP motion, Fannie Mae contended Crossroads’ action was actually an
attempt to punish Fannie Mae for exercising its rights in the bankruptcy action. It argued
Crossroads was challenging Fannie Mae’s filing of its bankruptcy claim and its
objections to Crossroads’ disclosure statements, which objections purportedly contained
the information Crossroads sought and Fannie Mae’s rejections of Crossroads’ tenders.
Fannie Mae also claimed Crossroads was challenging its response to Crossroads’
interrogatory. These acts by Fannie Mae were arguably protected conduct of speech and
petition under the terms of the anti-SLAPP statute, and thus subjected the complaint to
the statute. Fannie Mae also contended Crossroads was unlikely to succeed on the merits.
5 The complaint also named as defendants the trustee, Fidelity National Title, Inc.,
and the purchasers of the apartment complex, JCM Properties, LLC, and Daylight Assets
II, LLC. These additional parties and the allegations against them are not before us.
7
The trial court denied Fannie Mae’s motion. It ruled Fannie Mae had not shown
Crossroads’ action arose from Fannie Mae’s protected activity. The court wrote: “The
gravamen of plaintiff’s first amended complaint is its contention that defendant
wrongfully foreclosed upon the subject property in an illegally conducted non-judicial
foreclosure.” The court also overruled the demurrer.
DISCUSSION
Fannie Mae contends the trial court erred when it denied its anti-SLAPP motion.
It argues it submitted sufficient evidence to establish that Crossroads’ was suing based on
Fannie Mae’s protected activities, and that Crossroads failed to show it was likely to
succeed on the merits. We disagree. Fannie Mae failed to establish Crossroads’ action
arose from its protected conduct. To the extent Fannie Mae established any action that
was based on protected conduct was not merely incidental to the actions based on
unprotected conduct, Crossroads established a prima facie case of succeeding on the
merits.
I
Standard of Review
The anti-SLAPP statute provides a “procedural remedy to dispose of lawsuits that
are brought to chill the valid exercise of constitutional rights.” (Rusheen v. Cohen (2006)
37 Cal.4th 1048, 1055-1056.) Consequently, “the anti-SLAPP statute is to be construed
broadly.” (Padres L.P. v. Henderson (2003) 114 Cal.App.4th 495, 508.)
We review the trial court’s ruling de novo. (Flatley v. Mauro (2006) 39 Cal.4th
299, 325.) We consider “the pleadings, and supporting and opposing affidavits stating
the facts upon which the liability or defense is based.” (§ 425.16, subd. (b)(2).) We do
not weigh the evidence or determine its credibility. Instead, in this case, we accept the
plaintiff’s evidence as true and evaluate the defendant’s evidence only to determine if it
has defeated the plaintiff’s evidence as a matter of law. (Soukup v. Law Offices of
Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3.)
8
We evaluate an anti-SLAPP motion using a two-step process. (Equilon
Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67 (Equilon).) We first
determine “whether the defendant has made a threshold showing that the challenged
cause of action is one arising from protected activity.” (Navellier v. Sletten (2002) 29
Cal.4th 82, 88 (Navellier).) A defendant meets this burden by showing the plaintiff’s
action arises from acts taken “in furtherance of the [defendant’s] right of petition or free
speech under the United States Constitution or the California Constitution in connection
with a public issue . . . .” (§ 425.16, subd. (b)(1).)
The anti SLAPP statute defines an “ ‘act in furtherance of a person’s right of
petition or free speech’ ” to include: “(1) any written or oral statement or writing made
before a . . . judicial proceeding . . . , (2) any written or oral statement or writing made in
connection with an issue under consideration or review by a . . . judicial body . . . , or
(4) any other conduct in furtherance of the exercise of the constitutional right of petition
or the constitutional right of free speech in connection with a public issue or an issue of
public interest.” (§ 425.16, subd. (e)(1), (2), (4).) The “any other conduct” language
codifies that the anti-SLAPP statute “applies to both ‘communicative conduct’ and
‘noncommunicative conduct.’ ” (Sen. Rules Com., Off. of Sen. Floor Analyses,
Unfinished Business of Sen. Bill No. 1296 (1997-1998 Reg. Sess.) as amended June 23,
1997, p. 4, quoting Ludwig v. Superior Court (1995) 37 Cal.App.4th 8, 18-20.)
In deciding whether a cause of action arises from protected activity, “the critical
point is whether the plaintiff’s cause of action itself was based on an act in furtherance of
the defendant’s right of petition or free speech.” (City of Cotati v. Cashman (2002) 29
Cal.4th 69, 78, original italics.) An “act underlying the plaintiff’s cause of action must
itself have been an act in furtherance of the right of petition or free speech.” (Ibid.,
original italics.) Courts must look to “the act underlying the cause of action, not the gist
of the cause of action.” (Wallace v. McCubbin (2011) 196 Cal.App.4th 1169, 1190.)
9
When we take this first step and determine whether the plaintiff’s causes of action
arise from defendant’s protected activity, we do not consider the legitimacy of the
plaintiff’s claims. (City of Costa Mesa v. D’Alessio Investments, LLC (2013) 214
Cal.App.4th 358, 371.) If the defendant fails to establish the plaintiff’s action is based on
defendant’s protected activity, then the complaint is not subject to the anti-SLAPP
statute. (Haight Ashbury Free Clinics, Inc. v. Happening House Ventures (2010) 184
Cal.App.4th 1539, 1550.)
If the defendant makes the requisite showing, the burden shifts to the plaintiff to
demonstrate a probability of prevailing on the claim. “[I]n order to establish the requisite
probability of prevailing (§ 425.16, subd. (b)(1)), the plaintiff need only have ‘ “stated
and substantiated a legally sufficient claim.” ’ [Citations.] ‘Put another way, the plaintiff
“must demonstrate that the complaint is both legally sufficient and supported by a
sufficient prima facie showing of facts to sustain a favorable judgment if the evidence
submitted by the plaintiff is credited.” ’ [Citations.]
“Only a cause of action that satisfies both prongs of the anti-SLAPP statute–i.e.,
that arises from protected speech or petitioning and lacks even minimal merit–is a
SLAPP, subject to being stricken under the statute.” (Navellier, supra, 29 Cal.4th at pp.
88-89, original italics.)
II
Analysis
Fannie Mae contends Crossroads’ suit is based on its exercise of its protected right
of petition in the bankruptcy proceeding. It argues that each of the three types of action
Crossroads is challenging–failure to provide an accounting, failure to accept tender, and
failure to give prior notice of the trustee sale–occurred as part of the bankruptcy
proceeding and was protected activity. It also contends Crossroads has not established a
prima facie case of succeeding on its causes of action.
10
Crossroads disagrees, arguing it is suing Fannie Mae based on statements it made
and conduct it took (and did not take) that is not protected under the anti-SLAPP statute.
It also claims that even if its action challenges protected activity, it submitted sufficient
evidence to establish a prima facie case of success on the merits.
We agree with Crossroads.
We examine the challenged activities.
A. Failure to respond to requests for accounting
Section 2924c requires a recorded notice of default to inform the debtor that he
may obtain the amount required to pay off or reinstate the loan by communicating with
the lender or beneficiary. The notice provides the debtor with two ways he can obtain
this information. He may make a written request to the beneficiary or mortgagee for a
written itemization of the entire amount required to pay off the loan, or, to find out either
the pay off amount or the amount required to stop the foreclosure, he may simply contact
the beneficiary or mortgagee. The notice provides the beneficiary or mortgagee’s
mailing address and telephone number. (Civ. Code, § 2924c, subd. (b)(1).)6
Crossroads verbally requested an accounting from Fannie Mae under Section
2924c many times during and after the bankruptcy proceeding, and requested one in
6 Relevant portions of former Section 2924c require the notice of default to include
the following provisions: “Upon your written request, the beneficiary or mortgagee will
give you a written itemization of the entire amount you must pay. . . . [¶] . . . [¶] To
find out the amount you must pay, or to arrange for payment to stop the foreclosure, or if
your property is in foreclosure for any other reason, contact:
“______________________________
(Mailing address)
“______________________________
(Name of beneficiary or mortgagee)
“______________________________
(Telephone)”
(Former § 2924c, subd. (b)(1); Stats. 2001, ch. 438, § 3.)
11
writing in the form of an interrogatory during the proceeding. It never received a
response except to its interrogatory, in which Fannie Mae refused to provide the
requested information. It contends Fannie Mae violated Section 2924c by not providing
an accounting.
Fannie Mae contends Crossroads is attacking protected actions because (1) its
response to the interrogatory occurred as part of the bankruptcy proceeding; and (2) the
information Crossroads sought–the amount to reinstate or pay off the loan–was litigated
and provided to Crossroads in the bankruptcy proceeding through Crossroads objecting to
Fannie Mae’s receiving the prepayment premium, Crossroads’ disclosure statements,
Fannie Mae’s objection to those statements, and Fannie Mae’s claims.
Fannie Mae also argues that Crossroads cannot successfully establish a violation
of Section 2924c because that statute purportedly requires all requests for an accounting
to be in writing, and there is no evidence Crossroads’ requests were in writing. The only
exception is Crossroad’s interrogatory, and that arguably cannot serve as a valid request
under Section 2924c because it sought payoff information as of a future date, not the date
of the response’s preparation.
Turning to the first step–deciding whether Crossroads is suing based on
constitutionally protected conduct–we conclude Crossroads is suing on both protected
and nonprotected conduct.
The attack on Fannie Mae’s response to the interrogatory served in the bankruptcy
action challenges protected activity. The response was made as part of a judicial
proceeding. Specifically, the response was discovery in the bankruptcy proceeding and
was directed to persons who had an interest in that proceeding. (See Contemporary
Services Corp. v. Staff Pro Inc. (2007) 152 Cal.App.4th 1043, 1055.) Moreover, the
information Crossroads sought concerned an issue in the bankruptcy proceeding. The
interrogatory sought to know the amount required to reinstate the loan as of a later date.
Crossroads’ proposed reorganization plan called for reinstating the loan in some fashion.
12
The response was thus protected for purposes of the anti-SLAPP statute as a statement
made before, and concerning an issue in, a judicial proceeding. (Code Civ. Proc., §
425.16, subd. (e)(1), (2).)
On the other hand, Crossroads’ causes of action based on Fannie Mae’s lack of
responses to Crossroads’ other verbal requests for an accounting do not arise from
protected activity because they challenge nonexpressive, and thus nonprotected, conduct.
The sections of the anti-SLAPP statute on which Fannie Mae relies, subdivisions (e)(1)
and (e)(2), protect “any written or oral statement or writing” made before a judicial
proceeding or in connection with an issue under review by a judicial body. Here,
Crossroads is suing on Fannie Mae’s failure to make any communication to Crossroads.
Fannie Mae’s silence is not a protected written or oral statement.
Fannie Mae argues it provided the information Crossroads sought in its
bankruptcy claim and objections, and those are the writings Crossroads is really
challenging. It also claims the information Crossroads sought was an issue that was
being considered by the bankruptcy court. However, Crossroads’ complaint does not
allege it is challenging Fannie Mae’s writings submitted in the bankruptcy proceeding.
The assertion that Crossroads is challenging those writings comes solely from Fannie
Mae’s briefing. Moreover, nowhere does Fannie Mae show it filed its bankruptcy claim
and objections in response to Crossroads’ requests under Section 2924c. Indeed, Fannie
Mae introduces no evidence showing it responded to Crossroads’ verbal requests.
Crossroads is suing on Fannie Mae’s silence, and subdivisions (e)(1) and (e)(2) do not
protect silence.
Fannie Mae’s filings in the bankruptcy court cannot be seen as actionable
responses to Crossroads’ requests. The information Crossroads sought–the amount to
cure the default or pay off the loan–was not the same issue being considered by the
bankruptcy court. The bankruptcy court was deciding the amount Fannie Mae was
entitled to receive under federal bankruptcy law as of the bankruptcy petition date
13
(11 U.S.C. § 502(b)), not the amount needed to cure the default or pay off the loan under
state law on a different date. The bankruptcy court specifically determined Fannie Mae
was entitled to receive the prepayment premium in this instance because under
bankruptcy law, Crossroads still had an opportunity to reinstate the loan by confirming a
reorganization plan. The court took no position on whether Fannie Mae was entitled to
the premium under state law because the parties did not brief that issue. Fannie Mae has
not shown the court determined the amount to cure the default or pay off the loan as of a
date other than the petition date. And Fannie Mae has not shown that it provided any
payoff amounts in its bankruptcy court filings other than its claim of amounts owed as of
the petition date.
Subdivision (e)(4) of the anti-SLAPP statute also does not protect Fannie Mae’s
silence. The provision protects “conduct in furtherance of the exercise of the
constitutional right of petition or the constitutional right of free speech in connection with
a public issue or an issue of public interest.” (§ 425.16, subd. (e)(4).) Refusing to reply
to a request for an accounting under Section 2924c is not a protected refusal to speak in
connection with a public issue or an issue of public interest. To be connected to a public
issue, the conduct must in general concern a person or entity in the public eye, directly
affect a large number of people beyond the direct participants, or concern a topic of
widespread public interest. (USA Waste of California, Inc. v. City of Irwin dale (2010)
184 Cal.App.4th 53, 65; Weinberg v. Feisel (2003) 110 Cal.App.4th 1122, 1132-1133.)
Fannie Mae’s refusal to respond to Crossroads’ requests under Section 2924c does not
rise to the level of conduct made in connection with a public issue or one of public
interest.
Thus, we have causes of action that arise out of protected and nonprotected
activity. In determining whether such an action is subject to the anti-SLAPP statute,
courts have used different tests. Some courts look to the “principal thrust” or
“gravamen” of plaintiff’s action to determine whether it is subject to the anti-SLAPP
14
statute. (See Cotati, supra, 29 Cal.4th at p. 79.) The trial court used this test, concluding
the principal thrust of Crossroads’ action was to recover for Fannie Mae’s failure to
comply with state nonjudicial foreclosure law and for fraud, not for its protected activity
in the bankruptcy action. We agree with the trial court for the reasons stated above.
Despite the interrogatory, the thrust of this action does not arise from Fannie Mae’s
constitutional activity. We conclude under the “principal thrust” test that Crossroads’
causes of action based on Fannie Mae’s failure to provide Crossroads with the requested
accounting is not subject to the anti-SLAPP statute.
Other courts faced with mixed causes of action arising and not arising from the
defendant’s protected activity hold the complaint subject to the anti-SLAPP procedure
unless the protected conduct is “ ‘merely incidental’ ” to the unprotected conduct.
(Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133
Cal.App.4th 658, 672.) Applying this test here, we see the protected conduct, Fannie
Mae’s response to Crossroads’ interrogatory, is not merely incidental to the unprotected
conduct. Had Crossroads sued only on Fannie Mae’s response to the interrogatory, that
cause of action would certainly be subject to the SLAPP statute, as it would challenge
Fannie Mae’s exercise of petition rights in the bankruptcy action. We cannot say that
potential liability based on protected activity is merely incidental to the unprotected
conduct in this case. We thus proceed to the second step of the anti-SLAPP analysis.
Crossroads argues it has presented a prima facie case showing it established
Fannie Mae violated Section 2924c by not providing it with an accounting of the amount
needed to reinstate or pay off the loan. Fannie Mae contends Section 2924c required
Crossroads to make its request for an accounting in writing, and all of its requests were
made orally except for the interrogatory. As for the interrogatory, Fannie Mae argues it
is not evidence of a violation of Section 2924c as it sought something the statute did not
15
require Fannie Mae to provide–a payoff amount as of a future date. It also was privileged
against attack as a discovery response.7
Fannie Mae incorrectly claims Section 2924c requires all requests for an
accounting to be in writing. It requires requests to be in writing only when the debtor
wants a written accounting. Otherwise, the statute encourages the debtor to contact the
beneficiary, even by telephone, to obtain the information. This point, however, does not
end our analysis. Crossroads must still establish a prima facie case that Fannie Mae
violated Section 2924c.
California law provides a statutory right to reinstate a loan (sometimes referred to
as curing the default or decelerating the loan) generally up to five business days before
the property securing the loan is scheduled to be sold. (Civ. Code, § 2924c, subd. (e).) It
also provides an equitable right to pay off the loan (referred to as redemption) any time
before the property is actually sold. (Civ. Code, §§ 2903, 2905.) Crossroads sought
information to exercise both rights. Rather than delve into whether Crossroads had a
right to reinstate the loan when it requested the amount to cure the default after the five-
day period may have expired, we review the record to determine if Crossroads can
establish a violation of Section 2924c based on Fannie Mae’s failure to provide the
amount needed to redeem the loan. We conclude Crossroads has established a prima
facie case.
“Where a cause of action refers to both protected and unprotected activity and a
plaintiff can show a probability of prevailing on any part of its claim, the cause of action
is not meritless and will not be subject to the anti-SLAPP procedure. [¶] Stated
7 Crossroads contends Young’s e-mail after the stay was lifted also constituted a
written request for an accounting. However, it did not request reinstatement or payoff
information. Rather, Young asked if Fannie Mae would agree to sell the property to
Ezralow for a price equal to its bankruptcy claim.
16
differently, the anti-SLAPP procedure may not be used like a motion to strike under
section 436, eliminating those parts of a cause of action that a plaintiff cannot
substantiate. Rather, once a plaintiff shows a probability of prevailing on any part of its
claim, the plaintiff has established that its cause of action has some merit and the entire
cause of action stands.” (Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th
90, 106 (Mann).)8
Crossroads has established a prima facie case showing Fannie Mae violated
Section 2924c by not providing it with the requested information to redeem the loan. In
compliance with Section 2924c, Fannie Mae’s recorded notice of default informed
Crossroads that in order to find out how much it must pay, or to arrange for payment to
stop the foreclosure, it could contact Fannie Mae’s trustee. Crossroads went a step
further and contacted Fannie Mae’s attorney during the bankruptcy proceeding many
times and asked to know the amount required to pay off the loan. It also sought the
information by means of an interrogatory. Fannie Mae did not provide the information.
Implied in Section 2924c’s right to learn the amount needed to pay off the loan is a
requirement that the beneficiary or trustee will in fact provide that information to the
debtor. There is no evidence Fannie Mae responded to Crossroads’ requests.
Thus, there is a likelihood Crossroads will be able to establish a violation of
Section 2924c. As a result, its causes of action that arise from Fannie Mae’s violation are
not subject to the anti-SLAPP statute. That is significant here, because the violation
serves as a basis for liability in five of Crossroads’ seven causes of action against Fannie
Mae. Having found prima facie evidence establishing the requisite likelihood of
8 We recognize the issue of whether a court can treat an anti-SLAPP motion like a
motion to strike under section 436 and strike only portions of a cause of action is
currently before our Supreme Court. (Baral v. Schnitt, review granted May 13, 2015,
S225090.) Meanwhile, Mann continues to be good law.
17
Crossroads’ succeeding on those five causes of action, our analysis ends as to those
causes of action, and the trial court’s denial of the anti-SLAPP motion against them must
be affirmed. We need not address whether Crossroads’ allegations of Fannie Mae’s
failure to accept tender of the amount required to reinstate or redeem the loan are subject
to the anti-SLAPP motion, as those allegations relate to the same causes of action.
B. Agreeing to provide notice of the sale
The parties disagree on whether Napolitano, Fannie Mae’s attorney, agreed to
provide Crossroads with notice of any foreclosure sale after the bankruptcy stay was
lifted. Because we must assume Crossroads’ allegations are true for purposes of the anti-
SLAPP motion, we assume Napolitano did in fact agree to provide notice. According to
attorney Young’s testimony, Young spoke with Napolitano after the stay was lifted and
asked if he would provide prior notice of any foreclosure sale. Napolitano promised he
would. Napolitano did not provide notice.
Fannie Mae asserts Crossroads’ challenge based on Napolitano’s alleged promise
arises from protected activity because it is an attack against settlement discussions made
in connection with litigation. (See Thayer v. Kabateck Brown Kellner LLP (2012) 207
Cal.App.4th 141, 154.) The request to provide notice, however, was not a protected
settlement discussion. It did not contemplate or constitute a settlement of the bankruptcy
action, because when the promise was made, there was nothing left in that action to settle.
Crossroads’ reorganization plan had not been approved and Fannie Mae had been
released from the bankruptcy stay.
At best, the promise took place while the parties talked about settling the
nonjudicial foreclosure action. However, statements made in or about nonjudicial
foreclosure proceedings are not protected activity. For purposes of the anti-SLAPP
statute, a nonjudicial foreclosure is not a judicial proceeding where the constitutional
right of petition is exercised. A nonjudicial foreclosure “does not involve legislative,
executive, or judicial proceedings. Nonjudicial foreclosure proceedings are statutorily
18
based. . . . [A]ccording to the proponents of the 1996 amendment to the nonjudicial
foreclosure statute, . . . ‘a nonjudicial foreclosure is a private, contractual proceeding,
rather than an official, governmental proceeding or action.’ [Citations.]” (Garretson v.
Post (2007) 156 Cal.App.4th 1508, 1520.) “Nonjudicial foreclosure merely provides a
nonjudicial, private alternative to judicial foreclosure.” (Id. at p. 1521.)
Napolitano’s agreement to provide prior notice of a foreclosure sale related only to
the nonjudicial foreclosure process, and was not a statement made in a judicial
proceeding or about issues pending in a judicial proceeding. Thus, his statement was not
protected activity, and Crossroads’ fraud and promissory estoppel causes of action, each
based on Napolitano’s statement, did not arise from protected activity. The trial court
correctly denied the anti-SLAPP motion as to those causes of action.
DISPOSITION
The trial court order denying the anti-SLAPP motion is affirmed. Costs on appeal
are awarded to Crossroads. (Cal. Rules of Court, rule 8.278(a).)
NICHOLSON , Acting P. J.
We concur:
ROBIE , J.
DUARTE , J.
19
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In The
Court of Appeals
Sixth Appellate District of Texas at Texarkana
No. 06-13-00131-CR
DENNIS RAY FREEMAN, Appellant
V.
THE STATE OF TEXAS, Appellee
On Appeal from the 124th District Court
Gregg County, Texas
Trial Court No. 42132-B
Per Curiam
ORDER
Dennis Ray Freeman appeals from his convictions for attempted sexual assault of a child
and indecency with a child. Freeman filed a pretrial motion seeking to suppress oral statements
that he made to police before, during, or after his arrest and a second pretrial motion seeking to
suppress evidence seized in connection with his detention and arrest. The motions were
ultimately denied, with oral findings made on the record by the trial court. No written findings
of fact or conclusions of law were entered by the trial court. See TEX. CODE CRIM. PROC. ANN.
art. 38.22, § 6 (West Supp. 2013).
Freeman and the State have jointly asked that written findings be made and filed in the
record of this case and have represented that the trial court is willing to do so. Based on their
joint request, we abate this appeal and remand it to the trial court. See TEX. R. APP. P. 44.4.
The trial court is instructed to enter its findings of facts and conclusions of law related to
Freeman’s pretrial motions to suppress, which shall be filed with this Court in the form of a
supplemental clerk’s record within twenty-one days of the date of this order.
The abatement will terminate and this Court’s jurisdiction will resume on the filing of the
supplemental clerk’s record.
Counsel has also asked for an opportunity to file additional briefing based on the written
findings. That request is granted. Any supplemental briefing shall be filed by the parties within
ten days of the date on which the supplemental clerk’s record is filed with this Court.
2
All appellate timetables are hereby stayed and will resume on our receipt of the
supplemental clerk’s record.
IT IS SO ORDERED.
BY THE COURT
Date: April 10, 2014
3
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487 S.E.2d 760 (1997)
Douglas D. ROBERTS, Plaintiff-Appellee
v.
Carroll E. SWAIN, Jr., Individually and in his position as Lieutenant, University of North Carolina Police Department; J.B. MCCracken, Individually and in his position as Lieutenant, University of North Carolina Police Department; Alana M. Ennis, Individually and in her position as Public Safety Director and Chief, University of North Carolina Police Department and University of North Carolina, Defendants-Appellants.
No. COA96-656.
Court of Appeals of North Carolina.
July 15, 1997.
*763 Bayliss, Hudson & Merritt by Ronald W. Merritt, Chapel Hill, for plaintiff-appellee.
Attorney General Michael F. Easley by Special Deputy Attorney General Thomas J. Ziko and Assistant Attorney General Sylvia Thibaut, for defendants-appellants.
McGEE, Judge.
This is an appeal from an order denying defendants' motion for summary judgment on claims asserted by plaintiff against defendants Swain, McCracken and Ennis in their individual capacities. Defendants contend these claims are barred by sovereign and qualified immunity.
Plaintiff filed this action on 3 July 1995, and defendants answered on 6 September 1995. On 13 March 1996, defendants moved to amend their answer and also moved for summary judgment. By order entered 28 March 1996, the trial court denied the motion to amend and allowed the motion for summary judgment as to all claims except the following: (1) plaintiff's claim for assault and battery against defendants Swain and McCracken in their individual capacities; (2) plaintiff's claim for false imprisonment against defendants Swain and McCracken in their individual capacities; (3) plaintiff's claim for malicious prosecution against defendant Swain in his individual capacity; and (4) plaintiff's Fourth Amendment claim based on excessive force and unreasonable search and seizure against defendants Ennis, Swain and McCracken in their individual capacities. Defendants appeal the denial of their motion for summary judgment on these claims and the denial of their motion to amend their answer.
Evidence presented by both parties at summary judgment shows the following events. On the evening of 18 January 1995, Lt. Carroll E. Swain, Jr. of the University of North Carolina at Chapel Hill (UNC-CH) Police Department, arrested Douglas D. Roberts for solicitation to sell basketball tickets when he discovered Roberts standing on a sidewalk outside the Dean Smith Student Activities Center (Smith Center) attempting to sell two tickets to the UNC-CH v. Virginia basketball game scheduled that evening. Roberts resisted, contending he was doing nothing wrong. Swain handcuffed Roberts, performed a pat-down, and then took him to the UNC-CH Police Department where he removed the handcuffs, performed another pat-down, and questioned Roberts. When asked to give his social security number, Roberts refused. Swain and Lt. J.B. McCracken, who was present at the office, both told Roberts he would be taken before a magistrate if he failed to provide the number.
The parties' evidence of the following events varies somewhat. When Roberts again refused to give his social security number, Swain tried to handcuff him again. Roberts protested verbally. Swain testified he then reached for Roberts' arm but is not sure whether he made contact. Roberts testified Swain grabbed his shirt lapel and pushed him back against a table. Roberts testified at this point he resisted by grabbing Swain's lapel. Swain testified Roberts grabbed him "about the throat and collar." McCracken intervened and a scuffle ensued. Roberts testified both officers held him up in the air while he had Swain's head between his arms putting pressure on it. Both Roberts and Swain testified that Swain and McCracken then restrained Roberts by holding him face down on the floor. Swain testified he told Roberts to put his hands behind his back or he would "spray" him but Roberts refused. While Roberts was in this position, Swain testified he sprayed him in the face with pepper spray. Roberts testified *764 Swain placed his knee on his right temple and sprayed him directly in the face.
The officers then handcuffed Roberts and took him to a magistrate who issued arrest warrants for: (1) "solicitation" in violation of Chapel Hill Ordinance § 13-2, which requires a permit to sell goods and services by going door to door or place to place without prior appointments; (2) resisting, delaying, and obstructing an officer under N.C. Gen. Stat. § 14-223; and (3) assault on a police officer under N.C. Gen.Stat. § 14-33(b). Roberts was then released. All three charges were subsequently dismissed by an assistant district attorney.
Ordinarily, a denial of summary judgment is not immediately appealable. Herndon v. Barrett, 101 N.C.App. 636, 639, 400 S.E.2d 767, 769 (1991). However, a denial of a summary judgment motion based on sovereign and qualified immunity is immediately appealable. Id.
I. State Law Tort Claims
Defendants first contend the trial court erred by denying their motion for summary judgment on plaintiff's assault and battery and false imprisonment claims against defendants Swain and McCracken in their individual capacities and on plaintiff's malicious prosecution claim against Swain in his individual capacity. They contend the doctrine of sovereign immunity bars these claims.
We first note "[a]s a general practice, plaintiffs designate in the caption of the complaint whether the defendants have been sued in their `official' or `individual' capacity." Whitaker v. Clark, 109 N.C.App. 379, 383, 427 S.E.2d 142, 144, disc. review denied and cert. denied, 333 N.C. 795, 431 S.E.2d 31 (1993). Here, plaintiff's complaint caption states Swain and McCracken are each sued "individually."
In Epps v. Duke University, 116 N.C.App. 305, 447 S.E.2d 444 (1994)(Epps I), this Court stated:
[I]f a public officer is sued in his individual capacity, he is entitled to immunity for actions constituting mere negligence, ... but may be subject to liability for actions which are corrupt, malicious or outside the scope of his official duties.
Epps I, 116 N.C.App. at 309, 447 S.E.2d at 447 (citations omitted). In Epps I, this Court held the plaintiff's allegations sufficient to state a claim against a defendant in his individual capacity when the allegations put the defendant on notice that he "may have acted beyond the scope of his official duties in authorizing and/or supervising an autopsy allegedly involving procedures not routinely performed and seemingly unrelated to the cause of death." Id. at 311, 447 S.E.2d at 448; see also Epps v. Duke University, 122 N.C.App. 198, 201, 468 S.E.2d 846, 849 (Epps II), disc. review denied, 344 N.C. 436, 476 S.E.2d 115 (1996). Similarly, in Ingram v. Kerr, 120 N.C.App. 493, 462 S.E.2d 698 (1995), this Court held a plaintiff stated a cause of action against a police officer in his individual capacity when he alleged the officer's actions "were intentional and reckless" and "outside the scope of his duties." Id. at 497-98, 462 S.E.2d at 701.
In his assault and battery and false imprisonment claims against Swain and McCracken, plaintiff alleges these two defendants acted willfully and their actions were without probable cause or otherwise unlawful. In his malicious prosecution claim against Swain, plaintiff alleges Swain acted "with implied malice toward Plaintiff," with "reckless disregard of Plaintiff's rights and without probable cause." As in Epps I and Ingram, these allegations are sufficient to give notice that plaintiff is seeking to recover against defendants Swain and McCracken individually on his tort claims.
We also find plaintiff has forecast sufficient evidence that Swain and McCracken acted outside the scope of their official duties in regard to these tort claims. In sum, at this stage of the proceedings, sovereign immunity does not bar plaintiff's assault and battery and false imprisonment claims against defendants Swain and McCracken in their individual capacities and plaintiff's malicious prosecution claim against defendant Swain in his individual capacity. See Epps II, 122 N.C.App. at 211, 468 S.E.2d at 855. The trial court correctly denied defendants' *765 motion for summary judgment on these claims.
II. Claims under 42 U.S.C. § 1983
Defendants next contend the trial court erred by denying their motion for summary judgment on plaintiff's 42 U.S.C. § 1983 claims against defendants Ennis, Swain, and McCracken in their individual capacities. Specifically, they contend defendants Ennis, Swain, and McCracken were entitled to qualified immunity on these claims.
Under the doctrine of qualified immunity, "government officials performing discretionary functions generally are shielded from liability for civil damages 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, 102 S.Ct. 2727, 2738, 73 L.Ed.2d 396, 410 (1982). Resolution of whether a government official is insulated from personal liability by qualified immunity "turns on the `objective legal reasonableness' of the [official's] action... assessed in light of the legal rules that were `clearly established' at the time it was taken." Anderson v. Creighton, 483 U.S. 635, 639, 107 S.Ct. 3034, 3038, 97 L.Ed.2d 523, 530 (1987)(quoting Harlow, 457 U.S. at 818-19, 102 S.Ct. at 2738-39, 73 L.Ed.2d at 410-11).
The right purportedly violated by the official must be clearly established in a particularized and relevant manner. Anderson, 483 U.S. at 640, 107 S.Ct. at 3039, 97 L.Ed.2d at 531. "The contours of the right must be sufficiently clear that a reasonable official would understand that what he is doing violates that right." Id. Qualified immunity protects conduct which was reasonable although mistaken. Hunter v. Bryant, 502 U.S. 224, 229, 112 S.Ct. 534, 537, 116 L.Ed.2d 589, 596 (1991).
This Court has summarized the relevant analysis as follows:
[R]uling on a defense of qualified immunity requires (1) identification of the specific right allegedly violated; (2) determining whether at the time of the alleged violation the right was clearly established; and (3) if so, then determining whether a reasonable person in the officer's position would have known that his actions violated that right. While the first two requirements involve purely matters of law, the third may require factual determinations respecting disputed aspects of the officer's conduct.... Thus, "[i]f there are genuine issues of historical fact respecting the officer's conduct or its reasonableness under the circumstances, summary judgment is not appropriate, and the issue must be reserved for trial."
Lee v. Greene, 114 N.C.App. 580, 585, 442 S.E.2d 547, 550 (1994)(quoting Pritchett v. Alford, 973 F.2d 307, 312-13 (4th Cir.1992))(internal citations omitted).
Plaintiff alleges Ennis, Swain, and McCracken violated his rights under the Fourth Amendment of the U.S. Constitution by engaging in unreasonable search and seizure and by using excessive force. We address each alleged violation of rights.
A. Unreasonable Search and Seizure Probable Cause to Arrest Swain and Ennis
Plaintiff contends defendant Swain violated his Fourth Amendment rights against unreasonable search and seizure when Swain arrested him under Chapel Hill Ordinance § 13-2 (Ordinance § 13-2) without probable cause that he had violated the ordinance or had committed any other crime. He contends defendant Ennis violated his Fourth Amendment right not to be arrested without probable cause when she authorized Swain to charge persons under Ordinance § 13-2 for selling basketball tickets at the Smith Center.
The Fourth Amendment of the U.S. Constitution protects individuals from unreasonable searches and seizures. State v. Harrell, 67 N.C.App. 57, 60, 312 S.E.2d 230, 234 (1984). This Fourth Amendment protection includes the right not to be arrested without probable cause. Id. at 61, 312 S.E.2d at 234. Thus, we address whether, under the specific facts and circumstances, there was probable cause for plaintiff's arrest under law clearly established at the time. In regard to plaintiff's activities at the Smith Center, we hold, *766 as a matter of law under the undisputed facts, there was not probable cause.
Probable cause for arrest exists if: at the moment the arrest was made ... the facts and circumstances within [the officer's] knowledge and of which [the officer] had reasonably trustworthy information were sufficient to warrant a prudent man in believing that the [arrestee] had committed or was committing an offense.
Beck v. Ohio, 379 U.S. 89, 91, 85 S.Ct. 223, 225-26, 13 L.Ed.2d 142, 145 (1964). Plaintiff was charged with violation of Ordinance § 13-2. At the time of plaintiff's arrest, this ordinance provided:
Sec. 13-2. Permit required.
No person shall for commercial purposes sell, or solicit orders for, goods and services by going from door to door or from place to place without prior appointments with the residents or occupants thereof, without first having obtained a permit therefor from the town manager or manager's designee. (Ord. No. 0-84-77, § 1, 11-12-84)
Chapel Hill, N.C., Code § 13-2.
We first evaluate Swain's conduct. There is no evidence of record that Swain had any information showing plaintiff was engaged in prohibited activity under Ordinance § 13-2. The evidence shows only that Swain observed plaintiff attempting to sell two basketball tickets for an unknown price outside the Smith Center. In fact, Swain does not purport to have made any inquiries or to have obtained any information leading him to believe plaintiff was engaged in door to door or place to place solicitation. There is simply no evidence showing that the facts and circumstances within Swain's knowledge and of which he had reasonably trustworthy information were sufficient to warrant a prudent person in believing plaintiff was violating Ordinance § 13-2. Thus, under law clearly established at the time of plaintiff's arrest, as a matter of law and as determined by the trial court, there was no probable cause to charge and arrest plaintiff for violation of this ordinance and plaintiff had a clearly established right not to be charged and arrested under this ordinance.
As to Ennis, at the time she authorized arrests for the selling of basketball tickets under this ordinance, she did not limit her authorization to the activities specifically prohibited under the ordinance. That is, she did not direct Swain to arrest only those who were soliciting "by going from door to door or from place to place." This is so in spite of the fact that a single act of selling a small number of basketball tickets in a single location is not explicitly prohibited under the ordinance. In light of the fact that she knew Swain planned to apply the ordinance in this fashion, she had an obligation to make sure it was applied in a constitutional manner. There is simply no evidence showing that the facts and circumstances within Ellis' knowledge and of which she had reasonably trustworthy information were sufficient to warrant a prudent person to believe one engaged in the simple act of selling basketball tickets outside the Smith Center, without more, was violating Ordinance § 13-2. Thus, under clearly established law at the time she authorized Swain to charge persons for this conduct, as a matter of law, plaintiff had a clearly established right not to be charged and arrested under Ordinance § 13-2 for this conduct.
Furthermore, solicitation to sell tickets in and of itself, without more, is not a crime under any statute or ordinance of record. For instance, there is no evidence of record which would have led a reasonable person to believe plaintiff's conduct violated N.C. Gen. Stat. § 105-53, another provision relied upon by Swain to support his conduct. At the time of plaintiff's arrest, G.S. § 105-53 required any person "engaged in business or employed as a peddler" to obtain a license from the Secretary of Revenue "for the privilege of peddling goods." G.S. § 105-53(a) (1995). The statute defines "peddler" as "a person who travels from place to place with an inventory of goods, who sells the goods at retail or offers the goods for sale at retail, and who delivers the identical goods he carries with him." G.S. § 105-53(a).
This statute also requires a person "engaged in business as an itinerant merchant" to obtain a license from the Secretary of Revenue. G.S. § 105-53(b). "Itinerant merchant" *767 is defined as "a merchant, other than a merchant with an established retail store in the county, who transports an inventory of goods to a building, vacant lot, or other location in a county and who, at that location, displays the goods for sale and sells the goods at retail or offers the goods for sale at retail." G.S. § 105-53(b). The statute does not apply, inter alia, to a person who sells "his own household personal property." G.S. § 105-53(e)(1)(b). This statute makes it a misdemeanor offense for a person to, inter alia, "fail to obtain a license" as required by this section, "fail to display the license" if the person is an "itinerant merchant," or "fail to produce the license" upon request if the person is a "peddler."
Here, there is no evidence of record showing Swain had any facts or information which could reasonably lead him to believe plaintiff was a peddler or itinerant merchant as defined in this statute. He had no probable cause to believe plaintiff was "engaged in business or employed as a peddler," see G.S. § 105-53(a), or was a "merchant ... who transports an inventory of goods" in the manner described under this statute. See G.S. § 105-53(b). In addition, a reasonable person could only have concluded, absent other information, that plaintiff was selling "his own household personal property," i.e., two basketball tickets owned by him, and was therefore exempt under the statute. See G.S. § 105-53(e)(1)(b).
There is also no record evidence showing plaintiff's actions could reasonably have been prohibited by N.C. Gen.Stat. § 14-344, the "scalping" statute. This statute provides:
Any person ... shall be allowed to add a reasonable service fee to the face value of the tickets sold, and the person ... which sells or resells such tickets shall not be permitted to recoup funds greater than the combined face value of the ticket, tax, and the authorized service fee. This service fee may not exceed three dollars ($3.00) for each ticket.... Any person ... which sells or offers to sell a ticket for a price greater than the price permitted by this section shall be guilty of a Class 2 misdemeanor.
G.S. § 14-344 (1993). There is no evidence of record that Swain obtained any information, prior to arresting plaintiff, of the price at which plaintiff was offering to sell his two tickets. Thus, he had no information reasonably leading him to believe plaintiff was violating this statute. In fact, this statute explicitly authorizes the sale of tickets within the price range described in the statute. Thus, under the facts evident to him at the time of plaintiff's arrest, Swain had no probable cause to arrest plaintiff for violation of G.S. § 14-344 and plaintiff had a clearly established right not to be arrested for this offense.
In sum, we hold, as a matter of law, that plaintiff had a clearly established right not to be arrested for selling two basketball tickets outside the Smith Center on 18 January 1995. The remaining issue under qualified immunity analysis is whether a reasonable person in the positions of defendants Ennis and Swain would have known their actions violated plaintiff's Fourth Amendment rights. As we have previously stated, this portion of the qualified immunity analysis is not appropriate for summary judgment resolution "[i]f there are genuine issues of historical fact respecting the officer's conduct or its reasonableness under the circumstances." Lee, 114 N.C.App. at 585, 442 S.E.2d at 550. However, if there are no genuine issues of historical and material fact needing resolution, the issue may be resolved as a matter of law at summary judgment. See e.g., Hunter, 502 U.S. at 228, 112 S.Ct. at 536-37, 116 L.Ed.2d at 596 (making reasonableness determination at summary judgment when facts undisputed).
Here, as a matter of law under the undisputed facts, Swain and Ennis were not entitled to summary judgment based on qualified immunity because a reasonable person in these officers' positions would have known, under the circumstances, their actions violated plaintiff's right not to be arrested without probable cause. Thus, the trial court did not err by denying defendants' motion for summary judgment on these claims.
*768 B. Unreasonable Search and Seizure Swain and McCracken Conduct at UNC-CH Police Department
We now address plaintiff's unreasonable search and seizure claim in regard to Swain's and McCracken's conduct at the UNC-CH Police Department. Plaintiff contends that, because he was legally resisting an illegal arrest, there was no probable cause for his arrest for: (1) resisting, delaying or obstructing a public officer in the discharge of his duties (G.S. § 14-223) (resisting charge) and (2) assault on an officer (G.S. § 14-33(b))(assault charge). For this reason, plaintiff contends he had a clearly established Fourth Amendment right not to be arrested for these offenses and that reasonable officers in Swain's and McCracken's positions would have known this. Since they did not, he contends they are not entitled to qualified immunity.
1. Resisting an Officer Charge
Plaintiff asserts there was no probable cause to arrest him for resisting an officer under G.S. § 14-223 because he was legally resisting an illegal arrest. Every person has the right to resist an unlawful arrest. State v. Mobley, 240 N.C. 476, 478, 83 S.E.2d 100, 102 (1954). However, a person "may use only such force as reasonably appears to be necessary to prevent the unlawful restraint of his liberty." Id. at 479, 83 S.E.2d at 102. "[A]n `arrest' does not necessarily terminate the instant a person is taken into custody; arrest also includes `bringing the person personally within the custody and control of the law.'" State v. Leak, 11 N.C.App. 344, 347, 181 S.E.2d 224, 226 (1971). In Leak, this Court held the arrest of the defendant terminated when he was delivered to the jailer and properly confined. Id.
Here, plaintiff's arrest began at the Smith Center and continued while he was at the UNC-CH Police Department and during the time he was taken before the magistrate. Since we have determined Swain did not have probable cause to arrest plaintiff for selling the basketball tickets, his arrest of plaintiff for this conduct was illegal. Since plaintiff's arrest was continuing while he was at the UNC-CH Police Department, at the time he refused to give his social security number, we conclude he was lawfully resisting the illegal arrest for "solicitation" of basketball tickets.
In addition, both the citation and Swain's affidavit list plaintiff's refusal to give his social security number as the basis for the resisting charge. We find his mere refusal to provide his social security number insufficient to establish probable cause for the charge of resisting arrest. This situation is similar to that in State v. Allen in which we held an arrest for resisting an officer illegal when the defendant merely argued with the officer and protested the confiscation of his liquor. State v. Allen, 14 N.C.App. 485, 491-92, 188 S.E.2d 568, 573 (1972). We stated: "`[M]erely remonstrating with an officer ... or criticizing an officer while he is performing his duty, does not amount to obstructing, hindering, or interfering with an officer[.]'" Id. at 491, 188 S.E.2d at 573 (quoting 58 Am.Jur.2d, Obstructing Justice, §§ 12 and 13, pp. 863, 864).
Furthermore, we have more recently stated that "[c]ommunications simply intended to assert rights, seek clarification or obtain information in a peaceful way are not chilled by section 14-223." Burton v. City of Durham, 118 N.C.App. 676, 681, 457 S.E.2d 329, 332, disc. review denied and cert. denied, 341 N.C. 419, 461 S.E.2d 756 (1995). "Only those communications intended to hinder or prevent an officer from carrying out his duty are discouraged by this section [G.S. § 14-223]." Id. Plaintiff's verbal refusal to provide his social security number did not hinder or prevent Swain and McCracken from completing the arrest and citation of plaintiff. We hold there was no probable cause for the resisting an officer charge under G.S. § 14-223.
However, qualified immunity could operate to shield Swain and McCracken from plaintiff's damages suit "if `a reasonable officer could have believed'" plaintiff's arrest "`to be lawful, in light of clearly established law and the information the [arresting] officers possessed.'" Hunter, 502 U.S. at 227, 112 S.Ct. at 536, 116 L.Ed.2d at 595 (quoting Anderson, 483 U.S. at 641, 107 S.Ct. at 3039-40, *769 97 L.Ed.2d at 532). Here, Swain was present during the initial phase of the arrest and knew the facts and circumstances supporting his decision to arrest plaintiff under Ordinance § 13-2. Since a reasonable officer in his position should have known he had no probable cause to arrest plaintiff under Ordinance § 13-2 or any other law for selling the tickets under these circumstances, a reasonable officer in his position would also have known plaintiff was entitled to resist the arrest. Thus, under the undisputed facts, we hold, as a matter of law, Swain is not entitled to qualified immunity on plaintiff's unreasonable search and seizure claim regarding his arrest under G.S. § 14-223.
The situation is somewhat different for defendant McCracken. Since he was not present at the Smith Center, he reasonably may not have known Swain lacked probable cause for the arrest under Ordinance § 13-2. The question, then, is whether an officer in McCracken's position could reasonably have concluded, under clearly established law, that plaintiff's mere refusal to give his social security number was not sufficient to establish probable cause for the resisting charge. Since State v. Allen clearly held it illegal to charge and arrest someone for resisting based on mere remonstrations or criticisms of an officer, we hold, as a matter of law under the undisputed facts, a reasonable officer should have known, under clearly established law, that plaintiff's conduct did not constitute resisting an officer under G.S. § 14-223. McCracken is not entitled to qualified immunity in regard to plaintiff's unreasonable search and seizure claim regarding his arrest under G.S. § 14-223.
2. Assault on an Officer Charge
Plaintiff also contends Swain and McCracken are not entitled to qualified immunity on his unreasonable search and seizure claim regarding his arrest for assault on an officer under G.S. § 14-33(b). He contends he had a clearly established right under the circumstances not to be arrested without probable cause for this offense. He also contends summary judgment on this issue is not proper because the facts present a jury issue as to whether reasonable officers in Swain's and McCracken's positions should have known there was no probable cause for this offense. We agree.
N.C. Gen.Stat. § 14-33(b) provides, in pertinent part:
(b) ... any person who commits any assault, assault and battery, or affray is guilty of a Class 1 misdemeanor if, in the course of the assault, assault and battery, or affray, he:
* * *
(8) Assaults an officer ... when the officer... is discharging or attempting to discharge his official duties.
G.S. § 14-33(b)(8) (1993).
A person resisting an illegal arrest is not resisting an officer within the discharge of his official duties. State v. Anderson, 40 N.C.App. 318, 322, 253 S.E.2d 48, 51 (1979). Since the initial arrest for "solicitation" at the Smith Center and the attempt to arrest plaintiff for resisting an officer were both illegal, plaintiff was entitled to use a reasonable amount of force to resist. See Mobley, 240 N.C. at 479, 83 S.E.2d at 102. Under this analysis, if the amount of force used by plaintiff was unreasonable and rose to the level of an assault under G.S. § 14-33(b)(8), then the officers had probable cause to arrest him under G.S. § 14-33(b)(8). However, Swain and McCracken did not have probable cause to arrest plaintiff for assault on an officer if, at the time, plaintiff was using a reasonable amount of force to resist the illegal arrests for "solicitation" and for resisting an officer. Furthermore, if the amount of force used by plaintiff was reasonable, he had a clearly established right, as a matter of law, not to be arrested for a violation of G.S. § 14-33(b)(8).
We have previously held a defendant justifiably used reasonable force to resist an illegal arrest when he grabbed an officer's shirt pocket. Allen, 14 N.C.App. at 492, 188 S.E.2d at 573. Here, the parties' evidence diverges regarding the level of force used by plaintiff to resist Swain's attempt to handcuff him in the UNC-CH Police Department. Plaintiff contends he grabbed Swain's shirt lapel and applied pressure to Swain's head only after Swain and McCracken had lifted *770 him off the floor. In contrast, Swain contends plaintiff grabbed him by the throat and collar and had Swain's head between his arms applying pressure.
This divergence of evidence requires resolution at trial and may not be resolved at summary judgment. Under plaintiff's version of the facts, a reasonable fact finder could conclude the force he used was reasonable. In contrast, under defendants' version of the facts, a fact finder could reasonably conclude the force used by plaintiff was unreasonable and that Swain and McCracken had probable cause to arrest plaintiff for assault. Similarly, the question of whether Swain and McCracken reasonably should have known, under the facts found, that they had violated plaintiff's right not to be arrested without probable cause is one to be resolved at trial, not at summary judgment. See Lee, 114 N.C.App. at 585, 442 S.E.2d at 550. At this stage of the proceedings, neither Swain nor McCracken is entitled to qualified immunity on plaintiff's unreasonable search and seizure claim regarding his arrest for assault on an officer.
C. Excessive Force Claim
1. Swain and McCracken
Plaintiff further contends Swain and McCracken are not entitled to qualified immunity on his claims that they violated his Fourth Amendment rights by using excessive force to restrain him.
Claims that law enforcement officers used excessive force in the course of an arrest should be analyzed under the Fourth Amendment and its "reasonableness" standard because the Fourth Amendment protects against such physically intrusive conduct. Graham v. Connor, 490 U.S. 386, 395, 109 S.Ct. 1865, 1871, 104 L.Ed.2d 443, 454 (1989).
When attempting a lawful arrest, an officer has the right to use reasonable force to subdue the person arrested and the person arrested has no right to resist. N.C. Gen.Stat. § 15A-401(d)(1) (1988); State v. Burton, 108 N.C.App. 219, 226, 423 S.E.2d 484, 488 (1992), appeal dismissed and disc. review denied, 333 N.C. 576, 429 S.E.2d 574 (1993). Our Supreme Court has stated:
The law will protect an officer who is attempting to make a lawful arrest or to make a lawful search, from consequences of his acts done necessarily in the performance of his duty. This principle cannot be invoked, however, in defense of an officer who in attempting to make an unlawful arrest or an unlawful search, commits an assault, with or without a deadly weapon. For the consequences of his unlawful acts, he must be held responsible to the same extent and with the same result as others who do not profess to act under the law.
State v. Simmons, 192 N.C. 692, 695, 135 S.E. 866, 867 (1926).
Given this precedent, we hold plaintiff had a clearly established right, under the facts and circumstances shown, not to be subjected to use of excessive force by Swain and McCracken. However, the remaining portions of qualified immunity analysis in regard to this issue may not be resolved at this stage of the proceedings. There is a dispute of fact regarding the level of force used by plaintiff and by Swain and McCracken in the UNC-CH Police Department. In turn, the question of whether the force used by Swain and McCracken was excessive relates directly to the degree of force used by plaintiff to resist their attempts to handcuff him. Furthermore, the issue of whether a reasonable officer in the positions of Swain and McCracken should have known the force used was excessive, if it was in fact excessive, is a matter for resolution at trial because it involves unresolved questions of fact and concerns the reasonableness of the officers' conduct under the circumstances. See Lee, 114 N.C.App. at 585, 442 S.E.2d at 550. These matters are more properly reserved for trial and may not be resolved at this stage of the proceedings. The trial court correctly denied defendants' motion for summary judgment on this claim.
2. Ennis
Defendants contend the trial court erred by denying Ennis qualified immunity on plaintiff's claim under 42 U.S.C. § 1983 that she is responsible, under a theory of *771 supervisory liability, for the excessive force allegedly used by Swain and McCracken. In their brief, defendants only analyze the sufficiency of plaintiff's substantive proof of the elements of this claim. They do not offer any argument discussing the application of the doctrine of qualified immunity to this claim. This portion of their appeal is deemed abandoned. See N.C.R.App. P. 28(a) (1997).
III. Denial of Motion to Amend Answer
Defendants contend the trial court erred by denying their motion to amend their answer. This issue is not related to sovereign and qualified immunity, and defendants have not demonstrated how any substantial right would be affected if this issue is not reviewed now. See Smith v. Phillips, 117 N.C.App. 378, 384, 451 S.E.2d 309, 314 (1994). However, in the interest of judicial economy, we exercise our discretion and address this issue. N.C.R.App. P. 2 (1997); Smith, 117 N.C.App. at 384, 451 S.E.2d at 314.
In their answer, defendants admit plaintiff's allegation that Swain did not have probable cause to arrest plaintiff at the Smith Center. The proposed amendment sought to withdraw this admission.
A trial court need not grant a motion to amend if the amendment would be futile. See IRT Property Co. v. Papagayo, Inc., 112 N.C.App. 318, 327-28, 435 S.E.2d 565, 570-71 (1993), rev'd on other grounds, 338 N.C. 293, 449 S.E.2d 459 (1994). Here, the trial court held, as a matter of law, that there was no genuine issue of material fact regarding the circumstances of plaintiff's arrest and that, as a matter of law, defendant Swain had no probable cause to arrest plaintiff. As discussed above, we herein affirm this ruling and hold, as a matter of law, Swain had no probable cause to arrest plaintiff at the Smith Center. Our decision on this lack of probable cause is not based on defendants' admission of no probable cause to arrest in their answer. Rather, it is a legal conclusion based on the undisputed facts. As the amendment sought by defendants would be futile, the trial court properly denied the motion to amend.
IV. Conclusion
The trial court's order is affirmed.
Affirmed.
GREENE and WALKER, JJ., concur.
| {
"pile_set_name": "FreeLaw"
} |
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING
MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT OF APPEAL
OF FLORIDA
SECOND DISTRICT
NEHA PATEL, )
)
Appellant, )
)
v. ) Case No. 2D16-4488
)
RASESH PATEL )
)
Appellee. )
)
Opinion filed September 15, 2017.
Appeal from the Circuit Court for Polk
County; William Sites, Judge.
William J. Lobb and Howardene Garrett of
Law Office of William J. Lobb, Bartow, for
Appellant.
Jean Marie Henne of Jean M. Henne,
P.A., Winter Haven, for Appellee.
BLACK, Judge.
We affirm the order on modification of final judgment of dissolution of
marriage, which denies Neha Patel's motion to modify the final judgment as it relates to
timesharing. Competent substantial evidence supports the trial court's finding that Ms.
Patel met her burden of establishing a substantial, material, and unanticipated change
in circumstances since the entry of the final judgment of dissolution of marriage. See
Wade v. Hirschman, 903 So. 2d 928, 934 (Fla. 2005) ("A decree for purposes of the
substantial change test includes both a decree that has incorporated a stipulated
agreement concerning child custody and a decree awarding custody after an
adversarial hearing."). And we find no error in the court's determination that
modification was not in the child's best interests at the time of the evidentiary hearing.
However, we remand with directions that the trial court strike the language
of paragraph eleven following its finding that it is not in the minor child's best interests to
modify the current timesharing and parental responsibility "at this time."1 The trial court
may neither determine the child's best interests prospectively, see Eisele v. Eisele, 91
So. 3d 873, 874-75 (Fla. 2d DCA 2012), nor delegate its statutory duties to a parent or
expert, Grigsby v. Grigsby, 39 So. 3d 453, 457 (Fla. 2d DCA 2010). Future motions to
modify the final judgment with regard to timesharing are governed by the statutory
requirements to establish a "substantial, material, and unanticipated change in
circumstances" since entry of the final judgment—which has been met in this case—and
that "modification is in the best interests of the child." See § 61.13(3), Fla. Stat. (2016);
see also Howell v. Howell, 207 So. 2d 507, 511-12 (Fla. 2d DCA 1968) (discussing the
law of the case doctrine).
Affirmed; remanded with instructions.
SILBERMAN and CRENSHAW, JJ., concur.
1
We note that the modification order contains two paragraphs numbered
eleven. Our direction on remand is specific to the second paragraph eleven.
-2-
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453 F.2d 375
UNITED STATES of America, Plaintiff-Appellee,v.George Llewellyn ASHTON, Defendant-Appellant.
No. 26813.
United States Court of Appeals,Ninth Circuit.
Dec. 8, 1971.
Roswell Bottum, Jr., Los Angeles, Cal., for defendant-appellant.
Irving Prager, Asst. U. S. Atty. (appeared), Los Angeles, Cal., Robert L. Meyer, U. S. Atty., David R. Nissen, Asst. U. S. Atty. and Chief, Crim. Div., Los Angeles, Cal., for plaintiff-appellee.
Before HAMLEY, HUFSTEDLER, and KILKENNY, Circuit Judges.
HUFSTEDLER, Circuit Judge:
1
Ashton appeals from his conviction on both counts of a two-count indictment charging him with a violation of 18 U.S.C. Sec. 659 (theft of goods from an interstate shipment of freight) and with conspiring to steal goods from interstate freight in violation of 18 U.S.C. Sec. 371 (conspiracy). Ashton challenges the sufficiency of the evidence and the trial court's instructions to the jury. We affirm.
2
The evidence, viewed in the light most favorable to the Government (Glasser v. United States (1942) 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680), showed that a semi-trailer containing 32 rolls of carpeting was shipped by rail from Georgia to California. The trailer arrived in California on June 23, 1969, and was parked in the Southern Pacific Railroad's Piggyback Yard. The Trailer was stolen the next day, June 24. The rugs were recovered from Rushton's carpet store following a tip by informant Anderson who participated in the theft and who testified for the Government.
3
The testimony of several witnesses tied Ashton into the theft and conspiracy in the following particulars. Ashton was present at Luigi's Restaurant on the afternoon of the theft when Anderson arrived with the tractor truck used to tow the stolen trailer from the Piggyback Yard. Ashton was later seen driving around the Yard while the trailer was being removed. Ashton arrived at the carpet store before the trailer, announced the arrival of the rugs, directed their unloading, and demanded payment for the rugs from Rushton's son. In Ashton's presence, the trailer was wiped clean to destroy any incriminating fingerprints. The next day Ashton paid Anderson and his driver each $250 for their efforts.
4
Ashton's theory that Anderson hired him to unload the rugs did not convince the jury. After reviewing the record, we cannot say that the jury was wrong. (See United States v. Nelson (9th Cir. 1969) 419 F.2d 1237.)
5
Secondly, Ashton argues that the court erred by refusing to give a requested instruction on interpreting circumstantial evidence and on reasonable doubt. The Government contends that other instructions given by the court contained correct statements of the law on these points. We have perused the court's instructions and find no error. (See Mull v. United States (9th Cir. 1968) 402 F.2d 571, 575, cert. denied (1969) 393 U.S. 1107, 89 S.Ct. 917, 21 L.Ed.2d 804.)
6
Affirmed.
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873 F.2d 1125
Art KNIGHT, Appellant,v.INTERCO INCORPORATION, formerly International Hat Company, Appellee.
No. 88-1778.
United States Court of Appeals,Eighth Circuit.
Submitted Jan. 12, 1989.Decided May 2, 1989.
Donald B. Kendall, Fayetteville, Ark., for appellant.
Constance G. Clark, Fayetteville, Ark., for appellee.
Before MAGILL and JOHN R. GIBSON, Circuit Judges, and HEANEY, Senior Circuit Judge.
MAGILL, Circuit Judge.
1
In the district court,1 appellant Art Knight sued Interco Incorporation for breach of contract. Knight claimed that Interco terminated him as its manufacturer's representative in New Mexico without giving the thirty days written notice required by their contract. The jury returned a verdict for Knight and awarded Knight $200 in damages. On appeal, Knight argues that the judgment should be reversed and remanded for a new trial. He contends that the district court erred (1) by applying the parol evidence rule to his testimony concerning alleged oral modifications of the contract, and (2) by failing to give two jury instructions he requested concerning the appropriate measure of damages. We affirm the judgment of the district court.
I.
2
In 1978, Art Knight purchased a manufacturer's sales representative's business. For $21,000, he received a list of clients, the commercial goodwill accumulated by his predecessor and the right to sell the products of the American Hat and Mexican-American Hat companies (both were later acquired by Interco) in New Mexico. During the next seven years, Knight sold Western hats to retailers in New Mexico and was paid on commission.
3
In early 1985, Knight left Interco and joined Lambert Hat Company, one of its competitors. Several months later, Knight was asked to return to Interco. An agent of Interco told him that his position would be the same as it had been before he left and allegedly agreed orally that if Knight chose again to leave Interco, he could sell his business, just as he had acquired it in 1978.
4
On April 11, 1985, Knight and Interco signed a three-page written agreement. The contract essentially formalized the terms of Knight's previous dealings with Interco. However, paragraph 21 of the agreement indicated that "[e]ither party may terminate this contract by giving thirty (30) days notice in writing to the other party * * *." Despite Interco's alleged oral promises, the contract was silent on the issue of Knight's right to sell his business.
5
A year later, Knight searched for a buyer to take over his accounts. When he informed Interco that he was negotiating with a prospective buyer, the company insisted on the right to approve Knight's replacement. The attempted sale fell through and Knight continued to sell Interco products in New Mexico. In 1986, Knight moved to Arkansas, but he planned to continue working the New Mexico territory. Knight alleges that Interco gave him oral permission to do so. However, the Vice President of Sales and Marketing for Interco testified that he "absolutely" never gave such assent. Tr. at 146. In fact, Interco insists that it "informed Knight that if he moved to Arkansas, the company would have to find someone else to work the New Mexico territory." Appellee's brief at 4.
6
While he was relocating to Arkansas, Knight negotiated with a second would-be buyer. Interco refused to approve the buyer and informed Knight on November 26, 1986 that he was no longer their New Mexico sales representative and that his accounts were no longer his to sell. Knight protested that he had been informed that he had permission to sell his business and move to Arkansas. Nevertheless, Interco awarded his territory to a new sales representative.
7
On June 5, 1987, Knight filed suit for breach of contract in the United States District Court for the Western District of Arkansas. Federal jurisdiction was based on diversity of citizenship under 28 U.S.C. Sec. 1332. During the trial, Knight testified that Interco told him that when he retired, he could sell his accounts. Tr. at 54. Counsel for Interco objected that such testimony was impermissible. The court ruled that Knight's testimony concerning Interco's alleged agreement that he could sell his business was barred by the parol evidence rule.
8
As for the measure of damages, the court instructed the jury to award no damages in excess of the net commissions2 Knight would have earned during the thirty days notice period if Interco had not breached the contract. Despite Knight's requests, the court refused to instruct the jury (1) that Knight could be awarded damages for the loss of his right to sell his business, and (2) that Interco could be estopped from relying on the thirty days notice clause to limit Knight's damages. The jury concluded that Interco breached the April 11, 1985 contract because it did not give Knight the required thirty days written notice and awarded damages for Knight's lost net commissions.
II.
9
Knight's first contention on appeal is that the district court erred in ruling that the parol evidence rule barred him from testifying that Interco orally promised that he could sell his business. Knight claims that on numerous occasions (before and after the signing of his contract), Interco reassured him that he could sell his business, provided that Interco approved his replacement. The court deemed all testimony to that effect inadmissible under the parol evidence rule.
10
The parol evidence rule states that "[w]hen two parties have made a contract and have expressed it in a writing to which they have both assented as the complete and accurate integration of that contract, evidence, whether parol or otherwise, of antecedent understandings and negotiations will not be admitted for the purpose of varying or contradicting the writing." Corbin on Contracts, Ch. 26, Sec. 573, p. 357. See generally Faver v. Faver, 266 Ark. 262, 583 S.W.2d 44 (1979); Sterling v. Landis, 9 Ark.App. 290, 658 S.W.2d 429 (1983). Arkansas courts have consistently held that "where a contract is plain, unambiguous and complete in its terms, parol evidence is not admissible to contradict or add to the written document." Brown v. Aquilino, 271 Ark. 273, 608 S.W.2d 35, 36 (1980) (citing Carolina Casualty Insurance Co. v. Helms, 248 F.2d 268 (8th Cir.1957)); see also City of Crossett v. Riles, 549 S.W.2d 800 (1977). The purpose of the parol evidence rule is to enhance the stability of written contracts. See Hoffman v. Late, 222 Ark. 395, 260 S.W.2d 446, 447 (1953) (quoting Wigmore on Evidence). Knight insists that the district court was incorrect to apply the parol evidence rule (which is inaptly named since it is a substantive, not evidentiary, rule that applies to both parol and written proof, see Corbin at 358). Specifically, he asserts that his testimony concerning Interco's alleged oral promises should not have been barred because:
11
(1) he wished to testify concerning a subsequent, not prior or contemporaneous, oral agreement;
12
(2) the barred testimony would not vary or contradict the written agreement;
13
(3) parol evidence is permissible to reveal the real consideration behind a written agreement if it does not contradict the agreement; and
14
(4) the barred testimony pertained to a separate agreement.
15
The record reveals that under the parol evidence rule, the district court was correct to exclude Knight's testimony concerning Interco's alleged oral promises that he could sell his business. The record does not indicate that Knight received such a promise after the contract was signed. Rather, it appears that Interco's consistent position after the written agreement was that while Knight could sell his accounts to an approved buyer, Interco had the ability (under paragraph 21, see supra ) to terminate Knight with thirty days written notice at any time, for any reason.
16
The contract says nothing about Knight's authority to sell his business. Rather, it discusses the termination of the agreement only in the terms listed in paragraph 21. Therefore, Knight's second and third contentions, based on the premise that his testimony would not have contradicted or varied the agreement, are meritless. Finally, Knight's fourth contention (that the alleged oral promises by Interco constituted a separate agreement) is unpersuasive because, on its face, the written agreement is a complete statement of Knight's and Interco's respective rights and obligations. The contract covers every issue from compensation to territory to termination. We are not convinced that the alleged promises by Interco that Knight could sell his accounts are separate from the all-encompassing written agreement. If the parties had agreed to the content of the alleged promises Knight alludes to, they could have easily interpolated it into the contract. Instead, they included a strikingly different agreement regarding termination of the contract: paragraph 21.
III.
17
Knight also argues for reversal and a new trial because the court failed to give two jury instructions he requested pertaining to the measure of damages. The court ruled that the jury could award Knight no damages exceeding the net commissions he would have earned during the thirty days notice period to which he was contractually entitled. Pursuant to that ruling, it gave the jury the following damage instruction:
INSTRUCTION NUMBER 9
18
If you find from a preponderance of the evidence that defendant breached the agreement by terminating it without giving plaintiff the thirty (30) days notice provided for in the written contract, you must fix the amount of money which will reasonably and fairly compensate him for the following damage sustained:
19
The amount of gross earnings the plaintiff could have reasonably expected to make during the thirty (30) days following his termination less any expenses he would have incurred in making those gross earnings during that thirty (30) day period. Only such damages are recoverable as are the direct, natural and proximate result of the breach and as can be shown with reasonable certainty.
20
Tr. at 208-09.
21
Knight contends that this instruction alone is incomplete. In his view, the district court erred in failing to instruct the jury that:
22
(1) an element of damages the jury could have awarded Knight for Interco's breach of contract was the reasonable amount Knight could have realized for the sale of his business.
23
(2) Interco could be equitably estopped by its conduct (i.e., by allegedly promising Knight he could sell his accounts and that he could move to Arkansas and continue to work the New Mexico territory) from relying on the thirty days notice provision as a limit on his damages.
24
We find Knight's arguments concerning the jury instructions unpersuasive. The first instruction Knight contends should have been given is that proceeds he could have received by selling his business should have been an element of his damages. As we concluded above, see supra section II, the district court correctly ruled that testimony concerning Interco's alleged promises that Knight could sell his business was barred by the parol evidence rule. Since that testimony was properly excluded, the district court clearly did not err by preventing the jury from considering the sale value of Knight's accounts when it calculated his damages.
25
Knight also argues that the court erroneously failed to instruct the jury that Interco could be equitably estopped by its actions from arguing that Knight's damages could be limited to thirty days' net commissions. In light of paragraph 21, we believe the district court properly refused to give such an instruction. During the trial, Knight unequivocally admitted that because of paragraph 21, the contract created no commitment for either side beyond the issuance of thirty days written notice:
26
Q. As a matter of fact, Mr. Knight, at all times, when you were selling for International Hat, you had the right to just simply stop selling, didn't you, if you wanted to?
27
A. Well, after I give my notice. Lived upon [sic] to the contract.
28
Q. And if you got a better deal, you were free to take it, weren't you?
29
A. Yes, sir.
30
Q. You weren't committed to stay for any length of time, were you?
31
A. Just thirty days.
32
Tr. at 119.
33
Regardless of Interco's actions, an estoppel instruction was not necessary because Interco had no duty to Knight except to give him thirty days written notice before terminating him. It failed to do so, and the court properly compensated Knight for that failure by awarding him the net commissions he would have earned had Interco given him the required notice.
34
For the foregoing reasons, we affirm.
1
The Honorable H. Franklin Waters, Chief Judge, United States District Court for the Western District of Arkansas
2
His net commissions were calculated by subtracting Knight's average monthly expenses from the gross commissions he would have earned during the thirty days notice period
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88 Wis.2d 1 (1979)
276 N.W.2d 302
Donald NELSON, and another, Petitioners-Appellants:
Palmer NELSON, and others, Petitioners-Appellants,
v.
DEPARTMENT OF NATURAL RESOURCES, Respondent.[]
No. 77-568.
Court of Appeals of Wisconsin.
Argued August 23, 1978.
Decided January 17, 1979.
*2 For the petitioners-appellants there were briefs by DeWitt, McAndrews & Porter, S. C., and oral argument by Robert Sundby of DeWitt, McAndrews & Porter, S. C., of Madison.
For the respondent there was a brief by Bronson C. La Follette, attorney general and Robert B. McConnell, assistant attorney general, and oral argument by Robert B. McConnell, assistant attorney general.
Before Gartzke, P.J., Bablitch, J. and Dykman, J.
BABLITCH, J.
This case involves a conflict between the authority of counties to regulate the use and development of county lands under zoning powers conferred by sec. 59.97, Stats., and the authority of the Department of Natural Resources (DNR) to control statewide the location and operation of solid waste disposal sites pursuant to sec. 144.30 to 144.46, Stats.
*3 In 1961 Columbia County (County) enacted a zoning ordinance designating certain lands as agricultural and prohibiting, among other uses, the use of such lands as dumping grounds without prior written approval of the Board of Adjustments (Board).[1] In 1968, the Town of Newport (Town), which is located in Columbia County, adopted the ordinance, as amended. In 1968, the City of Wisconsin Dells (City) purchased an eighty acre parcel of land in the Town which was designated as agricultural under the ordinance.
In May, 1975, the City petitioned the Board for permission to use the parcel as a public dumping ground. Three public hearings were held on the application. On *4 May 29, 1975, the Board rendered its decision denying the City's request, on the grounds that such use of the site would have an adverse environmental impact, that increased traffic generated by use of the land as a dump would create an extreme traffic hazard, and that the waterways and land topography rendered the site unsuitable for the proposed use.
The City petitioned for a writ of certiorari before the circuit court of Columbia County to review the Board's action. On March 29, 1976, the court rendered a decision upholding the Board. The City did not appeal that decision.
On May 20, 1976, the City petitioned the DNR for a license pursuant to sec. 144.445, Stats., to operate a solid waste disposal facility on the same parcel. The appellants, other interested Town residents, and the Board all appeared in opposition to the petition. Hearings were held before a DNR examiner on June 29 and November 12, 1976. On February 10, 1977, the DNR issued an order granting the license to the City "subject to the conditions that the site meets and satisfies all applicable statutory and administrative code requirements." Appellants brought this proceeding for judicial review of the DNR's decision on May 8, 1977, before the circuit court of Dane County pursuant to sec. 227.16, Stats. This appeal is from a judgment of that court entered on September 15, 1977, upholding the DNR's order.
[1-3]
The only issue which we need reach on this appeal is whether sec. 144.445, Stats., authorizes the DNR to contravene a county ordinance prohibiting the use of county lands for solid waste disposal sites.[2] We hold that it does not.
*5 [4, 5]
The DNR correctly contends that the various provisions of ch. 144, Stats. (1975), pertaining to solid waste disposal must be construed together.[3] It argues that when so construed they demonstrate a legislative declaration that solid waste disposal is a matter of statewide concern, and that the DNR has been designated by the legislature as the preeminent agency to administer that concern. It submits that sec. 144.445, Stats., specifically empowers the DNR to override all local policy determinations as to the location of waste disposal sites, including those policies expressed in county zoning ordinances prohibiting (or conditioning on prior county approval) the use of certain lands as such sites.
Section 144.445, Stats. (1975), sets forth the conditions under which the DNR may issue a license for the operation of a solid waste disposal site without regard to, or in direct contravention of, local standards. Subsection (1) of that section provides in relevant part:[4]
*6 Any site which meets all state standards and is to be operated . . . in accordance with an approved county plan shall not be required to obtain any local permits or authorization. (Emphasis added.)
The DNR contends that the zoning ordinance prohibiting the use of agricultural lands for dumping grounds without written authorization from the Board establishes a "local permit or authorization" which need not be obtained within the meaning of the subsection. However, the meaning of the phrase in this subsection must be gleaned in light of the immediately preceding sections of the statutes dealing with the same subject.[5] Section 144.435, Stats. (1975),[6] authorizes counties to "prepare and adopt a county solid waste management plan consistent with state criteria," subject to the approval of the DNR. Section 144.44(2), Stats. (1975),[7] provides:
*7 Nothing in ss. 144.30 to 144.46 shall limit the authority of any local governing body to issue licenses and permits for any state-licensed sites or facilities or to adopt, subject to department approval, standards for the location, design, construction, operation and maintenance of solid waste disposal sites and facilities more restrictive than those adopted by the state under this section. (Emphasis added.)
Viewed together, these sections set forth a statutory scheme under which a county may, subject to DNR approval, promulgate a county waste management plan with more restrictive standards than those imposed by the state, and may, together with other local governmental units, exercise licensing authority with respect to those standards. But for the existence of sec. 144.445(1), Stats., then, a potential operator of a waste disposal site would have to apply for permits or licenses both from the DNR and from one or more local governing bodies even if it were willing to comply with both state and county standards.
We read sec. 144.445(1), Stats., as a means to allow applicants to avoid the duplicative effort and red tape delays inherent in proving their ability to meet state and local requirements before both state and local licensing officials. Under this provision, the DNR, which would have approved any applicable county plan under secs. 144.435(2) and 144.44(2), Stats., is implicitly charged with determining whether a proposed site is one which both meets state standards and "is to be operated . . . in accordance with an approved county plan," thus entitling *8 the applicant to bypass local authorities. Under this reading, the "local permits or authorization" thus avoided by the applicant are those authorized under secs. 144.435(2) and 144.44(2), and not the prohibitions or conditions in a zoning ordinance dealing generally with the use and development of county lands.
In this case, Columbia County never adopted a plan for solid waste management under sec. 144.435, Stats., or a licensing ordinance or standards regulating waste disposal under sec. 144.44(2). Consequently, sec. 144.445(1), does not apply, and the DNR had no authority under that subsection to avoid the provisions of the zoning ordinance.
The DNR contends that, even if sec. 144.445(1), Stats., does not relieve the City from obtaining the County's approval under the ordinance, the DNR has authority under sec. 144.445(2) to waive that requirement. Section 144.445(2) provides:
(a) Notwithstanding s. 144.44(2) [authorizing local licensing and more restrictive local standards], if a solid waste disposal site . . . is otherwise eligible for licensing except for failure to obtain a local permit, the department may, after notice and hearing, issue a license under s. 144.44 for the operation of said site. In issuing said license the department must find that the requirements of public health, safety and welfare require the waiver of local approvals as a condition precedent to issuance of a license.
(b) Any license issued under this section shall supersede all local requirements. However, operations licensed under this section may be required to render payments in lieu of local license or permit fees to the municipality in whose jurisdiction they lie not to exceed $100 per site per year. (Emphasis added.)
The DNR argues that the ordinance requiring written approval by the Board is either a "local approval" which may be waived by the DNR or a "local requirement" *9 which may be superseded by the DNR or both. We do not agree with this argument.
The waiver provision contained in subsection (a) was obviously created to enable the DNR to license sites "notwithstanding" the fact that a county or other local governing body had exercised its right to require higher than state standards under the authority of sec. 144.44 (2), Stats.[8] The use of the term "local approvals" in the second sentence of the subsection cannot be viewed as broadening the DNR's right to waive those local requirements to reach the approvals or prohibitions contained within a zoning ordinance promulgated under an entirely different legislative grant of authority.
Similarly, the use of the phrase "all local requirements" in sec. 144.445(2) (b), Stats., must be construed to relate solely to the "requirements" imposed under sec. 144.44 (2), Stats. Under the statutory scheme, the more stringent local requirements will be superseded by a DNR license only when it is "issued under this section," that is, after the hearing and findings specified in subsection (a). The limited scope of the requirements which the DNR is authorized to supersede is further apparent from the second sentence of subsection (b) which entitles the county to collect "license or permit" fees despite the fact that its power to issue the license or permits authorized *10 under sec. 144.44(2) has been voided by DNR action.
We conclude that the legislature has conferred no express authority on the DNR under sec. 144.445, Stats., or in any other provision of ch. 144, Stats., to contravene the county zoning ordinance prohibiting use of certain lands as a solid waste disposal site without prior approval of the Board. The question remains whether the DNR's power to do so is implicit from the provisions of ch. 144, taken as a whole, which confer paramount superintending power on the DNR to regulate solid waste disposal. Wis. Environmental Decade, Inc. v. DNR, 85 Wis.2d 518, 271 N.W.2d 69 (1978).
We agree with the DNR's assertion that the legislature has determined solid waste disposal to be a matter of statewide importance and concern. This is apparent not only from the composite statutory scheme set forth in secs. 144.30 to 144.46, Stats. (1975), and the detailed amendments to those sections in ch. 377, Laws of 1977, but also from the express declaration of policy in sec. 1, ch. 305, Laws of 1973, reciting the reasons for creating the Solid Waste Recycling Authority.[9] The statewide *11 nature of this concern, which was recognized by the Wisconsin Supreme Court in Wisconsin Solid Waste Recycling Auth. v. Earl, 70 Wis.2d 464, 479-80, 235 N.W.2d 648 (1975), does not automatically indicate a legislative intention to preempt local policy determinations of local zoning authorities, however. Legislative recognition of the importance of these concerns is found from the Solid Waste Recycling Act itself, which provides:
Where any building, structure or facility is constructed for the benefit of or use of the authority, such construction shall not be subject to the ordinances or regulations of the municipality in which the construction takes place *12 except zoning including without limitation because of enumeration, ordinances or regulations relating to materials used, permits, supervision of construction or installation, payment of permit fees, or other restrictions of any nature whatsoever. Sec. 499.45, Stats. (Emphasis added.)
Section 499.01(6), Stats., defines "municipality" to include a county.
In exempting the authority charged with administering a program of statewide importance from all local regulations and restrictions except zoning, the legislature has plainly stated its determination that local zoning considerations remain of major consequence even in the face of the statewide importance of solid waste disposal administration. In our view, the same legislative determination is inherent in the applicable sections of ch. 144. Nowhere in secs. 144.30 through 144.445, Stats., is the DNR given express authority to contravene local zoning ordinances. Its power to override local regulations is limited to the regulations of the same kind as it is authorized to make, and it is not authorized to zone local lands.
Section 144.31, Stats., sets forth the general powers and duties of the DNR with respect to solid waste management. Subsection (1) (c) of that section provides that it shall "[e]ncourage local units of government to handle air pollution and solid waste disposal problems within their respective jurisdictions . . . and provide technical and consultative assistance therefor." Subsection (2) (e) authorizes the DNR to "[a]dvise, consult, contract and co-operate with" other state agencies and local units of government, among others, to achieve the purpose of secs. 144.30 to 144.46 and 144.54, Stats. Section 144.43, Stats., requires the DNR to
prepare and adopt minimum standards for the location, design, construction, sanitation, operation and maintenance *13 of solid waste disposal sites and facilities and . . . adopt such rules relating to the operation and maintenance of solid waste disposal sites and facilities as it deems necessary . . . . (Emphasis added.)
The DNR has construed its own power to set "minimum standards for the location" of disposal sites in adopting such rules as Wis. Adm. Code sec. NR 151.12(4) and (6), which provide that no site shall be maintained within specified distances of lakes, rivers, highways, and residential areas.
The power of the DNR to set minimum standards generally applicable to the location of sites, and to license specific facilities which meet those standards, is fundamentally different from the power of a county to zone its lands set forth in sec. 59.97(1), Stats. That section provides:
It is the purpose of this section to promote the public health, safety, convenience and general welfare; to encourage planned and orderly land use development; to protect property values and the property tax base; to permit the careful planning and efficient maintenance of highway systems; to insure adequate highway, utility, health, educational and recreational facilities; to recognize the needs of agriculture, forestry, industry and business in future growth; to encourage uses of land and other natural resources which are in accordance with their character and adaptability; to preserve wetlands; to conserve soil, water and forest resources; to protect the beauty and amenities of landscape and man-made developments; to provide healthy surroundings for family life; and to promote the efficient and economical use of public funds . . . . (Emphasis added.)
In exercising its zoning authority under this section, the county is required to consider a much broader range of local concerns than those addressed in ch. 144, Stats. Zoning officials charged with planning the long range growth and development of their own communities are *14 arguably, if not presumably, in a better position than a state agency to weigh the competing factors of those concerns and evaluate the present and future impact of locating a solid waste disposal facility within a particular region of the community.
The DNR asserts that to hold that it has no authority to veto local zoning ordinances prohibiting sanitary waste disposal sites in certain areas will lead to a mushrooming of such ordinances forbidding the use of all local land for waste disposal and a consequent frustration of legislative purpose. We will be "up to our ears" in undisposable garbage, it argues, since "nobody loves a dump." This argument presupposes bad faith on the part of local units of government which the legislature has refused to echo or share to the present date.
The legislature provided in sec. 59.97(13) that the zoning powers conferred on the county in that section "shall be liberally construed in favor of the county exercising them." In the same act which created secs. 144.435 and 144.445, it created sec. 59.07(135), which conferred substantial and detailed powers on the county to establish and operate solid waste management systems or to participate jointly in such systems with other municipalities. Sec. 1, ch. 130, Laws of 1971. In its detailed 1977 amendments to these and related provisions of the statutes, the legislature mandated the greater involvement of local units of government in DNR licensing procedures by, e.g., requiring the DNR to give notice and information as to each application for site approval to each municipality "with zoning jurisdiction over the proposed site . . . [or] within whose boundaries any portion of the proposed site will be located, or which could be substantially affected by the operation of the proposed site." Section 17, ch. 377, Laws of 1977. It also gave the DNR express authority to waive application of local ordinances or resolutions which inhibit the ability *15 of an applicant to obtain data required to be submitted to the DNR in preliminary reports, but omitted to grant any similar authority with respect to local zoning ordinances prohibiting the location of waste disposal sites within certain geographic territory. This omission, in light of its specific attention to "zoning authorities" and the DNR waiver powers, can hardly have been inadvertent.
We view the history of the legislature's enactments in the field of solid waste disposal as its recognition that state and local units of government share the same concerns for safe, sanitary, environmentally sound, and convenient disposal of waste. Though it gave the DNR central and preemptive power to license and supervise maintenance and operation of specific facilities, and to promulgate uniform general standards for location of sites and general rules of regulation, it left with the county the traditional powers of planning and developing community lands according to the long range goals of the local community. These powers do not inherently conflict. La Crosse Rendering Works v. La Crosse, 231 Wis. 438, 285 N.W. 393 (1939); Fox v. Racine, 225 Wis. 542, 275 N.W. 513 (1937).
We cannot presume that municipal governments, acting on behalf of their citizens, would arbitrarily "zone out" the areas of land under their control so as to prevent the location of safe and convenient disposal sites anywhere within their constituent communities. It is doubtful whether any such attempt could be sustained under the appropriate standards of judicial review.
The DNR has brought to our attention the recent case of Wis. Environmental Decade, Inc. v. DNR, 85 Wis.2d 518, 271 N.W.2d 69 (1978), which was decided after oral arguments in this case. That case involved a city council resolution entirely prohibiting the chemical treatment for weed control of all lakes within the City of Madison. The *16 court found that the city's policy was in diametrical conflict with a statute authorizing the DNR to "supervise" and to grant permits for such treatment of waters throughout the state, as that statute was implemented by the DNR. It held that the legislation relating to use and control of navigable waters manifested a clear legislative intent to place central and preemptive power in the DNR as the "central unit of state government" charged with administering the "public trust" in all navigable waters in the state. The resolution was consequently held to be invalid.
That case is not on point with this case. The legislative authority granted to the DNR with respect to solid waste disposal sites stops well short of its authority with respect to navigable waters. The zoning ordinance here in question does not purport to totally "`forbid what the legislature has expressly licensed'"[10] or "`infringe the spirit of a state law or . . . general policy of the state.'"[11] Columbia County has made no attempt to "zone out" the use of all lands within its boundaries as waste disposal sites, but merely to preclude such use of lands zoned "agricultural" without prior county approval.
In this case, Columbia County's refusal to condone the conditionally prohibited use of a specific eighty acre parcel of agricultural land was upheld by the circuit court as being neither arbitrary nor capricious. The decision of that court was not appealed. Unless and until the legislature wishes to grant the DNR the power to veto such local zoning determinations, as it has empowered the DNR to override local prohibitions in the area of navigable waters, such zoning policies are subject to review by the courts, and not by the DNR.
By the Court.Reversed.
NOTES
[] Petition to review granted March 14, 1979.
[1] Sec. 11.04 of the ordinance, in its present form, provides as follows:
In the Agricultural District no building or premises shall be used and no building shall hereafter be erected, moved, or structurally altered, unless otherwise provided in this ordinance, except for one or more of the following uses:
. . . .
10. The following uses when the location of each such use shall have been approved in writing by the Board of Adjustments, after public hearings and after a view of the proposed site or sites . . . . The Board's decision on any application shall be based upon the evidence produced at . . . public hearing and shall be consistent with the general purposes and intent of this ordinance, giving due consideration to convenience and necessity, environmental and agricultural effects, cost, geographic feasibility and other factors tending to show the suitability of specific proposed locations for a specific proposed use from the standpoint of public interest because of such factors as (without limitation because of enumeration) smoke, dust, noxious or toxic gases or odors, noise, vibration, operation of heavy vehicular traffic and increased traffic on the public streets; such uses shall also be required to meet the specific conditions attached below:
. . . .
(i) Public dumping grounds which meet the minimum standards of the applicable Wisconsin Administrative Codes. (Emphasis added.)
[2] The DNR contends that appellants are barred from review under sec. 227.16, Stats., because its original petition for review, which was never filed in circuit court, named the Natural Resources Board rather than the Department of Natural Resources as respondent. We find no merit in this contention. Cruz v. ILHR Department, 81 Wis.2d 442, 260 N.W.2d 692 (1978). The DNR also argues that the review proceedings were improperly commenced because the corrected petition for review was not filed and authenticated prior to service on the DNR pursuant to sec. 801.02, Stats. This argument is similarly without merit. The procedure for review of administrative decisions is set forth in sec. 227.16 with which the appellants fully complied. Sec. 801.02 is a part of the rules of civil procedure applicable to civil actions, and inapplicable to review proceedings under the Administrative Procedure Act. Wis. Environmental Decade v. Public Service Comm., 79 Wis.2d 161, 170, 255 N.W.2d 917 (1977).
[3] "It has long been settled in this state that statutes in pari materia, i.e., . . . must be read together and harmonized if possible." Weiss v. Holman, 58 Wis.2d 608, 619, 207 N.W.2d 660 (1973).
[4] This section was amended by sec. 19, ch. 377, Laws of 1977, as follows: (1) Any solid waste site or facility which meets all state standards and is to be operated . . . in accordance with an approved county plan under s. 144.435(2) shall not be required to obtain any local permits or authorization.
[5] Montreal Mining Co. v. State, 155 Wis. 245, 247, 144 N.W. 195 (1913). See also Tanck v. Clerk, Middleton Jt. School Dist., 60 Wis.2d 294, 304, 210 N.W.2d 708 (1973), and Dept. of Natural Resources v. Clintonville, 53 Wis.2d 1, 10-11, 291 N.W.2d 866 (1971).
[6] These provisions were left substantially intact by the legislature in 1977. The only substantial change is found in sec. 12, ch. 377, Laws of 1977, which deleted the requirement that the county plan must be submitted to the Department of Local Affairs and Development prior to submitting it to the Department of Natural Resources for final review, and added an absolute requirement that the DNR consult with "the appropriate regional planning commission or other planning agency" in reviewing county plans.
[7] Sec. 16, ch. 377, Laws of 1977, renumbers this section as 144.43(2), but makes no other change in the provision. Subsection (1) of sec. 144.43 which, for purposes of this appeal, is substantially identical in both its 1975 and 1977 versions (see sec. 11, ch. 377, Laws of 1977) requires the DNR to "prepare and adopt minimum standards for the location, design, construction, sanitation, operation and maintenance of solid waste disposal sites and facilities . . . ." The legislature's action in 1977 in placing the subsection authorizing counties to license waste disposal sites and to adopt standards concerning the identical categories which the DNR is required to adopt is evidence of a legislative grant of concurrent jurisdiction to the DNR and counties to regulate waste disposal.
[8] We believe this construction is clear from the plain meaning of the 1975 statute. It gains additional support from the legislature's clarifying amendment in sec. 19, ch. 377, Laws of 1977, which clearly delimits the DNR's power to waive "such" local approvals to those approvals the county may have chosen to require under sec. 144.44(2) (now sec. 144.43(2)). The text of sec. 144.445(2), as amended, is as follows:
(a) Notwithstanding s. . . . 144.43(2), if a solid waste disposal site . . . or facility is otherwise eligible for construction and licensing except for failure to obtain a local permit, the department may, if it finds after notice and hearing, . . . that the requirements of public health, safety and welfare so require . . ., waive such local approvals . . . .
[9] SECTION 1. Legislative findings. It is found and declared that the people of this state have the right to a clean and wholesome environment; that prevailing solid waste disposal practices generally, throughout the state, result in unnecessary environmental damage, waste valuable land and other resources, and constitute a continuing hazard to the health and welfare of the people of the state; that local units of government and the private solid waste management industry are becoming hard pressed to provide adequate services at reasonable costs, without damage or hazard to the environment and the loss of useful resources; that locally organized voluntary recycling programs have shown that solid wastes produced in the state contain recoverable resources; that technology and methods now exist to dispose of solid wastes and recover resources with commensurate environmental benefits; that coordinated large-scale processing of solid wastes is necessary in order to achieve maximum environmental and economic benefits for the people of the state; that the amounts of solid waste being produced within the state are adequate to sustain such large-scale processing; that the geography and population density of the state are such as to enable and facilitate the effective and economic regional accumulation of solid wastes; that present patterns of governmental organization and the rapidly increasing cost of financing solid waste management facilities greatly limit the ability of local government and the private solid waste management industry to construct and operate the large-scale processing plants needed to maximize environmental and economic benefits; that the development of systems and facilities and the use of the technology necessary to initiate large-scale processing of solid wastes are logical and necessary functions to be assumed by a state authority; that the provision of solid waste disposal services at reasonable cost, through a state authority, would supply valuable assistance to local units of government and the private solid waste management industry; that in establishing a Wisconsin solid waste recycling authority, the legislature is acting in all respects for the benefit of the people of this state to serve a public purpose in improving and otherwise promoting their health, welfare and prosperity and that the Wisconsin solid waste recycling authority, as created by this act, is empowered to act on behalf of the people of this state in serving this public purpose for the benefit of the general public; and that it is a valid public purpose to assist local units of government and the private solid waste management industry in providing the necessary systems, facilities, technology and services for solid waste management and resources recovery and to provide the necessary powers needed to accomplish these public purposes.
[10] Wis. Environmental Decade, Inc. v. DNR, 85 Wis.2d 518, 529, 271 N.W.2d 69 (1978), quoting Fox v. Racine, 225 Wis. 542, 545, 275 N.W. 513 (1937).
[11] Id. at 534, quoting Fox, 225 Wis. 542, 545.
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905 N.E.2d 505 (2009)
E.D., Appellant-Defendant,
v.
STATE of Indiana, Appellee-Plaintiff.
No. 49A02-0810-JV-972.
Court of Appeals of Indiana.
May 4, 2009.
*506 Chris P. Frazier, Marion County Public Defender Agency, Indianapolis, IN, Attorney for Appellant.
Gregory F. Zoeller, Attorney General of Indiana, Tiffany N. Romine, Deputy Attorney General, Indianapolis, IN, Attorneys for Appellee.
OPINION
MATHIAS, Judge.
E.D. was adjudicated a delinquent child in Marion Superior Court for carrying a handgun without a license, a Class A misdemeanor if committed by an adult. E.D. appeals arguing that the evidence was insufficient to prove that E.D. constructively possessed the handgun. We reverse.
Facts and Procedural History
On May 24, 2008, Indianapolis Metropolitan Police Department Officer Gary Toms ("Officer Toms") initiated a traffic stop of a vehicle with a missing headlight. There were five individuals in the car; E.D. was seated in the backseat between two males. Officer Toms asked the driver for identification and the driver stated that he did not have a driver's license. Officer Toms placed him in custody and then asked the other passengers to get out of the vehicle so he could do an inventory search prior to having the vehicle towed.
During the inventory search, Officer Toms found a handgun in the pocket behind the driver's seat, approximately one foot away from where E.D. had been sitting. Officer Toms also found a "blunt" allegedly containing marijuana in the pocket behind the front passenger's seat, approximately two feet away from where E.D. had been sitting. Finally, Officer Toms found a small baggie of what appeared to be marijuana in the front cup holder.
On May 27, 2008, E.D. was alleged a delinquent child on Count I: carrying a handgun without a license, which would be a Class A misdemeanor if committed by an adult, and Count II: possession of marijuana, which would be a Class A misdemeanor if committed by an adult. The trial court entered a true finding with respect to Count I. Count II was dismissed because the chemist was not present to testify as to the substance found in the vehicle. The trial court suspended E.D.'s commitment to the Department of Correction with the following conditions: undergo a substance abuse evaluation and random drug testing; abide by a 7:00 p.m. curfew for sixty days; participate in the "Think for a Change" program; remove all weapons from the home; prohibit riding in vehicles without his mother or another adult's permission; and to pay court-ordered fees. E.D. now appeals.
I. Insufficient Evidence
E.D. argues that the evidence is insufficient to support the delinquency adjudicationspecifically that the evidence is insufficient to prove that E.D. was in constructive possession of a handgun without a license. When the State seeks to have a juvenile adjudicated as a delinquent child for committing an act which would be a crime if a committed by an adult, the State must prove every element of the crime beyond a reasonable doubt. J.S. v. State, 843 N.E.2d 1013, 1016 (Ind.Ct.App.2006), trans. denied. In reviewing a juvenile adjudication, this court will consider only the evidence and reasonable inferences supporting the judgment and will neither reweigh evidence nor judge the credibility of the witnesses. Id. If there is substantial evidence of probative value from which a *507 reasonable trier of fact could conclude that the juvenile was guilty beyond a reasonable doubt, we will affirm the adjudication. Id.
Indiana Code section 35-47-2-1 states in pertinent part: "a person shall not carry a handgun in any vehicle or on or about his person ... without a license[.]" See Ind.Code § 35-47-2-1 (2004 & Supp.2007). To convict E.D. of Class A misdemeanor possession of a handgun without a license, the State is required to prove that "the handgun was found in a vehicle and that the defendant had control of either the weapon or of the vehicle with knowledge of the weapon's presence." Grim v. State, 797 N.E.2d 825, 831 (Ind.Ct. App.2003) (emphasis in original) (citations omitted). Additionally, it must be established that there was an intention to convey or transport the weapon. Id. (citing Klopfenstein v. State, 439 N.E.2d 1181, 1184 (Ind.Ct.App.1982)).
To satisfy the element of control, the State must show that E.D. had constructive possession, which occurs when an individual has the intent and capability to maintain dominion and control over the contraband. Bradshaw v. State, 818 N.E.2d 59, 62 (Ind.Ct.App.2004). Where a person's control is non-exclusive, intent to maintain dominion and control may be inferred from additional circumstances that indicate that the person knew of the presence of contraband. Allen v. State, 798 N.E.2d 490, 501 (Ind.Ct.App.2003). These additional circumstances include: 1) incriminating statements made by the defendant; 2) attempted flight or furtive gestures; 3) location of substances like drugs in settings that suggest manufacturing; 4) proximity of the contraband to the defendant; 5) the location of the contraband within the defendant's plain view, and; 6) the mingling of the contraband with other items owned by the defendant. Jones v. State, 881 N.E.2d 1095, 1098-99 (Ind.Ct. App.2008).
In D.C.C. v. State, 695 N.E.2d 1015 (Ind. Ct.App.1998), a police officer initiated a traffic stop of a vehicle and D.C.C. was sitting in the front passenger seat. The police officer arrested both D.C.C. and the driver of the car for curfew violation and possession of alcohol by a minor. After searching the car, another officer found a gun under D.C.C.'s seat. The gun was positioned in a way that it could not be seen by a passenger in that seat. Without any other evidence, we found that the State failed to prove that D.C.C.'s constructive possession of the gun could be inferred. Id. at 1016-17.
In Ferrell v. State, 656 N.E.2d 839, 842 (Ind.Ct.App.1995), however, we found that there was sufficient circumstantial evidence to support an inference of constructive possession. In that case, a witness to a shooting saw Ferrell carrying a pistol during the incident. Approximately twenty minutes later, an officer stopped a vehicle matching the description only blocks from the shooting. After Ferrell was ordered out of the car, the officer seized a pistol from beneath the seat in a location that was within Ferrell's reach. We held that the evidence was sufficient to conclude that Ferrell had discarded the pistol under the seat prior to the police stop of the vehicle. Id.
Unlike the defendant in Ferrell, other than E.D.'s proximity to the gun, there was no other evidence to suggest that E.D. had capability to maintain control and dominion of the gun. Officer Toms testified that E.D. was sitting in the back of the car between two other males, approximately one foot away from the gun. However, Officer Toms also testified that the gun was approximately "arm's length" away, or two feet, from the passenger riding behind the driver's seat. Tr. p. 19. Thus, E.D. *508 was only marginally closer to the gun. Additionally, the gun was arguably in reach of the driver, who was three to three-and-a-half feet away from the gun if he turned to reach for it.
The State did not provide evidence establishing whether the gun was in plain view, and there was no evidence to suggest that E.D. made incriminating statements regarding knowledge of the gun or that E.D. made furtive gestures. Accordingly, we reverse E.D.'s adjudication as a delinquent child for possession of a handgun without a license, a Class A misdemeanor if committed by an adult.
Reversed.
RILEY, J., and KIRSCH, J., concur.
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911 F.Supp. 11 (1996)
Brian K. MEYER, Plaintiff,
v.
Janet RENO, Attorney General of the United States; Kathleen Hawk, Director, Federal Bureau of Prisons; R.M. Booher, Inmate Systems Manager, F.C.I. Memphis; Ray Warren, Raul Zambrano, and R. Robin Stickler, Assistant State Attorneys, Florida Seventh Judicial Circuit, and Unknown Other Defendants, Defendants.
Civil Action No. 95-1748 (CRR).
United States District Court, District of Columbia.
January 4, 1996.
*12 *13 Brian K. Meyer, pro se.
Rudolph Contreras, Assistant United States Attorney, Civil Division, with whom Eric H. Holder, United States Attorney for the District of Columbia, was on the brief, for the defendants.
MEMORANDUM OPINION
CHARLES R. RICHEY, District Judge.
Before the Court in the above-captioned case is the defendants' Motion to Dismiss. Upon careful consideration of the parties' pleadings, the entire record herein, and the applicable law with respect thereto, the Court will grant the defendants' Motion.
I. BACKGROUND
The plaintiff, currently incarcerated at the Sandstone Federal Correctional Institution at Sandstone, Minnesota, brings this action pro se and in forma pauperis, alleging that the defendants acted in concert and under the color of state law to deprive him of his "civil and constitutional rights." The gravamen of the plaintiff's claim is that the defendants conspired to secure detainers against him from local authorities in Florida which, in turn, "negatively affected [his] programming and barred plaintiff from `boot camp' effectively keeping [him] in a higher custody classification and subjecting [him] to longer incarceration than a minimum custody prisoner may have without a detainer." See Complaint, Attachment, p. 3. The plaintiff seeks "punitive and compensatory damages in excess of $50,000." Id.
II. DISCUSSION
The plaintiff does not invoke any basis for recovery nor does he indicate whether he is suing the defendants in their individual or official capacities. While he alleges that the defendants acted under color of state law, a number of the defendants are federal employees. Thus, assuming that the plaintiff is seeking relief against the defendants in their individual capacities, it is unclear whether the plaintiff is suing under 42 U.S.C. § 1983 or directly under the Constitution pursuant to Bivens v. Six Unknown Named Agents, 403 U.S. 388, 397, 91 S.Ct. 1999, 2005, 29 L.Ed.2d 619 (1971). Furthermore, if the defendant *14 is suing the defendants in their official capacities, he does not identify the basis for any such action.
Consistent with the liberal treatment generally afforded pro se litigants, the Court will consider several possible constructions of the plaintiff's allegations.[1] However, notwithstanding the liberal construction of the plaintiff's Complaint, it is still subject to dismissal. The Court is unable to exercise personal jurisdiction over the nonresident defendants, venue does not lie in this district for any Bivens or § 1983 claim, and the Complaint fails to state a claim upon which relief can be granted. Sovereign immunity bars any claims against the defendants in their official capacities. Furthermore, the defendants are entitled to qualified immunity.
A. The plaintiff's claims must be dismissed for want of jurisdiction, improper venue, and failure to state a claim upon which relief can be granted.
1. The Court cannot exercise jurisdiction over defendants Booher, Warren, Zambrano, and Stickler.
The District of Columbia long arm statute, D.C.Code § 13-423, is the only basis upon which personal jurisdiction may be obtained over defendants who do not reside within or maintain a principal place of business in the District of Columbia. Reuber v. United States, 750 F.2d 1039, 1049 (D.C.Cir. 1984). The statute provides that a court in the District of Columbia may exercise personal jurisdiction over a defendant with regard to a claim arising from the defendant's
(1) transacting any business in the District of Columbia;
(2) contracting to supply services in the District of Columbia;
(3) causing tortious injury in the District of Columbia by an act or omission in the District of Columbia;
(4) causing tortious injury in the District of Columbia by an act or omission outside the District of Columbia if he [or she] regularly does or solicits business, [or] engages in any other persistent course of conduct ... in the District of Columbia.
D.C.Code § 13-423(a)(1)-(4) (1981).
Defendants Booher is an employee of the Federal Bureau of Prisons who works at the FCI Memphis in Memphis, Tennessee. Defendants Warren, Zambrano, and Stickler are Florida State Attorneys. Because these defendants are not alleged to conduct any business or make any contracts for services in the District of Columbia and because no injury is alleged to have been suffered in the District of Columbia, the Court cannot exercise jurisdiction over them.
2. Venue does not lie in this district for any potential Bivens or § 1983 claim.
28 U.S.C. § 1391(e), the applicable venue provision for suits against federal officials in *15 their official capacities, is inapplicable to suits against such officials in their individual capacities; rather, venue in such suits is governed by 28 U.S.C. § 1391(b), which provides that
A civil action wherein jurisdiction is not founded solely on diversity of citizenship may, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of the property that is the subject of the action is situated, or (3) a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought.
28 U.S.C. § 1391(b).
Because all of the federal defendants do not reside in the same state, venue cannot lie in this district under § 1391(b)(1). Further, because none of the alleged events or omissions giving rise to the plaintiff's claims took place in the District of Columbia, but rather in Tennessee and/or Florida, venue cannot lie in this district under § 1391(b)(2).
Any potential claim under § 1983 suffers from the same deficiency. See Flanagan v. Shively, 783 F.Supp. 922, 935-36 (M.D.Pa. 1992) (only proper venue for civil rights suit brought by prison inmate against prison officials, who resided in several different states, was in district where claim arose). Therefore, any potential § 1983 claim against either the federal or state defendants is subject to dismissal pursuant to Federal Rule of Civil Procedure 12(b)(3).
3. The plaintiff fails to state a claim upon which relief can be granted.
a. The plaintiff's claims against defendants Reno and Hawk must be dismissed because respondeat superior may not be the basis of a § 1983 or Bivens suit.
Absent any allegations that defendants Reno and Hawk personally participated in the events which gave rise to the plaintiff's claims, or any corroborative allegations to support the inference that these defendants had notice of or acquiesced in the improper securing of detainers against the plaintiff by their subordinates, dismissal is appropriate. See Haynesworth v. Miller, 820 F.2d 1245, 1259 (D.C.Cir.1987) (fellow government employees cannot be held liable under the theory of respondeat superior for either constitutional or common law torts); Smith-Bey v. District of Columbia, 546 F.Supp. 813, 814 (D.D.C.1982) (same). Respondeat superior has been consistently rejected as a basis for the imposition of § 1983 or Bivens liability. See, e.g., Monell v. Dep't of Social Srvcs., 436 U.S. 658, 691, 98 S.Ct. 2018, 2036, 56 L.Ed.2d 611 (1978); Rizzo v. Goode, 423 U.S. 362, 375-76, 96 S.Ct. 598, 606-07, 46 L.Ed.2d 561 (1976); Boykin v. District of Columbia, 689 F.2d 1092, 1097-99 (D.C.Cir.1982); Tarpley v. Greene, 684 F.2d 1, 9-11 (D.C.Cir.1982). Therefore, any potential § 1983 or Bivens claims against these defendants, whose only relationship to the instant litigation is their ultimate supervisory status, must be dismissed.
b. The plaintiff's conspiracy allegation is too generalized and conclusory to state a claim upon which relief can be granted.
To the extent that the plaintiff suggests the existence of a conspiracy between the Defendants and others, his allegations fail to state a claim upon which relief can be granted. As the United States Court of Appeals for the District of Columbia Circuit has observed,
[u]nsupported factual allegations which fail to specify in detail the factual basis necessary to enable [defendants] to intelligently prepare their defense, will not suffice to sustain a claim of governmental conspiracy to deprive [plaintiffs] of their constitutional rights.
Martin v. Malhoyt, 830 F.2d 237, 258 (D.C.Cir.1987). The plaintiff fails to assert any factual basis to support the conclusion that a conspiracy existed. Therefore, the plaintiff's conspiracy claims will be dismissed for failure to state a claim upon which relief can be granted.
*16 c. The plaintiff fails to identify an interest sufficient to trigger the Due Process Clause.
There is no protected liberty interest in obtaining or maintaining a particular security classification. Therefore, the plaintiff fails to state a cognizable claim with respect to the alleged failure to enroll him in a program that would result in his incarceration at a lower security level.
Liberty interests protected by the Fourteenth Amendment may arise directly from the Due Process Clause itself or from the laws of the states. Kentucky Dep't of Corrections v. Thompson, 490 U.S. 454, 460, 109 S.Ct. 1904, 1908, 104 L.Ed.2d 506 (1989); Hewitt v. Helms, 459 U.S. 460, 466, 103 S.Ct. 864, 868, 74 L.Ed.2d 675 (1983). However, "lawfully incarcerated persons retain only a narrow range of protected liberty interests." Helms, 459 U.S. at 467, 103 S.Ct. at 869. See also Hernandez v. Coughlin, 18 F.3d 133, 136-37 (2d Cir.1994). Thus, the Court has held that an inmate has no inherent liberty interest in commutation of his sentence, Connecticut Bd. of Pardons v. Dumschat, 452 U.S. 458, 464, 101 S.Ct. 2460, 2464, 69 L.Ed.2d 158 (1981); in being paroled, Greenholtz v. Inmates of Neb. Penal & Correctional Complex, 442 U.S. 1, 7, 99 S.Ct. 2100, 2103, 60 L.Ed.2d 668 (1979); in receiving good-time credit for satisfactory behavior while in prison, Wolff v. McDonnell, 418 U.S. 539, 557, 94 S.Ct. 2963, 2975, 41 L.Ed.2d 935 (1974); in remaining in one correctional institution rather than another, Olim v. Wakinekona, 461 U.S. 238, 248, 103 S.Ct. 1741, 1747, 75 L.Ed.2d 813 (1983); Meachum v. Fano, 427 U.S. 215, 225, 96 S.Ct. 2532, 2538, 49 L.Ed.2d 451 (1976); or in avoiding "administrative" (nonpunitive) segregation from the general prison population, Helms, 459 U.S. at 468, 103 S.Ct. at 869. But cf. Vitek v. Jones, 445 U.S. 480, 491-94, 100 S.Ct. 1254, 1263-65, 63 L.Ed.2d 552 (1980) (holding that prisoner retained a "residuum of liberty" that was infringed by his summary transfer to a mental hospital).
The plaintiff does not contend that he has an inherent right to participate in the boot camp. Rather, he contends that the defendants, by issuing detainers against him, have effectively kept him in a higher custody classification and thereby subjected him to longer incarceration than a minimum custody prisoner faces in the absence of such detainers, thus depriving him of a liberty interest. In essence, the plaintiff claims that the Bureau of Prisons promises participants in its boot camp programs that their successful completion of such a program will lead to their early release and that it has thereby conferred an enforceable liberty interest on eligible participants.
In Hewitt v. Helms, 459 U.S. 460, 103 S.Ct. 864, 74 L.Ed.2d 675 (1983), the Supreme Court held that the Due Process Clause of the Fourteenth Amendment does not itself create in an inmate a protected interest in being confined in the general prison population. Id. at 467-68, 103 S.Ct. at 869-70. Instead, the Clause standing alone requires only that an inmate be confined under conditions consistent with his sentence, id. at 468, 103 S.Ct. at 869 (citing Montanye v. Haymes, 427 U.S. 236, 242, 96 S.Ct. 2543, 2547, 49 L.Ed.2d 466 (1976)), and "administrative segregation is the sort of confinement that inmates should reasonably anticipate receiving at some point in their incarceration," id. See also Olim v. Wakinekona, 461 U.S. 238, 247, 103 S.Ct. 1741, 1746, 75 L.Ed.2d 813 (1983) (transfer for confinement in another state is within normal range of custody); Meachum v. Fano, 427 U.S. 215, 224, 96 S.Ct. 2532, 2538, 49 L.Ed.2d 451 (1976) (transfer within state is within normal range of custody); cf. Vitek v. Jones, 445 U.S. 480, 100 S.Ct. 1254, 63 L.Ed.2d 552 (1980) (transfer to mental hospital is not within normal range of custody).
A state may create by statute or regulation an interest protected by the Due Process Clause even though the same interest is not among those protected by the Clause standing alone. See Hewitt, 459 U.S. at 470-71, 103 S.Ct. at 870-71; Vitek, 445 U.S. at 487-92, 100 S.Ct. at 1260-64. However, as the Supreme Court recently made clear in Sandin v. Conner, ___ U.S. ___, 115 S.Ct. 2293, 132 L.Ed.2d 418 (1995), while such language may create interests which are protected by the Due Process Clause, "these interests will be generally limited to freedom *17 from restraint which, while not exceeding the sentence in such an unexpected manner as to give rise to protection by the Due Process Clause of its own force, ... nonetheless imposes atypical and significant hardship on the inmate in relation to the ordinary incidents of prison life." Id., at ___, 115 S.Ct. at 2300; see also Montanye, 427 U.S. at 242, 96 S.Ct. at 2547 ("As long as the conditions or degree of confinement to which the prisoner is subjected are within the sentence imposed on him [or her] and are not otherwise violative of the Constitution, the Due process Clause does not in itself subject an inmate's treatment by prison authorities to judicial oversight.").
As the Court noted in Sandin, the methodology used in Hewitt has unduly shifted the focus of the protected interest inquiry from one based upon the nature of the deprivation to one based upon language of a particular statute. Sandin, ___ U.S. at ___, 115 S.Ct. at 2299. This approach has "encouraged prisoners to comb regulations in search of mandatory regulations on which to base entitlements to various state privileges," id., created "disincentives for States to codify prison management procedures in the interest of uniform treatment," id., and "led to the involvement of federal courts in the day-to-day management of prisons, often squandering judicial resources with little offsetting benefit to anyone," id.
Therefore, as a threshold matter, courts should determine whether the "conditions suffered were expected within the contour of the actual sentence imposed." Id., at ___ n. 9, 115 S.Ct. at 2301 n. 9. Applying that methodology to the facts in Sandin, the Court determined that prison regulations on confinement of an inmate did not create a liberty interest. In making its decision, the Court did not rely on the language of the regulations for mandatory language and substantive predicates. ___ U.S. at ___, 115 S.Ct. at 2301; cf. Hewitt, 459 U.S. at 471-72, 103 S.Ct. at 871-72. Rather, the Court focused on the particular discipline imposed disciplinary segregation for thirty days and held that it "did not present the type of atypical, significant deprivation in which a state might conceivably create a liberty interest." Sandin, ___ U.S. at ___, 115 S.Ct. at 2301. The Court reached this conclusion after reviewing the record (the district court proceeding was resolved by summary judgment) and finding that, "with insignificant exceptions," the inmate's disciplinary segregation "mirrored those conditions imposed upon inmates in administrative and protective custody." Id. The Court supported this conclusion by discussing the various custodial conditions at the particular prison in question and by demonstrating that the plaintiff's segregation "did not work a major disruption in his environment." Id.
Post-Sandin courts have similarly rejected the notion that inmates have a protected liberty interest in remaining among the general population. See, e.g., Mujahid v. Meyer, 59 F.3d 931, 932 (9th Cir.1995) (Disciplinary segregation for fourteen days did not constitute atypical deprivation sufficient to trigger Due Process Clause.); Seltzer-Bey v. Delo, 66 F.3d 961, 964 (8th Cir.1995) (The Due Process Clause does not give an inmate a liberty interest in remaining in the general population and the plaintiff failed to identify any regulations or statutes that create such a liberty interest.). But cf. Gotcher v. Wood, 66 F.3d 1097, 1100-01 (9th Cir.1995) (Reversing district court on its dismissal of an inmate's claim with regard to disciplinary segregation, when, "[i]n contrast to the detailed record in Sandin, the record [on] appeal is insufficient for a determination of whether the disciplinary segregation at issue imposed an `atypical and significant hardship [on the inmate] in relation to the ordinary incidents of prison life.'" (quoting Sandin, ___ U.S. at ___, 115 S.Ct. at 2300)). There is nothing to suggest a contrary result here. The plaintiff does not have a protected liberty interest in a particular security classification, which is analogous to a claimed interest in remaining among the general population. Slezak v. Evatt, 21 F.3d 590, 594 (4th Cir.1994) ("The federal constitution itself vests no liberty interest in inmates in retaining or receiving any particular security or custody status `[a]s long as the [challenged] conditions or degree of confinement is within the sentence imposed ... and is not otherwise violative of the Constitution.'" (quoting Hewitt, 459 *18 U.S. at 468, 103 S.Ct. at 869 (internal quotation omitted))), cert. denied, ___ U.S. ___, 115 S.Ct. 235, 130 L.Ed.2d 158 (1994); Newell v. Brown, 981 F.2d 880, 883 (6th Cir.1992) (same), cert. denied, ___ U.S. ___, 114 S.Ct. 127, 126 L.Ed.2d 91 (1993); Larson v. Mulcrone, 575 F.Supp. 1, 3 (N.D.Ill.1982) (same), aff'd, 723 F.2d 914 (7th Cir.1983); cf. Moody v. Daggett, 429 U.S. 78, 88 n. 9, 97 S.Ct. 274, 279 n. 9, 50 L.Ed.2d 236 (1976). Accordingly, any due process claim predicated on such an interest fails to state a claim upon which relief can be granted. Accord Knox v. Lanham, 895 F.Supp. 750, 759 (D.Md.1995) (observing, without deciding, that, under Sandin, inmates do not have a protected liberty interest in remaining in their particular security classifications).
B. The defendants are entitled to qualified immunity.
Prison officials enjoy qualified immunity from constitutional and statutory claims. Cleavinger v. Saxner, 474 U.S. 193, 206, 106 S.Ct. 496, 503, 88 L.Ed.2d 507 (1985). As the Supreme court made clear in Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982), officials are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known. Id. at 818, 102 S.Ct. at 2738; see also Hunter v. District of Columbia, 943 F.2d 69, 75 (D.C.Cir.1991).
"In order for a person to have a clearly established right, `the contours of the right must be sufficiently clear that a reasonable official would understand that what he is doing violates that right.'" Mahers v. Harper, 12 F.3d 783, 785 (8th Cir.1993) (quoting Anderson v. Creighton, 483 U.S. 635, 640, 107 S.Ct. 3034, 3039, 97 L.Ed.2d 523 (1987)). "This is not to say that an official action is protected by qualified immunity unless the very action in question has previously been held unlawful, but it is to say that in the light of pre-existing law the unlawfulness must be apparent." Anderson, 483 U.S. at 640, 107 S.Ct. at 3039. (citation omitted). This analysis "focuses on the objective legal reasonableness of an official's acts." Harlow, 457 U.S. at 819, 102 S.Ct. at 2738.
The Court must decide whether the plaintiff had a clearly established right not to have detainers issued against him. As a threshold matter, the Court notes that there are no outstanding detainers against the plaintiff. See Federal Bureau of Prisons, Sentry Report, attached to Defendants' Motion as Attachment 1. Thus, the factual predicate for the plaintiff's claims is absent. Even assuming that there were outstanding detainers against him, however, the plaintiff has no clearly established right to be free of them. Indeed, in light of the Court's conclusion that the plaintiff fails to state a claim upon which relief can be granted with respect thereto, a fortiori he fails to demonstrate that the defendants violated any of his "clearly established rights."
C. Sovereign immunity bars any claims against the United States Department of Justice, the Federal Bureau of Prisons, or the individual defendants in their official capacities.
To the extent that the plaintiff seeks damages against the United States or the individual federal defendants in their official capacities, his claims must be dismissed absent a waiver of sovereign immunity. The inherent sovereign immunity of the United States protects it and its agencies from suit absent an express waiver. See United States v. Nordic Village, 503 U.S. 30, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992). Sovereign immunity also bars suits for money damages against officials in their official capacities absent a specific waiver by the government. Clark v. Library of Congress, 750 F.2d 89, 101-02 (D.C.Cir.1984). Because the Court cannot discern from the plaintiff's Complaint any colorable basis for such a waiver, to the extent the plaintiff asserts any claims for damages against the United States Department of Justice, the United States Bureau of Prisons, or the federal defendants in their official capacities, such claims must be dismissed for lack of subject matter jurisdiction.
*19 III. CONCLUSION
Upon careful consideration of the parties' pleadings, the entire record herein, and the applicable law with respect thereto, the Court will enter an Order of even date herewith consistent with the foregoing Memorandum Opinion GRANTING the Defendants' Motion to Dismiss.
NOTES
[1] It is well established that 42 U.S.C. § 1983, which provides a cause of action for violations of constitutional rights accomplished under color of state law, does not provide a basis for suit for actions taken under color of federal law. See Stonecipher v. Bray, 653 F.2d 398 (9th Cir.1981), cert. denied, 454 U.S. 1145, 102 S.Ct. 1006, 71 L.Ed.2d 297 (1982); Gillespie v. Civiletti, 629 F.2d 637 (9th Cir.1980). And while federal employees, like private individuals, presumably act under color of state law if they act in concert with state officials to deprive a person of his or her civil liberties, see Billings v. United States, 57 F.3d 797, 801 (9th Cir.1995) (citing Collins v. Womancare, 878 F.2d 1145, 1154 (9th Cir.1989), cert. denied, 493 U.S. 1056, 110 S.Ct. 865, 107 L.Ed.2d 949 (1990); Lopez v. Dep't of Health Srvcs, 939 F.2d 881, 883 (9th Cir.1991)), there is no evidence that the federal defendants have acted under color of state law within the meaning of § 1983. "`Misuse of power, possessed by virtue of state law and made possible only because the wrongdoer is clothed with the authority of state law, is action taken `under color of' state law.'" Id. (quoting Scott v. Rosenberg, 702 F.2d 1263, 1269 (9th Cir.1983), cert. denied, 465 U.S. 1078, 104 S.Ct. 1439, 79 L.Ed.2d 760 (1984)). The plaintiff merely alleges that the the detainers were executed under state law, not that the federal defendants have any authority thereunder. Accordingly, because the plaintiff does not present any basis upon which to assert a Bivens claim against the state defendants or a § 1983 claim against the federal defendants, the Court will construe the plaintiff's Complaint as setting forth two separate claims: a § 1983 claim against the state defendants and a Bivens claim against the federal defendants.
| {
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614 So.2d 975 (1992)
Jerry PARKER
v.
Charles WARD and Commonwealth Land Title Insurance Company.
1910578.
Supreme Court of Alabama.
August 7, 1992.
As Modified on Denial of Rehearing March 12, 1993.
J.E. Sawyer, Jr., Enterprise, for appellant.
Kenneth T. Fuller of Cassady, Fuller & Marsh, Enterprise, for appellees.
Jeffrey W. Blitz and Jack B. Hinton, Jr. of Rushton, Stakely, Johnston & Garrett, P.A., Montgomery, on rehearing, for amicus curiae Lawyers Title Ins. Corp.
John S. Bowman and James A. Byram, Jr. of Balch & Bingham, Montgomery, on rehearing, for amicus curiae First American Title Ins. Co.
SHORES, Justice.
Is a title insurance company liable to its insured for failing to list a recorded timber deed as an exception on a title insurance policy? This is the single issue involved in this appeal. The trial court entered a summary judgment for the defendant, Commonwealth Land Title Insurance Company; Jerry Parker, the plaintiff, appeals. We reverse and remand.
On August 14, 1987, D. Patrick Haney and John P. Russell jointly purchased 589 acres of land in Coffee County. Three days later, Haney and Russell conveyed all the standing timber that was on the property to Flack-Haney Company, Inc., by deed. The timber deed was duly recorded in the Coffee County probate office.
Jerry Parker purchased 335 of the 589 acres in September 1987. A written agreement reserved the timber to the sellers. Thereafter, between September 1987 and March 1988, Haney cut the timber on the 335 acres.
In December 1987, Haney and Russell conveyed their remaining land to C.E.F., Inc., a corporation they had formed. In March 1988, Jerry Parker negotiated with Haney to purchase two additional tracts, consisting of a 10-acre parcel and a 30-acre parcel. Parker did not walk over the land but viewed it from the road, and, at *976 the time, the timber had not been cut on those parcels.
When Parker agreed to purchase the property from C.E.F., he also entered into a contract with Commonwealth Land Title Insurance Company and Charles Ward, individually, d/b/a Coffee County Abstract & Title Company, under which Commonwealth agreed to issue a title insurance policy that insured Parker free and clear title. Pursuant to that agreement, a policy of title insurance was issued; that policy stated that as of 4:10 p.m. on April 5, 1988, fee simple title to the land involved was vested in insureds Thomas G. Parker and his wife, May Rose Parker. The policy then described the land by reference to the Government survey.
Exclusions from Coverage included:
"3. Defects, liens, encumbrances, adverse claims, or other matters (a) created, suffered, assumed or agreed to by the insured claimant; (b) not known to the Company and not shown by the public records but known to the insured claimant either at Date of Policy or at the date such claimant acquired an estate or interest insured by this policy and not disclosed in writing by the insured claimant to the Company prior to the date such insured claimant became an insured hereunder...."
(Emphasis added.)
The policy insured title to the estate in fee simple, subject to exceptions contained in Schedule B, which read as follows:
"This policy does not insure against loss or damage by reason of the following:
"1. Rights or claims of parties other than Insured in actual possession of any or all of the property.
"2. Unrecorded easements, discrepancies or conflicts in boundary lines, shortage in area and encroachments which an accurate and complete survey would disclose.
"3. Unfiled mechanics' or materialmen's liens.
"4. Mortgage from Thomas G. Parker and wife, May Rose Parker to South-Trust Bank of Coffee County, Elba, Alabama, showing an original sum of $10,715.60 dated April 1, 1988, in Mortgage Book 86A, page 511 in the Office of the Judge of Probate, Coffee County, Elba, Alabama, recorded April 15, 1988.
"5. Rights-of-Way for public roads crossing said lands.
"6. Prior reservations of Mineral rights (an undivided one-half interest) as recorded in Probate Office, Elba, Coffee County, Alabama in Deed Book 87-A, pages 171-172.
"7. Any state of facts which constitute an objection to title that might be shown by an accurate survey.
"8. All taxes due in the year 1988, which are a lien but not yet payable."
It is not disputed that when Parker purchased the property and when the title policy was issued there was a timber deed from Parker's grantor to a third party, which was in the recorded chain of title, and which was, in fact, recorded in the public records in the office of the judge of probate at Deed Book 87-A, page 143. However, Parker's title insurance policy did not list the timber deed, nor did the policy exclude the timber from coverage. Flack-Haney, as owner of the standing timber by virtue of the recorded timber deed, cut the timber on Parker's land.
Consequently, Parker sued, alleging that Commonwealth and its agent, Charles Ward, had breached the agreement between them "by not informing or listing on said policy of insurance the exception to the property that the timber located on said property had previously been sold by virtue of a timber deed." Parker subsequently filed an amended complaint substituting C.E.F. for fictitiously named party X in the original complaint. On December 7, 1989, Commonwealth moved for a summary judgment, which was entered on March 14, 1990. Parker appeals from this judgment, which the trial court made final pursuant to Rule 54(b), A.R.Civ.P. Parker's claims against C.E.F. alleging breach of contract and fraud are still pending; C.E.F. is not a party to this appeal.
*977 An outstanding timber deed, under which the grantee acquires a right to enter upon the land, constitutes a defect in the title. "A defect in title exists when the aggregate of rights, privileges, powers and immunities known as ownership [fee simple title] is subject to the claims of others."[1] The policy insures against losses from such defects, unless those defects are excepted from the coverage.
It has been observed that title insurance is not, in fact, insurance, because title policies except any risks apparent after a title search.[2] In this case, Parker admits that Commonwealth had a contractual right to except the timber deed from coverage under the policy, but, because it did not do so, he argues that the policy either affords coverage from loss due to that defect in the title insured or Commonwealth breached an implied agreement to disclose defects in his title that are a matter of public record.[3]
A title insurance company has an obligation to answer for any loss due to a defect in a title if it has not excepted that defect from its coverage. It cannot escape liability when it does not except a defect that is a matter of public record. It is generally assumed that a title defect that appears in the public records but that is not noted is covered by a title policy.[4]
Commentators have urged, and some courts have held, that a title company, in the absence of an express promise to search title, has an implied duty to search the title and disclose any defect found upon the public record.[5] Because the policy itself insures against loss or damage from defects in the title, subject to certain exceptions set out in the policy, it necessarily follows that it insures against any defect that is a matter of public record if that defect is not excepted from the coverage. In this case, the policy excepted certain defects that were a matter of public recorde.g., the mineral deedbut did not except the timber deed. Under these facts, the timber deed should not be excepted from the coverage, and the title company should be held liable for any loss occurring from this defect in the title, or, alternatively, it should be held liable to its insured for failing to disclose this defect. It has been said that the most common error in the title insurance industry is the negligent failure to note a title defect appearing in the public records.[6]
The question presented by this case may be an unsettled one in other jurisdictions, but it has been resolved here. In Upton v. Mississippi Valley Title Insurance Co., 469 So.2d 548 (Ala.1985), this Court held that a title insurance company had a duty to search the public records and to reveal any defect that such a search might disclose, but that the duty did not extend beyond the title records in the office of the judge of probate to include a search of the circuit court records, as the insured contended. In that case, a judgment granting third parties an easement or right-of-way over the land involved had been entered in a litigated case. It was filed in the office of the clerk of the circuit court, but was never recorded in any record book in the office of the judge of probate. Mississippi Valley Title Insurance Company searched the title to the property before issuing its binder. The search included records in the office of the judge of probate, the tax assessor's office, the tax collector's office, and the United States Bankruptcy Court. It did not include the records in the office of the clerk of the circuit court. The plaintiff claimed that Mississippi Valley's failure to find and list the easement judgment as an exception was a breach of the title insurance *978 binder and policy and that Mississippi Valley had negligently failed to uncover an easement of public record.
This Court held that because the title insurance policy excluded from coverage "any easement not shown by the public records" (emphasis in original) and because the term "public records" was defined in the policy as "those records which by law impart constructive notice of matters relating to said land" (the exact definition of "public records" contained in the policy that is the subject of this action), the title company was obligated only to search the records of the probate court because those were the only public records that, by law, imparted constructive notice of easements.
Thus, this Court held that the title company had a contractual obligation to search (and disclose) at least those records that, by law, impart constructive notice of matters relating to the land. The policy in this case is not materially different from that considered by the Court in Mississippi Valley. In fact, it is identical in all material respects. In this case, the timber deed was in the chain of title and it was recorded in the office of the judge of probate. "Public records" is defined in this policy in exactly the same language as that contained in the Mississippi Valley policy. Commonwealth, therefore, had a contractual duty to search those records and to disclose to its insured a defect in title that those records contained.
The Court in Mississippi Valley held that there was no common law duty on title insurance companies to search circuit court records. It did not hold that there was no common law duty on title companies to search title records in the office of the judge of probate. That was not the issue before the Court. In that case, the title company did, in fact, search the records in the office of the judge of probate. In this case, Commonwealth apparently searched the records in the office of the judge of probate, because it excepted from its coverage some, although not all, of the defects shown by those records. To hold that it is not liable to its insured either for breach of its contractual obligation to search those records or breach of a common law duty to search those records (imposed by the relationship of the parties) is to disregard the law in this state.
In Fox v. Title Guar. & Abstract Co. of Mobile, 337 So.2d 1300 (Ala.1976), this Court reversed a summary judgment for the title company in a case in which the plaintiffs alleged a negligent failure to discover a tax lien. The Court held that the title company had a duty to discover the tax lien, and that it should not be allowed to profit (to be unjustly enriched) from its failure to do so. Id. at 1303. Justice Jones, concurring specially, noted:
"Ordinarily the purchaser contracts for a policy of insurance to guarantee title to property to which he is a stranger. If there are encumbrances which are overlooked and not excepted by the title insurance company, the purchaser's loss flows directly from this breach of obligation."
337 So.2d at 1305.
It is no answer to Parker's contention that § 35-4-363, Code of Alabama 1975, makes standing timber and cutting rights personal property while owned by one other than the owner of land. An outstanding, recorded timber deed constitutes a defect in the title against which Commonwealth contracted to insure Parker. It had a contractual obligation to search the records in the office of the judge of probate and to disclose any defect in those records to Parker, or else to compensate him for any loss suffered as a result of that defect.
The trial court erred in entering the summary judgment in favor of Commonwealth. Commonwealth may have a defense to Parker's action for breach of contract if it can prove to the satisfaction of a factfinder that he knew, as it asserts in its brief, that the timber on the land he bought had been previously deeded away, but that issue was not resolved on the motion for summary judgment.
Some commentators have stated that, under these facts, a title company should be held liable for damages beyond the limits of the title policy. They argue *979 that a title company has a duty to search (as this Court held in Mississippi Valley) and that the negligent failure to disclose a defect that is a matter of public record entitles the insured to damages beyond those contracted for.[7] Our research has disclosed no case where the argument was advanced that the title company was not liable for losses flowing from defects in the title insured against, which is the argument advanced by Commonwealth here. To be sure, Commonwealth rests its argument on § 35-4-363, Code of Alabama 1975. That statute cannot have the effect Commonwealth suggests. Sections 35-4-360 et seq. were passed to permit grantees of timber deeds to remove timber from land without incurring liability to the landowner for trespass. Section 35-4-361 expressly states that the grantee of a timber deed has a right-of-way over and across the lands on which the timber stands for the purpose of cutting and removing the timber. Thus, an outstanding timber deed is a defect on the title, and, if it is recorded in the office of the judge of probate, the title company is obligated to find and disclose it to its insured or else to compensate for any loss suffered as a result of that defect.
For the reasons stated, the judgment is reversed and the case remanded.
REVERSED AND REMANDED.
HORNSBY, C.J., and ADAMS, KENNEDY and INGRAM, JJ., concur.
MADDOX, HOUSTON and STEAGALL, JJ., dissent.
HOUSTON, Justice (dissenting).
The complaint involved in this case reads in pertinent part as follows:
"On or about the 5th day of April, 1988, [Parker] and [Commonwealth] entered into an agreement whereby [Commonwealth] agreed to issue a policy of title insurance ... thereby insuring [Parker] of a free and clear title to [the land in dispute] described in Exhibit `A'.
"[Commonwealth] breached said agreement by not informing or listing on said policy of insurance the exception to the property [in dispute] that the timber located on said property had previously been sold by virtue of a timber deed (see Exhibit `B')."
According to the timber deed (attached to the complaint as Exhibit "B"), Haney and Russell conveyed to Flack-Haney Company on August 17, 1987, "all Merchantable Timber standing, growing and being on the [land in dispute] ... together with all necessary rights of ingress and egress and rights of way for railroads, log carts, teams, employees, machinery and appliances for cutting and removing said timber from said lands ... [for] a period of 36 months."
Under our liberal notice pleading, the language of the complaint is broad enough to sufficiently state a claim based on an encumbrance to the title to the land by virtue of the language of the timber deed that grants Flack-Haney "rights of ingress and egress and rights of way for ... cutting and removing said timber" for approximately 2½ years after Parker purchased the land in question. However, in his deposition testimony, Parker denied a claim based on an encumbrance to the land and specifically limited his claim against Commonwealth to the claim that the title insurance policy insured the timber:
"Q. Well, did you get good title to [the property in dispute]?
"A. I have to assume that I did.
"Q. Have you ever had anyone to question your title to [the land in dispute]?
"A. No.
"Q. Do you know any defect in or lien or encumbrance on the title to that property?
"A. All I know is that there is a timber deed, according to what I was told.
"Q.... Is the only defect, lien or encumbrance or problem with that piece of property is that you didn't get the standing timber on that land?
"A. That is correct.
"Q. That is the only claim you are making against Commonwealth ... in this *980 lawsuit, is that you bought the land and the timber wasn't included?
"A. I bought the land with the understanding the timber was in there [which would have increased the value of the land].[8]
"....
"Q. That is the only question in issue in this lawsuit is to whether or not the this title insurance policy covers that timber that was cut?
"A. Right.
"Q. And if the title insurance does not include the timber then you would not be making a claim for anything else?
"A. If it had been an exclusion then I would not be.
"Q. That's what I say, if the title insurance does not insure timber, then you do not have any other claim other than timber?
"A. That is correct."
(Emphasis added.)
The purpose of title insurance is to protect the insured against defects in title, not to protect the insured against loss from physical damage to property; and title insurance companies are not required to explain the significance and effect of exculpatory covenants discovered in their title searches. Holmes v. Alabama Title Co., 507 So.2d 922 (Ala.1987).
According to the declaration page (Schedule A) of the title insurance policy issued by Commonwealth to Parker, "[t]he estate or interest in the land ... which is covered by this policy [and which is described below]" is a "FEE SIMPLE"; and "land" is defined in the policy as "the land described, specifically or by reference in Schedule A, and improvements affixed thereto which by law constitute real property." (Emphasis added.) The policy insured:
"[A]gainst loss or damage, not exceeding the amount of insurance stated in Schedule A, and cost, attorneys' fees and expenses which the Company may become obligated to pay hereunder, sustained or incurred by the insured by reason of:
"1. Title to the estate or interest described in Schedule A being vested otherwise than as stated therein...."
Section 35-4-363, Ala.Code 1975, provides:
"All standing timber and trees, and cutting rights with respect thereto, while owned by or mortgaged to anyone other than the owner of the land upon which such timber or trees are located, under or by virtue of any conveyance, mortgage or other instrument executed hereafter by the owner or owners of the entire fee simple title to the timber or trees or by the owner or owners of the full cutting rights with respect thereto shall be and shall be considered as chattels and not real property, or any interest therein, in all instances where the right or obligation to cut and remove such timber or trees is limited to a period not exceeding 10 years from date of the conveyance, mortgage or other instrument transferring such timber or trees, or rights with respect thereto."
(Emphasis added.) When timber has been conveyed to and is therefore owned by a person other than the owner of the land on which the timber stands, the timber is considered a chattel, not real property. See Crew v. W.T. Smith Lumber Co., 268 Ala. 628, 109 So.2d 721 (1959); § 35-4-363.
Based on the foregoing, I conclude that the title insurance policy Commonwealth issued to Parker did not insure the timber on the property, because the policy insured only "land," which was defined in the policy as "real property"; and the timber, which had been conveyed to Flack-Haney, was considered to be a chattel, not real property. Because Commonwealth made a prima facie showing of an absence of a genuine issue of material fact as to whether it breached its contract, the burden shifted to Parker to present substantial evidence to the contrary to defeat the summary judgment motion. This he failed to *981 do. Therefore, the trial court properly entered the summary judgment for Commonwealth.
I note that but for the express waiver of the claim of an encumbrance on the land, I would have voted to reverse, but because of Parker's deposition testimony and his statement in his brief that his only claim was that the title insurance policy insured the timber, I would affirm the judgment for Commonwealth.
MADDOX and STEAGALL, JJ., concur.
NOTES
[1] Title Insurance: The Duty to Search, 71 Yale L.J. 1161, at 1161 (1962).
[2] Q. Johnstone, Title Insurance, 66 Yale L.J., 492 at 492 (1957).
[3] Parker concedes that the only claim he states in this case is a contract claim.
[4] Id. at 495.
[5] Title Insurance: The Duty to Search, supra, at 1166, n. 32, citing Glyn v. Title Guarantee & Trust Co., 132 App.Div. 859, 861-62, 117 N.Y.S. 424, 426-27 (1909); Dorr v. Massachusetts Title Ins. Co., 238 Mass. 490, 131 N.E. 191 (1921); Ehmer v. Title Guarantee & Trust Co., 156 N.Y. 10, 50 N.E. 420 (1898).
[6] Q. Johnstone, Title Insurance, supra, at 495.
[7] Title Insurance: The Duty to Search, supra.
[8] I note that Parker purchased the land in March 1988 for $350 an acre and sold it in July 1988 for $475 an acre.
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Having considered the petition, the answer, and the attached
documents, we conclude that our intervention by extraordinary writ relief
is not warranted as it appears that petitioner's petition for a writ of
habeas corpus has, in fact, been filed by the district court. See NRS
34.160; Pan, 120 Nev. at 228, 88 P.3d at 844. Accordingly, we
ORDER the petition DENIED.
Gibbons
J.
Douglas
cc: Robert Curtis Gibbons
Clark County District Attorney/Civil Division
Attorney General/Carson City
Eighth District Court Clerk
SUPREME COURT
OF
NEVADA
2
(0) 1947A
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431 F.Supp. 1235 (1977)
Guy R. PURSER, Plaintiff,
v.
BILL CAMPBELL PORSCHE AUDI, INC., a Florida Corporation, Defendant Third-Party Plaintiff,
v.
Robert H. CONN, Third Party Defendant.
No. PCA 76-141.
United States District Court, N. D. Florida, Pensacola Division.
May 20, 1977.
Geoffrey B. Dobson, St. Augustine, Fla., for plaintiff.
G. Miles Davis, Beggs & Lane, Pensacola, Fla., for defendant third-party plaintiff.
John P. Welch, J. McHenry Jones, P. A., Pensacola, Fla., for third party defendant.
*1236 MEMORANDUM DECISION
ARNOW, Chief Judge.
Before the court are the motions of both plaintiff and defendant for partial summary judgment on one of the claims asserted by the plaintiff. Plaintiff claims that misrepresentations by defendant regarding the model and body type of a vehicle purchased by plaintiff constitute a violation of Subchapter IV of the Vehicle Information and Cost Savings Act of 1972, 15 U.S.C. § 1981, et seq. Jurisdiction is vested in this court under Section 1989 of the Act.
On the record before the court, defendant, Bill Campbell Porsche Audi, Inc., is an automobile dealer selling new and used automobiles. In that capacity, defendant sold a Porsche automobile to the plaintiff. Both orally and on the Disclosure Form-Odometer Mileage Statement required by 15 U.S.C. § 1988 and 49 C.F.R. § 580.6, the defendant represented that the vehicle was a 1969 model Porsche with a 911S body type. The vehicle, in fact, was a 1967 model Porsche, body type 912, into which a 1969 Porsche 911S engine had been placed. The record does establish that the model and body type of the vehicle sold to plaintiff were misrepresented by the defendant. The question before the court is whether such misrepresentations constitute a violation of 15 U.S.C. § 1988 and the regulations promulgated thereunder, 49 C.F.R. 580.1, et seq., so that plaintiff has a claim under 15 U.S.C. § 1989. The court concludes they do not, and defendant's motion for partial summary judgment respecting that issue will be granted.
Section 1988(b) provides that "[n]o transferor shall violate any rule prescribed under this section or give a false statement to a transferee in making any disclosure required by such rule."
The regulations promulgated pursuant to the Act are set forth at 49 C.F.R. § 580.1, et seq. Section 580.4(a)(4), requires disclosure of the identity of the vehicle, including its make, model and body type, and the disclosure form set forth in Regulation 49 C.F.R. 580.6 provides space for such information.
Plaintiff contends that the misrepresentation of the model and body type of the Porsche is contrary to the regulations and therefore violates 15 U.S.C. § 1988(b).
A comprehensive review of the statutory scheme, the regulations and the legislative history of 15 U.S.C. § 1981, et seq., however, dictates a contrary conclusion. The court concludes only violations of the odometer requirements give rise to a claim under 15 U.S.C. § 1989.
Section 1981 of Title 15 sets forth the Congressional purpose of the subchapter. That section, in pertinent part, states as follows:
It is therefore the purpose of this subchapter to prohibit tampering with odometers on motor vehicles and to establish certain safeguards for the protection of purchasers with respect to the sale of motor vehicles having altered or reset odometers.
Section 1988, the section relied upon by plaintiff, directs the Secretary to promulgate rules requiring disclosure (1) of cumulative mileage registered on vehicle odometers, and (2) that the actual mileage is unknown, if the odometer reading is known to the transferor to be different from the number of miles the vehicle has actually traveled.
The statutes require no further disclosures and evince no intention by Congress to extend civil liability into any other area.
The regulations likewise evidence the limited scope of the Act. The regulations state that the scope of the regulations is to require written disclosure of odometer mileage and that the purpose of the regulations is to provide purchasers with odometer information to assist in determining the vehicle's condition. See 49 C.F.R. §§ 580.1 and 580.2
The required Disclosure Form set forth in Regulation § 580.6 is labeled an "Odometer Mileage Statement" and states as follows:
Federal regulations require you to state the odometer mileage upon transfer of ownership. An inaccurate statement may make you liable for damages to your *1237 transferee pursuant to section 409(a) of the Motor Vehicle Information and Cost Savings Act of 1972. (15 U.S.C.A. § 1989.)
The conclusion reached is that the Act and the regulations were intended to address a single problemodometer violations. A thorough review of the legislative history of the Act fortifies that conclusion. See 1972 U.S.Code Cong. and Adm.News at p. 3960.
No case has been cited, nor has the court found any case, imposing civil liability under 15 U.S.C. § 1989 for violations unrelated to odometer requirements.
Plaintiff contends that 49 C.F.R. § 580.4 clearly prescribes disclosure of the model and body type of the vehicle and that 15 U.S.C. § 1988(b) establishes a violation of the Act whenever a false statement of the required information is provided a transferee. Plaintiff, therefore, contends that the only inquiry is whether the regulation, 49 C.F.R. § 580.4, is within the authority delegated to the Administrative Agency under the Act. Plaintiff cites general cases regarding the authority of administrative agencies and the deference to be afforded regulations promulgated by such an agency pursuant to an enabling Act of Congress. See Thorpe v. Housing Authority, 393 U.S. 268, 89 S.Ct. 518, 21 L.Ed.2d 474 (1968); State of Florida v. Mathews, 526 F.2d 319 (5th Cir. 1976).
Even if the regulations were intended to impose civil liability for false disclosures of model and body type, they would be beyond the scope of the Act. The cases cited by the plaintiff regarding the deference to be accorded the regulations of the agency charged with the administration of the Act are inapposite. Section 1988 of Title 15 narrowly directs the Secretary to prescribe rules requiring the disclosure of odometer data. There is no broad delegation of authority to make such rules and regulations as may be necessary to carry out the provisions of the Act as was true in the cases cited by plaintiff.
The court has determined, however, that the regulations dictate no such intent. The disclosures unrelated to odometer requirements required by the regulations serve to identify the vehicle made the subject of the odometer disclosures; they are not intended to expand the statutory scheme nor could they do so.
For the reasons set forth herein, defendant's motion for partial summary judgment as to this issue will be granted, and the plaintiff's motion will be denied.
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5 F.Supp.2d 587 (1998)
David BAILEY, Petitioner,
v.
Jerry GILMORE, Warden, Respondent.
No. 97 C 3054.
United States District Court, N.D. Illinois, Eastern Division.
April 23, 1998.
*588 David Bailey, Pontiac, IL, pro se.
Robert K. Villa, Robin Zavett, Ill. Atty. General's Office, Chicago, IL, Lorna T. Amado, Ill. Atty. General's Office, Criminal Appeals Div., Chicago, IL, for Respondent.
MEMORANDUM OPINION AND ORDER
HART, District Judge.
Following a bench trial in the Circuit Court of Cook County, Illinois, David Bailey was found guilty of murdering two victims. He was sentenced to natural life in prison and the conviction and sentence were affirmed on direct appeal. People v. Bailey, 164 Ill.App.3d 555, 115 Ill.Dec. 159, 517 N.E.2d 570 (1st Dist.1987), appeal denied, 119 Ill.2d 560, 119 Ill.Dec. 388, 522 N.E.2d 1247 (1988). Pending in this court is Bailey's petition for a writ of habeas corpus. Respondent moves to dismiss Bailey's petition on the ground that it is untimely. See 28 U.S.C. § 2244(d).
On April 18, 1997, Bailey provided his habeas petition to prison officials for mailing. The petition was received by this court on April 25 and docketed on April 29. Submitted with the petition was Bailey's application to proceed in forma pauperis. On April 30, the following order was entered:
Petitioner's application for leave to proceed in forma pauperis is denied. His application shows that although he has no money presently in his account, he earns $30-45 per month on the state payroll and can afford the $5.00 habeas corpus filing fee. If petitioner does not pay the fee by 05/30/97, the petition will be dismissed without prejudice.
On May 14, Bailey requested that prison officials send $5.00 from his prison account to pay the filing fee. Prison officials did not process that request until May 23 and payment was received by the Clerk of the Court on May 30.
The aforementioned facts are not in dispute. The parties, however, disagree as to whether this constitutes a timely habeas corpus petition.
Effective April 24, 1996, a one-year statute of limitations period for federal habeas petitions went into effect. 28 U.S.C. § 2244(d)(1) ("A 1-year period of limitation shall apply to an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court."). There is no dispute that all of the possible predicates for beginning the running of that limitation period had occurred more than one year prior to the effective date of the new limitation period. However, the Seventh Circuit has held that, under such circumstances, a petitioner had until April 23, 1997 to commence a habeas proceeding. Lindh v. Murphy, 96 F.3d 856, 866 (7th Cir.1996) (en banc), rev'd on other grounds, ___ U.S. ___, 117 S.Ct. 2059, 138 L.Ed.2d 481 (1997); O'Connor v. United States, 133 F.3d 548, 550 (7th Cir.1998).
First, respondent argues that, since Bailey's habeas petition was received by the Clerk of the Court on April 25, 1997, his habeas petition is untimely. Respondent acknowledges that the Supreme Court has held that, as to notices of appeal, a prisoner is considered to have filed the notice of appeal when the prisoner provides the notice of appeal to a prison official for mailing. See Houston v. Lack, 487 U.S. 266, 108 S.Ct. 2379, 101 L.Ed.2d 245 (1988). Respondent argues that this same mailbox rule should not be applied to commencement of habeas petitions. While some cases agree with respondent's *589 position, the majority of appellate court cases, and apparently the majority of district court cases, have concluded otherwise, holding (or at least indicating) that a habeas petition is considered to have been received by the court at the same time that it is given to prison officials for mailing. See Nichols v. Bowersox, ___ F.3d ___, ___-___, 1998 WL 151380, *4-5 (8th Cir. April 13, 1998); Burns v. Morton, 134 F.3d 109, 112-13 (3d Cir.1998); In re Sims, 111 F.3d 45, 47 (6th Cir.1997);[1]Peterson v. Demskie, 107 F.3d 92, 93 (2d Cir.1997) (dictum); United States ex rel. Barnes v. Gilmore, 987 F.Supp. 677, 678-82 (N.D.Ill.1997), reconsideration denied, 1998 WL 30705 (N.D.Ill. Jan.22, 1998). But see Allen v. Dowd, 964 F.2d 745, 746 (8th Cir.), cert. denied, 506 U.S. 920, 113 S.Ct. 335, 121 L.Ed.2d 253 (1992);[2]United States ex rel. Banks v. Barnett, 1997 WL 786666, *2-4 (N.D.Ill.Dec. 15, 1997). The primary rationale for the mailbox rule of Houston v. Lack is that a person in custody generally has no direct ability to file a document with the court and instead must rely on prison officials to forward the document, usually by mailing. That rationale applies as well to the filing of a habeas corpus document. This court agrees with Judge Shadur's reasoning in Barnes, supra, holding that the mailbox rule applies to the delivery of a habeas corpus petition and other documents submitted by the petitioner in a habeas corpus proceeding. Bailey's habeas petition and in forma pauperis application are considered to have been received by the Clerk of the Court on April 18, 1997 when Bailey provided those documents to prison officials for mailing.
Respondent's second argument is that, even assuming the habeas petition was constructively received by the court on April 18, it is not considered to be filed until Bailey paid the $5.00 filing fee on May 30. Respondent points to Rule 3(b) of the Rules Governing Section 2254 Cases which provides in pertinent part: "Upon receipt of the petition and the filing fee, or an order granting leave to the petitioner to proceed in forma pauperis, and having ascertained that the petition appears on its face to comply with rules 2 and 3, the clerk of the district court shall file the petition and enter it on the docket in his office." Respondent contends that, to have his petition deemed filed on the date he provided it to prison officials, petitioner must have simultaneously requested payment of the filing fee, or at least have submitted a meritorious application to proceed in forma pauperis. This contention is partially supported by Barnes, 987 F.Supp. at 682. In Barnes, however, it was found that Barnes's in forma pauperis application lacked good faith in that it should have been clear to Barnes that the amount in his trust fund account precluded him from obtaining a waiver of the filing fee. It is unclear if the lack of good faith was essential to the holding in Barnes. To the extent that it was, Bailey's situation is distinguishable in that he had no funds in his trust account and therefore his in forma pauperis application would not be found to have been in bad faith. For the reasons stated below, it is held that a habeas corpus petition submitted with a good faith, but nonmeritorious, in forma pauperis application is deemed to have been commenced when the petition and application are submitted as long as the petitioner pays the filing fee within a reasonable time period after the in forma pauperis application is denied.
It is implicitly assumed by respondent that the formal filing of a habeas petition is the act that measures the timeliness of a habeas petition. Section 2244(d)(1), however, uses the term "1-year period of limitation." There is no mention in that statute of a filing requirement. Also, 28 U.S.C. § 2254 makes no mention of filing a habeas petition. It refers to "a proceeding instituted by an application for a writ of habeas corpus."[3]*590 Rule 11 of the Rules Governing Section 2254 Cases provides that "t]he Federal Rules of Civil Procedure, to the extent that they are not inconsistent with these rules, may be applied, when appropriate, to petitions filed under these rules." Federal Rule of Civil Procedure 3 provides that "[a] civil action is commenced by filing a complaint with the court." Even assuming that rule applies to habeas petitions, the Seventh Circuit has held that Rule 3 is not to be applied literally to civil actions, especially when determining the commencement date for statute of limitations purposes of a case in which the plaintiff has applied to proceed in forma pauperis. See Williams-Guice v. Board of Education of City of Chicago, 45 F.3d 161, 162 (7th Cir.1995). Thus, holding that a habeas proceeding commences for statute of limitation purposes when the petition and pauper application is provided to prison officials does not necessarily require that event also be deemed the filing of the habeas corpus petition. In any event, Habeas Rule 3(b) provides that the Clerk shall file the petition when the events stated in that Rule are satisfied. Rule 3(b) does not state that this is the one and only circumstance for filing the petition. But even if that is implicit in the Rule, the Rule is also silent as to what date should be deemed to be the filing date of the petition for limitations purposes.[4] A local rule or decision that a habeas petition subsequently filed is deemed commenced (or even filed) as of the date it is delivered to prison officials (with or without a fee or meritorious pauper application) would not be a rule that must be found unenforceable because inconsistent with Rule 3(b). Nichols, 1998 WL 151380, *6. Rule 3(b) instructs a clerk of the court to file a petition when certain conditions are met; the issue presently under consideration is what date such a filing (or other commencement of a habeas proceeding) should be deemed to have occurred for statute of limitations purposes.
Northern District of Illinois Local Rule 11(B) provides:
Any complaint in a civil action presented for filing without prepayment of the prescribed fees that is accompanied by a petition for leave to file in forma pauperis together with an affidavit of financial status in the form prescribed by the Executive Committee of this Court shall be accepted by the clerk. The petition for leave to file in forma pauperis and the accompanying affidavit of financial status shall be filed and assigned to a judge in accordance with the procedures established by these rules. The complaint shall be stamped received as of the date presented. The clerk shall promptly forward the petition for leave to file in forma pauperis together with all other papers to the judge to whom it is assigned. If the judge grants plaintiff leave to file, the complaint shall be filed as of the date of the judge's order except that where the complaint must be filed within a time limit and the order granting leave to file is entered after the expiration of that time limit, the complaint shall be deemed to have been filed:
(a) in the case of any plaintiff in custody, as of the time of the plaintiff's delivery of the complaint to the custodial authorities for transmittal to the court; or
(b) in the case of any other plaintiff, as of the time the complaint was received by the clerk.
If the court fails to rule within 60 days of the filing of the petition for leave to proceed in forma pauperis, the clerk shall, unless otherwise ordered by the court, enter an order on the court's behalf directing that in accordance with this Rule, the petition for leave to file in forma pauperis is granted and forthwith file the complaint and issue summons. In that event, the same provisions as to deemed dates of filing that have been stated earlier in this Rule's subparagraphs (a) and (b) shall apply.
Even if Local Rule 11(B) applies to in forma pauperis applications in habeas corpus cases, it is silent regarding Bailey's situation because Rule 11(B) contains no express provision *591 as to when a case is deemed filed if the application is denied. See also Local Rule 11(C) & (D) (provisions regarding the denial of in forma pauperis applications). As is discussed below, however, case law in nonhabeas cases has held or indicated that, where an in forma pauperis application is denied, the complaint is deemed to have been filed when first submitted, at least when the filing fee is paid within a reasonable time after the application is denied.
In Williams-Guice, 45 F.3d at 164-65, a non-habeas civil action, the Seventh Circuit held that the running of a statute of limitations period is tolled while an application for in forma pauperis status is pending. Unlike Paulk v. Department of Air Force, Chanute Air Force Base, 830 F.2d 79 (7th Cir.1987), which had also so held (see also Gilardi v. Schroeder, 833 F.2d 1226, 1233 (7th Cir. 1987)), the pauper application in Williams-Guice was denied. As held in Williams-Guice, if an application to proceed in forma pauperis is submitted five days before the statute of limitations expires and the application is denied, the plaintiff will have at least five days after the denial to pay the fee and have the action deemed timely filed. Further, Williams-Guice strongly suggests that, after the denial, the running of the limitations period should be tolled for a reasonable period of time in which to pay the fee. Id. at 165. After all, the applicant may not even receive notice of the denial until after the limitation period has expired. The Seventh Circuit also indicated that a provision such as this court's Local Rule 11(D) which allows an applicant at least 15 days after a denial to pay the filing fee may be presumed to be a reasonable time period in which to pay the fee. Id. In Williams-Guice, it was unnecessary to resolve whether the limitation period was tolled during the reasonable time period to pay because the plaintiff did not pay in a timely manner and her complaint was untimely regardless of whether the additional tolling period was applied. Id. At least one district court case from this circuit, as well as cases from other circuits, have held that the limitation period is tolled for a reasonable time period after a pauper application is denied. See Rounds v. Milwaukee County Community Correctional Center, 862 F.Supp. 232 (E.D.Wis.1994); Mealancon v. Associated Catholic Charities of New Orleans, Inc., 1997 WL 194620 (E.D.La. April 22, 1997). See also Nichols, 1998 WL 151380, *6; Rodgers v. Bowen, 790 F.2d 1550 (11th Cir.1986).
It is held that the § 2244(d)(1) statute of limitations is tolled during the pendency of a good faith application to proceed in forma pauperis and that, when such application is denied, it is further tolled during the reasonable time period thereafter for the payment of such fee. In the present case, both the habeas petition and pauper application are deemed to have been received by the court when given to prison officials for mailing on April 18, 1997. The statute of limitations period was tolled until the pauper application was denied on April 30 and for a reasonable time period thereafter. In this case, Bailey was expressly granted until May 30 to pay the filing fee. Given the express grant of time by the court, the period until May 30 must be considered a reasonable time within which to pay the fee. Therefore, the running of the limitation period continued to be tolled until the fee was paid within the time allowed. Bailey's petition was timely. Respondent's motion to dismiss will be denied.
Respondent shall answer the habeas petition by May 27, 1998. Even if respondent raises issues of waiver or procedural default, respondent shall also answer the merits of all claims that are raised.
IT IS THEREFORE ORDERED that respondent's motion to dismiss [13-1] is denied. Respondent shall answer the habeas petition on or before May 27, 1998. A status hearing is set for June 2, 1998 at 9:15 a.m.
NOTES
[1] Sims involved a motion for leave to file a second or successive § 2255 motion. See 28 U.S.C. § 2244(b)(3).
[2] Subsequent Eighth Circuit cases find Allen to be dictum or otherwise nondispositive as to the mailbox rule. See Nichols, 1998 WL 151380, *6-8; Miller v. Benson, 51 F.3d 166, 169 n. 2 (8th Cir.1995); Parker v. Bowersox, 975 F.Supp. 1251, 1253 (W.D.Mo.1997).
[3] Rule 2 of the Rules Governing Section 2254 Cases requires that the application be in the form of a petition.
[4] Such an omission is not surprising since, prior to April 24, 1996, there was no strict limitation period for commencing a habeas petition, only a limitation on delayed petitions. See Rule 9(a) of the Rules Governing Section 2254 Cases; Burns, 134 F.3d at 112 & n. 4.
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114 F.3d 1198
97 CJ C.A.R. 891
NOTICE: Although citation of unpublished opinions remains unfavored, unpublished opinions may now be cited if the opinion has persuasive value on a material issue, and a copy is attached to the citing document or, if cited in oral argument, copies are furnished to the Court and all parties. See General Order of November 29, 1993, suspending 10th Cir. Rule 36.3 until December 31, 1995, or further order.
Nadji Eddine HENNIENE, Petitioner,v.IMMIGRATION & NATURALIZATION SERVICE, Respondent.
No. 96-9527.No. Ajy-thi-jtm
United States Court of Appeals, Tenth Circuit.
June 5, 1997.
1
ORDER AND JUDGMENT*
2
Before PORFILIO and LOGAN, Circuit Judges, and BURRAGE, District Judge.**
3
After examining the briefs and appellate record, this panel has determined unanimously to grant the parties' request for a decision on the briefs without oral argument. See Fed. R.App. P. 34(f); 10th Cir. R. 34.1.9. The case is therefore ordered submitted without oral argument.
4
Petitioner seeks review of a final order of the INS denying his request for asylum or withholding of deportation.1 The Board of Immigration Appeals (BIA) found he had not established the requisite "well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion," 8 U.S.C. § 1101(a)(42)(A) (defining "refugee" status), and denied relief accordingly, see Castaneda v. INS, 23 F.3d 1576, 1578 (10th Cir.1994) (failure to satisfy definition of refugee precludes asylum and, a fortiori, withholding of deportation). Mindful of the Supreme Court's admonition that "[t]o reverse the BIA finding we must find that the evidence not only supports [a contrary] conclusion, but compels it," INS v. Elias-Zacarias, 502 U.S. 478, 481 n. 1 (1992), we affirm.
5
Petitioner is a native Algerian. In 1992, he was recruited under an implied threat of violence by members of the Front Islamique du Salut (FIS) to contribute money and distribute leaflets at his shop for the anti-government group. Several months later, government security officers came into the shop to ask about the FIS. Petitioner, who was away on business at the time, learned from his family about these inquiries. He ceased his activities for the FIS, closed his shop, and moved to another city. Ultimately, he left the country and entered the United States without inspection in late 1993. He claims the dual threat of persecution by the Algerian government and the FIS precludes his safe return. We have reviewed the record and conclude the BIA properly denied relief.
6
With respect to governmental persecution, petitioner "failed to provide direct and specific evidence of facts that would support a reasonable fear that he faces persecution on account of" his brief, minor, and coerced relationship with the FIS in 1992. Hadjimehdigholi v. INS, 49 F.3d 642, 648 (10th Cir.1995). His apprehension that the government might detain him for questioning, and then, upon hearing that he is unable to identify any FIS members, might torture him, is too speculative to compel rejection of the BIA's determination. The record does contain some general accounts of governmental hostility toward the FIS, but there is no particularized evidence of ill treatment with respect to similarly situated individuals. See id. at 648-49. Indeed, a United Nations report on Algerian asylum-seekers specifically states that while active members of the now-outlawed FIS are "at risk of being exposed to serious difficulties including imprisonment," "[p]assive members or sympathizers of the FIS are not likely to be targeted." A.R. at 103.
7
As for persecution by the FIS, the BIA held petitioner had shown at most a "local" threat restricted to his prior residence--a finding insufficient to warrant relief under BIA precedent relating to nongovernmental persecution, which evidently requires proof of a countrywide threat directed at the petitioner (as opposed to proof of a direct threat from a group with a countrywide presence). See generally Sotelo-Aquije v. Slattery, 17 F.3d 33, 37-38 (2d Cir.1994) (discussing and rejecting similar BIA decision). We need not decide the propriety of this restrictive rule, for even if we held that the pervasiveness of the FIS could not be ignored by focusing exclusively on the situs of a particular FIS threat, petitioner could not prevail.
8
The Supreme Court has held that "persecution on account of ... political opinion" under § 1101(a)(42) is not implicated by mere resistance to recruitment by an anti-government group, at least when such resistance is not itself the expression of a (contrary) political opinion but, rather, simply an effort to avoid government retaliation. See Elias-Zacarias, 502 U.S. at 481-84; cf. Sotelo-Aquije, 17 F.3d at 36-37 (finding political persecution because guerrilla organization threatened petitioner on account of his active, ideological opposition). That is precisely the situation here. See A.R. 50-52. Thus, as in Elias-Zacarias, the denial of asylum must be affirmed because, whatever the merits of the BIA's determination regarding the requisite magnitude of the alleged threat, petitioner cannot satisfy the statutory condition regarding its political motivation.2
9
The petition for review is DENIED.
*
This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. The court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3
**
Honorable Michael Burrage, Chief Judge, United States District Court for the Eastern District of Oklahoma, sitting by designation
1
The Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA), Pub.L. No. 104-208, 110 Stat. 3009, alters the availability, scope, and nature of judicial review in INS cases. However, because petitioner's deportation proceedings commenced before April 1, 1997, and the final decision of the INS issued before October 31, 1996, neither IIRIRA's permanent "new rules," nor its interim "transitional rules," apply to this case. See id. §§ 306(c)(1), 309(a), (c)(1) & (4), as amended Pub.L. No. 104-302, § 2, 110 Stat. 3657, set out in notes to 8 U.S.C. §§ 1101, 1252. In contrast, provisions of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub.L. No. 104-132, 110 Stat. 1214, may apply to INS cases commenced, like this one, before AEDPA's enactment on April 24, 1996, see Fernandez v. INS, Nos. 95-9550, 96-9504, 1997 WL 240965 (10th Cir. May 12, 1997), though none of these appear pertinent to this petition for review, which does not involve deportation for criminal activity addressed by AEDPA
2
Petitioner argues affirmance of the BIA for any reason not included in its decision is impermissible under the general principle barring an agency from defending its actions in court on the basis of post hoc rationales. See SEC v. Chenery Corp., 318 U.S. 80, 87-88 (1943). This rule does not require futile, formalistic remands when despite (arguable) error in the agency's analysis, the result is clear under controlling law. See NLRB v. Wyman-Gordon Co., 394 U.S. 759, 766 n. 6 (1969); NLRB v. American Geri-Care, Inc., 697 F.2d 56, 64 (2d Cir.1982) (discussing historical "softening" of Chenery rule; "[i]t does not mean that a reversal and remand are required each and every time an administrative agency assigns a wrong reason for its action ... [but] only where there is a significant chance that but for the error, the agency might have reached a different result"); see, e.g., Osmani v. INS, 14 F.3d 13, 15 (7th Cir.1994) (declining to remand asylum application to BIA "where it is clear what the agency's decision has to be"). Indeed, in Elias-Zacarias itself, the Supreme Court affirmed the denial of asylum for lack of the requisite political motive although the BIA had relied on the lack of threat per se. Compare Elias-Zacarias, 502 U.S. at 482-84, with Elias-Zacarias v. INS, 921 F.2d 844, 847-48, 851, 855 & n. 14 (9th Cir.1990) (discussing rationale of BIA decision), rev'd, Elias-Zacarias v. INS, 502 U.S. 478 (1992)
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Case: 15-10163 Date Filed: 04/22/2016 Page: 1 of 7
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 15-10163
________________________
D.C. Docket No. 9:14-cr-80156-DTKH-1
UNITED STATES OF AMERICA,
Plaintiff–Appellee,
versus
CANDIDO ARMENTA-MENDOZA,
a.k.a. Guillermo Salgado,
Defendant–Appellant.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(April 22, 2016)
Before WILSON and JULIE CARNES, Circuit Judges, and HALL, * District
Judge.
PER CURIAM:
Defendant pleaded guilty to illegally reentering the United States as a
*
Honorable James Randal Hall, United States District Judge for the Southern District of
Georgia, sitting by designation.
Case: 15-10163 Date Filed: 04/22/2016 Page: 2 of 7
previously deported alien in violation of 8 U.S.C. § 1326(a). The Presentence
Investigation Report yielded a Guidelines range of 8 to 14 months. After
considering the factors set out in 28 U.S.C. § 3553(a), the district court varied
upward, sentencing Defendant to 36 months’ imprisonment, followed by two years
of supervised release. Defendant appeals his above-Guidelines sentence as both
procedurally and substantively unreasonable. We find no reversible error and
therefore affirm Defendant’s sentence.
I. DISCUSSION
A defendant appealing his sentence bears the burden of showing that the
sentence is unreasonable. United States v. Carpenter, 803 F.3d 1224, 1232 (11th
Cir. 2015). We review “all sentences—whether inside, just outside, or
significantly outside the Guidelines range—under a deferential abuse-of-discretion
standard.” Gall v. United States, 552 U.S. 38, 41 (2007). We assess the
reasonableness of a sentence in two steps. “First, we look at whether the district
court committed any significant procedural error, such as miscalculating the
advisory guidelines range, treating the guidelines as mandatory, failing to consider
the 18 U.S.C. § 3553(a) factors, selecting a sentence based on clearly erroneous
facts, or failing to adequately explain the chosen sentence.” United States v.
Cubero, 754 F.3d 888, 892 (11th Cir. 2014). Second, “we examine whether the
sentence is substantively unreasonable under the totality of the circumstances and
2
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in light of the § 3553(a) factors.” Id. Ultimately, we may vacate a sentence based
on a variance “only ‘if we are left with the definite and firm conviction that the
district court committed a clear error of judgment in weighing the § 3553(a) factors
by arriving at a sentence that lies outside the range of reasonable sentences dictated
by the facts of the case.’” United States v. Shaw, 560 F.3d 1230, 1238 (11th Cir.
2009) (quoting United States v. Pugh, 515 F.3d 1179, 1191 (11th Cir. 2008)).
A. Procedural Unreasonableness
A sentencing judge commits no procedural error when he “correctly
calculate[s] the applicable Guidelines range, allow[s] both parties to present
arguments as to what they believe[] the appropriate sentence should be, consider[s]
all the § 3553(a) factors, and thoroughly document[s] his reasoning.” Gall, 552
U.S. at 53; accord United States v. Irey, 612 F.3d 1160, 1185–87 (11th Cir. 2010)
(en banc). Defendant does not argue that the sentencing judge in this case
incorrectly calculated the Guidelines range, refused to allow the parties to fully
argue their position as to the appropriate sentence, failed to consider the § 3553(a)
factors, or neglected to set out his reasoning.
Instead, Defendant contends that the district court erred procedurally when it
upwardly varied on a particular ground without first considering whether an
upward departure would have been warranted in lieu of, or in addition to, an
upward variance. Specifically, in reaching its decision to upwardly vary and in
3
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fixing the amount of that variance, the district court considered, among other
things, Defendant’s prior drug-trafficking conviction involving 4.1 kilograms of
cocaine. 1 Defendant argues that by not first considering an upward departure
under U.S.S.G. § 4A1.3 (1),2 the district court “circumvented the required steps of
[G]uidelines calculation” and committed a procedural error. We disagree.
At bottom, Defendant is arguing that when a particular fact is recognized
under the Guidelines as a permissible ground for departure, a sentencing court
must first go through a departure analysis before considering whether to vary on
that particular ground. Defendant cites no persuasive case authority for this
position, however. In a case addressing an analogous issue, we held that a district
court need not consider a Guidelines enhancement for multiple victims before it is
allowed to impose an upward variance based on the impact of the defendant’s
crime on multiple victims. United States v. Rodriguez, 628 F.3d 1258, 1264 (11th
Cir. 2010) (rejecting the defendant’s argument that “the district court should not
have considered that there were multiple victims in its decision to vary upward
because an enhancement under [§] 2B1.1(b)(2)(A) of the sentencing guidelines
was the ‘proper mechanism’ for considering multiple victims”). Moreover,
1
This was not Defendant’s only prior conviction. The Presentence Investigation Report also
shows two convictions for driving under the influence and one for driving while license
suspended.
2
U.S.S.G. § 4A1.3(a)(1) permits an upward departure when a defendant’s criminal history
category substantially underrepresents the seriousness of his criminal history or the likelihood
that he will commit other crimes.
4
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although not binding on us, other courts of appeals have held that nothing requires
a district court to consider or impose a departure under § 4A1.3 based on a
defendant’s criminal history before varying from the Guidelines pursuant to
§ 3553(a) based on that history. See United States v. Gutierrez, 635 F.3d 148, 152
(5th Cir. 2011) (“[A] district court is not required to employ the methodology set
forth in § 4A1.3 before imposing a non-Guidelines sentence.”); United States v.
Diosdado-Star, 630 F.3d 359, 362–66 (4th Cir. 2011) (rejecting the defendant’s
argument that “the district court procedurally erred by failing to ‘first address[] a
departure before imposing a purportedly non-guidelines sentence’”).
Likewise, we conclude that the district court here did not commit a
procedural error when it considered Defendant’s prior criminal conduct in its
assessment of the § 3553(a) factors and ultimate decision to upwardly vary. That
the district court did not explore whether it should also upwardly depart under
§ 4A1.3, in lieu of or in addition to its variance, does not alter our conclusion that
no procedural error occurred. Accordingly, we reject Defendant’s argument that
his sentence was procedurally unreasonable.
B. Substantive Unreasonableness
As for substantive unreasonableness, Defendant argues that the district court
impermissibly “fixat[ed] on a single negative factor”: specifically, Defendant’s
criminal history and the amount of cocaine that he had previously trafficked.
5
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Defendant’s assertion that the court focused on only the above factor is belied by
the transcript from the sentencing hearing. The court acknowledged that it was
“obligated to look at [§ 3553(a)]” and that “Congress has set forth a list of factors
that need to be considered in determining what would be an appropriate sentence.”
(emphasis added). The court further confirmed, “I have looked at all of the factors
in Title 18, Section 3553(a), and it is my view that a sentence above the advisory
guideline range is required.” (emphasis added).
Moreover, the district court expressly considered multiple § 3553(a) factors,
including the nature and circumstances of the offense, the need to protect the
public, the need to deter Defendant and others from reentering the country
illegally, and Defendant’s character and criminal history. In considering
Defendant’s character, the court specifically acknowledged that Defendant had
been a “family man” and that the United States was the only home that Defendant
knew. Thus, to the extent that the district court expressed concern about
Defendant’s prior drug-trafficking conviction, its focus was not “single-minded[].”
United States v. Crisp, 454 F.3d 1285, 1292 (11th Cir. 2006); see also United
States v. Overstreet, 713 F.3d 627, 638 (11th Cir. 2013) (“Although the district
court must evaluate all § 3553(a) factors in imposing a sentence, it is ‘permitted to
attach great weight to one factor over others.’” (quoting Shaw, 560 F.3d at 1237)).
6
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Consequently, we are left with no “definite and firm conviction that the
district court committed a clear error of judgment in weighing the § 3553(a)
factors” when it imposed a 36-month sentence. Shaw, 560 F.3d at 1238.
Defendant’s sentence is therefore not substantively unreasonable.
II. CONCLUSION
Because we conclude that Defendant’s sentence is both procedurally and
substantively reasonable, we AFFIRM.
7
| {
"pile_set_name": "FreeLaw"
} |
United States Court of Appeals
For the Eighth Circuit
___________________________
No. 12-3990
___________________________
United States of America
lllllllllllllllllllll Plaintiff - Appellee
v.
Dean Earl Wilkens
lllllllllllllllllllll Defendant - Appellant
____________
Appeal from United States District Court
for the District of Minnesota - St. Paul
____________
Submitted: October 24, 2013
Filed: February 6, 2014
____________
Before LOKEN, GRUENDER, and SHEPHERD, Circuit Judges.
____________
SHEPHERD, Circuit Judge.
Dean Earl Wilkens was convicted after a jury trial of four counts of aggravated
sexual abuse. Following his conviction, the district court1 sentenced Wilkens to 360
months imprisonment. Wilkens appeals, claiming the court committed numerous trial
1
The Honorable Michael J. Davis, Chief Judge, United States District Court for
the District of Minnesota.
errors and requesting the verdict be set aside and his conviction reversed or, in the
alternative, that his sentence be vacated and the case remanded for a new trial. We
affirm.
I.
In December 2011, a school social worker received an anonymous report that
Wilkens was abusing a child residing in his home. At the time, Wilkens and his
former wife, now known as Judith Jourdain, lived on the Red Lake Indian
Reservation. Several children resided in their home, including the victims of the
offenses of conviction, D.J. and T.J., who are Jourdain’s biological grandchildren and
Wilkens’s step-grandchildren. L.B., a child involved in a count dismissed at trial,
also resided in the home. L.B. is the biological grandchild of Jourdain and Wilkens.
After receiving the information, the social worker interviewed D.J., who told her
Wilkens had sexually abused her numerous times. The social worker reported D.J.’s
disclosure to social services, and eventually the case was referred to the Family
Advocacy Center of Northern Minnesota (FACNM), which provides forensic
interviews and medical examinations of children. Nine of Jourdain and Wilkens’s
grandchildren residing in their home were sent for an evaluation at the FACNM.
D.J., T.J., and L.B. all expressed in their interviews that Wilkens had sexually abused
them.
Wilkens was charged with four counts of sexual assault and one count of
abusive sexual conduct. Because the offenses occurred on the Red Lake Indian
Reservation, he was charged with violating 18 U.S.C. §§ 1151; 1153(a); 2241(c); and
2246(2)(A), (B), and (C). The count involving L.B., Count 5, was dismissed by the
Government during trial after seven-year-old L.B. was unable to adequately answer
questions posed to her.
-2-
II.
Wilkens claims the trial court committed error by: (1) denying his motion to
sever counts before and during trial; (2) excluding certain videotape evidence after
his counsel focused on the evidence during closing argument; (3) striking Jourdain’s
testimony, including testimony of possible government threats made against her, after
she invoked her Fifth Amendment right against self-incrimination; (4) sustaining
relevancy objections to testimony regarding the victims’ sexual abuse history; and
(5) sustaining relevancy objections to evidence of a strained relationship between
Wilkens and the victims’ fathers. We address each in turn.
A. Motion to Sever
First, Wilkens argues the district court abused its discretion in denying his
motions to sever the counts both before and during the trial. The Federal Rules of
Criminal Procedure permit separate offenses to be joined for trial when the offenses
are “of the same or similar character.” Fed. R. Crim. P. 8(a). A court may sever the
counts for trial if the consolidation prejudices the defendant. Fed. R. Crim. P. 14(a).
Severance is appropriate if there is “a serious risk that a joint trial would compromise
a specific trial right of one of the defendants, or prevent the jury from making a
reliable judgment about guilt or innocence.” Zafiro v. United States, 506 U.S. 534,
539 (1993). “We reverse a denial of a motion to sever only when the defendant
shows an abuse of discretion that resulted in severe prejudice.” United States v.
Crouch, 46 F.3d 871, 875 (8th Cir. 1995).
A magistrate judge recommended that Wilkens’s pretrial motion to sever be
denied because Wilkens had not demonstrated a joint trial would cause severe or
compelling prejudice and because proof of all of the counts would nonetheless be
admissible in separate trials. The trial court adopted the recommendation and denied
the motion. After Count 5 was dismissed during trial, Wilkens moved again to sever
-3-
the remaining counts, and the court denied the motion. Wilkens now argues the jury
could not make a reliable judgment about his guilt or innocence because the case,
involving five counts, including one count dismissed during the trial, and three
victims, was too complex for the jury to compartmentalize the evidence, and, thus,
he was severely prejudiced.
We are not persuaded that Wilkens was severely prejudiced by the joinder of
the offenses. “[A] defendant cannot show prejudice when evidence of the joined
offense would be properly admissible in a separate trial for the other crime.” United
States v. Brown, 653 F.3d 656, 662 (8th Cir. 2011) (internal quotation marks
omitted). Although generally evidence of other crimes is not admissible to show the
propensity to commit crimes, sexual assault is an exception. Under Federal Rule of
Evidence 413, evidence of other sexual assaults by the defendant is admissible in
sexual assault cases so long as the party meets certain disclosure requirements and the
evidence is otherwise relevant. United States v. Tyndall, 263 F.3d 848, 850 (8th Cir.
2001). Because the evidence of the other counts would have been admissible in
severed trials, Wilkens cannot show prejudice. See id.
Wilkens points to the witness’s different versions of events and argues the
counts should have been severed because it is unreasonable to assume that the jury
would be able to separate the evidence. However, a jury will often hear multiple
versions of the same events, and it “has the . . . responsibility to resolve conflicts or
contradictions in testimony.” United States v. Moya, 690 F.3d 944, 949 (8th Cir.
2012). After careful review of the record, we conclude there was little possibility the
jury was confused over which evidence related to which count, and we are satisfied
that the denial of severance did not deprive Wilkens of a fair trial. See United States
v. Jones, 880 F.2d 55, 62 (8th Cir. 1989).
-4-
B. The Withdrawal of Exhibit #9
Next, Wilkens contends the trial court erred in withdrawing from evidence the
videotaped interview of L.B. (Exhibit #9) after closing argument. During trial, the
Government introduced into evidence videotapes of the FACNM interviews of the
three alleged victims. D.J.’s and T.J.’s interviews were both played for the jury;
Exhibit #9, the interview of L.B., was not played. After Count 5 was dismissed, the
Government indicated that its position was Exhibit #9 should be withdrawn. Defense
counsel did not make an argument or give an opinion regarding its admissibility and
the court did not at that time make a definitive ruling on the matter. Defense counsel
then focused on Exhibit #9 during closing argument, characterizing the interviewing
techniques displayed in the video as leading and suggestive. After closing arguments
and after the jury retired for deliberations, the district court granted the Government’s
motion to withdraw Exhibit #9. Though not specifically stated, it is apparent from
the context of the motion to withdraw the exhibit that the court determined that the
exhibit was either no longer relevant or only slightly probative after Count 5 was
dismissed. See Fed. R. Evid. 403(a)(1)(B).
A district court’s decision to exclude evidence is reviewed for abuse of
discretion. United States v. Cook, 454 F.3d 938, 940 (8th Cir. 2006). Although
relevant evidence is admissible, Fed. R. Evid. 402, it may be excluded if the district
court finds, in its discretion, that “its probative value is substantially outweighed” by
the possibility of “unfair prejudice, confusing the issues, misleading the jury, undue
delay, wasting time, or needlessly presenting cumulative evidence,” Fed. R. Evid.
403. Exhibit #9 was a videotaped interview of the alleged victim L.B., the only
victim alleged in Count 5 of the indictment. At the time Exhibit #9 was withdrawn
from evidence, Count 5 had already been dismissed.
“[T]he district court [was] in a better position than we to evaluate the
helpfulness of [the evidence] and to make the subtle balancing required by Fed. R.
-5-
Evid. 403.” Hogan v. Am. Tel. & Tel. Co., 812 F.2d 409, 411 n.2 (8th Cir. 1987) (per
curiam). Once Count 5 was dismissed, Exhibit #9 was marginally relevant at best.
The decision of Wilkens’s attorney to focus in closing argument on evidence that the
court had already discussed dismissing does not make that evidence more relevant or
probative to the counts before the jury. Even if it was relevant, the court did not
abuse its discretion in finding that the evidence had the potential of confusing or
misleading the jury since the content of the evidence related to the dismissed count.
C. Jourdain’s Stricken Testimony
Wilkens also appeals the court’s decision to strike Jourdain’s testimony after
she invoked her Fifth Amendment right against self incrimination. Jourdain testified
for the defense on direct examination that D.J. told her she had fabricated the story
of abuse. Defense counsel asked Jourdain if “anyone accused her of lying about that
story.” She responded that the Government’s attorney had. She also responded in the
affirmative when asked if “anyone ever threatened her with consequences if she came
and testified.” Immediately after giving this testimony, the Government objected and
the jury was excused. The Government’s attorney informed the court he had warned
Jourdain of the possible consequences for her if she knew the sexual abuse was going
on or if she told the children not to say anything about it. The court then appointed
a public defender to advise Jourdain of her Fifth Amendment rights. After meeting
with the public defender, Jourdain returned to the stand and invoked her right to
remain silent. The court then struck all of her testimony and admonished the jury to
disregard it.
Wilkens’s argument concerning Jourdain’s testimony is twofold: (1) the
testimony should have remained in evidence due to its content, and (2) the court erred
-6-
by not allowing the jury to hear the details of any threats made by the Government’s
attorney to determine whether the trial was tainted by prosecutorial misconduct.2
i. Striking Testimony
A trial court’s decision to strike a witness’s testimony after the witness’s
assertion of the Fifth Amendment privilege against self incrimination is reviewed for
an abuse of discretion, and “only in a case of abuse of such discretion resulting in
obvious prejudice should an appellate court intervene.” United States v. Brierly, 501
F.2d 1024, 1027 (8th Cir. 1974). The trial court has the duty to “exercise reasonable
control over the mode . . . of examining witnesses and presenting evidence so as to
[] make those procedures effective for determining the truth.” Fed. R. Evid.
611(a)(1). To provide a trial with a fair truth-seeking process, testimony should be
stricken when its truth cannot be tested. See Smith v. United States, 331 F.2d 265,
277 (8th Cir. 1964). Direct testimony may remain on the record, even though the
witness asserts the privilege against self-incrimination on cross-examination, if the
Fifth Amendment is invoked on cross-examination as to the collateral matters rather
than the details of the direct testimony. Brierly, 501 F.2d at 1027. Here, Jourdain’s
invocation of the Fifth Amendment did not occur on cross-examination, but during
direct examination.
Wilkens argues the court erred in striking Jourdain’s testimony because the
court did not clarify the subjects as to which Jourdain wished to invoke her Fifth
Amendment right. He suggests that Jourdain may have intended to invoke the right
only as it relates to the threats, but she may have been willing to respond to questions
2
In his reply brief, Wilkens attempts for the first time to argue that Jourdain
waived her Fifth Amendment right against self incrimination by taking the stand to
testify. “[W]e generally do not address issues and arguments asserted for the first
time in a reply brief.” Giove v. Stanko, 49 F.3d 1338, 1344 n.4 (8th Cir. 1995). We
will not depart from our general rule in this case.
-7-
on cross-examination regarding D.J.’s credibility. Accordingly, had the court allowed
Jourdain to answer questions on cross-examination concerning D.J.’s credibility, her
direct testimony on the same subject could have remained on the record. We
disagree. The court was within its discretion to determine that Jourdain’s invocation
of her Fifth Amendment rights included a refusal to answer questions on
cross-examination. After meeting with her public defender, she took the stand and
immediately invoked her Fifth Amendment right. The public defender informed the
court that he would “have a hard time advising her to answer even questions
selectively.” Thus, we find the trial court did not abuse its discretion, and no
prejudice resulted, by not requiring the Government to attempt cross-examination
when it was clear Jourdain would not have responded.
Wilkens also argues Jourdain’s testimony on direct examination concerning the
fabrication of the abuse should have remained on the record because it went to
credibility, regardless of her availability for cross-examination. He points to Brierly,
where we noted a witness’s direct testimony may remain on the record even when the
witness asserts the privilege against self-incrimination when the witness refuses to
give testimony on cross-examination concerning collateral matters or the witness’s
own credibility. 501 F.2d at 1027. Wilkens’s argument misconstrues our holding in
Brierly, which instructs that if “the witness—by invoking the privilege—precludes
inquiry into the details of his direct testimony so that there is a substantial danger of
prejudice, the direct testimony should be stricken in whole or in part.” Id.; see also
Coil v. United States, 343 F.2d 573, 580 (8th Cir. 1965). The details of Jourdain’s
testimony concerned whether D.J. fabricated her story. This testimony is not
collateral matter and did not involve Jourdain’s credibility. Since the details of her
direct testimony were not at all subject to testing through cross-examination, the trial
court did not abuse its wide discretion in striking the testimony. See id.; see also
United States v. Doddington, 822 F.2d 818, 822 (8th Cir. 1987) (striking testimony
of defense witness when not subject to cross-examination by Government).
-8-
Finally, Wilkens argues that evidence of a predisposition to fabricate sexual
abuse or assault should always be admitted unless its potential for unfair prejudice
substantially outweighs its probative value. It is true that, under Federal Rule of
Evidence 412, courts have found evidence tending to show a predisposition to
fabricate rape can be admitted in some circumstances due to its probative value, even
if it would otherwise be excluded under the Rule. Accord Stephens v. Miller, 13 F.3d
998, 1001-02 (7th Cir. 1994) (en banc). However, the trial court did not exclude this
evidence under Rule 412, and Wilkens’ argument fails to overcome the fact that
Jourdain’s testimony was not subjected to cross-examination.3
Thus, we conclude that the district court’s decision in this case is a fair one and
“promote[s] the development of evidence law[] to the end of ascertaining the truth
and securing a just determination.” Fed. R. Evid. 102.
ii. Prosecutorial Misconduct
Wilkens further contends the trial court ignored prosecutorial misconduct by
accepting the Government attorney’s account of the conversation he had with
Jourdain and refusing to allow the jury to hear the extent of any threats made against
Jourdain. The test for reversible prosecutorial misconduct has two parts: (1) the
prosecutor’s remarks or conduct must in fact have been improper, and (2) such
remarks or conduct must have prejudicially affected the defendant’s substantial rights
so as to deprive the defendant of a fair trial. United States v. Burrage, 687 F.3d 1015,
1022 (8th Cir. 2012); United States v. Barrera, 628 F.3d 1004, 1007 (8th Cir. 2011).
The defendant may be prejudiced if the prosecutor made threats to a potential defense
3
Wilkens vaguely argues that excluding Jourdain’s testimony violated his right
to due process, to confront his accusers, and to offer evidence in his own defense.
However, to provide a trial with a fair truth-seeking process, the testimony should be
stricken when its truth cannot be tested. See Smith v. United States, 331 F.2d 265,
277 (8th Cir. 1964). Wilkens cites no cases holding otherwise.
-9-
witness. United States v. Morrison, 535 F.2d 223, 227-28 (3d Cir. 1976) (holding
that coercive threats during personal interview were impermissible); but see United
States v. Simmons, 699 F.2d 1250, 1251-52 (D.C. Cir. 1983) (holding that a mere
warning of the dangers of testifying was permissible).
Because Wilkens cannot show that any possible threats by the Government
prejudiced him or denied him a fair trial, there was no error in the court not hearing
the extent of the threats. Jourdain, despite her conversation with the Government’s
attorney, took the witness stand and testified in a manner favorable to Wilkens. It
was Wilkens’ attorney who led her into invoking the Fifth Amendment on direct
examination. Her decision to invoke the Fifth Amendment was not finalized until
after she consulted with her own attorney, which further establishes that it was an
independent, deliberate, and informed decision, rather than the result of any threats
or coercion. See United States v. Mahasin, 362 F.3d 1071, 1086-87 (8th Cir. 2004).
D. Sexual Abuse Evidence
Wilkens argues the court erred in sustaining relevancy objections to evidence
that the victims had been sexually abused in the past by persons other than Wilkens.
Specifically, he argues that, by not hearing testimony of prior abuse, the jury assumed
the only way the children could have acquired the arguably advanced sexual
knowledge to which they testified was as a result of abuse from Wilkens. Wilkens
maintains, however, the victims’ history of abuse serves as an alternative explanation
for their sexual knowledge.
T.J. and D.J. testified in great detail regarding the abuse, arguably exhibiting
sexual knowledge beyond their age. Wilkens attempted to elicit testimony from two
witnesses that the children had previously been abused by their fathers, to which
relevancy objections by the Government were sustained. The Government argued in
closing that the only way the children could have known the level of sexual detail to
-10-
which they testified was if Wilkens had abused them. Wilkens made no objection
during closing argument and did not otherwise bring the issue before the trial court
after the Government’s closing argument.
Wilkens’s contention is focused on the trial court’s sustaining relevancy
objections to two witnesses’ testimony, Tammy Brummitt, L.B.’s mother, and Rena
Parisien, a child protection case manager at Red Lake Family and Children Services.
These witnesses both testified after Count 5 concerning L.B. had been dismissed.
During direct examination of Brummitt, defense counsel asked whether she had ever
reported “concerns that [L.B.’s father] had sexually abused any of the children that
were in the house.” After the Government objected, defense counsel made an offer
of proof that he had a note indicating Brummitt had reported that L.B. had been
abused by her father. Because any evidence would have involved possible abuse of
L.B. and another child not involved in this prosecution, the court sustained the
objection on relevancy grounds. Wilkens also challenges the trial court’s twice
sustaining relevancy objections to Parisien’s testimony. The court first sustained a
Government relevancy objection after an attempt to have Parisien elaborate about a
conversation in which she heard “about [L.B.’s father] being abusive to [L.B.].” The
second relevancy objection was sustained after counsel asked Parisien whether “any
other children indicated that they had been sexually touched by [L.B.’s father].”
The court did not err in sustaining relevancy objections to testimony
concerning victims not involved in any remaining counts against Wilkens. A district
court is given “broad discretion” to determine the relevance of evidentiary matters.
Smith v. Tenet Healthsystem SL, Inc., 436 F.3d 879, 885 (8th Cir. 2006). We will
reverse that decision only if there is a “clear abuse of discretion.” Suggs v. Stanley,
324 F.3d 672, 682 (8th Cir. 2003). The trial court was within its wide discretion to
find that evidence relating to whether a child uninvolved in the counts charged was
previously abused by someone other than the defendant is irrelevant to the questions
before the jury.
-11-
Wilkens only challenges one evidentiary ruling that might have related to
victims actually involved in the counts remaining against Wilkens after Count 5 was
dismissed. However, it is unclear whether the witness’s testimony would have
included information that T.J. or D.J. had been sexually abused because Wilkens did
not attempt to make any offer of proof regarding the contents of the elicited
testimony. In order to challenge a trial court’s exclusion of evidence, an attorney
must preserve the issue for appeal by making an offer of proof. Dupre v. Fru–Con
Engineering Inc., 112 F.3d 329, 336 (8th Cir. 1997) (citing Holst v. Countryside
Enters., Inc., 14 F.3d 1319, 1323 (8th Cir. 1994)). We will only consider an offer of
proof that is contained in the record. See, e.g., Potts v. Benjamin, 882 F.2d 1320,
1323 (8th Cir. 1989) (concluding that party must put evidence on the record in order
to challenge its exclusion on appeal). Because Wilkens did not make an offer of
proof at trial concerning what Parisien would have testified to when asked whether
“any of the other children indicated they had been sexually touched by [L.B.’s
father],” we cannot evaluate which child, if any, Parisien may have had knowledge
about. There were nine children from Wilkens and Jourdain’s home sent to the
FACNM, only two of which were involved in the counts against Wilkens. We cannot
properly evaluate the trial court’s decision to exclude the testimony as irrelevant
without knowing what the excluded testimony would have been. In the absence of
such an offer of proof, we have no basis in the record from which to conclude that the
ruling affected a substantial right of the defendant. See, e.g., United States v. Seibel,
712 F.3d 1229, 1235 (8th Cir. 2013); Johnson v. Hill, 274 F.2d 110, 115 (8th Cir.
1960). Even if the issue was raised pre-trial,4 it was incumbent upon Wilkens to make
4
Before trial, Wilkens filed a motion in limine relating to certain documents
that may have contained information suggesting the victims had previously been
abused by their fathers. The trial court stated that it would conduct an in camera
review of the documents, and if they “become relevant and admissible—in that the
Government does attempt to argue that one or more of the victims could not have
known a particular level of sexual detail unless [Wilkens] abused them—the Court
will provide the responsive documents to the defense.” The documents involved in
-12-
an offer of proof at trial when faced with evidentiary rulings he now claims to be
improper. United States v. Kirkie, 261 F.3d 761, 767 (8th Cir. 2001). Thus, the issue
was not properly preserved for appeal, and there is no warrant for reversal on this
claim of error.
E. Strained Relationship
Finally, Wilkens contends that limiting evidence of his strained relationship
with the victims’ fathers was error. Wilkens argues this error denied him due process
because he did not have a fair opportunity to offer evidence in his own defense or
confront his accusers. The court sustained relevancy objections to questions
concerning the strained relationship between Wilkens and the victims’ fathers,
including questions regarding the fact that Wilkens had previously reported the
fathers to the police. Defense counsel offered that he intended to suggest the victims’
fathers had a motive to fabricate allegations against him and they may have made the
initial call regarding the abuse, spurring the investigation.
“[T]he Constitution guarantees criminal defendants ‘a meaningful opportunity
to present a complete defense.’” Holmes v. South Carolina, 547 U.S. 319, 324 (2006)
(quoting Crane v. Kentucky, 476 U.S. 683, 690 (1986)). Trial courts may exclude
defense evidence on grounds the evidence is “repetitive, only marginally relevant or
poses an undue risk of harassment, prejudice, or confusion of the issues” without
violating the Constitution. Id. at 326-27 (alterations omitted) (internal quotation
the motion in limine were never given to the defense attorney, and we see nothing in
the record indicating he attempted to obtain these documents. The district court’s
tentative ruling on admissibility pre-trial was not final, and not sufficient to preserve
any objections on appeal. See United States v. Big Eagle, 702 F.3d 1125, 1130 (8th
Cir. 2013). Because no objection was made at trial concerning these documents, the
district court was not called upon to exercise its discretion. Therefore, our review is
limited to plain error, of which we find none. See id.
-13-
marks omitted). This attempt to link the fathers to the initial report of abuse due to
a strained relationship is speculative evidence at best. Because the court has wide
latitude to exclude evidence as irrelevant and speculative, the court did not abuse its
discretion. See United States v. Rabins, 63 F.3d 721, 726 (8th Cir. 1995); see also
United States v. Maestas, 554 F.2d 834, 837 n.2 (8th Cir. 1977) (“[E]vidence which
is vague and speculative is not competent proof and should not be admitted into
evidence.”). The exclusion of such evidence was not an unreasonable application of
evidentiary rules nor did it render Wilkens’ trial fundamentally unfair.
The Confrontation Clause guarantees that a defendant has the ability to
confront his accusers. Crawford v. Washington, 541 U.S. 36, 51 (2004). We
understand Wilkens’s argument to be that he was denied the opportunity to challenge
the anonymous tip by indicating to the jury that the victims’ fathers may have
fabricated the tip. However, the excluded testimonial evidence is derived from the
direct examination of his own witnesses who were not his accusers. In fact, there was
no evidence admitted as to the identity of any anonymous accuser. Instead, the
evidence presented at trial focused on information learned from a full investigation
after the tip. Thus, the Confrontation Clause argument is misplaced as it does not
involve confronting any “witnesses against him.”
F. Cumulative Effect
For his final challenge to his conviction, Wilkens argues that even if the
alleged errors we have already discussed were harmless individually, their cumulative
effect deprived him of a fair trial. Because we have not found multiple errors,
harmless or otherwise, we must also reject this contention.
-14-
III.
Accordingly, we affirm Wilkens’s conviction.
______________________________
-15-
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447 F.2d 894
UNITED STATES of America, Plaintiff-Appellee,v.Franklin Eugene WILLIAMS and James Edison Williams, Defendants-Appellants.
No. 29937.
United States Court of Appeals, Fifth Circuit.
July 30, 1971.
John A. DeVault, III, Jacksonville, Fla. (Court Appointed), for Franklin E. Williams.
Edward J. Witten, Jacksonville, Fla. (Court Appointed), for James E. Williams.
John L. Briggs, U. S. Atty., Joseph W. Hatchett, Harvey E. Schlesinger, Asst. U. S. Attys., Jacksonville, Fla., Richard J. Mandell, Asst. U. S. Atty., Orlando, Fla., for plaintiff-appellee.
Before TUTTLE, AINSWORTH and SIMPSON, Circuit Judges.
SIMPSON, Circuit Judge:
1
The Williams brothers, Franklin and James, here appeal from convictions in the district court for alleged dealings in counterfeit United States currency.1 We find support in the record for such claims of irregularities in the proceedings below as to require that the case be retried. We accordingly reverse and remand.
2
A number of asserted errors are insisted upon by the appellants between them. We dispose of the more serious of these contentions more or less in the order in which they are raised by the briefs. We limit our discussion of the evidence because of the likelihood of retrial.
METHOD OF JURY SELECTION
3
Appellant James Williams contends that the method the trial judge employed in the selection of the jury violated his Sixth Amendment right to a fair and impartial trial. The trial judge, a senior district judge from another circuit sitting by designation, employed a method of jury selection beyond the experience of the Florida lawyers in the case. 32 jurors were initially brought inside the rail and seated, both within and without the jury box. The five defendants were limited to a total of ten peremptory challenges, which could be utilized by the defendants jointly, or two to each defendant.2 See Rule 24(b), F. R.Crim.P. The government had the six peremptory challenges allowed by Rule 24(b). The parties were at this point required to exercise all of their sixteen peremptory challenges to reduce the panel of 32 jurors to 16. Of the remaining four extra jurors, each side was allowed to strike one, in turn so that a jury of twelve and two alternates remained and was empaneled.
4
James Williams, while asserting that this method of empaneling the jury was prejudicial, fails to indicate the basis for such a claim. None appears from an inspection of the voluminous record. There is no suggestion that any biased, prejudiced or otherwise objectionable juror served in the trial. It must be assumed then that all such jurors were eliminated either by peremptory challenge or by challenge for cause.
5
James Williams here actually presents the identical unsuccessful contention made by defense counsel in Amsler v. United States, 9 Cir. 1967, 381 F.2d 37, 44, that twelve jurors should have been called and challenges exercised against the panel with replacements then called to fill the place on the panel of the excused juror. There is no authority known to us for so limiting the discretion of trial judges in the federal system of courts. Indeed the whole procedure outlined by Rule 24, F.R.Crim. P., emphasizes the wide discretion committed to the trial judge in the methods employed to select juries. As did our sister circuit in Amsler, we conclude that there is no substance in this argument.
6
Moreover, the limitation of the five defendants to ten peremptory challenges and permitting them to be exercised separately or jointly is in direct compliance with F.R.Crim.P., Rule 24(b). Under that rule the court may (not must) allow additional peremptory challenges where there are multiple defendants. See also, Gradsky v. United States, 5 Cir. 1965, 342 F.2d 147, 152, United States v. Crutcher, 2 Cir. 1968, 405 F.2d 239, 245.
7
The method of jury selection employed, while strange to Florida counsel in the case, is not demonstrated to have been erroneous.
8
ADMISSION OF STATEMENT OF MRS. FRANKLIN WILLIAMS
9
Over defense counsel's objection, on cross-examination of Franklin Williams, government counsel asked whether his wife, Sarah Hart Williams, made a statement at the time Franklin Williams was arrested by a government agent:
10
"Q Didn't she say, `I told you you were going to get in trouble messing with J. E. Williams and those counterfeits?'
11
"A No, sir, she did not."
12
On rebuttal Police Officer Powell testified that Mrs. Williams at the time of such arrest in the presence of the defendant Franklin Williams and Agent Williamson, in the course of having a violent argument, stated:
13
"I told you that goddamn JE was going to get you in trouble with them goddamn counterfeits."
14
Appellant Franklin Williams claims here that the admission of Officer Powell's testimony violated the common law rule that a wife's testimony is inadmissible against her husband. Counsel claims that this was the singularly most damaging piece of evidence admitted against appellant Franklin Williams because it was the only evidence which linked him to the activities of his brother James, and that it also presented evidence that the notes found in his possession were known to be counterfeit. The government asserts that the testimony is proper for the following reasons: (1) It impeaches defendant's denial on cross-examination; (2) it is an incriminating statement in the presence of the defendant; and (3) it is an admission against interest by a co-conspirator. Sarah Hart Williams was not then on trial, her case having been severed for trial.
15
In Hawkins v. United States, 1958, 358 U.S. 74, 79 S.Ct. 136, 3 L.Ed.2d 125, the Supreme Court reaffirmed the common law rule that grants to a husband in a criminal proceeding the privilege to prevent his spouse from testifying against him. This Court, in Ivey v. United States, 5 Cir. 1965, 344 F.2d 770, held that the admission of the testimony of a government agent to the contents of a statement made prior to trial by a wife against her husband was reversible error. We said in Ivey:
16
"Miley's testimony relating what Mrs. Ivy [sic] had told him about the appellant's participation in the importation not only violates the rule against admitting hearsay testimony but also the rule against admitting testimony of one spouse against the other. In Hawkins v. United States, 358 U.S. 74, 79 S.Ct. 136, 3 L.Ed.2d 125 (1958), the Court reaffirmed the old common law rule, to the extent that a wife's testimony was inadmissible against her husband." 344 F.2d at 772.
17
This Court noted no distinction between a statement allegedly made out of court, as in the instant case, and one made on the witness stand:
18
"The Hawkins case, supra, involved the admission of a wife's testimony in open court, but we know of no reason why the rule there reaffirmed is not equally applicable to a statement alleged to have been made by her out of court. She might as well be permitted to testify against her husband in open court as to permit the introduction of a statement she made against him out of court." 344 F.2d at 772.
19
We view this case as indistinguishable from Ivey unless it can be demonstrated that since Sarah Williams was a charged co-conspirator in the indictment the evidence was an admission against the interest of a co-conspirator admissible against the other conspirators.3 We need not consider that question, however, since even if the law is that the statements of a wife may be introduced in derogation of the husband-wife privilege where the wife is also a co-conspirator, (a question which we expressly refrain from deciding) it is without dispute that here the statement of the wife was made after the arrest (and hence the termination of the conspiracy) and could therefore be admissible only against the defendant who made the statement. See Wharton, Criminal Evidence (12th Ed.), Sections 429, 433; United States v. Harrell, 5 Cir. 1970, 436 F.2d 606.
20
We hold that the admission of the statement of Sarah Hart Williams was prejudicial error as to Franklin Williams.
THE "ALLEN" CHARGE
21
The jury began its deliberations in this case at 10:35 A.M., on Tuesday, March 31, 1970. The jury deliberated until 4:30 P.M., when they sent word to the court that they were thirsty and requested that some Coca-Colas be sent to them. At that point, the trial judge, sua sponte, without any intimation from the jury that they were deadlocked, or any request for further instruction, and without informing counsel of his intentions called the jury back into the courtroom and gave them the following variation on the so-called "Allen" Charge4 or "dynamite" charge:
THE COURT:
22
Now, Mr. Carter, I have had the statement from the Marshal that some of you are getting a little thirsty and would like to have some Cokes and he will take care of those needs right after I have said a few words to you.
23
I hope that you will be able to come to an agreement on at least some count to each defendant and I want to say this to you: This is an important case and in all probability it cannot be tried better or more exhaustively that it has been on either side. It is desirable that you agree upon a verdict or verdicts.
24
The Court does not want any juror to surrender his or her conscientious convictions. Each juror should perform his or her duty conscientiously and honestly according to the law and the evidence. All the verdicts to which the jurors agree must be his or her own verdict. It is the result of his or her own convictions and not a mere acquiescence in the conclusion of other jurors.
25
Yet in order to bring 12 minds to a unanimous result, you must examine the questions submitted to you with candor and with the proper regard and deference to the opinions of each other. You should consider that the case at some time must be decided and that you 12 are selected in the same manner and from the same source from which each future jury must be, and there is no reason on the part of anyone to suppose that the case will ever be submitted to a jury more intelligent and more impartial or more competent to decide it or that more or clearer evidence will be produced on one side or the other.
26
Now, in conferring together, you ought to pay proper respect to each others' arguments. On the one hand, if much the larger number of your panel are for conviction, a dissenting juror should consider whether a doubt in his or her mind is a reasonable one which makes no impression on the minds of so many men or women equally intelligent with himself or herself to have heard the same evidence with the same attention and with equal desire to arrive at the truth and under the sanctity of the same oath.
27
On the other hand, if a majority are for acquittal the minority ought to seriously ask themselves whether they may not reasonably and ought not to doubt the correctness of a judgment which is not concurred in by most of those with whom they are associated and to distrust the weight or sufficiency of that evidence which fails to carry conviction in the minds of their fellow jurors.
28
On the other hand, the majority, if there is one — and I am not making any inquiry in that regard — should consider carefully the opinions of the minority with the same force and effect that I have asked the minority to consider the opinions and convictions of the majority.
29
Now, I am going to ask you to again retire and carefully consider all of the evidence in light of the Court's instructions and see if you cannot agree upon a verdict. You understand, of course, that if you agree on some and can't agree on others, if you agree on a verdict — and I am not suggesting either way — guilty or not guilty as to each of the defendants and can't agree on others, that is a perfectly valid verdict which you can return to this Court.
30
So now, we will ask the Marshal to get that Coke quickly so that you can have an afternoon break. Retire and consider the case again. (T. pages 1039-1042).
31
Counsel for both Williams brothers objected promptly to the giving of the charge. The jury retired at 4:30 P.M. and its verdict, not surprisingly, followed shortly thereafter, at 5:20 P.M., 40 minutes later. The Allen charge, discredited in some circles,5 has been approved so many times by this Circuit as hardly to require the citation of authorities, viz: Hale v. United States, 5 Cir. 1970, 435 F.2d 737; United States v. Hill, 5 Cir. 1969, 417 F.2d 279; Posey v. United States, 5 Cir. 1969, 416 F.2d 545; Thaggard v. United States, 5 Cir. 1965, 354 F.2d 735; Andrews v. United States, 5 Cir. 1962, 309 F.2d 127; Huffman v. United States, 5 Cir. 1962, 297 F.2d 754; although often with insistence that the exact language of "Allen", or a close paraphrase thereof is the ultimate permissible limit, Green v. United States, 5 Cir. 1962, 309 F.2d 852, and occasionally with dissents, Thaggard, supra, Andrews, supra, Huffman, supra.
32
The charge here may be criticized on similar grounds, as it has been effectively in the appellants' brief. We do not analyze these contentions or the government's counter-arguments that the charge was really a model of its kind. The charge as to its substance was borderline and probably not prejudicial under the jurisprudence as it now stands. But the content of it is not as disturbing to us as its timing. Giving the charge, when it was given, in the posture of the trial at that time came perilously close to an abuse of the trial court's discretion. This was a complicated trial, lasting six days and resulting in a transcript of 1086 pages. Five defendants were tried on twelve counts, one a conspiracy count, which itself charged 19 overt acts. Forty-six witnesses were called to the stand. The jury had deliberated less than six hours, 10:35 A.M. to 4:30 P.M. the same day, with an indefinite time out for lunch, when they indicated that they wanted soft drinks sent in. Nothing more, no hint of deadlock, no request for additional instructions. It is unlikely that up to that point enough time had elapsed for even scant consideration and discussion of the evidence as it applied to each defendant on trial under each of the twelve counts on trial.
33
As noted, we have often approved the giving of a proper Allen charge, and have stated that "Whether in any case the Allen charge should be given rests initially in the sound discretion of the trial judge," Powell v. United States, 5 Cir. 161, 297 F.2d 318, 322, but as we also said in Powell "But the correctness of the charge must be determined by the consideration of the facts of each case and the exact words used by the trial court" in the following sentence. The use of the charge in the circumstances present in the trial below, with no indication by the jury that an impasse had been reached, and with no basis in reason for the court to conclude that a deadlock existed or that sufficient time had elapsed for full consideration of numerous issues in a complex case verged upon coercion of a verdict. As in United States v. Rogers, 4 Cir. 1961, 289 F.2d 433, 436:
34
"The time interval" (40 minutes in our case) "was quite long enough for acceptance of a theory of majority rule, but was hardly long enough to have permitted a painstaking reexamination of the views which the minority had held steadfastly until the charge was given."
35
An inference arises that the jury's will and consequently the appellant's right to its unfettered exercise of its right to decide may have been overridden and overcome by the action of the trial judge. Neither Powell, supra, nor Andrews, supra, are contrary to such a holding, for a reading of those cases reveals that in each of them the juries had reached actual stalemates. In Hale, supra, as the government points out, the district court gave the Allen charge after three hours of jury deliberation with no indication from the jury that they were unable to reach agreement. We iterate that in this critical field, each case must stand or fall on its own facts, and that a case by case approach is the only proper one. We think that a potent and substantive argument is put forward here that the surrounding facts require a reversal on this point, but inasmuch as the case is reversed on other grounds as to both defendants, we do not decide this close and bothersome question.
DISCLOSURE OF JENCKS ACT MATERIAL
36
Following the direct examination of the first two witnesses against Frank Williams defense counsel requested production of any Jencks Act material out of the presence of the jury. Defense counsel called to the attention of the trial court this Court's opinion in Beaudine v. United States, 5 Cir. 1959, 414 F.2d 397, and the procedures outlined in that case for the turning over of Jencks Act material. The trial judge denied the request for the physical removal of the jury from the courtroom. The court viewed the government material in camera, and then, in the presence and hearing of the jury, ordered the deputy marshal to hold the material produced by the government so that defense counsel could view only the portions which the court deemed relevant. The material revealed was not used in the cross-examination of the witnesses.
37
Defense counsel here rightfully urges that this exercise undertaken in the presence and hearing of the jury laid the defense open to an inference by the jury that all that was in the reports was consistent with the testimony of the witnesses. This bolstering of the testimony of government witnesses was impermissible under our decisions. In both Beaudine, supra and United States v. Lepiscope, 5 Cir. 1970, 429 F.2d 258, we made it very clear that while it was a matter of trial court discretion whether Jencks Act material should be turned over to the defense outside the presence of the jury, at least the defense did have the right to have their request, receipt, and examination of the material out of the hearing of the jury. In this case the jury was not only not excused, but were permitted to hear the colloquy between counsel and the court relating to the request, disclosure, and procedure for examination of the material. This was error.
RULE 30 COMPLIANCE
38
Defense counsel makes two points with respect to the trial judge's failure to comply with Rule 30, F.R.Crim.P.: (1) his refusal to permit review of the intended charges prior to closing arguments or to inform counsel specifically of its proposed action on the requested charges, as Rule 30 requires; and (2) his failure to hear and consider objections to the supplemental (Allen) charge as Rule 20 directs "before the jury retires to consider its verdict".
39
As to the first of these contentions, the record shows that the judge merely advised counsel, prior to argument, "I have looked over all your requests and I find nothing in there that I have to directly state flatly that I will not charge. But I propose to charge in my own language, gentlemen." Counsel for the Williamses urges that this is strikingly similar to the "cryptic remarks" held to be inadequate in Wright v. United States, 9 Cir. 1964, 339 F.2d 578, 579:
40
"I am going to give the general instructions. And you go ahead and argue the case any way you want to argue it. And I will instruct the jury as to the law involved in this case."
41
While we do not stamp "approved" on the method pursued here, we think the information conveyed to counsel was so nearly adequate as not to require reversal, especially since we reverse on other grounds. Prejudice to rights of either defendant is not shown. We note also that the judge involved was a visiting judge and that for this reason the circumstances are the more unlikely to recur.
42
The same is true as to a related incident. After having been told by the judge that he would "charge along the lines you have requested" Franklin Williams' trial counsel, at the close of the court's instructions objected to the failure to give or to paraphrase certain requested instructions. The judge gave one of the omitted charges, then said, in the jury's presence: "I think that's bad law". In addition to prejudicing counsel in the eyes of the jury, this remark effectively deprived the defendant Franklin Williams of the effect of the instructions. Williams would have come off better before the jury if the judge had omitted the charge entirely, instead of giving it and immediately labelling it "bad law". Whether it was "bad law" was off the mark. The rule entitles counsel to argue his facts with knowledge of the legal instructions the jury will be told to apply. Williams' counsel here was deprived of that right. We think this occurrence is unlikely to be repeated in this case on another trial and do not find it necessary to decide whether it was so prejudicial as to require reversal.
43
As to the second claim regarding the trial judge's refusal to follow the requirements of Rule 30, the dereliction appears more serious and we definitely disapprove the conduct of the judge. Again, since we reverse on other grounds we do not decide whether this ground standing alone would require reversal.
44
But mainly to sound a warning to district judges of this Circuit, we consider it worthwhile to recount briefly what occurred.
45
After giving the Allen or "dynamite" charge, the judge directed the jury to retire and immediately left the bench, giving counsel no opportunity to state objections, the trial deputy clerk stating that the judge had instructed him to allow counsel to put objections in the record. The judge did not hear the objections himself and had no opportunity to consider correcting the charge before the jury was permitted to resume its declaration.
46
We consider this a departure from the manner in which criminal cases should be tried. The rights of the defendants on trial and the courtesy due to their counsel require that they receive a courteous and patient hearing from the trial judge. Although as indicated, supra, a serious question is present as to whether the Allen charge should have been given, in view of the posture of the trial at the time it was given, we have not found serious fault with the content of the charge itself. This being so we do not feel called upon to determine whether the way in which objections to the charge were handled was erroneous.
REMARKS OF THE TRIAL JUDGE
47
In the midst of his general instructions on the law, the trial judge tangentially embarked upon the following irrelevant and completely extraneous dissertation:
48
"Now, members of the jury, I don't think any of us can doubt under the evidence that has been produced here that between February and May, perhaps June, of 1968 the Secret Service was pretty busy in the Jacksonville Area trying to protect the currency of the United States. That crime against the currency of the United States is a pretty serious crime. Right after the founding of the country in 1789, the Congress thought it most important to protect the currency of the United States. In 1792, Congress ordered the creation of a commission to yearly test the quality and fineness of coins.
49
With one exception of one year during the Civil War — the mint was then at Philadelphia — that commission has met every year, including the year 1970, on the second Wednesday of February. The Chief Judge of the Eastern District of Pennsylvania is the chairman of that commission and I had the honor to preside at eight sessions of that commission. I show you that this is a long period. It's the oldest commission — governmental commission — in the United States. The Government must for the protection of the public carefully guard its own currency.
50
That duty for the past half century, at least — the Secret Service is now about 104 years old — has been entrusted to the Secret Service." (T. 1018-19)
51
A trial judge is not required to sit mute at a trial over which he is presiding. He is more than a referee, much more. But determination of the credibility of witnesses is the jury's proper function, not the court's. The jury's fact-finding duties may not be trespassed upon by a judge's comments, directly or impliedly, which point to one witness or set of witnesses as the more likely to be telling the truth. However innocently they were made, we find the quoted comments objectionable on this ground. They had the effect of bringing vividly and favorably to the minds of the jurors the testimony of the Secret Service witnesses and the important work they perform in protecting the integrity of the currency. We view these remarks as being out of place in jury instructions, and as exceeding our concept of appropriate and fair comment from the bench.
52
While the briefs of counsel for the appellants cite numerous instances of claimed undue interference with the course of the trial by the presiding judge, numerous remarks claimed to be hostile and hence prejudicial to the defendants and their counsel, we find it unnecessary to discuss these in detail. They are borderline and it is not at all clear that they were intended to have or had the effect counsel argue they had. In any event, there is no likelihood of their recurrence. But the instance cited, the puffing Chamber of Commerce discourse on the Secret Service and its duties was we think egregious and reversible error.
CONCLUSION
53
In summary, we find (1) as to Franklin Williams, prejudicial error occurred in the admission of testimony with respect to the post-arrest statement of Sarah Hart Williams, (2) as to both defendants (a) in the handling of Jencks Act material, and (b) in the homily delivered by the trial judge praising the prosecuting government agency, the U. S. Secret Service. Additionally, we have considerable doubt as to the propriety of the trial judge giving the "Allen" charge. One of these errors might be termed not prejudicial, and the convictions affirmed. In their totality, the prejudicial effect mounts, and we conclude that the ends of justice require reversal for retrial. We disapprove, but dispense with deciding, whether the effect was prejudicial in the noncompliance with Rule 30, F.R.Crim.P. as to the handling of charges and the opportunity afforded counsel to object thereto. Additionally, there are several other claimed grounds of error raised on brief. We conclude that we would serve no useful purpose by discussing them, since the possibility of their recurrence is most remote.
54
Reversed and remanded for further proceedings.
Notes:
1
The judgments of conviction were entered on the verdicts of a jury. Appellant Franklin Williams was convicted on a charge that he "did possess, with intent to defraud, counterfeit obligations of the United States" in violation of Title 18, U.S.C., Section 472. Appellant James Williams was convicted of conspiracy to "possess, utter, publish, receive, and exchange counterfeit Twenty Dollars ($20.00) Federal Reserves Notes" in violation of Title 18, U.S.C., Section 371, and of three counts of possessing, passing, and uttering counterfeit bills in violation of Title 18, U.S.C., Section 472
2
Three other persons not involved on this appeal were tried jointly with the Williams brothers. These were Leon Kicklighter, Porter Hilton Spikes and William Daniel Weisman. Three defendants also named in the indictment, Preston Eugene Dowdy, Carl Lee Livingston and Sarah Hart Williams, the wife of Franklin Williams, were not on trial, having been granted severances
3
See footnote 1, supra. Sarah Hart Williams was charged as a co-conspirator under Count One but was not on trial. She was not named defendant in Counts Two through Eleven, which were substantive charges charging one or more defendant with possessing or uttering counterfeit currency, bogus $20 bills bearing the same check letter, Front and Back Plate numbers and serial number. Sarah was again named as a defendant, with the other seven defendants in Count Twelve, which charged receipt, delivery and exchange, Title 18, U.S.C., Section 473, of a large quantity, in excess of thirty, of the counterfeit twenties. It is at once apparent then that since Sarah was not on trial in the proceedings appealed from, the government had no occasion whatever to introduce proof of the damaging remark as part of its case againsther.
4
So-called because of its approval in Allen v. United States, 1896, 164 U.S. 492, 17 S.Ct. 154, 41 L.Ed. 528
5
See United States v. Brown, 7 Cir. 1969, 411 F.2d 930; United States v. Fioravanti, 3 Cir. 1969, 412 F.2d 407, cert. denied Panaccione v. United States, 1970, 396 U.S. 837, 90 S.Ct. 97, 24 L.Ed. 2d 88. The use of the charge is disapproved by the recommendation of the American Bar Association Advisory Committee (A.B.A. Project on Minimal Standards of Criminal Justice, Trial by Jury, Sec. 5.4 at 145-156, approved draft, 1968).
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405 F.Supp.2d 602 (2005)
UNITED STATES of America
v.
Willie MITCHELL, Shelton Harris, Shelly Wayne Martin, and Shawn Gardner.
No. CRIM AMD 04-0029.
United States District Court, D. Maryland.
December 19, 2005.
Robert Harding, Thomas M. Dibiagio, Office of the United States Attorney, Baltimore, MD, for United States of America.
Laura Kelsey Rhodes, Albright and Rhodes LLC, Rockville, MD, Timothy Joseph Sullivan, Law Offices of Timothy Sullivan, College Park, MD, Gerard P. Martin, Rosenberg Martin Funk Greenberg LLP, William Walter Kanwisher, Law Offices of William Kanwisher, Baltimore, MD, Adam Harris Kurland, Howard University School of Law, Barry Coburn, Trout Cacheris PLLC, Peggy Bennett, Coburn and Schertler LLP, Washington, DC, for Willie Mitchell, Shelton Harris, Shelly Wayne Martin, and Shawn Gardner.
MEMORANDUM OPINION and ORDER
DAVIS, District Judge.
The four defendants in this case, Willie Mitchell, Shelton Harris, Shelly Wayne Martin, and Shawn Gardner, have moved to dismiss all charges against them based on a lack of jurisdiction. Their individual but identical written pro se motions, the substance of which have been reiterated *603 orally numerous times during in-court proceedings, are hereby DENIED for the reasons stated herein.[1]
I.
The defendants have been indicated by a properly constituted grand jury, and they are, indisputably, subject to the jurisdiction of this court. In particular, the grand jury has accused Mitchell, Harris, Martin, and Gardner of having participated in a criminal racketeering enterprise that began in the mid-1990s and continued up to their arrests in 2004. The group is alleged to have sustained itself through armed robberies, drug trafficking, and the establishment of a music production company called Shake Down Entertainment, Ltd. Each of the defendants is alleged to have willfully participated in one or more of five murders in and around Baltimore. If convicted on the capital counts, Mitchell, Harris and Gardner will face the possibility of the death penalty.
II.
The defendants' challenge to jurisdiction is unusual if not bizarre. The defendants claim that the court does not have jurisdiction "for lack of verified complaint."[2] They also state that the court "lacks subject matter jurisdiction over the Res and lacks subject matter jurisdiction over the Rem."[3] The motions, dated November 8, 2005, are supported by sources of law that are not ordinarily associated with challenges to criminal jurisdiction, including the Uniform Commercial Code and the Federal Rules of Civil Procedure.
A.
The exact theory relied on by the defendants is difficult to ascertain, but it seems to be related to their common statements insisting that, "I do not consent. I did not sign anything. And I do not understand the attached documents [the front page of the Second Superceding Indictment]." The defendants also persistently claim that they are not properly identified in the caption of the indictments because their names are printed in all capital letters, thereby failing to properly represent them as "flesh and blood" men.[4]
*604 These arguments are patently without merit. Perhaps they would even be humorous were the stakes not so high. To begin with, the U.C.C. has no bearing on criminal subject matter jurisdiction. In crossing out the front page of their indictments, the defendants cite "U.C.C. 3.501." The court takes this to mean U.C.C. § 3-501. This section of the Uniform Commercial Code, however, pertains to presentment of negotiable instruments. It is unfathomable how such a provision has any relevance in a criminal proceeding.
The defendants also cite Rule 12(h)(3) of the Federal Rules of Civil Procedure. Again, this has nothing to do with the instant case. Although the rule does pertain to courts dismissing actions for lack of jurisdiction of the subject matter, the rule applies only to civil actions. This is a criminal action.
Furthermore, the defendants, who, prior to November 8, 2005, acted with appropriate dignity at all times while in court and cooperated fully with their counsel, apparently recognizing the authority of this court, are mistaken if they think they cannot be prosecuted without their consent or signatures.[5] If this were the case, it is hard to imagine that any indicated defendant would "consent" to any proceedings against him, and the entire federal criminal code would be pointless. The court can only speculate as to the motivations behind the defendants' recent actions, but it seems that the defendants are confusing criminal procedure with the requirement in civil cases that the defendant be properly served with process.
Finally, the use of capital letters in the caption of an indictment is irrelevant to the issue of subject matter jurisdiction. The government attorneys and the court have addressed the defendants, both in court and on paper, in a proper manner that clearly identifies them. "It makes no sense to rest a jurisdictional distinction upon the use of all upper case letters or a mixture of upper and lower case letters. The federal courts abandoned this level of formalism long ago." United States v. Singleton, 2004 WL 1102322, *3 (N.D.Ill. May 7, 2004) (denying motion to dismiss for lack of jurisdiction based on argument, in part, that defendant was "a flesh and blood man").
B.
Although unique by conventional legal standards, the defendants arguments are not new. Increasingly, they have been asserted in criminal cases pending in this district, and have been summarily rejected. Similar challenges have been advanced in other districts as well, but the results have been the same. In Singleton, for example, the defendant argued first that the capitalization of his name referred not to a flesh and blood man, but to a treasury account the government had set up for each citizen in the 1930s. Id. at *2. Second, the defendant argued that Congress had illegally adjourned without a quorum in 1861, thereby invalidating every law passed since then. Id. The court rejected these assertions. See also United States v. Secretary of Kansas, 2003 WL 22472226 (D.Kan. Oct. 30, 2003) (criminal defendant who filed a lien against property *605 owned by a federal judge sought dismissal of injunctive action filed by the United States on the ground, in part, that he was a "flesh and blood man with a soul").
These assertions are equally unimpressive as invoked in the instant case. This court clearly has jurisdiction over the defendants and over the criminal charges contained in the indictment. By statute, federal district courts "have original jurisdiction, exclusive of the courts of the States, of all offenses against the laws of the United States." 18 U.S.C. § 3231. The defendants are all charged with crimes that were established by acts of Congress, including racketeering under 18 U.S.C. § 1962 and drug offenses under 21 U.S.C. § 841. They were indicted by a properly assembled federal grand jury. Now they must stand trial in federal court.
III.
It is not likely that the defendants in this case, charged with, but presumed innocent of, involvement in the urban violence that all too commonly attends the modern drug trade, know of the origins of their in-court tirades and irrational written objections based on "jurisdiction." But courts have encountered these claims before, namely, in the antics and writings of extremists who wish to dissociate themselves from the social compact undergirding this nation's democratic institutions, including the independent judicial branch of government. See THE ANTI-GOVERNMENT MOVEMENT GUIDEBOOK, National Center for State Courts (1999), downloadable at http://www.ticket slayer.com/beta _ts_ 2/anti-gov_ handbook.pdf and by purchase from the National Center for State Courts at http://library.ncsc. dni.us/uhtbin/cgisir si.exe. There, the authors have described activities and arguments made by others not unlike those employed by the defendants in this case:
Though the precise contours of their philosophy differ among the various groups, almost all antigovernment movements adhere to a theory of a "sovereign" citizen. Essentially, they believe that our nation is made up of two types of people: those who are sovereign citizens by virtue of Article IV of the Constitution, and those who are "corporate" or "14th Amendment" citizens by virtue of the ratification of the 14th Amendment. The arguments put forth by these groups are generally incoherent, legally, and vary greatly among different groups and different speakers within those groups. They all rely on snippets of 19th Century court opinions taken out of context, definitions from obsolete legal dictionaries and treatises, and misplaced interpretations of original intent. One of the more cogentin the sense that it is readily followed-arguments is that there were no United States citizens prior to the ratification of the 14th Amendment. All Americans were merely citizens of their own state and owed no allegiance to the federal government. As a result of that amendment, however, Congress created a new type of citizen-one who now enjoyed privileges conferred by the federal government and in turn answered to that government.
One of the ramifications of this belief is the dependent belief that, unless one specifically renounces his federal citizenship, he is not the type of citizen originally contemplated by the Constitution. And, in their view, the Constitution requires all federal office holders to be the original or sovereign type of citizen, a state citizen rather than a United States citizen. As a result, all federal officers are holding office illegally and their laws and rules are thus constitutionally suspect.
*606 Id. at 51. It is truly ironic that four African-American defendants here apparently rely on an ideology derived from a famously discredited notion: the illegitimacy of the Fourteenth Amendment.
The NCSC monograph further describes some of the ideas behind jurisdictional challenges to the proper exercise of judicial authority as follows:
Members of the anti-government movement will often attempt to avoid conferral of jurisdiction onto a court by refusing to identify themselves or denying that they are the person named in a warrant or summons. This refusal may come from any one of or even several of the following bases. Often, antigovernment adherents will refuse to come forward simply to waste time, or out of a more general refusal to recognize or submit to the court's jurisdiction. Some parts of the anti-government movement however, will refuse to come forward on the ground that their name is misspelled, or even because their name is in all capital letters. This particular objection comes from a number of "sources". Some believe that the spelling (or misspelling, or use of all capital letters) of their name is a sign of the movement toward "one world government." Others believe that all capital letters denotes a corporation, and that answering as a corporation subjects them to the illegitimate laws of the American judicial system. Some believe that all capital letters denotes "the Mark of the Beast," or that it is a denotation of a "war name."
Finally, some members of the movement believe that they only "own" their first and middle names, and that their last name reveals their family. They use their middle name in place of a last name, or go by their first and middle name from the family of their last name. Attached to this particular issue may be a desire to be referred to as "Sir" or "Sovereign," because of a belief that this title more effectively conveys their status as a "sovereign citizen." It is the belief of members of the movement that they can file a document renouncing their citizenship to become a nation subject only to their own local common-law, and not subject to the law of their state or the federal government. Another ground for a follower's refusal to identify himself may be his refusal to recognize himself as a "person." This particular objection comes from what appears to be a somewhat mystical distinction between a "person" and a "human being" according to the anti-government movement's philosophy.
Id. at 63.
Bizarre and misguided contentions by defendants in criminal cases have never proven effective and they will not prove effective in this capital case. Defendants are urged here, as they have been urged viva voce in open court, and in the strongest possible terms, to desist from their disruptive behavior and resume cooperation with their counsel, who want desperately to save their lives.[6]
*607 IV.
For the reasons set forth above, the defendants' motions to dismiss for lack of jurisdiction are this 19th day of December, 2005, DENIED.
THE CLERK SHALL MAIL A COPY OF THIS MEMORANDUM OPINION AND ORDER TO ALL COUNSEL AND TO EACH OF THE DEFENDANTS, PRO SE.
NOTES
[1] The defendants have raised other objections that have been noted by the court, including a challenge to the ability of their court-appointed lawyers to represent them. This memorandum, however, only concerns the court's jurisdiction.
[2] Each defendant, in a pro se filing described as "Affidavit of Status and Notice of Dismissal of Charges Attached to as Incorporated Herein," states the following: "Your Affiant challenges the subject matter jurisdiction of the Court for lack of verified complaint and lack of Verified complaint Sworn under oath, and the fact that he does NOT understand any of the charges."
[3] This assertion comes from another pro se filing called "Refusal for Fraud."
[4] The defendants' protestations echo the sentiments included in the following excerpt from an essay found on an Internet website:
There appears to be general misunderstanding by people in general as to the difference between a natural person and an artificial person. This document will explain that difference.
John Joseph Smith, is a natural, flesh and blood, person, created by God. JOHN JOSEPH SMITH, is a U.S. corporate artificial person, U.S. citizen, created by the government. In basic English grammar, a name spelled in upper and lower case, such as John Joseph Smith, is indicative of a flesh and blood man, a natural person. . . . On the other hand, a name spelled in all caps, such as JOHN JOSEPH SMITH, is indicative of an artificial person.
See http://www.usa-t he-republic.com/ revenue/true_ history/AffTruth.html (visited December 16, 2005).
[5] The defendants also state that they "do not understand" the proceedings. The court does not, however, take this to mean that the defendants lack an understanding of the charges, or that they are arguing they are incompetent to stand trial. To the contrary, before they launched their recent, misguided attack on the court's jurisdiction, each defendant cooperated fully with their counsel through several pre-trial motions hearings and never suggested that they lacked understanding of the charges, the potential penalties, or the very gravity of this case.
[6] Indeed, the defendants' repeated assertions that they lack confidence that their appointed counsel can adequately represent them is especially misguided. The court has appointed two highly competent and experienced attorneys for each defendant, as required in capital cases by federal law. See 18 U.S.C. § 3005. It would be especially tragic if, in the end, one or more of these young men were to receive a death sentence, in part, because he acted willfully to thwart the very efforts of his lawyers to obtain a not guilty verdict and/or to save his life even if he is convicted. If the defendants continue on the course they have now chosen, of continued disruptive behavior in the courtroom (which will require their removal from the courtroom during pre-trial and trial proceedings) and of continued attacks on their lawyers and refusals to cooperate with counsel, the possibility of such an outcome will grow increasingly more likely. Surely, no matter what they may feel about this case, their own families and loved ones cannot possibly desire such a result.
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805 F.Supp.2d 858 (2011)
M & I BANK, FSB, Plaintiff,
v.
Ty COUGHLIN, et al., Defendants.
No. CV09-2282-PHX-NVW.
United States District Court, D. Arizona.
August 9, 2011.
*860 Kathleen Ann Weber, Larry Omer Folks, Folks & Oconnor PLLC, Phoenix, AZ, Rachel M. Dollar, Sean M. Beehler, Jon Ac Vonderhaar, Smith Dollar PC, Santa Rosa, CA, for Plaintiff.
Barry Lance Entrekin, Law Offices of Lance Entrekin PC, Brian James Cosper, Fidelity National Law Group, Phoenix, AZ, for Defendants.
ORDER
NEIL V. WAKE, District Judge.
I. Introduction
The question posed is whether an Arizona statute, A.R.S. § 33-814(D), bars a lender's action against third parties associated with a deed of trust loan transactionthat is, persons other than the borrower or others liable on the noteif the lender brings that action more than 90 days after the trustee's sale disposing of the property securing the note.
Plaintiff M & I Bank alleges that it was tricked into funding a $285,300 real estate loan to Defendant Ty Coughlin. His annual income was represented as exceeding $360,000, when it was only about $24,000. He was supposed to contribute $32,521.86 to the closing, but the seller funded the closing. As alleged, this was a flagrant seller and buyer fraud on the lender. The brokerage contract with M & I made the mortgage broker the guarantor of the loan application, putting the burden of due diligence and the risk of fraud on the broker. The escrow agent agreed, among other things, to accept funds only from the borrower's verified account and to disclose all relevant information to M & I.
Coughlin defaulted and the propertya parcel of vacant landwas sold at a non-judicial trustee's sale. M & I was the successful bidder for $125,375.46, far less than the full amount of its note. That is, M & I made a partial credit bid, not a full credit bid. M & I then resold the property for less than the amount of its partial credit bid.
Based on these alleged facts, M & I brought suit against Coughlin, the seller, the broker, and the escrow agent, alleging fraud, breach of the brokerage contract, breach of the escrow agreement, negligent misrepresentation, and other claims. As damages, M & I requests (among other things) the difference between the amount it lent Coughlin and the amount of its winning bid at the trustee's sale. The prayer for damages is "no less than $159,838.54." (Doc. 32.) This action was brought more than 90 days after the trustee's sale.
The seller, the broker, and the escrow agent (but not the borrower, Coughlin) now move for judgment on the pleadings.[1] (Docs. 80, 81, 95.) They seek to dismiss M & I's claims against them based on the following language from Arizona's statutes regulating trustee's sales of real property:
If no action is maintained for a deficiency judgment within the time period prescribed in subsections A and B of this section [usually 90 days after the trustee's sale], the proceeds of the sale, regardless of amount, shall be deemed to be in full satisfaction of the obligation and no right to recover a deficiency in any action shall exist.
A.R.S. § 33-814(D). Defendants contend that the plain language of this subsectionwhich *861 the Court will sometimes refer to as "subsection D"dictates dismissal because M & I's attempt to recover its losses on the Coughlin loan is effectively an "action . . . for a deficiency judgment" brought more than 90 days after the trustee's sale and M & I's debt is deemed paid in full, though it was not in fact paid in full. They thus contend there is no loss to the lender and no damage to support any claim against anyone else in connection with the loan.
Defendants' argument, if correct, would have far-reaching consequences. It would require lenders to uncover all wrongdoing related to a bad real estate loan and identify all of its perpetrators far more rapidly than statutes of limitations relating to their conduct would require. See, e.g., A.R.S. § 12-543(3) (three-year limitations period for fraud, which begins to run upon "discovery by the aggrieved party of the facts constituting the fraud or mistake"); A.R.S. § 12-548 (six-year limitations period for action on written contract executed within the state). Indeed, it would protect scam artists clever enough to avoid detection for 90 days after the trustee's sale.
The Court does not take subsection D as yielding this surprising result. A thorough examination of the Arizona Deed of Trust Act, its evolution, its use of terms of legal art, and its structure and purposes shows that the statute can and should be read as limiting only the obligation of a borrower and "any person directly, indirectly or contingently liable on the contract for which the trust deed was given as security." A.R.S. § 33-814(A). In short, borrowers, partners, guarantors, and other persons "directly, indirectly or contingently liable on the contract" are protected by subsection D's 90-day limit for bringing a deficiency action. Defendants are not among the class of persons so protected, and therefore subsection D does not shield Defendants from liability, even if M & I is eventually awarded damages calculated with respect to the indebtedness that M & I was unable to recover through the trustee's sale.
II. Legal Standard
"Rules 12(b)(6) and 12(c) are substantially identical." Strigliabotti v. Franklin Resources, Inc., 398 F.Supp.2d 1094, 1097 (N.D.Cal.2005). Rule 12(c) motions for judgment on the pleadings are therefore reviewed under the standard applicable to a Rule 12(b)(6) motion to dismiss for failure to state a claim. See Aldabe v. Aldabe, 616 F.2d 1089, 1093 (9th Cir.1980). In ruling on a Rule 12(c) motion, the Court must "determine whether the facts alleged in the complaint, to be taken for [the purposes of a Rule 12(c) motion] as true, entitle the plaintiff to a legal remedy." Strigliabotti, 398 F.Supp.2d at 1097. "If the complaint fails to articulate a legally sufficient claim, the complaint should be dismissed or judgment granted on the pleadings." Id. A Rule 12(c) motion is thus properly granted when, taking all the allegations in the pleading as true, the moving party is entitled to judgment as a matter of law. Knappenberger v. City of Phoenix, 566 F.3d 936, 939 (9th Cir.2009).
III. The Deed of Trust Act
A. Origins and Purposes
The contractual instrument known as a "deed of trust" has existed for a long time in Arizona, but "historically it has been treated as a mortgage." Gary E. Lawyer, The Deed of Trust: Arizona's Alternative to the Real Property Mortgage, 15 Ariz. L.Rev. 194, 194 n. 5 (1973). A "realty mortgage must be foreclosed by judicial action," which can be a lengthy and expensive process, followed by a six-month redemption period that further delays the foreclosing party's realization of value from the property. See id. at 194-95, 199; *862 see also Lane Title & Trust Co. v. Brannan, 103 Ariz. 272, 277, 440 P.2d 105, 110 (1968) ("in Arizona . . . a mortgage can only be foreclosed by court action, with a definite redemption period"). Indeed, before 1971, deed of trust terms purporting to grant a power of extrajudicial sale were invalid, and the deed of trust therefore required judicial foreclosure. See, e.g., Schwertner v. Provident Mut. Bldg. Loan Ass'n, 17 Ariz. 93, 94, 148 P. 910, 910 (1915).
In 1971 the legislature added chapter 6.1 to title 33 of the Arizona Revised Statutes. See 1971 Ariz. Sess. Laws, ch. 136 § 7 (codified at A.R.S. § 33-801 to -821). Through chapter 6. 1, known as the Deed of Trust Act, Arizona for the first time recognized the deed of trust (or "trust deed") as a real property security device distinct from a mortgage. The Act set forth detailed provisions governing formation and administration of trust deeds, and introduced procedures that differ markedly from the procedures governing mortgages.
One of the most notable differences enacted by the Deed of Trust Act was recognition of the "power of sale." This power permits the trust deed beneficiary (typically the lender) to cause the trust property to be sold and to apply the proceeds of that sale to a defaulted loan, without going to court. Unlike mortgage foreclosures, which always begin with the filing of a lawsuit, a sale under the power of sale begins when a trustee (appointed by the beneficiary) files a notice of trustee's sale giving the defaulting borrower 90 days to get current. If the borrower does not do so, and if the trustee complies with all of the Act's requirements, the trustee can then auction the property. The borrower has no right of redemption after such a sale, and the successful bidder is entitled to immediate possession. If the winning bid does not fully repay the beneficiary, the Act establishes requirements for a court judgment against the borrower for the balance of the contract debt, excepting debts incurred to purchase certain residential properties. See Lawyer, supra, at 202-10.
The trustee's sale does not determine that the borrower was in default on the note or adjudicate any other substantive matter between the borrower and the beneficiary. The borrower may bring a plenary action to adjudicate that he was not in default and that the trustee's sale was therefore wrongful. If the court so adjudicates, the trustee's sale and deed are invalidated, and the beneficiary will be liable for breach of the note and the deed of trust and for wrongful eviction if the borrower has lost possession in the mean time. See, e.g., In re Hills, 299 B.R. 581 (Bankr.D.Ariz.2002); In re Steiner, 251 B.R. 137 (Bankr.D.Ariz.2000); Schaeffer v. Chapman, 176 Ariz. 326, 861 P.2d 611 (1993).[2]
*863 Thus, assuming the beneficiary and trustee follow appropriate procedures, the Deed of Trust Act eliminates the need for judicial proceedings before conducting a trustee's sale of the property securing the trust deed. Instead, judicial proceedings should only arise if the borrower elects to challenge the claim of default in a later action, or if a debt remains after the trustee's sale and the borrower elects to pursue the deficiency.
The Act also preserves the trust deed beneficiary's option to foreclose judicially. See Lawyer, supra, at 202. If the beneficiary so chooses, then the statutes regulating mortgage foreclosures govern. A.R.S. § 33-807(A). One such statute provides that a judgment of foreclosure "shall give judgment for the entire amount [of debt] determined due, and shall direct the mortgaged property, or as much thereof as is necessary to satisfy the judgment, to be sold." Id. § 33-725(A). Accordingly, whereas a non-judicial foreclosure under a trustee's power of sale will lead to a court judgment only if the sale does not pay off the outstanding debt and the beneficiary brings a separate action for deficiency judgment, a judicial foreclosure requires a court judgment for the entire amount of debt before any sale.
B. The Current Structure of A.R.S. § 33-814
The dispute in this case turns on the meaning of one part of the Deed of Trust Act, A.R.S. § 33-814, entitled, "Action to recover balance after sale or foreclosure on property under trust deed." As the title suggests, § 33-814 governs situations (such as in this case) where trust property is sold at a trustee's sale, but indebtedness remains. This remaining indebtedness is referred to as a "deficiency." However, the parties' arguments tend to conflate the procedures for pursuing a deficiency liability with the substantive debt remaining after a trustee's sale. To avoid confusing the potential meanings, the Court will use "remaining indebtedness" or the "balance of the debt" wherever possible to indicate the latter meaning.
Section 33-814 contains seven subsections, A through G, but it is difficult to understand § 33-814 simply by reading it from beginning to end because most subsections point elsewhere for exceptions to the rules (e.g., "except as provided in subsections F and G . . . ."). Given this interconnectedness, § 33-814 is perhaps best understood by working backwards, beginning with the exceptions and then moving to the general rules.
Section 33-814's principal exception is found in subsection G, which prohibits lenders from seeking the balance of the debt after a trustee's sale of typical residential property:
If trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling is sold pursuant to the trustee's power of sale, no action may be maintained to recover any difference between the amount obtained by sale and the amount of the indebtedness and any interest, costs and expenses.
A.R.S. § 33-814(G). This subsection is often referred to as the "anti-deficiency statute." The Arizona Supreme Court has interpreted it "as evincing the legislature's desire to protect certain homeowners from the financial disaster of losing their homes to foreclosure plus all their other nonexempt property on execution of a judgment *864 for the balance of the purchase price." Baker v. Gardner, 160 Ariz. 98, 101, 770 P.2d 766, 769 (1988).[3] This anti-deficiency statute places on the lender, not the borrower, the risk of lending more money than what the residence is worth, or is likely to be worth in the future.
A lesser-known exception in § 33-814 is subsection F, which permits lenders and borrowers to exclude personal recourse: "A deed of trust may, by express language, validly prohibit the recovery of any balance due after trust property is sold pursuant to the trustee's power of sale, or the trust deed is foreclosed in the manner provided by law for the foreclosure of mortgages on real property." A.R.S. § 33-814(F). This subsection is merely declaratory of what the parties could otherwise agree to.
With allowance for these exceptions, subsection A establishes the major rules for seeking the balance of the debt after a trustee's sale:
Except as provided in subsections F and G of this section, within ninety days after the date of sale of trust property under a trust deed . . ., an action may be maintained to recover a deficiency judgment against any person directly, indirectly or contingently liable on the contract for which the trust deed was given as security including any guarantor of or surety for the contract and any partner of a trustor or other obligor which is a partnership. In any such action against such a person, the deficiency judgment shall be for an amount equal to the sum of the total amount owed the beneficiary as of the date of the sale, as determined by the court less the fair market value of the trust property on the date of the sale as determined by the court or the sale price at the trustee's sale, whichever is higher. . . . Any deficiency judgment recovered shall include interest on the amount of the deficiency from the date of the sale at the rate provided in the deed of trust or in any of the contracts evidencing the debt, together with any costs and disbursements of the action.
Id. § 33-814(A). Subsection A also defines "fair market value" and describes the procedure by which the court determines the fair market value, but those details are not relevant here.
Subsection A is very particular about the requirements for "an action . . . to recover a deficiency judgment." It must be brought within 90 days of the trustee's sale. It is an action against those "directly, indirectly or contingently liable on the contract for which the trust deed was given as security." "In any such action against such a person," the measure of damages is "the sum of the total amount owed the beneficiary as of the date of the sale, as determined by the court less the fair market value of the trust property on the date of the sale as determined by the court or the sale price at the trustee's sale, whichever is higher." "Fair market value," in turn, is calculated through specific procedures.
Subsection B then addresses multiple trustee's sales related to the same property:
If a trustee's sale is a sale of less than all of the trust property or is a sale pursuant to one of two or more trust deeds securing the same obligation, the ninety day time limitations of subsection A of this section shall begin on either the date of the trustee's sale of the last of the trust property to be sold or the date of sale under the last trust deed *865 securing the obligation, whichever occurs last.
Id. § 33-814(B).
Subsection C addresses "[t]he obligation of a person who is not a trustor to pay, satisfy or purchase all or a part of the balance due on a contract secured by a trust deed." Such obligation
may be enforced, if the person has so agreed, in an action regardless of whether a trustee's sale is held. If, however, a trustee's sale is held, the liability of a person who is not a trustor for the deficiency is determined pursuant to subsection A of this section and any judgment for the deficiency against the person shall be reduced in accordance with subsection A of this section. If any such action is commenced after a trustee's sale has been held, it is subject, in addition, to the ninety day time limitations of subsections A and B of this section.
Id. § 33-814(C).
Then comes subsection D, the basis of Defendants' motion. Previous subsections state that an "action" for a "deficiency judgment" must commence within 90 days of the trustee's sale. Subsection D restates the consequences for not doing so:
If no action is maintained for a deficiency judgment within the time period prescribed in subsections A and B of this section, the proceeds of the sale, regardless of amount, shall be deemed to be in full satisfaction of the obligation and no right to recover a deficiency in any action shall exist.
Id. § 33-814(D).
IV. Subsection D and the Full Credit Bid Rule
Subsection D at least prohibits the lender from pursuing an "action . . . for a deficiency judgment" against the borrower if more than 90 days have elapsed since the trustee's sale. This is simply an explicit statement of the prohibition implicit in subsection A's permission to file a deficiency action within 90 days.
According to Defendants, however, subsection D's "plain language" covers much more than an "action . . . for a deficiency judgment" against the borrower. Defendants argue that the phrase "the proceeds of the sale, regardless of amount, shall be deemed to be in full satisfaction of the obligation" enacts a form of the "full credit bid rule," prohibiting actions against third parties for claims that are measured by the balance of the debt, even though they are not claims on the secured debt. Some discussion of the full credit bid rule follows.
A. Background on the Full Credit Bid Rule
Like anyone else, a lender may bid for property at a trustee's sale. But the lender's position differs from that of other potential purchasers because a lender's cash, if treated the same as other bidders' cash, would run a pointless "round trip": the lender (as winning bidder) would write a check to the trustee, and the trustee would in turn write a check to the lender (as beneficiary) for the same amount. "[T]o avoid the inefficiency of requiring the lender to tender cash which would only be immediately returned to it," the lender is allowed to "make a credit bid up to the amount of the outstanding indebtedness." Alliance Mortg. Co. v. Rothwell, 10 Cal.4th 1226, 1238, 44 Cal.Rptr.2d 352, 900 P.2d 601, 608 (1995). In other words, the lender may "bid" the money it already lent, to the extent it has not been repaid. In Arizona a credit bid may also include interest and the costs incurred arranging for the trustee's sale. A.R.S. § 33-801(5).
Sometimes lenders make a "full credit bid," meaning they bid the entire amount of unpaid principal, interest, and trustee's sale expenses. Such a bid has important *866 consequences. "Most states . . . hold that a lender is deemed to have received repayment of a loan in full if, at a foreclosure, it successfully [credit] bids the full amount of the loan . . . ." Freedom Mortg. Corp. v. Burnham Mortg., Inc., 720 F.Supp.2d 978, 1006 (N.D.Ill.2010) (internal quotation marks omitted). Not only is the lender "deemed to have received repayment of [the] loan in full," the law will not look behind the bid to see whether the bid exceeded the property's market value. Michelson v. Camp, 72 Cal.App.4th 955, 963, 85 Cal.Rptr.2d 539, 544 (1999) ("under the full credit bid rule, the market value of the property is said to be the price obtained at the foreclosure sale"). Accordingly, "when a lender makes such a bid, it is precluded for purposes of collecting its debt from later claiming that the property was actually worth less than the bid." Alliance Mortg., 10 Cal.4th at 1238, 44 Cal. Rptr.2d 352, 900 P.2d at 608.
The full credit bid rule has various justifications, including that "[t]he lender, perhaps more than a third party purchaser with fewer resources with which to gain insight into the property's value, generally bears the burden and risk of making an informed bid." Id. at 1246, 44 Cal.Rptr.2d 352, 900 P.2d at 613. Further, "[t]o allow the [lender], after effectively cutting off or discouraging lower bidders, to take the propertyand then establish that it was worth less than the bidencourages fraud, creates uncertainty as to the [borrower]'s rights, and most unfairly deprives the sale of whatever leaven comes from other bidders." Whitestone Sav. & Loan Ass'n v. Allstate Ins. Co., 28 N.Y.2d 332, 337, 321 N.Y.S.2d 862, 270 N.E.2d 694, 697 (1971). Thus, there must be "repercussions for making a full credit bid." Michelson, 72 Cal.App.4th at 964, 85 Cal.Rptr.2d at 545.
Such repercussions can be broad, especially with respect to the lender's rights as against parties outside the lender-borrower relationship, such as insurers, appraisers, escrow agents, and brokers. For example, a full credit bid terminates the borrower's rights to insurance proceeds that would otherwise have been paid to compensate for damage to the property. Smith v. Gen. Mortg. Corp., 402 Mich. 125, 128, 261 N.W.2d 710, 712 (1978); Whitestone, 28 N.Y.2d at 336-37, 321 N.Y.S.2d 862, 270 N.E.2d at 696-97. A full credit bid preempts an action for waste. Cornelison v. Kornbluth, 15 Cal.3d 590, 606, 125 Cal.Rptr. 557, 542 P.2d 981, 992-93 (1975). A full credit bid may even prevent a fraud action against those accused of intentionally misleading the lender into making the loan. Michelson, 72 Cal.App.4th at 962-69, 85 Cal.Rptr.2d at 543-48.
Nonetheless, a lender can avoid all of these consequences by bidding what it believes the property is actually worth. Cornelison, 15 Cal.3d at 607, 125 Cal.Rptr. 557, 542 P.2d at 993; Whitestone, 28 N.Y.2d at 335, 321 N.Y.S.2d 862, 270 N.E.2d at 696. Thus, lenders can make a rational choice: bid in the full debt and let the matter rest, or bid a lesser amount and preserve any rights that may exist to seek a deficiency judgment or to pursue others for insurance, tort damages, and so forth.
B. Mata and the Full Credit Bid Rule
Here, M & I did not make a full credit bid for the Coughlin property. Defendants nonetheless interpret subsection D's language"the proceeds of the sale, regardless of amount, shall be deemed to be in full satisfaction of the obligation and no right to recover a deficiency in any action shall exist"as declaring that a lender who fails to timely sue for a deficiency "shall be deemed" to have made a full credit bid at the trustee's sale, thus triggering all the collateral consequences of a *867 full credit bid, including preclusion of claims against third parties.
In support of their argument, Defendants rely on a decision from this District by Judge Snow, ING Bank, FSB v. Mata, No. CV-09-748-PHX-GMS, 2009 WL 4672797 (D.Ariz. Dec. 3, 2009). In Mata, the plaintiff bank claimed that the defendants had conspired to create a fraudulent loan application, thereby inducing the bank to make a real estate loan it otherwise would not have made. Id. at *1. The loan soon went into default, and the bank bought back the property at a trustee's sale with a full credit bid. Id. About a year after the trustee's sale, the bank sued various defendants for fraud, negligent misrepresentation, and unjust enrichment, seeking the unpaid balance of the loan as damages. Id. Among the defendants in Mata was the mortgage broker who assembled the loan application. The broker moved to dismiss based on subsection D, claiming (as Defendants do here) that subsection D broadly protects third parties from any action whose effect is to compensate the lender for the unpaid balance of the loan.
For four reasons, Judge Snow accepted the broker's argument that subsection D protects third parties. First, recognizing that Arizona courts have not explicitly adopted the full credit bid rule, Judge Snow nonetheless accepted the mortgage broker's contention that subsection D was a statutory equivalent, and is otherwise implicit in an Arizona Supreme Court decision discussed further below, Nussbaumer v. Superior Court. See Mata, 2009 WL 4672797 at *3 n. 3, *4. Second, Judge Snow found it persuasive that other states' full credit bid rules protect third parties. Id. at *4. Third, subsection D's "plain language" states that "sale proceeds shall be deemed a `full satisfaction' of the obligation. If a credit-bid fully satisfies the obligation, then the creditor cannot sue third parties for damages based on any alleged deficiency in the payment of the obligation." Id. (citation omitted). Fourth, "the statute prohibits a right to recover an asserted deficiency in `any action.' By its plain terms, this language mandates that, just as creditors cannot seek to recover a deficiency against the debtor, they cannot seek to recover deficiency damages in any other action." Id. (citation omitted).
C. Arizona's Full Credit Bid Rule
Mata reached the right result for that case because Arizona indeed follows the full credit bid rule. As Mata recognized, the rule is implicit in Nussbaumer v. Superior Court, 107 Ariz. 504, 489 P.2d 843 (1971). In that case a lender brought chattel, crop, and real estate foreclose proceedings. The lender successfully credit bid the full amount of its debt at a special execution foreclosure sale on the real estate alone. The lender had previously sued a $20,000 crop buyer for impairment of the lender's security by that amount. Id. at 504-06, 489 P.2d at 843-45. Following the foreclosure sale, the crop buyer moved for summary judgment on the basis that its liability was secondary to the borrower's, which "was satisfied in full when [the lender] bid in the full amount of [the indebtedness] at the foreclosure sale." Id. at 506, 489 P.2d at 845. The lender parried by moving to vacate the judgment on the foreclosure sale and to withdraw its successful bid "on the grounds that [its] attorney had made a mistake in bidding the full amount of [the indebtedness] at the foreclosure sale." Id. The trial court granted the lender's motion, but the Arizona Supreme Court reversed, holding it an abuse of discretion to set aside the lender's own overbid where not caused by the misconduct of some other person. Id. at 506-08, 489 P.2d at 845-47. The Supreme *868 Court's decision had no point absent the force of the full credit bid rule.
Mata also correctly noted that § 33-814(A) defines "deficiency" as
the sum of the total amount owed the beneficiary as of the date of the sale, as determined by the court less the fair market value of the trust property on the date of the sale as determined by the court or the sale price at the trustee's sale, whichever is higher.
This plainly means that the winning bid, partial or full, is actual payment and extinguishes the debt of persons liable for a deficiency at least to the amount of the bid, even if the market value of the collateral is less. While it does not explicitly speak to collateral consequences of reduction or elimination of deficiency liability of persons liable on the note, it is consonant with the collateral consequences generally recognized in other states.
Mata was decided correctly on its facts, in light of the full credit bid in that case. The bank's full credit bid extinguished the borrower's debt and left the plaintiff with no loss to recover from any third-party wrongdoer. A beneficiary's credit bid, whether full or partial, is actual payment to the beneficiary to the extent of the bid, just as a cash bid and payment by a non-beneficiary would be. A beneficiary who bids high, drives out other bidders, and takes the property for the amount of its bid may not then say it was not really paid because it paid itself too much.
V. The Meaning of "Deficiency"
Although Mata correctly applied the full credit bid rule, the undersigned differs with Mata regarding the relationship of the full credit bid rule to subsection D. Mata interpreted subsection D as creating a constructive full credit bid regardless of whether a full credit bid was made, thus barring the lender from seeking "damages [from third parties] based on the value of the property," Mata, 2009 WL 4672797 at *3, or "damages that result from an alleged deficiency in the amount of the loan," id. at *5. That is also Defendants' position here. Defendants argue that subsection D's limitation on the "right to recover a deficiency in any action" extends to any action against anyone in which the measure of damages would be based on the difference between what the lender is owed and what the lender realized from the trustee's sale of the collateral. Because this is the measure of economic damages that M & I asserts against Defendants, and because M & I did not bring the action within 90 days of the trustee's sale, Defendants argue that subsection D bars M & I's claims.
However, as described above, § 33-814 speaks to a "deficiency" owed by those "directly, indirectly or contingently liable on the contract for which the trust deed was given as security." A.R.S. § 33-814(A). Nothing in the context of this section, or of the Deed of Trust Act in general, suggests that the legislature meant to go beyond limiting deficiency actions against persons liable on the note. The statute's universe of discourse encompasses them only. The legislature is unlikely to have meant to abolish liability of third parties for their own fraud, negligence, and breach of separate contracts with the lender when the Deed of Trust Act nowhere else touches on that subject. Thus, Mata went too far in reading § 33-814(D) as fictionally deeming the trustor's debt as paid (i.e., extinguished through a full credit bid) for purposes of persons not liable on the secured contract.
A. Textual Development of A.R.S. § 33-814 Since 1971
Interpreting "deficiency" in § 33-814 as the outcome of a special procedure involving specific parties, rather than the in rem *869 extinguishment of the unpaid debt, is supported by § 33-814's textual development since 1971, especially the development of subsections A and D. As enacted in 1971, subsection A stated that
within three months after the date of sale of property under a trust deed . . ., an action may be maintained to recover a deficiency judgment for the balance due on the contract for which the trust deed was given as security. Such deficiency judgment shall be for an amount equal to the sum of the amount owing, as determined by the judgment, with interest, costs and disbursements of the action and the amount owing on all prior liens and encumbrances with interest, less the fair market value of the property as determined by the court or the sale price at the trustee's sale, whichever is higher.
1971 Ariz. Sess. Laws, ch. 136 § 7.
What we now know as subsection D began as subsection B in 1971. At that time, it read as follows: "If no action is maintained for a deficiency judgment, as provided for in subsection A of this section, the proceeds of the sale, regardless of amount, shall be deemed to be in full satisfaction of the debt and no right to recover a deficiency in any action shall exist." Id. Thus, at their birth in 1971, subsection A established a three-month window in which one could "maintain[]" "an action . . . to recover a deficiency judgment for the balance due on the contract" and subsection B established a consequence for not "maintain[ing]" the "action. . . provided for in subsection A."
Subsections A and B remained like this until 1984. In that year, the legislature amended subsection A with various minor clarifications such as specifying that "fair market value" is measured as of the date of the trustee's sale, and that deficiency judgments include interest from the date of the trustee's sale. See 1984 Ariz. Sess. Laws, ch. 121 § 17. Subsection B did not change.
Subsections A and B began to drift apart in 1988, when the legislature bumped subsection B down to subsection C, and inserted a new subsection B. This new subsection B addressed the "obligation of a person who is not a trustor to pay, satisfy or purchase all or part of the balance due on a contract secured by a trust deed." 1988 Ariz. Sess. Laws, ch. 22 § 1. Actions against such non-trustors could be maintained "separate and independent of a trustee's sale or action for a deficiency, whether commenced or maintained before, during or after the trustee's sale." Id. Further, "[s]uch action or actions [would] not [be] subject to the time or fair market value limitations of subsection A . . . ." Id.
Although most of new subsection B discussed obligations of non-trustors and generally exempted them from the requirements of subsection A, new subsection B also clarified an issue that only trustors would need to worry about: when the three-month period from subsection A would begin to run if circumstances required multiple trustee's sales (either because the first trustee's sale did not dispose of all the trust property or because more than one trust deed secured the same obligation). Id. In such a situation, the three-month clock would begin to run "on either the date of the trustee's sale of the last of the trust property to be sold or the date of sale under the last trust deed securing the obligation, whichever occurs last." Id.
As for old subsection B, now subsection C, it retained much of its original character, but now needed to accommodate new subsection B's treatment of non-trustors. Accordingly, it changed to read: "Except for an action pursuant to subsection B of this section, if no action is maintained for a deficiency judgment, as provided for in *870 subsection A of this section, the proceeds of the sale, regardless of amount, shall be deemed to be in full satisfaction of the debt and no right to recover a deficiency in any action shall exist." Id. (emphasis indicates insertion).
Additional amendments in 1989 brought these subsections very close to their current state. The three-month window prescribed by subsection A was changed to 90 days. 1989 Ariz. Sess. Laws, ch. 192 § 1. New subsection B's provisions relating to non-trustors were struck out, leaving only the clause about when subsection A's 90-day time period begins to run where multiple trustee's sales relating to the same property are necessary. Id. Part of the material struck regarding non-trustors ended up in a new subsection C, thus displacing the previous subsection C (which had been subsection B) to subsection D. And new subsection C changed course. The year before, the statute had said that actions against non-trustors need not be brought within the time limits of subsection A. New subsection C, however, declared the opposite: actions against non-trustors must be brought within subsection A's 90-day time limit. Id.
Part of the previous year's concern for non-trustors also ended up in subsection A. Since 1971, subsection A had stated that "an action may be maintained to recover a deficiency judgment for the balance due on the contract for which the trust deed was given as security," and that "[s]uch deficiency judgment shall be" calculated in a certain way. Now subsection A specified: "an action may be maintained to recover a deficiency judgment against any person directly, indirectly or contingently liable on the contract for which the trust deed was given as security including any guarantor of or surety for the contract and any partner of a trustor or other obligor which is a partnership. In any such action against such a person, the deficiency judgment shall be [calculated in essentially the same way it had been since 1971]." Id. (emphasis indicates insertions).
As for subsection A's increasingly distant companion, subsection B-then-C-now-D, it also received an amendment. It now read, "If no action is maintained for a deficiency judgment, as provided for in subsection A of this section within the time period prescribed in subsections A and B of this section, the proceeds of the sale, regardless of amount, shall be deemed to be in full satisfaction of the debt obligation and no right to recover a deficiency in any action shall exist." Id. (emphasis indicates insertions; strikeout indicates deletions). This is how subsection D reads today.
Subsection A, however, received one more major revision in 1990. At that time, the legislature added an extensive clause governing the issue of "fair market value," including a provision for the "judgment debtor" to apply to "the court in the action for a deficiency judgment or in any other action on the contract" for a "determination of the fair market value of the real property." 1990 Ariz. Sess. Laws, ch. 341 § 4. Subsection A has not substantially changed since this insertion.
B. Implications of § 33-814's Textual Development
The foregoing review of § 33-814's history confirms two things. First, as previously discussed, subsection A's "action . . . to recover a deficiency judgment" does not refer to all actions against any person in which the damages are measured by the difference between the sale price and the indebtedness. Rather, it is a specific type of action that the beneficiary of a trust deed can bring against specific persons for a specific measure of damages on the secured contract. Second, there is no reason to believe that subsection D's reference to *871 an "action . . . maintained for a deficiency judgment" refers to anything other than the "action . . . to recover a deficiency judgment" described in subsection A. Indeed, this would not be debatable but for the 1989 amendments. Before 1989, what is now subsection D had read, "If no action is maintained for a deficiency judgment, as provided for in subsection A of this section. . . ." 1971 Ariz. Sess. Laws, ch. 136 § 7. Thus, under this wording, the only "action. . . for a deficiency judgment" that mattered was the action "provided for in subsection A." In 1989, however, the legislature changed this to say, "If no action is maintained for a deficiency judgment within the time period prescribed in subsections A and B . . . ." 1989 Ariz. Sess. Laws, ch. 192 § 1.
There is no persuasive reason to think that an "action . . . for a deficiency judgment within the time period prescribed in subsection[] A" is substantially different than an "action . . . for a deficiency judgment, as provided for in subsection A." And indeed, Defendants agreed at oral argument that the change in phrasing does not change the substance.[4] Subsection D continues to perform the same function it performed in 1971, when it immediately followed subsection A. Specifically, it says that if a trust beneficiary does not bring an "action . . . for a deficiency judgment" within 90 days of the last trustee's sale related to that property, then "no right to recover a deficiency"a specific type and measure of damages against a specific type of defendant"in any action shall exist." In short, the only thing subsection D bars after 90 days is the "action . . . to recover a deficiency judgment" described in subsection A.
C. "Indirectly Liable"
Although Defendants agree that subsection D limits only subsection A's "action. . . to recover a deficiency judgment," Defendants point out that such an action may be brought "against any person directly, indirectly or contingently liable on the contract for which the trust deed was given as security." Defendants argue that "indirectly. . . liable on the contract" is broad enough to protect third parties accused of tortious wrongdoing or breach of other contracts, such as themselves. Defendants stretch subsection A too far.
Section 33-814, in context, contemplates contractual liability because deeds of trust may be given only to secure performance of a contract. See A.R.S. § 33-801(8) ("`deed of trust' means a deed executed . . . to secure the performance of a contract"). Subsection A's reference to indirect contractual liability applies to third parties who, by further contract (such as a guaranty) have agreed to fulfill the obligations of the primary borrower. It also applies to third parties whose relationship to the primary borrower renders them liable by operation of law for the primary borrower's contract. Such third parties include partners, agents' principals, and debtors' estates. See, e.g., A.R.S. § 33-814(A) (specifying that a deficiency action may be brought against "any partner of a trustor or other obligor which is a partnership"); Restatement (Third) of Agency § 6.03 (2006) (undisclosed principal *872 usually liable for agent's contracts). But § 33-814 contains no indication that the legislature intended the phrase "indirectly. . . liable on the [secured] contract" to include sellers, escrow agents, and mortgage brokers who are not liable on the secured contract. Such parties remain liable within the specific limitations periods prescribed for their alleged wrongful acts. See, e.g., A.R.S. § 12-543(3) (fraud); A.R.S. § 12-548 (written contract executed within the state). They need not be sued within 90 days of the trustee's sale.
D. Case Law Regarding the Meaning of "Deficiency"
Arizona cases discussing the meaning of "deficiency" do not support the conclusion that A.R.S. § 33-814(D) protects parties not liable on the secured contract.
In an early mortgage case, the Arizona Supreme Court stated:
Technically speaking, there is no such thing under our law as a "deficiency judgment" in the sense that a formal judgment of that description is rendered by the court. . . . There is only the original judgment for the full amount of the indebtedness, upon which a deficiency may exist after the issuance and return of the special execution [i.e., the court order permitting sale of the property to satisfy the debt] . . . . It has nevertheless been customary in ordinary parlance to refer to the amount still due after the return of the special execution as a "deficiency judgment" . . . .
Bank of Douglas v. Neel, 30 Ariz. 375, 381, 247 P. 132, 134 (1926). As is apparent from the mention of special executions, Bank of Douglas involved a lender who sued the borrowers on the note, obtained a judgment for the outstanding debt, and then received a writ of special execution to foreclose on the mortgage securing the note. Suing on the note first and then judicially foreclosing is a materially different procedure from a non-judicial trustee's sale first authorized by the Deed of Trust Act in 1971.
Nonetheless, some post-1971 cases have re-animated Bank of Douglas's language about what "deficiency" means. In Kries v. Allen Carpet, Inc., for example, the Arizona Supreme Court quoted Bank of Douglas in support of the notion that "what is commonly referred to as a deficiency judgment . . . is not a separate judgment as such." 146 Ariz. 348, 349, 706 P.2d 360, 361 (1985). But Kries, like Bank of Douglas, dealt with a judicial action in which a seller first obtained a judgment against a non-paying buyer and then received a writ of execution against the buyer's property. Id. Further, Kries nowhere mentioned any statute relating to deeds of trust, but instead focused almost entirely on the effect of certain redemption statutes, which apply only in mortgage foreclosure procedure. See id. at 349-51, 706 P.2d at 361-63. Given that a trustee's sale cuts off all redemption rights, see A.R.S. § 33-811(E), the court in Kries could not have had subsection D's "deficiency judgment" in mind.
Another post-1971 case on the meaning of "deficiency judgment" also arose from a judicial judgment before the sale of the collateral, although discussion of trust deeds obscures that fact. In Citibank (Arizona) v. Bhandhusavee, the lender sued borrowers who had defaulted on a commercial real estate loan secured by multiple deeds of trust. 188 Ariz. 434, 435, 937 P.2d 356, 357 (Ct.App.1996). Through a settlement agreement, the lender obtained a stipulated money judgment against the borrowers and then conducted trustee's sales with proceeds applied to the judgment, but the trustee's sales did not fully compensate the lender. Id. Three years later, the lender garnished the borrowers' wages. The borrowers objected *873 that the garnishment amounted to a "deficiency judgment" that should have been brought within 90 days of the trustee's sale, as required in subsection D. Id.
The court rejected the borrowers' argument. The court outlined the procedures for obtaining a deficiency judgment under § 33-814, with specific discussion of subsections A, C, and D. Id. at 436-37, 937 P.2d at 358-59. To dispel "the confusion that arises under foreclosure law regarding the nature of a `deficiency judgment,'" the court quoted Bank of Douglas for the notion that, "`[t]echnically speaking, there is no such thing under our law as a "deficiency judgment" . . . . There is only the original judgment for the full amount of the indebtedness, upon which a deficiency may exist . . . .'" Id. at 437, 937 P.2d at 359 (ellipses added; emphasis in original). Finally, the court concluded that the judgment against the borrowers on the note personally established their entire liability and that the lender did not need to bring a second action specifically for a deficiency after the trustee's sales. Id.
Bhandhusavee's quotation from Bank of Douglas's pre-Deed of Trust Act discussion of a "deficiency judgment" does not tell us much about § 33-814. Under § 33-814, the only available court judgment comes after the trustee's sale, and that judgment is not for the "full amount of the indebtedness." In Bhandhusavee, the lender obtained a money judgment before the trustee's sales, and therefore all of § 33-814's provisions for calculating the "deficiency" with reference to fair market value and so forth were inapplicable. Indeed, the procedures followed by the lender in Bhandhusavee tracked those used in a traditional judicial foreclosure on a mortgagealbeit accomplished through post-judgment trustee's sales rather than special executions. Ultimately, Bhandhusavee addressed a mortgage/trust deed hybrid spawned by the parties themselves, which does not apply in this case and does not clarify the meaning of "deficiency" in § 33-814.
VI. Issues for Another Day
Some questions that may eventually arise under the Deed of Trust Act do not arise on this motion, and whatever the answers may be, they do not undercut the conclusions in this order. One such question is whether a borrower/trustor who actively defrauds the lender/beneficiary, as the borrower Coughlin is alleged to have done in this case, is protected by § 33-814's 90-day limitations period from an action grounded in fraud in addition to a claim for deficiency on the secured contract. This is not an obvious consequence of the Deed of Trust Act. The California anti-deficiency statute, for example, does not bar fraud actions against borrowers, despite its otherwise strongly pro-borrower policies. Guild Mortg. Co. v. Heller, 193 Cal.App.3d 1505, 1512, 239 Cal.Rptr. 59, 63 (1987) ("A suit for fraud obviously does not involve an attempt to recover on a debt or note. As such, it stands separate and apart from any action which the antideficiency legislation seeks to preclude."); Glendale Fed. Sav. & Loan Ass'n v. Marina View Heights Dev. Co., 66 Cal.App.3d 101, 138-39, 135 Cal.Rptr. 802, 824 (1977) ("The defense of [California's anti-deficiency statute] is not available to the trustor as a defense to an action by the beneficiary for fraud.").
In Arizona, however, it may be that the borrower is so protected as the explicit beneficiary of the 90-day limitation. Policy reasons may disfavor the possibility of leaving borrowers exposed to alternative liability theories, such as fraud, when the borrower can no longer be sued for a deficiency as such. But if a defrauding borrower is protected from fraud suits, it hardly means that other participants in the *874 fraud should share in that immunity, or that violators of their own separate contracts with the lender should have special privilege to do so.
Similarly, if the defrauding borrower escapes under the 90-day limitation, it may mean that third parties who may later be sued by the lender are barred from seeking indemnification from the borrower. Whether there otherwise would be any such right to indemnification, and whether it is lost, could turn on complicated considerations of precedent, policy, and the specially favored position of trustors under the Deed of Trust Act. If the best answer to that question is that the defrauding borrower escapes a duty to indemnify, the otherwise liable third parties can protect themselves by hewing to their legal duties in the first place. Contrary to Defendants' arguments, such an outcome would not weigh in favor of a surprising, onerous, and textually dubious 90-day limitations period for all claims against all parties.
VII. Conclusion
The restrictions in A.R.S. § 33-814(D) on a "deficiency" apply only to actions against those "directly, indirectly or contingently liable on the contract for which the trust deed was given as security," id. § 33-814(A). Plaintiff's claims against Defendants are not claims against those "directly, indirectly or contingently liable on the [secured] contract." Accordingly, subsection D does not protect Defendants from liability, even if the damages assessed against such Defendants are calculated based on the indebtedness that M & I was unable to recover through the trustee's sale.
IT IS THEREFORE ORDERED that Defendants Lawyers Title Insurance Company and Vicki Collier's Motion for Judgment on the Pleadings (Doc. 80), in which Defendant Blue Brick Financial, LLC and Defendants James and Janae Jarnigan joined (Docs. 81, 95), is DENIED.
NOTES
[1] In this order the moving Defendantsthe seller, the broker, and the escrow agentare referred to as the Defendants. Though the borrower, Coughlin, is also a Defendant, he is generally not included in that reference.
[2] The Deed of Trust Act has long limited post-sale actions seeking to unwind the trustee's sale on grounds of improper notice. See A.R.S. § 33-811(B) ("A trustee's deed shall constitute conclusive evidence of the meeting of [pre-sale notice] requirements in favor of purchasers or encumbrancers for value and without actual notice."). However, a relatively recent amendment to the Act, § 33-811(C), has been argued to extinguish literally "all defenses and objections to the sale not raised in an action that results in the issuance of a court order granting relief pursuant to rule 65, Arizona rules of civil procedure, entered before 5:00 p.m. mountain standard time on the last business day before the scheduled date of the sale." A.R.S. § 33-811(C); see also Spielman v. Katz, No. CV10-0184-PHX-JAT, 2010 WL 4038838 (D.Ariz. Oct. 14, 2010) (interpreting § 33-811(C) broadly). Other courts have disagreed, expressing skepticism about § 33-811(C)'s scope in light of non-existent legislative history and potential conflict with other portions of the Act. See Martenson v. RG Financing, No. CV09-1314-PHX-NVW, 2010 WL 334648 (D.Ariz. Jan. 22, 2010); see also Silving v. Wells Fargo Bank, NA, No. CV 11-0676-PHX-DGC, 2011 WL 2669246 (D.Ariz. July 7, 2011) (calling for further briefing on the issue). There is no citable Arizona case authority. That issue need not be resolved in this case.
[3] The Coughlin property did not have a residence, so subsection G does not apply in this case.
[4] For the sake of thoroughness, the Court would reject a contrary argument. Such an argument would rest on the improbable assumption that the legislature intended the words "deficiency judgment" in the 1989 amendments to subsection D to refer to something different than every other instance of "deficiency judgment" in § 33-814. To compound the improbable, one would have to assume also that the radically different content of this other "deficiency judgment" was so obvious that the legislature felt no need to define it, even though it would go by the same name as the more specific type of "deficiency judgment" in subsection A and elsewhere in the statute since 1971.
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FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHEMICAL PRODUCERS AND
DISTRIBUTORS ASSOCIATION,
Plaintiff-Appellant,
v.
PAUL E. HELLIKER, Director of the
California Department of Pesticide
Regulation, No. 04-56318
Defendant-Appellee,
D.C. No.
CV-02-09781-AHM
and
SYNGENTA CROP PROTECTION, INC.; OPINION
DOW AGROSCIENCES LLC; BASF
CORPORATION; BAYER CROPSCIENCE
LP; DU PONT DE NEMOURS AND
COMPANY; MONSANTO COMPANY,
Defendants-Intervenors-
Appellees.
Appeal from the United States District Court
for the Central District of California
A. Howard Matz, District Judge, Presiding
Argued and Submitted
May 4, 2006—Pasadena, California
Filed August 31, 2006
Before: Michael Daly Hawkins and Richard A. Paez,
Circuit Judges, and Neil V. Wake,* District Judge.
*The Honorable Neil V. Wake, United States District Judge for the Dis-
trict of Arizona, sitting by designation.
10615
10616 CHEMICAL PRODUCERS v. SYNGENTA CROP
Opinion by Judge Wake
10618 CHEMICAL PRODUCERS v. SYNGENTA CROP
COUNSEL
David H. Bamberger, DLA Piper Rudnick Gray Cary US
LLP, Washington, D.C., for the plaintiff-appellant.
Stanley W. Landfair and Lawrence S. Ebner, McKenna Long
& Aldridge LLP, Los Angeles, California, for the defendants-
intervenors-appellees.
CHEMICAL PRODUCERS v. SYNGENTA CROP 10619
OPINION
WAKE, District Judge:
We must decide whether intervening amendments to Cali-
fornia’s pesticide registration laws, which were challenged
and upheld below, render this appeal moot. We hold they do.
Because the amendments cannot be attributed to the voluntary
conduct of the party seeking relief from the judgment, we
vacate the district court’s judgment.
I. Federal and California Pesticide Regulation
Under the Federal Insecticide, Fungicide, and Rodenticide
Act, 7 U.S.C. §§ 136 to 136y (“FIFRA”), all pesticides must
be registered with the Environmental Protection Agency
before being sold or distributed. 7 U.S.C. § 136a(a). Pesti-
cides also must be registered with California’s Department of
Pesticide Regulation (“the Department”) to be sold in Califor-
nia. Cal. Food & Agric. Code § 12811 (Deering 2006). Both
the California and federal registration laws require prospec-
tive sellers to submit with their registration applications
extensive data on the health and environmental effects of their
pesticides. Because the testing required to produce such data
is costly, applicants seeking to register pesticides with the
same active ingredients as previously registered pesticides
have incentive to acquire and use data submitted by prior reg-
istrants.
FIFRA’s rules relating to re-use of data by secondary regis-
tration applicants fall into time periods beginning on the date
the data were originally submitted. Original registrants are
entitled to exclusive control over the data submitted with their
application for ten years following their registration. 7 U.S.C.
§ 136a(c)(1)(F)(i). During the ten-year period, secondary reg-
istrants may use such data only if they obtain written consent
from the original registrant, i.e., a “letter of authorization.”
The exclusive control afforded to original registrants during
10620 CHEMICAL PRODUCERS v. SYNGENTA CROP
this period allows them to deny use of their data to others or
to set their own prices for letters of authorization. After this
ten-year period is a five-year “mandatory data-licensing”
period. During the five years, secondary applicants may rely
on previously filed data without permission from the original
submitter but “only if the applicant has made an offer to com-
pensate the original data submitter and submitted such offer
to the Administrator [of the Environmental Protection
Agency] accompanied by evidence of delivery to the original
data submitter of the offer.” Id. at 136a(c)(1)(F)(iii). If the
original data submitter deems the offer unsatisfactory, the
amount of compensation is fixed through binding arbitration.
Id. Arbitrated pricing during this mandatory-licensing period
replaces the original submitter’s previous power unilaterally
to dictate the price secondary applicants must pay to use the
data. Disagreement between the original submitter and a new
applicant, moreover, will not delay the new applicant’s regis-
tration. Id. After expiration of the five-year mandatory data-
licensing period, the data become freely available for use by
secondary applicants. Id. at 136a(c)(1)(F)(iv).
When this case began, California required secondary appli-
cants to obtain letters of authorization from original data sub-
mitters when federal law did not. While federal law provides
only a ten-year period of exclusive use to original submitters,
California law granted them exclusive use in perpetuity. Cal.
Food & Agric. Code § 12811.5 (Deering 2004). Before its
amendment, section 12811.5 read:
Except as provided in Section 13128, data, other
than public literature, previously submitted to the
director or the Administrator of the United States
Environmental Protection Agency to support an
application for the original registration of a pesticide,
or to support an application for an amendment
adding any new use to that registration and that per-
tains solely to that use, shall not, without the written
permission of the original data submitter, or its
CHEMICAL PRODUCERS v. SYNGENTA CROP 10621
assigns or successors in interest, be considered by
the director to support an application by another
person.
Id. (emphasis added); see also Cal. Code Regs. tit. 3,
§ 6170(c) (Barclay 2004). Thus, in California a secondary
applicant could never use previously submitted data without
permission from the original submitter, who could hold out
for any price or refuse authorization altogether.
Chemical Producers and Distributors Association (“the
Association”), a trade organization of manufacturers and sell-
ers of generic pesticides, brought this action against Paul Hel-
liker, Director of the Department, challenging California’s
longer exclusive use period. The complaint sought an injunc-
tion and a declaration that the California statute was pre-
empted “to the extent that [it] purport[s] to grant data
submitters in California exclusive use rights to data that were
previously submitted to EPA and are subject to FIFRA’s man-
datory data-licensing scheme.”
The Director declined to defend the law he was charged
with enforcing. However, Syngenta Crop Protection, Inc.,
Dow Agrosciences L.L.C., B.A.S.F. Corporation, Bayer
Cropscience L.P., E.I. Du Pont De Nemours and Company,
and Monsanto Company (“Intervenors”) intervened as defen-
dants in support of the California statute and regulations. The
district court granted summary judgment for the Intervenors
and the Director, finding the state statute and regulations not
preempted. Chem. Producers & Distrib. Ass’n v. Helliker,
319 F. Supp. 2d 1116 (C.D. Cal. 2004). The Association
appealed.
While the appeal was pending, California enacted amend-
ments to its pesticide registration law, effective January 1,
2006. The amended statute eliminates any state law period of
exclusive use by the original data submitter. Instead, Califor-
nia now allows mandatory data-licensing at arbitrated prices
10622 CHEMICAL PRODUCERS v. SYNGENTA CROP
from the outset for secondary users, although a new applicant
may obtain a letter of authorization if the original data submit-
ter is willing. Alternatively, a new applicant may (1) formu-
late or obtain its product from a source that has data
authorization from the data owner or (2) formulate or obtain
its product from a source that has irrevocably offered to pay
the data owner a share of the cost of producing the data. Cal.
Food & Agric. Code §§ 12811.5(a) & (c) (Deering 2006).
Like FIFRA, the new law provides for arbitration where an
irrevocable offer to pay is made but price is not agreed upon,
and a secondary applicant’s registration will not be delayed
by the dispute. Id. at § 12811.5(d). As in FIFRA, data may be
used by secondary registrants without compensation to the
original submitter after a certain period. Id. at § 12811.5(a).
In FIFRA that period is fifteen years, and under the amended
California law it is fifteen years for data submitted after
August 1, 2005, and seventeen years for data submitted before
that date. Id. at § 12811.5(a)(3).
In summary, although the new California law does not rep-
licate FIFRA’s first ten-year period of original submitters’
exclusive entitlement to their data, original submitters still
have that exclusivity, even in California, by force of FIFRA’s
terms. The former California law’s extension of the exclusive
use period beyond FIFRA’s ten years is abolished. In no cir-
cumstance does the California law now give original submit-
ters exclusive right to their data for California registration
purposes when FIFRA subjects those data to mandatory
licensing at arbitrated prices.
In light of the amendments, the Association suggests its
appeal is moot and moves for vacatur of the lower court’s
judgment. Intervenors contest both mootness and vacatur.
II. Mootness
[1] “Where intervening legislation has settled a controversy
involving only injunctive or declaratory relief, the controversy
CHEMICAL PRODUCERS v. SYNGENTA CROP 10623
has become moot.” Bunker Ltd. P’ship v. United States, 820
F.2d 308, 311 (9th Cir. 1987) (citations omitted). Here the
Association sought only injunctive and declaratory relief. We
therefore must decide whether California’s amended statute
has settled the Association’s controversy.
A. Statutory Amendment as Settling the Controversy
[2] The test for whether intervening legislation has settled
a controversy involving only declaratory or injunctive relief
is “whether the new [law] is sufficiently similar to the
repealed [law] that it is permissible to say that the [govern-
ment’s] challenged conduct continues.” Ne. Fla. Chapter of
Associated Gen. Contractors of Am. v. City of Jacksonville,
508 U.S. 656, 662 n.3 (1993) (citations omitted). Where the
law has been “sufficiently altered so as to present a substan-
tially different controversy from the one the District Court
originally decided,” there is “no basis for concluding that the
challenged conduct [is] being repeated.” Id. (citations and
internal quotation marks omitted).
[3] In evaluating whether the government’s challenged con-
duct continues, the case or controversy giving rise to jurisdic-
tion is the touchstone. See id. at 662; Diffenderfer v. Cent.
Baptist Church of Miami, Inc., 404 U.S. 412, 414 (1972);
Nome Eskimo Cmty. v. Babbitt, 67 F.3d 813, 815 (9th Cir.
1995). In Northeastern Florida, for example, a trade associa-
tion representing mostly non-minority construction firms
sought an injunction and declaration that the city’s set-aside
program for minority businesses was unconstitutional. 508
U.S. at 658-59. Intervening amendments to the program did
not render the case moot:
The gravamen of petitioner’s complaint is that its
members are disadvantaged in their efforts to obtain
city contracts. The new ordinance may disadvantage
them to a lesser degree than the old one, but insofar
as it accords preferential treatment to black- and
10624 CHEMICAL PRODUCERS v. SYNGENTA CROP
female-owned contractors — and, in particular, inso-
far as its “Sheltered Market Plan” is a “set aside” by
another name — it disadvantages them in the same
fundamental way.
Id. at 662 (footnote omitted).
The same inquiry yielded the opposite answer in Diffender-
fer. 404 U.S. at 415. There the plaintiffs sought a declaratory
judgment striking down Florida’s tax exemption for church
property used primarily for commercial purposes. Id. at 412-
13. Although the trial court upheld the law, Florida amended
it while the case was on appeal. The new version exempted
church property from taxation “only if the property is used
predominantly for religious purposes and only to the extent of
the ratio that such predominant use bears to the non-exempt
use.” Id. at 413-14 (citations and internal quotation marks
omitted). The “crux” of plaintiff’s complaint was the uncon-
stitutionality of “state aid in the form of a tax exemption for
church property used primarily for commercial purposes.” Id.
at 413. The case was mooted because the church parking lot
that was the “subject of the . . . complaint” was no longer
exempt beyond the extent of its church use. Id. at 414-15.
[4] Here the case or controversy the Association posed was
that its member-companies were “directly and adversely
affected by the letter of authorization requirement” in their
attempts to register generic pesticides in California. The
Association’s grievance over the letter of authorization
requirement in the former section 12811.5, which effectuated
exclusive use rights for original submitters in perpetuity, was
the “crux,” the “gravamen,” and indeed the only grievance, of
the complaint. The new statute has resolved that grievance.
The member-companies of the Association are no longer
affected by the letter of authorization requirement in the way
contested by the Association. Although a letter of authoriza-
tion remains one avenue for generic pesticide companies to
secure the use of previously filed data, it is only an alternative
CHEMICAL PRODUCERS v. SYNGENTA CROP 10625
to other avenues, including mandatory licensing at arbitrated
prices. The new statute accords letters of authorization a role
no larger than they play in FIFRA, which is everything the
Association hoped to achieve by this action.1
[5] Intervenors’ search for life in this case looks to a sav-
ings clause in the new section 12811.5 concerning future
adjudications of the lawfulness of existing registrations. That
provision, subdivision 12811.5(j), states: “No cost sharing as
provided in subdivisions (a), (b), and (c) shall be required to
support an application for annual renewal of pesticide product
registration, provided this provision shall not authorize
renewal of a product registered prior to the effective date of
this section if that registration is declared to have been unlaw-
fully issued by a court of competent jurisdiction.” The “cost
sharing” of subdivisions (a), (b), and (c) refers to the manda-
tory data licensing and compensation. Some registrations pre-
viously granted have been challenged in the state courts. See,
e.g., Syngenta Crop Prot., Inc. v. Helliker, 138 Cal. App. 4th
1135, 42 Cal. Rptr. 3d 191 (2006).
[6] Subdivision (j) plainly seeks to avoid inadvertently
redeeming registrations that were invalid when granted and
are so adjudicated in the future. Subdivision (j) states explic-
itly what the amendment as a whole would mean even without
subdivision (j): that the validity of prior registrations turns on
the law at the time and is not affected by the January 1, 2006
amendment.
1
The mandatory licensing terms of the new California statute differ
from those of FIFRA in one limited respect. For some data, the new Cali-
fornia law entitles original submitters to compensation at arbitrated prices
for two years longer than FIFRA. See Cal. Food & Agric. Code
§ 12811.5(a)(3) (Deering 2006). Intervenors rightly do not contend that
this difference affects mootness, for it is not relevant to the Association’s
sole challenge to the former California law’s grant of exclusive rights lon-
ger than those provided in FIFRA.
10626 CHEMICAL PRODUCERS v. SYNGENTA CROP
Intervenors argue that litigation of old registrations as con-
templated by subdivision (j) may occasion a decision on the
preemptive effect of FIFRA on the old statute. However,
Intervenors point to no litigation or actual controversy posing
that issue and do not sufficiently explain how FIFRA preemp-
tion of the former California statute would arise in litigation
over registrations that should not have been issued.
[7] In any event, any disputes regarding the unlawfulness
of registrations already issued are beyond the complaint in
this case. The Association’s sole challenge here is that FIFRA
preempts California’s former grant of exclusive use rights to
original submitters beyond the period such rights are provided
by FIFRA. This case involves no registration actually
obtained. Intervenors’ bare assertion that such litigation could
reach the issue decided below in this case is speculative and
falls far short of sustaining a case or controversy here. See
Hall v. Beals, 396 U.S. 45, 49-50 (1969) (holding that “specu-
lative contingencies afford no basis for our passing on the
substantive issues the appellants would have us decide with
respect to the now-amended law of Colorado” (citations omit-
ted)); Blair v. Shanahan, 38 F.3d 1514, 1519 (9th Cir. 1994)
(“[N]either we, nor the Supreme Court, have ever allowed
plaintiffs to challenge a statute unless the plaintiffs had an
actual and well founded fear that the law will be enforced
against them.” (citations and internal quotation marks omit-
ted)).
B. Statutory Amendment as Voluntary Cessation
[8] Intervenors argue, the statutory amendment notwith-
standing, that the voluntary cessation exception to mootness
applies. Under that doctrine, a “defendant’s voluntary cessa-
tion of a challenged practice does not deprive a federal court
of its power to determine the legality of the practice.” City of
Mesquite v. Aladdin’s Castle, Inc., 455 U.S. 283, 289 (1982);
accord Ne. Florida, 508 U.S. at 661-62. If it were otherwise,
“the defendant’s mere voluntary cessation would compel the
CHEMICAL PRODUCERS v. SYNGENTA CROP 10627
courts to leave the defendant free to return to his old ways.”
Smith v. Univ. of Wash. Law Sch., 233 F.3d 1188, 1194 (9th
Cir. 2000) (citations, alterations and internal quotation marks
omitted); accord City of Mesquite, 455 U.S. at 289 n.10.
Intervenors draw comfort from general language in some of
our cases. “Our circuit, perhaps following the lead of the
Supreme Court, has issued somewhat confused pronounce-
ments regarding mootness generally, and mootness in the con-
text of repealed or amended statutes in particular.” Jacobus v.
Alaska, 338 F.3d 1095, 1103 (9th Cir. 2003). As we noted in
Jacobus, sometimes we have said that “if a challenged law is
repealed or expires, the case becomes moot,” id. (citing Smith,
233 F.3d at 1195, Native Vill. of Noatak v. Blatchford, 38
F.3d 1505, 1510 (9th Cir. 1994), and Barilla v. Ervin, 886
F.2d 1514, 1521 (9th Cir. 1989), overruled on other grounds
by Simpson v. Lear Astronics Corp., 77 F.3d 1170, 1174 (9th
Cir. 1996)), and at other times we have said that repeal or
amendment “does not deprive a federal court of its power to
determine the legality of the practice.” 338 F.3d at 1103 (cit-
ing Carreras v. City of Anaheim, 768 F.2d 1039, 1047 (9th
Cir. 1985), and City of Mesquite, 455 U.S. at 289) (internal
quotation marks omitted).
The confusion in our pronouncements diminishes if our
cases are examined on their facts. The cases we cited in Jaco-
bus for a near categorical rule of mootness are cases of statu-
tory amendment. The examples we cited of continuing federal
adjudicatory power are of local government or administrative
agency repeal or amendment. Some of our pronouncements
were in cases that were not moot. E.g., Jacobus, 338 F.3d at
1104; Carreras, 768 F.2d at 1047; see also City of Mesquite,
455 U.S. at 289 & n. 11 (amending authority announced its
intention to reenact); Coral Constr. Co. v. King County, 941
F.2d 910, 927 (9th Cir. 1991) (remanded to determine
whether amended ordinance mooted the case).
[9] The voluntary cessation doctrine comes into play in
diverse circumstances, so sometimes our pronouncements
10628 CHEMICAL PRODUCERS v. SYNGENTA CROP
have been general. Nevertheless, we have been clear in refin-
ing the voluntary cessation exception for state legislative
enactments that otherwise moot a controversy. In that circum-
stance the exception is narrow:
A statutory change . . . is usually enough to render
a case moot, even if the legislature possesses the
power to reenact the statute after the lawsuit is dis-
missed. As a general rule, if a challenged law is
repealed or expires, the case becomes moot. The
exceptions to this general line of holdings are rare
and typically involve situations where it is virtually
certain that the repealed law will be reenacted.
Native Vill. of Noatak, 38 F.3d at 1510 (emphasis added; cita-
tions omitted); accord Smith, 233 F.3d at 1195; see also Bari-
lla, 886 F.2d at 1521 (rejecting appellant’s voluntary
cessation argument where there was no indication that the
state legislature intended to repeal the statutory amendments).
[10] This is not one of those rare cases in which it is “virtu-
ally certain that the repealed law will be reenacted.” Village
of Noatak, 38 F.3d at 1510. Indeed, there is no reason to think
the California legislature enacted the amendment with a mind
to restoring the old law later. Nor is there any reason to think
the Association would seek its own harm by asking the legis-
lature to do so.
[11] Because the statutory amendment has settled this con-
troversy, this case is moot.
III. Vacatur
[12] In deciding whether to vacate a moot judgment, “the
principal condition to which we have looked is whether the
party seeking relief from the judgment below caused the
mootness by voluntary action.” U.S. Bancorp Mortgage Co.
v. Bonner Mall P’ship, 513 U.S. 18, 24 (1994) (citations omit-
CHEMICAL PRODUCERS v. SYNGENTA CROP 10629
ted). In this circuit, causation of mootness is a threshold ques-
tion. Where mootness was caused by “voluntary action” of the
party seeking vacatur, “we generally remand with instructions
to the district court to weigh the equities and determine
whether it should vacate its own judgment.” Mayfield v. Dal-
ton, 109 F.3d 1423, 1427 (9th Cir. 1997); accord Cammer-
meyer v. Perry, 97 F.3d 1235, 1239 (9th Cir. 1996); Dilley v.
Gunn, 64 F.3d 1365, 1370-71 (9th Cir. 1995). Where moot-
ness was caused not by the “voluntary action” of the party
seeking vacatur but by “happenstance” or the “vagaries of cir-
cumstance,” we direct vacatur. Doe v. Madison Sch. Dist. No.
321, 177 F.3d 789, 799 (9th Cir. 1999) (en banc); see also
Pub. Utils. Comm’n v. FERC, 100 F.3d 1451, 1460-61 (9th
Cir. 1996); Mayfield, 109 F.3d at 1427. When we cannot by
resort to the factual record determine whether mootness was
caused by the voluntary action of the party seeking vacatur,
this threshold question too is left to the district court. See Dil-
ley, 64 F.3d at 1371.
Intervenors argue that the Association’s advocacy before
the California Legislature voluntarily mooted this case, thus
precluding vacatur by this court. The Association sent letters
to every member of the Senate Committee on Environmental
Quality and the Assembly Committee on Agriculture urging
passage of the bill that would eliminate the letter of authoriza-
tion requirement. An Association delegation also discussed
the issue with the Assembly.
[13] Lobbying Congress or a state legislature cannot be
viewed as “causing” subsequent legislation for purposes of
the vacatur inquiry. Attributing the actions of a legislature to
third parties rather than to the legislature itself is of dubious
legitimacy, and the cases uniformly decline to do so. Even
where new legislation moots the executive branch’s appeal of
an adverse judgment, the new legislation is not attributed to
the executive branch. See Khodara Envtl., Inc. ex rel Eagle
Envtl., L.P. v. Beckman, 237 F.3d 186, 194-95 (3d Cir. 2001)
(stating that the U.S. Bancorp presumption against vacatur
10630 CHEMICAL PRODUCERS v. SYNGENTA CROP
applies “when mootness results from the voluntary action of
the party seeking relief from the judgment below,” but declin-
ing to apply the presumption where a federal agency’s appeal
was mooted by congressional action); Valero Terrestrial
Corp. v. Paige, 211 F.3d 112, 121 (4th Cir. 2000) (“In this
case, the mootness was, as noted, caused by the state legisla-
ture’s amendment of statutory provisions that it had earlier
enacted, and not by the actions of the defendants before this
court, all of whom are state executive officials, none of whom
is the Governor. Therefore, defendant state executive officials
are in a position akin to a party who finds its case mooted by
‘happenstance,’ rather than events within its control.” (cita-
tions, alterations and internal quotation marks omitted)); Nat’l
Black Police Ass’n v. District of Columbia, 108 F.3d 346,
351-52 (D.C. Cir. 1997) (vacating judgment when the District
of Columbia’s appeal was mooted by the District of Colum-
bia’s legislative action); Am. Library Ass’n v. Barr, 956 F.2d
1178, 1187 (D.C. Cir. 1992) (finding the duty to vacate was
“certain” where executive branch officials lost below and
Congress amended the statute); see also U.S. Bancorp, 513
U.S. at 25 n.3 (noting the “implicit conclusion” in United
States v. Munsingwear, 340 U.S. 36 (1950), that the “repeal
of administrative regulations cannot fairly be attributed to the
Executive Branch when it litigates in the name of the United
States”); U.S. Dep’t of the Treasury v. Galioto, 477 U.S. 556,
559-60 (1986) (vacating for mootness the lower court’s judg-
ment that the federal firearms statutes were unconstitutional
because “Congress came to the conclusion, as a matter of leg-
islative policy, that the firearms statutes should be redrafted”).
The principle that legislation is attributed to the legislature
alone is inherent in our separation of powers. See Khodara,
237 F.3d at 195 (“Mindful of the fact that legislative actions
are presumptively legitimate, we are wary of impugning the
motivations that underlie a legislature’s actions.” (citations
and internal quotation marks omitted)); Nat’l Black Police
Ass’n, 108 F.3d at 352 (“The legislature may act out of rea-
sons totally independent of the pending lawsuit, or because
CHEMICAL PRODUCERS v. SYNGENTA CROP 10631
the lawsuit has convinced it that the existing law is flawed.”);
id. at 353 (“Separation of powers concerns provide further
reason to exempt . . . the situation of a case which has become
moot on appeal due to passage of legislation.”); Am. Library
Ass’n, 956 F.2d at 1187 (“Congress rendered the case moot by
passing legislation designed to repair what may have been a
constitutionally defective statute. Congress’ action represents
responsible lawmaking, not manipulation of the judicial pro-
cess.”).
The rule of vacatur that we recognize is for mootness
caused by enactments of Congress and state legislatures. The
strength of the rule may attenuate for lesser public bodies and
those with mixed legislative and executive character, where
closer inquiry may be permissible. We do not have occasion
in this case to calibrate that attenuation.
[14] The statutory amendment that moots this case legally
cannot be attributed to the Association, regardless of its legis-
lative advocacy. We accordingly vacate the lower court’s
judgment and remand with instructions to dismiss the case as
moot.
VACATED and REMANDED.
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280 F.Supp.2d 1196 (2003)
Michelle HANSEN, et al., Plaintiff(s),
v.
TICKET TRACK, INC., Defendant(s).
No. C02-1032P.
United States District Court, W.D. Washington at Seattle.
July 21, 2003.
*1197 Patrick S. Brady, Forsberg & Umlauf, Seattle.
Juli E Farris, Keller Rohrback, Seattle.
Carl Edward Forsberg, Forsberg & Umlauf, Seattle.
Michael P Hooks, Forsberg & Umlauf, Seattle.
Alexander Perkins, Keller Rohrback, Seattle.
ORDER ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
PECHMAN, District Judge.
This matter comes before the Court on defendant Ticket Track, Inc.'s ("Ticket Track") motion for summary judgment. (Dkt. No. 85) Plaintiff class in this case alleges that Ticket Track, which operates as a debt collector for owners of unmanned parking lots, unlawfully collected fees in addition to the principal amounts of parking fees. Plaintiffs assert that collection of these fees was in violation of the Washington Collection Agencies Act, RCW § 19.16.100 et seq. ("WCAA"), the Washington Consumer Protection Act, RCW §§ 19.86.010-19.86.920 ("WCPA"), and the Federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 ("FDCPA"). In addition, plaintiffs allege that Ticket Track and the parking lot owners constituted an "enterprise" engaged in a pattern of racketeering activity in violation of the Racketeer Influenced and Corrupt Organizations *1198 Act ("RICO"). 18 U.S.C. § 1962. Having reviewed the pleadings and papers submitted by the parties, the Court hereby GRANTS IN PART AND DENIES IN PART the defendant's motion. Specifically, the Court DENIES defendant's motion for summary judgment and GRANTS summary judgment in favor of the plaintiff class on the WCAA and WCPA claims, as defendant's collection of the contractually-imposed violation fee was in violation of RCW 19.16.250(18). Next, the Court DENIES summary judgment concerning plaintiff's FDCPA claims. Finally, the Court GRANTS summary judgment in favor of the defendant on plaintiff's RICO claims, as the defendant's activities did not constitute an "enterprise" within the meaning of RICO.
BACKGROUND
Defendant Ticket Track is a state-licensed collection agency that contracts with owners (or managers) of unmanned parking lots for collection of unpaid parking fees, a debt that arises when customers park in the lots and fail to pay the required fee. Customers are made aware of their obligation to pay and the possible imposition of extra fees for failure to pay by way of large signs posted at each of the lots. With some slight variation, those signs read:
PERMIT PARKING ONLY UNAUTHORIZED OR OVERTIME OR IMPROPERLY PARKED VEHICLES WILL BE CHARGED UP TO AN ADDITIONAL $50 VIOLATION FEE 24 HOURS A DAY COLLECTED BY TICKET TRACK 1-800-207-9551
Griffin Decl. Ex 9. These signs are provided by Ticket Track, and the parking lot owners are contractually required to post them at their lots. At oral argument, defense counsel clarified that this sign is separate from a second sign that is posted by the parking lot owners that lists the rates for parking in the lot.
In accordance with Ticket Track's contracts, when a customer fails to pay (or fails to pay enough), the owners assess a "violation fee" and typically attempt to collect the debt through notice placed on the customer's windshield along with a payment envelope. That notice states that failure to pay within 30 days will result in "further collection action, additional search fees, and possible impounding in the event of further violations." Griffin Decl. Ex 11. It also reads: "This is an attempt to collect a debt." Id. Ticket Track provides the lot owners with expiration stickers for use on its notices and/or pay envelopes placed on the cars or mailed to lot customers who have allegedly failed to pay the required fee. Griffin Decl. Exs. 10, 11. The stickers read: "Additional $25.00 surcharge waived if paid within 14 days Ticket Track." Griffin Decl. Ex. 10. The pay envelopes are addressed to Ticket Track. Griffin Decl. Ex. 11.
Apparently, the owners may opt to waive the violation fee if a customer pays in full in a timely manner. After 7 to 14 days, however, the debt is assigned to Ticket Track, who bills the debtor a lump sum amount, including the previously-added violation fee. Thus, the lot owners are contractually required to charge a violation fee prior to referring the debt to Ticket Track. If Ticket Track is successful in collecting the amount owed, Ticket Track retains some or all (typically $25) of the added fee, while the underlying debt owed by the customer (plus any remainder of the violation fee) is remitted to the parking lot owner.
The plaintiff class asserts that this business practice is illegal under the Washington Collection Agencies Act, RCW § 19.16.100 et seq. ("WCAA"), the Washington Consumer Protection Act, RCW *1199 §§ 19.86.010-19.86.920 ("WCPA"), the Federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 ("FDCPA"), and the Racketeer Influenced and Corrupt Organizations Act ("RICO") 18 U.S.C. § 1962.
By prior order, the Court certified the following class:
All persons with addresses in the State of Washington on whose claims the statute of limitations has not run who were sent, or will be sent during the pendency of this action, a letter from defendant Ticket Track demanding payment of an obligation incurred for personal, family, or household purposes relating to an unpaid parking ticket, which was not returned as undelivered by the Post Office, where the amount demanded exceeds the amount of the originally assessed parking ticket.
Ticket Track now brings this motion for summary judgment on most of plaintiffs' claims. First, it argues that the WCAA (and WCPA) claims should be dismissed because Ticket Track did not actually impose the violation fees, and because an implied contract with each of the customers authorized the assessment of such fees. Second, Ticket Track argues that the FDCPA claims should be dismissed on three grounds: 1) because the amounts owed are not "debt" within the meaning of the act, since the failure to pay parking fees does not constitute a "transaction" within the meaning of the act; 2) because plaintiffs' obligations did not arise out of transactions involving "personal, family or household purposes;" and 3) because the amounts collected are "authorized by the agreement creating the debt." Ticket Track also argues that at the very least, the claims of three of the individual named-plaintiffs should be dismissed because they cannot verify that they parked in the lots for "personal, family or household purposes." Finally, Ticket Track argues that plaintiffs' RICO claims must be dismissed because plaintiffs cannot show the requisite "enterprise" needed for liability.
The Court notes at this time that defendant's motion does not specifically address several claims listed in the complaint, namely claims brought under 15 U.S.C. § 1692(e) and RCW 19.16.250(8) and (19). The Court also notes that it is unclear whether these alleged violations are indeed included in the allegations of the presently certified class. In any case, the Court declines to reach issues not moved on by the parties.
ANALYSIS
1. Summary Judgment Standard
This matter is before the Court on defendants's motion summary judgment. Summary judgment is not warranted if a material issue of fact exists for trial. Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir.1995), cert. denied, 516 U.S. 1171, 116 S.Ct. 1261, 134 L.Ed.2d 209 (1996). The underlying facts are viewed in the light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). "Summary judgment will not lie if ... the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The party moving for summary judgment has the burden to show initially the absence of a genuine issue concerning any material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 159, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). However, once the moving party has met its initial burden, the burden shifts to the nonmoving party to establish the existence of an issue of fact regarding an element essential to that party's case, and on which that party will bear the burden of proof at *1200 trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). To discharge this burden, the nonmoving party cannot rely on its pleadings, but instead must have evidence showing that there is a genuine issue for trial. Id. at 324, 106 S.Ct. 2548. If indeed there is no material issue of fact, the court may grant summary judgment in favor of the movant, or may sua sponte grant summary judgment in favor of the non-movant, even in the absence of a cross-motion, where denial of summary judgment would essentially be a grant of summary judgment for the other party. Kassbaum v. Steppenwolf Prods., Inc., 236 F.3d 487, 494 (9th Cir.2000).
2. Claims under the Washington Collection Agencies Act ("WCAA") and the Washington Consumer Protection Act ("WCPA")
The WCAA requires licensing of debt collection agencies and places specific restrictions on debt collection practices. Relevant to the present matter, the WCAA makes it unlawful for a licensed collection agency to:
Collect or attempt to collect in addition to the principal amount of a claim any sum other than allowable interest, collection costs or handling fees expressly authorized by statute, and in the case of suit, attorney's fees and taxable court costs. A licensee may collect or attempt to collect collection costs and fees, including contingent collection fees, as authorized by a written agreement or contract, between the licensee's client and the debtor, in the collection of a commercial claim. The amount charged to the debtor for collection services shall not exceed thirty-five percent of the commercial claim.
RCW 19.16.250(18) (emphasis added). The Act also makes it unlawful to:
Procure from a debtor or collect or attempt to collect on any written note, contract, stipulation, promise or acknowledgment under which a debtor may be required to pay any sum other than principal, allowable interest, except as noted in subsection (18) of this section, and, in the case of suit, attorney's fees and taxable court costs.
RCW 19.16.250(19). A "collection agency" is defined as "[a]ny person ... engaged in soliciting claims for collection, or collecting or attempting to collect claims owed or due or asserted to be owed or due another person." RCW 19.16.100(2)(a).
To be clear, what the act makes illegal is the collection of any sum other than the principal amount of the claim and some specifically stated exceptions, or the attempt to procure an agreement that such sums are collectable. Furthermore, these practices are only prohibited for collection agencies who collect debt for "another person." What does not appear to be unlawful is the imposition and collection of such additional amounts by the actual creditor, in this case, the parking lot owners. Therefore, the critical issue in this entire cause of action is whether the "violation fees" imposed by the owners can be considered part of the "principal amount" of the debt, or are these fees "any sum other than" the principal amount. In the present case, this inquiry is heavily factually driven, but no material facts are in dispute.
On this issue, defendant asserts that it does not impose any of the fees, and therefore the referred amount constitutes the "principal amount" of the debt. On its face, that may be true, but all underlying facts indicate that this is a fee that is imposed and collected by Ticket Track. First, every one of the contracts submitted to the Court contain a clause that obligates the parking lot owners to assess a "violation fee." See Griffin Decl. Ex. 5. The clauses then dictate the allocation of recovered *1201 funds between the lot owners and Ticket Track. Id. Each of the more recent contracts reference an "Addendum A" rather than expressly stating a dollar amount in the body of the contract. Id. That addendum contains blanks to be filled in by the parties, designating the "total amount for the violation fee" to be assessed by the lot owners, as well as an allocation of that fee to be paid to the owners and to Ticket Track. See generally, Griffin Decl. Ex. 4. Ticket Track typically receives $25 of the assessed amount. More often than not this equals the total amount of the violation fee. In no case is the total amount of the additional fee less than the amount given to Ticket Track.
Furthermore, all public representations of the imposition of the fees indicate that the fees are assessed or at least collected by Ticket Track, not the lot owners. The signs posted at each of the lots (which is required by contract) each contain Ticket Track's name on them, not that of the lot owners. The notices placed on customers' cars generally have a Ticket Track sticker on them indicating that additional fees will be waived if the parking fee is paid within 14 days. Those stickers at least imply that it is Ticket Track that will waive the additional fee. The collection envelopes are sent to Ticket Track, even if paid within 14 days. Thus, in all respects, it appears that Ticket Track is the entity responsible for collection (and even imposition) of the additional fees. The only thing Ticket Track doesn't do is place the notices on the cars.
Defendant argues that it had an implied contract with each of the members of the plaintiff class, and that such contract included a clause for additional fees to be imposed in the event that a customer failed to pay the required parking fee. Defendant further argues, without justification or authority, that the implied contracts entitled them to collect the additional violation fees. Plaintiffs conceded at oral argument that an implied contract existed, but argued that a person cannot agree to accept an illegal fee.[1] The Court finds this reasoning persuasive. It is well established that a contract or contract provision that is "contrary to the provisions of any statute [is] void." Coey v. Low, 36 Wash. 10, 17, 77 P. 1077 (1904); see also Evans v. Luster, 84 Wash.App. 447, 450, 928 P.2d 455 (1996) Regardless of the relationship between the customers and lot owners, Ticket Track violates the WCAA if it is collecting "any sum" "in addition to the principal amount." Any implied contract purporting to allow Ticket Track to collect such fees is void and unenforceable. Even if this implied contract is a written one, the Court finds that this is not a "commercial claim" for reasons addressed below. RCW 19.16.250(18). Independently, it seems that any such implied contract, because it is initiated by Ticket Track through its contracts with the lot owners, would be prohibited by RCW 19.16.250(19).
The Court finds that Ticket Track's collection of the "violation fee" was contrary to the WCAA, but it does so with reservation. Plaintiffs are not in a sympathetic position. The plaintiff class is logically comprised of persons who failed to pay for services for which they knew they had an obligation to pay, and even after they were reminded that they had to pay via the windshield notice. It seems only just that persons who park and walk away from their obligation should have to pay something extra as a deterrent to such inexcusable and dishonest behavior in the future. Yet this Court's holding that Ticket Track's contractual arrangement and collection of "violation fees" runs afoul of the *1202 statute does not leave the parking lot owners without alternatives. There are probably ways that imposition (and even collection) of such fees could be done legally. But the present arrangement simply cannot be reconciled with the language of the WCAA. The Court hereby finds that under the facts of this case, Ticket Track violated RCW 19.16.250(18) by collecting "violation fees" that it contractually arranged to impose on parking violators. The violation fees were additional sums, not part of the "principal amount." Because there is no material issue of fact, and because denial of the motion for summary judgment necessarily results in summary judgment in favor of the non-movant, the Court hereby GRANTS summary judgment on liability in favor of the plaintiff class on this cause of action.
It is undisputed that violations of RCW 19.16.250 also constitute violations of the Washington Consumer Protection Act, RCW 19.86.20. See RCW 19.16.440. Thus, the Court GRANTS summary judgment on this cause of action in favor of the plaintiffs.
C. Claims under the Federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692
The FDCPA makes it unlawful for a debt collector to use unfair or unconscionable means to collect a debt. In particular, the act prohibits:
The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.
15 U.S.C. § 1692f (1). A "debt collector" is a "person who uses any instrumentality of interstate commerce or the mails ... who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692a(6). A "debt" within the meaning of the act is:
any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
15 U.S.C. § 1692a(5) (emphasis added).
Defendant argues that the FDCPA claims should be dismissed for three reasons: 1) there was never a "transaction" as contemplated by the act, and therefore no "debt" was created; 2) the three named plaintiffs who cannot remember why they parked cannot show that the debt arose out of a transaction "primarily for personal, family, or household purposes"; and 3) the imposition of the fees was "expressly authorized by the agreement creating the debt."
1) "Transaction" and "Debt" within the Meaning of the FDCPA
Defendant first argues that the customers' obligation to pay the lot owners does not constitute "debt" within the meaning of the act because their nonpayment of parking fees does not constitute a "transaction." This is true, defendant argues, because a "transaction" cannot be read to include theft of goods or services. Defendant cannot have it both ways. On the one hand, defendant argues that there is an implied contract that its customers have breached by failing to pay the appropriate fees. On the other hand, defendant argues that no "debt" is created within the meaning of the act because the customers are stealing services.
Defendant's reliance on Zimmerman v. HBO Affiliate Group, 834 F.2d 1163, 1168 (3d Cir.1987), is misplaced. In that case, the defendant cable television companies *1203 attempted to collect amounts related to alleged piracy of their television signals by the plaintiffs. The defendants had sent each of the plaintiffs a letter clearly stating that legal action would be taken against them for interception of microwave signals, and that the letter constituted an offer of settlement for all past and present claims against them. Id. at 1166. The court held that because the letters were "offers of settlement" of plaintiffs' potential tort liability, the obligation was not "debt" within the meaning of the act because there was never a "transaction" for services. Id. at 1168. This holding was founded on the premise that a transaction giving rise to a debt within the meaning of the act must involve the "offer or extension of credit to a consumer." Id.See also Shorts v. Palmer, 155 F.R.D. 172 (S.D.Ohio 1994) (attorney letter requesting payment of civil damages for alleged attempted theft of cigars was offer of settlement of tort claim obligation not arising out of a credit transaction).
In the present case, defendant appears to have always treated plaintiffs' obligations as contractual in nature, not tortious. All of defendant's documents, including the notices, collection envelopes, and collection letters indicate that Ticket Track is a debt collection agency attempting to collect a debt. If Ticket Track considered the acts of the plaintiffs to be a "theft of services," there would be no "debt" to be collected; instead, "damages" would be claimed. No where in any of the notices, envelopes or letters was there any reference to settlement of a tort claim resulting from trespassing or conversion. Defendant should not be able to change its basis for its original claims mid-stream.
The Court also notes that neither Zimmerman nor Shorts involved a self-proclaimed "debt collection agency" such as Ticket Track, but rather concerned attorney letters threatening legal action if settlement was not reached. The present case is therefore factually distinguishable from the above-cited cases. In any event, the rationale requiring an "offer or extension of credit" that underlies those cases has been expressly rejected by the Ninth Circuit. See Charles v. Lundgren and Assocs., P.C., 119 F.3d 739, 742 (9th Cir. 1997); see also, Thies v. Law Offices of William A. Wyman, 969 F.Supp. 604, 607 (S.D.Cal.1997) (obligation arising out of refusal to pay homeowners association fees is "debt" within the meaning of FDCPA). The Court holds that the debt that Ticket Track was attempting to collect arose out of a "transaction" within the meaning of the FDCPA, specifically out of an implied contract between the parties.
2. "Personal, Family, or Household Purposes" and the Three Named Plaintiffs
Defendant next argues that FDCPA claims should be dismissed regarding the three named plaintiffs who cannot remember the reasons they parked on the occasion that led to the imposition of the violation fees because they cannot show that the debt was incurred "primarily for personal, family, or household purposes."
An examination of the relevant case law is instructive. In Bloom v. I.C. System, Inc., 972 F.2d 1067, 1068 (9th Cir.1992), the plaintiff borrowed $5000 from a friend and used the money as a venture capital investment in a software company. When the debt was later referred to a collection agency, plaintiff brought suit against the agency for unlawful collection practices in violation of the FDCPA. Id. The court first addressed the threshold issue of whether the loan was a debt incurred "primarily for personal, family, or household purposes." Id. In determining that this constituted a "business loan" and was thus *1204 outside the protections of the FDCPA, the Ninth Circuit "examine[d] the transaction as a whole, paying particular attention to the purpose for which the credit was extended." Id. (internal quotations omitted). While in that case, the court found that the purpose of the loan was nearly dispositive of the issue, it also examined such factors as the capacity in which the borrower accepts the loan, i.e. in an official capacity for a company or in a personal capacity. Id.citing Thorns v. Sundance Properties, 726 F.2d 1417, 1419 (9th Cir.1984). The court also specifically held that the lender's motives in extending credit and the degree of formality of the loan documentation were not relevant to the inquiry.
In Slenk v. Transworld Sys., Inc., 236 F.3d 1072, 1073 (9th Cir.2001), plaintiff took out a loan to purchase a backhoe in his company's name. The loan was eventually referred to a collection agency, which attempted to collect on the loan. Plaintiff brought suit alleging violations of the FDCPA, claiming that the backhoe was used only for personal purposes. The District Court found that the loan was for business purposes, and granted summary judgment in favor of the defendant collection agency. In making this determination, the court considered the following facts: the company name was listed on the invoice, the company name was listed on the building permit for the work that was done, and the backhoe was listed on the company's tax return. The Ninth Circuit reversed, holding that while the documents presented certainly constituted "substantial ... evidence suggesting that the backhoe was purchased for business purposes," the district court had erred in failing to consider factors such as the loan documents, the actual use of the backhoe for strictly personal purposes, and the fact that the company never used the backhoe. Id. at 1075-76.
From this analysis, the Court finds that the determination of whether a debt is incurred "primarily for personal, family, or household purposes" is a fact driven one, and should be decided on a case-by-case (not necessarily plaintiff-by-plaintiff) basis looking at all relevant factors. In the present case, the Court finds the nearly-dispositive factor to be the identity of the individual plaintiff and whether the debt was incurred and paid in their personal capacities or some other capacity. It is undisputed that each of the three named plaintiffs paid the obligation out of personal funds. This was not a transaction between two business entities. The defendant argues that a plaintiff's reason for parking in the lot, i.e. the errand that they happened to be running that day, is the only relevant inquiry. While this factor is potentially relevant, in nearly every case it will be outweighed by the "identity" or "capacity" of the debtor. The Court finds that context of the present case significantly distinct from the loan context in the above-cited cases giving significant weight to the "purpose" of the obligation. This is so because the "purpose" of the obligation incurred by the parking plaintiffs cannot be equated with the "purpose" of the errand they happened to be running. Here, where the debt was paid with personal funds, the nature of the obligation is a personal one, not a business one. Because the three named plaintiffs incurred the debt in their personal capacities and paid the obligation from personal funds, the Court DENIES summary judgment on this issue.
3. "Expressly Authorized by the Agreement Creating the Debt"
Finally, defendant argues that the plaintiffs' FDCPA claim must be dismissed because the amounts to be collected are "expressly authorized by the agreement creating the debt." Ticket Track *1205 asserts that an agreement existed between each of the plaintiffs and the lot owners that allowed for the imposition of additional fees. This is evidenced by the signs posted at each lot. See Griffin Decl. Ex. 9. Because plaintiffs were given notice that these fees would be added if they failed to properly pay, Ticket Track argues that the imposition of such fees was "expressly authorized." As held above, any implied contractual provision that is contrary to the provisions of any statute is void and unenforceable. Because the contractual provision purporting to authorize the imposition of additional fees is void under state law, it cannot be implicated to show compliance with the Federal statute.
Based on the above analysis, the Court DENIES defendant's motion for summary judgment on plaintiffs' claims under the FDCPA.
D. Claims under RICO, 18 U.S.C. § 1962
Plaintiffs allege that the defendants violated 18 U.S.C. § 1962(c) of RICO, which prohibits the conduct of an enterprise through a pattern of racketeering activity. Specifically, plaintiffs allege that defendants engaged in an enterprise of racketeering through the collection or attempts to collect an unlawful collection fee, committing thousands of acts of mail fraud in the process. (Compl. ¶ 13-14). To prove liability under § 1962(c), plaintiffs must establish: (1) the existence of an enterprise that affected interstate or foreign commerce; (2) that the defendant was employed by or associated with the enterprise; (3) that the defendant conducted or participated, directly or indirectly, in the conduct of the enterprise's affairs; and (4) that the participation was through a pattern of racketeering activity. Imagineering, Inc. v. Kiewit Pacific Co., 976 F.2d 1303, 1309-10 (9th Cir.1992), cert. denied, 507 U.S. 1004, 113 S.Ct. 1644, 123 L.Ed.2d 266 (1993). Defendants contend that plaintiffs have failed to show that an "enterprise" exists within the meaning of the statute, and only this element appears to be at issue.
RICO defines the term enterprise as "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C.1961(4). Plaintiffs claim that Ticket Track, its employees, and the individual lot owners or entities constitute an "association-in-fact enterprise." An association-in-fact enterprise is an ongoing organization, either formal or informal, whose members function as a continuing unit for a common purpose. United States v. Turkette, 452 U.S. 576, 580, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981). This "enterprise" element must be different from the "pattern of racketeering activity" element. Chang v. Chen, 80 F.3d 1293, 1298 (9th Cir.1996). Plaintiffs must go beyond simply pleading a conspiracy and demonstrate a structure to the defendants' collusion beyond and separate from the illegal racketeering activities. Simon v. Value Behavioral Health, Inc., 208 F.3d 1073, 1083-84 (9th Cir.2000), amended on other grounds, 234 F.3d 428 (9th Cir.2000), cert. denied, 531 U.S. 1104, 121 S.Ct. 843, 148 L.Ed.2d 723 (2001). In other words, plaintiffs must show an "organization separate and apart from that inherent in the perpetration of the alleged [unlawful] transactions." Chang, 80 F.3d at 1301.
Plaintiffs also argue that this case involves legitimate corporations that made the RICO activities possible, and as such, they constitute a RICO enterprise. Indeed the Ninth Circuit's Feldman decision appeared to hold, as some courts have concluded, that the very naming of a corporation as part of the enterprise meets the requirement for a separate structure. United States v. Feldman, 853 F.2d 648, *1206 660 (9th Cir.1988), cert. denied, 489 U.S. 1030, 109 S.Ct. 1164, 103 L.Ed.2d 222 (1989); see also Dumas v. Major League Baseball Props., Inc., 52 F.Supp.2d 1170, 1178 (S.D.Cal.1999), vacated, 104 F.Supp.2d 1220 (S.D.Cal.2000). Feldman reasoned that the corporate entities in the matter had a legal existence separate from their participation in the racketeering activity, since they existed to carry on legitimate business activities as well as the racketeering activities. Id. Yet commentators and judges have criticized the logic of Feldman. See, e.g., David B. Smith and Terrance G. Reed, Civil RICO ¶ 3.06, 3-50-64 (2001); Dumas, 52 F.Supp.2d at 1178. Smith and Reed are particularly critical in describing what often may be a mere pleading device:
All one can say is that it makes it much easier to plead and prove an association in fact if the mere inclusion of a legitimate entity satisfies the "structure" requirement.... This presumably will lead prosecutors in the Ninth Circuit to include innocent individuals in any association in fact enterprise they charge in order to demonstrate that the enterprise is separate and distinct from the pattern of racketeering activity.
Smith and Reed at ¶ 3.06, 3-62.
More recent Ninth Circuit cases have chipped away at the Feldman holding, but not overruled it. In Chang, the Ninth Circuit found that an association-in-fact enterprise with a corporate participant, which existed solely to engage in fraud, did not state an enterprise separate from the pattern of racketeering. Chang, 80 F.3d at 1300-01. In so deciding, Chang used language that indicated a broader holding, including in its separate enterprise analysis such factors as a "the existence of a system of authority," "decision-making apparatus," and structure to distribute proceeds of the transactions. Id. at 1300. Simon positively cites these quotes from Chang in holding that an alleged "mass conspiracy" of 1,600 insurance companies, employee benefit plans, employers and governmental entities did not state an enterprise separate from the racketeering activity. Simon, 208 F.3d at 1083-84. Simon is of particular importance to the defendant because it rejects an association-in-fact enterprise that includes legitimate corporations.
The Court acknowledges that the Ninth Circuit case law defining an association in fact using the "separate structure" analysis is less than clear. Nevertheless, the Court finds that plaintiffs have failed to demonstrate that there was any separate structure apart from the structure that carried out the collection of illegally-imposed debt. Plaintiffs argue that the organization was involved in both illegal and legal activities, but this is not the entire inquiry. Plaintiffs must also establish that there was a separate structure that engaged in conduct constituting the pattern of racketeering activity. Here, there was not. There is no allegation that there existed some subset of actors that carried out the illegal collections that was distinct from the actors who carried out the legal ones. Thus there is no separate system of authority or decision-making apparatus other than the one that carried out the alleged racketeering activity. Furthermore, there is no allegation that proceeds were distributed utilizing "a structure separate and apart from the predicate acts." Chang, 80 F.3d at 1300. Here, proceeds were allocated to the members of the alleged enterprise in a manner consistent with an ordinary business. Quite simply, plaintiffs have failed to show anything beyond a conspiracy, and a "conspiracy is not an enterprise for purposes of RICO." Id.
The Court rejects plaintiffs' RICO claims on another ground. Plaintiffs characterize Ticket Track's business operations as existing for the dual purpose of collection *1207 of legally-imposed debts and collection of illegally-imposed debts. Thus, plaintiffs argue, Ticket Track "has an existence separate from [their] participation in the racketeering activity." Opp'n at 20. Yet the more proper characterization of Ticket Track's business operations is one of a collection agency. Ticket Track is in the business of collection of debts. That some of those debts (or the collection thereof) later turn out to be unlawful does not establish a separate structure as required under RICO as interpreted by the Ninth Circuit. For each of these reasons, the Court GRANTS summary judgment in favor of the defendant on plaintiffs' RICO claims.
CONCLUSION
Based on the foregoing analysis, the Court hereby GRANTS IN PART AND DENIES IN PART the defendant's motion. Specifically, the Court DENIES defendant's motion for summary judgment and GRANTS summary judgment in favor of the plaintiff class on the WCAA and WCPA claims, as defendant's collection of the contractually-imposed violation fee was in violation of RCW 19.16.250(18). Next, the Court DENIES summary judgment concerning plaintiff's FDCPA claims. Finally, the Court GRANTS summary judgment in favor of the defendant on plaintiff's RICO claims, as the defendant's activities did not constitute an "enterprise" within the meaning of RICO.
The Clerk is directed to send copies of this order to all counsel of record.
NOTES
[1] Logically, there may even be two implied contracts: one for parking fees with the lot owner, and one with Ticket Track for "violation fees."
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Case: 16-60551 Document: 00514421765 Page: 1 Date Filed: 04/09/2018
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
No. 16-60551
Fifth Circuit
FILED
April 9, 2018
EDGAR VASQUEZ, Lyle W. Cayce
Clerk
Petitioner
v.
UNITED STATES PAROLE COMMISSION,
Respondent
Appeal from the Determination of the
United States Parole Commission
USPC No. 18 USC 4106A
Before KING, HAYNES, and HIGGINSON, Circuit Judges.
STEPHEN A. HIGGINSON, Circuit Judge:*
In 2012, a court in Mexico convicted Edgar Vasquez of aggravated kid-
napping—with an enhancement for carrying out the crime with violence—and
imposed a 20-year sentence. Vasquez was later transferred to the United
States under a treaty. See Treaty on the Execution of Penal Sentences, U.S.-
Mex., Nov. 25, 1976, 28 U.S.T. 7399 (entered into force Nov. 30, 1977). The U.S.
Parole Commission then calculated Vasquez’s release date and supervised-re-
lease conditions as if Vasquez had been convicted of federal kidnapping in a
* 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: 16-60551 Document: 00514421765 Page: 2 Date Filed: 04/09/2018
No. 16-60551
United States district court. See 18 U.S.C. §§ 1201, 4106A. This appeal raises
a single issue: whether the Parole Commission plainly erred by employing a
two-level, dangerous-weapon enhancement to calculate Vasquez’s advisory
guidelines range. See U.S.S.G. § 2A4.1(b)(3) (2014). Viewing the entire record,
and with the benefit of oral argument, we are not persuaded that the Parole
Commission committed “clear or obvious” error. Molina-Martinez v. United
States, 136 S. Ct. 1338, 1343 (2016). We therefore AFFIRM.
2
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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
April 25, 2008
No. 07-40011
Summary Calendar Charles R. Fulbruge III
Clerk
UNITED STATES OF AMERICA
Plaintiff-Appellee
v.
LUIS ALEJANDRO GARZA
Defendant-Appellant
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 1:00-CR-36-1
Before WIENER, GARZA, and BENAVIDES, Circuit Judges.
PER CURIAM:*
Luis Alejandro Garza was convicted by a jury of conspiracy to possess with
intent to distribute more than five kilograms of cocaine, possession with intent
to distribute more than five kilograms of cocaine, and aiding and abetting others
in the possession with intent to distribute more than 500 grams of cocaine. The
district court sentenced Garza to serve concurrent 324-month terms of
imprisonment to be followed by concurrent five-year (counts one, two and three)
and four-year (count four) terms of supervised release.
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion
should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
No. 07-40011
Garza timely filed a notice of appeal, but we dismissed his appeal for
failure to prosecute. Garza subsequently filed a motion pursuant to 28 U.S.C.
§ 2255 in which he asked the district court for permission to file an out-of-time
appeal. Although the district court granted Garza’s motion, it did not reenter
the criminal judgment against Garza. Thus, Garza’s instant notice of appeal
was filed more than six years after the original criminal judgment was entered
against him and is untimely. See FED. R. CRIM. P. 4(b)(1)(A). However, the time
limit for filing a criminal appeal is not jurisdictional and can be waived. United
States v. Martinez, 496 F.3d 387, 388-89 (5th Cir. 2007). Because the
Government did not oppose Garza’s out-of-time appeal, it has waived application
of Rule 4(b). Accordingly, we may address the merits of Garza’s claims.
Garza argues for the first time on appeal that his sentence is invalid
because the district court imposed a sentence under the mandatory federal
guideline sentencing scheme and enhanced Garza’s sentence on the basis of facts
not admitted by Garza or found by the jury beyond a reasonable doubt. We
review for plain error. United States v. Mares, 402 F.3d 511, 513, 520-22 (5th
Cir. 2005). Garza is unable to establish plain error with regard to his claims
because he cannot establish that being sentenced under a mandatory guidelines
scheme affected his substantial rights. The record does not indicate that the
district court “would have reached a significantly different result” under a
sentencing scheme in which the Sentencing Guidelines were advisory only. See
Mares, 402 F.3d at 520-22.
Garza also argues that the district court reversibly erred when it denied
his motion for a new trial, arguing that the district court admitted inadmissible
evidence under Rule 404(b) of the Federal Rules of Evidence. We review the
denial of a motion for a new trial for abuse of discretion. When inadmissible
Rule 404(b) evidence is introduced, a new trial is warranted if after reviewing
the record there is a significant possibility that the prejudicial evidence had a
substantial impact on the verdict. United States v. Honer, 225 F.3d 549, 555 (5th
2
No. 07-40011
Cir. 2000). The record reflects that overwhelming direct and circumstantial
evidence of Garza’s guilt was presented at trial. In light of the record, there is
no significant possibility that the alleged 404(b) evidence had any impact on the
verdict. Accordingly, Garza has failed to establish that the district court abused
its discretion in denying his motion for a new trial.
AFFIRMED.
3
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935 F.2d 57
Kenneth B. GRUBB, t/a Grubb Contractors, Plaintiff-Appellant,andKevin K. Grubb; Eric D. Grubb; Kerry S. Grubb, Plaintiffs,v.DONEGAL MUTUAL INSURANCE COMPANY, Defendant-Appellee,andWarwick C. Sherrard; Annis P. Sherrard, his wife, Defendants.
No. 90-2059.
United States Court of Appeals,Fourth Circuit.
Argued Dec. 3, 1990.Decided June 10, 1991.
Paul Joseph Mraz, Sr., Elkton, Md., for plaintiff-appellant.
Daniel Warren Whitney, Sr., argued (Robert G. Bello, Semmes, Bowen & Semmes, Baltimore, Md., on brief), for defendant-appellee.
Before PHILLIPS and NIEMEYER, Circuit Judges, and MERHIGE, Senior United States District Judge for the Eastern District of Virginia, sitting by designation.
PHILLIPS, Circuit Judge:
1
Kenneth Grubb, t/a Grubb Contractors, Kevin Grubb, Eric Grubb and Kerry Grubb (the Grubbs) appeal the district court's denial of their motion to remand, contending that Donegal Mutual Insurance Company (Donegal), defendant in their declaratory action in state court, had waived its right to remove the action to federal court by its participation in the state court proceedings. Because we agree with the district court that Donegal had not waived its right to remove, we affirm.
2
* In August 1989, the Grubbs filed a declaratory judgment action against Donegal in the Circuit Court for Cecil County, Maryland. The Grubbs asserted that Donegal was obligated to provide them with insurance coverage and a defense to a suit filed against the Grubbs by Warwick C. Sherrard and Annis P. Sherrard (the Sherrards). The complaint also named the Sherrards as defendants. The Grubbs and the Sherrards reside in Maryland, while Donegal's principal place of business is in Pennsylvania. In their answer, the Sherrards moved that the complaint against them be dismissed for failure to state a claim.
3
With this issue joined, Donegal filed a summary judgment motion. At a hearing on this motion, the Sherrards' attorney told the state circuit court, "I don't know why we're here." J.A. at 54. The Grubbs' attorney responded, "We brought the Sherrards in. I'm trying--I would stipulate to their dismissal." The judge then stated, "All right. The Sherrards are dismissed in this case." J.A. at 54.
4
After this exchange, the court proceeded with the hearing. The Grubbs based their claims on two policies issued to them by Donegal, a general liability policy and a commercial excess policy. At the conclusion of the hearing, the court ordered Donegal to provide the Grubbs with a defense under the general liability policy to all counts alleging poor workmanship. However, the court did grant Donegal's motion as it applied to the commercial excess policy; and it reserved judgment on the issue of Donegal's duty to provide coverage on the workmanship counts. J.A. at 83-84.
5
Donegal filed a notice of removal on diversity grounds on January 17, 1990, after receiving a copy of the typewritten docket entry that noted the state court's dismissal of the Sherrards. On January 19, 1990, Donegal filed a renewed motion for summary judgment in federal district court. The Grubbs responded with a motion to remand and a memorandum in opposition to Donegal's summary judgment motion. The district court denied the Grubbs' motion to remand and granted Donegal's summary judgment motion. The Grubbs filed a motion to alter or amend judgment, which the district court also denied.
6
The Grubbs then took this appeal from the denial of their motion to remand.1
II
7
The Grubbs present several arguments in support of their position.
8
First, they claim that Donegal waived its right to remove the case to federal court by failing to assert that right immediately after the state court judge dismissed the Sherrards. The Grubbs contend that by allowing the summary judgment hearing to proceed, Donegal showed its intent to waive its right to remove the case.
9
Under 28 U.S.C. Sec. 1446(b), if a case that was not removable when it was first filed becomes removable,
10
a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable....
11
28 U.S.C. Sec. 1446(b). In a recent case, the Seventh Circuit has held that after Congress passed Sec. 1446(b), there was no further need for the waiver doctrine:
12
In sum, it appears that the doctrine of waiver developed out of the necessity to interpret the pre-1948 removal statutes. The 1948-49 revisions [including the present Sec. 1446(b) ] addressed the problems that created the need for the doctrine, set definite time limits, and strove to make the removal process uniform throughout the federal jurisdiction.
13
Rothner v. City of Chicago, 879 F.2d 1402, 1415 (7th Cir.1989). The Rothner Court therefore held that Sec. 1446(b) did not authorize the district court to remand a case on the ground of waiver but added the following qualification:
14
This is not to say, however, that district courts are without power to remand in extreme situations.... [T]he values of judicial economy, fairness, convenience and comity justify supplementation of statutory rules with common law doctrines. The same values may justify the application of the common law doctrine of waiver.
15
Id. at 1416 (citations omitted).
16
We are persuaded by this reasoning, and adopt Rothner 's holding that although a defendant may yet waive its 30-day right to removal by demonstrating a "clear and unequivocal" intent to remain in state court, such a waiver should only be found in "extreme situations." Rothner, 879 F.2d at 1416.
17
In reviewing the district court's determination that Donegal did not waive its right to remove to federal court, we review a factual determination. See Rothner, 879 F.2d at 1408 ("a waiver determination involves a factual and objective inquiry as to the defendant's intent to waive"). We could reverse, therefore, only if we could declare that finding clearly erroneous, and that we cannot do.
18
Donegal did not take any substantial affirmative steps in the state court after the Sherrards were dismissed. Donegal had already filed its summary judgment motion before the dismissal of the Sherrards, and its attorney did not go to the hearing with any knowledge that the Sherrards might be dismissed. As the district court explained, Donegal's conduct in failing to remove the case immediately after the judge orally dismissed the Sherrards did not show a "clear and unequivocal" intent to waive its rights, especially since the Grubbs had not filed a written response to Donegal's summary judgment motion and the hearing itself "in some ways more resembled a colloquy than a hearing." Grubb v. Donegal Mutual Ins. Co., CA-90-195-S, slip op. at 3 (D.Md. Feb. 9, 1990).
19
Further supporting the district court's ruling is the fact that under Maryland's civil rules dismissal of the Sherrards which made the action removable was not effective until it was recorded on the docket. Maryland Rule 2-601(b) provides:
20
The clerk shall enter a judgment by making a record of it in writing on the file jacket, or on a docket within the file, or in a docket book, according to the practice of each court, and shall record the actual date of the entry. That date shall be the date of the judgment.
21
Under Maryland law, a judgment is not final for appeal purposes until it has been entered in accordance with this statute. Estep v. Georgetown Leather Design, 577 A.2d 78, 80 (Md.1990). This is based on the practical consideration, among others, that until an order or judgment is thus formally entered, a judge who has announced an intention or disposition to rule in a certain way might yet change his mind before making the ruling a formal one. Id. at 81. This is also true in the removal context. The state court judge here could have changed his mind about dismissing the Sherrards before his order was entered on the docket. Thus, the case was not officially removable until the dismissal order was entered on the docket and Donegal was entitled to proceed on that assumption.
22
Finally, the removal statute itself provides that the thirty-day time limit begins after receipt "through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable...." 28 U.S.C. Sec. 1446(b) (emphasis added). The combination of the plain language of the statute and Maryland law on final judgments thus additionally supports the district court's finding that Donegal had not evinced a "clear and unequivocal intent" to remain in state court, hence had not waived its right to remove.
23
The Grubbs point to several factors that might have supported a contrary finding of fact as to Donegal's intent in participating as it did in the state court proceeding. Had the court found differently, we likely would have been compelled to affirm that finding as not clearly erroneous; but that was not its finding, and the one made was, as indicated, a plausible one that we may not reject. See Anderson v. City of Bessemer City, 470 U.S. 564, 573-74, 105 S.Ct. 1504, 1511-12, 84 L.Ed.2d 518 (1985).
III
24
The Grubbs' other arguments in support of their motion to remand require less detailed analysis. First, the Grubbs contend that Donegal should have filed a petition for removal within thirty days of receiving the original complaint, because Donegal should have recognized that the Sherrards were only nominal parties to the action. However, under Maryland law the Sherrards were more than nominal parties. The Maryland Code provides that "[i]f declaratory relief is sought, a person who has or claims any interest which would be affected by the declaration, shall be made a party." Md. Cts. & Jud. Proc.Code Ann. Sec. 3-405(a)(1) (1989). Because the Sherrards were suing the Grubbs in the underlying litigation, they had such an interest.
25
Although the Sherrards were necessary parties under Maryland law, they could choose to waive their right to take part in the proceedings. See Bodnar v. Brinsfield, 60 Md.App. 524, 483 A.2d 1290, 1295 (1984) (so long as necessary parties are aware of litigation and have opportunity to participate, they are bound by result of such litigation). The state court's dismissal of the Sherrards was therefore necessary to effect their removal as formal parties to the action, and Donegal was correct in its determination that the case was not removable until the Sherrards were dismissed.
26
The Grubbs also argue that the Sherrards were not voluntarily dismissed from the case. If the Grubbs did not voluntarily dismiss the Sherrards, then the case was improperly removed. See Heniford v. American Motors Sales Corp., 471 F.Supp. 328, 335 (D.S.C.1979) ("The paramount consideration in determining whether the dropping of the resident defendant as an adverse party renders a case removable is if such resulted from the voluntary act of the plaintiff."). The Grubbs base their argument in part on Maryland Rule 2-506(a), which requires that a stipulation of dismissal be signed by all parties. However, as the district court noted, Rule 2-506, (entitled "voluntary dismissal") also provides for voluntary dismissal by order of the court, which does not require the parties' signatures. Md.Rule of Civ.Pro. 2-506(b). The Grubbs' assertion that if the dismissal was by order of the court, then it could not have been achieved by a voluntary act of the plaintiff is inconsistent with the language of Rule 2-506(b), which states in relevant part, "[e]xcept as provided in section (a) of this Rule, a plaintiff may dismiss an action only by order of court...." Thus, voluntary dismissal under Rule 2-506(b) still contemplates voluntary dismissal initiated by the plaintiff.
27
The Grubbs also claim that their counsel's statement, "I would stipulate to their [the Sherrards] dismissal" was too tentative to be considered voluntary. In the context of the state court hearing, however, this contention fails. After counsel's comment, the state court judge responded, "All right. The Sherrards are dismissed in this case." J.A. at 54. The Grubbs' counsel did not object to the judge's oral ruling. Presumably, if he had not meant to voluntarily dismiss the Sherrards, counsel would have objected at the hearing. The district court was therefore correct in holding that the Grubbs' dismissal of the Sherrards was voluntary.
28
The Grubbs' final two arguments also lack merit. The Grubbs cite several cases for the proposition that if federal jurisdiction is in doubt, the case should be remanded to the state court. However, at the time Donegal filed its petition for removal, there was no question that diversity jurisdiction actually existed. Similarly, the Grubbs' argument that Donegal has the burden of establishing that removal was proper does not require us to reverse the district court. Donegal has shown that its removal was proper, as there was never a question of whether diversity jurisdiction existed at the time Donegal filed its removal petition. Donegal also complied with all of the requirements of 28 U.S.C. Sec. 1446(b).
IV
29
For the foregoing reasons, we affirm the district court's denial of the Grubbs' motion to remand.
AFFIRMED
1
The Grubbs are not appealing the district court's grant of summary judgment on the merits
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491 So.2d 271 (1986)
Raymond STEWART, Petitioner,
v.
STATE of Florida, Respondent.
No. 67315.
Supreme Court of Florida.
July 17, 1986.
Michael E. Allen, Public Defender, Larry G. Bryant, Asst. Public Defender, Second Judicial Circuit, Tallahassee, for petitioner.
Jim Smith, Atty. Gen., Wallace Allbritton, Asst. Atty. Gen., Tallahassee, William N. Meggs, State Atty., Elaine K. Ashley, Asst. State Atty., Second Judicial Circuit, Tallahassee, for respondent.
McDONALD, Chief Justice.
The First District Court of Appeal has certified the following question as being one of great public importance:
IF THE STATE FILES A FELONY CHARGE AGAINST THE DEFENDANT AND THE DEFENDANT MOVES FOR A CONTINUANCE MORE THAN 90 DAYS BUT LESS THAN 180 DAYS AFTER HIS ARREST, AND THE STATE THEN NOL PROSSES THE FELONY CHARGE AND REFILES THE INFORMATION CHARGING A MISDEMEANOR, IS THE DEFENDANT ENTITLED TO AN IMMEDIATE DISCHARGE UNDER THE SPEEDY TRIAL RULE?
Stewart v. State, 470 So.2d 101, 102 (Fla. 1st DCA 1985). This Court has jurisdiction pursuant to article V, section 3(b)(4), Florida Constitution. We answer in the negative and approve the opinion of the district court.
Stewart was arraigned on June 18, 1983 on the charge of grand theft. On December 2, 1983, approximately 157 days later, *272 Stewart requested a continuance, thereby waiving his rights under the speedy trial rule. Ziegler v. State, 402 So.2d 365 (Fla. 1981), cert. denied, 455 U.S. 1035, 102 S.Ct. 1739, 72 L.Ed.2d 153 (1982); Mohler v. State, 466 So.2d 1233 (Fla. 2d DCA 1985); Fla.R.Crim.P. 3.191. On January 17, 1984 the state nol prossed the felony information charging grand theft and on January 21, 1984 filed a new misdemeanor information charging petit theft. Stewart then moved for a discharge on speedy trial grounds and the county court granted the motion. The state appealed and the circuit court reversed. On petition for writ of certiorari the district court approved the decision of the circuit court, but certified the instant question.
As the district court correctly stated, when a defendant requests a continuance prior to the expiration of the applicable speedy trial time period for the crime with which he is charged, the defendant waives his speedy trial right as to all charges which emanate from the same criminal episode. E.g., State v. Albanez, 448 So.2d 596 (Fla. 2d DCA 1984); Goldstein v. State, 447 So.2d 903 (Fla. 4th DCA 1984); State v. Cocalis, 443 So.2d 138 (Fla. 3d DCA 1983); State v. Jones, 404 So.2d 395 (Fla. 5th DCA 1981); Conner v. State, 398 So.2d 983 (Fla. 1st DCA 1981). Moreover, the district court correctly concluded that Florida Rule of Criminal Procedure 3.191(h)(2) is inapplicable under the facts of this case. The purpose of rule 3.191(h)(2) is to prevent the state from circumventing the speedy trial rule and extending the applicable time period by nol prossing a charge and refiling a new information when the time limit approaches. See Fyman v. State, 450 So.2d 1250 (Fla. 2d DCA 1984); Wright v. State, 387 So.2d 1060 (Fla. 5th DCA 1980). The state could not have violated rule 3.191(h)(2) by nol prossing the information when the defendant had already waived his rights under the rule. State v. Condon, 444 So.2d 73 (Fla. 4th DCA 1984); State v. Kerper, 393 So.2d 77 (Fla. 5th DCA 1981).
Further, we reject Stewart's argument that the speedy trial period in the instant case expired on day ninety. At the time Stewart requested the continuance, he stood charged with grand theft, for which the applicable speedy trial period was 180 days. Fla.R.Crim.P. 3.191(a)(1). Because Stewart requested the continuance within that period, the request constituted a timely waiver.
Accordingly, we answer the certified question in the negative and approve the opinion of the district court.
It is so ordered.
ADKINS, BOYD, OVERTON, EHRLICH, SHAW and BARKETT, JJ., concur.
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145 F.3d 721
UNITED STATES of America, Plaintiff-Appellant,v.Kenneth Lee SCHNITZER, Sr., Philip J. Barber, and Walter M.Ross, Defendants-Appellees.
No. 96-20908.
United States Court of Appeals,Fifth Circuit.
July 2, 1998.
Katherine L. Haden, Paula Camille Offenhauser, Asst. U.S. Atty., Houston, TX, for Plaintiff-Appellant.
Michael E. Tigar, Washington, DC, Saskia Audrey Jordan, Haddon, Morgan & Foreman, Denver, CO, for Schnitzer.
Marjorie A. Meyers, Federal Public Defender's Office, Robert C. Bennett, Jr., Bennett, Secrest & Meyers, Houston, TX, for Barber.
Charles M. Meadows, Jr., Michael Todd Welty, Meadows, Owens, Collier, Reed, Cousins & Blau, Dallas, TX, for Ross.
Appeal from the United States District Court for the Southern District of Texas.
Before REAVLEY, JONES and BENAVIDES, Circuit Judges.
BENAVIDES, Circuit Judge:
1
On July 20, 1995, a federal grand jury returned a four-count indictment against Kenneth Lee Schnitzer, Sr., Philip J. Barber, and Walter M. Ross. These three defendants were directors of the BancPLUS Savings Association, a federally insured financial institution operating in Texas. The charges in the indictment stemmed from a two-part real estate transaction negotiated and approved, in large part, by the defendants, whereby California-Texas Properties, Inc. (Cal-Tex), agreed to buy land owned by BancPLUS in exchange for BancPLUS's agreement to purchase land from Scott's Cattle Company (Scott's Cattle).
2
At trial, the government advanced several theories for why the events surrounding this transaction and its accounting subjected the defendants to criminal liability. Convinced by the government's myriad attacks on the propriety of the conditional sales, the jury convicted the defendants of misapplying BancPLUS funds, making a false entry in BancPLUS records, devising or attempting to devise a scheme and artifice to defraud BancPLUS, and conspiring to commit at least one of these three substantive offenses.
3
The district court, however, directed a judgment of acquittal for each defendant on each count, and in the alternative, granted each defendant's request for a new trial on all counts. On appeal, the government challenges both of these decisions by the district court. With respect to the false entry count, we hold that the government produced sufficient evidence in support of its permissible theory of false entry but also placed evidence of a legally impermissible theory of false entry before the jury. We therefore reverse the district court's decision to acquit the defendants on the false entry count, but affirm its decision to grant the defendants a new trial on this count and the related conspiracy charge. For the reasons discussed below, we affirm the district court's decision to acquit each defendant on the misapplication of funds and bank fraud counts. The defendants are also entitled to acquittals on the conspiracy charges related to these two substantive offenses.
I. Factual Background
4
In order for the defendants to be acquitted on the basis of insufficient evidence, the evidence viewed in the light most favorable to the verdict must demonstrate that a rational trier of fact could not have found the essential elements of the alleged crimes beyond a reasonable doubt. See United States v. Beuttenmuller, 29 F.3d 973, 978 (5th Cir.1994). Accordingly, we set forth the facts in the light most favorable to the jury's determination that the defendants were guilty of the crimes charged in the indictment.
5
In May 1985, BancPLUS owned land in the Houston area that was causing it substantial losses. In order to improve its financial performance, BancPLUS decided to sell the Houston property and employed James Rash and Neil Freese to locate a purchaser. Rash and Freese eventually contacted Hal Pettigrew, a land speculator who expressed interest in buying the Houston property for the stated price of $46 million. Pettigrew, however, indicated that his willingness to purchase the Houston property was conditioned on BancPLUS's agreement to buy a tract of property in return.
6
After considering several pieces of property in Pettigrew's portfolio, Rash and Freese expressed interest in 200 acres of undeveloped land in the Dallas area. Although the Dallas property was featured in Pettigrew's portfolio, he was not the owner. Once it became clear that BancPLUS was interested in the Dallas property, however, Pettigrew paid the owner of the land--Lintex Land--$150,000 in earnest money toward his acquisition of the Dallas property.
7
On May 28, 1986, Schnitzer, Barber, Freese, Rash, Ross, and Pettigrew toured the Dallas property by helicopter. Immediately after the tour, the defendants met with Pettigrew to discuss the proposed conditional sale. During this meeting, Pettigrew stated that the asking price for the Dallas property was $26 million.
8
To determine if that price was reasonable, BancPLUS spoke to developers of adjacent property about the development potential of the Dallas property, hired an engineering firm to investigate utility and flood plain issues, and investigated zoning and other issues regarding future development. As a result of this investigation, BancPLUS concluded that the property was a desirable investment, in part because it was located near both the Dallas-Fort Worth airport and a planned interstate highway and was zoned for a mix of commercial and residential development. The defendants also believed that BancPLUS would benefit from owning the Dallas property rather than the Houston property because the Dallas real estate market was faring better than its Houston counterpart.
9
To complete its due diligence, BancPLUS obtained an appraisal of the Dallas property from an experienced and accredited appraiser, Robert Brandt. This appraisal indicated that the property was worth $35 million. Although Pettigrew paid for this appraisal and Brandt was not listed in BancPLUS's records as an approved appraiser, Brandt had appraised the property for others and had consistently valued it at $35-36 million.
10
After BancPLUS determined that Pettigrew had the financial ability to make a 20% down payment on the Houston property from his personal funds and was a creditworthy borrower, Rash and Freese negotiated the conditional sale with Pettigrew. Pettigrew, through his Cal-Tex corporation, agreed to purchase the Houston property for $46 million with a $9 million down payment. In return, BancPLUS, through a subsidiary, agreed to purchase the Dallas property from Scott's Cattle for $26 million with a $15 million down payment. Pettigrew was the sole representative of Scott's Cattle during these negotiations.
11
In reality, however, Scott's Cattle was Pettigrew's representative in the sale of the Dallas property. Before closing, Scott's Cattle, a corporation previously created by Pettigrew's lawyer, Ray Williamson, agreed to act as Cal-Tex's (and thus ultimately Pettigrew's) agent in the purchase and resale of the Dallas property. In addition, Scott's Cattle obtained Pettigrew's purchase rights in the Dallas property by assignment. This agency or nominee relationship between Scott's Cattle and Pettigrew was never formally disclosed to BancPLUS or any of its representatives. Nevertheless, Williamson once asked Pettigrew why he needed Scott's Cattle to act as his nominee in the sale of the Dallas property and Pettigrew responded by stating: "They tell me I need one." At trial, Williamson testified that he believed Pettigrew was referring to BancPLUS when he made this statement.
12
As the closing neared, those responsible for handling various aspects of the transaction for BancPLUS began asking questions about Pettigrew's involvement in the sale of the Dallas property. For example, Bruce Merwin, the lawyer in charge of simultaneously closing both transactions for BancPLUS, questioned BancPLUS officials, including defendants Ross and Barber, about whether "Pettigrew or Scott Cattle Company [should] be designated as the [s]eller" of the Dallas property. He also sent Ross and Barber a memorandum stating that the $26 million asking price was "approximately $6 million in excess of fair market value." In addition, Eric Schumann, an accountant at BancPLUS, and Peter Hensley, the BancPLUS director responsible for overseeing the accounting for these transactions, also asked Ross and Barber whether Pettigrew was the seller of the Dallas land. Ross responded to these inquiries by stating that Pettigrew was not the seller of the Dallas property and by discouraging additional queries about Pettigrew's relationship to Scott's Cattle.
13
On June 13th, Scott's Cattle purchased the Dallas land from Lintex Land for $13 million. Three days later, the sale of the Houston property by BancPLUS to Cal-Tex for $46 million and the purchase of the Dallas property by BancPLUS from Scott's Cattle for $26 million closed simultaneously. At the closing, Pettigrew provided BancPLUS with an affidavit that stated: "I am not an officer, director, or shareholder of Scott's Cattle Company. Additionally, there are no agreements or understandings under which I have a right to become an officer, director, or shareholder in Scott's Cattle Company." Thus, Pettigrew's affidavit, while true, did not rule out his participation in other legal arrangements giving him a financial interest in the sale of the Dallas property.
14
The BancPLUS records relating to the conditional sales were then placed in closing binders. Although these binders did not reveal that Pettigrew was the seller of the Dallas property, they did contain documents tracing BancPLUS's circular funding of Cal-Tex's down payment on the Houston property. The payment instructions in these binders indicated that the $15 million down payment by BancPLUS was wired to Texas National Title, a company owned, like BancPLUS, by Century Corporation. Texas National Title in turn wired the down payment to an account for Scott's Cattle at Texas Commerce Bank. Scott's Cattle then immediately wired $9 million of this $15 million deposit to a Cal-Tex account at Texas Commerce Bank. Finally, this $9 million was then wired back to Texas National Title, which in turn wired the money to BancPLUS as the Cal-Tex down payment on the Houston property.
15
The documents in the closing binders also revealed that Scott's Cattle had purchased the Dallas property and then immediately sold it to BancPLUS. These records did not, however, reveal that Scott's Cattle had purchased the Dallas property for $13 million. Further, although this sale price was listed in records located at Texas National Title, it was not a matter of public record.
16
After these transactions closed, the financial condition of BancPLUS appeared to be significantly improved. BancPLUS had reduced its exposure on its real estate holdings and had replaced burdensome property with potentially profitable property in a better real estate market. Moreover, because BancPLUS's accountants believed that Pettigrew was not the seller of the Dallas property based on Ross's statements and Pettigrew's affidavit, they recorded a profit from the sale of the Houston property. Thus, from an accounting point of view, the sale of the Houston property had generated a profit that made BancPLUS profitable for the first time in its history.
17
By mid-1987, however, BancPLUS's financial outlook had dimmed considerably. Cal-Tex defaulted on its loan for the Houston property, and BancPLUS was forced to foreclose on the land. As a result, the profit that BancPLUS had recorded on the sale could not be realized. Examiners from the Federal Home Loan Bank Board (FHLBB), moreover, were conducting a yearly audit of BancPLUS at this time. Based on their review of the circular funding instructions and the Pettigrew affidavit, the auditors suspected that Pettigrew was involved in the sale of the Dallas property and that BancPLUS had improperly accounted for the conditional sales under Financial Accounting Standards Board (FASB) 66. After the defendants arranged for the examiners to review records held by Texas National Title, the examiners determined that Pettigrew was the seller of the Dallas property, that a profit could not be booked on the related transactions, and that the profit recorded by BancPLUS would have to be reversed.
18
The events unfolding at BancPLUS eventually attracted the attention of the Resolution Trust Corporation (RTC). During his discussions with the RTC, Barber stated that he knew Pettigrew "had to have something to do with" the sale of the Dallas property, but that he believed the sale of the Houston property and the purchase of the Dallas property were separate from an "accounting standpoint."
II. Procedural History
19
The investigations by federal banking regulators led to the convening of a grand jury. In an effort to fend off criminal charges, Schnitzer elected to testify. Although he did not admit that he knew Pettigrew was the seller of the Dallas property, Schnitzer testified that he, like Barber, had been "suspicious" of Pettigrew's role in the sale of that property.1 Schnitzer's testimony, however, did not have the desired effect, for the grand jury indicted the defendants.
20
At trial, the government presented numerous and shifting theories of why the defendants should be found criminally liable for their roles in negotiating, approving, and accounting for the sale of the Houston property and the purchase of the Dallas property. The defendants rested at the close of the government's case and together moved for a judgment of acquittal on all counts. The district court denied this motion, and the jury then convicted the defendants on the four counts contained in the indictment.
21
After the verdict, the defendants renewed their joint motion for judgment of acquittal and, in the alternative, moved for a new trial. The district court granted this motion and acquitted each defendant on all charges because of insufficient evidence. With respect to the false entry count, the district court stated that the validity of the conviction turned on "whether the government has shown beyond a reasonable doubt that [the] defendants knew of the falsity of Pettigrew's affidavit and of his involvement with Scott's [Cattle]." Because the district court found that the government failed to prove beyond a reasonable doubt that the defendants knew that Pettigrew was the seller of the Dallas property, it granted each defendant an acquittal on the false entry count. With respect to the misapplication of funds and bank fraud counts, the district court concluded that the government's evidence failed to show beyond a reasonable doubt that the sale of the Houston property in exchange for the purchase of the Dallas property was a sham as the indictment charged. Instead, the district court believed the evidence before the jury demonstrated that these conditional sales constituted "a legitimate value-for-value transaction."
22
In the alternative, the district court also ordered a new trial on all counts. The district court justified this decision on the grounds that the verdict, even if supported by sufficient evidence, was nevertheless against the great weight of the evidence and that the government placed undue emphasis on an erroneous understanding of the relevant accounting regulations governing the savings and loan industry in 1986.
III. Discussion
A. False Entry
23
To establish a false entry in violation of 18 U.S.C. § 1006,2 the government must prove: 1) that BancPLUS was a lending institution authorized by and acting under the laws of the United States; 2) that the defendants were officers, agents, or employees of BancPLUS; 3) that the defendants knowingly and willfully made, or caused to be made, a false entry concerning a material fact in a BancPLUS book, report, or statement; and 4) that the defendants acted with the intent to injure or defraud BancPLUS or any of its officers, auditors, examiners, or agents. United States v. Parks, 68 F.3d 860, 865 (5th Cir.1995); see also United States v. Shunk, 113 F.3d 31, 34 (5th Cir.1997) (holding that materiality is an element of a § 1006 offense notwithstanding the Supreme Court's decision in United States v. Wells, 519 U.S. 482, 117 S.Ct. 921, 137 L.Ed.2d 107 (1997), which held that materiality is not an element of an 18 U.S.C. § 1014 offense).
24
The defendants contend that the government failed to prove that BancPLUS's records contained a false statement either because these records accurately reflected all of the information known by the defendants or because the recognition of profits on the sale of the Houston property was consistent with federal banking regulations. In addition, the defendants assert that even if BancPLUS's records contained a false statement, they did not cause this entry to be made. Finally, the defendants claim that absent proof of causation, there is no basis for finding that they acted with the requisite intent.
25
In response, the government first contends that either the recognition of profits from the sale of the Houston property, in violation of BancPLUS accounting policies, or the omission from the closing binders of Pettigrew's financial interest in the Dallas Property, constituted the false entry of material fact. See Parks, 68 F.3d at 865 (stating that a "false entry can be ... an omission of material information").3 The government maintains that the defendants caused this false entry by failing to disclose to BancPLUS's accountants that Pettigrew was the seller of the Dallas property. To complete its first theory of false entry, the government asserts that the defendants purposely withheld this information to deceive federal bank examiners as to the profitability of BancPLUS because they knew that BancPLUS's accountants would not book an immediate profit on the sale of the Houston property if told of Pettigrew's true role in the sale of the Dallas property.
26
To prove this theory of false entry, the government introduced evidence that the defendants knew that Pettigrew was the seller of the Dallas property. To begin with, the government's witnesses testified that the defendants knew that Pettigrew had conditioned his purchase of the Houston property (through Cal-Tex) on BancPLUS's agreement to purchase a parcel of property in return. In addition, the government demonstrated that the defendants negotiated solely with Pettigrew regarding BancPLUS's purchase of the Dallas property. Based on these facts alone, Barber and Schnitzer admitted that they suspected that Pettigrew was the seller of the Dallas property, and Schumann and Hensley told the defendants that Pettigrew could be viewed as the seller of the Dallas property. Further, based on his review of the closing documents, Merwin asked Ross and Barber if BancPLUS was purchasing the Dallas property from Pettigrew. In light of this evidence, the jury could have reasonably concluded that the defendants were more than suspicious of Pettigrew's role in the sale of the Dallas property and in fact knew, based on the structure of the transaction, Pettigrew's overarching involvement in the negotiations, and the questions raised by those reviewing the transaction for BancPLUS, that Pettigrew was the seller of that property.
27
Contrary to the defendants' suggestion, the affidavit provided by Pettigrew does not preclude a finding that Pettigrew was the seller of the Dallas property. Although the affidavit could reasonably be viewed as allaying the defendants' suspicions that Pettigrew was affiliated with Scott's Cattle as an officer, director, or shareholder, a jury could also reasonably conclude that this affidavit was itself suspicious because it did not rule out other legal arrangements whereby Scott's Cattle could operate as Pettigrew's nominee. Further, Williamson testified that Pettigrew stated that he was instructed to obtain a nominee for the sale of the Dallas property. The jury, like Williamson, could infer that it was the defendants, with whom Pettigrew had been negotiating, who instructed him to obtain a nominee. Thus, when considering all the evidence, a reasonable juror could conclude that the defendants knew that Pettigrew was the seller of the Dallas property.4
28
The evidence also supported the jury's finding that the defendants' failure to inform BancPLUS's accountants that Pettigrew was the seller of the Dallas property caused the accountants to record falsely a profit on the sale of the Houston property. Each BancPLUS accountant responsible for recording these transactions testified that he would not have recorded an immediate profit on the sale of the Houston property had he known that Pettigrew was the seller of the Dallas property. Thus, the government adequately proved that the defendants' concealment of Pettigrew's role in the sale of the Dallas property caused BancPLUS's accountants to record a profit that was false under BancPLUS's accounting policies. That this false statement of profits caused by the defendants' omission of Pettigrew's financial interest in the sale of the Dallas property "had the capacity to impair or pervert the functioning of" BancPLUS is not in dispute. Accordingly, the false entry was material, see Parks, 68 F.3d at 865, and the government's proof of the third element of false entry was sufficient.
29
Finally, there was sufficient evidence to support a finding that the defendants acted with the intent to deceive federal regulators when causing the false statement of profits by concealing Pettigrew's actual involvement in the transaction. The jury could have reasonably concluded that given BancPLUS's history of losing money, the appearance of profitability was necessary to stave off federal supervision of BancPLUS's operations or to obtain federal approval for certain transactions that the defendants were interested in pursuing. Therefore, under the government's first theory of false entry and conspiracy to commit false entry, there was sufficient evidence to sustain each defendant's conviction because the government adequately proved each element of these offenses.5
30
Had this been the only theory of false entry before the jury, then we would reinstate each defendant's conviction on this count and its conspiracy analog. But the government also argued that the booking of a profit on the sale of the Houston property constituted a false entry because the federal banking regulations in effect in 1986, which the government believed incorporated FASB 66, precluded a bank from recording a profit on the sale of real property when it financed the purchaser's down payment on that property. Consistent with this understanding of the relevant regulations, the government also tried the false entry count on the alternate theory that the defendants caused the violation of FASB 66 and the resulting false entry by concealing evidence of the circular funding of the Cal-Tex down payment on the Houston property from BancPLUS's accountants. The government maintained that the defendants withheld this information from the accountants in order to deceive regulators as to the profitability of BancPLUS because the defendants knew that the accountants would not record a profit on the transaction under FASB 66 if this information were revealed. Thus, the government contends that the evidence regarding the violation of FASB 66 was relevant because it demonstrated that the recognition of profits from the sale of the Houston property constituted a false entry and that the defendants concealed the circular funding from the accountants with the intent to deceive federal examiners.
31
The district court, however, correctly recognized that this second theory of false entry should not have been before the jury. To begin with, the government's position that BancPLUS's immediate recognition of profits violated federal banking regulations is foreclosed by our precedent. In United States v. Baker, we reviewed the "Regulatory Accounting Principles (RAP)" in effect in 1986 and determined that under these regulations, a bank could sell its real estate holdings, "finance[ ] 100% of [a purchaser's] loan[ ], and book[ ] a profit at the inception of the loan." 61 F.3d 317, 321 (5th Cir.1995). Accordingly, the government's second theory of false entry is "contrary to law" because it is " 'based on an erroneous view' " of the applicable federal regulations. See Griffin v. United States, 502 U.S. 46, 112 S.Ct. 466, 474, 116 L.Ed.2d 371 (1991) (quoting United States v. Townsend, 924 F.2d 1385, 1414 (7th Cir.1991)).
32
In addition, the evidence regarding the alleged violation of FASB 66 was also inadmissible because it was not introduced for the permissible purpose of showing the defendants' intent to deceive federal regulators. See United States v. Cordell, 912 F.2d 769, 775 (5th Cir.1990) (holding that evidence of violations of civil banking regulations may be introduced for the limited purpose of establishing a defendant's motive or criminal intent); United States v. Christo, 614 F.2d 486, 490-92 (5th Cir.1980) (holding that the government may not prove a criminal violation of federal banking law solely by proving a violation of a civil banking regulation). In order for this alleged violation to be probative of the defendants' intent to deceive federal regulators as to BancPLUS's profitability, the government needed to demonstrate that the defendants concealed the circular funding from BancPLUS's accountants because they knew that these accountants would interpret FASB 66 to preclude the recognition of an immediate profit on the sale of the Houston property. The government, however, failed to show that the defendants concealed the circular funding from BancPLUS's accountants, for the closing binders given to the accountants revealed that BancPLUS had funded the Cal-Tex down payment on the Houston property. More importantly, Hensley, the BancPLUS director in charge of accounting for the sale of the Houston property, unequivocally testified that he would have booked a profit on the sale of the Houston property even if the defendants had explicitly told him of the circular funding, notwithstanding the government's contention that this accounting treatment would have violated FASB 66. The evidence regarding the alleged regulatory violation, therefore, was not probative of the defendants' intent to deceive federal regulators as to BancPLUS's profitability. Accordingly, the government's evidence regarding FASB 66 should have been excluded.
33
The admission of this evidence, moreover, created the risk that its exclusion was designed to avoid. As a result of the government's failure to connect the evidence regarding FASB 66 to the defendant's intent to deceive federal banking regulators, the jury was left only with Carlton's testimony that the booking of a profit on the sale of the Houston property constituted a false entry because it purportedly violated FASB 66. The government, however, elicited this testimony after Hensley, another government witness, had already testified that the disclosure of the circular funding would not have precluded BancPLUS from recording a profit on the sale of the Houston property. Even more troubling is the fact that the government closed by telling the jury: "Now, if we're just going to ignore the regulations and the way the institutions are run, then we might as well give bankers a shoe box and let them just keep the money in it." These events indicate that the government "improperly focus[ed] the jury's attention to the prohibitions of" FASB 66 rather than the elements of a § 1006 violation and thus "impermissibly infected the very purpose for which the trial was being conducted." Christo, 614 F.2d at 492. Thus, by not excluding evidence of the alleged regulatory violation, the district court opened the door for the government's legally impermissible "attempt to bootstrap a ... civil regulatory violation into [a] ... felon[y]." Id. at 492.
34
The risk of a legally unsound false entry conviction was further heightened by the district court's failure to close the door on the government's second theory of false entry before submitting the case to the jury. By instructing the jury that the evidence of the violation of FASB 66 could not by itself support a conviction and was relevant, if at all, only as evidence of the defendants' intent, the district court could have minimized the potential impact of this irrelevant evidence. See, e.g., United States v. Brechtel, 997 F.2d 1108, 1115 (5th Cir.1993); Cordell, 912 F.2d at 775. The district court, however, refused the defendants' request for this limiting instruction. Further, by instructing the jury to disregard the evidence relating to FASB 66 in its entirety because of its irrelevance under the government's permissible and supported theory of false entry, the district court could have perhaps eliminated any possible prejudice to the defendants. See Griffin, 502 U.S. 46, 112 S.Ct. at 474; Christo, 614 F.2d at 492. The district court, however, also failed to take this step.
35
To its credit, the district court later recognized the troubling implications of its evidentiary rulings and the government's alternate theory of false entry and granted a new trial on this count. Under these circumstances, we hold that the district court did not clearly abuse its discretion in taking this action "in the interests of justice." Fed.R.Crim.P. 33; United States v. Robertson, 110 F.3d 1113, 1118 (5th Cir.1997) (noting that a district court's decision to grant a new trial is reviewed for a clear abuse of discretion). We therefore remand for a new trial on the government's permissible theory of false entry and the related conspiracy charge.
B. Misapplication of Funds
36
To establish a misapplication of BancPLUS funds in violation of 18 U.S.C. § 657,6 the government must prove: 1) that BancPLUS was authorized under the laws of the United States; 2) that the defendants were officers or directors of BancPLUS; 3) that the defendants knowingly and willfully misapplied BancPLUS funds; 4) that the defendants misapplied these funds with the intent to injure or defraud the institution. Parks, 68 F.3d at 863. The government can prove the necessary intent by " 'showing a knowing, voluntary act by [each] defendant, the natural tendency of which may have been to injure the bank even though such may not have been his motive.' " Id. (quoting United States v. Parekh, 926 F.2d 402, 408 (5th Cir.1991)).
37
The defendants contend that the government failed to prove that they misapplied BancPLUS funds. Relying on our decision in Beuttenmuller, they argue that the government failed to prove a criminal misapplication because BancPLUS sold burdensome property, reduced its real estate holdings, and obtained something of value--the Dallas property--in exchange for the $26 million purchase price and the $15 million down payment. The government, on the other hand, argues that BancPLUS's purchase of the Dallas property for $26 million constituted a criminal misapplication of BancPLUS funds because the defendants knew that Scott's Cattle had paid only $13 million for the property a few days before.
38
In Beuttenmuller, Shamrock Savings, like BancPLUS, owned burdensome real estate--the Tanglewood property. 29 F.3d at 975. Shamrock decided to sell the Tanglewood property because it was causing the savings and loan substantial losses. The Southmeadow Joint Venture, which was formed by Larry Gill and Richard Billings, expressed interest in purchasing the Tanglewood property. At that time, Gill and Billings were also operating the Mansfield 150 Joint Venture to develop some real estate known as the Mansfield property, which had an appraised value of over $4 million and an equity value of approximately $1.8 million.7 Just as Pettigrew, through Scott's Cattle, conditioned the Cal-Tex purchase of the Houston property on BancPLUS's agreement to buy the Dallas property, Gill and Billings, through the Southmeadow Joint Venture, conditioned their agreement to purchase the Tanglewood property on Shamrock's agreement to buy a 45% share in the Mansfield 150 Joint Venture, which owned nothing but the Mansfield property. Id. at 975-76.
39
Shamrock agreed to the conditional sales and the parties established a circular funding arrangement identical to the one in this case. Shamrock agreed to purchase a 45% share of the Mansfield 150 Joint Venture for $753,000. In exchange, the Southmeadow Joint Venture agreed to purchase the Tanglewood property for $2.725 million with a 20% down payment of $555,000. Gill and Billings then returned $555,000 of the $753,000 Shamrock payment to Shamrock as Southmeadow Joint Venture's down payment on the Tanglewood property. Id. at 975-77.
40
Like BancPLUS, Shamrock recorded an immediate profit on the sale of its property. Id. at 977. As in this case, however, Shamrock later foreclosed on the real estate it sold when the purchaser defaulted on its loan. Id. at 978.
41
As a result of their roles in this transaction, Gill and Billings were indicted. Gill was charged with aiding and abetting bank fraud and the misapplication of Shamrock funds. Beuttenmuller, the lawyer responsible for closing the transaction for Shamrock, was charged with conspiracy to commit bank fraud. Both were tried before a jury, and both were convicted. Id.
42
On appeal, this court reversed their convictions reasoning that Shamrock's purchase of a 45% interest in the Mansfield Joint Venture and its circular funding of the Southmeadow Joint Venture down payment on the Tanglewood property could not constitute a criminal misapplication of funds or bank fraud unless "Shamrock Savings effectively gave Gill and Billings the down payment money" for the purchase of the Tanglewood property. Id. at 979. But as the court noted, Shamrock did not provide Gill and Billings this down payment money as a gift. Instead, by investing in the Mansfield 150 Joint Venture, Shamrock acquired a 45% interest in the Mansfield property. Id. at 979-80. Under these circumstances, criminal liability for bank fraud and misapplication turned on whether "the Mansfield property had no value" or the value of this property "was so low that the transaction was essentially a sham designed to cover the fact that Shamrock Savings was gratuitously providing Gill and Billings with the down payment money." Id. at 980.
43
The court concluded that a reasonable juror could not find beyond a reasonable doubt that the transaction was a sham. In exchange for its $753,000 cash payment, Shamrock obtained a 45% interest in property with an appraised value of over $4 million and approximately $1.8 million in equity value. Thus, the record in Beuttenmuller clearly indicated that the sale of the Mansfield property to Shamrock was not part of a "criminal venture" because it was "within the range of a value-for-value transaction." Id.
44
Given the factual parallels between this case and Beuttenmuller, we find that the defendants' convictions for misapplication cannot stand unless the government's evidence sufficiently demonstrates that BancPLUS's payment of $26 million for the Dallas property was outside the range of a value-for-value transaction. Notwithstanding the fact that the price that Scott's Cattle paid for the Dallas property was not a matter of public record and the absence of evidence indicating that anyone who knew of this price provided it to the defendants, the government argues that BancPLUS's $26 million purchase price was not within the range of a value-for-value transaction because the defendants knew that Scott's Cattle had paid only $13 million for this property. In support of its contention that the defendants were aware of the Scott's Cattle purchase price, the government points to evidence in the record that Century Corporation, which owned BancPLUS, also owned Texas National Title, where the records documenting the Scott's Cattle purchase price were located. To show that the defendants had access to the records at Texas National Title, the government notes that Carlton testified on cross examination that the defendants arranged for her to have access to the records at Texas National Title upon her request.8 From these two pieces of evidence, the government contends that the jury could reasonably infer that the defendants gained access to the records and Texas National Title and discovered Scott's Cattle's $13 million purchase price.
45
For this inference to be a reasonable one, and not the result of unguided speculation, the government needed to provide the jury with at least two pieces of additional evidence: 1) testimony or corporate documents demonstrating that the defendants could have taken certain steps to obtain for themselves the records at Texas National Title documenting Scott's Cattle's $13 million purchase price for the Dallas Property; and 2) testimony indicating that the defendants were likely to have taken these steps in the three days following Scott's Cattle's purchase of the Dallas property from Lintex Land. The government, however, never asked its witnesses from Texas National Title whether the defendants, by virtue of their positions at BancPLUS or Century Corporation, had or were given access to the records at Texas National Title documenting the price Scott's Cattle paid for the Dallas property. Likewise, the government failed to elicit testimony explaining why the defendants would have sought these records in the three days preceding the simultaneous closings on BancPLUS's sale of the Houston property and purchase of the Dallas property. We therefore hold that the government failed to prove sufficiently that the defendants knew, at the time BancPLUS purchased the Dallas property for $26 million, that Scott's Cattle was selling this property for a $13 million profit.
46
Consequently, there were only two pieces of evidence before the jury establishing the value of the Dallas property at the time of BancPLUS's purchase. On the one hand, Merwin's memorandum, which was sent to Ross and Barber, indicated that the $26 million purchase price was $6 million over fair market value. On the other hand, Brandt's appraisal, which was furnished to the defendants, suggested that the Dallas property was worth $35 million. Although the government argues that the jury could discredit this appraisal because it was paid for by Pettigrew, this argument ignores the fact that Brandt's prior appraisals on the Dallas property clearly indicated that Pettigrew's involvement did not affect Brandt's valuation. Thus, the evidence before the jury established that BancPLUS knew that the Dallas property had a fair market value between $20 and $35 million and agreed to the $26 million price after performing due diligence. Under these circumstances, a reasonable juror could not conclude that a purchase price of $26 million was outside the range of a value-for-value transaction.
47
In the alternative, the government, focusing solely on the purchase of the Dallas property, argues that the $6 million portion of the $15 million down payment that was not used to fund the Cal-Tex down payment on the Houston property represents a separate misapplication. We do not dispute that there may be circumstances where a large down payment will constitute a misapplication even when part of a value-for-value transaction. The government, however, did not prove a criminal misapplication in this case simply by demonstrating that the defendants, in order to secure Pettigrew's purchase of the Houston property, provided him with a $15 million rather than a $9 million down payment on the Dallas property. To impose criminal liability under these circumstances would punish the defendants for taking the steps necessary to sell BancPLUS's nonperforming property and reduce its real estate holdings. For the portion of the BancPLUS down payment that was not used to fund the Cal-Tex down payment on the Houston property to constitute a criminal misapplication of BancPLUS funds, the government was obligated to prove that this excess funding was itself a sham. Cf. id. at 980 (requiring proof that value was not received in exchange for value given).9
48
Although the government does not expressly argue that BancPLUS did not receive value in exchange for the additional $6 million, it implies that the defendants knew, or had reason to believe, that Pettigrew, through Cal-Tex, was unlikely to return this money in the form of loan payments on the Houston property. Cf. Parekh, 926 F.2d at 407 (stating that a loan is a sham "if there was little likelihood or expectation that the named debtor would repay") (quotations omitted). The evidence, however, shows that the defendants investigated Pettigrew's financial condition before selling the Houston property to Cal-Tex and determined that Pettigrew had the resources, independent of the proceeds of the sale of the Dallas property, to make this purchase and to make him a good credit risk. Accordingly, without additional evidence indicating that Pettigrew was unlikely to repay the BancPLUS loan, a reasonable juror could not conclude that the large down payment was a sham rather than a necessary component of a value-for-value transaction. Cf. id. (holding that proof of the debtor's ability to repay the loan will not necessarily preclude a finding that the loan was a sham when there is additional evidence suggesting that the borrower is nevertheless unlikely to repay).
49
In conclusion, we hold that the evidence was insufficient to sustain the defendants' convictions for misapplying BancPLUS funds under either of the government's theories. We therefore affirm the district court's decision to acquit each defendant on the charges that he conspired to misapply BancPLUS funds and misapplied BancPLUS funds. Beuttenmuller, 29 F.3d at 980 ("Because the government has failed to provide sufficient evidence that the object of the conspiracy was illegal, we reverse Beuttenmuller's conviction for conspiracy.").
C. Bank Fraud
50
To establish bank fraud in violation of 18 U.S.C. § 1344(1),10 the government must prove: 1) that the "defendant[s] engage[d] in ... a pattern or course of conduct designed to deceive [BancPLUS], a federally chartered or insured institution, into releasing property;" and 2) that the defendants acted with the "intent to victimize [or injure BancPLUS] by exposing it to actual or potential loss." United States v. Stavroulakis, 952 F.2d, 686, 694 (2d Cir.1992).11
51
The defendants contend that the government's evidence was insufficient to show that they acted with the requisite intent because the purchase of the Dallas property was a value-for-value transaction. In response, the government once again argues that the purchase of the Dallas property was a sham that caused BancPLUS an actual loss of $13 million--the difference between the prices paid by BancPLUS and Scott's Cattle. The government maintains that the evidence was sufficient to show that the defendants negotiated and approved the purchase of the Dallas property with the intent to injure BancPLUS because they knew of Scott's Cattle's purchase price.
52
As we have noted, however, the government failed to prove that the defendants knew that Scott's Cattle purchased the Dallas property for $13 million. Consequently, the government also failed to prove that the defendants acted with the intent to injure BancPLUS by causing it a $13 million actual loss. In fact, because BancPLUS's purchase of the Dallas property was a value-for-value transaction, the evidence indicates that the risk of loss associated with BancPLUS's purchase of the Dallas property was the risk of overpayment inherent in every decision to acquire valuable real estate for value.12 We therefore also find that the government failed to show that the purchase of the Dallas property exposed BancPLUS to a risk of loss sufficient to support criminal liability for bank fraud. Cf. Beuttenmuller, 29 F.3d at 981 (implying that the risk of overpayment in a value-for-value transaction is insufficient to sustain a conviction for bank fraud because this type of transaction is not a "criminal venture").
53
In the alternative, the government contends that the circular funding of Pettigrew's down payment on the Houston property exposed BancPLUS to a potential loss by elevating the risks associated with this otherwise lawful transaction. As we discussed in connection with our analysis of the government's proof of misapplication, a bank's circular funding of a down payment on bank property may lead to criminal liability if bank officials know or have reason to believe that the purchasing party will be unable to repay its loan. In such cases, a risk of loss exists because the bank is likely to reacquire costly property. Saks, 964 F.2d at 1519. Further, insofar as a bank provides a purchaser with funds exceeding a 20% down payment on bank property but requires only a 20% down payment notwithstanding the likelihood that this purchaser will default, there is a greater risk associated with the circular funding because the bank is unlikely to see the return of the excess funds in the form of loan payments.
54
These risks, however, were not present in this case because BancPLUS determined that Pettigrew could have paid the down payment on the Houston property with funds unrelated to the proceeds of the sale of the Dallas property and was a creditworthy borrower. Thus, from a risk perspective, it was immaterial whether the down payment funds came from the sale of the Dallas property or whether Pettigrew transferred the funds from his bank account to BancPLUS and then immediately replaced these funds with the BancPLUS down payment on the Dallas property. Consequently, the risk of default associated with the sale of the Houston property to Pettigrew was no different than the risk of default that accompanies every loan properly made to a creditworthy individual. Thus, we also find that the government failed to show that the circular funding of the Cal-Tex down payment on the Houston property exposed BancPLUS to a risk of loss sufficient to support criminal liability for bank fraud. Cf. Beuttenmuller, 29 F.3d at 981 (voiding a conviction for bank fraud notwithstanding the fact that he defaulted on his loan from the bank that circularly funded his down payment on the purchase of bank real estate); Parekh, 926 F.2d at 407 (suggesting that additional evidence regarding the risk of default is necessary to establish bank fraud in these circumstances); United States v. Bridges, 820 F.Supp. 475, 476 (W.D.Mo.1993) (acquitting the defendant of bank fraud because "[i]f there was a risk [of loss] suggested in the present case, it cannot be classified as high risk, or anything demonstrably more hazardous than the risk of a normal loan.").13 Because the government failed to provide sufficient evidence regarding BancPLUS's exposure to an actual or potential loss, we affirm the district court's decision to acquit the defendants on the charges of conspiring to commit bank fraud and committing bank fraud. Beuttenmuller, 29 F.3d at 980 ("Because the government has failed to provide sufficient evidence that the object of the conspiracy was illegal, we reverse Beuttenmuller's conviction for conspiracy.").
IV.
55
For the foregoing reasons, we REVERSE the judgment of acquittal for each defendant on the false entry count and the related conspiracy charge, AFFIRM the district court's decision to grant each defendant a new trial on the false entry count and its conspiracy counterpart, REMAND for a new trial on these two charges, and AFFIRM the judgment of acquittal for each defendant on the misapplication of funds and bank fraud counts and the related conspiracy charges.
1
This testimony was admitted into evidence at trial
2
This statute provides, in pertinent part:
Whoever, being an officer, agent, or employee of ... any lending [institution] ... authorized or acting under the laws of the United States, or any institution ... the accounts of which are insured by the Federal Deposit Insurance Corporation, ... with the intent to defraud any such institution ..., or to deceive any officer, auditor, examiner, or agent of any such institution or of [any] department or agency of the United States, makes any false entry in any book, report, or statement of or to any such institution ... shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
18 U.S.C. § 1006.
3
The indictment in this case specified that the omission of Pettigrew's financial interest in the sale of the Dallas property constituted the false entry. This omission and the resulting false statement of profits are merely flip sides of the same coin. Accordingly, our analysis of the government's proof of causation and intent under its first theory of false entry applies equally to either articulation of the false entry
4
The defendants also contend that the evidence did not support an instruction on deliberate ignorance and that they are therefore entitled to a new trial. We disagree. As the government notes, there was evidence that would allow a jury to conclude that the defendants in fact knew that Pettigrew was the seller of the Dallas property or that the defendants deliberately avoided learning that Pettigrew was the seller by refusing to determine if Scott's Cattle was his nominee or agent when confronted with the questioning by Schumann, Hensley, and Merwin and the obviously incomplete affidavit. Under these circumstances, a deliberate ignorance instruction was not improper. See United States v. Chen, 913 F.2d 183, 192 (5th Cir.1990)
5
The defendants do not contest that the evidence of a conspiracy was sufficient. Instead, they argue that they agreed to pursue, and acted in furtherance of, a lawful business objective
6
This statute provides:
Whoever, being an officer, agent, or employee of ... any lending [institution] ... authorized or acting under the laws of the United States or any institution ... the accounts of which are insured by the Federal Deposit Insurance Corporation, willfully misapplies any moneys, funds, credits, securities, or other things of value belonging to such institution ... shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
18 U.S.C. § 657.
7
As the term is used in Beuttenmuller, equity value is calculated by subtracting the debts owed on a piece of property from its appraised value. 29 F.3d at 980 n. 15
8
The defendants elicited this testimony to show that they cooperated with the FHLBB investigation
9
This theory of fraud could also be used, although not on the facts of this case, to demonstrate that the circular funding in an otherwise facially valid value-for-value transaction constituted a criminal misapplication of funds
10
In relevant part, the broad language of this statute imposes criminal liability on "[w]hoever knowingly executes, or attempts to execute, a scheme or artifice to defraud a financial institution." 18 U.S.C. § 1344(1)
11
This statement of the elements of a § 1344 offense is a succinct summation of our holdings on this subject. See, e.g., United States v. Saks, 964 F.2d 1514, 1518 (5th Cir.1992) (defining a "scheme to defraud" to include "any false or fraudulent pretenses or representations intended to deceive others in order to obtain something of value, such as money, from the institution to be deceived" and stating that the "requisite intent to defraud is established if the defendant acted knowingly and with the specific intent to deceive, ordinarily for the purpose of causing some financial loss to another or bringing about some financial gain to himself"); see also United States v. Barakett, 994 F.2d 1107, 1111 (5th Cir.1993) (holding that a "knowing execution of [a] scheme[ ] causing [a] risk of loss--rather than actual loss--to the institution, can be sufficient to support [a] conviction"); Parekh, 926 F.2d at 408 (holding that the "intent to defraud" element, in the context of a false entry charge, "is proven by showing a knowing, voluntary act by the defendant, the natural tendency of which may have been to injure the bank even though such may not have been his motive.") (quotations omitted)
12
The government did not argue that this transaction posed a risk of loss because BancPLUS needed the down payment funds on the Dallas property to satisfy other obligations and, in light of our holding that the transaction was not a sham, could not argue that the purchase of the Dallas property constituted bank fraud because it precluded the use of these funds for legitimate banking purposes. See Parekh, 926 F.2d at 408
13
The government also argues that Carlton's testimony that unspecified conduct by the defendants exposed BancPLUS to civil sanctions was sufficient to prove BancPLUS's exposure to a potential loss. See Parekh, 926 F.2d at 408. We reject this argument because the jury had no basis for connecting this testimony with the government's theories of bank fraud. In fact, given its context, this statement likely refers to the purported impropriety of BancPLUS's recording a profit on the sale of the Houston property in light of the circular funding rather than the propriety of the circular funding itself under federal banking regulations
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-6277
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
THOMAS NEIL PICKETT,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Wilmington. James C. Fox, Senior
District Judge. (7:04-cr-00047-F-1)
Submitted: August 26, 2009 Decided: September 1, 2009
Before TRAXLER, Chief Judge, and GREGORY and SHEDD, Circuit
Judges.
Dismissed by unpublished per curiam opinion.
Thomas Neil Pickett, Appellant Pro Se. Steve R. Matheny,
Assistant United States Attorney, Eric David Goulian, OFFICE OF
THE UNITED STATES ATTORNEY, Raleigh, North Carolina, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Thomas Neil Pickett seeks to appeal the district
court's order treating his Fed. R. Civ. P. 60(b) motion as a
successive 28 U.S.C.A. § 2255 (West Supp. 2009) 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) (2006); 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)
(2006). 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 Pickett has
not made the requisite showing. Accordingly, we deny a
certificate of appealability and dismiss the appeal.
Additionally, we construe Pickett’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
2
obtain authorization to file a successive § 2255 motion, a
prisoner must assert claims based on either: (1) 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; or (2) a new rule of constitutional law, previously
unavailable, made retroactive by the Supreme Court to cases on
collateral review. 28 U.S.C.A. § 2255(h) (West Supp. 2009).
Pickett’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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Dismissed and Memorandum Opinion filed November 12, 2004
Dismissed and Memorandum Opinion filed November 12,
2004.
In The
Fourteenth Court of
Appeals
____________
NO. 14-04-00272-CV
____________
LOUISA STUART PARKER,
Appellant
V.
HATTIE PARKER and ROBERT PARKER, II, Appellees
On Appeal from the
311th District Court
Harris County, Texas
Trial Court Cause
No. 02-51774
M E M O R A N D U M O P I N I O N
This is an appeal from a judgment signed October 31, 2003.
On October 12, 2004, appellant filed an unopposed motion to
dismiss the appeal because the trial court signed a final order in appellant=s suit to modify the parent-child
relationship on September 24, 2004, to which all parties agreed. Appellant asserts that this order resolved
all issues of controversy in the appeal.
See Tex. R. App. P. 42.1. The motion is granted.
Accordingly, the appeal is ordered dismissed.
PER CURIAM
Judgment rendered and Memorandum
Opinion filed November 12, 2004.
Panel consists of Justices
Anderson, Hudson, and Seymore.
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398 F.3d 863
Everett HADIX; et al., Plaintiffs-Appellants,v.Perry M. JOHNSON; Barry Mintzes; Charles Anderson; William F. Grant; Dale Foltz; Daniel Trudell; Duane Sholes; John Jabe; James Pogats; Roy Rider; Charles Ustess; Don P. Leduc; Robert Brown, Jr.; Graham Allen; Elton I. Scott; Pam Withrow; Frank Elo, Warden; Marjorie Van Ochten; and John Prelesnik, Defendants-Appellees.
No. 03-1068.
United States Court of Appeals, Sixth Circuit.
Argued: June 15, 2004.
Decided and Filed: February 25, 2005.
ARGUED: Elizabeth R. Alexander, National Prison Project, Washington, D.C., for Appellants. Leo H. Friedman, Office of the Attorney General, Lansing, Michigan, for Appellees. ON BRIEF: Elizabeth R. Alexander, National Prison Project, Washington, D.C., Patricia A. Streeter, Ann Arbor, Michigan, Michael J. Barnhart, Detroit, Michigan, for Appellants. Leo H. Friedman, A. Peter Govorchin, Office of the Attorney General, Lansing, Michigan, for Appellees.
Before: KRUPANSKY,* RYAN, and COLE, Circuit Judges.
OPINION
RYAN, Circuit Judge.
1
The plaintiffs appeal the district court's calculation of attorney fees under the Prison Litigation Reform Act of 1995 (PLRA), Pub.L. No. 104-134, 110 Stat. 1321 (codified in scattered sections of the U.S.Code). We must decide whether attorney fees under the PLRA should be computed according to the hourly rate authorized by the Judicial Conference for the payment of court-appointed counsel or on the rate that historically has actually been paid to appointed counsel in PLRA cases. For the reasons that follow, we shall REVERSE and REMAND.
I.
2
The facts are not in dispute. In 1980, inmates at a Michigan prison filed suit under 42 U.S.C. § 1983 alleging various constitutional violations. The parties entered into a consent decree, which was approved by and made an order of the federal district court. Surprising as it may be, to this day, 24 years after the suit was filed, the plaintiffs' attorneys are still monitoring the defendants' compliance with the decree and, by order of the district court, are still being paid attorney fees. The propriety of this state of affairs is not before us.
3
In 1996, Congress enacted the PLRA, which, among other things, places a cap on attorney fees in prisoner civil rights litigation. Under the PLRA, attorney fees in such cases may not be "greater than 150 percent of the hourly rate established under section 3006A of Title 18 for payment of court-appointed counsel." 42 U.S.C. § 1997e(d)(3). Section 3006A, also known as the Criminal Justice Act (CJA), establishes the maximum allowable fees for court-appointed counsel representing indigent defendants in federal criminal cases and authorizes the Judicial Conference of the United States to increase these fees by taking into account such factors as inflation and prevailing hourly rates. 18 U.S.C. § 3006A(d)(1) (West Supp.2004).
4
In September 2000, the Judicial Conference's Committee on Defender Services proposed to increase the hourly rate for court-appointed counsel from $75 to $113 for fiscal year 2002. The Judicial Conference approved the committee's recommendation and submitted a budget request to Congress based on the new rate. However, due to budget constraints, the hourly rate of $113 was never implemented. Based on available funds, the hourly rate actually paid to appointed counsel was $75 for work performed up to May 1, 2002, and $90, thereafter.
5
The plaintiffs filed a motion for attorney fees and costs incurred from January 1 to June 30, 2002. The plaintiffs' attorneys calculated their fees at a rate of $169.50 per hour, or 150 percent of $113, which was the rate authorized by the Judicial Conference and requested of Congress in the Conference's 2002 budget proposal. The defendants opposed the motion, arguing that the rate should be based not on the amount authorized by the Judicial Conference, but on the lower amount actually being paid to court-appointed counsel at the time. Specifically, the defendants claimed that the maximum allowable fee for work performed prior to May 1, 2002, was $112.50, or 150 percent of $75, and for work performed after May 1, 2002, the maximum allowable fee was $135, or 150 percent of $90.
6
The district court ruled in favor of the defendants, calculating the plaintiffs' attorney fees at a rate of $112.50 per hour for work performed prior to May 1, 2002, and $135 per hour for work performed thereafter. The plaintiffs appealed.
II.
7
We review a district court's interpretation of a statute de novo. Riley v. Kurtz, 361 F.3d 906, 910-11 (6th Cir.), cert. denied, ___ U.S. ___, 125 S.Ct. 169, 160 L.Ed.2d 156 (2004).
III.
8
The plaintiffs argue that attorney fees under the PLRA should be calculated using the hourly rate authorized by the Judicial Conference for court-appointed counsel under § 3006A rather than on the amount actually appropriated by Congress. The plaintiffs argue that the plain language of § 3006A gives the Judicial Conference sole authority to set the hourly rate without any ratification by Congress. Thus, according to the plaintiffs, the amount actually budgeted by Congress to pay court-appointed counsel is irrelevant to a determination of the hourly rate authorized by the Judicial Conference under § 3006A. The plaintiffs also argue that their interpretation of the PLRA is consistent with Congress's intent. By tying the PLRA rates to the reasonable market rate as determined by the Judicial Conference, say the plaintiffs, the fee provisions of the PLRA serve the dual purpose of discouraging frivolous litigation while ensuring that meritorious claims are litigated. Accordingly, the plaintiffs claim that they should be compensated at an hourly rate of $169.50, or 150 percent of the maximum hourly rate authorized under § 3006A.
9
The defendants maintain that attorney fees under the PLRA should be calculated using the hourly rate as it has been "implemented," that is, the rate supported by congressional appropriations to the federal courts and actually paid to court-appointed counsel. The defendants concede that the Judicial Conference has the authority to establish the hourly rate of compensation for court-appointed counsel under § 3006A, but they claim that the federal courts do not consider such rates to be approved until Congress provides adequate funding for those rates. The defendants claim that the plain language of the PLRA supports their position. Specifically, they point to § 1997e(d), which states that attorney fees under the PLRA shall not be "greater than 150 percent of the hourly rate established under section 3006A of Title 18 for payment of court-appointed counsel." 42 U.S.C. § 1997e(d)(3) (emphasis added). According to the defendants, the phrase "established ... for payment" should be interpreted to mean the rate actually paid to court-appointed counsel, rather than the rate authorized by the Judicial Conference. Finally, the defendants claim that it would be unfair to force them to pay attorney fees for PLRA litigation at a higher rate than is actually paid to court-appointed counsel under the CJA.
10
This case presents a question of statutory interpretation, the first canon of which is that we begin with the language of the statute itself. Walker v. Bain, 257 F.3d 660, 666 (6th Cir.2001). If we can discern an unambiguous and plain meaning from the language of the statute, we must enforce it according to its terms. Id. at 667.
11
The PLRA places the following cap on attorney fees:
12
No award of attorney's fees in [prisoner civil rights litigation] shall be based on an hourly rate greater than 150 percent of the hourly rate established under section 3006A of Title 18 for payment of court-appointed counsel.
13
42 U.S.C. § 1997e(d)(3). Section 3006A provides for court-appointed counsel in certain cases and authorizes the Judicial Conference to establish rates of compensation for such counsel:
14
Hourly rate. — Any attorney appointed pursuant to this section or a bar association or legal aid agency or community defender organization which has provided the appointed attorney shall, at the conclusion of the representation or any segment thereof, be compensated at a rate not exceeding $60 per hour for time expended in court or before a United States magistrate judge and $40 per hour for time reasonably expended out of court, unless the Judicial Conference determines that a higher rate of not in excess of $75 per hour is justified for a circuit or for particular districts within a circuit, for time expended in court or before a United States magistrate judge and for time expended out of court. The Judicial Conference shall develop guidelines for determining the maximum hourly rates for each circuit in accordance with the preceding sentence, with variations by district, where appropriate, taking into account such factors as the minimum range of the prevailing hourly rates for qualified attorneys in the district in which the representation is provided and the recommendations of the judicial councils of the circuits. Not less than 3 years after the effective date of the Criminal Justice Act Revision of 1986, the Judicial Conference is authorized to raise the maximum hourly rates specified in this paragraph up to the aggregate of the overall average percentages of the adjustments in the rates of pay under the General Schedule made pursuant to section 5305 of title 5 on or after such effective date. After the rates are raised under the preceding sentence, such maximum hourly rates may be raised at intervals of not less than 1 year each, up to the aggregate of the overall average percentages of such adjustments made since the last raise was made under this paragraph.
15
18 U.S.C. § 3006A(d)(1) (West Supp.2004).
16
We find no ambiguity in these provisions and hold that attorney fees under the PLRA should be based on the hourly rate for court-appointed counsel that is authorized by the Judicial Conference, rather than on the rate that is actually paid to such counsel. The language of § 1997e(d) states that the hourly rate for attorney fees in prisoner civil rights litigation shall not be "greater than 150 percent of the hourly rate established under section 3006A of Title 18 for payment of court-appointed counsel." 42 U.S.C. § 1997e(d)(3). The defendants urge the court to interpret the phrase "hourly rate established ... for payment" to mean an hourly rate that is funded by Congress and that is actually paid to court-appointed counsel. However, the defendants' interpretation of § 1997e(d) is at odds with the plain meaning of both § 1997e(d) and the statute it cross-references, § 3006A.
17
Section 3006A authorizes the Judicial Conference to establish reasonable rates of compensation for court-appointed counsel limited only by prevailing hourly rates, the recommendations of the judicial councils of the circuits, and adjustments tied to the General Schedule. 18 U.S.C. § 3006A(d)(1) (West Supp.2004). The statute contains no reference to congressional appropriations or to rates of compensation that are actually paid to court-appointed counsel. While congressional appropriations may place a practical limitation on the amount actually paid to court-appointed counsel, there is no language in § 3006A that expressly limits the Judicial Conference's discretion to set rates based on budgetary constraints. If Congress had wanted attorney fees under the PLRA to be based on the amount of money budgeted for payment of court-appointed counsel, it could easily have used such language rather than cross-referencing § 3006A.
18
Moreover, in the absence of express statutory language, there is no inherent reason why attorney fees under the PLRA should be limited by the amount budgeted to pay court-appointed counsel under the CJA. Attorney fee awards in prisoner civil rights litigation are paid from the pockets of unsuccessful defendants whether they be private individuals or government entities; such fees are not paid from funds set aside by Congress to compensate court-appointed counsel under the CJA. There is no logical reason to limit fee awards in such cases to the amount of money set aside to fund the CJA.
19
Even if the language of § 1997e(d) and § 3006A could be considered ambiguous, there is nothing in the record to indicate that Congress intended to base the rate for PLRA attorney fees on the actual amount budgeted for court-appointed counsel. In their discussion of the legislative record, the defendants correctly state that Congress was concerned about the high cost of prisoner civil rights litigation. However, the record does not reveal whether anyone proposed to control such costs by basing PLRA attorney fees on congressional appropriations for implementing the CJA. As stated above, the language of the statute indicates that Congress intended the PLRA rate to be determined by the Judicial Conference.
IV.
20
For the foregoing reasons, we conclude that the maximum allowable attorney fees under the PLRA should be based on the amount authorized by the Judicial Conference, not the amount actually paid to court-appointed counsel under the CJA. Accordingly, the maximum allowable hourly rate for attorney fees under the PLRA is $169.50, or 150% of $113. The judgment of the district court is REVERSED and the case REMANDED so that the district court may award attorney fees to the plaintiffs based on an hourly rate no greater than $169.50.
Notes:
*
The Honorable Robert B. Krupansky concurred in this opinion prior to his death on November 8, 2004
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19 So.3d 269 (2007)
EX PARTE RANDY F. WILLIS.
No. CR-07-0106.
Court of Criminal Appeals of Alabama.
November 19, 2007.
Decision of the alabama court of criminal appeal without published opinion. Mandamus petition dismissed.
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37 Cal.Rptr.3d 795 (2006)
135 Cal.App.4th 1008
1231 EUCLID HOMEOWNERS ASSOCIATION, Plaintiff and Appellant,
v.
STATE FARM FIRE AND CASUALTY COMPANY, Defendant and Respondent.
No. B175242.
Court of Appeal, Second District, Division Three.
January 20, 2006.
*796 Law Offices of Steven L. Zelig and Steven L. Zelig, Los Angeles, for Plaintiff and Appellant.
Crandell, Wade & Lowe, James L. Crandall, Edwin B. Brown, Michael J. McGuire and Matthew F. Batezel, Irvine; Robie & Matthai and James R. Robie, Los Angeles; LHB Pacific Law Partners and Clarke B. Holland, Emeryville, for Defendant and Respondent.
CROSKEY, Acting P.J.
In this case, the appellant, 1231 Euclid Homeowners Association (HOA), a homeowners association of a 10-unit residential condominium, made a claim to its insurer for damages resulting from the January 17, 1994 Northridge earthquake. HOA's building was insured by the respondent, State Farm Fire and Casualty Company (State Farm), under a policy with coverage of $1,191,600 for earthquake damage, subject to a 10 percent deductible ($119,160). The appellate record reflects that, after a preliminary inspection by representatives of both State Farm and HOA, it was determined that the damage sustained was largely cosmetic and totaled an amount that was well below the deductible under the State Farm policy. Thereafter, HOA withdrew its claim and State Farm closed its file. Nearly eight years later, after the passage of Code of Civil Procedure, section 340.9[1], HOA filed this action against State *797 Farm alleging claims for breach of contract and breach of the implied covenant of good faith and fair dealing.
On State Farm's motion for summary judgment, the trial court concluded that there was no dispute of material fact with respect to HOA's 1994 withdrawal of its claim. The court held that such withdrawal excused State Farm from further performance of any coverage obligation under the policy and precluded any claim for breach of contract or bad faith. State Farm's motion was granted and judgment was thereafter entered. After a review of the record on appeal, we conclude that the trial court's analysis and ruling were correct and we will therefore affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND[2]
On January 17, 1994, HOA was the homeowner's association managing a 10-unit two story condominium building at 1231 Euclid Street, Santa Monica, California. State Farm had issued a policy (covering the period April 1, 1993 to April 1, 1994) that provided earthquake coverage of $1,191,000, subject to a 10 percent deductible.
As of the date of the earthquake, HOA's building had a number of deferred maintenance problems. For example, prior to any damage that might have been caused by the earthquake, the building needed new plumbing and had experienced leaks and water pressure problems; also, the exterior of the building needed to be painted. In addition, there were problems involving balcony leaks, concrete cracks and uneven flooring.[3]
About 12 hours after the earthquake, building inspectors from the City of Santa Monica inspected HOA's building and determined that it was structurally safe. They placed a "green tag" on the property. Within a few days after the earthquake, a structural engineer retained by HOA's management company found no structural damage to the building, but did discover a number of stucco and plaster cracks in the walls and ceilings.[4] Shortly thereafter, a *798 retired building inspector (who was the father of one of the residents living in HOA's building) also inspected the building and found no significant structural damage. He also found, however, that there was a substantial amount of cosmetic damage.
In late January 1994, HOA solicited at least five bids to make repairs to the building. None of those bids exceeded $13,000. On January 27, 1994, HOA submitted a claim of loss to State Farm. State Farm was advised by two officers of HOA that its president, Elaine Baker, was the "contact person" for the claim. On February 7, 1994, State Farm confirmed this in a letter addressed to Elaine Baker but mailed to HOA's management company.[5] In order to facilitate repairs to the building, HOA obtained a Small Business Administration (SBA) loan which, after an SBA estimator had apparently visited the property, was set in the sum of $30,200.[6]
Because she had been informed by the engineer who had inspected the property that the damage to the building did not include structural damage and was apparently largely cosmetic (e.g., multiple ceiling and wall cracks) and had received the same information from the retired building inspector, Elaine Baker formed the belief that the total damage to the building would not exceed the 10 percent deductible. After discussing it with the other tenants,[7] she advised State Farm, on or about February 18, 1994, that the previously submitted claim was withdrawn. State Farm confirmed such withdrawal by a letter dated March 2, 1994.[8] The fact *799 and import of such withdrawal was not disputed or even questioned until this action was filed nearly eight years later, in late December 2001.
The HOA building had also received a preliminary damage inspection by Don Robison, an independent adjuster hired by State Farm. This inspection was conducted by Robison on or about January 29, 1994.[9] When he arrived at 1231 Euclid, he asked an HOA board member to show him all of the earthquake damage to HOA's building. She did so. They went around the building exterior, hallways and stairs looking for earthquake damage. Robison inspected only three condominium units because he was advised that those were the only units with any earthquake damage. If he had been told there was a claim of earthquake damage in the other units, he would have inspected those units as well.
Robison's opinion of the extent of the damage to HOA's building was consistent with the opinions which HOA had obtained. The earthquake damage was primarily cosmetic and involved stucco cracks and drywall cracks around windows and doors. Robison did not see sufficient cosmetic damage to the wall finishes at 1231 Euclid to suggest there was any structural damage beneath the walls. He knew that if there had been serious hidden structural damage there would also have been more serious cosmetic damage to the building's finishes. In other words, if there had been broken wood framing behind the drywall, there would also have been extensive damage to the drywall itself.
Based upon Robison's observations of cosmetic damage and his extensive experience in assessing damaged residential buildings, he formed the opinion that the earthquake did not cause structural damage to the HOA building and the cosmetic damage could be repaired by patching and painting. He admitted, however, that he had only "perused" the building, meaning that he "walked around the property, looking at both the exterior and some interior corridors and hallways and stairs." He wrote down in his claim log that he thought the repairs could be made for "+/-$10,000." He did not write a complete estimate because he felt that the total damage was far less than the $119,160.00 deductible. Board member Joan McCrea told Robison she was not sure HOA was going to proceed with the claim. However, Ms. McCrea asked him to communicate directly with HOA's president, Elaine Baker.
HOA went ahead and used its SBA loan to make the various repairs needed by the building. As already noted (see fn. 6, ante), such repairs did not exceed $56,640.25, which was less than half of the deductible under the policy. Neither HOA, nor its management company, nor any of its board members or residents ever contacted State Farm again until for nearly eight (8) years, after the passage of *800 section 340.9. An examination of the record reflects that HOA's apparent first contact with State Farm (after withdrawing its claim in 1994) was on or about January 8, 2002, when it caused the insurer to be served with this lawsuit (which had been filed on December 28, 2001, just three days before the expiration of the one-year revivor period created by section 340.9).[10] On February 11, 2002, State Farm advised HOA by letter that the matter was being referred to its litigation counsel.[11]
After filing an answer asserting a number of affirmative defenses, including the allegation that HOA's damages did not *801 exceed the policy's deductible clause and that HOA had failed to comply with the "Duties in the Event of Loss" provisions of the policy,[12] State Farm responded to HOA's complaint by filing a motion for summary judgment. As suggested by the record that we have just summarized, State Farm's primary contentions were that (1) HOA had in fact withdrawn its claim in early 1994 within a few weeks after originally submitting it and thus State Farm, as a matter of law, could not be liable for breach of either an express or an implied term of the policy; and, (2) in any event, the damages actually sustained by HOA as a result of the Northridge earthquake were well below the 10 percent deductible set out in the policy.
HOA responded to State Farm's detailed evidentiary showing by presenting a number of declarations, to which the trial court sustained State Farm's multiple evidentiary objections, and a "Separate State of Undisputed Facts" that was conclusionary and unsupported by any admissible or relevant evidence. Indeed, as the trial court put it, "[HOA's] separate statement of additional facts consists of eight legal conclusions asserting that State Farm breached the insurance contract and the implied covenant of good faith and fair dealing, and acted with malice, oppression and fraud [ ]. No competent evidence is set forth in [HOA's] separate statements."[13]
On January 12, 2004, the trial court granted State Farm's motion for summary judgment. HOA has prosecuted this timely appeal. The parties assert the same contentions and arguments that were presented to the trial court, as summarized above.[14]
DISCUSSION
1. Standard of Review
In addressing this appeal, we apply the settled principles of summary judgment review.
Summary judgment is granted when no triable issue exists as to any *802 material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c); Villa v. McFerren (1995) 35 Cal.App.4th 733, 741, 41 Cal.Rptr.2d 719.) After examining documents supporting a summary judgment motion in the trial court, this court independently determines their effect as a matter of law. (Hulett v. Farmers Ins. Exchange (1992) 10 Cal.App.4th 1051, 1057-1058, 12 Cal.Rptr.2d 902.) The moving party bears the burden of establishing, by declarations and evidence, a complete defense to plaintiff's action or the absence of an essential element of plaintiff's case. (Westlye v. Look Sports, Inc. (1993) 17 Cal.App.4th 1715, 1726-1727, 22 Cal.Rptr.2d 781; Code Civ. Proc., § 437c, subd. (f)(1).) The moving party must demonstrate that under no hypothesis is there a material factual issue requiring a trial. (Flowmaster, Inc. v. Superior Court (1993) 16 Cal.App.4th 1019, 1026, 20 Cal.Rptr.2d 666.) When the moving party makes that showing, the burden of proof shifts to the opposing party to show, by responsive separate statement and admissible evidence, that one or more triable issues of fact exist. (Lorenzen-Hughes v. MacElhenny, Levy & Co. (1994) 24 Cal.App.4th 1684, 1688, 30 Cal.Rptr.2d 210; Code Civ. Proc., § 437c, subd. (n)(1).) An issue of fact becomes one of law and loses its "triable" character if the undisputed facts leave no room for a reasonable difference of opinion. (Preach v. Monter Rainbow (1993) 12 Cal.App.4th 1441, 1450, 16 Cal.Rptr.2d 320.)
2. State Farm Did Not Breach Its Contractual Obligations Under The Policy
a. HOA Effectively Never Submitted A Claim On Which State Farm Was Required To Act
In its policy, State Farm undertook to provide coverage for any loss sustained by HOA by reason of earthquake, subject to a deductible of 10 percent. State Farm's obligation was also subject to a number of conditions. One of those conditions was that the insured provide prompt notice of the claimed loss, including a description of the lost or damaged property. In addition, the insured was required to provide a timely submission of a sworn statement of loss. Given the unrebutted evidence that State Farm was advised, on or about February 18, 1994, by HOA's president that the claim for which a notice had previously been given was withdrawn, neither of these conditions was ever met. Indeed, the voluntary withdrawal of a damage claim by an insured arguably has the same legal consequence as the failure to file any claim at all or, after filing a claim, the failure or refusal to provide to the insurer the information necessary to adjust the claim. (See e.g., Othman v. Globe Indemnity Co. (9th Cir.1985) 759 F.2d 1458, 1465.)
While the submission of a proper and timely notice and proof of loss may be subject to a "substantial compliance" standard (McCormick v. Sentinel Life Ins. Co. (1984) 153 Cal.App.3d 1030, 1046, 200 Cal.Rptr. 732) and even a predicate requirement of insurer prejudice (Scottsdale Ins. Co. v. Essex Ins. Co. (2002) 98 Cal.App.4th 86, 97, 119 Cal.Rptr.2d 62), the total failure to comply with the notice and proof of loss conditions will excuse insurer liability due to the failure of a condition precedent. (See Hickman v. London Assurance Corp. (1920) 184 Cal. 524, 529, 195 P. 45; Hall v. Travelers Ins. Companies (1971) 15 Cal.App.3d 304, 308, 93 Cal.Rptr. 159.) A fortiori, where an insured submits no claim at all or, as in this case, voluntarily withdraws the claim less than 45 days after first giving notice of the claim to the insurer, *803 the insurer cannot be faulted for closing its file. The burden is on the insured to initiate and support a claim.
b. HOA's Voluntary Withdrawal Effectively Resolved Its Original Claim
This record clearly demonstrates that State Farm had every justification to conclude that HOA had independently determined that whatever damage its building may have sustained, it did not exceed the policy deductible. Certainly, this was entirely consistent with State Farm's own initial inspection of the property following the earthquake. For nearly eight years HOA apparently believed this to be true as it did nothing further after the February 1994 claim withdrawal until it filed this action in late December 2001. Although HOA alleges that State Farm had breached the contract of insurance, there is no factual basis for such a conclusion that is either alleged in HOA's complaint or supported by any admissible evidence submitted in opposition to State Farm's motion for summary judgment. This record reflects only that State Farm accepted HOA's claim withdrawal and took no further action. It did not at any time fail or refuse to provide demanded policy benefits. It simply closed its claim file at HOA's request.
In its complaint, HOA alleged only that State Farm failed to "adequately investigate" HOA's claim of damage. This alleged investigative failure led State Farm to deny the claim "as below the deductible." This is the sole factual basis alleged by HOA in support of its breach of contract claim. There is however, no record support for such allegations. Indeed, the record directly contradicts such a claim. It is undisputed that in less than 45 days after the Northridge earthquake, HOA had satisfied itself that its damages were well below the deductible and voluntarily withdrew the claim.[15] That act, which is clearly demonstrated by the record excused State Farm from any obligation to conduct further investigation of possible damage to the HOA property. These circumstances demonstrate that a claim was submitted and effectively resolved, to the apparent satisfaction of the parties and in accordance with the relevant terms (i.e., the deductible provisions) of State Farm's policy. As we have previously held, a claim resolved by the parties to an insurance contract ends the matter and it will not be given new life by the provisions of section 340.9. (See, e.g., Rosenblum v. Safeco Ins. Co. (2005) 126 Cal.App.4th 847, 858-859, 24 Cal.Rptr.3d 427.)
Thus, as of the date that HOA filed its complaint, State Farm was not in breach of the policy. Although HOA seems to argue otherwise, the passage of section 340.9 did not give or create any rights for HOA beyond a one-year window to file any claim it might otherwise have. As we explained in Rosenblum v. Safeco Ins. Co., supra, 126 Cal.App.4th at p. 858, 24 Cal.Rptr.3d 427, "[s]ection 340.9 did nothing more than reopen the filing window, for a one year period, to those otherwise viable cases that had become time barred. It did not impact or affect any *804 other defenses that an insurer might have to an insured's claim [e.g., a voluntary abandonment in light of policy limitations]. Indeed, to hold otherwise, as the foregoing authorities make clear, would risk subjecting section 340.9 to the constitutional infirmity of contractual impairment." (Italics added.)
Moreover, this record demonstrates that State Farm would sustain substantial prejudice as a result of HOA's voluntary withdrawal of its claim in February 1994 if now, after nearly eight years of silence, its resurrection in this lawsuit is allowed. While the "notice prejudice" rule is applicable in California and requires that an insurer must demonstrate substantial prejudice arising from an insured's failure to provide a timely notice and proof of loss (Downey Savings & Loan Assn. v. Ohio Casualty Ins. Co. (1987) 189 Cal.App.3d 1072, 1089, 234 Cal.Rptr. 835), the undisputed record in this case establishes such prejudice to State Farm. After HOA withdrew its claim, it spent up to $53,640 in making repairs to its building. The nearly eight year delay and the making of such repairs effectively denied to State Farm any opportunity to fully investigate the loss which HOA now argues is over 15 times greater than the amount it actually spent on repairs in 1994. As noted, HOA'S voluntary claim withdrawal terminated both State Farm's obligation and reason to conduct an appropriate investigation. Obviously, critical observations of the property, as it existed immediately after the earthquake, would be impossible nearly eight years after the fact. A number of the unit owners, who were living in the building in 1994, have sold their units and moved away and were replaced by persons who have no first hand knowledge of the damage allegedly sustained. Indeed, the individual declared to be the "person most knowledgeable" during discovery in this matter was one Robert Wakefield, who did not even live at 1231 Euclid at the time of the earthquake. As a result of these circumstances, it is clear that HOA's failure to provide a timely notice of claim and proof of loss[16] violated the terms of the policy's notice, cooperation and proof of loss provisions and State Farm was prejudiced thereby. The failure of those conditions precedent is a complete defense to HOA's breach of contract claim.
Section 340.9 did not create a new claim to which State Farm had some obligation to respond. It did not even purport to address any defense to a claim other than expiration of the applicable limitations period. In other words, it did nothing more than permit an insured, whose existing claim was time barred as of December 31, 2000, but otherwise viable, a new one-year period to file suit on that claim. But here, there was no viable claim to revive. It had been resolved by HOA's voluntary withdrawal which excused any further obligation on the part of State Farm. Thus, the insurer, as a matter of law, did not breach the policy and HOA cannot successfully allege or prove that it did.
3. State Farm Is Not Liable For Bad Faith
Since State Farm was not in breach of contract and owed no policy benefits to HOA, its failure to pay such benefits cannot serve as a basis for a claim for bad faith. As the Supreme Court has clearly held, "as the [ ] court [in Love v. Fire Ins. *805 Exchange (1990) 221 Cal.App.3d 1136, 271 Cal.Rptr. 246] noted, when benefits are due an insured, `delayed payment based on inadequate or tardy investigations, oppressive conduct by claims adjusters seeking to reduce the amounts legitimately payable and numerous other tactics may breach the implied covenant because' they frustrate the insured's right to receive the benefits of the contract in `prompt compensation for losses.' [Citation.] Absent that contractual right, however, the implied covenant has nothing upon which to act as a supplement, and `should not be endowed with an existence independent of its contractual underpinnings.' [Citation.]" (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 36, 44 Cal.Rptr.2d 370, 900 P.2d 619; italics added.)
As HOA could state no cause of action for breach of contract, it could not assert a claim for bad faith. The trial court properly granted summary judgment.
DISPOSITION
The judgment is affirmed. State Farm shall recover its costs on appeal.
WE CONCUR: KITCHING and ALDRICH, JJ.
NOTES
[1] Section 340.9 provides:
"(a) Notwithstanding any other provision of law or contract, any insurance claim for damages arising out of the Northridge earthquake of 1994 which is barred as of the effective date of this section solely because the applicable statute of limitations has or had expired is hereby revived and a cause of action thereon may be commenced provided that the action is commenced within one year of the effective date of this section. This subdivision shall only apply to cases in which an insured contacted an insurer or an insurer's representative prior to January 1, 2000, regarding potential Northridge earthquake damage.
"(b) Any action pursuant to this section commenced prior to, or within one year from, the effective date of this section shall not be barred based upon this limitations period.
"(c) Nothing in this section shall be construed to alter the applicable limitations period of an action that is not time barred as of the effective date of this section.
"(d) This section shall not apply to either of the following:
"(1) Any claim that has been litigated to finality in any court of competent jurisdiction prior to the effective date of this section.
"(2) Any written compromised settlement agreement which has been made between an insurer and its insured where the insured was represented by counsel admitted to the practice of law in California at the time of the settlement, and who signed the agreement" (hereafter, referred to as "section 340.9"; italics added.)
[2] The facts we recite are taken from the trial court's order and the evidentiary showing submitted by State Farm in support of its motion. HOA failed to present any admissible evidence contradicting the relevant facts and we treat them as established by this record.
[3] In July of 1993, the HOA had obtained a bid to perform some of these repairs in the amount of $13,496. This work was not completed prior to January 17, 1994.
[4] The engineer, one, Rodney B. Spears, apparently expressed his findings orally to the management company and later included them in a written report, dated April 1, 1994. He recommended a number of repairs.
[5] This letter provided:
"Dear Ms. Baker: ¶ This letter is to confirm your conversation with Don Robison [State Farm's assigned adjuster] on January 28, 1994 wherein it was agreed that you are the contact person for your Homeowners Association for the purpose of handling this claim. We will be unable to respond to each individual unit owner, but we will be happy to address any questions you may have. This will avoid confusion and duplication of effort and allow us to most effectively service the associations claim. ¶ I am the team leader responsible for correspondence and communication for this claim. If you have any questions, please call me at (818) 597-4700 extension 401. ¶ Please advise your association members to direct their inquiries through you. Thank you for your cooperation. I look forward to working with you...." ¶
No person, either resident or board member at HOA, or at HOA's management company, ever advised State Farm to the contrary.
[6] Subsequently, after this action was filed, HOA stated, in responses to interrogatories, that the total amount actually expended in repairs was $53,640.25. As State Farm emphasizes, this was less than one-half of the deductible under the policy.
[7] In her deposition taken in this matter on March 23, 2003, Elaine Baker testified: ¶ "Q. Now, you made the decision to withdraw the claim; is that correct? ¶ A. The board made all the decisions. I made no decisions. ¶ Q. Was there a board vote on the withdrawal? ¶ A. A board vote? You make it sound so much more formal than it was. I did nothing, absolutely nothing, without consulting all the other owners, not just the board. ¶ Q. Was there a board vote, to your recollection, on the issue of withdrawing the earthquake? ¶ A. I have no idea. If you mean did I phone the other owners and have them say, `Yes, that's okay to do'? Yes, I certainly did."
[8] The State Farm letter to Ms. Baker reads as follows:
"1231 Euclid Homeowners Association
c/o Ms. Elaine Baker President
1231 Euclid Ave. ¶ Santa Monica, Ca
90404
RE: Claim Number: 75-R040-412
Date of Loss: 01-17-94
Location: 1231 Euclid Ave.
"Dear Ms. Baker: ¶ This letter is to confirm your conversation with our adjuster Don Robison on February 18, 1994 in which you advised State Farm that the association wished to withdraw their claim for earthquake damage. ¶ We must advise you that your Condominium policy contains the following condition: ¶ 6. Legal Action Against Us. No one may bring legal action against us under this insurance unless: ¶ a. there has been full compliance with all of this insurance; and ¶ b. the action is brought within two years after the date on which the accidental direct physical loss occurred. But if the law of the state in which this policy is issued allows more than two years to bring legal action against us, that longer period of time will apply. ¶ If you have any questions, please feel free to contact me at the number below."
[9] HOA makes much of the fact that this was the first earthquake on which Mr. Robison worked. The record, however, demonstrates that Mr. Robison had extensive experience in assessing damage to residential buildings. During the 10 years prior to the Northridge earthquake, Mr. Robison had inspected, assessed damage to, and wrote damage estimates for many flood, hail, tornado and hurricane damaged properties. Prior to sending Mr. Robison out to adjust Northridge earthquake claims, he was given additional training in the adjustment of such claims.
[10] The record reflects that after the passage of section 340.9, but approximately 10 days prior to the end of the one-year revivor period, State Farm sent the following form letter to policyholders who had previously submitted Northridge earthquake claims (the record does not disclose that this letter was in response to any contact initiated by HOA):
"December 20, 2001
Jeanie Bedrosian
1231 Euclid HOA
C/O V. Paragon Companies
P.O. Box 2153
Santa Monica, CA 90407-2153
RE: Policy Number: XX-XX-XXXX-X
Claim Number: 75-R040-412
Date of Loss: January 17, 1994
Dear Ms. Bedrosian:
Because you have an open claim, we want you to know State Farm's position regarding the California Statute of Limitations. ¶ Last year the California Legislature enacted Code of Civil Procedure Section 340.9, which extended the Statute of Limitations for filing suit against an insurance company for damages arising out of the Northridge Earthquake. Under the terms of Code for Civil Procedures Section 340.9 the Statute of Limitations for suits involving earthquake damage will expire December 31, 2001. The provision also sets forth other conditions and limitations that may impact those cases subject to the new law. ¶ We are working to resolve your claim. While that process will continue, State Farm is not willing to further extend the Statute of Limitations for filing litigation against State Farm. ¶ This letter does not waive nor should you consider that it waives any of State Farm's legal rights. If you have questions about your legal options you should consult an attorney. ¶ Sincerely, State Farm Fire and Casualty Company."
[11] Following service of HOA's complaint in this matter, HOA sent the following letter to HOA counsel:
"February 11, 2002
Law Offices of Joshua H. Haffner
4222 Glencoe Ave Ste 102
Marina Del Rey CA 90292
RE: Your Client: 1231 Euclid Homeowners Association
Our Insured: 1231 Euclid Homeowners Association
Claim No.: 75-R040-412
Policy No.: XX-XX-XXXX-X
Loss Location: 1231 Euclid Street
Santa Monica, CA 90404
Date of Loss: January 17, 1994
"Dear Mr. Haffner:
"This letter is in response to your lawsuit served January 8, 2002. State Farm has reviewed this matter and determined that the insured requested that their claim be withdrawn in February 1994. This request was honored by State Farm and confirmed in our letter to the insured on March 2, 1994. To date we have received no additional information that is sufficient to evaluate the scope and amount of earthquake damages. ¶ We are also aware that litigation on this claim was recently served. State Farm is assuming that you have elected to pursue this matter through litigation. Therefore, the file will be closed effective the date of this letter. If you have any additional questions, please contact Jim Robie at Robie & Matthai, (213) 624-3062 or Clarke Holland at LHB Pacific Law Partners, (510) 841-7777. ¶ We are required by California Insurance Regulations, Section 2695.7(b)(3), to advise you that if you believe this claim, or any part of this claim, has been wrongfully denied or rejected, you may have the matter reviewed by the California Department of Insurance, Claims Service Bureau, 300 South Spring Street, Los Angeles, California 90013, telephone (800) 927-4357. ¶ Sincerely, ¶ STATE FARM FIRE AND CASUALTY COMPANY."
[12] Such provisions include a requirement of (1) timely notice of loss, (2) cooperation with respect to loss investigation and protection of property from further loss and (3) submission of a sworn "proof of loss" statement within 60 days after request by State Farm.
[13] The record reflects that State Farm's multiple objections to the declaration of John Hall, were overruled. In his declaration, Hall had purported to offer his opinion that the damage sustained by HOA building in the Northridge earthquake was not less than $750,000. The court's specific ruling that HOA presented no competent evidence in opposition to the summary judgment motion was correct. While it is true that in Hall's declaration he stated that in 1994 he was a general contractor and had been involved as a consultant "in excess of 300 Northridge earthquake claims" and considered himself very knowledgeable, he nowhere demonstrated any basis for his claimed expertise in identifying structural building damage or estimating the cost of its repair. He was not an engineer, but simply a general contractor who inspected an already repaired building nearly 10 years after the 1994 earthquake. Moreover, he provided nothing but unsupported conclusions amounting to gross speculation as to why he believed that the repairs he described (and for which he himself would not bid less than $750,000 to perform) were required to repair damage caused by the earthquake 10 years earlier. For example, he relied on a "mold report" for his conclusion that mold eradication work was required without explaining how mold was caused by the earthquake; and he made no effort to distinguish between damage caused by the earthquake and repairs required to remedy the admittedly numerous pre-earthquake conditions.
[14] We recognize that HOA has raised in its briefs a number of issues. However, in light of our conclusion, with respect to the dispositive issues of the effect of its claim withdrawal and failure to demonstrate a proof of loss in excess of the policy deductible, there is no need for us to reach or discuss these other matters.
[15] There are no allegations in HOA's complaint nor any supported argument on appeal, that HOA reached its decision about the extent of its damage in reliance upon any acts or misrepresentations of State Farm or its adjuster. Thus, we are not presented with circumstances such as those discussed in Vu v. Prudential Property & Casualty Ins. Co. (2001) 26 Cal.4th 1142, 1152-1153, 113 Cal.Rptr.2d 70, 33 P.3d 487 or Ward v. Allstate Ins. Co. (C.D.Cal.1997) 964 F.Supp. 307, 312, where the insured's delay in prosecuting a claim was held to be justified by the insured's demonstrated reasonable reliance on the insurer's misrepresentations as to the nature, extent or amount of the loss.
[16] The record reflects that HOA did not provide even a preliminary cost estimate supporting its "revived" damage claim until December 2003 (nearly 10 years after the earthquake) and this was included in its opposition to State Farm's summary judgment motion.
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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 7, 2019 Decided March 10, 2020
No. 18-5068
MICHAEL S. EVANS,
APPELLANT
v.
FEDERAL BUREAU OF PRISONS,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:16-cv-02274)
Ari Holtzblatt, appointed by the court, argued the cause as
amicus curiae in support of plaintiff-appellant. With him on
the briefs was Daniel S. Volchok.
Johnny H. Walker III, Assistant U.S. Attorney, argued the
cause for appellee. With him on the brief were Jessie K. Liu,
U.S. Attorney, and R. Craig Lawrence, Assistant U.S.
Attorney.
2
Before: MILLETT and KATSAS, Circuit Judges, and
SENTELLE, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
SENTELLE.
SENTELLE, Senior Circuit Judge: Michael Evans was a
federal prisoner when the underlying events leading to the
current litigation occurred. Evans was stabbed from behind
with a screwdriver in the prison dining hall. Later, Evans
submitted a Freedom of Information Act (“FOIA”) request to
the Federal Bureau of Prisons (the “Bureau”) seeking to
compel the release of records related to the screwdriver, as well
as surveillance footage of the episode. The Bureau was unable
to locate any responsive records related to the screwdriver and
withheld the surveillance footage asserting various FOIA
exemptions. After exhausting the administrative appeals
process, Evans filed suit in district court. The district court
granted summary judgment in favor of the Bureau. The court
held that the Bureau’s response to Evans’s request for records
related to the screwdriver was adequate, and that the Bureau
justified withholding the surveillance footage in full under
FOIA Exemptions (b)(7)(C) and (b)(7)(E). Evans filed the
instant appeal, and we appointed Amicus Curiae to argue on his
behalf.1
For the reasons that follow, we affirm the district court’s
grant of summary judgment insofar as it pertains to the
Bureau’s response to Evans’s request for records related to the
screwdriver. However, we vacate and remand the judgment to
1
Because appellant has fully adopted the briefs and arguments of the
amicus, we will throughout the opinion attribute those positions to
the appellant. We thank the amicus for his service to the court.
3
the district court as to the Bureau’s withholding of the
surveillance footage under Exemptions (b)(7)(C) and (b)(7)(E).
I. BACKGROUND
A. Facts and History
On May 2, 2013, while Evans was incarcerated at Federal
Correctional Institution (“FCI”) Gilmer in Glenville, West
Virginia, another inmate stabbed him multiple times with a
Phillips-head screwdriver in the prison dining hall. Following
that incident, Evans sued the United States under the Federal
Tort Claims Act (“FTCA”) and individual officers employed at
FCI Gilmer under 42 U.S.C. § 1983, alleging in both cases that
the screwdriver was FCI Gilmer property that the corrections
officers failed to properly secure. The Bureau disclaimed
ownership of the tool, and those suits were dismissed. J.A. 58;
Evans v. United States, No. 3:15-CV-64, 2016 WL 4581339, at
*2 (N.D. W. Va. Sept. 2, 2016) (“The modified screwdriver
used in the Plaintiff’s assault was not a [Bureau] tool.”); Evans
v. Officer Cunningham, No. 2:15-CV-60, 2016 WL 3951157,
at *6 (N.D. W. Va. July 20, 2016) (noting that the report and
recommendation from the magistrate showed that the
screwdriver was “a non-[Bureau] tool, not subject to [Bureau]
tool-control policies”).
While those lawsuits were pending, Evans submitted his
initial FOIA request to the Bureau seeking the following:
Names, numbers, and addresses to all
companies that shipped and/or delivered tools,
recreation equipment, maintenance equipment,
and machines to Federal Correctional
Institution–Gilmer in Glenville, West Virginia
26351, from January 2003, to, June 2013.
4
F.C.I.–Gilmer[’]s, Receiving and Departure
Logs for all tools, recreation equipment,
maintenance equipment, and machines shipped
and/or delivered to F.C.I.–Gilmer from January
2003, to, June 2013.
Names and pictures of all tools, recreation
equipment, maintenance equipment, and
machines shipped and/or delivered to F.C.I.–
Gilmer, from January 2003, to, June 2013.
A copy of the video footage of the May 02, 2013
incident of Michael Evans being assaulted in the
inmate dining area at F.C.I.–Gilmer.
J.A. 8–9. The Bureau responded that it would cost
approximately $14,320 to process Evans’s request. Id. at 10.
Due to the high cost, the Bureau allowed Evans the opportunity
to reformulate his request. Id.
Evans took advantage of that opportunity. In an apparent
attempt to narrow his request for records related to the
screwdriver, he included a picture of the tool and stated that
the screwdriver may have been a[] maintenance
accessory tool that came with recreation, or
maintenance equipment. I would like the name
of the company that made the tool, along with
the phone number and mailing address of the
company. I would like to know what is the tool
used for and what equipment it came with, and
when that equipment was delivered to F.C.I.
Gilmer in Glenville, WV 26351.
5
Id. at 38–39. Additionally, he again sought surveillance
footage of the incident. Id.
The Bureau contacted FCI Gilmer officials for assistance
in locating responsive materials. Id. at 43. This time, the
Bureau located the prison-surveillance footage but withheld it
from disclosure under FOIA Exemptions (b)(2), (b)(7)(C),
(b)(7)(E), and (b)(7)(F). Id. As to any records pertaining to the
screwdriver, the Bureau responded that, because the FCI
Gilmer officials did not recognize the screwdriver or know
from where it originated, they were “unable to ascertain what
records to search.” Id.
Evans appealed the Bureau’s decision to the Office of
Information Policy (“OIP”). OIP determined that the
surveillance footage was properly withheld under Exemptions
(b)(7)(C), (b)(7)(E), and (b)(7)(F). Id. at 51. It also stated that
the Bureau “does not have the capability to segregate images
potentially responsive to [Evans’s] request from the images of
third parties on video recordings.” Id. at 52. Thus, it justified
withholding the entire video under Exemption (b)(7)(C). Id.
As to the requests related to the screwdriver, OIP explained that
“FOIA does not require federal agencies to answer questions
or create records in response to a FOIA request, but rather is
limited to requiring agencies to provide access to reasonably
described, nonexempt records.” Id. Accordingly, OIP
affirmed the Bureau’s response to Evans’s requests. Id.
Evans filed this action in the district court. Evans claimed
that the Bureau’s response to his request for records related to
the screwdriver was inadequate because he did not ask the
Bureau to answer questions or conduct research but, instead,
reasonably described the records sought. Evans also objected
to the Bureau’s withholding the video footage. He argued that
none of the claimed exemptions applied, and that at least some
6
portion of the footage is segregable and that the Bureau must
possess the technological capability to segregate it.
The Bureau moved for summary judgment, relying on a
declaration filed by Sharon Wahl, a paralegal from the Beckley
Consolidated Legal Center at the Federal Correctional
Institution in Beckley, West Virginia. The district court first
determined that Evans’s request related to the screwdriver
“indeed call[ed] for responses to inquiries.” Evans v. Fed.
Bureau of Prisons, No. 16-2274, 2018 WL 707427, at *3
(D.D.C. Feb. 5, 2018). The district court emphasized that
Evans “expected the [Bureau] to identify [the screwdriver’s]
manufacturer, to provide the manufacturer’s phone number and
mailing address, to specify the tool’s use and to explain how
and when a particular screwdriver found its way to FCI
Gilmer.” Id. Thus, the district court upheld the Bureau’s
nondisclosure of records related to the screwdriver.
It then ruled that the Bureau properly withheld the footage
under Exemptions (b)(7)(C) and (b)(7)(E). As to Exemption
(b)(7)(F), however, the district court found that the Bureau
failed to justify withholding the footage under that exemption.
Id. at 6. Additionally, the court deferred to Wahl’s declaration
in holding that no portion of the video was segregable and, even
if it were, the Bureau lacks the technological capability to
segregate it. Id. Accordingly, the district court granted the
Bureau’s motion for summary judgment.
For the reasons that follow, we affirm the district court’s
ruling as to the screwdriver, but not as to the withholding of the
videotapes under Exemptions (b)(7)(C) and (b)(7)(E) and the
Bureau’s ability to segregate the footage. We take no issue
with the district court’s holding as to Exemption (b)(7)(F).
7
B. Legal Framework
As the Supreme Court stated in Department of Air Force
v. Rose, FOIA was enacted “to pierce the veil of administrative
secrecy and to open agency action to the light of public
scrutiny.” 425 U.S. 352, 361 (1976) (quoting Rose v. Dep’t of
Air Force, 495 F.2d 261, 263 (2d Cir. 1974)). However,
“Congress realized that legitimate governmental and private
interests could be harmed by release of certain types of
information.” FBI v. Abramson, 456 U.S. 615, 621 (1982).
Accordingly, FOIA exempts nine categories of records from
disclosure, 5 U.S.C. § 552(b), seeking “to establish a general
philosophy of full agency disclosure unless information is
exempted under clearly delineated statutory language,” NLRB
v. Sears, Roebuck & Co., 421 U.S. 132, 136 (1976) (quoting S.
Rep. No. 89-813, at 3 (1965)).
Relevant to this appeal, Exemption (b)(7) allows an
agency to withhold
records or information compiled for law
enforcement purposes, but only to the extent
that the production of such law enforcement
records or information . . . (C) could reasonably
be expected to constitute an unwarranted
invasion of personal privacy [or] . . . (E) would
disclose techniques and procedures for law
enforcement investigations or prosecutions, or
would disclose guidelines for law enforcement
investigations or prosecutions if such disclosure
could reasonably be expected to risk
circumvention of the law.
5 U.S.C. § 552(b)(7). Additionally, “[a]ny reasonably
segregable portion of a record shall be provided to any person
8
requesting such record after deletion of the portions which are
exempt under this subsection.” Id. § 552(b). “[N]on-exempt
portions of a document must be disclosed unless they are
inextricably intertwined with exempt portions.” Mead Data
Cent., Inc. v. U.S. Dep’t of Air Force, 566 F.2d 242, 260 (D.C.
Cir. 1977).
When an agency identifies responsive records but
withholds them under one of the FOIA exemptions, it bears the
burden of demonstrating that the records were properly
withheld. See Summers v. Dep’t of Justice, 140 F.3d 1077,
1080 (D.C. Cir. 1998). To meet this burden, the agency can
submit affidavits that “show, with reasonable specificity, why
the documents fall within the exemption.” Hayden v. Nat’l Sec.
Agency/Cent. Sec. Service, 608 F.2d 1381, 1387 (D.C. Cir.
1979).
Under FOIA, an agency is only obligated to release
nonexempt records if it receives a request that “reasonably
describes such records.” 5 U.S.C. § 552(a)(3)(A). “A request
reasonably describes records if ‘the agency is able to determine
precisely what records are being requested.’” Kowalczyk v.
Dep’t of Justice, 73 F.3d 386, 388 (D.C. Cir. 1996) (quoting
Yeager v. DEA, 678 F.2d 315, 326 (D.C. Cir. 1982)). In light
of FOIA’s pro-disclosure purpose, an agency has “a duty to
construe a FOIA request liberally.” Nation Magazine, Wash.
Bureau v. U.S. Customs Serv., 71 F.3d 885, 890 (D.C. Cir.
1995). Thus, an agency may not refuse to comply with a FOIA
request simply because the request is phrased in the form of a
question. See Yagman v. Pompeo, 868 F.3d 1075, 1081 (9th
Cir. 2017) (“The flaw of Yagman’s FOIA request is its
vagueness, not the way in which he framed it.”). Instead, the
agency should determine whether, construing the request
liberally, “it in fact has created and retained” responsive
9
records. Kissinger v. Reporters Comm. for Freedom of the
Press, 445 U.S. 136, 152 (1980).
If the agency determines that it does not possess any
records responsive to a FOIA request, it bears the burden of
demonstrating the adequacy of its search. See Reporters
Comm. for Freedom of the Press v. FBI, 877 F.3d 399, 402
(D.C. Cir. 2017). The agency meets its burden if it shows that
“it made a good faith effort to conduct a search for the
requested records, using methods which can be reasonably
expected to produce the information requested.” Oglesby v.
U.S. Dep’t of the Army, 920 F.2d 57, 68 (D.C. Cir. 1990).
Again, the agency may make this showing “by submitting ‘[a]
reasonably detailed affidavit, setting forth the search terms and
the type of search performed, and averring that all files likely
to contain responsive materials (if such records exist) were
searched.’” Reporters Comm. for Freedom of the Press, 877
F.3d at 402 (quoting Oglesby, 920 F.2d at 68).
II. SUMMARY JUDGMENT
We review the district court’s grant of summary judgment
de novo. Gallant v. NLRB, 26 F.3d 168, 171 (D.C. Cir. 1994).
Summary judgment may be granted only when the moving
party, in this case the Bureau, is able to show that there is “no
genuine dispute as to any material fact.” Fed. R. Civ. P. 56(a).
In this case, that would require the Bureau to establish beyond
factual dispute that its failure to produce responsive records
comes outside the mandate of FOIA either by virtue of the
nonexistence of the records or by a factually indisputable right
to protection under one of the statutory exemptions.
We will affirm the grant of summary judgment if, viewing
the record in the light most favorable to the nonmovant, there
are no genuine disputes of material fact and the movant is
10
entitled to judgment as a matter of law. Id. “[T]he vast
majority of FOIA cases can be resolved on summary
judgment.” Brayton v. Office of Trade Representative, 641
F.3d 521, 527 (D.C. Cir. 2011). In the FOIA context,
“[s]ummary judgment may be granted on the basis of agency
affidavits if they contain reasonable specificity of detail rather
than merely conclusory statements, and if they are not called
into question by contradictory evidence in the record or by
evidence of agency bad faith.” Gallant, 26 F.3d at 171 (quoting
Halperin v. CIA, 629 F.2d 144, 148 (D.C. Cir. 1980)).
Otherwise put, agency affidavits that are “‘relatively detailed
and non-conclusory, and . . . submitted in good faith’. . . are
accorded a presumption of good faith.’” SafeCard Servs., Inc.
v. SEC, 926 F.2d 1197, 1200 (D.C. Cir. 1991) (first alteration
in original) (quoting Ground Saucer Watch, Inc. v. CIA, 692
F.2d 770, 771 (D.C. Cir. 1981)).
III. ANALYSIS
A. Screwdriver Records
We first address appellant’s argument that the Bureau’s
response to the request for records related to the screwdriver
was inadequate because it reasonably described the records
sought and did not ask the Bureau to create new records or
answer questions. We disagree and affirm the decision of the
district court. Nothing in the record refutes the Bureau’s
repeated assertions that it knows nothing about the screwdriver
and has no records responsive to Evans’s demands.
Appellant argues that by framing the requests related to the
screwdriver as seeking answers to questions and thus refusing
to conduct a search in the first place, the Bureau shirked its
responsibility to conduct a search for the records under FOIA.
Appellant asserts that, even if the request was phrased as a
11
question, the Bureau may only refrain from producing
documents “if doing so would require creating a new record.”
Amicus Curiae Br. in Support of Plaintiff-Appellant at 34.
Further, appellant contends that the initial request and the
reformulated request should be construed together. Because
the Bureau estimated the cost to conduct a search in response
to his initial request, appellant argues that it necessarily
understood the request and believed responsive documents to
exist. Thus, his narrower reformulated request could have been
satisfied with production of the same types of records. Even
if Evans’s original and reformulated requests are read together,
they are insufficient.
While appellant correctly points out that the Bureau cannot
refuse to conduct a search simply because a request is framed
as a question, the more relevant issue, as noted above, is
whether Evans reasonably described documents that the
Bureau has in fact created and retained. See Kowalczyk, 73
F.3d at 388. This turns, at least in part, on whether the
screwdriver was prison property in the first place. But the
Bureau has claimed in this case and in prior related proceedings
that it did not own the screwdriver and that Evans’s
assumptions to the contrary are flawed. Appellee’s Br. at 11;
Evans, 2016 WL 4581339, at *2; Cunningham, 2016 WL
3951157, at *6.
In fact, when Evans included the picture of the screwdriver
in his reformulated request, the Bureau sent the photo to FCI
Gilmer officials who responded that they did not recognize the
screwdriver, leaving them “unable to ascertain what records to
search.” J.A. 43; Evans, 2016 WL 4581339, at *2;
Cunningham, 2016 WL 3951157, at *6. The request was thus
presented to professional employees of the Bureau who are
familiar with the subject area of the request, but those officials
were unable to determine what records to search with a
12
reasonable amount of effort. See Dale v. IRS, 238 F. Supp. 2d
99, 104 (D.D.C. 2002).
Moreover, even when the two requests are construed
together, the reality is that Evans’s reformulated request
fundamentally altered his initial request. In an effort to reduce
the costs of responding to his request, Evans abandoned his
broad requests for shipping logs, delivery logs, and
maintenance equipment information over a span of ten years.
Instead, he narrowed his request to seek only documents
specifically related to a particular screwdriver. Indeed, records
not containing information related to that screwdriver might
not have been considered responsive to Evans’s request. In
light of the Bureau’s affidavit stating that FCI Gilmer officials
did not recognize the screwdriver referenced above, it was
necessarily unable to produce responsive records.
Appellant has provided us with no reason to doubt the
veracity of the prison officials’ response, nor has he presented
anything to convince us that the screwdriver must have been
prison property. As far as we know, it is entirely plausible that
the prison officials did not recognize the screwdriver because
it was not prison property. Prisoners are capable of smuggling
contraband into prison, including weapons and other materials.
See, e.g., Bame v. Dillard, 637 F.3d 380, 385 (D.C. Cir. 2011)
(noting that “[s]muggling of money, drugs, weapons, and other
contraband is all too common an occurrence” in detention
facilities (quoting Bell v. Wolfish, 441 U.S. 520, 559–60 (1979)
(alteration in original))). Without any evidence beyond
unfounded claims speculating that the screwdriver was prison
property or that the Bureau’s response should not otherwise be
accorded the presumption of good faith, the Bureau’s efforts to
identify the screwdriver by contacting prison officials and its
statement that it was unable to conduct a search for responsive
records because the prison officials did not possess such a tool
13
are sufficient to support the grant of summary judgment. See
SafeCard Servs., Inc., 926 F.2d at 1200. Accordingly, we
affirm the district court’s judgment as it relates to Evans’s
request for screwdriver records.
B. Surveillance Footage
Next, we turn to appellant’s contention that the Bureau
failed to justify withholding the surveillance footage under
FOIA Exemptions (b)(7)(C) and (b)(7)(E), and that, even if
withholding was proper, at least some portion of the video was
segregable. On these points, we agree with appellant that the
Bureau failed to justify withholding the footage on this record.
Accordingly, we vacate the district court’s judgment as to those
issues and remand for further proceedings.
We begin the analysis of the Bureau’s claimed exemptions
regarding the entirety of the videotape with the underlying
principles stated above. That is, the congressional philosophy
in the adoption of FOIA favors disclosure, not concealment.
To exercise the exceptions warranted by the statute, the
government bears the burden of proving the applicability of the
statutory exemption. See Summers, 140 F.3d at 1080. With
respect to the claimed exemption under (b)(7)(C), in order to
be entitled to summary judgment, the Bureau needed to
establish beyond any genuine dispute that the disclosure of the
withheld records “could reasonably be expected to constitute
an unwarranted invasion of personal privacy.” 5 U.S.C.
§ 552(b)(7)(C) (emphasis added). As discussed above, an
agency claiming a FOIA exemption may carry this burden by
the production of affidavits. Hayden, 608 F.2d at 1387.
However, we remind the government that such “affidavits must
show, with reasonable specificity, why the documents fall
within the exemption.” Id. Further, we have long held that
“[t]he affidavits will not suffice if the agency’s claims are
14
conclusory, merely reciting statutory standards, or if they are
too vague or sweeping.” Id. The affidavit relied upon by the
Bureau fails on all counts. It lacks specificity; it is conclusory;
and it recites statutory language without demonstrating its
applicability to the information withheld.
More specifically, statutory Exemption (b)(7)(C) requires
that, to be exempted, information must “constitute an
unwarranted invasion of personal privacy.” 5 U.S.C.
§ 552(b)(7)(C). With respect to that claimed exemption, the
Bureau stated that the “footage contained the images of
approximately 70 or more other individuals” and, thus,
disclosure of the footage “may constitute an unwarranted
invasion of privacy.” J.A. 27 (emphasis added). This will not
do. To shelter otherwise responsive data under the protection
of Exemption (b)(7)(C) by the terms of the statute, the
government agency must show that the disclosure “could
reasonably be expected to constitute an . . . invasion of personal
privacy,” and that this invasion is “unwarranted.” 5 U.S.C.
§ 552(b)(7)(C). The language of the affidavit that the
disclosure of the video recording “may” constitute an
unwarranted invasion is far too vague and unspecific to remove
all factual issue as to whether it could reasonably be expected
to invade personal privacy and that such invasion would be
unwarranted.
So far as we know from the current affidavit, all
information that would be revealed is that seventy or so inmates
were eating a meal in a place where they were not only
expected to be, but were required by law to reside. It is true
that we have discouraged serial summary judgment motions
after the government’s first loss. See Maydak v. U.S. Dep’t of
Justice, 218 F.3d 760, 769 (D.C. Cir. 2000). We recognize,
however, that responding to a request for videotape rather than
printed data may have been a novel experience for the Bureau.
15
Therefore, it may be that on remand, the district court will
permit more flexibility than in the customary case. It is further
possible that the Bureau will be no more able to make a
showing entitling it to withholding than it has so far. That of
course leaves open the possibility that the court might grant a
summary judgment in favor of Evans. Unusual as it may be,
this may be the rare FOIA case that results in a trial in which
the court would have to find facts as to the applicability of the
exemptions.
If in possible further proceedings, the Bureau is able to
produce additional evidence supporting this claimed
exemption, it needs to do so with specificity and without
vagueness in such a fashion that the courts can say with
confidence that the statutory standard has been met. In other
words, as we stated above, the government may carry its
burden by the introduction of affidavits, but only if “affidavits
. . . show, with reasonable specificity, why the documents fall
within the exemption.” Hayden, 608 F.2d at 1387.
Even if we were to accept the Bureau’s current affidavit as
adequately bringing the document within the protection of this
exemption, we are still confronted with the vagueness of the
government’s claim of inability to segregate unprotected data.
As we discussed with the government at oral argument, if we
assume that the video record does constitute an unwarranted
invasion of privacy as to individuals in the record, it is not at
all clear from the government’s affidavit why it cannot
segregate the portions of the record that do not do so. More
specifically, we live in an era in which teenagers regularly send
each other screenshots from all sorts of video media.
Presumably, most of these teenagers have fewer resources than
the United States government. It is not at all clear why the
government could not at least isolate some screenshots that
16
would meet the same sort of segregability standards typically
applied to printed material.
The government further does not explain why it cannot by
use of such techniques as blurring out faces, either in the video
itself or in screenshots, eliminate unwarranted invasions of
privacy. The same teenagers who regale each other with
screenshots are commonly known to revise those missives by
such techniques as inserting cat faces over the visages of
humans. While we do not necessarily advocate that specific
technique, we do hold that the government is required to
explain why the possibility of some similar method of
segregability is unavailable if it is to claim the protection of the
exemption.
The Bureau’s affidavit supporting its claim to protection
of the data under Exemption (b)(7)(E) suffers from the same
shortcomings as the other exemption claim. The Bureau
argued that releasing the footage “would reveal the specific law
enforcement methods employed in responding [to] and/or
conducting the investigation into the prohibited conduct” and
would “demonstrate[] the location of video cameras.” J.A. 27.
Thus, prisoners could “modify[] their criminal behavior to
prevent detection and circumvent the methods law enforcement
officers use to discover the existence of and investigate the
conduct of prisoners.” Id.
We do not question the government’s good faith on this
subject. However, we do note its vagueness and lack of
specificity. For example, the affidavit does not even make
clear whether the location of video cameras would be visible to
inmates in the prison dining hall. Moreover, it does not address
the field of view of any or all of the cameras so as to reveal
potential blind spots—a concern first raised in the Bureau’s
briefs. And it is not possible from the words of the affidavit to
17
determine whether the government is actually describing
anything in the way of technique or placement of cameras that
is sufficient to overcome the statutory presumption in favor of
disclosure. Summary judgment on this issue would require that
the Bureau show that there is no genuine dispute as to whether
the placement and visibility of cameras is such that exposure of
the video recording would in fact provide any new information
not already available through observation by prisoners
physically present in the dining room. Even if exposure of the
cameras’ field of view would result with respect to some
cameras, the affidavit does not establish that it would make an
exempt exposure if only the views from one specific camera
were shown; that is to say one camera location of which is
readily visible, for example. Similarly, as to law enforcement
techniques, if all the Bureau is able to show is that, when a
prisoner does something violent, guards respond to the location
of the violence and take action to control the prisoner, that is
not likely to fall within the exemption.
We understand that the Bureau may be concerned that if an
affidavit were more detailed and specific, it might reveal
information protected by the FOIA exemptions. This is not an
insurmountable problem. True, we have many times reminded
litigants that it is not necessary for district courts to conduct an
in camera inspection in every FOIA case. Quiñon v. FBI, 86
F.3d 1222, 1228 (D.C. Cir. 1996) (“[I]n camera review should
not be resorted to as a matter of course.”). However, this case
may constitute an exceptional circumstance warranting such
inspection if the Bureau continues to insist on the applicability
of this exemption after remand. Indeed, as the present record
is not sufficient to support summary judgment, such an
examination by the court may be necessary should this case
result in a rare FOIA trial. That is, in such a trial, the district
court would need to make findings of fact as to the exemptions,
and it is difficult to see how this could be done without more
18
than what the Bureau has offered in the affidavit. In summary,
the agency’s declaration is too unspecific on its own to
establish that withholding the footage under the exemptions is
justified.
IV. CONCLUSION
We enter a judgment affirming the district court as to the
responses concerning the screwdriver. However, as to the
responses concerning the video recording, we vacate the
judgment granted by the district court and remand the matter
for further proceedings.
So ordered.
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377 Pa. 502 (1954)
Knight, Appellant,
v.
Allegheny County.
Supreme Court of Pennsylvania.
Argued March 31, 1954.
May 24, 1954.
*503 Before STERN, C.J., STEARNE, JONES, BELL, MUSMANNO and ARNOLD, JJ.
John A. Metz, Jr., with him Metz & Metz, for appellants.
John W. Mamula, Assistant County Solicitor, with him Nathaniel K. Beck, County Solicitor, for appellee.
OPINION BY MR. JUSTICE MUSMANNO, May 24, 1954:
This is an appeal from the Court of Common Pleas of Allegheny County involving eminent domain proceedings. The jury returned a verdict in an amount less than that awarded by the Board of Viewers. The plaintiffs contend on appeal that the small verdict of the jury was influenced by the improper remarks of counsel for the County of Allegheny. According to the attorney for the plaintiff-appellants, the appellee's attorney, in his summation to the jury, said that the jury should return a verdict that was "fair to me and him and you." The record from this point reads:
"Mr. Sniderman: `If the Court please, that last remark that was made by Mr. Mamula to the Jury in his *504 closing address, as to the taxpayers, "fair to me and him and you," is improper and prejudicial. It is an appeal to prejudice and it is irrelevant and it is likely to have a prejudicial effect on the verdict. I just want to have that remark placed in the record and the circumstances under which it has been made, and I ask for the withdrawal of a juror.'
"Mr. Mamula: `I might state I have tried many cases with Mr. Sniderman and that this objection has been raised on one previous occasion and was disallowed as not being prejudicial, but being a mere statement of a positive fact.'
"The Court: `I will refuse the motion to withdraw a juror. The Jury will of course recognize that the County of Allegheny is a municipal body for the benefit of everyone. I mean that is, I think, a mere statement of fact and I am certain that the Jury will not be prejudiced by that fact.'
"Exception noted.
"Mr. Mamula closes finally to the Jury."
Whatever may be said about the impropriety of Mr. Mamula's remarks to the jury, it must be conceded that he is laudably candid, for in his counter-history of the case he recalls that his remarks to the jury on the subject under discussion were more vivid than as recalled by Mr. Sniderman. Reconstructing the passage-at-arms, appellee's counsel says that he told the jury that if the plaintiffs got less than they were entitled to, this would not be fair to them, "and, similarly, if the verdict was in excess of the amount to which plaintiffs were entitled they [the jurors] would not be fair to `me and you, Judge DREW, Mr. Sniderman, and all the other citizens and residents of Allegheny County.'"
It was, of course, generous of appellee's counsel to make the jury, the attorney of the opposing side, and all the citizens and residents of Allegheny County party-defendants *505 to the lawsuit, but when he included the Court itself in the litigation, his bounty was too overwhelming to be accepted in the name of the law. And that the Court should not have instantaneously declined this proferred largesse on the part of appellee's counsel, crippled, from that very moment, the neutrality of the trial beyond all hope of repair or retrieving.
A judge in a trial at nisi prius is the very fountainhead of impartiality between the contesting parties and, with the exception of the announcement of his identity at the opening of the day's session, there should be no need to refer to him by name throughout the proceedings. Appellee counsel's specific reference to "Judge DREW," added to the declaration that a certain type of verdict would affect that particular judge as a private citizen, was a trespassing of decorum and a perversion of jury argument that threw the machinery of justice hopelessly out of joint.
Appellee counsel's error was compounded when he remarked, after appellant counsel's objection, that he had done this very thing in the past and that the same opposing attorney had objected and had been overruled by an unnamed judge because appellee's counsel was merely stating a "positive fact."
The Trial Judge at this point said that the "County of Allegheny is a municipal body for the benefit of everyone," and then added "I mean that is, I think, a mere statement of fact . . ." Here he repeated practically the very same phrase of defendant's counsel, allowing the jury to believe that Mr. Mamula's statement was a statement of fact. And then the Trial Judge went on to say "that the Jury will not be prejudiced by that fact."
The very least the Court should have done here was to define a municipal corporation, pointing out that a corporation is an artificial body or entity with rights *506 which are wholly separate from those who compose it; that the life of a corporation is not limited to the longevity of those it represents, nor is its wealth or resources dependent upon its members.
It appears that the errors and improprieties did not end here. In further arguing to the jury, appellee counsel, by his own admission, said: "The County of Allegheny is not the building across the street but those of us who are residents and citizens of Allegheny County." Of course, in simple fact the County of Allegheny, the municipal corporation defendant in this lawsuit, was not "those of us who are residents of Allegheny County."
The Court failed also to correct this second misstatement by appellee counsel. In its charge, the Court said: "There has been some question here of who the parties are. I would like just to say to you that in this case, and in any other case you may hear, you should just regard them as parties, not as individuals, not as corporations, not as municipalities, not as authorities, or anything else like that."
This instruction added little if any light to the dispute raised by the contending attorneys. It still did not say who were the "parties." In a way, the Court's charge may have inadvertently even helped to retain (in the jury's estimation) the residents and citizens as party-defendants, the role assigned to them by appellee counsel.
Counsel are expected and in fact it is part of their functions as advocates to argue their respective contentions with zeal and fervor. They may point out inconsistencies in the testimony of the opposing side, they may challenge even the honesty of their adversary if the testimony allows such a challenge, and they may ascribe to the legal foe such motives as the evidence warrants. Such argument is part of the tradition of *507 trial by jury as it has come down to us through the centuries. In the very nature of things one of the contesting parties is bound to be in the wrong, and unless the respective champions of the party litigants explore every fault, expatiate on every contradiction, and condemn every defect in logic, morals or law on the other side, the jury may overlook some very important and telling piece of proof.
Of course, every right can be abused and every privilege may be misemployed. Thus, if counsel introduce into their speeches misstatements of fact and appeals not justified by the evidence, a mistrial will follow if the trespass cannot be corrected by the Court. In the recent case of Narciso v. Mauch Chunk Township, 369 Pa. 549, the defendant township's counsel argued that the suit there involved was not against the municipality but against its taxpayers. Plaintiff's counsel objected, whereupon counsel for the township said: "May it please the Court, the jury is permitted to take general notice that Mauch Chunk Township is a municipality and that the suit is against the residents and taxpayers of the Township."
The jury returned a verdict for the defendant, but this Court on appeal granted a new trial, saying:
". . . counsel admittedly stated that the suit in reality was against the taxpayers of the township and not against the township itself. It is plaintiff's contention that this remark was so improper and prejudicial that it was likely to appeal to the passions and prejudices of the jury that a new trial should be granted.
"It is well established that any statements by counsel, not based on evidence, which tend to influence the jury in resolving the issues before them solely by an appeal to passion and prejudice are improper and will not be countenanced. As we have stated on many occasions: *508 `. . . a verdict obtained by incorrect statements or unfair argument or by an appeal to passion or prejudice stands on but little higher ground than one obtained by false testimony': Saxton v. Pittsburg Railways Co., 219 Pa. 492, 495, 68 A. 1022; [etc.]"
Judgment reversed with a venire facias de novo.
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853 F.2d 858
22 Soc.Sec.Rep.Ser. 563, Unempl.Ins.Rep. CCH 14123AMary E. SHOEMAKER, Plaintiff-Appellee,v.Otis R. BOWEN, Secretary of Health and Human Services,Defendant-Appellant.
No. 87-7696Non-Argument Calendar.
United States Court of Appeals,Eleventh Circuit.
Aug. 30, 1988.
Frank W. Donaldson, U.S. Atty., Jenny L. Smith, Marvin Neil Smith, Jr., Asst. U.S. Attys., Birmingham, Ala., Russell Shultis, Office of General Counsel, Dept. of Health and Human Services, Baltimore, Md., for defendant-appellant.
R. Michael Booker, Shores & Booker, Birmingham, Ala., for plaintiff-appellee.
Appeal from the United States District Court for the Northern District of Alabama.
Before TJOFLAT, VANCE and COX, Circuit Judges.
VANCE, Circuit Judge:
1
The sole issue in this appeal is whether a district court may consider interim benefits received by a social security claimant pursuant to 42 U.S.C. Sec. 423(g) in computing an award of reasonable attorney's fees under 42 U.S.C. Sec. 406(b). Because we find that the consideration of interim benefits for attorney's fee awards is not prohibited by the language of the statutes and the legislative history, and that absent an election by a claimant the interim benefits would be payable as past-due benefits, we affirm the district court's decision.
2
On March 12, 1979 appellee applied for social security disability benefits. The Secretary subsequently determined her to be disabled and awarded benefits. On August 13, 1982 the Social Security Administration determined that her disability had ceased as of July 1982. After a requested hearing, the decision was upheld by an administrative law judge. When the Appeals Council affirmed the ALJ's decision, appellee sought judicial review in federal district court. Finding that the ALJ failed to apply the proper legal standard, the district court remanded the case to the Secretary for further review. On remand the Secretary determined that appellee continued to be disabled and awarded her benefits.
3
During the pendency of the case on remand, appellee elected to receive "interim benefits" pursuant to 42 U.S.C. Sec. 423(g).1 As a result she received monthly benefits from December 1984 until December 21, 1986 when she was placed back on continuing pay status. Due to the favorable administrative decision, appellee received a lump-sum award of $4,768.88. This sum represented past-due benefits for the period from October 1982, when her payments ceased, until November 1984, when she elected interim benefits.
4
Appellee's attorney subsequently filed a petition in federal district court requesting an award of attorney's fees pursuant to 42 U.S.C. Sec. 406(b).2 He requested a fee of $2,015.75 for services rendered before the court. The attorney stated that the request did not exceed twenty five percent of "past-due benefits payable or paid" to appellee, and suggested that the funds withheld from the past-due benefits by the Secretary and the $726.13 the attorney withheld from appellee's interim benefits and placed in a trust account be used for payment of the award.
5
The Secretary opposed the request on the ground that under section 406, attorney's fee awards may not exceed twentyfive percent of a claimant's past-due benefits. The Secretary maintained that interim benefits, because they have already been paid, are not past-due benefits. The Secretary noted that $1,589.62 was withheld from the claimant's past-due benefits for attorney's fees. Because $300 was awarded to the attorney for his administrative services,3 the Secretary argued that only $1,289.62 was available for a fee award for the attorney's services before the court.
6
The district court awarded attorney's fees in the amount of $1,642.50. The district court rejected the Secretary's argument that attorney's fees could not be granted out of the interim benefits. Recognizing that the purpose of section 406 was "to limit the amount attorneys may collect" and reasoning that section 423(g)'s policy of eliminating hardship on claimants may not be achieved if the statute affected attorney's fees, the district court concluded that "Congress did not intend to limit further attorney's fees by its enactment of Section 423(g)."
7
Section 406(b) authorizes attorney's fees "not in excess of 25 percent of the total past-due benefits to which the claimant is entitled," and provides that the Secretary may certify such an amount "out of, and not in addition to, the amount of such past-due benefits." 42 U.S.C. Sec. 406(b). Under an earlier statutory scheme, past-due benefits represented the amount of benefits that accrue during a claimant's appeal of the termination of benefits.4 Due to the financial burden on claimants during the appeal process, Congress recently enacted section 423(g), which permits claimants to continue receiving disability payments during the redetermination of their entitlement to benefits.5 See Schweiker v. Chilicky, --- U.S. ----, ---- n. 3, 108 S.Ct. 2460, 2474 n. 3, 101 L.Ed.2d 370 (1988) (Brennan, J., dissenting).
8
Because Congress did not specifically refer to attorney's fee awards when it enacted section 423(g), the Secretary draws a distinction between "interim benefits" and "past-due benefits." The Secretary contends that neither the statutory language nor the legislative history indicates that an attorney's fee award under section 406(b) may be based in part on section 423(g) interim payments. According to the Secretary this demonstrates that Congress did not intend to increase the funds available for attorney's fee awards.
9
We believe that the Secretary's interpretation of section 406(b) fails to promote the goals of Congress in enacting the provision. While one of the purposes of section 406 is to limit attorney's fees, Congress also intended "to encourage effective legal representation" by ensuring that attorneys will receive a fee for their representation. Dawson v. Finch, 425 F.2d 1192, 1195 (5th Cir.), cert. denied, 400 U.S. 830, 91 S.Ct. 60, 27 L.Ed.2d 60 (1970); see Watford v. Heckler, 765 F.2d 1562, 1566 (11th Cir.1985) (citing S.Rep. No. 404, 89th Cong., 1st Sess. 422 (1965), reprinted in 1965 U.S.Code Cong. & Admin.News 1943, 2062). Under the Secretary's interpretation, claimants who do not elect to receive interim benefits have a greater amount of money available for a reasonable attorney fee than those who elect the interim benefits. This would place claimants who elect the interim benefits at a disadvantage in obtaining effective legal representation.6
10
The Secretary's interpretation is also illogical. The Secretary argues that the interim benefits received by appellee resulted not from the actions of her counsel, but as a result of legislation. The Secretary adds that because interim benefits are paid prior to the reinstatement of benefits they are not "past-due benefits." We disagree. Section 423(g) provides that a claimant may receive the interim benefits pending a final decision by the Secretary, but if the decision is unfavorable the interim benefits are considered "overpayments" and must be repaid. 42 U.S.C. Sec. 423(g)(2)(A).7 The claimant, therefore, is not entitled to the benefits until the Secretary renders a favorable decision. We note also that after the Secretary determines that the claimant is entitled to continuing benefits, the claimant receives past-due benefits only for the period from the cessation of benefits until the time of the election. Absent an election by the claimant, the interim benefits accumulate and are reimbursed as "past-due benefits."
11
We recognize that where Congress has not directly addressed the question at issue, the agency's interpretation of the statute should be accorded considerable weight. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843-44, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984); Southern Motors Carriers Rate Conference v. United States, 773 F.2d 1561, 1567 (11th Cir.1985). Courts, however, need not accept an agency's interpretation that frustrates the underlying congressional policy. See Bureau of Alcohol, Tobacco & Firearms v. Federal Labor Relations Auth., 464 U.S. 89, 97, 104 S.Ct. 439, 444, 78 L.Ed.2d 195 (1983); see also Frank Diehl Farms v. Secretary of Labor, 696 F.2d 1325, 1331 (11th Cir.1983) ("[t]he court remains the final authority on issues of statutory construction"). Because the Secretary's interpretation is unreasonable and not consistent with the purposes of the statute and the legislative history, we are not required to accept it.8 We therefore hold that interim benefits received pursuant to 42 U.S.C. Sec. 423(g) may be considered by a district court in awarding attorney's fees under 42 U.S.C. Sec. 406(b).
12
AFFIRMED.
1
42 U.S.C. Sec. 423(g) provides in part:
(g) Continued payment of disability benefits during appeal
(1) In any case where--
(A) an individual is a recipient of disability insurance benefits, or of child's, widow's, or widower's insurance benefits based on disability,
(B) the physical or mental impairment on the basis of which such benefits are payable is found to have ceased, not to have existed, or to no longer be disabling, and as a consequence such individual is determined not to be entitled to such benefits, and
(C) a timely request for a hearing under section 421(d) of this title, or for an administrative review prior to such hearing, is pending with respect to the determination that is not so entitled,
such individual may elect (in such manner and form and within such time as the Secretary shall by regulations prescribe) to have the payment of such benefits ... continued for an additional period beginning with the first month beginning after January 12, 1983, for which (under such determination) such benefits are no longer otherwise payable, and ending with the earlier of (i) the month preceding the month in which a decision is made after such a hearing, (ii) the month preceding the month in which no such request for a hearing or an administrative review is pending, or (iii) June 1989.
2
Congress provided in 42 U.S.C. Sec. 406(b)(1) that:
Whenever a court renders a judgment favorable to a claimant under this subchapter who was represented before the court by an attorney, the court may determine and allow as part of its judgment a reasonable fee for such representation, not in excess of 25 percent of the total of the past-due benefits to which the claimant is entitled by reason of such judgment, and the Secretary may, notwithstanding the provisions of section 405(i) of this title, certify the amount of such fee for payment to such attorney out of, and not in addition to, the amount of such past-due benefits. In case of any such judgment, no other fee may be payable or certified for payment for such representation except as provided in this paragraph.
3
On June 30, 1987 the Secretary authorized appellee's attorney to receive a $300 fee for his administrative services. Because the attorney was holding $726.13 in a trust account, the Secretary authorized him to take the money from this account
The district court also has awarded attorney's fees of $487.50 under the Equal Access to Justice Act ("EAJA"), 28 U.S.C. Sec. 2412. Attorney's fee awards under EAJA are not subject to the statutory maximum in 42 U.S.C. Sec. 406(b). Watford v. Heckler, 765 F.2d 1562, 1567 (11th Cir.1985). Because the EAJA and section 406 awards represent compensation for the same work, however, the district court ordered that the smaller fee be refunded to the client.
4
Past-due benefits are not defined in the statute, but the Secretary's regulations provide:
"Past-due benefits" means the total amount of benefits payable under title II of the Act to all beneficiaries that has accumulated because of a favorable administrative or judicial determination or decision, up to but not including the month the determination or decision is made.
20
C.F.R. Sec. 404.1703
5
One of the primary purposes of the interim benefits provision was to "ease the severe financial and emotional hardships that would otherwise be suffered by disabled persons." H.R.Rep. No. 618, 98th Cong., 2d Sess. 18 (1984); reprinted in 1984 U.S.Code Cong. & Admin.News 3038, 3055; see also Heckler v. Day, 467 U.S. 104, 126-28 n. 8, 104 S.Ct. 2249, 2261-62 n. 8, 81 L.Ed.2d 88 (Marshall, J., dissenting) (Senate Committee Report explained that emergency relief was warranted for claimants who had had their benefits terminated and then reinstated after appeal)
6
See Santos Rivera v. Secretary of Health & Human Servs., 674 F.Supp. 963, 965 (D.P.R.1987)
7
Congress recognized that the repayment of interim benefits after an unfavorable ruling may make individuals reluctant to make this election. The legislative history reflects an intent to lessen this impact by allowing the Secretary to consider waiving repayment or providing for an extended repayment plan. See H.R.Rep. No. 618, 98th Cong., 2d Sess. 18 (1984), reprinted in 1984 U.S.Code Cong. & Admin.News 3038, 3055; see also Soper v. Heckler, 754 F.2d 222, 225 (7th Cir.1985) ("repayment may be waived if the appeal was taken in good faith")
8
We are not persuaded by appellant's additional argument that a proposed 1987 amendment to section 406 evidences a congressional understanding that a court may not consider interim benefits in determining a reasonable attorney's fee. Appellant asserts that this proposed amendment would have provided a specific formula for determining attorney's fees upon decisions made with respect to section 423(g) interim benefits. See H.R. 3545, 100th Cong., 1st Sess., 133 Cong.Rec. H9185, H9276 (1987). Appellant notes that this provision did not survive the conference process and thus section 406 was not amended. We believe that Congress simply could have decided that the amendment was unnecessary
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340 F.Supp.2d 54 (2004)
J.S. McCARTHY, CO., INC., d/b/a J.S. McCarthy Printers, Plaintiff,
v.
BRAUSSE DIECUTTING & CONVERTING EQUIPMENT, INC., Defendant
No. CIV. 04-107-B-W.
United States District Court, D. Maine.
October 19, 2004.
*55 Jeffrey W. Peters, Preti, Flaherty, Beliveau, Pachios & Haley, LLC, Portland, ME, for J.S. McCarthy Co., Inc., dba J.S. McCarthy Printers, Plaintiffs.
Sidney St. F. Thaxter, Curtis, Thaxter, Stevens, Broder & Micoleau, Portland, ME, for Brausse Diecutting and Converting Equipment, Inc., Defendant.
ORDER ON DEFENDANT'S MOTION TO DISMISS COUNTS III, IV AND VI OF PLAINTIFF'S COMPLAINT
WOODCOCK, District Judge.
J.S. McCarthy Co., Inc. (McCarthy) claims Brausse Diecutting & Converting Equipment, Inc. (Brausse) sold it a defective machine and delivered it late. Brausse has moved to dismiss three counts of McCarthy's seven-count complaint. Because the contract has effectively excluded the implied warranties of merchantability and fitness and because McCarthy has not requested relief available under Maine's Uniform Deceptive Trade Practice Act, this Court grants Brausse's motion to dismiss these two counts. Although McCarthy's fraud count fails to comply with Federal Rule of Civil Procedure 9(b)'s particularity requirement, this Court denies Brausse's motion to dismiss, *56 allows McCarthy time within which to complete discovery on this issue, but orders it either to amend its complaint to comply with Rule 9(b) or file a voluntary dismissal within sixty days.
I. STATEMENT OF FACTS
On April 30, 2003, McCarthy and Brausse entered into a contract for the purchase and sale of an automatic foil stamping machine.[1] Before the contract was entered into, Brausse arranged for McCarthy to view the operation of two automatic foil stamping machines. Both demonstration machines had been manufactured in Taiwan. The McCarthy-Brausse contract provided the machine would be shipped from Brausse "on or before Sept. 15th" and would be "up and running at Buyer's plant on or before October 15, 2003." The machine, however, was not delivered until November 17, 2003 and was not partially operable until the second week of December, 2003. Even then, the machine failed to conform to contract specifications and performance criteria. After McCarthy ordered the machine, Brausse moved its manufacturing plant from Taiwan to mainland China. Brausse assured McCarthy the model manufactured in China would be of at least the same quality as machines manufactured in Taiwan. It was not. Instead, the machine was of grossly inferior workmanship and quality compared with the demonstration machines manufactured in Taiwan. After McCarthy filed suit, alleging six separate theories of recovery, Brausse moved to dismiss Counts IIIBreach of Implied Warranty; IVFraud; and, VI Deceptive Trade Practices.[2]
II. MOTION TO DISMISS STANDARD
In reviewing a motion to dismiss under Rule 12(b)(6), the court is required to accept as true all well-pleaded factual allegations in the complaint and to draw all reasonable inferences in McCarthy's favor. Fed.R.Civ.P. 12(b)(6); Educadores Puertorriquenos en Accion v. Rey Hernandez, 367 F.3d 61, 62 (1st Cir.2004); Carroll v. Xerox Corp., 294 F.3d 231, 241 (1st Cir. 2002). A motion to dismiss is a vehicle to determine whether the complaint alleges facts sufficient to make out a cognizable claim. Id.; LaChapelle v. Berkshire Life Ins. Co., 142 F.3d 507, 508 (1st Cir.1998). A court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Roy v. Augusta, 712 F.2d 1517,1522 (1st Cir.1983).
III. DISCUSSION
A. Count IIIBreach of Implied Warranty.
Count III of McCarthy's complaint alleges Brausse's machine failed to conform to Brausse's specifications or meet the performance criteria specified in its proposal documents and was not fit for the ordinary purposes for which such machines are used. PI.'s Complaint at ¶ 33. It goes on to allege the machine was inoperable for lengthy periods of time and required numerous service calls. Id. at ¶ 34. Finally, it claims Brausse breached an implied warranty of merchantability, *57 since the machine did not comply to its contract description, meet the performance criteria specified in proposal documents..., was not of fair average quality and was not fit for the ordinary purposes for which foil stamping machines are used." Id. at ¶ 35.
Pointing to the terms of the McCarthy-Brausse contract, Brausse contends the contract itself expressly prohibits a claim for breach of implied warranty.[3] The contract reads in part:
"The warranty set forth above is the only warranty by the Seller with respect to the commodity specified in this Agreement. No other warranties of any kind, whether statutory, written, oral, expressed or implied, including but not limited to, warranties of fitness for a particular purpose or merchantability, shall apply."
This paragraph appears on the signature page of the contract and is highlighted in black.
Maine law permits the exclusion of implied warranties of merchantability and fitness under certain limited circumstances.[4] 11 M.R.S.A. § 2-316(2); Todd Equipment Leasing Co. v. Milligan, 395 A.2d 818, 820 (Me.1978); Lincoln Pulp & Paper Co., Inc. v. Dravo Corp., 445 F.Supp. 507, 516 (D.Me.1977); see McLaughlin v. Denharco, Inc., 129 F.Supp.2d 32, 40 (D.Me.2001). The disclaimer must be in writing and conspicuous.[5] 11 M.R.S.A. § 2-316(2); Todd Equipment, 395 A.2d at 820; Lincoln Pulp, 445 F.Supp. at 516. In the case of an implied warranty of merchantability, the language must mention merchantability. 11 M.R.S.A. § 2-316(2); Todd Equipment, 395 A.2d at 820; Lincoln Pulp, 445 F.Supp. at 516. The exclusion in this contract complies with section 316(2)'s requirements, since it is in writing and, in the case of the implied warranty of merchantability, it expressly mentions the term, "merchantability." The only remaining issue is whether the exclusion is conspicuous.
Maine law defines "conspicuous" as written so that "a reasonable person against whom it is to operate ought to have noticed it." 11 M.R.S.A. 1-201(10). The statute provides that "Language in the body of a form is `conspicuous' if it is in larger or other contrasting type of color." Id. Finally, the statute clarifies that the determination as to whether a term or clause is conspicuous is a decision for the court. Id. In Todd Equipment, the Maine Supreme Judicial Court engaged in such an analysis. It reviewed the disclaimer terms of a contract and found the "persuasive facts" to include the placement of the disclaimer, whether the disclaimer was in capital letters, and whether it stood out *58 against the remainder of the text. Todd Equipment, 395 A.2d at 821.
Applying this analysis to the McCarthy-Brausse contract, this Court concludes the disclaimer language is conspicuous within the meaning of § 1-202(1). It is found under the general hearing of "Warranty." It is highlighted in type. It is located on the signature page. Finally, just below the disclaimer appears highlighted language all in capital letters alerting the reader to circumstances that will void the warranty. This Court concludes a "reasonable person against whom it is to operate ought to have noticed" the exclusion. Because the exclusion of the implied warranties of merchantability and fitness complies with the applicable statutory requirements, the agreement has effectively excluded an implied warranty claim and Count III must be dismissed.[6]
B. Count IVFraud.
In Count IV of its Complaint, McCarthy alleges Brausse "falsely represented to McCarthy that the foil stamping machine would meet contract specifications and performance requirements promised in proposal documents, that it would be `up and running' on October 15, 2003, that the machine manufactured in China would be of equivalent quality of machine manufactured in Taiwan that Brausse demonstrated to McCarthy, and that it owned the design for the machine." PI.'s Complaint at ¶ 38. McCarthy states that Brausse's false representations were material to McCarthy's decision to purchase the machine. Id. at ¶ 39. McCarthy further alleges that Brausse knew these representations were false or acted in reckless disregard of whether its representations were true or false and made them for the purpose of inducing McCarthy to purchase the foil stamping machine. Id. at ¶¶ 40-41. It asserts justifiable reliance on the part of McCarthy and claims pecuniary losses as a consequence. Id. at ¶¶42-43.
Citing Rule 9(b), Brausse argues that McCarthy's allegations fail to meet its "particularity" requirement.[7] Fed. R.Civ.P. 9(b). It also notes McCarthy's allegation that Brausse knew its representations were false or acted in reckless disregard as to their truth or falsity was made on its "information and belief," which it says is insufficient to sustain a fraud allegation.
In order to state a claim of fraudulent misrepresentation, a plaintiff must allege:
"(1) that the statement was knowingly false; (2) that (defendants) made the false statement with the intent to deceive; (3) that the statement was material to the plaintiffs' decision...; (4) that the plaintiffs reasonably relied on the statement; and, (5) that the plaintiffs were injured as a result of their reliance."
Doyle v. Hasbro, Inc., 103 F.3d 186, 193 (1st Cir.1996); Turner v. Johnson & Johnson, 809 F.2d 90, 95 (1st Cir.1986); Francis v. Stinson, 2000 ME 173, ¶ 38, 760 A.2d 209, 217. A comparison of the elements of fraud against the allegations in the Complaint establishes McCarthy has made sufficient allegations of the elements of fraud to withstand dismissal on this ground.
However, Rule 9(b) requires more. It is not enough for a plaintiff to "chant the *59 statutory mantra, and leave the identification of predicate acts to the time of trial." Feinstein v. Resolution Trust Corp., 942 F.2d 34, 42 (1st Cir.1991); see also Serabian v. Amoskeag Bank Shares, 24 F.3d 357, 361 (1st Cir.1994). The Complaint must be specific about "the time, place and content of an alleged false representation, not the circumstances or evidence from which fraudulent intent could be inferred." Doyle, 103 F.3d at 194 (quoting McGinty v. Beranger Volkswagen, Inc., 633 F.2d 226, 228 (1st Cir.1980)). As the First Circuit explained in Doyle, the purpose of the heightened pleading requirement of Rule 9(b) is "to give notice to defendants of the plaintiffs' claim, to protect defendants whose reputation may be harmed be meritless claims of fraud, to discourage `strike suits', and to prevent the filing of suits that simply hope to uncover relevant information during discovery." Doyle, 103 F.3d at 194.
Moreover, the First Circuit has "strictly applied Rule 9(b)." Serabian, 24 F.3d at 361 (quoting New England Data Services, Inc. v. Becher, 829 F.2d 286, 288 (1st Cir. 1987)). It has concluded Rule 9(b) does not "permit a complainant to file suit first, and subsequently to search for a cause of action." Hayduk v. Lanna, 775 F.2d 441, 443 (1st Cir.1985). Allegations based on "`information and belief do not satisfy the particularity requirement unless the complaint sets forth the facts on which the belief is founded." Wayne Invest, Inc. v. Gulf Oil Corp., 739 F.2d 11, 13 (1st Cir. 1984); but see Freeport Transit v. McNulty, 239 F.Supp.2d 102, 110 (D.Me.2003). This is true even where the fraud relates to matters peculiarly within the knowledge to the opposing party. Wayne Invest, Inc., 739 F.2d at 14.
Count IV of the Complaint fails to allege "time, place and content of the alleged false representation" and, therefore, in its current form, is subject to dismissal. The remaining question is whether McCarthy should be given an opportunity to engage in a period of discovery on the issue of fraud and to amend its Complaint to satisfy Rule 9(b) requirements.[8] In Becher, the First Circuit, addressing a RICO claim, stated that the district court should conduct a two-part test: (1) whether Rule 9(b) was satisfied, and if not, (2) whether to allow discovery. Becher, 829 F.2d at 291. Citing United States v. Hougham, 364 U.S. 310, 317, 81 S.Ct. 13, 5 L.Ed.2d 8 (1960), Becher also reminds the trial courts to "note the policy in favor of allowing amendments and trying cases on their merits, and against dismissals which would deny plaintiffs their day in court." Id. at 292. Against this admonition is the language quoted above that discourages discovery, when the Plaintiff has filed a cause of action in fraud, but then seeks to discover facts that support his hypothesis.
But, the First Circuit cases that allow limited discovery fall within the RICO context, where the Court of Appeals has placed what it has termed a "special gloss" on Rule 9(b). Feinstein, 942 F.2d at 43; Ahmed v. Rosenblatt, 118 F.3d 886, 889-90 (1st Cir.1997) cert, denied 522 U.S. 1148, 118 S.Ct. 1165, 140 L.Ed.2d 176 (1998).[9] Where the plaintiffs specific allegations in a RICO claim make it likely the defendant used interstate mail or telecommunications facilities and this specific information is *60 likely in the exclusive control of the defendant, the First Circuit instructed trial courts to "proceed a step further" and to allow discovery and an opportunity to amend the complaint. Feinstein, 942 F.2d at 43; Ahmed, 118 F.3d at 889-90; Becker, 829 F.2d at 290. But, in doing so, the Court of Appeals differentiated RICO claims from "garden-variety fraud" cases. Feinstein, 942 F.2d at 43 ("In a gardenvariety fraud case, this deficit would eliminate the need for further inquiry.").
Despite indications the First Circuit has not extended the two-step analysis to garden-variety fraud cases, this Court declines to dismiss the fraud count at this time. McCarthy's allegations as they now stand, though failing to comport with Rule 9(b)'s particularity requirement, raise a substantial question of whether, if granted discovery, the current skeletal allegations could be substantiated. McCarthy alleges Brausse made certain very specific representations regarding the machine, including where it was going to be manufactured, the standards under which it would be manufactured, it specific performance criteria, the proprietary nature of its design, Brausse's ownership of the design, and the delivery and start up dates for the machine. Further, what Brausse knew, when it knew it, and whether it intended to deceive McCarthy are facts within the "exclusive control" of Brausse. Ahmed, 118 F.3d at 890. In view of the potential that these allegations could be factually substantiated, an outright dismissal would deny McCarthy the opportunity to engage in discovery and the right to trial on the merits.[10]
However, in light of the First Circuit's strict application of Rule 9(b), this Court dechnes to give McCarthy unfettered discovery. In Freeport Transit, Magistrate Judge Kravchuk allowed a discovery period of sixty days at the close of which she ordered the plaintiff either to: (1) submit a proper motion to amend and amended complaint complying with Rule 9(b); or, (2) voluntarily dismiss Count IV of its Complaint at the end of the sixty day period. Freeport Transit, 239 F.Supp.2d at 118. Even though Freeport Transit involved a RICO claim and, therefore, falls within the First Circuit's Rule 9(b) "special gloss," Magistrate Judge Kravchuk's ruling still provides from this Court's perspective a useful template for action. This Court denies Brausse's motion to dismiss Count IV, allows McCarthy sixty days of discovery from the date of this Order focused on the time, place and content of alleged fraud, and orders McCarthy on or before the expiration of the sixty-day period either to file a motion to amend and amended complaint complying fully with Rule 9(b) or to dismiss voluntarily Count IV of the Complaint. In the event McCarthy fails to file either a motion to amend or dismissal, Count IV of the Complaint will be dismissed after the expiration of the sixty-day period.
C. Count VIDeceptive Trade Practice.
Count VI of McCarthy's Complaint alleges that Brausse engaged in deceptive trade practices in violation of 10 M.R.S.A. §§ 1211-16. Specifically, McCarthy claims Brausse used "deceptive representations or designations of geographic origin in connection with the machine it sold to McCarthy, by representing that [the] machine it sold to McCarthy has performance *61 characteristics, uses, or benefits that it does not in fact have, by representing that the machine is of a particular standard, quality or grade when it was not, and that the machine is of a particular model and design, when it is of another." Pl's Complaint at ¶ 50. McCarthy claims Brausse committed these deceptive trade practices in the conduct of trade or commerce and thereby caused it financial loss. Id. at ¶¶ 52-53. It alleges Brausse did so willfully and is liable for its attorney's fees. Id. at ¶ 54. In its prayer for relief, McCarthy asks for "damages and attorneys fees as provided by 10 M.R.S.A. § 1213."
Brausse has moved to dismiss Count VI on the ground that Maine's version of the Uniform Deceptive Trade Practices Act (UDTPA) allows for injunctive relief only and since McCarthy has not sought an injunction, the Complaint fails to state a claim upon which relief may be granted. McCarthy has replied, contending the UDTPA expressly authorizes the wide range of equitable remedies and is not limited to injunctive relief.
It is a violation of the UDTPA to represent that goods or services are of a particular standard, quality or grade, or that goods are of a particular style or model, if they are of another. See 10 M.R.S.A. § 1212(1)(G). The UDTPA contains the following remedy provision:
"A person likely to be damaged by a deceptive trade practice of another may be granted an injunction against it under the principles of equity and on terms that the court considers reasonable. Proof of monetary damages, loss of profits or intent to deceive is not required. Relief granted for the copying of an article shall be limited to the prevention of confusion or misunderstanding as to source.
The court in exceptional cases may award reasonable attorneys' fees to the prevailing party. Costs or attorney' fees may be assessed against a defendant only if the court finds that he has willfully engaged in a deceptive trade practice.
The relief provided in this section is in addition to remedies otherwise available against the same conduct under the common law or other statutes of this State."
10 M.R.S.A. § 1213.
The Maine Supreme Judicial Court has interpreted the scope of this provision on only one occasion, Sebago Lake Camps, Inc. v. Simpson, 434 A.2d 519 (Me.1981). In Sebago Lake, the Maine Supreme Judicial Court made the following observation:
"Except where the statutory provision and the common law conflict, however, the Act suggests no intent to replace the common law. Other courts and commentators have agreed, viewing the Act as, with the enumerated exceptions, codifying the common law. Absent an indication that the legislature intended the Act to supplant the common law, we of course should not give it that effect. We find no such intent expressed. On the contrary, we conclude that section 1213 specifically incorporates equity principles in general...."
Id. at 521-22 (citations omitted). McCarthy and Brausse each claim Sebago Lake supports their conflicting positions.
This Court agrees with Brausse. The case law and commentary confirm that the intent and purpose of the UDTPA is to provide aggrieved parties an opportunity to seek injunctive relief from deceptive practices. See Grand Ventures v. Whaley, 622 A.2d 655, 660 (Del.Super.1992) (unless a state has specifically augmented the UDTPA's remedy provision by providing for other damages, as does Delaware, *62 "only those seeking injunctive relief may recover under the [U]DTPA."); Future Professionals v. Darby, 266 Ga. 690, 470 S.E.2d 644, 645 (1996) ("the sole remedy available under the Act is injunctive relief ... under the principles of equity.,")(emphasis in original); Alsides v. Brown Inst, Ltd., 592 N.W.2d 468, 476 (Minn.Ct.App. 1999) ("the sole statutory remedy for deceptive trade practices is injunctive relief."); Richard F. Dole, Jr., Merchant and Consumer Protection: The Uniform Deceptive Trade Practices Act, 76 Yale L.J. 485, 495-97 (1967) ("... relief under the Uniform Act is limited to an injunction.")(Richard*F. Dole was the Draftsman of the 1966 UDTPA).[11]
In this District, Judge Carter found the UDTPA, "by its own terms, only provides for injunctive relief." L.L. Bean, Inc. v. Drake Publishers, Inc., 629 F.Supp. 644, 647 (D.Me.1986). Judge Carter's decision is especially instructive. In L.L. Bean, he was asked to determine whether the Plaintiff, who was seeking damages and equitable relief under a variety of theories, could demand trial by jury on the UDTPA count. Noting the right to trial by jury does not extend to equitable claims, Judge Carter concluded that because the Maine UDTPA is expressly limited to injunctive relief and does not "support a legal claim," there is no right to a jury trial on a UDTPA claim.
The statute's plain language and interpretive case law and commentary compel the conclusion that the UDTPA provides injunctive relief alone, a remedy neither sought by McCarthy nor applicable to his claim.[12]
Brausse's motion to dismiss Count VI is granted.
IV. CONCLUSION
This Court GRANTS Defendant Brausse Diecutting & Converting Equipment, *63 Inc.'s motion to dismiss Counts III and VI of Plaintiff J.S. McCarthy's Complaint. It DENIES Defendant's Motion to Dismiss Count IV; however, it ORDERS Plaintiff McCarthy to engage in discovery on the issues of the time, place, and content of the alleged fraud and on or before sixty days from the date of this Order, Plaintiff McCarthy must file either: (1) a motion to amend and amended complaint complying fully with Rule 9(b); or, (2) a voluntary dismissal of Count IV. The failure to so file on a timely basis shall be grounds for dismissal of Count IV.
SO ORDERED.
NOTES
[1] This statement of facts accepts as true all well-pleaded factual allegations set forth in McCarthy's Complaint and draws all reasonable inferences in favor of McCarthy. Carroll v. Xerox Corp., 294 F.3d 231, 241 (1st Cir. 2002).
[2] This Court's jurisdiction is based on 28 U.S.C. § 1332.
[3] Brausse correctly notes this Court may consider the terms of the contract as part of its Rule 12(b)(6) analysis. Beddall v. State St. Bank and Trust Co., 137 F.3d 12, 17 (1st Cir. 1998); Forum Fin. Group v. President and Fellows of Harvard College, 173 F.Supp.2d 72, 85 (D.Me.2001).
[4] This provision does not apply to sales of consumer goods or services. 11 M.R.S.A. § 2-316(5). There is no indication the foil stamping machine is a consumer good within the meaning of this subsection, ("used or bought primarily for personal, family or household purposes.").
[5] 11 M.R.S.A. § 316(2) provides the following: "Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in the case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that `There are no warranties which extend beyond the description on the face hereof.'"
[6] A disclaimer of warranties is ineffective to the extent it is inconsistent with any express warranty. 11 M.R.S.A. § 2-316(1); Cuthbertson v. Clark Equipment Co., 448 A.2d 315, 320 (Me. 1982).
[7] Fed.R.Civ.P. 9(b) reads in part as follows: "In all averments of fraud..., the circumstances constituting fraud.. . shall be stated with particularity."
[8] McCarthy has requested the opportunity to conduct limited discovery on these issues. Pl's Opp. To Def.'s Motion to Dismiss at 4. See Feinstein, 942 F.2d at 43.
[9] As Ahmed explained, even under a RICO claim, the plaintiff does not have a right to a "second determination." Ahmed, 118 F.3d at 890 ("the application of the Becher second determination is neither automatic, nor of right for every plaintiff.").
[10] Defendant has not moved to dismiss any of the remaining counts, including breach of contract, breach of express warranty, negligent misrepresentation, and revocation of acceptance. The parties will, therefore, in any event engage in discovery on the very same issues generated by the fraud count.
[11] The drafters of the UDTPA stated that its goal was to "bring state law up to date by removing undue restrictions on the common law action for deceptive trade practices." Prefatory Note, Revised Uniform Deceptive Trade Practices Act, at 2 (1966) (available at http:// www.law.upenn.edu/bll/ulc/ulc_frame.htm, the National Conference of Commissioners on Uniform State Laws' official archival site). By this token, the UDTPA lowered the standard of proof under the common law by deleting such requirements as proof of competition between parties, proof of damages and proof of intent to afford relief. Id.; Sebago Lake, 434 A.2d at 521; Grand Ventures, 622 A.2d at 660. Thus, the UDTPA remedy was meant to be concurrent with the existing common law and statutory remedies. See 10 M.R.S.A. § 1213; Sebago Lake, 434 A.2d at 521-22; Dole, 76 Yale L.J. at 496.
[12] The UDTPA defines "deceptive trade practices" in § 1212 to include such activities as passing off goods or services as those of another, creating a likelihood of confusion or misunderstanding as to the source, sponsorship, approval or certification of goods or services, and using deceptive representations. The Act is more commonly used, not in a one time sale, such as the Brausse sale to McCarthy, but in an ongoing infringement. See Town and Country Motors, Inc. v. Bill Dodge Automotive Group, 115 F.Supp.2d 31, 33 (D.Me.2000); Greentree Laboratories, Inc. v. G.G. Bean, Inc., 718 F.Supp. 998 (D.Me. 1989); Kardex Systems, Inc. v. Sistemco N.V., 583 F.Supp. 803 (D.Me. 1984); Sebago Lake, 434 A.2d 519. The injunctive remedy authorized by the Act fits a claim of ongoing deception, where the remedy is cessation of the deception. In this circumstance, however, McCarthy is not seeking to enjoin Brausse from further deception; it is seeking a remedy solely for past deception. As such, the Act allows McCarthy to proceed separately for any "unfair trade practices otherwise actionable at common law or under other statutes of this State." 10 M.R.S.A. § 1212(3). But, the Act does not allow McCarthy to engraft common law remedies onto its provisions. Brooks v. Midas-International Corp., 47 Ill. App.3d 266, 276, 5 Ill.Dec. 492, 361 N.E.2d 815, 822 (1977)("(W)e do not believe (the Act) creates any additional rights of recovery.....").
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259 Cal.App.2d 757 (1968)
66 Cal. Rptr. 776
IMOGENE PETERSEN et al., Plaintiffs and Appellants,
v.
CITY OF VALLEJO et al., Defendants and Respondents.
Docket No. 24114.
Court of Appeals of California, First District, Division One.
March 4, 1968.
*763 Werchick & Werchick, Jack H. Werchick, Arne Werchick and David P. Weaver, Jr., for Plaintiffs and Appellants.
Goodman & Herbert, Goodman, Herbert & Lucas, F. Richard Lucas, Harry S. Fenton, Robert F. Carlson and Marc Sandstrom for Defendants and Respondents.
SIMS, J.
Plaintiffs, the surviving widow of Alma A. Petersen, who seeks to recover damages for her own injuries, for the wrongful death of her husband and for loss of her car, and the surviving adult daughter, who, individually and as administratrix, seeks to recover damages for the wrongful death of her father, have appealed from judgments entered in favor of the defendants City of Vallejo and State of California, following an order of the court which granted the City's motion for summary judgment and the State's motions for summary judgment, and for dismissal and to preclude evidence.
The action arises out of an automobile collision which occurred on March 19, 1961. In addition to the City and the State, the driver of another vehicle, the County of Solano, and named and fictitious defendants who allegedly worked on the street were joined as defendants. It is asserted with respect to the City and the State that the street at the scene of the accident was maintained in a dangerous condition. This appeal involves a review of the contention of both the City and the State that the daughter failed to file a timely claim either individually or as administratrix, the City's further contention that there is no triable issue as to any of plaintiffs because it did not have possession or control of the street at the scene of the accident at the time it occurred, the State's contention that the action was properly dismissed as to the surviving widow because it was filed prior to the formal rejection of her claim, and the State's further claim that the trial court properly dismissed the complaint because the plaintiffs failed to comply with discovery orders.
The pertinent facts are set forth in the discussion which follows. It is concluded that the daughter's action, individually or as administratrix is barred by her failure to file a timely claim with either the City or the State; that the court properly granted the City summary judgment because it did not have possession or control of the street at the scene of the accident; that it was error to dismiss the widow's suit because it was prematurely filed; but that the action was properly dismissed as to the State because of the plaintiffs' failure to *764 comply with discovery orders. The judgments must be affirmed.
I. Claim of Susan Santini, the adult daughter, as surviving child and administratrix
Susan P. Santini is named individually, and as administratrix of Alma A. Petersen in the caption of the first amended complaint for damages, filed January 26, 1962, and made a part of the record on this appeal. A search of the allegations of the amended complaint reveals no reference to her appointment, qualifications or capacity to act. If she is properly before the court as administratrix, despite the lack of such allegations, the considerations which apply to her individually govern her rights as administratrix. It is alleged that she is an adult married person, and that she and her mother are the sole surviving heirs at law of her deceased father.
The eighth cause of action of this complaint purports to set forth a cause of action against the City of Vallejo for $250,000 for the wrongful death of Alma A. Petersen, on behalf of all the plaintiffs, widow, daughter and administratrix. The tenth cause of action contains similar allegations against the State of California. In neither of these causes of action is it alleged directly or by reference that a claim was filed with the respective public entity for the damages sought. However, in the second and fourth causes of action, in which the widow seeks damages for her own personal injuries against the City and the State, it is alleged that a claim was filed with each. The City by failure to deny these allegations in its answer filed April 25, 1962, admitted the filing of the claim and its disallowance. The State, in its answer filed March 6, 1964, admitted that a claim was filed May 18, 1961 and denied on September 19, 1961. It also expressly alleged that all plaintiffs' actions were barred by reason of failure to comply with the provisions of Government Code, section 644;[1] that plaintiff-daughter, both in her individual and representative capacity, failed to file a claim as provided by section 641[2] and section 644 of the Government Code; and that therefore her action in both capacities was barred.
*765 The text of the claim of the widow has not been made a part of the record of the case on appeal, but it appears to be assumed that it included not only damages for her own personal injuries, but also her damages for the loss of her husband. Although the original complaint is not a part of the record, it was apparently filed on September 11, 1961, and served on the State on March 25, 1963. Appellants assert the complaint was served on the City in September 1961, the month it was filed.
[1] According to the uncontradicted affidavits filed in support of the motions for summary judgment interposed by the State and the City, the daughter never filed any claim with the State, individually or in her representative capacity, and never filed any claim with the City prior to December 31, 1963. Under these circumstances, her action against the City is barred by the provisions of former sections 710 and 715[3] of the Government Code, and her action against the State is precluded by the provisions of former sections 641 and 644.[4] The court properly granted the motions for summary judgment. (Gonzales v. Brennan (1965) 238 Cal. App.2d 69, 76 [47 Cal. Rptr. 501]; Ruffino v. City of Los Angeles (1964) 226 Cal. App.2d 67, 70 [37 Cal. Rptr. 765]; McGranahan v. Rio *766 Vista etc. School Dist. (1964) 224 Cal. App.2d 624, 631 [36 Cal. Rptr. 798]; Redwood v. State of California (1960) 177 Cal. App.2d 501, 504 [2 Cal. Rptr. 174]; and see Fidelity & Deposit Co. v. Claude Fisher Co. (1958) 161 Cal. App.2d 431, 435-437 [327 P.2d 78]; and Hall v. City of Los Angeles (1941) 19 Cal.2d 198, 203 [120 P.2d 13].)
[2a] The claimant seeks to avoid the effect of the foregoing principles upon the theory that the filing by the widow "was implicitly on behalf of all heirs who might be entitled to share in any eventual recovery" and "was sufficient so as to allow the State and City to fully exploit ..." investigation and settlement of the claim. (See Cal. Law Rev. Com., Recommendations Relating to Sovereign Immunity, 1008; and Van Alstyne, Cal. Gov. Tort Liability (Cal.Cont.Ed.Bar 1964) § 8.5, pp. 361-362.) [3] However, it is generally recognized that the mere fact the governmental entity has some notice or knowledge of the accident and possible claim will not excuse failure of the claimant to file a timely claim as required by the statute. (See McGranahan v. Rio Vista etc. School Dist., supra, 224 Cal. App.2d 624, 629; and Redwood v. State of California, supra, 177 Cal. App.2d 501, 504.)
[2b] There is nothing in the record to indicate that the mother, as agent, filed a claim on behalf of her daughter. (See Gov. Code, § 910.2, and former § 711; and Van Alstyne, Cal. Gov. Tort Liability, supra, § 8.21, p. 377.) It is not alleged or claimed that the daughter was named as a claimant, or that any sum was claimed on her behalf. (See Gov. Code, former §§ 621, 641 and 711.)
[4] Nor can this claimant rely upon the claim of her mother on the theory that there can be only one action, and therefore one claim for wrongful death. (Code Civ. Proc., § 377.) Whatever may have been said of the California law prior to the decision in Cross v. Pacific Gas & Elec. Co. (1964) 60 Cal.2d 690 [36 Cal. Rptr. 321, 388 P.2d 353],[5] that case established the following principles: "Section 377 of the Code of Civil Procedure is a procedural statute establishing compulsory joinder and not a statute creating a joint cause of action. Otherwise, its provisions could not be waived. [Citations.] Although recovery under section 377 is in the form of a `lump sum,' the amount is determined in accordance with *767 the various heirs' separate interests in the deceased's life and the loss suffered by each by reason of the death, and no recovery can be had by an heir who did not sustain a loss. [Citation.] Accordingly, each heir should be regarded as having a personal and separate cause of action." (60 Cal.2d at p. 692. See also Tammen v. County of San Diego (1967) 66 Cal.2d 468, at pp. 474-479 and pp. 479-480 [58 Cal. Rptr. 249, 426 P.2d 753]; Changaris v. Marvel (1964) 231 Cal. App.2d 308, 312 [41 Cal. Rptr. 774]; and Good v. City of San Bernardino (1920) 49 Cal. App. 559, 560-561 [193 P. 790].)
[5] As against the City, the daughter further asserts an estoppel or waiver of the right to assert that there was a failure to file the claim. She relies upon Rand v. Andreatta (1964) 60 Cal.2d 846 [36 Cal. Rptr. 846, 389 P.2d 382], wherein it is stated: "Estoppel may be used in a proper case to excuse the late filing of claims against public entities or the filing of such claims in a defective form. [Citations.] Therefore, since late or defective notice is regarded as the equivalent of no notice [citations] estoppel may likewise be used to excuse no notice. [Citations.]" (60 Cal.2d at pp. 849-850.) The matrix furnishes a form which is pertinent, but there is no substance with which to mold a figure which will throw a shadow on the clear base upon which the City predicates its case for nonliability. It is suggested that the failure of the City to raise the absence of a claim by the daughter when originally served with the summons and complaint in September 1961, and until July 25, 1966, when it made its motion for summary judgment, furnishes a basis for waiver or estoppel. Spence v. State of California (1961) 198 Cal. App.2d 332 [18 Cal. Rptr. 302] lends some support to the daughter's contention (see 198 Cal. App.2d at pp. 335-336). Nevertheless, as has been noted (Gonzales v. Brennan (1965) 238 Cal. App.2d 69, 72-73 [47 Cal. Rptr. 501]) in Spence there were undenied allegations of compliance with the claim requirements for actions against employees of the State, and the answer of the State, which failed to raise the question, was filed at a time when there was still ample time remaining to comply with the claim statute.
In this case the 100 days specified in section 715 of the Government Code expired long before the date the action was filed. In Tammen v. County of San Diego, supra, 66 Cal.2d 468, the opinion states: "... estoppel requires some affirmative representation or acts by the public agency or its representatives inducing reliance by the claimant. [Citations.] *768 At no time did [the claimant] allege that she was induced by any representations of the county to delay the filing of her claim or that she relied on action taken by the county on any other claims." (66 Cal.2d at pp. 480-481. See also Gonzales v. Brennan, supra, 238 Cal. App.2d 69, 75-76; McGranahan v. Rio Vista etc. School Dist., supra, 224 Cal. App.2d 624, 630-631; and Fidelity & Deposit Co. v. Claude Fisher Co., supra, 161 Cal. App.2d 431, 438-439.)
No cause has been shown for relieving the daughter from her failure to file a claim, and the court properly granted the State's and the City's motions for summary judgment.
II. Claim of Imogene Petersen individually and as surviving spouse
The widow's claim against the State admittedly was filed on May 18, 1961. The action was commenced September 11, 1961, eight days prior to the rejection of the claim. Insofar as is pertinent here, Government Code, section 644[6] provided: "... An action on such claim shall be brought within six months after the claim is rejected or disallowed in part." (Italics added.) It has been generally considered that the foregoing provision prevented a claimant from bringing an action against the State until the claim was rejected or disallowed. (See Law Revision Com. (1963) Comments on Gov. Code, § 945.4; Van Alstyne, Cal. Gov. Tort Liability (Cont. Ed. Bar 1964) §§ 3.11 and 9.3, pp. 82 and 414; Van Alstyne, Claims Against Public Entities, 6 U.C.L.A.L.Rev. (1959), 205, 263.)[7]
In Walton v. County of Kern (1940) 39 Cal. App.2d 32 [102 P.2d 531] (hearing in S.Ct. denied July 1, 1940) the court considered statutory provisions, extant in 1937, which provided that the claimant "may sue the county on the claim at any time within six months after the final action of the board [of supervisors]," and gave that body 90 days within which to consider the merits of the claim. (See former Pol. Code, § 4078; and Gov. Code, former §§ 29714 and 29715.) A timely claim was filed February 1, 1938 for a death which occurred December 24, 1937. No action was ever taken with respect to rejecting or allowing the claim, but the complaint was filed on March 7, 1938. The county filed an answer in April 1938. A *769 year later in April 1939 the trial court granted the county's motion for judgment on the pleadings on the ground that the action was prematurely filed, and denied the plaintiff's motion to file a supplemental complaint which alleged that the claim had been rejected by the failure of the board to act upon it within 90 days after it was filed. The reviewing court observed, "The general rule is that where an action is prematurely brought, and the original complaint must fall, a supplemental complaint has no place as a pleading. [Citations.] Ordinarily, a plaintiff's cause of action must have arisen before the filing of the complaint and he may not recover in a cause of action arising after the suit is filed. [Citation.] In Bank of Italy etc. Assn. v. Bentley, 217 Cal. 644 [20 P.2d 940], the court said: `Every complaint is predicated upon the theory that the plaintiff therein is entitled to judgment at the time of its filing.'" (39 Cal. App.2d at p. 34. To the same effect see A. Teichert & Son, Inc. v. State of California (1965) 238 Cal. App.2d 736, 744 [48 Cal. Rptr. 225] (overruled on other grounds in E.H. Morrill Co. v. State of California (1967) 65 Cal.2d 787 [56 Cal. Rptr. 479, 423 P.2d 551]) and Chas. L. Harney, Inc. v. State of California (1963) 217 Cal. App.2d 77, 101-102 [31 Cal. Rptr. 524].)
The extent to which Walton should be applied is open to question. In Taylor v. City of Los Angeles (1960) 180 Cal. App.2d 255 [4 Cal. Rptr. 209], the court observed that there was a distinction between claim provisions that required rejection before suit, and those which merely required the filing of a claim. In the latter situation, there is no need to await rejection before bringing an action (180 Cal. App.2d at p. 260). The court noted that there were factors limiting the effectiveness of Walton as a precedent (id., p. 259, fn. 3). It held that the general state law giving a right of action for injuries resulting from the dangerous or defective condition of public property (Gov. Code, former §§ 53050, 53053) fully covered the situation, and precluded the application of the provisions of a City charter which purported to limit the right to sue "until a demand ... has been ... rejected in whole or in part." (Id., pp. 258-262.)
The widow urges that, in similar vein, Walton should be limited to situations where the period in which the public entity may consider the claim is prescribed, and the failure to act within that period therefore may be considered a rejection. (Cf. the 90-day provision of former Pol. Code, § 4078, at issue in Walton [see Gov. Code, former §§ 29714 and 29714.1] *770 and the 45-day provision of present Gov. Code, § 912.4, with the absence of any such provision in claims against the state as outlined in former §§ 641-646 of the Gov. Code; [see also Gov. Code, former §§ 16043-16044].) She points out that under the law prior to 1963, the claimant against the State, whose claim was not acted on, could never tell when it might be deemed rejected, and that it would be unjust to make the claimant wait indefinitely for the State to act. It has been suggested that the failure to act on the claim may be controlled by mandamus. (See Chas. L. Harney. Inc. v. State of California supra, 217 Cal. App.2d at p. 102.) [6a] The existence of that remedy does not, however, determine whether the failure to resort to it should be fatal, or whether the claimant may proceed with his suit after waiting a reasonable time when no specific time has been prescribed for consideration of the claim. The difficulty of coordinating actions against multiple governmental entities, any one of which may be liable, suggests that the latter would be a desirable course. (See Van Alstyne, op. cit., 6 U.C.L.A.L.Rev. at p. 264.)
The adoption of this principle need do no violence to the statutory mandate. If the action, filed prior to rejection, serves to deprive the public entity of sufficient time within which to investigate, consider, and act on the claim, a motion to abate, not dismiss, should lie. In the field of probate law it has been held: "The defense that suit was commenced before the presentation and rejection of claim `is simply matter of abatement a defense which is not favored, and must be made by plea, and in proper time, or it is waived.' (Bemmerly v. Woodward (1899) 124 Cal. 568, 574-575 [57 P. 561].) Here there is no occasion to consider whether the unfavored defense was waived, for it had ceased to exist at the time defendant sought to raise it." (Radar v. Rogers (1957) 49 Cal.2d 243, 250 [317 P.2d 17]. See also Taylor v. City of Los Angeles, supra, 180 Cal. App.2d 255, 263; but cf. Chas. L. Harney, Inc. v. State of California, supra, 217 Cal. App.2d 77, 93-95.) In Radar the opinion observes: "It has been said that `The general rule is that where an action is prematurely brought and the original complaint must fall, a supplemental complaint has no place as a pleading.' (Walton v. County of Kern, supra, 39 Cal. App.2d 32, 34....) But the rule of the Walton case is by no means absolute and universal in application. The statement quoted was made in connection with a holding that a supplemental complaint cannot aid an original complaint *771 which was filed before a cause of action had arisen. Here there was a cause of action when the original complaint was filed. That cause of action accrued when the accident happened. Every fact essential to state a cause of action, at least in the absence of a plea in abatement is well pleaded." (Id., p. 247.)
[7a] The reasons expressed in Radar are pertinent and most persuasive. Here, as in that case, the plaintiffs "believed they had a cause of action and in the exercise of diligence they wished to have their complaint on file before any question as to the running of an applicable statute of limitations could arise." (Id., at p. 248.) "The substantial rights of the [State] are not affected by the procedure followed by plaintiffs. The [State] had ample opportunity, before the filing of the amended complaints, to approve plaintiffs' claim." (Id. p. 249.) [8] The court noted that the object of the claim statute and the requirements of a rejection of the claim prior to suit were to save the expense of useless suits. It applied the maxim, "When the reason of a rule ceases, so should the rule itself." (Civ. Code, § 3510.)
Radar suggests a distinction between a claim against a public entity, where no cause of action exists until rejection, and a claim against an estate on an existing cause of action which antedated the death of the obligor. [9] However, since the decision in Radar, it has been recognized that the Legislature, in providing the manner in which a public entity may be sued, does not create a cause of action, but merely prescribes the manner in which it may be asserted. (See Muskopf v. Corning Hospital Dist. (1961) 55 Cal.2d 211, 216-218 [11 Cal. Rptr. 89, 359 P.2d 457]; and see Gov. Code, §§ 815-818.3 and §§ 944 and 945.) The prerequisite of rejection may, therefore, be considered more of a procedural than a substantive requirement.
There is nothing to compel a contrary conclusion in the other cases cited in support of the proposition that a suit filed prior to the rejection of the claim should be dismissed. In A. Teichert & Son, Inc., supra, the court stated: "[T]he question is whether plaintiff's claim had arisen or accrued by September 21, 1961." (238 Cal. App.2d at p. 744.) The court's statement, "Actually, the contractor had no right to sue until the State Board of Control had acted" (id.), had nothing to do with the case because the claim in fact had been rejected and action was timely filed thereafter. The sole issue was whether the claim was barred by the general statute of limitations *772 when it was filed. The court concluded it was not because the prior pendency of administrative proceedings prevented the running of the statutory time (id., pp. 744-751). In Chas. L. Harney, Inc., supra, the principal contention was that the action was predicated upon a claim which had been rejected more than six months previously (Gov. Code, § 644). (217 Cal. App.2d at p. 85.) The court found that an alleged second claim, which was denied consideration because it was identical with the first claim, was in fact identical, and could not serve as the basis for an action filed within six months of the time consideration was denied (id., pp. 85-93 and 95-101). The opinion did further observe that "the commencement of any action [on the second claim, which was refused consideration] prior to rejection is premature." (Id., p. 102.) Nevertheless, it did not pass on the question of whether the proceedings could be amended to show such rejection, if it in fact occurred, or the question of whether abatement or dismissal was the proper remedy. The statement in Wiersma v. City of Long Beach (1940) 41 Cal. App.2d 8 [106 P.2d 45], that a supplemental complaint will not serve to relieve the failure to allege presentation of a claim in the original complaint, refers not to the question of rejection, but to the fact that no claim was filed at all until the summons and complaint were served five months after they were filed. (Id., p. 12.)
[10] The following is pertinent, "While none of the foregoing decisions gives precise guidance to us in the present case, that does not automatically bar recovery. `Equity does not wait upon precedent which exactly squares with the facts in controversy, but will assert itself in those situations where right and justice would be defeated but for its intervention.' (Farrell v. County of Placer (1944) supra, 23 Cal.2d 624, 628 [145 P.2d 570, 153 A.L.R. 323].)" (Satterfield v. Garmire (1967) 65 Cal.2d 638, 645 [56 Cal. Rptr. 102, 422 P.2d 990].)
[6b, 7b] It is, therefore, concluded that where, as here, no time is specified within which the public entity shall act on the claim, the claimant, at his election, may bring suit after the passage of a reasonable time. In the absence of a motion to abate, the action should proceed as though the claim were rejected, or, if such a motion is made to permit action on the claim, or if, as in this case, such action is taken without such motion, the proceedings may be amended to show the true facts.
[11] The widow also contended that the State was estopped to raise the question of the prematurity of the *773 action. (See Taylor v. City of Los Angeles, supra, 180 Cal. App.2d 255, 262-264.) No basis is found for an estoppel. The State was not served until March 25, 1963, and its answer, raising the defense of prematurity of suit was not filed until March 6, 1964. Here, unlike Taylor, the answer did not indicate the claim was considered rejected, nor did the mere inaction of the State, between the time it was served and the time it answered, give rise to a waiver or estoppel. (See Tammen v. County of San Diego, supra, 66 Cal.2d 468, 481, and other cases cited, supra, in connection with the discussion of the daughter's claim of estoppel.) Nevertheless, for the reasons set forth above, it was error to grant the State's motion for summary judgment against the widow on the ground that the action was commenced prematurely.
III. Liability of the City
The first amended complaint alleges that the place where the accident occurred was on a public highway "located in the City of Vallejo." It is further alleged: "That plaintiffs cannot reasonably determine at this time, and do not know which defendant had control, duty of maintenance, or otherwise was responsible for said highways or roads and therefore is in doubt as to which said defendant or group of said defendants are liable hereunder, and therefore joins said defendants in order to determine liability of all or some of said defendants.
"That plaintiff is informed and believes, and based on such information and belief, alleges that at said time and place defendant CITY OF VALLEJO was in control of said Springs Road overpass. Said defendant, or its employees, contractors, departments, subdivisions commissions, or other agencies so negligently and carelessly maintained the white guide lines, other traffic controls and said highway, or so allowed them to be so maintained, that the said guide lines were not visible, were misleading, were inadequate and were otherwise dangerous to users of said highway as was said highway in general." Similar allegations were made against the State of California, and other named defendants. [12a] The City denied the allegations which purported to implicate it, and moved for summary judgment on the ground (in addition to that discussed in connection with the daughter's claim) that it "did not possess, maintain or control the area in which this accident occurred, and was not responsible for any alleged defective condition in said area."
[13a] The City's motion is supported by the declaration of its Director of Public Works and City Engineer. He alleges *774 that the State acquired possession and control of the scene of the accident by virtue of a freeway agreement entered into with the City in 1956; that the State constructed the overpass and relocated the street, and was in possession and control of the street on the date of the accident; that "any and all traffic control markings on Springs Road in the area that the collision took place were placed there and maintained by the State of California, its agents or contractors, and not by the City of Vallejo, or anyone acting on its behalf"; and that the maintenance and control of the area did not revert to the City of Vallejo until it was relinquished by the State on November 22, 1961, some eight months after the accident. Copies of the freeway agreement and documents relating to relinquishment were filed with the declaration.
In opposition to the City's motion the plaintiffs filed a declaration setting forth the following: "That Defendant State of California in answer to plaintiff's earlier interrogatory No. 12, responded as follows: `The land at the location of the accident is owned by the City of Vallejo and all cities have a duty to maintain their own city streets.' That the declarant is informed and believes and therefore alleges that the City does own the property and is charged with the maintenance of such, and such is the case despite any agreement between the City and the State of California; That a further basis for the denial of this motion is that discovery is still in process at this time and has not been completed." There was also before the court a document entitled, "Defendant State of California's Answers to Further Interrogatories," in which the following statement appears: "(1) Our records indicate that on March 18, 1960, a crew under the direction of E.J. Dillon striped the service roads and overpass on this project at the request of the City of Vallejo's traffic engineer. Our records, however, do not indicate specifically what portion of the overcrossing was striped."
Plaintiffs further rely on the clause of the freeway agreement under which the City agreed to accept control and maintenance of certain streets and structures on notice to the City Engineer from the State that the work had been completed.[8]
*775 They also assert that the exhibits concerning relinquishment indicate that the State gave the City a 90-day notice of relinquishment dated October 24, 1960, and that by virtue of that notice the streets reverted to the City on January 24, 1961, prior to the accident.
The trial court concluded, "as respects both plaintiffs it has been made to appear conclusively in support of the motion that on March 19th, 1961, the date on which the accident occurred which occasioned this law suit, defendant City of Vallejo had no right of possession or control, or actual possession or control, of the area of Springs Road whereon the subject accident occurred nor had it, prior to such date, ever caused directional indications or divisional markings to be placed on or about said area of the roadway."
[14] "A summary judgment will stand if the movant's affidavits state facts sufficient to sustain a judgment and the counteraffidavits do not proffer competent and sufficient evidence to present a triable issue of fact [citation]. [15] The procedure is drastic and should be used with caution in order that it may not become a substitute for existing methods of determination of issues of fact [citation]. [16a, 17] Affidavits of the moving party must be strictly construed and those of his opponent liberally construed. The opposing affidavit must be accepted as true, and need not be composed wholly of strictly evidentiary facts [citation]. [18] The issue to be determined by the trial court in consideration of a motion for summary judgment is whether or not any facts have been presented which give rise to a triable issue or defense, and not to pass upon or determine the true facts in the case [citation].
[16b] Any doubts are to be resolved against the moving party [citation]. The facts in the affidavits shall be set forth with particularity. [19] The movant's affidavit must state all of the requisite evidentiary facts and not merely the ultimate facts or conclusions of law or conclusions of fact [citation]." (McGranahan v. Rio Vista etc. School Dist., supra, 224 Cal. App.2d 624, 627; and see Arnold v. Hibernia Sav. & Loan Soc. (1944) 23 Cal.2d 741, 744-745 [146 P.2d 684]; Eagle Oil & Ref. Co. v. Prentice (1942) 19 Cal.2d 553, 555-556 *776 [122 P.2d 264]; and Dreyfuss v. Burton (1966) 246 Cal. App.2d 629, 631-632 [54 Cal. Rptr. 843].)
[13b] Tested by the above rules there is no evidence to contradict the unequivocal statements filed on behalf of the City. [20] The answers of one party, the State, elicited in response to interrogatories propounded to it by the plaintiff, cannot be used as evidence against a third party, the City. (Associates Discount Corp. v. Tobb Co. (1966) 241 Cal. App.2d 541, 550-552 [50 Cal. Rptr. 738].) [12b] Even if it be assumed that the statements were submitted in proper form, they do not raise an issue. The State answer, first quoted, purports to speak in the present tense and indicates that the land was owned by the City at the time the answer was made. The failure to set forth the question leaves the statement bereft of persuasiveness on the issue in dispute.[9] The second State answer upon which plaintiffs rely reveals that the State did mark the streets. The fact that the City's traffic engineer requested the work to be done on the service roads and overpass does not indicate what portion, if any, of those thoroughfares was subject to control and maintenance by the City, so as to controvert the declaration of the City Engineer.
Neither the terms of the freeway agreement nor the notice, apparently given in connection with the proceedings for relinquishment, raise an issue of fact. There are no allegations to show whether or not the street in question was embraced as part of the freeway proper, nor is there anything to show that notice was given to the City Engineer (see fn. 8, supra). His statements of nonreacceptance at the time of the accident stand unchallenged. Reference to the provisions of section 73 of the Streets and Highways Code indicates that there is no automatic relinquishment at the end of the 90-day notice period prescribed by that section, but that "... relinquishment shall be by resolution."
[13c] The City cannot be held for the defective condition of property which it did not possess or control. (Gillespie v. City of Los Angeles (1950) 36 Cal.2d 553, 555-558 [225 P.2d 522]; Donnachie v. East Bay Regional Park Dist. (1963) 217 Cal. App.2d 172, 174-176 [31 Cal. Rptr. 611]; and see Schwerdtfeger v. State of California (1957) 148 Cal. App.2d 335, 345 *777 [306 P.2d 960]; and present Gov. Code, § 830, subd. (c).) The trial court properly granted the City's motion for summary judgment as to all of the plaintiffs. (Donnachie v. East Bay Regional Park Dist., supra, at p. 176.)
IV. Propriety of dismissal as a sanction
The rejection of the contention that the action of the surviving widow against the State should be dismissed because it was filed prematurely makes it necessary to consider the propriety of the court's order granting the State's motion to dismiss for failure of the plaintiffs to comply with an order of the court pertaining to discovery. (Code Civ. Proc., § 2034, subd. (b)(2) (iii).)[10]
*778 The order was the culmination of numerous proceedings taken by the State to determine the factual basis for plaintiffs' allegations that the State maintained the street at the scene of the accident in a dangerous condition. Although all of the proceedings have not been made a part of the record on appeal, the following are referred to in the record, and have been verified from the files of the trial court.
January 26, 1962 After the City had interposed its demurrer to the original complaint, a first amended complaint for damages was filed. This complaint contained allegations against the State similar to those set forth against the City, as quoted in part III, supra.
March 25, 1963 The State was served with summons and presumably a copy of the first amended complaint.
July 24, 1963 The court sustained the State's special demurrer to the first amended complaint.
August 13, 1963 The plaintiffs filed their second amendment to complaint which alleged, in more detail, the condition of the guidelines and the road which allegedly contributed to the accident.
December 12, 1963 The court sustained the State's special demurrer to the complaint as supplemented by the foregoing amendment.
January 2, 1964 The plaintiffs filed their third amendment to complaint, in which they purported to elaborate on the nature of the dangerous condition.[11]
March 5, 1964 The State filed an answer to the first amended complaint as last amended, after its special demurrer to the third amendment was overruled.
March 23, 1964 The State filed 175 interrogatories which had been served upon plaintiffs. These included the following question: "169. State in detail the factual basis for your allegation *779 that the State of California `negligently and carelessly controlled, maintained, repaired and constructed said Springs Road and Overpass.'"
May 29, 1964 Answers subscribed by plaintiffs' attorney were filed. Question 169 and numerous other questions were not answered other than by a comment, "all the above questions not answered were objected to as being irrelevant."
June 30, 1964 In response to the State's motion, the plaintiffs were ordered to individually answer all of the interrogatories under oath. A ruling was reserved on the defendant's motion for expenses and attorney's fees under section 2034, subdivision (d) of the Code of Civil Procedure.
November 5, 1964 Further answers to interrogatories, subscribed by plaintiff widow were filed. These interrogatories included the following answer: "169. State of California was negligent in its supervision of employees and in retaining said employees to the extent that said Springs Road and Overpass was allowed to become and was a hazard to people using it for its intended purpose, to-wit: as a thoroughfare for automobiles."
January 8, 1965 In response to the State's second motion the court ordered plaintiffs to further answer question 169, among others, and reserved the question of attorney's fees and costs.
July 6, 1965 The plaintiff widow filed further answers in which she stated: "169. Plaintiff does not wish by the answer of this question to any way limit itself in its introduction of evidence at the time of the trial, which evidence may not be known or readily available to this plaintiff at this time. The defendants through their negligence and carelessness allowed certain road markings and directional guides to remain on said roadway and said markings and roadguide were hazardous to people operating their automobiles under the conditions which prevailed on the evening in which plaintiff's decedent died and plaintiff sustained her severe bodily injuries."
August 6, 1965 In response to the State's third motion, the court expressly ordered: "1.... 2. Plaintiff shall under oath and in further response to Question 169 set forth in detail the description and location of the `certain road markings and directional guides' referred to in her answer to Interrogatory 169 dated June 5, 1965.[[12]] 3. The defendant State of California's motion for attorneys' fees is denied. However, if plaintiff does not furnish the further answer to *780 Question 169 as required above within 30 days from the date of this order, plaintiff shall be precluded from offering evidence upon the theory of liability set forth in her June 5, 1965 [see fn. 12, supra] response to Question 169."
September 24, 1965 The widow filed her further answers dated September 16, 1965, and verified September 20, 1965. She stated: "169. In conjunction with the answers previously filed, the State, either during the time of construction or repairs of this roadway, allowed two divider strippings to remain on said roadway. These two strippings would and did create confusion as to which direction the roadway led."
April 1, 1966 A pretrial conference was held. The State in its pre-trial statement, dated March 30, 1966 and filed April 4, 1966, reserved the objections to the claims of the widow and daughter which have been reviewed in this opinion, and also asserted, "The plaintiffs are precluded from presenting any evidence against the State of California on the alleged dangerous condition as a result of their failure to comply with the Minute Order of Judge Kongsgaard entered on August 2, 1965, and his formal Order on August 4, 1965."
April 8, 1966 The pretrial order, dated April 4, 1966 was filed. It granted the State and City leave to advance by motion their special claims for dismissal or other relief.
April 8, 1966 The State filed its motion to dismiss and preclude evidence which was granted by the court on June 16, 1966, and resulted in the judgment of dismissal, signed and filed June 28, 1966, from which this appeal is taken.
[21a] In opposition to the motion to dismiss, plaintiffs filed the declaration of their attorney in which it is not denied that plaintiffs were represented in court when the court's ruling was pronounced. It is alleged, however, that no formal order was served on plaintiffs until a letter, dated September 8, 1965, was received September 10, 1965, following inquiry of counsel for the State. On this appeal plaintiffs contend that the granting of the State's motion to dismiss was an abuse of discretion because it inflicted punishment rather than furthered the discovery process, and because it denied plaintiffs due process of law. They assert there was no "refusal" within the contemplation of the provisions of section 2034 of the Code of Civil Procedure (see fn. 10, supra), and that any delay in filing the last answer was due to mistake and inadvertence predicated upon the State's failure to serve them with a formal order.
The State, in support of the order granting the motion and the ensuing judgment, relies not only upon the plaintiffs' *781 failure to answer within the time prescribed by the court, but also upon the plaintiffs' diffidence, after the extensive proceedings taken in this case, to ultimately comply with the trial court's order to "set forth in detail the description and location" of the road markings and guidelines.
[22] The State had the unquestionable right to determine the factual basis for the plaintiffs' claim of negligence. (Singer v. Superior Court (1960) 54 Cal.2d 318, 323-324 [5 Cal. Rptr. 697, 353 P.2d 305] [cf. question at p. 321 with question 169 quoted, supra]; and see Dahlquist v. State of California (1966) 243 Cal. App.2d 208, 212-213 [52 Cal. Rptr. 324].)[13]
[23] "[A party] is entitled to demand answers to his interrogatories as a matter of right unless [his adversary] has stated a valid objection thereto [citation]; ..." (Welgoss v. End (1967) 252 Cal. App.2d 982, 991 [61 Cal. Rptr. 52].) Where no answers are filed the court has power and authority under the provisions of subdivision (d) of section 2034 of the Code of Civil Procedure to dismiss an action as a means of enforcing discovery rules. (Id., at p. 986, and see cases there cited.) [24] It is recognized that the sanctions provided in subdivision (b)(2) of section 2034 apply to the refusal to obey in an order made under section 2030 requiring further response to interrogatories. (Fairfield v. Superior Court (1966) 246 Cal. App.2d 113, 120 [54 Cal. Rptr. 721].) In Fred Howland Co. v. Superior Court (1966) 244 Cal. App.2d 605 [53 Cal. Rptr. 341], the court stated: "There is no question of the power of the respondent court to apply the ultimate sanction of default against a litigant who persists in an outright refusal to comply with his discovery obligations." (244 Cal. App.2d at p. 612.)
[25] The plaintiffs have the burden of showing an abuse of the trial court's discretion. (Weinkauf v. Superior Court (1966) 64 Cal.2d 662, 665 [51 Cal. Rptr. 100, 414 P.2d 36]; and see Rosen v. Superior Court (1966) 244 Cal. App.2d 586, 594 [53 Cal. Rptr. 347]; and Crummer v. Beeler (1960) 185 Cal. App.2d 851, 858 [8 Cal. Rptr. 698].)
*782 [26] The applicable principles have been set forth in Caryl Richards, Inc. v. Superior Court (1961) 188 Cal. App.2d 300 [10 Cal. Rptr. 377], as follows: "One of the principal purposes of the Discovery Act (Code Civ. Proc., §§ 2016-2035) is to enable a party to obtain evidence in the control of his adversary in order to further the efficient, economical disposition of cases according to right and justice on the merits. (41 Mich.L.Rev. 205; 50 Yale Law Journal 711; Pettie v. Superior Court, 178 Cal. App.2d 680, 689 [3 Cal. Rptr. 267].) Its purpose is not `to provide a weapon for punishment, forfeiture and the avoidance of a trial on the merits.' (Crummer v. Beeler, 185 Cal. App.2d 851, 858 [8 Cal. Rptr. 698]; Mitchell v. Johnson, 274 F.2d 394.)
[27] "The statute is to be liberally interpreted so that it may accomplish its purpose. [28] The trial court has a wide discretion in granting discovery and by the provisions of section 2034 of the Code of Civil Procedure it is granted broad discretionary powers to enforce its orders but its powers are not unlimited.
[29] "Paragraph (b) (2) of section 2034, Code of Civil Procedure, and subparagraphs (i), (ii), (iii), and (iv) thereof, under which the court acted here, set forth the power of the court to impose sanctions and the sanctions which it may impose for violation of its orders but they may not be interpreted as granting to the court the power to arbitrarily select the sanction it will impose.
[30] "The sanctions the court may impose are such as are suitable and necessary to enable the party seeking discovery to obtain the objects of the discovery he seeks but the court may not impose sanctions which are designed not to accomplish the objects of the discovery but to impose punishment. (Crummer v. Beeler, supra, p. 858; Mitchell v. Johnson, supra, p. 401; Hovey v. Elliott, 167 U.S. 409, 414 [42 L.Ed. 215, 220, 17 S.Ct. 841]; Hammond Packing Co. v. Arkansas, 212 U.S. 322 [53 L.Ed. 530, 29 S.Ct. 370].
"What we have just said is made clear by the provisions of the statute. It provides in substance that if a party refuses to obey an order requiring discovery, such as that made by the court here, `the court may make such orders in regard to the refusal as are just' (emphasis added) and it then recites the sanctions that may be imposed. The first sanction specified is an order that the matter or fact concerning which an interrogatory is proposed shall be taken as established for the purposes of the action in accordance with the claim of the party obtaining the order; the second sanction is an order which *783 prohibits the disobedient party from opposing a designated claim; the third sanction is an order striking out a pleading and rendering a judgment by default against the disobedient party." (188 Cal. App.2d at pp. 303-304. See also Welgoss v. End, supra, 252 Cal. App.2d 982, 992; Fairfield v. Superior Court, supra, 246 Cal. App.2d 113, 120; and Fred Howland Co. v. Superior Court, supra, 244 Cal. App.2d 605, 610.)
[21b] If there were merely a 21-day delay in complying with the court's order it would be an abuse of discretion to dismiss the plaintiffs' action. In Fred Howland Co. v. Superior Court, supra, the court concluded: "When Mr. Hunt again appeared before the court on April 22 he had tendered his answers in proper form and had supplied the court with another declaration explaining more fully the difficulties which had been involved. Under these circumstances, to strike out the answer and enter a default, and then refuse to reconsider upon the showing made on April 22, was to inflict unnecessary and excessive punishment upon one litigant and to confer a windfall upon another litigant and his attorneys. The wrong done, at most, was to delay the preparation of the case and cause some additional work for counsel matters for which a reasonable monetary award would readily compensate." (244 Cal. App.2d at pp. 611-612. See also Welgoss v. End, supra, 252 Cal. App.2d 982, 991-992; Fairfield v. Superior Court, supra, 246 Cal. App.2d 113, 120-122; and Crummer v. Beeler, supra, 185 Cal. App.2d 857, 858-860.) On the other hand, were no answer at all filed, the trial court's dismissal of the action could be upheld. (Frates v. Treder (1967) 249 Cal. App.2d 199, 205-206 [57 Cal. Rptr. 383]. See also Rosen v. Superior Court, supra, 244 Cal. App.2d 586, 591; Bank of America v. Baker (1965) 238 Cal. App.2d 778, 779 [48 Cal. Rptr. 165]; and Unger v. Los Angeles Transit Lines (1960) 180 Cal. App.2d 172, 180-186 [4 Cal. Rptr. 370, 5 Cal. Rptr. 71] [but cf. with Unger, Fairfield v. Superior Court, supra, 246 Cal. App.2d 113, 120-122].)
In Caryl Richards, Inc., supra, as in this case, there were several proceedings to secure an answer which was sufficient to enable the interrogator to properly prepare for trial. An order was made granting attorney fees, but denying more serious sanctions if proper answer was made within a designated time. The ensuing answers were found insufficient and the court made an order striking the defendant's answer and entering its default. (188 Cal. App.2d at pp. 302-303.) The court in granting a writ of mandamus to vacate the default *784 and reinstate the answer concluded: "It seems to us self-evident that an order imposing as a sanction that, for the purposes of the trial the fact that petitioner's product was such as might cause injury to the human eye, would have accomplished the full purpose of discovery for it would have given real parties in interest the benefit of everything which they might have had from the discovery which they sought. It seems to us further evident that the order that the court made which deprived petitioner of any right to defend the action upon its merits was one designed not to accomplish the purposes of discovery but designed to punish petitioner for its failure to disclose in detail its secret process." (Id., at p. 305.) The court also observed that the prior conditional order implied that the interrogator, upon the failure to receive a sufficient answer, was entitled to an order establishing the facts in accordance with his contention.
In this case the last preceding order of the court provided "if plaintiff does not furnish the further answer to Question 169 as required above within 30 days from the date of this order, plaintiff shall be precluded from offering evidence upon the theory of liability set forth" in her prior answers. The court on the second motion could well find that the tardy answer was insufficient to comply with its prior order which required the plaintiffs to "set forth in detail the description and location" of the markings and guidelines. (See in addition to Caryl Richards, Inc., supra, Welgoss v. End, supra, 252 Cal. App.2d at pp. 990-991 and 993, where dilatory tactics and evasive answers were involved.) The court could properly make an order that no evidence would be received on the issue involved in the question. Since no dangerous condition, other than that allegedly involving the markers and guidelines has been suggested, it was logical and proper for the trial court to dismiss the action, in the same manner as a dismissal would have been proper upon failure of proof of the allegation of the paragraph of the complaint which alleged the dangerous condition.[14]
There was no abuse of discretion in granting the motion to dismiss.
*785 The judgments are affirmed.
Molinari, P.J., and Elkington, J., concurred.
A petition for a rehearing was denied March 26, 1968, and appellants' petition for a hearing by the Supreme Court was denied May 1, 1968.
NOTES
[1] Government Code, section 644 [Stats. 1959, ch. 1715, § 2, p. 4118; repealed Stats. 1963, ch. 1715, § 6, p. 3395; see § 911.2, as adopted Stats. 1963, ch. 1715, § 1, p. 3376; and § 945.6, as adopted Stats. 1963, ch. 1715, § 2, p. 3384, and amended Stats. 1965, ch. 653, § 19, p. 2015] provided: "A claim not arising under Sections 17000 to 17003, inclusive, of the Vehicle Code shall be presented to the board within two years after the claim first arose or accrued. An action on such a claim shall be brought within six months after the claim is rejected or disallowed in whole or in part."
[2] Government Code, section 641 [Stats. 1959, ch. 1715, § 2, p. 4118; repealed Stats. 1963, ch. 1715, § 6, p. 3395; see § 905.2 as adopted Stats. 1963, ch. 1715, § 1, p. 3374, and § 945.4, as adopted Stats. 1963, ch. 1715, § 1, p. 3384, and amended Stats. 1965, ch. 653, § 17, p. 2014] provided: "Any person who has a claim against the State (1) on express contract, (2) for negligence, or (3) for the taking or damaging of private property for public use within the meaning of Section 14 of Article I of the Constitution, shall present the claim to the board in accordance with Section 621. If the claim is rejected or disallowed by the board, the claimant may bring an action against the State on the claim and prosecute it to final judgment, subject to the conditions prescribed by this article."
[3] Government Code, section 710 [Stats. 1959, ch. 1724, § 1, p. 4135, repealed Stats. 1963, ch. 1715, § 6, p. 3395; see § 910 as adopted Stats. 1963, ch. 1715, § 1, p. 3374; as amended Stats. 1965, ch. 653, § 1, p. 2010] provided: "No suit for money or damages may be brought against a local public entity on a cause of action for which this chapter requires a claim to be presented until a written claim therefor has been presented to the entity in conformity with the provisions of this article."
Government Code, section 715 [Stats. 1959, ch. 1724, § 1, p. 4136; see sections 901 and 911.2 as adopted Stats. 1963, ch. 1715, § 1, pp. 3373 and 3376] provided: "A claim relating to a cause of action for death or for physical injury to the person or to personal property or growing crops shall be presented as provided in Section 714 not later than the one hundredth day after the accrual of the cause of action. A claim relating to any other cause of action shall be presented as provided in Section 714 not later than one year after the accrual of the cause of action. For the purpose of computing the time limit prescribed by this section, the date of accrual of a cause of action to which a claim relates is the date upon which the cause of action accrued within the meaning of the applicable statute of limitations."
[4] See footnotes 1 and 2.
[5] Cf. Review of California law in Nolan v. Transocean Air Lines (1961) 365 U.S. 293, 295-296 [5 L.Ed.2d 571, 573, 81 S.Ct. 555] with Nolan v. Transocean Air Lines (2d Cir.1961) 290 F.2d 904, 906-908; and see J.A. Thompson & Sons, Inc. v. Superior Court (1963) 215 Cal. App.2d 719, 721, fn. 2 [30 Cal. Rptr. 471].
[6] See footnote 1, supra.
[7] Similar considerations do not apply to the widow's claim against the City of Vallejo, because under Government Code, section 710 the only condition precedent to suit is the presentment of a claim. (See fn. 3, supra; and references in above text.)
[8] These provisions read: "3. The City will accept control and maintenance over each of the relocated or reconstructed city streets and the frontage roads on notice to the City Engineer from the State that the work herein provided for on such roads or streets has been completed, except as to any portion thereof which is adopted by the State as a part of the freeway proper.
"4. The City will accept control and maintenance over designated sections of the interchange or separation structures constructed under this Agreement on notice to the City Engineer from the State that the work herein provided for on such structures has been completed, except as to any portion thereof which is adopted by the State as a part of the freeway proper."
[9] According to the City the question was as follows: "Who owns the land and who is responsible for the traffic markings on Springs Road, as described in Interrogatory No. 11?" (Interrogatory No. 11 was as follows: "Have you or your agents or employees ever painted any traffic markings, including lane markings, on Springs Road, where this accident occurred, within one block either way of Humboldt?")
[10] Code of Civil Procedure, section 2034 provides in pertinent part: "(a) ... Upon the refusal of a party to answer any interrogatory submitted under Section 2030 of this code, the proponent of the question may on like notice make like application for such an order ["compelling an answer"].... If the motion is granted and if the court finds that the refusal was without substantial justification the court may require the refusing party or deponent and the party or attorney advising the refusal or either of them to pay to the examining party the amount of the reasonable expenses incurred in obtaining the order, including reasonable attorney's fees....
"(b) (1) The court may punish as a contempt ... (iii) the refusal of any person to obey any order made by the court under subdivision (a) of this section.
"(2) If any party or person for whose immediate benefit the action or proceeding is prosecuted or defended, or an officer, director, superintendent, member, agent, employee or managing agent of any such party or person refuses to obey an order made under subdivision (a) of this section, ... the court may make such orders in regard to the refusal as are just, and among others the following:
"(i) An order that the matters regarding which the questions were asked, ... or any other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order;
"(ii) An order refusing to allow the disobedient party to support ... designated claims ... or prohibiting him from introducing in evidence ... items of testimony ...;
"(iii) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party;
"(iv) An order requiring the disobedient party or the attorney advising such disobedience to pay to the party obtaining an order under this section the reasonable expenses incurred in obtaining the order, including reasonable attorney's fees;
".... .... ...
"(d) ... if a party ... willfully fails to serve and file[*] answers to interrogatories submitted under Section 2030 of this code, after proper service of such interrogatories, the court on motion and notice may strike out all or any part of any pleading of that party, or dismiss the action or proceeding or any part thereof, or enter a judgment by default against that party, or impose such other penalties of a lesser nature as the court may deem just, and may order that party or his attorney to pay to the moving party the reasonable expenses in making such motion, including reasonable attorney's fees." ([*]Added Stats. 1965, ch. 126, § 1, p. 1074.)
[11] This amendment alleges on information and belief "that the above-described area was in a defective or dangerous condition in that the white guide lines on the highway were so placed that they created a substantial risk of injury when the property was used with due care in a reasonably forseeable [sic] manner. This condition included the leaving by said employees and other persons, in the course and scope of their employment, instead of removing or blanking out, of certain white guide lines on the highway after the highway had been altered. These guide lines would make it appear to a person, such as plaintiff IMOGENE PETERSEN'S deceased husband, travelling along such area that he was driving in the proper lane when, in fact, the lane he was in would direct him into the opposite lanes of traffic. In addition, no traffic control devices or warnings were installed or erected to warn drivers, such as plaintiff IMOGENE PETERSEN'S deceased husband, of such a condition that would not be reasonably apparent to, and would not have been anticipated by, such a person using due care...."
[12] An obvious clerical error. The answers before the court were those dated June 30, 1965 and filed July 6, 1965.
[13] The description and location of the road markings and directional guides, which the court ordered the plaintiffs to disclose, were material and relevant on the issue of whether the State owned, maintained or controlled the area in which they existed (see Donnachie v. East Bay Regional Park Dist. (1963) 217 Cal. App.2d 172, 173 [31 Cal. Rptr. 611]), and also on the issue of whether the condition was such as subjected the State to liability under the provisions of the California Tort Claims Act of 1963 (see Gov. Code, §§ 815 and 830-835.4) which are applicable to an accident occurring on March 19, 1961. (Loop v. State of California (1966) 240 Cal. App.2d 591, 599-600 [49 Cal. Rptr. 909].)
[14] Plaintiffs suggest "that the State at all times had in its possession photographs which clearly delineated the dangerous markings which had been placed on the roadway." It must be assumed that plaintiffs discovered the existence of these photographs at some time between the commencement of the action and their final answers which were filed four years later. Their failure to use or refer to them to answer the State's interrogatory permits the inference that they were evading a commitment on the issue.
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33 F.3d 53
NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.UNITED STATES of America, Plaintiff-Appellee,v.Bobby HAZEL, Defendant-Appellant.UNITED STATES of America, Plaintiff-Appellee,v.Homer RICHARDS, Defendant-Appellant.UNITED STATES of America, Plaintiff-Appellee,v.Bobby HAZEL; Homer Richards, Defendants-Appellants.UNITED STATES of America, Plaintiff-Appellee,v.Bobby HAZEL, Defendant-Appellant.UNITED STATES of America, Plaintiff-Appellee,v.Homer RICHARDS, Defendant-Appellant.
Nos. 93-5659, 94-5272, 93-5660, 94-5285, 94-5208.
United States Court of Appeals, Fourth Circuit.
Argued June 10, 1994.Decided August 16, 1994.
Appeals from the United States District Court for the Eastern District of Virginia, at Alexandria. Albert V. Bryan, Jr., Senior District Judge. (CR-93-62-A)
Argued: Peter Neil Mann, Washington, D.C., for appellant Hazel;
Argued: John M. Tran, Greenberg, Bracken & Tran, Alexandria, VA. On brief: Cary S. Greenberg, Greenberg, Bracken & Tran, Alexandria, VA, for appellant Richards.
Argued: John T. Martin, Asst. U.S. Atty., Office of the United States Attorney, Alexandria, VA. On brief: Helen F. Fahey, U.S. Atty., Cathleen A. Tutty, Sp. Asst. U.S. Atty., Office of the United States Attorney, Alexandria, VA, for appellee.
E.D.Va.
AFFIRMED.
Before WIDENER, HALL and HAMILTON, Circuit Judges.
OPINION
PER CURIAM
1
On February 11, 1993, a federal grand jury sitting in the Eastern District of Virginia returned a three-count indictment against Bobby Hazel and Homer Richards. Count one charged Hazel and Richards with first degree murder, 18 U.S.C. Secs. 1111 and 2, for the killing of Gregory Ford. The indictment also charged Hazel (count two) and Richards (count three) with possession of a dangerous weapon, 18 U.S.C. Sec. 13 (assimilating Va.Code Ann. Sec. 52.1-203(4)). On May 19, 1993, a jury found Hazel guilty of first degree murder and Richards guilty of the lesser included offense of second degree murder. In addition, the jury returned verdicts of guilty on counts two and three. The district court sentenced Hazel to life imprisonment and Richards to 235 months' imprisonment. Hazel and Richards noted timely appeals. On November 26 and December 6, 1993, respectively, Hazel and Richards filed motions for new trials based on newly discovered evidence. See Fed.R.Crim.P. 33. On December 17, 1993, the district court denied the motions, and Hazel and Richards noted timely appeals. On March 18 and 21, 1994, respectively, Hazel and Richards filed another series of motions for new trials based on additional alleged newly discovered evidence. The district court denied these motions and Hazel and Richards noted another set of appeals. We consolidated the various appeals on April 12, 1994 and now affirm.
2
* The facts of this case concern the murder of inmate Gregory Ford at the Lorton Reformatory, which is located at Lorton, Virginia, within the Eastern District of Virginia. The defendants and the material witnesses proffered by the government were also inmates at the Lorton Reformatory on the day Ford was killed.
3
Thomas Dinsmore testified that in May 1992 Richards told him that Ford owed Richards money and that Richards indicated that he was going to have to "hurt" Ford. (J.A. vol. 1 23). Thereafter, Richards and Hazel asked Dinsmore to hurt Ford in exchange for which a debt Dinsmore owed primarily to Richards would be erased.
4
David Basknight testified that on June 16, 1992, he heard an argument outside his room. As a result, Basknight hid behind a bed in the back of his room. Shortly thereafter, Basknight heard a body hitting the floor in his room. Basknight testified that he "stayed still for a while," (J.A. vol. 1 43), and then went to where Ford lay bleeding.
5
Two witnesses gave more damaging testimony. Travis Cameron testified that he saw Hazel and Richards stab Ford. Marshall Hollingsworth testified that he came upon the scene from a nearby stairwell and saw Hazel and Richards make aggressive hand motions toward Ford. Hollingsworth testified that he went back down the stairs and then returned, at which time Hazel and Richards were walking down the stairs past him. Hollingsworth continued up the stairs and saw Basknight standing over Ford.
II
6
During Cameron's cross-examination, counsel for Hazel elicited from Cameron that he did not like Hazel and wanted to kill Hazel. On redirect examination, the government asked Cameron why he harbored these feelings toward Hazel, to which Cameron testified that Hazel had sexually assaulted him. The district court sustained an objection to the question, but denied the appellants' motion for mistrial. In ruling on post-trial motions for a new trial based in part on the alleged prejudice which resulted from this question, the district court held, in retrospect, that it believed the question was proper in light of the preceding cross-examination and that, in any event, there was no prejudice to either appellant. Hazel and Richards argue that the district court's denial of the motion for mistrial, as well as the subsequent new trial motions, constitutes reversible error. We disagree.
7
The question placed by the government to Cameron was proper in light of the preceding cross-examination. On cross-examination, counsel for Hazel probed extensively into Cameron's bias against Hazel, going so far as to establish that Cameron would like to kill Hazel. Because Hazel placed the issue of bias into the scope of cross examination, it was entirely appropriate for the government to establish on redirect examination why Cameron harbored such a bias against Hazel. In any event, even if the government's question on redirect examination was improper, any error was undoubtedly harmless.
III
8
Hazel and Richards also contend that the district court erred in taking judicial notice of the fact that the Lorton Reformatory is in the special maritime and territorial jurisdiction of the United States. The appellants' argument is two-fold: first, they argue that the Lorton Reformatory is not within the special maritime and territorial jurisdiction of the United States; and second, they argue that, even if the Lorton Reformatory is within the special maritime and territorial jurisdiction of the United States, this was not properly the subject of judicial notice in the absence of supporting evidence from the government. We find no merit to these arguments.
9
We have previously held in a related context that the United States Sentencing Guidelines applied to crimes committed at the Lorton Reformatory, which is located in the Eastern District of Virginia. In reaching this ruling, we concluded "the United States District Court for the Eastern District of Virginia has original jurisdiction for crimes committed at Lorton Reformatory, which is located within that district, and this includes criminal charges for violation of the D.C.Code and also for violation of Virginia criminal laws assimilated by 18 U.S.C. Sec. 13." United States v. Young, 916 F.2d 147, 150 (4th Cir.1990). Following Young, crimes committed at the Lorton Reformatory fall within the special maritime and territorial jurisdiction of the United States.
10
We now turn to the argument that the district court erred in taking judicial notice of the fact that the Lorton Reformatory was within the special maritime and territorial jurisdiction of the United States. Fed.R.Evid. 201(b) provides:
11
A judicially noticed fact must be one not subject to reasonable dispute in that it is either: (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.
12
We believe the district court properly took judicial notice that the Lorton Reformatory fell within the special maritime and territorial jurisdiction of the United States. It is beyond cavil that Lorton Reformatory's status was generally known in the Alexandria Division of the Eastern District of Virginia and capable of ready accuracy from "sources whose accuracy cannot be reasonably questioned." Id.*
IV
13
Finally, Hazel and Richards argue that the district court erred in denying their motions for new trials based on newly discovered evidence. The appellants' motions for new trials were based on what they contended was the newly discovered testimony of five witnesses, submitted to the district court in the form of affidavits.
14
We have established a five-part test for evaluating motions for new trials. United States v. Chavis, 880 F.2d 788, 793 (4th Cir.1989). Under Chavis, Hazel and Richards must demonstrate: (1) that the evidence is newly discovered; (2) that there are facts alleged from which the court may infer due diligence on the part of the movant; (3) that the evidence is not merely cumulative or impeaching; (4) that the evidence is material to the issues involved; and (5) that the evidence would probably result in acquittal in a new trial. Id. The burden of persuasion rests with the movant. The district court's denial of a motion for new trial based on newly discovered evidence should not be disturbed absent an abuse of discretion. United States v. Plum, 558 F.2d 568, 576 (10th Cir.1977).
15
We shall briefly summarize the affidavits of the five witnesses proffered by the appellants. Jefferey Wells provided a sworn statement that, prior to the day Ford was killed, Ford assaulted Basknight and that Basknight and Ford had spoken on the day Ford was killed. Wells went on to say that, after lunch, he observed Ford and Bask night arguing and saw Cameron retrieving a shank from a room. Wells further stated that he then left the dorm in order to obtain a weapon, for his own protection, and, upon returning to the dorm, saw Cameron running away with a bloody knife and saw Ford on the floor. Wells concluded by saying that he never saw either defendant in the dormitory that day. The motions for new trials indicate that Hazel acknowledged that counsel had spoken to Wells prior to trial but states that Wells then said he had witnessed none of the events surrounding the killing of Ford.
16
Wiggins' affidavit states that, prior to calling correctional officers to report Ford's injury, he saw Cameron pull Ford's body from Basknight's room to a common area of the dorm, and at that time Cameron had "blood splattered all over his shirt." (J.A. vol. 2 60). Wiggins' affidavit also indicates that in prior interviews with defense attorneys and the Federal Bureau of Investigation (FBI) Wiggins denied having knowledge of these events.
17
The affidavits of both Carlisle Gore and Edward Ford (no relation to the victim) state that Basknight stated in their respective presence that he was a defendant in the murder trial, that he killed Gregory Ford, and that he was not convicted because of a lack of evidence.
18
Finally, the affidavit of Donald Johnson states that he saw Cameron attack a person with a knife in the hallway and back that person into Basknight's room. Johnson's affidavit also states that Cameron allegedly went into the room. Following these events, Basknight purportedly left the room, returned with a mop and bucket, and reentered the room. Finally, Johnson's affidavit states that he told the FBI that he was not aware of what had happened.
19
We believe the affidavits submitted below, examined individually or cumulatively, did not warrant a new trial. Assuming that the evidence presented by Hazel and Richards is new, material, and could not have been discovered with due diligence, the evidence is merely additional impeachment of the testimony of Basknight, Cameron, and Hollingsworth. The evidence, therefore, fails to meet the third prong of the Chavis standard--that the evidence not be merely cumulative or impeaching. The evidence also fails to meet the final prong of the Chavis standard. We glean from our review of the record that this evidence, if presented on retrial, would not probably result in acquittal in light of the strength of the government's case. As the district court noted: "[T]his was not a close case. Retrial, even with the added witnesses the defendants now proffer, would not probably produce a different result." (J.A. vol. 1 82). We agree.
AFFIRMED
*
We also find no merit to the appellants' contention that the district court erred in instructing the jury with respect to the element of federal jurisdiction
| {
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463 F.Supp. 859 (1978)
William R. MONKS, Petitioner,
v.
UNITED STATES PAROLE COMMISSION et al., Respondents.
Civ. No. 78-391.
United States District Court, M. D. Pennsylvania.
December 6, 1978.
*860 William R. Monks, pro se.
Sal D. M. Cognetti, Jr., Asst. U. S. Atty., Scranton, Pa., for respondents.
MEMORANDUM
NEALON, Chief Judge.
Petitioner, an inmate at the United States Penitentiary at Lewisburg, Pennsylvania, instituted this habeas corpus action pursuant to 28 U.S.C. § 2241. Petitioner contests the validity of the July 19, 1977 decision of the United States Parole Commission (Commission) denying him parole. There is no dispute concerning the averments made in the habeas petition and the statements contained in the exhibits appended to respondents' answer. Accordingly, since the pleadings do not present factual issues material to the questions of law raised by this case, an evidentiary hearing is unnecessary. See 28 U.S.C. § 2243; Boeckenhaupt v. United States Parole Commission, Civil No. 77-771, slip op. at 1 (M.D. Pa., filed Sept. 12, 1977); deVyver v. Warden, 388 F.Supp. 1213, 1215-16 (M.D.Pa. 1974). See generally C.A. Wright, Procedure for Habeas Corpus, 77 F.R.D. 227, 245 (1978). Because I believe that the Commission improperly weighed in its deliberations on petitioner's parole application petitioner's reversed murder conviction and failed to state with sufficient specificity the reasons for classifying his offense behavior severity as "greatest" and the reasons for denying him parole and continuing his case to June of 1979, the Commission will be instructed to grant petitioner a new parole hearing.
FACTS
In 1974, petitioner was convicted in the United States District Court for the District of Vermont of two counts of bank "burglary"[1] and of one count of interstate transportation of a stolen motor vehicle.[2] Petitioner received a "regular adult" prison term[3] of eight years on each of the bank burglary convictions and a regular adult term of three years on the interstate transportation of a stolen motor vehicle charge. These sentences were ordered to run concurrently. In January of 1977, petitioner pled guilty in the United States District Court for the District of New Jersey to one count of conspiracy[4] and one count of bank "larceny."[5] The New Jersey district court sentenced petitioner pursuant to 18 U.S. C.A. § 4205(b)(2) (Supp.1978)[6] to five years on the conspiracy count and ten years on *861 the bank larceny charge. These terms were ordered to run concurrently with each other and concurrently with the prison terms imposed by the Vermont district court.
Petitioner received his initial parole hearing on June 8, 1977, after having served more than one-third of the Vermont sentence.[7] The hearing summary indicates that the hearing examiners took into consideration a number of factors in deciding to recommend that parole be denied, among which were petitioner's juvenile record, which includes a reversed murder conviction; the multiple offenses for which petitioner is currently in prison; petitioner's demonstrated lack of remorse for his criminal activity; and remarks apparently made by a United States Attorney to the effect that petitioner is not a "good parole risk."[8]
The hearing examiners also evaluated petitioner's parole application under the Commission's "paroling policy guidelines."[9] Petitioner's offense behavior severity was rated as "greatest" because of the multiple offenses for which petitioner had been convicted. Petitioner's salient factor score, i. e., parole prognosis, fell within the "good" range. Under the "guidelines" applied in petitioner's case the customary time to be served for an inmate whose offense severity was rated as "greatest" and whose salient factor score fell within the "good" range is 48 months or more.[10] Based upon the foregoing, the hearing examiners recommended that petitioner, who at that time had served 40 months in prison, not be paroled and that his case be continued for a regular review hearing in June of 1978.
The Regional Commissioner assigned to petitioner's case disagreed with the hearing examiners' recommendation and referred the matter to the National Commissioners,[11] who decided to continue petitioner's case to the statutory required review hearing in June, 1979. The following statement was provided petitioner as an explanation for the continuance of his parole application until June, 1979:
Your offense behavior has been rated as greatest severity because of multiple offenses. You have a salient factor score of 6. You have been in custody a total of 42 months. Guidelines established by the Commission for adult cases which consider the above factors indicate a range of 48 or more months to be served before release for cases with good institutional program performance and adjustment. *862 After review of all relevant factors and information presented, it is found that your release at this time would depreciate the seriousness of your offense behavior and thus is incompatible with the welfare of society. Commission guidelines for greatest severity cases do not specify a maximum limit. Therefore, the decision in your case has been based in part upon a comparison of the relative severity of your offense behavior with offense behaviors and time ranges specifiedin the very high severity category.
18 U.S.C. § 4208 prohibits a continuance in your case of more than 24 months without review. Your next review has been scheduled in accordance with this statute.
Petitioner attempted to appeal the National Commissioners' decision. This appeal, however, was untimely[12] and was accordingly treated as a motion to reopen.[13] The motion was denied because it did not present "new or significant information deemed sufficient to warrant a recommendation for the reopening of [petitioner's] case. . . ."[14] Petitioner's appeal from this ruling was dismissed because "the denial to reopen a case . . . is not an appealable decision."[15]
Petitioner then instituted an action under 28 U.S.C. § 2255 in the United States District Court for the District of New Jersey contending that the denial of parole had frustrated the intention of the sentencing court. Relief in that proceeding was denied.
Petitioner now seeks habeas relief from this Court. Some of the claims asserted by him arguably have merit in light of Geraghty v. United States Parole Commission, 579 F.2d at 259-263, slip op. at 35-41 (3d Cir. 1978), petition for cert. filed, 47 U.S.L.W. 3351 (U.S. Oct. 5, 1978) (No. 78-572). Since he may be among the class certified by the district court in Geraghty, I will decline to entertain those claims raised by him in this action that are also being litigated in Geraghty.[16]See Jacobs v. United States Parole Commission, Civil No. 78-311, slip op. at 1 (M.D.Pa., filed July 17, 1978). See also Bryan v. Werner, 516 F.2d 233, 239 (3d Cir. 1975) (not error for district court to refuse to consider a claim being litigated in a class action in another district court where plaintiff is a member of the class).
Petitioner also believes that he is entitled to relief on the following grounds:
(1) the refusal to allow petitioner to contest the validity of the parole denial through administrative channels was wrongful;
(2) the computation of petitioner's aggregate prison term was erroneous; and
(3) the denial of parole and the reasons given therefor contravened statutory and administrative provisions and deprived petitioner of due process.
*863 These contentions will be considered seriatim.
The Inability to Challenge the Parole Denial through Administrative Channels
Petitioner was unable to contest the merits of the decision to deny parole because his appeal therefrom was untimely. It was therefore proper to consider the untimely appeal as a motion to reopen and confine review to whether "new or significant information" had been presented.
In addition, the procedural default imposed upon petitioner for failing to appeal within the prescribed time limit cannot be said to violate procedural due process. A procedural default rule promotes the Commission's interest in finality of parole decisions without precluding an inmate from taking an administrative appeal. Cf., Earnest v. Moseley, 426 F.2d 466, 469 (10th Cir. 1970) (Commission has authority to establish procedures that effectuate Congress' purpose in establishing the parole system). Accordingly, petitioner's claim that he was wrongfully barred from challenging the validity of the parole decision will be denied.
Computation of Petitioner's Aggregate Prison Term
The Commission has the authority to aggregate sentences for the purpose of determining parole eligibility. See Walker v. Taylor, 338 F.2d 945 (10th Cir. 1964); Newcombe v. Carter, 291 F.2d 202 (5th Cir. 1961); Brown v. United States, 256 F.2d 151 (5th Cir. 1958); Williams v. Arnold, Civil No. 76-673 (M.D.Pa., filed Aug. 19, 1976). The Commission computed petitioner's aggregate prison term as commencing on the date of his Vermont sentence and as terminating on the expiration date of the New Jersey sentence. The Commission's computation cannot be considered unlawful or erroneous and, therefore, relief will not be granted on this ground.
The Parole Denial
The scope of judicial review of parole decisions is closely circumscribed. The court is to ascertain whether the Commission "has followed criteria appropriate, rational and consistent with the statute and that its decision is not arbitrary and capricious, nor based on impermissible considerations." Zannino v. Arnold, 531 F.2d 687, 690 (3d Cir. 1976). Petitioner contends that the Commission improperly weighed a reversed murder conviction in its deliberations on his parole application; wrongfully categorized his offense behavior severity as "greatest"; and did not provide him with adequate reasons for the denial of parole and continuance to June, 1979. These claims will be considered separately.
Petitioner was convicted of murder when he was fifteen years old. This conviction was reversed some fifteen years later because a coerced confession and the tainted "fruits" thereof were admitted into evidence at the murder trial.[17] Although it appears that the hearing examiners did not rely upon the reversed murder conviction in computing petitioner's salient factor score, the hearing summary indicates that the murder conviction was at least a factor in the hearing examiners' deliberations.[18]
*864 Consideration of reversed convictions in assessing parole risk is not per se impermissible. See Dye v. United States Parole Commission, 558 F.2d 1376, 1379 (10th Cir. 1977). Several courts have held, however, that since convictions obtained in violation of Gideon v. Wainwright, 372 U.S. 335, 83 S.Ct. 792, 9 L.Ed.2d 799 (1963)[19] cannot be considered in the sentencing process,[20] the Commission cannot weigh such an unconstitutional conviction in its parole deliberations. See, e. g., Majchszak v. Ralston, 454 F.Supp. 1137 (W.D.Wis.1978); Wren v. United States Board of Parole, 389 F.Supp. 938 (N.D.Ga.1975). The issue here then is whether the considerations precluding use of "Gideon convictions" in sentencing and parole decisions compel a determination that the Commission cannot consider convictions predicated upon involuntary confessions.
The proscription against the use of Gideon convictions in the sentencing process was believed essential to prevent the evisceration of the Gideon rule and, concomitantly, the procedural safeguards of our criminal justice system. As the Court in United States v. Tucker, supra, 404 U.S. at 449, 92 S.Ct. at 593, observed:
The Gideon case established an unequivocal rule `making it unconstitutional to try a person for a felony in a state court unless he had a lawyer or had validly waived one.' (citation omitted) . . `[T]o permit a conviction obtained in violation of Gideon v. Wainwright to be used against a person either to support guilt or enhance punishment . . . is to erode the principal of that case.'
(emphasis added).
This necessity to protect the constitutionality of our criminal processes recognized in Tucker compels the conclusion here that a conviction overturned because of an involuntary confession cannot be considered in parole decisions. The Supreme Court has consistently held that the admission into evidence of a coerced confession vitiates the conviction because it violates the due process clause of the Fourteenth Amendment. See Brown v. Mississippi, 297 U.S. 278, 286, 56 S.Ct. 461, 80 L.Ed. 682 (1936); Chambers v. Florida, 309 U.S. 227, 228, 60 S.Ct. 472, 84 L.Ed. 716 (1940); Turner v. Pennsylvania, 338 U.S. 62, 65, 69 S.Ct. 1352, 93 L.Ed. 1810 (1949); Spano v. New York, 360 U.S. 315, 324, 79 S.Ct. 1202, 3 L.Ed.2d 1265 (1959). The Court in Watts v. Indiana, 338 U.S. 49, 54-55, 69 S.Ct. 1347, 1350, 93 L.Ed. 1801 (1949), stated the policy underlying the rule requiring reversal of a conviction where an involuntary confession was admitted at trial:
To turn the detention of an accused into a process of wrenching from him evidence which could not be extorted in open court with all its safeguards, is so grave an abuse of the power of arrest as to offend the procedural standards of due process.
This is so because it violates the underlying principle in our enforcement of the criminal law. Ours is the accusatorial as opposed to the inquisitorial system. Such has been the characteristic of Anglo-American criminal justice since it freed itself from the practices borrowed by the Star Chamber from the Continent whereby an accused was interrogated in secret for hours on end. (citations omitted) Under our system society carries the burden of proving its charge against the accused not out of his own mouth. It must establish its case, not by interrogation of the accused even under judicial safeguards, but by evidence independently secured through skillful investigation. `The law will not suffer a prisoner to be made the deluded instrument of his own conviction.' (citation omitted) The requirement of specific charges, their proof beyond a reasonable doubt, the protection of the accused from confessions extorted *865 through whatever form of police pressures, the right to a prompt hearing before a magistrate, the right to assistance of counsel, to be supplied by government when circumstances make it necessary, the duty to advise an accused of his constitutional rightsthese are all characteristics of the accusatorial system and manifestations of its demands. Protracted, systematic and uncontrolled subjection of an accused to interrogation by the police for the purpose of eliciting disclosures or confessions is subversive of the accusatorial system. It is the inquisatorial system without its safeguards. For while under that system the accused is subjected to judicial interrogation, he is protected by the disinterestedness of the judge in the presence of counsel.
Thus, the aim of the proscription against the use of involuntary confessions "is not to exclude presumptively false evidence, but to prevent fundamental unfairness in the use of evidence whether true or false." Lisenba v. California, 314 U.S. 219, 236, 62 S.Ct. 280, 290, 86 L.Ed. 166 (1941). Accord, Watts v. Indiana, supra, 338 U.S. at 50 n. 2, 69 S.Ct. 1347. Criminal trials in which involuntary confessions have been admitted are vitiated "even though there may have been sufficient evidence, apart from the coerced confession, to support a judgment of conviction . . .." Payne v. Arkansas, 356 U.S. 560, 568, 78 S.Ct. 844, 850, 2 L.Ed.2d 975 (1958). Accord, Spano v. New York, supra, 360 U.S. at 324, 79 S.Ct. 1202; Stroble v. California, 343 U.S. 181, 190, 72 S.Ct. 599, 96 L.Ed. 872 (1952). Involuntary confessions have even been held inadmissible for impeachment purposes. See Alesi v. Cramer, 440 F.2d 975, 977 (9th Cir.), cert. denied, 404 U.S. 856, 92 S.Ct. 103, 30 L.Ed.2d 97 (1971). And, in Brown v. Mississippi, supra, 297 U.S. at 286, 56 S.Ct. 461; the Court noted that use of an involuntary confession for conviction and sentence was a clear denial of due process.
It therefore cannot be said, in view of the Court's strong admonitions against the use of coerced confessions, that a conviction, void because an involuntary confession was admitted into evidence, may be used to enhance a prison term. Such consideration of an unconstitutional conviction in the sentencing process would force the inmate to suffer anew from the deprivation of his due process rights and derogates from the principles of our accusatorial system of justice. See United States v. Tucker, supra, 404 U.S. at 449, 92 S.Ct. 589.
It has been argued that the parole and sentencing processes are distinct, with separate functions and aims. I believe, however, that the parole process is sufficiently similar to the sentencing process to warrant a holding here that convictions based upon involuntary confessions cannot be weighed in parole deliberations. See Strader v. Troy, 571 F.2d 1263 (4th Cir. 1978); Majchszak v. Ralston, 454 F.Supp. 1137 (W.D.Wis. 1978); Wren v. United States Board of Parole, 389 F.Supp. 938 (N.D.Ga.1975). "Although the stated purposes of sentencing and parole decisions may differ, the practical effect of a denial of parole is to set the amount of time a prisoner must spend incarcerated. Where government action carries such a profound consequence, formalistic distinctions are not compelling." Majchszak v. Ralston, supra, 454 F.Supp. at 1144. And while the Commission may consider a wide range of information, including mere allegations of criminal behavior, in determining parole eligibility, see Billiteri v. United States Board of Parole, 541 F.2d 938, 944 (2d Cir. 1976), it may not base its decisions on impermissible considerations. See Strader v. Troy, supra, 571 F.2d at 1266; Majchszak v. Ralston, supra, 454 F.2d at 1143; Wren v. United States Board of Parole, 389 F.Supp. at 931. Cf. United States v. Tucker, supra, 404 U.S. at 446-48, 92 S.Ct. 589 (sentence may not be founded upon misinformation "of a constitutional magnitude").[21] Therefore, petitioner will be accorded a new parole hearing untainted by any consideration of his reversed murder conviction.
*866 I believe that petitioner is also entitled to relief because the Commission failed to state with sufficient specificity the reasons why his offense behavior severity was rated as "greatest" and why he was denied parole and his case continued to June, 1979. The reason given for rating petitioner's offense behavior severity as "greatest" was that he had been convicted of "multiple offenses." None of the offenses for which petitioner is currently in prison, however, are classified above the "high" category.[22] Thus, the Commission, in deciding to increase petitioner's offense behavior severity level, had the option of rating petitioner in either the "very high" or the "greatest" category. The Commission's choice of the "greatest" rating, which, in effect, placed petitioner outside the guidelines for parole eligibility purposes, is unexplained.
In Soloway v. Weger, 389 F.Supp. 409, 411 (M.D.Pa.1974), I held that a parole applicant is entitled to a "meaningful written statement as to the reasons for the denial of his application." Such a statement of reasons is necessary to insure that the Commission "acted fairly, lawfully and nonarbitrarily." Id. at 412. Accord, Childs v. United States Board of Parole, 167 U.S. App.D.C. 268, 511 F.2d 1270, 1283 (1974). In addition, "`[a] reasons requirement `promotes thought by the decider,' and compels him `to cover the relevant points' and `eschew irrelevancies.'" Id., 167 U.S.App.D.C. at 280, 511 F.2d at 1282.
The reason given here for classifying petitioner's offense behavior severity as "greatest" does not provide an adequate basis for this court to determine whether the Commission acted arbitrarily. Indeed, the hearing summary contradicts the "greatest" assessment. In the hearing summary, the hearing examiners observe that "[b]asically, [petitioner] is not a serious offender with [sic] his prior record is evaluated carefully." To then rate petitioner's offense behavior severity as "greatest" after having noted that he is not a serious offender leaves the court to guess at the circumstances, other than the bare mention of the multiple "non-serious" offenses, that compelled the "greatest" rating.
I believe that where, as here, the Commission has the option of increasing an inmate's severity level to either the "very high" or "greatest" category and chooses to increase the level to the "greatest" category it should substantiate that choice with a statement of reasons other than the fact that the inmate is currently in prison on several convictions. That is, in order to effectuate a prisoner's right to meaningful parole consideration, the prisoner must be informed of the reasons why the multiple offenses compelled a severity rating of "greatest" rather than "very high." Such a statement of reasons would indicate "that the specific circumstances of the crime[s] and the [inmate's] part in [them], and not merely the type[s] of the crime[s] generally, was the reason . . ."[23] to rate the prisoner's offense behavior severity as "greatest" rather than "very high." Since petitioner here was not provided with such a statement of reasons, the Commission will be required to re-examine petitioner's severity rating and, if it decides that the "greatest" rating is proper, provide petitioner with an adequate statement of the reasons therefor.
*867 Petitioner's final contention is that an adequate statement of reasons was not provided for denying parole and continuing his case to June, 1979. The "Notice of Action" from the National Commission contains the following elements: (1) petitioner's classification in the "greatest" category; (2) his salient factor score of 6; (3) the 42 months he had been incarcerated; (4) reference to the maximum period of confinement for an inmate in the "very high" category with a salient factor score of six; and (5) a statement that "your release at this time would depreciate the seriousness of your offense behavior and thus is incompatible with the welfare of society." (emphasis added)[24]
Although such a notice of action may be sufficient to continue a parole applicant within the guidelines, it is insufficient, where, as here, the continuance extends the applicant beyond the guidelines. Such a statement of reasons says nothing why petitioner should be confined at least 64 months, some 16 months beyond the maximum suggested by the guidelines for prisoners in the "very high" category. See Bowman v. United States Board of Parole, 411 F.Supp. 329, 330 (W.D.Wis.1976).
[W]hat is needed once a `greatest' prisoner is continued beyond the `very high' guideline period is a statement of reasons showing that the Commission has considered the specific circumstances of the prisoner's crime and has, in the exercise of its discretion, used those circumstances to determine specifically where, between the maximum for the `very high' category and mandatory release, the prisoner should be placed.
Jacoby, supra, 442 F.Supp. at 149 (emphasis in original). Accord, Bowman v. United States Board of Parole, supra, 411 F.Supp. at 330; Diaz v. Norton, 376 F.Supp. 112, 115 (D.Conn.1974); Lupo v. Norton, 371 F.Supp. 156, 163 (D.Conn.1974). In view of my ruling that petitioner must be granted a new parole hearing, the Commission will not be required to submit reasons justifying the continuance until June, 1979. Any future decision to deny parole and continue petitioner's application, however, must be supported by adequate reasons.
NOTES
[1] See 18 U.S.C.A. § 2113(b) (Supp.1978). Although offenses under 18 U.S.C.A. § 2113(b) might more properly be referred to as bank theft, the "Hearing Summary" of petitioner's June 8, 1977 parole hearing lists petitioner's offenses as bank "burglary" and they will be so described here. The Hearing Summary indicates that petitioner and a co-defendant stole approximately two thousand ($2000) dollars in silver coins from two Vermont banks.
[2] See 18 U.S.C.A. § 2312 (1970). The vehicle used in the Vermont bank burglaries was apparently stolen in New Jersey.
[3] "Regular adult" sentence refers to a prison term imposed under 18 U.S.C.A. § 4205(a) (Supp.1978). (At the time petitioner was sentenced, regular adult terms were delivered under 18 U.S.C.A. § 4202 (1969).) This sentencing provision was amended by the "Parole Commission and Reorganization Act," (PCRA), Pub.L.No. 94-233, § 2, 90 Stat. 222 (1976)). An inmate sentenced under this provision "becomes eligible for parole only after serving one-third of his or her full sentence." ProjectParole Release Decisionmaking and the Sentencing Process, 84 Yale L.J. 810, 818 (1975).
[4] See 18 U.S.C.A. § 371 (1966).
[5] See 18 U.S.C.A. § 2113(b) (Supp.1978). The details of the conspiracy and bank larceny charges are not reported in the Hearing Summary.
[6] An inmate sentenced under 18 U.S.C.A. § 4205(b)(2) becomes eligible for parole at the Commission's discretion. See 28 C.F.R. § 2.2 (1977).
[7] Petitioner's aggregate prison term (i. e., the sentence that he began serving in 1974 plus the sentence he began serving in 1977) was computed by totaling the maximum amount of time that could be served from the start of his first sentence to the expiration date on the second sentence. Therefore, petitioner's total sentence is stated in the hearing summary as twelve years, six months and sixteen days.
[8] Petitioner contends that undue emphasis was placed on the prosecutor's remarks. The PCRA authorizes the Commission to consider all relevant information in making a parole determination. 18 U.S.C.A. § 4207 (Supp. 1978). The Commission's regulations specifically provide that the Commission will consider, if available and relevant, "recommendations regarding the prisoner's parole made . . . by the . . . prosecuting attorney." 28 C.F.R. § 2.19(a)(4). Therefore, contrary to petitioner's contention, consideration of the United States Attorney's remarks was proper.
[9] The current "guidelines" are codified at 28 C.F.R. § 2.20 (1977). These guidelines utilize "a grid in which a combination of salient factor score and offense severity rating identifies a `customary' time span to be served." Geraghty v. United States Parole Commission, 579 F.2d 238, 242 (3d Cir., 1978), petition for cert. filed, 47 U.S.L.W. 3351(U.S. Oct. 5, 1978) (No. 78-572). The Offense Severity Rating is the Commission's assessment of the gravity of the offenses for which the inmate is currently imprisoned.
The Salient Factor Score is designed to predict the likelihood that an inmate will succeed on parole. This score is measured by an 11-point Salient Factor Score Scale, which consists of nine weighted personal characteristics that were statistically determined to have high predictive power in discriminating between past groups of releasees who `succeeded' and `failed' after their release. All but two of the nine items are part of the inmate's past criminal record and behavior. . . .
Project, supra note 5, at 823-24.
[10] Under the current guideline table, the customary time to be served by an inmate in petitioner's category is 45 months or more.
[11] See 28 C.F.R. § 2.24 (1977).
[12] An appeal from a decision to deny parole must be taken "within thirty days from the date of entry of such decision." 28 C.F.R. § 2.25(a) (1977). See 18 U.S.C.A. § 4215(a) (Supp.1978). Petitioner's appeal was taken almost four months after the parole denial.
[13] See 28 C.F.R. § 2.28 (1977).
[14] Respondents' Exhibit D (Letter of Nov. 7, 1977 from case analyst David E. O'Connor to petitioner).
[15] Respondents' Exhibit E (Letter of Nov. 23, 1977 from O'Connor to petitioner).
[16] Specifically, I refuse to entertain petitioner's claim that the guidelines defeated petitioner's statutory right to meaningful parole consideration at or prior to the completion of one-third of his prison term. See 18 U.S.C.A. §§ 4205-09 (Supp.1978). See also United States v. Wigoda, 417 F.Supp. 276, 279 (N.D.Ill.1976); Kehoe v. Jensen, 400 F.Supp. 899, 900 (M.D.Pa.1975).
Petitioner also seems to argue that the guidelines may not be applied to inmates who have served one-third of their sentence. This claim, which does not appear to have been presented in Geraghty, is clearly without merit. The PCRA contemplates the use of guidelines and there is nothing in the legislation or legislative history to suggest that Congress did not intend that those guidelines be applied only to inmates who had served less than one-third of their sentences. See 18 U.S.C.A. § 4203(a)(1); House Conf.Rep.No. 94-648, 94th Cong. 2d Sess. 26-27. Accordingly, relief on this claim will be denied.
[17] See United States ex rel. Monks v. Warden, 339 F.Supp. 30, 35 (D.N.J.), aff'd, 474 F.2d 1337 (3d Cir. 1972). The district court decision indicates that petitioner was arrested and kept incommunicado for over a week while law enforcement officials interrogated him concerning several purse snatching incidents and a murder. Petitioner was not advised during the course of the interrogation that he had the right to remain silent. On the day petitioner confessed he was examined intermittently for fifteen hours. This confession was declared the product of police coercion. Consequently, the confession and tainted evidence were held inadmissible. The court ordered New Jersey to either retry petitioner or release him. The record in this case does not indicate that petitioner was retried on the murder charge.
[18] The hearing summary reference to the murder conviction satisfies petitioner's burden of showing that the reversed conviction was considered in deciding to deny him parole. Cf., Mitchell v. United States, 482 F.2d 289, 291 (5th Cir. 1973) (petitioner need not show that an unconstitutional conviction actually enhanced his sentence; only that the conviction was considered).
[19] Gideon held that the states may not convict a person of a felony unless he was represented at trial by counsel or had validly waived his right to the assistance of an attorney.
[20] See United States v. Tucker, 404 U.S. 443, 92 S.Ct. 589, 30 L.Ed.2d 592 (1972); Del Piano v. United States, 575 F.2d 1066, 1067 (3d Cir. 1978); United States v. Radowitz, 507 F.2d 109, 112 (3d Cir. 1974).
[21] The decisions that preclude consideration of Gideon convictions in the sentencing or parole processes are based upon the fact that the decision-maker did not know that the convictions were unconstitutional and thus his decision was based upon an untrue assumption. Here, the decision-makers knew petitioner's conviction had been reversed. The distinction, however, is not significant. Case law cited above makes it clear that prior Gideon convictions cannot be used to enhance the inmate's sentence. This is true regardless of whether the decision-maker knew or did not know that the conviction was unconstitutional. Furthermore, a parole decision that takes into account a conviction reversed by virtue of the admission of an involuntary confession into evidence may be said to be based upon "misinformation of a constitutional magnitude" because the prior conviction is a nullity. Thus, the decision-maker considers a conviction that is not recognized in the eyes of the law as a conviction.
[22] See 28 C.F.R. § 2.20 (1977). The paroling policy guidelines indicate that "[i]f an offense behavior involved multiple separate offenses, the severity level may be increased." Id. n. 4. The Commission's authority to increase the severity level on the basis of multiple convictions has been sustained. See, e. g., Maslauskas v. United States Parole Commission, Civil No. 78-84, slip op. at 4 (M.D.Pa., filed Aug. 24, 1978); Payne v. United States Bd. of Parole, Civil No. 76-694 (M.D.Pa., filed Dec. 20, 1976).
[23] United States ex rel. Jacoby v. Arnold, 442 F.Supp. 144, 150 (M.D.Pa. 1977).
[24] I concur in the following observation made by Judge Muir concerning the propriety of this statement as a justification for denying parole:
To the extent that the use of the conjunctive `and thus' implies that a finding of probable future criminality follows automatically from a finding that release would depreciate the seriousness of the offense committed, it is in error. Both the PCRA and its legislative history, (citation omitted) indicate that the `public welfare' criterion is separate and distinct from the `seriousness of the offense' criterion. . . . [T]he Commission's statement of reasons should reflect the separate criteria and the determination made under each one. Otherwise, the inmate and any reviewing court are left to guess at the real reasons for the denial of parole.
United States ex rel. Boeckenhaupt v. United States Parole Commission, Civil No. 77-171, slip op. at 11-12 (M.D.Pa., filed Feb. 28, 1977) (emphasis in the original).
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FILED
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS January 30, 2009
Elisabeth A. Shumaker
TENTH CIRCUIT Clerk of Court
UNITED STATES OF AMERICA,
Plaintiff - Appellee, No. 08-2114
v. (D. New Mexico)
LLOYD TAPLIN, (D.C. No. 1:03-CR-01293-WJ-1)
Defendant - Appellant.
ORDER AND JUDGMENT *
Before MURPHY, ANDERSON, and GORSUCH, Circuit Judges.
In 2003, Lloyd Taplin pleaded guilty to three counts of distribution of crack
cocaine, in violation of 21 U.S.C. § 841(b)(1)(C). Utilizing the career offender
provisions set out in U.S.S.G. § 4B1.1, rather than the crack cocaine provisions
set out in U.S.S.G. § 2D1.1, the district court sentenced Taplin to a term of
imprisonment of 151 months. In a series of amendments to the Sentencing
Guidelines adopted in late 2007 and early 2008, the United States Sentencing
Commission decreased by two levels the base offense level assigned to quantities
*
This order and judgment is not binding precedent except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
of crack cocaine in § 2D1.1 and made that change retroactive to those previously
sentenced under § 2D1.1. United States v. Sharkey, 543 F.3d 1236, 1237 (10th
Cir. 2008) (setting out history of Amendments 706 and 713 of the Sentencing
Guidelines). Soon thereafter, Taplin filed a motion, pursuant to 18 U.S.C.
§ 3582(c), for a reduction in his sentence pursuant to Amendments 706 and 713.
The district court denied the motion, concluding Taplin was not entitled to relief
because his base offense level was set under the career offender guideline, rather
than the crack cocaine guideline. Thus, this appeal presents the following pure
question of law: Did the district court err in concluding Taplin was not entitled to
relief under § 3582(c) because Taplin’s offense level was set by application of the
§ 4B1.1 career offender guideline, rather than the crack cocaine provisions set out
in U.S.S.G. § 2D1.1?
In a decision issued after the briefing was complete in this case, we
resolved this exact question. Sharkey, 543 F.3d at 1239. Sharkey holds that when
a defendant’s base offense level is set under the § 4B1.1 career offender
guideline, the defendant is not entitled to a reduction in his sentence pursuant to
Amendment 706 and § 3582(c). Id. It further holds that neither the decision in
United States v. Booker, 543 U.S. 220 (2005), nor in Kimbrough v. United States,
128 S. Ct. 558 (2007), alter that outcome. Sharkey, 543 F.3d at 1239.
As Sharkey makes clear, the district court correctly denied Taplin’s
§ 3582(c) motion for a reduction in his sentence. Thus, the order of the United
-2-
States District Court for the District of New Mexico denying Taplin’s § 3582(c)
motion is hereby AFFIRMED.
ENTERED FOR THE COURT
Michael R. Murphy
Circuit Judge
-3-
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265 Ga. 116 (1995)
JANELLE
v.
JANELLE.
S94A1950.
Supreme Court of Georgia.
Decided March 6, 1995.
Calhoun & Associates, John R. Calhoun, Gregory N. Crawford, for appellant.
Beckmann & Lewis, J. Stephen Lewis, for appellee.
SEARS, Justice.
In this divorce action, the trial court instructed the jury that the husband's corporation and the husband's undivided one-half interest in the marital home were non-marital properties not subject to equitable division. The wife appeals the subsequent judgment entered on the jury's verdict, and we reverse.
1. It is undisputed that the corporation was the separate property of the husband before the parties married. The wife contends, however, that the corporation has appreciated in value since the marriage, and that the appreciation is a marital asset subject to division.
In general, "[w]hether a particular kind of property can ever be classified as marital property" is a question of law for a judge to decide. *117 (Emphasis in original.) Bass v. Bass, 264 Ga. 506, 508-509 (448 SE2d 366) (1994) (Hunt, C. J., concurring). "However, whether a particular item of property actually constitutes a marital or non-marital asset may be a question of fact for the trier of fact to determine from the evidence." (Emphasis supplied.) Bass, 264, Ga. at 507. We specifically addressed the treatment of the appreciation in the value of a spouse's separate property in Bass, where we held that
as a matter of law, if the separate non-marital property of one spouse appreciates in value during the marriage solely as the result of market forces, that appreciation does not become a marital asset which is subject to equitable division; but, if the separate non-marital property of one spouse appreciates in value during the marriage as the result of efforts made by either or both spouses, that appreciation does become a marital asset which is subject to equitable division. Thomas v. Thomas, [259 Ga. 73, 75 (377 SE2d 666) (1989)]; Halpern v. Halpern, 256 Ga. 639 (352 SE2d 753) (1987).
(Emphasis supplied.) Id.
Accordingly, as a matter of law, the appreciation in the value of the husband's corporation is marital property and subject to equitable division if, as a matter of fact, the appreciation was "the result of efforts made by either or both spouses." Since questions of fact are properly left up to the trier of fact, and the trier of fact in this case was the jury, the trial court erred in removing the corporation, and thus any appreciation in its value, from the jury's consideration in dividing assets without allowing the jury to resolve the factual question of the catalyst for the appreciation.
2. Likewise, the trial court erred in declaring, as a matter of law, that the husband had an undivided one-half interest in the marital residence which was non-marital property and not subject to equitable distribution. As with the appreciation in the corporation, the extent to which the marital residence was marital property depends upon the resolution of factual issues.[1] The jury should be allowed to hear the parties' evidence and arguments, and should be instructed on the legal principles appropriate to the determination of the extent *118 to which the final marital residence constitutes marital property.[2] Once that determination is made, the jury may apportion the marital property as it believes the equities demand.
Judgment reversed and case remanded for a new trial. All the Justices concur.
NOTES
[1] The husband contends that the original marital residence was purchased before the marriage, and that each subsequent marital residence was purchased with proceeds from the sale of that original marital residence. The wife contends that the husband made only a small down-payment on the original marital residence before the marriage, and that all mortgage payments on that residence and each subsequent residence were paid from the parties' joint checking account, to which both of their paychecks were directly deposited.
[2] In this regard, "[t]he source of funds rule is a reliable method for classifying property of this sort and is consistent with the purpose behind the doctrine of equitable division of property." Thomas v. Thomas, 259 Ga. at 77.
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Order Michigan Supreme Court
Lansing, Michigan
November 22, 2010 Marilyn Kelly,
Chief Justice
Michael F. Cavanagh
Maura D. Corrigan
141407 Robert P. Young, Jr.
Stephen J. Markman
Diane M. Hathaway
BETH HOFFMAN, Personal Representative of Alton Thomas Davis,
Justices
the Estate of EDGAR BROWN, Deceased,
Plaintiff-Appellee,
v SC: 141407
COA: 289011
Calhoun CC: 2003-003576-NH
DR. PETER BARRETT,
Defendant-Appellant.
_________________________________________/
On order of the Court, the application for leave to appeal the June 3, 2010
judgment of the Court of Appeals is considered and, it appearing to this Court that the
cases of Ligons v Crittenton Hosp (Docket No. 139978) and Green v Pierson (Docket
No. 140808) are pending on appeal before this Court and that the decisions in those cases
may resolve an issue raised in the present application for leave to appeal, we ORDER that
the application be held in ABEYANCE pending the decisions in those cases.
DAVIS, J., not participating. I recuse myself and am not participating because I
was on the Court of Appeals panel in this case. See MCR 2.003(B).
I, Corbin R. Davis, 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.
November 22, 2010 _________________________________________
d1115 Clerk
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02-12-245-CR
COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-12-00245-CR
Lawrence Edward Watson
APPELLANT
V.
The State of Texas
STATE
----------
FROM THE 213th
District Court OF Tarrant COUNTY
----------
MEMORANDUM
OPINION[1]
----------
Appellant
Lawrence Edward Watson filed a notice of appeal from his conviction for
possession of between one and four grams of cocaine. The trial court’s
certification states that this “is a plea-bargain case, and the defendant has
NO right of appeal.” On May 31, 2012, we notified Watson that this appeal
could be dismissed unless he or any party desiring to continue the appeal filed
a response on or before June 11, 2012, showing grounds for continuing the
appeal. We have not received a response. Therefore, in accordance with the
trial court’s certification, we dismiss this appeal. See Tex. R. App.
P. 25.2(d), 43.2(f).
PER CURIAM
PANEL:
MEIER, J.; LIVINGSTON,
C.J.; and GABRIEL, J.
DO
NOT PUBLISH
Tex.
R. App. P. 47.2(b)
DELIVERED: June 28, 2012
[1]See Tex. R. App. P. 47.4.
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867 F.2d 697
276 U.S.App.D.C. 81
COMMERCE CONSULTANTS INTERNATIONAL, INC., Appellant,v.VETRERIE RIUNITE, S.p.A., Appellee.
No. 88-7077.
United States Court of Appeals,District of Columbia Circuit.
Argued Nov. 22, 1988.Decided Feb. 14, 1989.
Russell J. Gaspar, Washington, D.C., for appellant.
Dario Ceppi, New York City, for appellee. Mark C. Ellenberg and David F. Williams, Washington, D.C., also entered appearances for appellee.
Before EDWARDS, WILLIAMS, and FRIEDMAN,* Circuit Judges.
Opinion for the Court filed by Circuit Judge FRIEDMAN.
FRIEDMAN, Circuit Judge:
1
This is an appeal from an order dismissing, for improper venue, a breach of contract suit by an American corporation against the other party to the contract, an Italian corporation. Commerce Consultants Int'l v. Vetrerie Riunite, No. 87-2104 (Jan. 28, 1988, D.D.C.). The ground for dismissal was that, under the contract, suit could be brought only in an Italian court. We affirm.
2
* A. The appellant, Commerce Consultants International, Inc. (Commerce Consultants), a District of Columbia corporation, entered into a written contract with Vetrerie Riunite, S.p.A. (Riunite), an Italian corporation, under which Commerce Consultants became Riunite's exclusive agent for the sale of Riunite's lenses in North America. The written agreement was drafted in English for Commerce Consultants by its employee Michael Galbraith, who was fluent in Italian, but not a lawyer. According to Galbraith's affidavit, Galbraith "was the sole person responsible for all of the relations between" the two companies.
3
The draft of the agreement that Galbraith sent to Riunite's representative in the negotiations, Rossi, contained the following provision:
4
13. The validity, enforceability and interpretation of this agreement shall be determined and governed by the laws of the District of Columbia, U.S.A.
5
In a letter that accompanied the agreement, written in Italian, Galbraith stated: "Of course, should you wish to modify any provision, we would be pleased to comply, based on your comments."
6
In response, Rossi stated in a Telex that his company was "in agreement with all points" except for two, one of which was (as translated into English by Galbraith):
7
Responsible will be the Verona court rather than the United States one.
8
Galbraith then redrafted paragraph 13 of the agreement to read:
9
13. The validity, enforceability and interpretation of this agreement shall be determined and governed by the appropriate court of Verona, Italy.
10
Galbraith sent the revised agreement to Rossi, and Riunite executed it.
11
B. More than a year after the contract was signed, Commerce Consultants filed in the district court a suit against Riunite alleging that Riunite had breached the contract by itself selling its products in the United States, in violation of Commerce Consultants' appointment as Riunite's exclusive sales agent there, and by terminating the contract before its expiration date.
12
Riunite moved, pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure, to dismiss the complaint for improper venue, because under the contract such a suit could be maintained only in the courts of Verona, Italy. The district court granted the motion.
13
The court held that paragraph 13 of the "agreement is unambiguous and the product of fair arms-length bargaining," and that it was a "choice-of-forum clause" and not a "choice-of-law" provision. The court rejected Commerce Consultants' contention that "even if the contract language is construed as a choice-of-forum provision, it should not be enforced because under the Italian system for conducting civil cases, CCI would effectively be deprived of its day in court." Id., slip op. at 5. The court stated that "[t]he court sees no reason to believe that reliance on the Italian courts will depreive [sic] CCI of its day in court." Id. at 6. The court
14
conclude[d] that paragraph 13 of the parties' agreement of February 26, 1986 requires plaintiff's claims to be brought in the courts of Verona, Italy. Defendant's motion to dismiss this case for improper venue is granted.
15
Id.
II
16
The district court correctly held (A) that paragraph 13 of the contract was a choice-of-forum and not a choice-of-law clause, and (B) that enforcement of paragraph 13 to require that the case be brought in Italy was proper.
17
A. Paragraph 13 unambiguously specified where any litigation relating to the contract should be conducted and, by implication, what law should be applied in such case. It states that the "validity, enforceability and interpretation" of the contract "shall be determined" by the "appropriate court of Verona, Italy" and that in making that determination the law of that court shall govern. This clear language cannot be read, as Commerce Consultants would read it, as permitting suit in the United States and requiring only that in deciding that suit the American court would apply Italian law.
18
This interpretation of paragraph 13 is confirmed by the negotiation of that provision. As Mr. Galbraith originally drafted it, paragraph 13 designated the law of the District of Columbia as governing any question relating to the contract. In response to an objection by Riunite that it could not agree to the provision and that "the Verona court rather than the United States one" should be "[r]esponsible," Galbraith changed the provision, as he had indicated he would be willing to do, to conform it to Riunite's demand, i.e., that any litigation regarding the contract would be conducted in an Italian court.
19
In light of this clear language of paragraph 13 and the negotiations that produced it, Commerce Consultants cannot rely on the statement in Galbraith's affidavit, which was filed long after the contract was negotiated and as part of Commerce Consultants' response in opposition to Riunite's motion to dismiss, that:
20
I understood Mr. Rossi's statement to be a request from VR to change the substantive law that "determined and governed" the relationship from the laws of the District of Columbia to the laws that would be applied by the courts of Verona. It was in this sense that I understood the word "[r]esponsible" used in the telex.... I did not believe that the requested change had to do with the choice of forum for disputes, which was not addressed by the Paragraph.
21
... I accepted that the laws "governing and determining" the relationship would be the laws of the Court of Verona. However, I would have never agreed to the possibility of having to go to Italy to protect CCI's rights under the agreement, because I had often been told that Italy operates one of the most inefficient and unpredictable legal system [sic] in the Western world.
22
Apart from the fact that the language of paragraph 13 of the agreement as executed is clear, so that there is no occasion to refer to parol evidence to interpret it, Mr. Galbraith's position ignores the significant change made in the provision as a result of Mr. Rossi's objection to the original version. The change did not substitute the laws of Verona for those of the District of Columbia; instead it provided that "the appropriate court of Verona, Italy" would determine disputes relating to the contract on the basis of its laws. Although Mr. Galbraith was not a lawyer, he surely was aware that specifying the court that would determine disputes concerning the contract was not the same thing as specifying the law that would be applied in resolving such disputes. It was Mr. Galbraith who made this change in response to Rossi's objection, and Commerce Consultants cannot now be heard to state that the revised paragraph 13 that Mr. Galbraith drafted does not really mean what it says.
23
B. In The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), the Supreme Court upheld a provision in an international towage contract between an American and a German corporation that any dispute under the contract would be litigated before the London Court of Justice. The Supreme Court stated that "such [forum-selection] clauses are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be 'unreasonable' under the circumstances." Id. at 10, 92 S.Ct. at 1913, footnote omitted. It ruled that "[t]he choice of that forum was made in an arm's-length negotiation by experienced and sophisticated businessmen, and absent some compelling and countervailing reason it should be honored by the parties and enforced by the courts." Id. at 12, 92 S.Ct. at 1914. The Court concluded that to invalidate a forum-selection clause, a party challenging it must "show that trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court." Id. at 18, 92 S.Ct. at 1917.
24
More recently, the Court stated that The Bremen and Scherk v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974), which relied upon The Bremen in applying and upholding a clause in a business acquisition agreement between an American and a German corporation providing for arbitration of any disputes under the contract in Paris, "establish a strong presumption in favor of enforcement of freely negotiated contractual choice-of-forum provisions." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631, 105 S.Ct. 3346, 3356, 87 L.Ed.2d 444 (1985).
25
In the present case, as in The Bremen, the "choice of [the Italian] forum was made in an arm's-length negotiation by experienced businessmen." 407 U.S. at 12, 92 S.Ct. at 1914. Commerce Consultants has not shown that trial of this case in Verona, Italy, will be "so gravely difficult and inconvenient" that it "will for all practical purposes be deprived of [its] day in court." Id. at 18, 92 S.Ct. at 1917.
26
The sole ground upon which Commerce Consultants seeks to avoid its agreement for trial in Verona is that discovery proceedings in the Italian court would be inadequate to enable it to develop its case. When Commerce Consultants agreed to the requirement of paragraph 13 that litigation of contractual disputes would be conducted in the courts of Verona, it also necessarily accepted the procedures that those courts follow. Commerce Consultants cannot now avoid the forum-selection clause on the claim that it "has a right to the same judicial process in the imposed forum that it would have in its chosen forum. This interpretation would make a mockery of the policy behind enforcing these clauses." Karlberg European Tanspa, Inc. v. JK-Josef Kratz, 618 F.Supp. 344, 348 (N.D.Ill.1985).
27
Commerce Consultants has fallen far short of making a showing that would entitle it under The Bremen to avoid the contractual commitment into which it freely entered. In The Bremen, the Court pointed out: "The expansion of American business and industry will hardly be encouraged if notwithstanding solemn contracts, we insist on a parochial concept that all disputes must be resolved under our laws and in our courts." 407 U.S. at 9, 92 S.Ct. at 1912. We agree with the district court that Commerce Consultants' argument about the inadequacy of Italian discovery proceedings "reflects the very kind of parochial attitude in comparing foreign judicial systems to our own that the Court specifically rejected in The Bremen and Mitsubishi Motors." Commerce Consultants, slip op. at 5-6.
28
The judgment of the district court granting Riunite's motion to dismiss the complaint is
29
AFFIRMED.
*
Daniel M. Friedman of the Court of Appeals for the Federal Circuit, sitting by designation pursuant to 28 U.S.C. Sec. 291(a)
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Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit
3-1-2006
USA v. Hughes
Precedential or Non-Precedential: Non-Precedential
Docket No. 04-4277
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2006
Recommended Citation
"USA v. Hughes" (2006). 2006 Decisions. Paper 1494.
http://digitalcommons.law.villanova.edu/thirdcircuit_2006/1494
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2006 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact [email protected].
NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 04-4277
UNITED STATES OF AMERICA
v.
JAMES ANTHONY HUGHES,
Appellant
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
D.C. Crim. 00-cr-00173
District Judge: The Honorable Sylvia H. Rambo
Submitted Under Third Circuit LAR 34.1(a)
January 10, 2006
Before: BARRY and AMBRO, Circuit Judges, and DEBEVOISE,* District Judge
(Opinion Filed: March 1, 2006)
OPINION
*
The Honorable Dickinson R. Debevoise, Senior District Judge, United States District
Court for the District of New Jersey, sitting by designation.
BARRY, Circuit Judge
James Anthony Hughes appeals from his sentence of 180 months in prison for
possession of a controlled substance with intent to distribute, arguing that the downward
departure the District Court granted him was too small and that the District Court
improperly treated the Sentencing Guidelines as mandatory. We lack jurisdiction, and
will dismiss the appeal.
On August 9, 2000, Hughes pleaded guilty to possession of more than fifty grams
of crack cocaine and five kilograms of cocaine with intent to distribute. 21 U.S.C. §
841(a)(1). His plea agreement stipulated the quantity of drugs involved. He agreed to
assist the government in other investigations and the government agreed that it would
move for a downward departure under U.S.S.G § 5K1.1 were his assistance “substantial.”
He subsequently provided information to federal authorities about drug traffickers, and to
Pennsylvania authorities about a murder.
Hughes was sentenced by the District Court for the Middle District of
Pennsylvania on January 19, 2001. The applicable Sentencing Guidelines range was 292
to 365 months. The government made a § 5K1.1 motion for a downward departure,
bringing to the District Court’s attention Hughes’s cooperation in the federal drug
investigations. The District Court granted the motion, and sentenced Hughes to 240
months in prison, a downward departure of 52 months from the bottom of the range. He
appealed, with counsel claiming in his brief filed pursuant to Anders v. California, 386
2
U.S. 738 (1967), that the sole issue worthy of consideration was that the departure
Hughes received was not commensurate with his cooperation. In his pro se submission,
Hughes argued, among other things, that his sentence should not have been based on the
amount of drugs in his possession, a fact not found by a jury beyond a reasonable doubt.
See Apprendi v. New Jersey, 530 U.S. 466, 490 (2000). We concluded that we lacked
jurisdiction to review the extent of the discretionary downward departure for substantial
assistance, and found no violation of Apprendi because Hughes admitted the quantity of
drugs in his plea agreement. We affirmed the judgment of sentence on July 28, 2003.
On June 16, 2004, Hughes filed a motion under 28 U.S.C. § 2255 to vacate, set
aside, or correct the sentence. He alleged that the government had violated the plea
agreement by not moving for a further downward departure to reflect his cooperation in
the state murder investigation, resulting in a violation of the Due Process clause of the
Fifth Amendment. He also alleged various other violations of his Fifth and Sixth
Amendment rights. The government replied that it had been unaware of Hughes’s
cooperation with the Pennsylvania authorities, and moved under Fed. R. Crim. P. 35(b)
for a downward departure of 20 percent from his already-reduced sentence, for a further
reduction of 48 months, to a new sentence of 192 months in prison. On September 7,
2004, the District Court denied Hughes’s other claims but granted his § 2255 motion
“insofar as Defendant’s claim [sic] that he was denied due process by not receiving a
downward departure pursuant to Federal Rule of Criminal Procedure 35.” A.45. It
scheduled a hearing on the Rule 35 motion but stated that it would not “permit argument
3
on the initial downward departure.” A.44.
The hearing was held on October 27, 2004. The District Court confirmed with the
government the details of Hughes’s cooperation. Hughes then testified about his
cooperation in the murder investigation and about his rehabilitation. He requested that
the District Court reduce his sentence to 131 months, which he claimed was the sentence
promised him during plea negotiations. The government denied any such promise. The
District Court granted the Rule 35 motion, amended the original judgment of conviction
to reflect a sentence of 180 months (60 months less than his previous sentence, or a 25
percent reduction), but affirmed the original sentence in all other respects. It accordingly
issued an amended judgment.
Hughes filed a timely notice of appeal. He argues that the District Court abused its
discretion in granting him a second downward departure of only 60 months, and that we
should remand for a reduction of his sentence to no more than 131 months. He also
argues that the District Court, which imposed sentence before the Supreme Court’s ruling
in United States v. Booker, 543 U.S. 220 (2005), unconstitutionally treated the
Sentencing Guidelines as mandatory. He, therefore, asks us to remand so that the District
Court, this time treating the Guidelines as merely advisory, may resentence him. See
United States v. Davis, 407 F.3d 162 (3d Cir. 2005).
We have no jurisdiction over Hughes’s claim that the District Court granted him
too small a downward departure. We lacked jurisdiction over decisions to deny a motion
for downward departure, and over the extent of one, before Booker, and we continue to
4
lack jurisdiction over them. United States v. Cooper, No. 05-1447, 2006 U.S. App.
LEXIS 3453 (3d Cir. Feb. 14, 2006). We also lack jurisdiction to consider Hughes’s
Booker claim. His sentence became final when we denied his first appeal. Accordingly,
the sentence and the procedures which were followed are not now properly before us on
direct review.1 See United States v. Taylor, 414 F.3d 528, 535 (4th Cir. 2005). The
District Court’s decision to grant the Rule 35 motion and the second downward departure
did not reopen any other aspect of Hughes’s sentence. The plain error presumption of
Davis does not apply where, as here, the error complained of is not part of the specific
judgment on review.
We will dismiss the appeal for lack of jurisdiction.
1
We would not grant the relief Hughes seeks as part of a collateral attack, even if
properly presented to us. Booker does not apply retroactively to cases on collateral review
where the judgment was final as of January 12, 2005. Lloyd v. United States, 407 F.3d
608, 616 (3d Cir.2005). The District Court would, therefore, have been required to deny a
Booker claim had one been presented to it as part of Hughes’s § 2255 motion.
5
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IN THE SUPREME COURT OF PENNSYLVANIA
MIDDLE DISTRICT
IN RE: PROPOSED CONSTITUTIONAL : No. 29 MM 2016
AMENDMENT 1, BALLOT QUESTION :
:
:
PETITION OF: PENNSYLVANIA SENATE :
MAJORITY CAUCUS, SENATE :
PRESIDENT PRO TEMPORE JOE :
SCARNATI, AND SENATE MAJORITY :
LEADER JAKE CORMAN :
ORDER
PER CURIAM
AND NOW, this 23rd day of March, 2016, it is hereby ordered as follows:
(1) The Application for Leave to File Reply Brief is GRANTED.
(2) The Application to Withdraw Request for Oral Argument is GRANTED.
(3) The Application to Hold the Matter in Suspense is DISMISSED AS MOOT.
(4) The Praecipe to Withdraw Praecipe to Discontinue Emergency Application for
Emergency Relief is treated as an Application and is GRANTED.
(5) The Praecipe to Discontinue the Emergency Application for Extraordinary
Relief, treated as an application, is DISMISSED AS MOOT.
(6) The Emergency Application for Extraordinary Relief is DENIED.
(7) The Joint Application for Extraordinary Relief and Approve Parties’ Stipulated
Resolution is DENIED; such denial should not be construed as condoning or
constraining any future legislative or executive action by the parties.
Chief Justice Saylor did not participate in the consideration or decision of this
matter.
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237 Md. 349 (1965)
206 A.2d 563
MANNING
v.
STATE
[No. 352, September Term, 1963.]
Court of Appeals of Maryland.
Decided February 2, 1965.
The cause was argued before PRESCOTT, C.J., and HAMMOND, HORNEY and SYBERT, JJ., and CARTER, J., Chief Judge of the Second Judicial Circuit, specially assigned.
Joseph S. Kaufman and Abraham L. Adler for the appellant.
Loring E. Hawes, Assistant Attorney General, with whom were Thomas B. Finan, Attorney General, William J. O'Donnell, State's Attorney for Baltimore City, and William T.S. Bricker, Assistant State's Attorney, on the brief, for the appellee.
HAMMOND, J., delivered the opinion of the Court.
At his trial on October 29, 1962, in the Municipal Court of Baltimore City (formerly a Magistrate's Court) the appellant Manning, neither having been advised of his right to counsel nor given the assistance of counsel, was convicted of various offenses and given terms of imprisonment totalling five years. At the time of his trial the law, under Betts v. Brady, 316 U.S. 455, 86 L.Ed. 1595, was that the Sixth Amendment to the Constitution of the United States was not as such made binding on the states by the Fourteenth Amendment and that one accused by a state of serious crime had not necessarily been denied due process of law because he had not been represented at his trial by a lawyer. Rather, held Betts, the test was whether the trial without counsel would have been "* * * offensive to the common and fundamental ideas of fairness and right * * *."
On March 18, 1963, some five months after the appellant had *351 been convicted and had begun serving his sentences, the Supreme Court decided Gideon v. Wainwright, 372 U.S. 335, 9 L.Ed.2d 799, in which it in terms overruled Betts v. Brady and, in effect, made absolute the right of an accused in a serious state prosecution to have counsel for his defense. Because of the great probability that Gideon would control the contention of Manning, that for lack of counsel he had been denied due process at his trial, we granted his application for leave to appeal from the order of the Criminal Court of Baltimore passed April 30, 1963, refusing post conviction relief, and appointed counsel to prosecute the appeal.
Manning was tried in the Municipal Court of Baltimore City on charges of assault by stabbing one Gloria Tucker with a meat cleaver, assault upon each of two police officers, having on his person a dangerous and deadly weapon, and disorderly conduct. He pleaded not guilty, but was found guilty by Judge Albert Blum on all charges and sentenced to two years on the stabbing charge, one year on each of the assault charges, one year on the concealed weapon charge, and sixty days for disorderly conduct. The sentences were imposed to run consecutively except for the sentence of sixty days which was suspended.
As is customary, no transcript was made of proceedings in the Municipal Court but both appellant's mother and Judge Blum testified before Judge Jones at the post conviction hearing in the Criminal Court of Baltimore that there was no discussion of counsel at the trial in the Municipal Court. Judge Blum also said that he did not advise Manning of his right to counsel but did advise him of his right to elect to be tried before a jury in the Criminal Court of Baltimore, and that Manning waived a jury trial and elected to be tried by Judge Blum.
After his convictions Manning did not appeal to the Criminal Court of Baltimore, as the law gave him a right to do, and immediately began to serve the sentences he had received.
Judge Jones held that Maryland Rule 719, which requires that the accused shall be advised of his right to counsel and that the record must affirmatively show that he was so advised, does not apply to the Municipal Court and that under Maryland law there is no requirement that an accused must be furnished *352 counsel in a criminal proceeding before a magistrate. She held further that there was nothing in the holding of Gideon to indicate that an accused cannot waive his right to counsel and "* * * while Petitioner's formal education is limited his education in criminal procedure is broad," and by his elections to waive a jury trial and not to appeal, he waived his right to counsel which his previous experiences had taught him would be provided in the Criminal Court. Judge Jones also found that Manning, who made forty dollars a week and had in his possession twenty-two dollars when he was arrested, had not shown he was an indigent person entitled to the appointment of counsel at state expense.
The State concedes, properly we think, that "* * * the right to counsel here was not `completely and intelligently waived' in accordance with the criteria of waiver set forth in the recent Supreme Court case of Carnley v. Cochran, 369 U.S. 506." In that case the Court said (p. 516 of 369 U.S.):
"Presuming waiver from a silent record is impermissible. The record must show, or there must be an allegation and evidence which show, that an accused was offered counsel but intelligently and understandingly rejected the offer. Anything less is not waiver."
The State also agrees with our view that in light of the complete lack of discussion of counsel or of indigency before Judge Blum and the paucity of evidence on the point before Judge Jones at the post conviction hearing, the finding in that hearing of lack of indigency at the time of the original trial cannot be relied on, particularly in view of Manning's testimony that after he was arrested he called his grandmother to see about getting money to pay a lawyer but found she had no money.
There is no merit in the contention of the State that Gideon would not apply, in any event, because the charges against Manning were petty offenses not serious enough to require representation by counsel as a constitutional requisite. The State relies on the distinction between petty offenses which do not constitutionally require trial by jury and traditionally more serious offenses which do. State v. Glenn, 54 Md. 572; District of Columbia v. Clawans, 300 U.S. 617, 81 L.Ed. 843.
*353 Wherever the line finally will be drawn, we have no doubt that the crimes with which Manning was charged would, if Gideon is applicable, constitutionally require representation by a lawyer. Upon request to the Judge in the Municipal Court, Manning would have been entitled to have his case sent to the Criminal Court of Baltimore for trial before a jury. Following a similar provision in the federal criminal system, this Court, on August 7, 1963, promulgated Maryland Rule 719, effective three days thereafter, binding on the Circuit Courts of the Counties and the Supreme Bench and other Courts of Baltimore City, to provide that "if at any stage of the proceeding, the accused appears in court without counsel, the court shall advise him of his right to counsel" and unless he elects to proceed without counsel or is financially unable to obtain counsel "the court shall assign counsel to represent him if the offense charged is one for which the maximum punishment is death or imprisonment for a period of six months or more, or a fine of $500.00 or more, or both * * *" (with specified exceptions as to charges of desertion or non-support) and with the further proviso that the court may assign counsel in other cases if "* * * the complexity of the case, the youth, inexperience and mental ability of the accused and any other relevant consideration" indicate that representation fairly is required. In Taylor v. State, 230 Md. 1, we held the requirements of Rule 719 to be mandatory and, therefore, required to be complied with irrespective of the type of plea entered or the lack of an affirmative showing of prejudice to the accused. We have no doubt that if Gideon controls to impose on the State the federal constitutional requirement of representation by a lawyer, the accused, unless he affirmatively and knowingly waives the right, must be represented by counsel, either privately secured or furnished by the State, in any case in which the possible punishment equals or exceeds, as in the charges here involved, the punishments specified in Rule 719. Cf. White v. Maryland, 373 U.S. 59, 10 L.Ed.2d 193.
We turn to the question of whether the rule of Gideon applies to this case, in which the accused was tried and sentenced at a time when, under Betts, there was not a constitutional requirement that in the absence of waiver he be represented by *354 counsel. We can see no good purpose in attempting a discussion, pragmatic, theoretical or philosophic, as to the merits, standing or place in the present legal system of the Blackstonian theory of the inevitability of the retroactivity of an overruling decision, or as to judicial legislation, either covert or overt that is, the extent to which "the potter, and not the pot, is responsible for the shape of the pot"[1] or as to the advantages and disadvantages of prospective overruling of prior decisions (for interesting discussion of these matters see Note, Prospective Overruling and Retroactive Application in the Federal Courts, 71 Yale Law Journal 907, and Levy, Realist Jurisprudence and Prospective Overruling, 109 Pa. L. Rev. 1) because we are persuaded that the Supreme Court has made it plain that the rule of Gideon must always now be applied whether the conviction of the accused occurred before or after that decision was handed down.
Gideon was convicted by a jury in a Florida court on August 4, 1961, of breaking and entering, and sentenced to five years. His petition for habeas corpus was denied by the Supreme Court of Florida and his petition for certiorari was granted by the Supreme Court of the United States on June 4, 1962; that Court, after hearing argument of counsel on January 15, 1963, decided the case and overruled Betts v. Brady, on March 18, 1963. Gideon's efforts to obtain his freedom were by way of collateral attack on his conviction, both in the Florida court and the Supreme Court, and not by way of direct appeal. Thus the Supreme Court applied the law it proclaimed on March 18, 1963, to Gideon's trial in August 1961, although after Betts that trial almost certainly would have been beyond attack on constitutional grounds at any time up to March 18, 1963. Twenty-two States in an amicus brief in Gideon asked for the overruling of Betts v. Brady but urged that the decision not be applied retroactively. Significantly, not only is there not the slightest hint of an answer to the States' requests for prospective application only in the Court's opinion in Gideon, but the Court said (p. 344 of 372 U.S.): "* * * the Court in Betts v. *355 Brady made an abrupt break with its own well-considered precedents. In returning to these older precedents, sounder we believe than the new, we but restore constitutional principles established to achieve a fair system of justice."
Doughty v. Maxwell, 376 U.S. 202, 11 L.Ed.2d 650, confirms the conclusion that Gideon was intended to apply retrospectively. Doughty had been indicted for rape in 1958 and pleaded guilty without the assistance of counsel. The Supreme Court of Ohio rejected his petition for habeas corpus on the ground that he had waived his right to counsel by pleading guilty. Doughty v. Sacks (Ohio), 183 N.E.2d 368. Doughty's petition for certiorari reached the Supreme Court after the decision in Gideon. In a per curiam opinion the Supreme Court remanded for "further consideration in light of Gideon v. Wainwright." On remand, the Ohio Court adhered to its first decision, and the Supreme Court thereafter summarily reversed in a per curiam order on the authority of Gideon and Carnley v. Cochran, 369 U.S. 506, 8 L.Ed.2d 70, supra.
Since announcing its decision in Gideon, the Supreme Court has remanded to state courts for further consideration in light of Gideon over forty cases, most of which were pre-Gideon convictions. See for example, Pickelsimer v. Wainwright and related cases, 375 U.S. 2, 11 L.Ed.2d 41. There, in ten cases of convictions antedating Gideon the judgments were vacated by per curiam orders and the cases remanded for further consideration "in the light of Gideon v. Wainwright." Justice Harlan, in solitary dissent, was the only Justice to articulate his views; he stated his belief that the federal question presented in common by the ten cases should not be summarily dealt with because it was "deserving of full-dress consideration." Justice Harlan continued (p. 3 of 375 U.S.):
"When this Court is constrained to change well-established constitutional rules governing state criminal proceedings, as has been done here and in other recent cases, see, e.g., Mapp v. Ohio, 367 U.S. 643; Ker v. California, 374 U.S. 23; Douglas v. California, 372 U.S. 353, it seems to me that the question *356 whether the States are constitutionally required to apply the new rule retrospectively, which may well require the reopening of cases long since finally adjudicated in accordance with then applicable decisions of this Court, is one that should be decided only after informed and deliberate consideration. Surely no general answer is to be found in `the fiction that the law now announced has always been the law.' Griffin v. Illinois, 351 U.S. 12, 26 (Frankfurter, J., concurring). Nor do I believe that the circumstance that Gideon was decided in the context of a state collateral proceeding rather than upon direct review, as were the new constitutional doctrines enunciated in Mapp and Ker, forecloses consideration of the retroactivity issue in this instance."
It would appear to be a fair inference from the language of the dissent that Justice Harlan's colleagues had no doubt that Gideon applied retrospectively and buttressed their opinion by the fact that the Gideon decision itself had applied its holding in that fashion since it was proclaimed in a collateral proceeding rather than on direct review.
The decisions which have dealt with the problem before us in lower federal courts and in state courts have, save in one instance, agreed that Gideon applies retrospectively. See United States v. LaVallee (2d Cir.), 330 F.2d 303, cert. den. 377 U.S. 998, 12 L.Ed.2d 1048 (Justice Harlan again dissented saying, inter alia, that the question of the retroactivity of Gideon "deserves plenary consideration by this Court"); United States v. Reincke (2d Cir.), 333 F.2d 608; Palumbo v. State of New Jersey (3rd Cir.), 334 F.2d 524; Geather v. State (Fla.), 165 So.2d 229; and State v. Boles (W. Va.), 139 S.E.2d 177. In Commonwealth of Pennsylvania, ex rel. Craig v. Banmiller (Pa.), 189 A.2d 875, the Pennsylvania court held Gideon to operate prospectively only. The Federal District Court for the Eastern District of Pennsylvania took a contrary view in United States ex rel. Craig v. Myers, 220 F. Supp. 762, and granted Craig the writ of habeas corpus. This action was affirmed by the Court of Appeals for the Third Circuit in United States *357 v. Myers, 329 F.2d 856. The Supreme Court of Pennsylvania in Commonwealth ex rel. McCray v. Rundle, 202 A.2d 303, 305, acknowledged that decisions of the Supreme Court of the United States, subsequent to Gideon, had convinced it that Gideon applied retroactively and that its ruling in Craig had been wrong.
We are persuaded that the Gideon holding controls the case at bar and that Manning's convictions must be vacated. We hold no more, and particularly do not rule on the retroactivity, vel non, of any Supreme Court decision except Gideon.
Order reversed, and case remanded for the entry of an order vacating the judgments and sentences of the Municipal Court of Baltimore City and the ordering of a new trial on the charges on which those judgments and sentences were based.
NOTES
[1] Whitehead, Symbolism: Its Meaning and Effect, pp. 8-9 (1927).
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88 Cal.App.2d 63 (1948)
R. DUFF WILLSON, Respondent,
v.
NIAGARA DUPLICATOR CO. (a Corporation), Appellant.
Civ. No. 13672.
California Court of Appeals. First Dist., Div. One.
Oct. 19, 1948.
Bronson, Bronson & McKinnon for Appellant.
Aaron M. Sargent for Respondent.
PETERS, P. J.
Plaintiff brought this action to recover certain commissions allegedly earned by him while employed by defendant under a written contract as sales manager and director of public relations. The main question presented is whether the written contract provided for commissions on all contracts secured by the company while plaintiff was employed, or provided for commissions on transactions only where the customer was billed during the term of the employment. Involved in the determination of this question is the problem as to whether parol evidence was properly admitted to explain the written document. The trial court determined all basic issues in favor of plaintiff, and granted him judgment in the sum of $4,142.63. Defendant appeals.
The original complaint prayed for commissions under the contract, and alleged, substantially, that defendant's president had deceived plaintiff with respect to the meaning and effect of the contract. The amended complaint made the same essential allegations, and, in addition, set up a cause of action for declaratory relief to have the meaning of the contract ascertained. At the trial plaintiff abandoned his cause of action for declaratory relief when it appeared that all of the transactions *65 had been completed and were proper subjects of a money judgment. During the trial, over the objections of defendant, the plaintiff was permitted to file a second amended complaint to conform to the proof. That complaint set up the contract, the nature and extent of defendant's business during plaintiff's employment, and repeated, in greater detail, the charges against defendant of misrepresentation and fraud.
The facts most favorable to plaintiff are as follows: L. John Himes was the president and principal stockholder of defendant corporation. All negotiations with plaintiff on behalf of the corporation were carried on by Himes, and it is admitted that he had full authority to act. The business of the company (manufacture of stencils, etc.) was adversely affected by the war. Himes desired to get some subcontracts to manufacture or machine airplane parts. The then existing staff of the corporation was not securing this business, and it was to assist in this regard that plaintiff was employed. Plaintiff is an engineer with over 15 years' experience in the airplane industry. He first met Himes in November, 1942, and at that time Himes told him that he wanted someone who knew the aircraft industry and who had the proper contacts to get the business. In December of 1942, plaintiff was hired as director of public relations of the defendant at a salary of $400 per month. His chief duty was to introduce the defendant's staff to executives in the aircraft industry. Plaintiff worked under this arrangement until March, 1943, and apparently his services were most satisfactory. On March 6, 1943, plaintiff visited Himes at the latter's home in Arizona. At that time "Himes stated that they were in great need of aircraft business; that Mr. Springer [the then sales representative of defendant in Los Angeles] had not been able to get any orders up to this time; and that if I would take on the job of getting the orders, in addition to just introducing the company to the aircraft industry, he would pay me one per cent of all the business I got as orders, and one-half per cent on all the business that Mr. Springer got with my assistance." On March 12, 1943, Himes verified this oral arrangement by a letter to plaintiff, stating that a formal contract would be later prepared "but you can take this in meantime as fact we agree you are to receive 1% on net sales you turn in as orders." Plaintiff worked under this arrangement until April 23, 1943, and again his services must have been most satisfactory. On this date he again conferred with *66 Himes in Los Angeles. At this conference "Himes told me that he was reorganizing his company, or making some organizational changes in the company, and that he would like to have me take the responsibility of all sales, and be the sales manager. And I asked Mr. Himes what he had in mind. And Mr. Himes said that he wanted me to be the sales manager, and that he would increase my salary $100.00 per month, and give me one-half of one per cent override on all the business done by the company." Plaintiff was also to be elected a vice-president of the company. It was agreed that some minimum amount of business should be excepted from the commission rights of plaintiff, but at this meeting the exact amount of this minimum business was not agreed upon. Plaintiff suggested that the amount of business done between January 1st and May 1st be averaged, and that this figure be the amount to be excepted. Later Himes suggested that this figure be $40,000 per month, but this was unacceptable to plaintiff. The parties finally agreed that the figure should be $20,000 per month. Plaintiff testified that his commission was to attach to "all business" done by the company in excess of $20,000 per month. Plaintiff admitted that prior to this meeting the company had some aircraft business, but it is quite apparent that at that time such business was not very substantial.
At this point a fundamental distinction between the duplicator and the aircraft business of the company should be noted. In manufacturing stencils and other duplicators the company owned the materials, and owned the finished product. This product is sold to its customers. Thus, as to this business, an actual and legal sale took place. The aircraft business was of an entirely different nature. Defendant's plant was equipped to do machine work, and the machinery was peculiarly adapted to machining certain gear boxes to be installed on military aircraft. The desire of Himes was to secure, from the companies constructing the aircraft, subcontracts to machine these gear boxes. As to these contracts the aircraft company or the government furnished the materials, and the subcontractors, such as defendant, merely furnished the services of machining the product. Obviously, as to this work of the company there never was a "sale" in the legal sense.
The parties agreed that the arrangement arrived at April 23, 1943, should be reduced to writing. It is admitted that on May 1, 1943, plaintiff assumed his new duties under this arrangement, and his increased salary was paid from that *67 date. Various office memoranda were prepared by Himes informing the organization of the new setup and telling the staff that plaintiff was in full charge of all "sales." It is conceded that, from the time that this arrangement went into effect, until November 14, 1943, when plaintiff quit, contracts totaling over a million and a half dollars were secured from aircraft companies to machine gear boxes. Some of this work was done and some payments for such work were received by the company after plaintiff quit the employment. The basic question involved is whether plaintiff is only entitled to commissions where the work was completed and the aircraft companies billed for the work before November 14, 1943, or whether he is entitled to commissions for all work secured while he was sales manager, less $20,000 per month, even though the company did not finish the work or bill the aircraft companies until after that date. If the latter, the plaintiff has earned commissions in the amount found by the trial court.
The dispute arises because of the following facts: As already pointed out, it was agreed that the arrangement of April 23, 1943, was to be reduced to writing. This was done, and it is the interpretation of this contract that is here involved. Just when it was executed is a matter of dispute. The document is in the form of a letter to plaintiff from Himes as president of defendant and is dated May 1, 1943. It is signed "accepted" by plaintiff, and such acceptance is also dated May 1, 1943. The letter reads in part as follows:
"May 1, 1943"
"Mr. R. Duff Willson"
"126 Main Street"
"San Francisco, California"
"Dear Duff:"
"Starting today your employment arrangement with the company will be changed."
"Up to this date you have been employed in the capacity of a line executive, as Director of Public Relations."
"Starting today you will become Sales Manager of Niagara Duplicator Co., a staff executive. You will be in charge of all company sales, selling, advertising, and public relations work, except as hereinafter provided and you will report to and be accountable to the President of the Company."
"Beginning today your base salary will be $500.00 per month, and you will be paid a sales commission of one-half of one *68 (.00- 1/2%) per cent of company net sales in excess of $20,000.00 per month, or $240,000. per year."
"The above sales commission arrangement will become effective June 1, 1943, inasmuch as that date starts our company fiscal year."
"Your salary will be paid semi-monthly, one-half on the 15th and one-half on the last day of the month. Your sales commission will be accumulated on company records monthly, and will be reported and paid to you each month, within 20 days following the end of each month. It is of course understood that your salary and sales commission are subject to payroll taxes and deductions covering Federal, State, City, and other Governmental taxes, assessments and deductions. "... This employment arrangement is subject to cancellation by the president of the Niagara Duplicator Co. or by yourself at any time on 30 days written notice.
"Your signature at the place provided at the end of this letter will constitute your understanding and acceptance of the foregoing employment arrangement."
"Niagara Duplicator Co."
"L. John Himes"
"L. John Himes, President"
"Accepted May 1, 1943:"
"R. Duff Willson"
"R. Duff Willson"
"LJH:heh"
The date this letter was delivered to plaintiff and signed by Himes and plaintiff is in dispute. Plaintiff testified that he did not receive it until June 30th or July 1st, and that the dates thereon did not truly reflect the date of its execution. Himes testified that the letter was prepared by him and delivered to plaintiff shortly after May 1, 1943, and that he received it back signed by plaintiff about two days thereafter. The then secretary of Himes, who had typed the letter, directly contradicted his testimony. She testified that the first draft of the letter was prepared about the middle of June, and that the final draft was not dictated until the "latter part of June." She further testified that the letter was dated back to May 1st on orders from Himes. Her dictation book would have disclosed the true date, but, although such book was subpoenaed, it was not produced by defendant, one of its witnesses testifying that it had been destroyed. The secretary *69 of Himes also testified that the May 1st letter was not delivered to plaintiff until a few days before plaintiff dictated to her a certain memorandum dated July 2, 1943. The trial court resolved this conflict in dates by finding in accord with the testimony of plaintiff and his witnesses.
The date the contract was actually executed becomes of vital importance because plaintiff produced the memorandum of July 2d, and it was signed by him but not by Himes. Plaintiff testified that this memorandum was delivered to Himes, and discussed with him, and an agreement reached as to the meaning of the May 1st agreement, before he, the plaintiff, signed the May 1st agreement. Himes vigorously denied this, but this conflict was resolved against defendant by the trial court. The internal structure of the memorandum supports plaintiff's testimony. The exact date the agreement was signed also becomes important because defendant secured, through plaintiff's efforts, during June of 1943, nearly a million dollars of aircraft contracts.
The trial court, over vigorous objections by defendant, admitted the memorandum into evidence as part of the same exhibit which included the May 1, 1943, letter. The theory of the trial court was that the May 1st letter and the July 2d memorandum had to be read together in order to understand what the parties actually intended about commissions payable to plaintiff. The memorandum reads as follows:
"Concord Calif."
"July 2, 1943"
"Mr. L. John Himes"
"Mr. R. Duff Willson"
"Working Arrangement"
"Dear John:"
"I have the proposed new contract for my services dated May 1st."
When we met in Los Angeles, at the time I took this position with you, I knew my ability to produce. You had, I thought, what it took to utilize that ability to produce. I made the remark in accepting your terms that it was 'quite a sacrifice' and you said, 'you produce the business and I'll take care of you,' or words to that effect. The same was repeated, in effect, at Larry's home when I accepted the additional responsibility of General Sales Manager and the promise of election to Vice-President. On your representation of the *70 business being done I too quickly accepted a small raise in pay (an amount still under that offered me by others) and from one per cent commission on my business to one-half per cent commission on all company business.
"... Now the commission 'on net sales over twenty thousand per month.' I find that while this amount and much more has been made in the past, the present picture is: 1. that the old stencils are finished with the completion of the Kaiser order--2. that we have no stencils for other orders which have come in--3. That there is an amount of aircraft business on contract obtained prior to May 1, 1943."
"I accepted the responsibility of introducing a New Stencil which will have to be Sold to old customers as well as to New Customers. Therefore, all business in New Stencils will be New Business."
"The proposed contract increases the scope of my services and responsibilities to the company for which I was getting one hundred dollars per month raise in salary. The proposed contract wipes out the one hundred dollars per month by limiting my commission to 'net sales in excess of twenty thousand dollars per month.' The proposed contract reduces my commission on business I have brought in so far more than four thousand dollars--is that mutual profit?"
"More is required of R. Duff Willson and less money is received by R. Duff Willson for the extra effort and accomplishment."
"The next point of your letter to which I did not agree--A commission [in], my experience, is earned when the order is brought in and accepted by the company. In some instances, a commission is paid upon the acceptance of the order. In this instance, the commission should be paid when and as payments are received by the company."
"Last, but most important: One should be free to exert All of his efforts to Selling the Customer and Promoting the best interests of the company and in turn to expect his individual interests to be protected and fostered By the Company."
"I want my connection with the Niagara Duplicator Co., as reflected by this new contract, to do just that. I want a commission on all net sales of the company on orders accepted by the company on and after May 1, 1943. I want it stated that commissions are earned as soon as the company accepts the order. I want the commission on the amount of money collected by the company each month and paid to me on the *71 fifteenth of the following month. I hope we can see eye to eye on this."
"Yours very truly,"
"R. Duff Willson"
"heh"
It was stipulated that by November, 1944, and long before trial, the defendant had completed its work on all aircraft parts and other business contracted for during plaintiff's tenure as sales manager. The defendant has received full payment on all the contracts.
Plaintiff testified that Himes, about the end of June, 1943, dropped the letter of May 1st on his desk; that plaintiff read the letter and took it back to Himes and asked him to discuss some of its terms; that Himes told him that he did not want to discuss the problem orally, but that plaintiff should put his views into writing. It was in response to this invitation that plaintiff prepared the July 2d memorandum. Plaintiff testified that he delivered the memorandum to Himes; that Himes read it; that this was about July 2, 1943; that then he and Himes had a discussion; that Himes argued that the $20,000 limitation had to stand, and plaintiff finally agreed; that Himes insisted that commission payments had to be paid on the 20th and not the 15th, and plaintiff agreed to that; that then the parties discussed the question as to when the commissions were to be deemed earned under the contract; that plaintiff argued that his commissions must be considered earned when the defendant accepted the orders, and payable when the company was paid; that after he finished his argument Himes said: "We have nothing to argue. It is covered in the contract." On cross-examination plaintiff clarified this by testifying that Himes conceded that the commissions, under the contract, were to be deemed earned as soon as the orders were accepted by the company. This was denied by Himes, but again this conflict was resolved against defendant by the trial court. Plaintiff testified that after the parties had so agreed he signed the May 1st agreement.
There is no dispute that plaintiff worked under the contract until November 14, 1943, when he resigned, having given a 30-day notice to that effect on October 14, 1943. There is no dispute that contracts in the amounts found by the trial court were secured by defendant during the period plaintiff acted as sales manager. There is no dispute that defendant paid plaintiff his salary as provided in the May 1st agreement, and *72 paid him commissions on all work billed to customers over $20,000 per month up to November 14, 1943. The dispute is over commissions on sums received by the company between November, 1943, and November, 1944, for work contracted for while plaintiff was sales manager, but not completed until that employment had been terminated.
[1] It is at once obvious that if plaintiff's oral and written evidence were admissible to explain the true meaning of the expression "company net sales" as used in the May 1st agreement, such parol evidence supports the trial court's finding that such commissions were earned as soon as contracts were accepted by defendant. Appellant urges, however, that all such evidence violated the parol evidence rule. It contends that the contract of May 1st is clear on its face and unambiguous, and that the proffered testimony did not interpret but "changed" the meaning of the terms of that agreement. It is also urged, as part of the same basic contention, that there is no evidence to support the finding that the May 1st and the July 2d documents constituted but a single contract.
The contentions of defendant on these points are without merit. The trial court found, and the finding is supported, that, before the May 1st agreement was signed, Himes represented to plaintiff that the May 1st letter was intended to express, in reference to commissions, the meaning expressed in the July 2d memorandum; that Himes represented that the May 1st agreement provided that commissions should be payable on the basis of contracts made, and that it was unnecessary to alter the May 1st agreement to so provide because it already so provided. It was also found that those representations were made with intent to mislead plaintiff and to induce him to sign the May 1st letter; that plaintiff acted on such misrepresentations and signed the letter; that defendant intended plaintiff to believe, and plaintiff did believe, that the letter and memorandum were one contract; that plaintiff was led to believe that the phrase in the May 1st letter "company net sales" referred to all contracts accepted by defendant as orders during his employment. As to these last findings defendant is faced with a dilemma. If the defendant fraudulently deceived the plaintiff as to the meaning of the letter, then the judgment may be sustained on that theory. If the defendant was not fraudulent, but made the representations testified to by plaintiff in good faith, then the parties agreed as to the meaning of the contract and evidence of such intended meaning is, of course, admissible. If the *73 phrase "company net sales" referred only to "sales" in the technical sense, then plaintiff could have earned no commissions at all because the company was almost entirely engaged in machining parts for aircraft and none of that business involved a "sale." Defendant contended that the phrase meant--business billed each month to the customers--but had to resort to parol evidence to support this interpretation.
If, for the moment, the competency of the evidence offered by the plaintiff be assumed, it is obvious from the summary of the evidence, supra, that the finding that the two documents were intended as a single contract is amply supported. It is also apparent, under the same assumption, that the finding as to the intent of the parties as to the meaning of the phrase in question is also amply supported. [2] The only real question is whether the evidence is admissible. Again the defendant finds itself on the horns of a dilemma. If the defendant intended the phrase "company net sales" to have the meaning contended for by it, then defendant was fraudulent, and parol evidence is admissible to show such fraud. Section 1856 of the Code of Civil Procedure, after first setting forth the parol evidence rule, provides: "But this section does not exclude other evidence of the circumstances under which the agreement was made or to which it relates, as defined in section 1860, [permitting evidence of surrounding circumstances] or to explain an extrinsic ambiguity, or to establish illegality or fraud. ..."
Section 1640 of the Civil Code expresses the same rule even more forcefully. It provides that: "When, through fraud, ... a written contract fails to express the real intention of the parties, such intention is to be regarded, and the erroneous parts of the writing disregarded."
On the other hand, if there was no fraud, then, under the evidence, the two documents must be read together, and, so read, they either have the effect of establishing plaintiff's interpretation, or, to say the least, there is an apparent and obvious ambiguity on the face of the contract, so that parol evidence was admissible to interpret it. Section 1856 of the Code of Civil Procedure provides that, except in cases of mistake or imperfection of the agreement, or where the validity of the agreement is in fact in dispute, "no evidence of the terms of the agreement other than the contents of the writing" is admissible, but that "this section does not exclude other evidence of the circumstances under which the agreement was made or to which it relates as defined in section *74 1860." This last-mentioned section provides: "For the proper construction of an instrument the circumstances under which it was made, including the situation of the subject of the instrument, and of the parties to it, may also be shown, so that the judge be placed in the position of those whose language he is to interpret."
In Wells v. Wells, 74 Cal.App.2d 449, 456 [169 P.2d 23], the court stated: "The function of all interpretation is, of course, to try to ascertain the true intent of the parties. Parol evidence should not be admitted to vary, to add to, or to subtract from the terms of a written agreement, but it should be, and is admissible, to explain what the parties meant by what they said."
In the present case if the phrase "company net sales" be considered entirely unrelated to the transaction to which it was intended to apply, it would mean that the plaintiff would be entitled to no commissions at all because the very business that the contract was intended to cover did not result in a sale. Once the surrounding circumstances are shown, it is at once apparent that the commissions were either intended to apply to contracts secured, or to work done under each contract. That is an ambiguity. Such ambiguity, appearing on the face of the instrument, permits the introduction of parol evidence. (Universal Sales Corp. v. Cal. etc. Mfg. Co., 20 Cal.2d 751 [128 P.2d 665]; Wells v. Wells, supra; Estate of Rule, 25 Cal.2d 1 [152 P.2d 1003, 155 A.L.R. 1319]; Jegen v. Berger, 77 Cal.App.2d 1 [174 P.2d 489]; Estate of Gaines, 15 Cal.2d 255 [100 P.2d 1055]; Payne v. Commercial Nat. Bank, 177 Cal. 68 [169 P. 1007, L.R.A. 1918C 328].) The challenged evidence was clearly admissible.
[3] This disposes of the main question presented on this appeal. Defendant next makes a technical argument about the findings, and contends that, in certain respects, the findings are conflicting and do not support the conclusions of law and the judgment. This somewhat obscure argument is apparently based upon the fact that the trial court found that on April 23, 1943, plaintiff's contract of employment was revised, and that, under the revised agreement, plaintiff was to receive the salary of $500 per month with a commission of one-half of 1 per cent on all company business in excess of average during the period January 1 to May 1, 1943. It was also found that plaintiff accepted the employment, and that such employment terminated on November 14, 1943. These findings, defendant contends, are contrary to *75 the findings and conclusions relating to the contract dated May 1, 1943. The court did not find, as is assumed by defendant, that the employment continued until November 14, 1943, under the agreement of April 23, 1943, alone. There is no room for doubt that the court found, and that the evidence shows, that the April 23, 1943, conference and agreement fixed the general outline of the new job, and that the letters of May 1st and July 2, 1943, clarified the arrangement as to when commissions should be deemed earned. The findings and conclusions and judgment are not in conflict.
[4] The contention that, since the written contract was not executed until July 2, 1943, the commission agreement could not apply to the contracts secured in June, 1943, totaling over $900,000, is without merit for the obvious reason that Himes' letter dated May 1, 1943, expressly states that the commission arrangement applies as of June 1, 1943.
[5] Defendant next makes an argument that is somewhat difficult to follow. Defendant states that "Because during his employment as sales manager respondent [plaintiff] contributed in a measure to all sales, this minimum [$20,000 per month or $240,000 per year] was and should have been deducted from all of appellant's [defendant's] net sales. But after respondent resigned, if respondent was entitled to any commission, a fact which appellant denies, this minimum should have been deducted from the sales which resulted from orders accepted during respondent's employment rather than from appellant's net sales resulting from orders accepted after respondent left its employ." (App.Op.Br., p. 19.) It is then contended that the finding that the company collected after November 14, 1943, on contracts accepted while plaintiff was employed, a total of $828,526.79, should be reduced by $240,000, which is 12 times $20,000. The argument begs the basic question on this appeal. Once it was determined that plaintiff earned his commissions on all contracts accepted during his employment, less, of course, $20,000 per month during those periods, payable when the money was collected, it was necessarily determined that the minimum deduction was not referable to the actual receipt of the money, but to the period during which the orders were accepted by defendant. The trial court found, and this finding is not challenged, "that on or before November 14, 1943, plaintiff received payment of all commissions which had then become due on billings for general sales of merchandise and for billings to the companies affected under aircraft orders then outstanding; *76 that in making payment for commissions up to this date, defendant made a full deduction at the rate of $20,000 per month before figuring commissions to plaintiff." Thus, for the purpose of figuring commissions prior to November 14, 1943, commissions which defendant admits were due to plaintiff, and which constituted part payment on the commissions on contracts secured prior to November 14, 1943, the defendant deducted the $20,000 monthly minimum. Since the $20,000 deductions had already been made on these contracts, it would have been improper to have duplicated them for the period subsequent to November 14, 1943.
[6] The last contention of defendant is that the trial court failed to find on a material issue raised in the answer of defendant. In its answer defendant had alleged that the written contract of employment had been "cancelled and terminated as of November 14, 1943, by an agreement in writing between plaintiff and defendant." That "agreement" was attached to the answer as an exhibit, and was introduced into evidence during the trial. It is the letter of resignation signed by plaintiff and addressed to Himes and is dated October 14, 1943. The letter first states that plaintiff is giving the 30-day required notice of termination, and then states:
"It is understood that I will be paid my commission on all billings up to and including the 14th day of November and that a complete settlement including salary and receipt for income tax withheld will be affected as of that date."
"Your signature at the bottom of this letter will constitute our agreement in the above." It is marked "accepted" with Himes' signature, dated October 14, 1943. It is urged that this letter amounted to a settlement, and that under it plaintiff agreed that he was only entitled to commissions on billings to customers where the billings were mailed prior to November 14, 1943. The trial court made no finding as to the proper interpretation of this letter because the trial court found that:
"... said letter was delivered by plaintiff to L. John Himes, the president of defendant company, to be retained for counter-signature in case such action became necessary to enable plaintiff to obtain a manpower clearance under wartime regulations then in force; that Himes received the original and copy of said letter in accordance with an express understanding to that effect; and that at the date of delivery thereof, plaintiff notified defendant of his intention to claim further commissions, based upon moneys thereafter received by defendant *77 upon aircraft contracts accepted as orders, during the course of plaintiff's employment."
"The court further finds that on or about November 1, 1943, plaintiff ascertained that no manpower clearance would be necessary to enable him to seek other employment, and that he then and there advised said Himes to that effect, and notified the latter that the provisions of said letter were revoked."
The court also found that after plaintiff delivered the letter to Himes he did not receive it back from Himes marked "accepted" until November 15, 1943, which was "after defendant had been notified by plaintiff of the revocation thereof." Thus, the trial court did not find on the alleged defense because the court found, by necessary implication, that the offer of October 14, 1943, if it be deemed an offer, was revoked before it was accepted. Defendant urges that there is no evidence to support such a finding, and quotes certain evidence on the issue which certainly does not support the finding. Defendant has apparently completely overlooked very positive testimony that supports the finding. Plaintiff testified that the letter of October 14th was written in order that he would not be "frozen" into his position by reason of certain wartime regulations, but that he learned prior to October 30th that such regulations did not apply to him; that he thereupon telephoned to Himes and told him the regulations were inapplicable to him and that he was "withdrawing" the letter of October 14th; that he had not then received back the countersigned letter; that when he delivered it to Himes he was told by Himes that he "would not act on it or accept it"; that when he told Himes that he was withdrawing the letter, Himes told him that he would see him two days later, but that Himes failed to keep the appointment; that on November 12th he next saw Himes and was then told by him that Himes had "accepted" the resignation, and that a few days later the countersigned letter was delivered to him. (R. T., pp. 81-83.) Thus, even if the letter be construed as an offer to settle the controversy over commissions (and we gravely doubt whether it can or should be so construed), it is apparent that the quoted finding is amply supported, and that by necessary implication the "offer" was revoked before it was "accepted."
The judgment appealed from is affirmed.
Ward, J., and Bray, J., concurred.
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78 F.3d 1395
28 Bankr.Ct.Dec. 926, Bankr. L. Rep. P 76,835,96 Cal. Daily Op. Serv. 1468,96 Daily Journal D.A.R. 2513
In re: MAYA CONSTRUCTION COMPANY, ID # XX-XXXXXXX, Debtor.Alan L. LEVIN, Appellant,v.MAYA CONSTRUCTION, Appellee.
No. 93-17195.
United States Court of Appeals,Ninth Circuit.
Argued and Submitted May 12, 1995.Decided March 5, 1996.
Joseph H. Watson, Law Office of Joseph H. Watson, Tucson, Arizona, for appellant.
Ralph E. Seefeldt, Seefeldt, Sparks & Neal, Tucson, Arizona, for appellee.
Appeal from the United States District Court for the District of Arizona; John M. Roll, District Judge, Presiding.
Before GOODWIN, POOLE and KLEINFELD, Circuit Judges.
KLEINFELD, Circuit Judge:
1
This is a chapter 11 bankruptcy case. The debtor did not timely list a creditor known to him, and the reorganization plan was confirmed before the creditor attacked it. The question is whether the creditor is bound by the confirmation of the plan.
FACTS
2
Mr. Levin and Maya Construction agreed that Maya would place fill dirt excavated elsewhere on Levin's land. The soil, excavated at a local bridge project Maya was working on, turned out to be contaminated with diesel fuel. Mr. Levin's lawyer wrote to Maya in November of 1990 demanding that, pursuant to its contract, Maya defend, indemnify and hold harmless Mr. Levin from all consequences of the contaminated soil, and proceed with an environmental assessment by a qualified person on Mr. Levin's behalf.
3
Subsequent to the contamination, there were conversations between Mr. Levin and Mr. Ruiz, the president of Maya. There is some ambiguity about exactly what they said to each other concerning the possibility of Mr. Levin suing Maya. Mr. Ruiz said in his affidavit that Mr. Levin told him either that Mr. Levin recognized that he had no claim, or that he preferred to sue a third party and have Maya as an ally instead of an adversary:
4
In the discussions between [Ruiz] and Levin, Levin indicated to [Ruiz] he had no claim, or was proposing to file no claim against Maya Construction Company but that he did want to obtain from the undersigned its cooperation and assistance in pursuing his claim against the Arizona Department of Transportation.
5
In Mr. Levin's recollection, he intended not to sue Maya when he thought Maya had been ignorant of the diesel fuel contamination, but changed his mind when he discovered that Maya had known about the contamination:
6
[Alan Levin says] [t]hat Roberto Ruiz and/or Maya Construction at no time were informed that a claim would not be made, as I discussed the contamination with Roberto Ruiz but at that time had no facts which indicated that Maya Construction Company knew that the soil being placed on my property was contaminated.
7
. . . . .
8
That I, Alan Levin, was not aware of any potential liability of Maya Construction with regard to the contaminated soil on my property until after the hearing on confirmation of the Maya Construction Plan of Organization.
9
Affidavit of Alan Levin, February 8, 1993, at 1, 5.
10
Although Mr. Levin's and Mr. Ruiz's recollections differ, they agree on what is material to this bankruptcy case: Mr. Ruiz knew that (1) Mr. Levin believed that Mr. Ruiz had put contaminated soil on Mr. Levin's land; (2) Mr. Levin had sent a formal written notice that he had a claim against Maya; (3) Mr. Levin stated orally that he did not intend to pursue the claim against Maya. The possibility that Mr. Levin might sue Maya concerned Mr. Ruiz enough that he hired an attorney to prepare an evaluation of the potential claim. The record does not establish whether Mr. Ruiz retained counsel regarding Mr. Levin's potential claim before or after the conversations in which Mr. Levin, as Mr. Ruiz recollected them, said that Mr. Levin had no claim or was not proposing to file a claim against Maya.
11
On February 22, 1991, Maya Construction filed for reorganization under Chapter 11 of the Bankruptcy Code. 11 U.S.C. §§ 101, et seq. This filing date was about three and one half months after Maya had received Mr. Levin's lawyer's written demand. It was after Maya asked its own attorneys to evaluate Mr. Levin's possible claim against Maya. Mr. Ruiz's declaration does not claim that Mr. Levin had made his statements about not filing a claim prior to the bankruptcy filing. All Mr. Ruiz says is that these conversations were "prior to August 23, 1991, the claim bar date." (emphasis in original).
12
Maya did not list Mr. Levin as a creditor. In March 1991, Maya filed the "Master Mailing List" required by the bankruptcy court of all creditors. Mr. Levin was not on the list. Maya also left Mr. Levin off the statement of financial affairs and schedule of liabilities it filed in March. The bankruptcy case proceeded without Mr. Levin. In June, Maya filed a plan of reorganization and disclosure statement. In July, Maya sent all creditors, but not Mr. Levin, notice of the hearing on its reorganization plan and bar date for filing claims. The only evidence on the record that Mr. Levin knew Maya was engaged in a bankruptcy proceeding before December is Mr. Ruiz's statement in his affidavit that "prior to August 23, 1991, the claim bar date in the above captioned matter, the undersigned had discussions with Alan L. Levin ("Levin") in which discussions it was evident that Maya Construction Company was a Debtor in a Chapter 11 proceeding." (emphasis in original).
13
On December 3, 1991, the bankruptcy court approved a final reorganization plan, "subject to everyone signing off on form of order." Mr. Levin still was not in the case, never having been served with any notice.
14
Mr. Levin's name first appears in the bankruptcy court file December 20, 1991. Maya filed a "Request for Addition to Debtor's Master Mailing Matrix," attaching 70 names in mailing label form. Maya filed an amended schedule of creditors the same day, listing Mr. Levin as having a contingent claim for contaminated soil. On December 26, Maya filed an "Objection To Contingent Claim of Alan L. Levin" and notice of hearing in January, and served the objection and notice on Mr. Levin. Mr. Levin filed a response on January 23, 1992, giving notice of his claim estimated at $500,000 for damage to his property on account of the contaminated soil. At the hearing, the court directed that the claim be designated an adversary proceeding and set it for trial in October. Subsequently it was rescheduled for January of 1993.
15
Meanwhile, on February 24, 1992, the bankruptcy court entered an order confirming the reorganization plan as anticipated at the December 3 hearing. Mr. Levin's name and address are in the matrix of mailing labels attached to an affidavit signed by Maya's attorney, in which he swears that he sent a notice of the February 24 order to all persons on that list. Mr. Levin and his wife submitted affidavits that they had not received this notice, but the bankruptcy court found that the notice had been mailed to them. Mr. Levin had not, during the approximately two months between his first notice and the court's confirmation of the plan, filed any paper to prevent the confirmation.
16
A little less than a year later, on January 12, 1993, Mr. Levin filed a motion to obtain a judicial determination of whether he was bound by the confirmation of the reorganization plan. He argued that he had been entitled to notice of the plan and an opportunity to object, and had been denied those rights. The bankruptcy court made findings of fact, evidently based on the written submissions described above:
17
The court finds that the debtor was hired by Levin to place soil on [Levin's] property; that such soil was contaminated; that Levin discovered the contamination pre-petition; that the debtor filed its petition under Chapter 11 on February 2, 1991; that Levin had actual notice of the debtor's bankruptcy; that Levin did not file a claim in this matter prior to the bar date; that Levin did not ask the court to extend the bar date; and that the debtor did not file a claim in Levin's behalf.
18
The court also finds that Levin was not placed on the master mailing list by debtor, nor did Levin request to be added; that the debtor's disclosure statement was approved on October 24, 1991; that the debtor's plan was initially confirmed on February 24, 1992; that Levin did not receive notice of the hearings concerning the debtor's disclosure statement and plan; that Levin was added to the master mailing list and that his claim was added to the debtor's schedules on December 20, 1991; that the notice of the order of confirmation was mailed to Levin and that Levin did not file an objection to or appeal the confirmation order.
19
The court further finds that Levin did not know of its claim against the debtor until after the debtor's plan was confirmed; and that during the pendency of the case, Levin indicated that he would not file a claim in this bankruptcy.
20
The bankruptcy court decided that Levin was bound by the plan, despite his lack of proper notice, on two grounds: first, since Levin had indicated that he would not file a claim, Maya "had knowledge that a claim would not be filed," and Levin could not be a known creditor; second, based on Levin's statement that he did not learn of the existence of his claim until after the plan was confirmed, Maya should not be held responsible for not acknowledging a claim Levin himself did not know of. As the court saw it, Mr. Levin knew of the contamination and, because of the financial significance of such an event, had good reason to investigate his possible claim fully between 1989, when Maya put the contaminated soil on his land, and 1992, when the plan was confirmed, yet told Maya he did not intend to make a claim against Maya. The court also noted that Levin did not object to discharge of his claim until ten months after the plan was confirmed.
21
Mr. Levin appealed to the district court, which affirmed. The district court concluded that the bankruptcy court had erred in treating Mr. Levin as an unknown creditor, because Maya had retained counsel to evaluate his potential claim and knew that he had the potential to make a claim. Nevertheless, the district court determined that Mr. Levin was barred because he did not seek to file an untimely claim despite the numerous procedural mechanisms open to him.
ANALYSIS
22
Mr. Levin's argument is that he should not have been held bound by the confirmation of the plan because Maya knew of his claim, yet did not give him notice of the time fixed for filing objections to the plan, notice of the hearing considering confirmation of the plan, or any other relevant notice.
23
We review the bankruptcy court's findings of fact for clear error, Fed.R.Bankr.P. 8013, and its conclusions of law de novo. In re Professional Inv. Properties, 955 F.2d 623, 626 (9th Cir.1992). We independently review the bankruptcy court's determinations and do not give deference to the district court. In re Weisman, 5 F.3d 417, 419 (9th Cir.1993).
24
We agree with the district court that the bankruptcy court erred in treating Mr. Levin's claim as one not known to Maya, and that Levin was entitled to formal notice of the proceedings. Though Levin told Mr. Ruiz he was not going to sue Maya, Mr. Levin's lawyer sent Maya a formal written demand which gave Maya reason to think the contrary. The record does not show which came first. Maya had nothing of formality comparable to the lawyer's letter, such as a written release, discharging Mr. Levin's potential claim. Mr. Levin's state of mind and intention did not obviate Maya's knowledge that it had placed contaminated soil on Levin's land and that, whether he planned to sue Maya or not, he had a potential claim. Maya, as the district judge noted, understood the seriousness of the potential claim and caused its attorneys to provide an evaluation of it.
25
Maya was required to file a list of all creditors and a schedule of liabilities and assets. 11 U.S.C. § 521(1). The debtor lists the creditors, so it is the debtor's knowledge of a creditor, not the creditor's knowledge of his claim, which controls whether the debtor has a duty to list that creditor. See In re Hi-Lo Powered Scaffolding, Inc., 70 B.R. 606, 610 (Bankr.S.D.Ohio 1987) (rejecting idea that "a claim arises only at such time as the entity asserting the claim learns of its existence."). The bankruptcy court must give formal notice of the first meeting of creditors to all creditors. Fed.R.Bankr.P. 3002. The notice must also advise of the method and deadline for filing a proof of claim. Fed.R.Bankr.P. 2002. Maya neither listed Levin as a creditor nor gave him any of the requisite formal notices. This is significant because if a contingent creditor such as Mr. Levin fails to file a proof of claim within the prescribed time limit, his claims are discharged by confirmation of a reorganization plan. 11 U.S.C. § 1141(d)(1)(A).
26
Generally, if a known contingent creditor is not given formal notice, he is not bound by an order discharging the bankruptcy's obligations. The fact that a creditor has actual knowledge that a Chapter 11 bankruptcy proceeding is going forward involving a debtor does not obviate the need for notice. As the Supreme Court explained in New York v. New York, New Haven & Hartford R.R. Co., 344 U.S. 293, 297, 73 S.Ct. 299, 301, 97 L.Ed. 333 (1953):
27
"Nor can the bar order against New York be sustained because of the city's knowledge that reorganization of the railroad was taking place in the court. The argument is that such knowledge puts a duty on the creditors to inquire for themselves about possible court orders limiting the time for filing claims. But even creditors who have knowledge of a reorganization have a right to assume that the statutory 'reasonable notice' will be given them before their claims are forever barred....
28
The statutory command for notice embodies a basic principle of justice--that a reasonable opportunity to be heard must precede judicial denial of a party's claimed rights."
29
Id. at 296-97, 73 S.Ct. at 301.
30
A debtor must list a creditor whose identity and claim he knows. 11 U.S.C. § 521. The burden is on the debtor to cause formal notice to be given; the creditor who is not given notice, even if he has actual knowledge of reorganization proceedings, does not have a duty to investigate and inject himself into the proceedings. Id.; In re Spring Valley Farms, Inc., 863 F.2d 832, 835 (11th Cir.1989); In re Intaco Puerto Rico, Inc., 494 F.2d 94, 99 (1st Cir.1974); In re Harbor Tank Storage Co., Inc., 385 F.2d 111, 114 (3d Cir.1967). Maya seeks to free itself of an obligation by means of a federal court judgment. As a matter of due process, the person whose entitlement to money from the debtor will be destroyed by the judgment is entitled to notice. Collier on Bankruptcy § 1141.01(b), at 1141-17 & n. 40 (Lawrence P. King ed.) (1993).
31
Our chapter 7 and 13 cases, In re Coastal Alaska Lines, Inc., 920 F.2d 1428 (9th Cir.1990), and In the Matter of Gregory, 705 F.2d 1118 (9th Cir.1983), are distinguishable because the lack of formal notice of a proof of claims deadline is not as significant in those chapters. In contrast to the rule governing proofs of claims in a Chapter 11 suit, which instructs the court to fix a proof of claims deadline and permits the court to extend that deadline "for cause shown," Fed.R.Bankr.P. 3003(c)(3), the rule governing Chapter 7 and 13 proceedings provides that proofs of claim shall be filed within 90 days of the first creditors meeting and specifies limited exceptions. Fed.R.Bankr.P. Rule 3002. Thus, once the creditors in Coastal and Gregory had received notice of the creditors meeting, they had effective notice that proofs of claim were due within 90 days, unless very limited exceptions applied. See In Re Unioil, 948 F.2d 678, 683 (10th Cir.1991) ("the rule that governs notice and dischargeability in Chapter 7 does not apply in Chapter 11" so formal notice of bar date is necessary in a Chapter 11 proceeding even if not necessary in Chapter 7). In contrast to creditors in a Chapter 7 or 13 case, even if Levin had received notice of a creditors meeting or any other formal notice, which he did not, he still would not have known when the deadline for filing proofs of claims was, and therefore, cannot be said to have been given any notice. In Coastal Alaska Lines, even though the creditor did not receive notice of the claims bar date, he received a copy of the first notice of creditors meeting. Likewise, in Gregory the creditor received notice of the meeting of creditors.
32
Maya also cites Wright v. Placid Oil Company, 107 B.R. 104, 106-07 (N.D.Texas 1989) (injured worker not known because he did not file suit for injury until after the deadline had passed); see also Chemetron Corp. v. Jones, 72 F.3d 341 (3d Cir.1995) (residents and visitors of a neighborhood containing a toxic site were not known because their identities and the fact of injury was not reasonably ascertainable prior to their filing a tort suit). These cases are distinguishable because the debtor could not identify the potential creditors. Maya knew Mr. Levin had a potential claim against it. Knowing also that Mr. Levin did not intend to sue did not obviate the fact that he had a claim on which he could sue, if he learned more or changed his mind. Knowing that a potential claimant does not presently intend to sue is not equivalent to discharge of a claim, as for example by a release.
33
The district court concluded that Mr. Levin forfeited his claim by not acting more rapidly and aggressively to derail confirmation of the plan. The bankruptcy court ruled against Levin on a different ground, which we and the district court have rejected, that Mr. Levin's claim was not known. Accordingly, we vacate the judgment, and remand to the bankruptcy court so that it can determine whether, despite Maya's failure to list Mr. Levin as a creditor when it should have, the subsequent notice to Mr. Levin would cause his claim to be discharged by the order confirming the plan. See In re Remington Rand Corp., 836 F.2d 825, 833 (3d Cir.1988) (remand to determine whether four year delay between creditor's knowledge and action was too long). The bankruptcy court should decide in the first instance whether, when Mr. Levin eventually was served, he had notice that the proceedings were far advanced and, by waiting too long to take action, "ignore[d] the proceedings to which the notice refers at [his] peril." Gregory, 705 F.2d at 1123. See In re Hunt, 146 B.R. 178 (Bankr.N.D.Tex.1992) (two and one half year delay too long); In re Pagan, 59 B.R. 394 (Bankr.D.P.R.1986) (four year delay too long).
34
Accordingly, the district court judgment is REVERSED, and the bankruptcy court judgment is VACATED and REMANDED so that the bankruptcy court can make the determination set out above.
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481 F.Supp.2d 249 (2007)
Annabelle MEBANE, Plaintiff,
v.
GC SERVICES LIMITED PARTNERSHIP, Defendant.
No. 06 Civ.1972(WCC).
United States District Court, S.D. New York.
March 9, 2007.
Adam J. Fishbein, P.C., Woodmere, NY, for Plaintiff.
Arthur J. Sanders, Spring Valley, NY, for Defendant.
OPINION AND ORDER
WILLIAM C. CONNER, Senior, District Judge.
Plaintiff Annabelle Mebane brings the instant action pursuant to the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq., ("FDCPA") against defendant GC Services Limited Partnership ("GC Services"). Plaintiff alleges that defendant violated the FDCPA by sending her a letter offering to settle an outstanding debt that specifically requested payment in the form of a cashier's check or money order despite the fact that defendant also would permit payment in the form of a personal check. According to plaintiff, defendant's letter constituted a deceptive debt collection practice because it did not *250 specifically list personal checks as an acceptable mode of payment. Defendant contends that, as a matter of law, the FDCPA contains no requirement that all debt collection letters list every acceptable payment option and, accordingly, defendant moves for judgment on the pleadings pursuant to FED. R. CIV. P. 12(c). For the reasons that follow, defendant's motion is granted.
BACKGROUND
Plaintiff's Complaint reveals the following facts, which, for the purposes of the present motion, are undisputed. (Def. Mem. Supp. Mot. J. Pldgs. at 5 n. 1.) Defendant is a "debt collector"[1] within the meaning of the FDCPA and sought to collect a $322.06 consumer debt from plaintiff. (See Complt., Ex. A.) Defendant sent a collection letter notice to plaintiff offering to settle the aforementioned debt for seventy percent of the total amount due if payment were made within fourteen days of the date of the letter. (Id.) Specifically, the letter stated, in pertinent part:
This is a great opportunity to finally take care of this long overdue account. If you wish to take advantage of this offer, contact our office or mail your remittance, in the form of a cashier's check or money order, in the amount of $225.44. If the settlement amount is not received within (14) days of the date of this letter this offer will become null and void. Please note that this letter does not reduce your rights as stated on the reverse side of this letter.
(Id. (emphasis added).) The letter did not state that defendant also would accept payment in the form of a personal check. (Def. Mem. Supp. Mot. Pldgs. at 4.) Plaintiff subsequently commenced the present action, alleging that the letter constituted a deceptive debt collection practice in violation of 15 U.S.C. § 1692e(10).[2]
DISCUSSION
I. Legal Standard
In ruling on a motion under FED. R. Civ. P. 12(c) motion, the Court employs the standard applicable to a motion made pursuant to FED. R. CIV. P. 12(b)(6). See Ad-Hoc Comm. of Baruch Black & Hispanic Alumni Ass'n v. Bernard M. Baruch Coll., 835 F2d 980, 982 (2d Cir.1987). When ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court must accept all of the well-pleaded facts as true and consider those facts in the light most favorable to plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236-37, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). On such a motion, the issue is "whether the claimant is entitled to offer evidence to support the claims." Id. at 236, 94 S.Ct. 1683. A complaint should not be dismissed for failure to state a claim "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Padavan v. United States, 82 F.3d 23, 26 (2d Cir.1996) (quoting Hughes *251 v. Rowe, 449 U.S. 5, 10, 101 S.Ct. 173, 66 L.Ed.2d 163 (1980)). In assessing the legal sufficiency of a claim, the Court may consider those facts alleged in documents that are "integral" to plaintiffs claims, even if not explicitly incorporated by reference. See Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 46-48 (2d Cir.1991); Smart v. Goord, 441 F.Supp.2d 631, 637 (S.D.N.Y.2006) ("`[W]hile courts generally do not consider matters outside the pleadings, they may consider documents attached to the pleadings, documents referenced in the pleadings, or documents that are integral to the pleadings in order to determine if a complaint should survive a 12(b)(6) motion.'") (quoting Garcia v. Lewis, No. 05 Civ. 1153, 2005 WL 1423253, at *3 (S.D.N.Y. June 16, 2005); U.S. Fid. & Guar. Co. v. Petroleo Brasileiro S.A.-Petrobras, No. 98 Civ. 3099, 2001 WL 300735, at *2 (S.D.N.Y. March 27, 2001) ("[T]he Court can consider documents referenced in the complaint and documents that are in the plaintiffs' possession or that the plaintiffs knew of and relied on in bringing suit.")). In the present case, we will consider the collection notice at issue, which plaintiff attached to her Complaint, in determining whether its use violated the FDCPA.
II. Whether Use of the Collection Notice Violated the FDCPA
The FDCPA was created in an attempt to stop abusive and deceptive practices by third party debt collectors and to insure that those who refrain from such practices are not competitively disadvantaged. See 15 U.S.C. § 1692(e). It incorporates congressional findings that debt collection abuses, including late night phone calls, the use of profane language and threats of violence, are widespread and pervasive. Id. § 1696; see also Russell v. Equifax A.R.S., 74 F.3d 30, 33 (2d Cir.1996). The FDCPA expressly prohibits certain practices deemed to be particularly egregious, including the three aforementioned activities. See 15 U.S.C. §§ 1692(d)(1')-(6). It also contains a "catch-all" provision prohibiting any debt collection practice that is "false, deceptive, or misleading." 15 U.S.C. § 1692e(10); see also Clomon v. Jackson, 988 F.2d 1314, 1320 (2d Cir.1993) ("[T]he use of any false, deceptive, or misleading representation in a collection letter violates § 1692e regardless of whether the representation in question violates a particular subsection of that provision.").
When evaluating the deceptiveness of collection material, we must consider how it would be perceived by the "least sophisticated consumer." Clomon, 988 F.2d at 1318 ("The most widely accepted test for determining whether a collection letter violates § 1692e is an objective standard based on the `least sophisticated consumer.'"). Generally, deceptive collection notices contain confusing or contradictory language about the consumer's rights. Savino v. Computer Credit, Inc., 164 F.3d 81, 85 (2d Cir.1998) (quoting Graziano v. Harrison, 950 F.2d 107, 111 (3d Cir.1991)). Notices that fail to include CERTAIN statutorily-mandated consumer protection provisions are also prohibited. DeSantis v. Computer Credit, Inc., 269 F.3d 159, 161 (2d Cir.2001); see also 15 U.S.C. 1692g(a)(4) (requiring debt collector to "send the consumer a written notice containing . . . a statement that if the consumer notifies the debt collector in writing within [thirty days after receipt of the notice] that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector.").
Of course, courts must balance the need to protect consumers against the need to shelter debt collectors "against liability for *252 unreasonable misinterpretations of collection notices." Clomon, 988 F.2d at 1319. Accordingly, the FDCPA "does not extend to every bizarre or idiosyncratic interpretation" of a collection notice. Id. For example, notices where the pertinent information is on the rear, as opposed to the front side, of a collection letter do not violate the FDCPA. See McStay v. I.C. Sys., Inc., 308 F.3d 188, 190 (2d Cir.2002). The standard presumes the consumer at least "possess a rudimentary amount of information about the world and a willingness to read a collection notice with some care." Clomon, 988 F.2d at 1319.
Considering the undisputed facts of the present case, we conclude that the least sophisticated consumer would not be misled by defendant's collection notice. As defendant correctly points out, the FDCPA does not require that a debt collection notice list every acceptable mode of payment, (see Def. Mem. Supp. Mot. J. Pldgs. at 11) nor does it require that a debt collector accept, certain types of payment. Nowhere does the collection notice state that defendant would not accept personal checks, and, moreover, the notice specifically states that "[defendant is] being as flexible as possible with [plaintiff,]" and advises plaintiff to "call us today and let us help . . . resolve this overdue account." (Complt., Ex. A.) Clearly, the collection notice evinces a desire to resolve the debt and lists two permissible ways of doing so, namely, payment of seventy percent of the amount owed by either certified check or money order. To hold, as plaintiff suggests, that defendant violated the FDCPA by failing to itemize all acceptable modes of payment would force a debt collector to either: (1) accept specifically enumerated modes of payment and absolutely refuse other modes; or (2) risk liability for failure to note that it might, under certain circumstances, accept some other form of payment. Such an interpretation would turn the FDCPA it on its head. Accordingly, for the foregoing reasons, we conclude that the least sophisticated consumer would not be deceived by defendant's collection notice.
Notably, the present matter is not the first in which plaintiffs counsel, Adam Fishbein, has been criticized for pursuing frivolous claims under the FDCPA. In Turner v. Asset Acceptance, LLC, 302 F.Supp.2d 56, 58 (S.D.N.Y.2004), the plaintiff contended that a collection notice stating: "It is a pleasure to welcome you as a new customer" violated the FDCPA because
the letter "is not intended to actually welcome [the plaintiff] to anything," . . . and . . . because Plaintiff is not a "customer" of Defendant, but rather a "debtor" or "consumer." Plaintiff submits that the least sophisticated consumer could be led to think that this letter is a "friendly" communication and that the debt is instead a payment for something "service-related," thus "welcoming confusion and dismay" upon the reader.
Id. In rejecting plaintiffs counsel's argument, the court stated:
It is this court that has experienced "confusion and dismay" at being required to rule on this frivolous question. . . . While Congress enacted the FDCPA in order to address many odious practices used by the debt collection industry, friendliness was not one of those odious practices. It is both possible and desirable for a new creditor to establish cordial relations with its debtors, and I find that as a matter of law there is nothing remotely deceptive about Defendant's use of the phrase "It is a pleasure to welcome you. . . . "
Id. The Turner court also noted: "Congress enacted the FDCPA in order to combat egregious abuses of debtors, abuses that are real and troubling. It is almost as troubling, however, for an attorney to take *253 unreasonable advantage of Congress's good intentions and the sound legislation it has enacted." Id. at 59; see also Kapeluschnik v. Leschack & Grodensky, P.C., No. 96-CV-2399, 1999 U.S. Dist. LEXIS 22883, at *30-31 (E.D.N.Y. Aug. 26, 1999) (characterizing Fishbein's FDCPA argument as "frivolous"); cf. Laster v. Cole, No. 99-CV-2837, 2000 WL 863463, *1, 2000 U.S. Dist. LEXIS 8672, at *4-5 (E.D.N.Y. June 23, 2000) (noting that Fishbein "inflated his billable hours and filed a perjurious affirmation" with the court).
In the present case, defendant conferred a benefit on plaintiff by offering to settle her indebtedness for a prompt payment of seventy percent of the amount due by cashier's check or money order. Nothing required defendant to allow the same generous discount for payment by any other means. And, even if it would do so, nothing requires it to inform the debtor of that option. The action is patently frivolous and a disturbing abuse of the privilege to practice in a federal court.
CONCLUSION
For the foregoing reasons, the motion of defendant GC Services Limited Partnership for judgment on the pleadings is granted. The Clerk's Office is directed to enter judgment in favor of defendant dismissing the Complaint in its entirety with prejudice and without costs or attorney's fees.
SO ORDERED.
NOTES
[1] The term "debt collector" is defined in the FDCPA as "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692a(6).
[2] 15 U.S.C. § 1692e(10) provides, in pertinent part:
A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section. . . . The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.
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In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
No. 02-19-00030-CR
MUSTAFA ABDULLAHI BUSSURI, § On Appeal from the 213th District
Appellant Court
§
of Tarrant County (1503216D)
§
V. January 23, 2020
§
Opinion by Chief Justice Sudderth
§
THE STATE OF TEXAS (nfp)
JUDGMENT
This court has considered the record on appeal in this case and holds that there
was no error in the trial court’s judgment. It is ordered that the judgment of the trial
court is affirmed.
SECOND DISTRICT COURT OF APPEALS
By __/s/ Bonnie Sudderth________________
Chief Justice Bonnie Sudderth
| {
"pile_set_name": "FreeLaw"
} |
Filed 12/14/10 by Clerk of Supreme Court
IN THE SUPREME COURT
STATE OF NORTH DAKOTA
2010 ND 236
Cavendish Farms, Inc., Plaintiff, Appellant
and Cross-Appellee
v.
Mathiason Farms, Inc., Defendant, Appellee
and Cross-Appellant
No. 20090380
Cavendish Farms, Inc., Plaintiff, Appellant
and Cross-Appellee
v.
Valley View Farms, Defendant, Appellee
and Cross-Appellant
No. 20100123
Appeals from the District Court of Stutsman County, Southeast Judicial District, the Honorable John E. Greenwood, Judge.
AFFIRMED.
Opinion of the Court by Crothers, Justice.
Michael J. Keaton (argued), Keaton & Associates, P.C., 1278 West Northwest Highway, Suite 903, Palatine, IL 60067 and Joseph F. Larson II (on brief), P.O. Box 1599, Jamestown, N.D. 58402-1599, for plaintiff, appellant and cross-appellee.
Michael Stuart Raum (argued), P.O. Box 1389, Fargo, N.D. 58107-1389 and Christopher Eric Rausch (on brief), P.O. Box 2097, Bismarck, N.D. 58502-2097, for defendant, appellee and cross-appellant.
Cavendish Farms v. Mathiason Farms
Nos. 20090380 & 20100123
Crothers, Justice.
[¶1] Cavendish Farms, Inc., appealed from district court judgments finding that it had breached contracts for the purchase of potatoes from Mathiason Farms, Inc. and Valley View Farms, Inc. (“the Growers”), and that the Growers had also breached the contracts. The Growers cross-appealed from the judgments. We affirm.
I
[¶2] Cavendish owns a potato processing facility, and the Growers grow potatoes. In 2005, Cavendish and the Growers entered into contracts whereby each of the Growers agreed to grow 25,000 hundredweight of russet burbank potatoes on certain designated fields and sell them to Cavendish. Cavendish agreed to buy the potatoes. The contracts specified they were for “crop year 2005,” and Cavendish agreed to pay a base price of $4.70 per hundredweight for “usable potatoes.” The Growers could not sell potatoes grown on the designated fields to another buyer unless Cavendish first rejected or released them.
[¶3] In November 2005, Cavendish made advance payments to the Growers ($36,400 to Valley View and $32,032 to Mathiason) as required by the contracts. It thereafter became apparent that there were problems with the quality of the potatoes, and the Growers attempted to recondition the potatoes by warming the piles. Cavendish refused to make the next scheduled advance payments due on February 15, 2006. Cavendish inspected two loads of potatoes in late February 2006 and determined that the potatoes were not acceptable. On March 31, 2006, Cavendish e-
mailed the Growers that it was rejecting the potatoes and sent a formal letter of rejection on April 3, 2006. By that time the potatoes had deteriorated and were unmarketable.
[¶4] Cavendish asked the Growers to return the November advance payments, but the Growers refused. Cavendish sued the Growers, alleging they had breached the contract by failing to deliver potatoes as promised, and sought damages and return of the advance payments. The Growers answered and counterclaimed, alleging Cavendish had supplied defective seed potatoes for the 2004 crop year;
(footnote: 1) Cavendish had breached the 2004 contracts by failing to pay the contract price; Cavendish had breached the 2005 contracts; Cavendish had breached an implied covenant of good faith and fair dealing in the 2005 contracts; and Cavendish had engaged in unfair trade practices under the 2005 contracts. On cross-motions for summary judgment, the district court dismissed the Growers’ claims for breach of an implied covenant of good faith and fair dealing and unfair trade practices. The remaining claims and counterclaims went to trial. The district court found that Cavendish owed damages for underpayments on the 2004 contracts, that Cavendish had acted in bad faith and breached the 2005 contracts by delaying its rejection of the 2005 crop of potatoes, thereby precluding the Growers from selling the potatoes to another buyer before they totally deteriorated and resulting in damages of $50,000 for each of the Growers, and that the Growers had breached the 2005 contracts by failing to provide usable potatoes and were required to return the advance payments made by Cavendish.
II
A
[¶5] At oral argument, Cavendish argued for the first time that the 2005 contracts were not contracts for the sale of goods and that the Uniform Commercial Code provisions codified in N.D.C.C. tit. 41 did not apply. We generally do not consider issues raised for the first time at oral argument on appeal,
see, e.g.
,
State v. Schmitt
, 2001 ND 57, ¶ 11 n.2, 623 N.W.2d 409. We also note that a contract to purchase a future crop is a contract for the sale of goods governed by N.D.C.C. tit. 41, even if the crop has not yet been planted.
See
Red River Commodities, Inc. v. Eidsness
, 459 N.W.2d 811, 814 (N.D. 1990);
Red River Commodities, Inc. v. Eidsness
, 459 N.W.2d 805, 807 (N.D. 1990). Other authorities are in accord, explicitly recognizing that a contract for the sale of a future crop is a contract for the sale of goods under the Uniform Commercial Code, even if the crop has not yet been planted.
See, e.g.
,
Seminole Peanut Co. v. Goodson
, 335 S.E.2d 157, 159 (Ga. Ct. App. 1985); 2 Lary Lawrence,
Anderson on the Uniform Commercial Code
§ 2-105:48 (3d ed. 2004); 21A Am. Jur. 2d
Crops
§ 48 (2008); 67 Am. Jur. 2d
Sales
§ 58 (2003); 77A C.J.S.
Sales
§ 4 (2008). The contracts in this case expressly provided that they were for “crop year 2005” and that “Cavendish Farms agrees to buy potatoes from Grower” and “Grower agrees to grow and sell potatoes to Cavendish Farms.” These were contracts for the sale of goods governed by the Uniform Commercial Code as codified in N.D.C.C. tit. 41.
B
[¶6] Cavendish contends the district court “secretly revived” the good-faith count of the Growers’ counterclaim after expressly dismissing that count months earlier by summary judgment. In their answer and counterclaim, the Growers raised several separate claims for relief. Count 5 alleged Cavendish had breached the 2005 contracts; Count 6 alleged breach of an implied covenant of good faith and fair dealing. On Cavendish’s motion for summary judgment, the district court dismissed Count 6 of the counterclaim, but Count 5 was left for trial. After trial, the district court concluded Cavendish had failed to act in good faith and had breached the 2005 contracts when it failed to reject the Growers’ potatoes until late March, after they had totally deteriorated and were unmarketable.
[¶7] Cavendish contends the district court’s summary judgment ruling completely removed the issue of good faith from the case. To support its argument, Cavendish relies upon cases acknowledging that a tort-based remedy for breach of an implied covenant of good faith and fair dealing has only been applied in this state to insurance contracts, not general commercial contracts.
See, e.g.
,
Dalan v. Paracelsus Healthcare Corp.
, 2002 ND 46, ¶ 11, 640 N.W.2d 726.
[¶8] In addition to the implied covenant of good faith and fair dealing which has been recognized in insurance contracts in this state, the Uniform Commercial Code, as codified in N.D.C.C. tit. 41, expressly imposes an obligation of good faith in the performance of contractual terms:
“Every contract or duty within this title imposes an obligation of good faith in its performance and enforcement. This section does not support an independent claim for relief for failure to perform or enforce in good faith and does not create a separate duty of fairness and reasonableness which can be independently breached.”
N.D.C.C. § 41-01-18.
(footnote: 2) This provision, while not authorizing a separate, independent claim for relief for breach of the duty of good faith, “means that a failure to perform or enforce, in good faith, a specific duty or obligation under the contract, constitutes a breach of that contract.” N.D.C.C. § 41-01-18 cmt. 1. The interplay between lack of good faith and breach of contract has been explained:
“As far as the UCC is concerned, there is no action that can be brought merely for breach of the covenant of good faith and fair dealing. In consequence, the UCC does not permit recovery of money damages for not acting in good faith where no other basis of recovery is present.
“The only action that can be brought is an action for a breach of a contract term. It is here that the concept of good faith comes into play to the extent that it gives scope or definition to a duty imposed by the contract or protects, by its implication, that neither party take any action that would defeat the performance of the other or the purpose of the contract.”
1A Lary Lawrence,
Anderson on the Uniform Commercial Code
§ 1-304:16R (3d ed. 2004) (footnotes omitted). In prior cases interpreting good faith under the Uniform Commercial Code, this Court has noted that the good-faith obligation must “attach” to an existing contract or duty.
See
Jerry Harmon Motors, Inc. v. First Nat’l Bank & Trust Co.
, 472 N.W.2d 748, 755 (N.D. 1991);
Union State Bank v. Woell
, 434 N.W.2d 712, 716-17 (N.D. 1989).
[¶9] The Growers had pleaded both a breach of contract claim and a separate claim for breach of the implied covenant of good faith and fair dealing. The district court’s summary dismissal of Count 6 merely disposed of good faith as the basis for an independent claim, whether based upon the tort remedy or the Uniform Commercial Code. The court’s ruling did not, expressly or impliedly, dispose of Cavendish’s alleged lack of good faith as a basis for the breach of contract claim in Count 5. The court simply dismissed Count 6 and did not purport to preclude the Growers from alleging bad faith in the performance of the terms of the contract as a basis for their breach of contract claim pleaded in Count 5.
[¶10] Cavendish claims it was unfair and a violation of due process for the district court to rely upon the good-faith argument after trial because it was “resurrected . . . without any notice or opportunity to be heard” and “none of the parties addressed this claim in any of the post-trial briefing.” The record does not support Cavendish’s claim. The Growers’ pre-trial and post-trial briefs addressed the issue of good faith at length, citing N.D.C.C. § 41-01-18, and expressly argued Cavendish’s failure to timely reject the potatoes when it knew it would not accept them established a lack of good faith and commercial reasonableness resulting in a breach of contract. Cavendish’s assertion that it did not know good faith was an issue at trial is clearly belied by the record.
[¶11] We conclude that the district court did not “secretly revive” a claim it had previously dismissed by summary judgment and that Cavendish’s due process rights were not violated by the court’s consideration of Cavendish’s lack of good faith in performing the contracts as a basis for finding a breach of the contracts.
C
[¶12] Cavendish asserts that it had a right to reject the Growers’ potatoes at any time until July 31, 2006 and that its rejection of the potatoes in late March, four months before the deadline, could not constitute a breach of the contracts.
[¶13] The contract provision governing rejection of potatoes provided “Cavendish Farms Inc. may at any time refuse to accept ‘contracted potatoes’” when the potatoes did not meet specified quality standards. Although the contracts do not specify a precise date for rejection, Cavendish points to a provision in the portion of the contracts entitled “Basis of Payment,” which provides a payment schedule for potatoes delivered through July, as support for its assertion that it could accept or reject potatoes at any time up to and including July 31, 2006, without breaching the contracts. Thus, Cavendish argues that, even though it may have decided in February that the potatoes were unsuitable and it would not accept them, they could wait until July 31 to reject the potatoes without breaching the contracts.
[¶14] This is precisely the type of situation the good-faith obligation in N.D.C.C. § 41-01-18 was intended to address. Section 41-01-18 mandates that “[e]very contract or duty within this title imposes an obligation of good faith in its performance and enforcement.” “Good faith” is defined as “honesty in fact and the observance of reasonable commercial standards of fair dealing.” N.D.C.C. § 41-01-
09(2)(t). In this case, the contracts did not provide a specific date for the rejection of the potatoes, but accorded significant discretion to Cavendish to reject them “at any time.” When one party to a contract “has the power to make a discretionary decision without defined standards,” the implied covenant of good faith and fair dealing applies to protect the parties’ reasonable expectations.
Speedway SuperAmerica, LLC v. Tropic Enters., Inc.
, 966 So. 2d 1, 3 (Fla. Dist. Ct. App. 2007) (quoting
Publix Super Markets, Inc. v. Wilder Corp. of Del.
, 876 So. 2d 652, 654 (Fla. Dist. Ct. App. 2004)). “[U]nder an agreement that appears by word or silence to invest one party with a degree of discretion in performance sufficient to deprive another party of a substantial proportion of the agreement’s value, the parties’ intent to be bound by an enforceable contract raises an implied obligation of good faith to observe reasonable limits in exercising that discretion, consistent with the parties’ purpose or purposes in contracting.”
Centronics Corp. v. Genicom Corp.
, 562 A.2d 187, 193 (N.H. 1989). Thus, the statutory duty to act in good faith becomes a limitation on contractual discretion:
“A contract may give one of the parties freedom of action or discretion to act with respect to certain matters. When a contract gives a party discretion the implied covenant of good faith and fair dealing bars that party from exercising that discretion in an arbitrary or unreasonable manner.”
1A Lary Lawrence,
Anderson on the Uniform Commercial Code
§ 1-304:46R (3d ed. 2004).
[¶15] In this case, the term in the parties’ contracts allowing Cavendish to reject the potatoes “at any time” accorded significant discretion to Cavendish in determining when it would formally reject the Growers’ potatoes and allow them to be sold to other buyers. The statutory provisions mandated that it exercise that discretion in good faith and in a commercially reasonable manner. We reject Cavendish’s assertion that the terms of the contracts allowed it to withhold notice of its rejection of the potatoes until July 31, even if it had made the decision to reject all of the Growers’ potatoes in February and knew that a delay in rejecting them would result in financial harm to the Growers. When one party is given substantial discretion in its manner of performance of a duty or exercise of a right under the contract, N.D.C.C. § 41-01-18 requires that the party exercise that discretion in good faith and in a commercially reasonable manner. Although Cavendish’s lack of good faith does not provide the basis for a separate, independent cause of action, its failure to perform under the contracts in good faith by failing to timely reject the potatoes after deciding it would not accept them constitutes a breach of the terms of the contracts.
See
N.D.C.C. § 41-01-18 cmts.
D
[¶16] Cavendish also challenges the district court’s findings that its actions constituted bad faith and breached the contract. The determination whether a party acted in good faith is generally a question of fact.
E.g.
,
Ballensky v. Flattum-
Riemers
, 2006 ND 127, ¶ 27, 716 N.W.2d 110; 1A Lary Lawrence,
Anderson on the Uniform Commercial Code
§ 1-304:11R (3d ed. 2004). Similarly, the determination whether a party has breached a contract is a finding of fact.
E.g.
,
Sanders v. Gravel Prods., Inc.
, 2008 ND 161, ¶ 7, 755 N.W.2d 826. The district court made extensive findings detailing Cavendish’s conduct and its effect on the Growers:
“84. Valley View and Mathiason claim they could have marketed their potatoes for purposes other than French fry production to another processor if Cavendish would have timely rejected the potatoes. The growers claim this failure to reject the potatoes is a breach of contract, and that they are entitled to damages from Cavendish.
“85. At Section V of the contract Cavendish can elect to reject the potatoes if they do not meet the quality specifications as provided in the contract. The contract does not specifically address the obligations of the parties if the potatoes are rejected.
“86. However, both Cavendish witness [sic] and witnesses for the growers testified that the potatoes have value for other purposes if they are not suitable for French fry production.
“87. While the Court has found that Valley View and Mathiason breached the contract by not providing the contracted potatoes, Cavendish still had an obligation under the contract to the growers because of that other value. Section XI, paragraph 4 of the contracts required the parties to cooperate fully to carry out the terms and intent of the contract. Also, N.D.C.C. § 41-01-18 imposes an obligation of good faith in performance and enforcement of contracts.
“88. The same evidence that Cavendish did not act without unreasonable delay in purchasing the Hutterian potatoes supports a conclusion that it did not act in good faith in delaying the rejection of the growers’ potatoes.
“89. Cavendish knew for certain no later than the load taken and sampled on February 28, 2006, that it would not take these potatoes. Urquhart [Cavendish’s employee] referred to the load as ‘disastrous’, and he ‘made the decision that, you know what, we’re fighting a losing battle here and we’re not able to take these potatoes.’ Even with this conclusion he still did not reject the potatoes until his email to Moe on March 31, followed by his formal letter of rejection dated April 3.
“90. Good faith in a contract is defined as ‘honesty in fact and the observance of reasonable commercial standards of fair dealing.’ N.D.C.C. § 41-01-09(2)(t).
“91. Urquhart was aware of the consequences to the growers if potatoes are rejected for processing. He testified that he realizes ‘the financial hardship these growers have when their potatoes are rejected.’ He was also aware that the potatoes still had value if rejected. Urquhart acknowledged that Valley View and Mathiason could not market the potatoes to another processor until he released them from the contracts, that he was aware that the soft rot was getting worse in storage, and that the possibility of the potatoes being sold to another processor was getting worse every day.
“92. Urquhart was aware that the potatoes, in the condition they were in when he knew Cavendish would not be taking them, still had value to the growers. He testified, ‘when you dump potatoes on the market at this quality, you know, as opposed to getting the four seventy he would have gotten from us, he may have gotten $2.00 at a flake factory or something.’
“93. Cavendish was aware of the financial hardship to the growers if the potatoes were rejected, and was aware that some financial hardship could be avoided by marketing the potatoes elsewhere if rejected.
“94. Reasonable commercial standards of fair dealing required Cavendish to release the potatoes when it knew it would not take the potatoes while that other market was available.”
The court ultimately concluded that Cavendish “did not act in good faith in the performance of the contract.”
[¶17] Findings of fact will not be disturbed on appeal unless they are clearly erroneous.
Marsden v. Koop
, 2010 ND 196, ¶ 8, 789 N.W.2d 531. “A finding of fact is clearly erroneous only if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, after review of the entire record, we are left with a definite and firm conviction a mistake has been made.”
Helfenstein v. Schutt
, 2007 ND 106, ¶ 14, 735 N.W.2d 410 (quoting
Wilson v. Ibarra
, 2006 ND 151, ¶ 9, 718 N.W.2d 568). The district court’s findings of fact are supported by the record and are not clearly erroneous.
E
[¶18] We conclude the district court did not err in finding Cavendish breached the 2005 contracts.
III
[¶19] Cavendish contends the district court’s award of damages was based upon mere speculation and was contrary to the evidence presented.
[¶20] We have outlined our standards for reviewing a district court’s determination of damages for a breach of contract:
“A trial court’s determination of the amount of damages caused by a breach of contract is a finding of fact subject to the clearly erroneous standard of review. ‘We do not reverse the trial court’s factual findings merely because we may view the evidence differently, and a choice between two permissible views of the weight of the evidence is not clearly erroneous.’
Krank v. Krank
, 2003 ND 146, ¶ 6, 669 N.W.2d 105. ‘In reviewing findings of fact, we give due regard to the trial court’s opportunity to assess the credibility and observe the demeanor of the witnesses.’
Wagner v. Wagner
, 2000 ND 132, ¶ 12, 612 N.W.2d 555. We view the evidence in the light most favorable to the findings, and we do not reweigh evidence or reassess credibility if there is evidence to support the trial court’s findings.”
Keller v. Bolding
, 2004 ND 80, ¶ 22, 678 N.W.2d 578 (citations omitted). “We will sustain an award of damages when it is within the range of evidence presented.”
Westby v. Schmidt
, 2010 ND 44, ¶ 18, 779 N.W.2d 681.
[¶21] Two witnesses testified regarding the value of the Growers’ potatoes in late February, when Cavendish knew it would not accept the potatoes but failed to release them for sale to other buyers. Mark Urquhart, the raw procurement manager of Cavendish’s Jamestown precessing plant, testified he had many years of experience in the potato industry, including knowledge of raw potato quality standards and negotiation of grower agreements. He had personally inspected the Growers’ potatoes and was familiar with their condition in February 2006. He testified that potatoes “at this quality” may have been worth $2 per hundredweight at a flake factory. Robert Moe, the owner and operator of Valley View Farms, testified that the Growers had 50,000 hundredweight of potatoes in storage on March 1, 2006 and that they were worth $3 per hundredweight. The district court found the Growers had suffered damages of $2 per hundredweight caused by Cavendish’s failure to timely reject the potatoes, resulting in damages of $50,000 for each of the Growers.
[¶22] Cavendish does not challenge the competency of Urquhart or Moe to testify as to the value of the potatoes. The district court heard the testimony and assessed the credibility of the witnesses. The amount of damages awarded, calculated at $2 per hundredweight for 50,000 hundredweight of potatoes, lies within the range of the evidence presented at trial through the testimony of competent witnesses. We conclude the district court’s findings of fact on damages are not clearly erroneous.
IV
[¶23] On their cross-appeal, the Growers contend the district court erred in finding that they breached the contracts and that Cavendish was entitled to recover the advance payments it made in November 2005.
A
[¶24] The Growers contend that, even though they admittedly did not provide usable potatoes as required by the contracts, their performance was excused by a contract provision requiring Cavendish to accept less than the full contracted amount. That provision states:
“Cavendish Farms Inc. will accept less than the full ‘contracted cwt.’ When growing conditions or storage cause substantial loss of the crop; provided, Cavendish Farms Inc. is satisfied that Grower exhausted all reasonable alternative means to meet its obligations in full. Cavendish Farms Inc. rejection of ‘contracted potatoes’ does not excuse grower from fulfilling this agreement in full with potatoes, which are acceptable to Cavendish Farms Inc.”
[¶25] The Growers have construed this provision much too broadly. It merely requires Cavendish to take acceptable potatoes from the contracted fields even if the Growers cannot provide the full 25,000 hundredweight each from those fields. In effect, it prevents Cavendish from treating the contract as “all or nothing” and refusing to accept
any
of the Growers’ potatoes unless they can provide the full contracted amount. This provision does not excuse the Growers’ failure to fully perform the contract or prevent Cavendish from seeking damages for breach if the Growers fail to provide the contracted amount of usable potatoes. The final sentence of this provision clarifies that the Growers are not excused “from fulfilling this agreement in full” with acceptable potatoes if Cavendish rejects some of the “contracted potatoes.”
[¶26] The district court did not err in finding that the Growers breached the 2005 contracts by failing to provide any usable potatoes.
B
[¶27] The Growers contend that, even if they did breach the contracts by failing to provide usable potatoes, Cavendish was not entitled to recover its advance payments.
[¶28] The Growers argue that “there is no provision in the 2005 contract providing
any
basis for the return of the advance payments, under any circumstances whatsoever.” The contracts provide, however, that the advance payments are a prepayment of part of the purchase price of the potatoes and are to be factored in when calculating the final balance due when all potatoes have been delivered and accepted. The Growers are clearly required to grow and deliver potatoes meeting the contract specifications before they are entitled to retain any part of the purchase price, including the advance payments. The Growers have not posited any persuasive legal argument supporting their claim that they are entitled to retain a portion of the purchase price despite their failure to provide any usable potatoes under the contract.
[¶29] The Growers also contend they are entitled to recover their contractual storage costs for the potatoes, and those amounts offset the amount of the November advance payments. The contract does include provisions requiring payment of storage costs to the Growers. Those costs, however, are to be paid based upon the date potatoes are “accepted into the processing plant” and are “determined by the usable weight delivered.” The contract clearly conditions Cavendish’s obligation to pay storage costs upon the potatoes ultimately being accepted and “usable” under the contract. The Growers did not provide “acceptable” or “usable” potatoes meeting the quality standards under the contract, and Cavendish therefore did not owe storage costs for the unacceptable potatoes.
C
[¶30] The district court did not err in determining that the Growers breached the 2005 contracts and that Cavendish was entitled to recover its advance payments made to the Growers.
V
[¶31] We have considered the remaining issues and arguments raised by the parties and find them to be either unnecessary to our decision or without merit. The judgments are affirmed.
[¶32] Daniel J. Crothers
Mary Muehlen Maring
Richard L. Hagar, D.J.
Donovan John Foughty, D.J.
Gerald W. VandeWalle, C.J.
[¶33] The Honorable Donovan John Foughty, D.J., and Richard L. Hagar, D.J., sitting in place of Sandstrom, J., and Kapsner, J., disqualified.
FOOTNOTES
1:The parties had also contracted for the sale of potatoes in 2004. The disputes arising from the 2004 contracts are not before this Court on appeal.
2:The parties and the district court throughout this litigation have applied the current version of N.D.C.C. tit. 41, which was broadly amended in 2007.
See
2007 N.D. Sess. Laws ch. 354. We therefore will also apply the current statutory provisions.
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11TH COURT OF APPEALS
EASTLAND, TEXAS
JUDGMENT
Jeremy Paul Paz, * From the 358th District
Court of Midland County,
Trial Court No. CR38102.
Vs. No. 11-12-00113-CR * February 6, 2014
The State of Texas, * Memorandum Opinion by Willson, J.
(Panel consists of: Wright, C.J.,
Willson, J., and Bailey, J.)
This court has inspected the record in this cause and concludes that there is
no error in the judgment below. Therefore, in accordance with this court’s
opinion, the judgment of the trial court is in all things affirmed.
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"pile_set_name": "FreeLaw"
} |
Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
02/28/2020 08:06 AM CST
- 23 -
Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
DH-1, LLC, a Nebraska limited liability
company, et al., appellants, v. City of
Falls City, Nebraska, appellee.
___ N.W.2d ___
Filed February 14, 2020. No. S-19-039.
1. Summary Judgment: Appeal and Error. An appellate court affirms a
lower court’s grant of summary judgment if the pleadings and admitted
evidence show that there is no genuine issue as to any material facts or
as to the ultimate inferences that may be drawn from the facts and that
the moving party is entitled to judgment as a matter of law.
2. ____: ____. In reviewing a summary judgment, an appellate court views
the evidence in the light most favorable to the party against whom the
judgment was granted, and gives that party the benefit of all reasonable
inferences deducible from the evidence.
3. Contracts. The interpretation of a contract and whether the contract is
ambiguous are questions of law subject to independent review.
4. Standing: Jurisdiction. The question whether a party has standing is
jurisdictional and may be raised at any time.
5. Contracts: Attorney and Client. The construction of contracts between
attorneys and their clients as to compensation is to be governed by the
usual rules relating to the construction of agreements generally.
6. Contracts. A contract written in clear and unambiguous language is not
subject to interpretation or construction and must be enforced according
to its terms.
7. Contracts: Words and Phrases. A contract is ambiguous when a word,
phrase, or provision in the contract has, or is susceptible of, at least two
reasonable but conflicting interpretations or meanings.
8. Contracts. A determination as to whether an ambiguity exists in a
contract is to be made on an objective basis, not by the subjective
contentions of the parties; thus, the fact that the parties have suggested
opposite meanings of a disputed instrument does not necessarily compel
the conclusion that the instrument is ambiguous.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
9. ____. Where a contract is found to be ambiguous, it is construed against
the drafter.
10. Contracts: Appeal and Error. An appellate court will not rewrite a
contract to provide terms contrary to those which are expressed. Nor is
it the province of a court to rewrite a contract to reflect the court’s view
of a fair bargain.
11. Contracts: Unjust Enrichment: Quantum Meruit. A claim that a
court should imply a promise or obligation to prevent unjust enrichment
goes by a number of names—“quasi-contract,” “implied-in-law con-
tract,” or “quantum meruit.”
12. Contracts. An express contract claim supersedes a quasi-contract claim
arising out of the same transaction to the extent that the contract covers
the subject matter underlying the requested relief.
13. ____. In the situation where both a contract claim and a quasi-contract
claim are alleged, a court should address the contract claim first.
Appeal from the District Court for Lancaster County: Susan
I. Strong, Judge. Affirmed.
J.L. Spray and Patricia L. Vannoy, of Mattson Ricketts Law
Firm, for appellants.
Michael R. Dunn, of Halbert, Dunn & Halbert, L.L.C., for
appellee.
Miller-Lerman, Cassel, Stacy, Funke, Papik, and
Freudenberg, JJ.
Freudenberg, J.
INTRODUCTION
This case presents the interpretation of a contingent fee for
legal services between the City of Falls City, Nebraska (Falls
City), and two law firms—Houghton Bradford Whitted, PC,
LLO, and Weaver & Merz, a partnership. The district court
concluded that no fees were due under the agreement or on the
firms’ equitable claim and accordingly dismissed the actions.
The law firms and DH-1, LLC, the organization to which
the firms had assigned their rights under the fee agreement,
appealed. We refer to the law firms and DH-1 collectively as
“the firms.” We affirm.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
BACKGROUND
Underlying Litigation.
This is the third appearance before this court by Falls City in
relation to the underlying litigation. We set forth the facts of the
underlying organizations—the Nebraska Municipal Power Pool
(NMPP), the Municipal Energy Agency of Nebraska (MEAN),
the National Public Gas Agency (NPGA), the American Public
Energy Agency (APEA), and the Central Plains Energy Project
(CPEP)—and the underlying litigation in our first opinion,
decided in 2010:
NMPP was created in 1975 as a nonprofit corporation
with the purpose of idea generation, research, analysis,
administration, and the creation of other entities to carry
out these activities. NMPP has a 16-member board of
directors made up of representatives from the participat-
ing municipalities. Falls City is a member of NMPP.
The first entity created by NMPP in 1981 was [MEAN]
. . . . NMPP created MEAN in order to obtain effi-
cient sources of electricity for participating communities.
[NPGA] was created in 1991 by NMPP in order to secure
natural gas for the participating municipalities. . . . NPGA
is governed by a board of directors made up of a repre-
sentative from each of the NPGA-member municipalities,
including Falls City. Both MEAN and NPGA require their
members to also be members of NMPP.
NMPP provides all the strategic planning and staffing
services for NPGA and MEAN. Other than an executive
director, who is employed jointly by NPGA and MEAN,
neither organization has employees. NMPP’s budgeting
process is administered through a joint operating com-
mittee, which consists of representatives from NMPP,
NPGA, and MEAN. At the beginning of each year, the
amount of time each NMPP employee will devote to a
particular organization is estimated and expenses are then
allocated among the organizations.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
In 1995, NMPP, NPGA, and MEAN created APEA,
another interlocal agency. APEA was intended to finance
bonds through which natural gas was purchased. APEA
remained separate from the joint operating committee
and had its own staff, but sometimes utilized NMPP staff
for various projects.
APEA issued bonds and purchased gas through a series
of “prepays.” A prepay involves the purchase of a large
supply of natural gas to be delivered in the future. The
goal is to purchase a large amount of natural gas at a
lower price than index, or market, price. The bonds used
to pay for the gas are tax exempt as long as municipal
entities purchase the gas later. As the gas is delivered and
paid for by the end user, the proceeds are used to repay
the principal and interest on the bonds.1
The complaint filed by Falls City against NMPP, CPEP,
and several individual defendants alleged breach of contract,
breach of fiduciary duty, and conspiracy to cause injury to
Falls City and others. As relevant, the district court found
in favor of Falls City in the amount of $628,267.90. In
our 2010 opinion, we reversed the district court’s award of
damages to Falls City on the ground that Falls City lacked
standing.2 The parties again appeared in 2011, this time with
respect to the order on costs assessed against Falls City.3
Upon remand, the district court entered an order assessing 22
percent of the costs to Falls City, which this court affirmed.
The appeal now before us deals with a fee dispute between
Falls City and the attorneys representing Falls City in the
prior litigation.
1
City of Falls City v. Nebraska Mun. Power Pool, 279 Neb. 238, 240-41,
777 N.W.2d 327, 330-31 (2010).
2
City of Falls City v. Nebraska Mun. Power Pool, supra note 1.
3
City of Falls City v. Nebraska Mun. Power Pool, 281 Neb. 230, 795
N.W.2d 256 (2011).
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
Fee Agreement.
On November 20, 2006, Falls City and the firms entered
into the contingency fee agreement now at issue in this appeal.
As relevant, that agreement provided that Falls City retained
the firms
for the prosecution of any claims that Falls City may
have and any claims Falls City may pursue on behalf of
MEAN, NPGA, NMPP or any of their members includ-
ing those who might join in the prosecution of these
claims individually or by virtue of a class action or who
might benefit from any common fund created, discovered,
increased, preserved or protected or property to which
they may have a claim, against any person or entity
thought to be responsible for damages sustained as a
result of actions by NMPP, its employees or CPEP.
For this work, the firms were entitled to “$15,000.00 as
an Initial Fee” and a “contingent fee based upon the follow-
ing schedule: (a) 40% of all amounts recovered by settlement
or verdict which is not appealed; or, (b) 50% of all amounts
recovered in the event of an appeal of a verdict by any party
involved in the lawsuit.” The agreement indicates that it applied
to “relief in addition to, or in lieu of, an immediate monetary
benefit, but which relief has a calculable present value”; “secu-
rities, or other non-cash assets”; “or[,] if the settlement of this
case is made by a structured settlement[,] . . . the present value
of the settlement.”
While the action filed against NMPP and others proceeded
in district court, APEA, NPGA, and MEAN entered into an
agreement on February 26, 2007, which dissolved and restruc-
tured APEA and equitably distributed its assets. NPGA and
MEAN withdrew from APEA, with the withdrawal agreement
dividing the $23.1 million held by APEA between NPGA
and MEAN. NPGA received $9.8 million. Though Falls City
was not a party to the withdrawal agreement, as a member of
NPGA it received $1,567,570.02. Thereafter, Falls City elected
to become a direct member of APEA.
- 28 -
Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
The firms sought payment under the contingency fee agree-
ment, based upon the funds Falls City received pursuant to
the withdrawal agreement and improved equity positions in
the various organizations, but Falls City declined to pay. The
firms then assigned their claims to DH-1, which filed suit on
January 14, 2015, for the fee under the contingency agree-
ment. Eventually, a second amended complaint was filed which
joined the firms for purposes of their equitable claims. In total,
the firms sought $1,487,785.60 consisting of (1) a $627,028
fee from the APEA distribution, (2) $564,197.60 as a fee for
Falls City’s interest in the APEA, (3) $40,000 for the increase
in Falls City’s equity interest in NPGA, and (4) $256,560 for
the value of the “Agreement for Termination of Participation of
Members, Distribution of Funds to Members, and for Complete
Settlement, Mutual Releases and Covenants” entered into
between MEAN, NPGA, and APEA.
On October 10, 2017, the district court granted Falls City’s
motion for summary judgment as to the claims under the
fee agreement, concluding that the contingency under the fee
agreement was not met and that thus, the firms were not enti-
tled to a fee under the agreement. The district court also held
that DH-1’s standing was limited to legal rights under the fee
agreement and that it had “no equitable rights to assert against
Falls City.” However, the district court granted DH-1’s motion
to file a second amended complaint. DH-1 did so, adding the
firms as parties to the litigation.
At a hearing on December 21, 2018, ostensibly held with
regard to Falls City’s motion to compel, Falls City orally
moved for summary judgment. The firms waived notice, and
a hearing was held at which evidence was offered. The district
court granted the motion for summary judgment and dismissed
the complaint.
ASSIGNMENTS OF ERROR
The firms assign that the district court erred in dismissing
both their contract and equitable claims.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
STANDARD OF REVIEW
[1,2] An appellate court affirms a lower court’s grant of
summary judgment if the pleadings and admitted evidence
show that there is no genuine issue as to any material facts
or as to the ultimate inferences that may be drawn from the
facts and that the moving party is entitled to judgment as a
matter of law.4 In reviewing a summary judgment, an appel-
late court views the evidence in the light most favorable to the
party against whom the judgment was granted, and gives that
party the benefit of all reasonable inferences deducible from
the evidence.5
[3] The interpretation of a contract and whether the con-
tract is ambiguous are questions of law subject to indepen-
dent review.6
ANALYSIS
Statute of Limitations and Standing.
Before reaching the substantive issues presented by this
appeal, we turn to Falls City’s arguments regarding the statute
of limitations and standing.
Falls City argues that the district court erred in not rul-
ing that the statute of limitations had run on all of the firms’
claims. But Falls City failed to file a cross-appeal on this issue,
and therefore, such issue is not properly before us, which pre-
vents us from reaching it.7
[4] Falls City’s argument regarding standing is different
in that the question whether a party has standing is jurisdic-
tional and may be raised at any time.8 Specifically, Falls City
argues that the firms have assigned, at least, their legal claims
to DH-1, which Falls City argues is an unlicensed collection
4
Williamson v. Bellevue Med. Ctr., 304 Neb. 312, 934 N.W.2d 186 (2019).
5
Id.
6
Wintroub v. Nationstar Mortgage, 303 Neb. 15, 927 N.W.2d 19 (2019).
7
See In re Estate of Graham, 301 Neb. 594, 919 N.W.2d 714 (2018).
8
See Hawley v. Skradski, 304 Neb. 488, 935 N.W.2d 212 (2019).
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
agency and as a result lacks standing. We disagree. The record
shows that the firms assigned their claims to DH-1. That
assignment was not challenged below. As the assignee, DH-1
is the real party in interest and has standing to bring suit in
this case.9
We disagree with Falls City’s argument to the contrary.
Recovery Under Fee Agreement.
[5-8] We now turn to the firms’ argument that, contrary to
the district court’s conclusion, they were entitled to a fee under
the contingency fee agreement. The construction of contracts
between attorneys and their clients as to compensation is to
be governed by the usual rules relating to the construction of
agreements generally.10 A contract written in clear and unam-
biguous language is not subject to interpretation or construc-
tion and must be enforced according to its terms.11 A contract
is ambiguous when a word, phrase, or provision in the contract
has, or is susceptible of, at least two reasonable but conflicting
interpretations or meanings.12 A determination as to whether
an ambiguity exists in a contract is to be made on an objective
basis, not by the subjective contentions of the parties; thus,
the fact that the parties have suggested opposite meanings of a
disputed instrument does not necessarily compel the conclusion
that the instrument is ambiguous.13
[9,10] Where a contract is found to be ambiguous, it is con-
strued against the drafter.14 This court will not rewrite the con-
tract to provide terms contrary to those which are expressed.
9
See Neb. Rev. Stat. §§ 25-301 and 25-302 (Reissue 2016). See, also,
Hawley v. Skradski, supra note 8.
10
7A C.J.S. Attorney & Client § 457 (2019).
11
Meyer Natural Foods v. Greater Omaha Packing Co., 302 Neb. 509, 925
N.W.2d 39 (2019).
12
Id.
13
Id.
14
See Beveridge v. Savage, 285 Neb. 991, 830 N.W.2d 482 (2013).
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
Nor is it the province of a court to rewrite a contract to reflect
the court’s view of a fair bargain.15
To support their argument that they are entitled to a fee
under the agreement, the firms note that the fee agreement
was broad both because it covered the “prosecution of any
claims that Falls City may have and any claims Falls City
may pursue” on behalf of a myriad of organizations or mem-
bers of those organizations and because it included language
allowing a fee to be recovered on the “receipt of securities, or
other non-cash assets,” or on the present value of a structured
settlement.
The firms further contend that the district court erred in
limiting the terms “prosecution,” “verdict,” and “settlement”
to the context of formal litigation and that Falls City received
benefits because of the underlying litigation even though Falls
City did not ultimately obtain a verdict or settlement with the
defendants in that litigation.
We find no error in the decision of the district court. Our
analysis begins with the plain language of the opening para-
graph of the parties’ fee agreement. That agreement, which
was entered into in November 2006, states that the firms
were retained to pursue claims “against any person or entity
thought to be responsible for damages sustained as a result
of actions by NMPP, its employees or CPEP.” In addition to
setting forth the 40- to 50-percent contingency fee owed in
the event of recovery, the agreement also notes that the firms
are entitled to “$15,000.00 as an Initial Fee . . . for the initial
investigation . . . and drafting of the Complaint.” It also states
that the firms were employed to “prosecute such claims and
assign to them a lien against all amounts recovered by settle-
ment or otherwise in connection with this litigation” (empha-
sis supplied).
When read together, this language plainly envisions the
agreement’s applying to the litigation as set forth in the
15
Meyer Natural Foods v. Greater Omaha Packing Co., supra note 11.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
complaint filed against NMPP, CPEP, and others alleging
breach of contract, breach of fiduciary duty, and conspiracy to
cause injury to Falls City and others. By contrast, the agree-
ment did not encompass other services the firms might provide
to Falls City.
The firms assert that the withdrawal agreement is within
the consideration of the agreement. However, the firms have
failed to establish what work they completed with regard to
the withdrawal agreement and how such work would bring the
withdrawal agreement within the parameters of the agreement’s
delineated list of claims. Therefore, since no recoverable ver-
dict or settlement occurred from the specified claims set forth
in the agreement, the contingency has not been met requiring
the payment of a fee.
There is no merit to the firms’ claim that they were entitled
to a fee under the agreement.
Recovery Under Equitable Principles.
[11] The firms also assign that the district court erred in
granting summary judgment in favor of Falls City on its equi-
table claims. A claim that a court should imply a promise or
obligation to prevent unjust enrichment goes by a number of
names—“quasi-contract,” “implied-in-law contract,” or “quan-
tum meruit.”16 Such claims do not arise from an express or
implied agreement between the parties; rather, they are imposed
by law “‘when justice and equity require the defendant to dis-
gorge a benefit that he or she has unjustifiably obtained at the
plaintiff’s expense.’”17
[12] Unjust enrichment or quasi-contract claims are viable
only in limited circumstances. For example, “‘[t]he terms of an
enforceable agreement normally displace any claim of unjust
16
Bloedorn Lumber Co. v. Nielson, 300 Neb. 722, 915 N.W.2d 786 (2018).
17
Id. at 729, 915 N.W.2d at 792, quoting City of Scottsbluff v. Waste
Connections of Neb., 282 Neb. 848, 809 N.W.2d 725 (2011).
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
enrichment within their reach.’”18 Put another way, an express
contract claim will supersede a quasi-contract claim arising out
of the same transaction to the extent that the contract covers
the subject matter underlying the requested relief.19
[13] Though contract claims supersede unjust enrichment or
quasi-contract claims, a plaintiff is permitted to allege both.20
We have said that when a plaintiff does so, a court should
address the contract claim first.21
In this case, there was a contract, the contingency fee agree-
ment, which expressly covered the litigation against NMPP.
This agreement superseded the equitable claims to the extent of
that contract. Thus, the issue presented is what work not cov-
ered by the fee agreement remains unpaid. There is no dispute
that the firms would be entitled to compensation for work done
on matters not covered by the fee agreement.
Additional factual background is helpful to analyzing this
issue. During the course of this litigation, the parties had
engaged in discovery. As relevant, Falls City sought infor-
mation regarding services provided by the firms, including
“[w]hether the service provided related to the withdrawal
agreement[, the] membership agreement[,] or some other serv
ice the [firms] claim to have provided not covered by the
contingency fee agreement.” To Falls City’s interrogatory, the
firms responded as follows:
The firm[s were] retained by [Falls] City to represent
[Falls] City and its related entities in efforts to protect
their interests and those of other community members of
NMPP, MEAN and NPGA in [APEA,] which at the time
18
City of Scottsbluff v. Waste Connections of Neb., 282 Neb. at 860, 809
N.W.2d at 740, quoting Restatement (Third) of Restitution and Unjust
Enrichment § 2, comment c. (2011).
19
Bloedorn Lumber Co. v. Nielson, supra note 16.
20
Id.
21
Id.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
was holding funds in excess of $20 Million and had valu-
able, proprietary, and profitable business interests. The
firm[s were] to file a legal action against individuals and
entities attempting to take APEA’s assets and business.
There was no “contingency fee agreement” when the
firm[s were] initially retained by [Falls] City. After the
firm[s] filed the action and [were] in the midst of discov-
ery, [Falls] City . . . requested that the firm[s] proceed on
a “contingency fee agreement.” At all times, the scope of
the engagement covered all efforts exerted by the firm[s]
for a percentage of all benefits derived from the attorney-
client relationship.
According to various motions to compel filed by Falls
City, counsel attempted to clarify or get the firms to supple-
ment this answer, but the firms stated they had no further
answer. Following a hearing, Falls City’s motion to compel
was granted, with the district court’s order noting:
[Falls City] seek[s] to have [the firms] specify what serv
ices were provided or what hours were spent outside the
contingency fee agreement for which they have not yet
been compensated (under any other agreement) and for
which . . . Falls City received a benefit. Whether [the
firms] can recover under an implied contract or other
equitable theory of relief depends on whether they can
show that they performed some services for the benefit of
[Falls City] such that [Falls City] should be made to pay
the reasonable value of those services. See Sorenson v.
Dager, 8 Neb. App. [729], 601 N.W.2d 564 (1999). [The
firms] have a duty to comply with the discovery requests
by going through their time records and specifying such
services. It was not sufficient for [the firms] to simply
direct [Falls City] to hundreds of time records which have
already been produced, especially if most of those serv
ices were expended in performance of the contingency
fee agreement.
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
DH-1, LLC v. CITY OF FALLS CITY
Cite as 305 Neb. 23
The firms were given 30 days to supplement their answers.
No supplementation occurred, and Falls City filed another
motion to compel. That motion was converted, with the agree-
ment of all parties, to Falls City’s motion for summary judg-
ment, which was granted, dismissing the firms’ equitable
claims.
For Falls City to obtain such relief as the defendant in this
litigation, Falls City had to show that if this case proceeded to
trial, the firms’ equitable claims would not have been success-
ful, and that Falls City was entitled to judgment.22 Falls City
did so by first relying on case law that showed that equitable
claims based on actions which were covered by the contingency
fee agreement should be determined under legal principles and
not under equity. Given this, the only claims remaining could
be those claims not covered by the contingency agreement.
Because the firms, in their answers to interrogatories, declined
to set forth any work they completed on behalf of Falls City
outside of the contingency fee agreement, Falls City met its
burden and was entitled to summary judgment.
There is no merit to the firms’ equitable claim.
CONCLUSION
The decision of the district court is affirmed.
Affirmed.
Heavican, C.J., not participating.
22
See Williamson v. Bellevue Med. Ctr., supra note 4.
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11 Ariz. App. 211 (1969)
463 P.2d 106
STATE of Arizona, Appellee,
v.
Franklin B. STREETT, Appellant.
Nos. 2 CA-CR 185, 2 CA-CR 186, 2 CA-CR 191.
Court of Appeals of Arizona. Division 2.
December 30, 1969.
*212 Gary K. Nelson, Atty. Gen., Phoenix, by Carl Waag, Asst. Atty. Gen., for appellee.
Rees, Estes & Browning, by H.W. Howard, Tucson, for appellant.
KRUCKER, Chief Judge.
Because of the identity of questions presented in these three appeals, this court, upon the defendant's motion, ordered consolidation for all purposes. In fact, Nos. 2 CA-CR 185 and 186 were consolidated for trial below, resulting in convictions for both offenses charged: (1) obtaining money by false pretenses or confidence game, and (2) theft by embezzlement. In a separate trial, defendant was found guilty of the crime of forgery. All three charges arose out of the defendant's conduct while employed as an automobile salesman for Pueblo Ford, a Tucson, Arizona car dealer.
The defendant was represented by court-appointed counsel at all stages of the respective proceedings below. On appeal, however, he is represented by another appointed counsel who has examined the record in all the cases and has concluded that the appeals therefrom are wholly frivolous. He has filed a motion for permission to withdraw as counsel and in compliance with Anders v. State of California, 386 U.S. 738, 87 S.Ct. 1396, 18 L.Ed.2d 493 (1967), filed a brief enumerating those points which "might arguably support an appeal." The defendant was furnished a copy of counsel's brief and its accompanying affidavit and was informed therefrom of counsel's belief that the appeals were frivolous. Counsel also forwarded to him the entire available record. Thus, the procedure followed by appellate counsel comports with that approved by the Arizona Supreme Court in State v. Leon, 104 Ariz. 297, 451 P.2d 878 (1969) and his motion to withdraw is granted.
We afforded the defendant an opportunity to file a brief in his own behalf. He has done so, in substance reiterating the "arguable errors" and in addition, he attacks the fairness of his trial and the adequacy of his representation by counsel.
Briefly, the evidence in support of the respective convictions is as follows. As to the embezzlement charge, it arose out of a transaction between the defendant and a couple with whom he dealt in the course of his employment. This couple, after discussion with the defendant, signed an agreement to purchase a new vehicle. They gave him a check as down payment and left the payee's name blank at the defendant's suggestion. He told them that Pueblo Ford's name would be inserted by the cashier. Subsequently, however, the defendant's name was written in as payee without the authorization of the makers. Later the same day on which the sales agreement was signed and the check issued, the purchasers returned to Pueblo Ford for purposes of rescinding the transaction and procuring their check. They were unable to contact the defendant as he had left *213 for the day and were informed that no papers of any kind concerning their transaction were in the office. Two days later, the defendant contacted the couple by phone and they agreed to purchase the same type of car, with a smaller engine. The check which the couple had given to the defendant as a deposit was cashed by him instead of being paid to Pueblo Ford.
As to the obtaining money by false pretenses or confidence game charge, this too arose out of purchase negotiations with a customer. The defendant was given a down payment check made out to Pueblo Ford by the customer. The following day, he advised the customer that the check had been accidentally torn and he had deposited his own money with Pueblo Ford. He asked the customer to give him a new check payable to him. The customer complied with this request but in fact, at that point in time the defendant had made no deposit of his own funds on behalf of the customer. It was contrary to company regulations for deposit checks to be made out to salesmen or for salesmen to retain any deposit money.
As indicated above, the forgery charge was tried separately. It arose out of the defendant's negotiations with another couple for their purchase of a new car. The couple signed a written purchase agreement and gave defendant a deposit check made out to Pueblo Ford. The next day defendant telephoned the wife, informing her that the check was torn and that the bank would not accept it in a mutilated condition. He asked if he could make out a new check, but she told him that he could not. The State introduced into evidence a counter check, dated the day following this telephone conversation, made payable to the defendant. This check bore the purported signature of the customer-husband (it was not in fact his signature) and the check was cashed by the defendant. When the couple received their monthly bank statement, which included the cancelled check, payment was stopped on the torn check. The customer-husband testified to a conversation with the defendant:
* * * * * *
"Q And was there any conversation regarding the check that you had made payable to him?
A Yes, there was.
Q And what was that?
A I told him that I wanted that check and that I would write him out another check for the amount, inasmuch as he would give me the cancelled check, and at that time he we were talking there and then he said he wanted the check made out to his name, and I told him that I was dealing with Pueblo Ford and that I wasn't going to write the check out to his name, and he then told me that the reason he wanted it made out to his name was due to the fact that he had put his name on the check here, and the bank had refused to cash it, and therefore, he tore it up."
It was not until the day after this conversation that the defendant deposited to the customer's account with Pueblo Ford a cash sum equivalent to the customer's deposit check.
In all three cases defendant challenges the trial court's refusal to grant his pre-trial motion for an order directing Pueblo Ford "to furnish counsel for defendant with the names and addresses of each and every person who has purchased a vehicle from Pueblo Ford Inc. during the month of July through December, 1968." The motion further recited:
"The defense in this case will be based on the lack of criminal intent by defendant at the time he committed the acts alleged to be crimes. In order to establish this defense it is essential that purchasers of vehicles at Pueblo Ford Inc. be subpoenaed for the trial. The defense has no way of ascertaining the names and addresses of these prospective witnesses except through Pueblo Ford Inc."
*214 Pueblo Ford, in its response to the motion, stated in part:
"It is respondent's position that this works a grave hardship on it to make available to defendant such records as during this period of time it sold approximately 850 motor vehicles at its business. It has the individual records of each of such sales. It does not have any compilation of the names and addresses of purchasers."
In this jurisdiction, a defendant's right to discovery and inspection is prescribed by Rule 195, Rules of Criminal Procedure, 17 A.R.S.:
"Upon motion of a defendant at any time after the filing of the indictment or information, the court may order the county attorney to permit the defendant to inspect and copy or photograph designated books, papers, documents or tangible objects, obtained from or belonging to the defendant or obtained from others by seizure or by process, upon a showing that the items sought may be material to the preparation of his defense and that the request is reasonable. The order shall specify the time, place and manner of making the inspection and of taking the copies or photographs and may prescribe such terms and conditions as are just."
Our Supreme Court has pointed out that this rule does not inhibit a trial court, in the exercise of its inherent power, to permit discovery beyond the scope of the rule when essential to the administration of justice. State ex rel. Polley v. Superior Court, 81 Ariz. 127, 302 P.2d 263 (1956); State ex rel. Corbin v. Superior Court, 103 Ariz. 465, 445 P.2d 441 (1968). This "fundamental fairness" doctrine, i.e., affording a defendant a reasonable opportunity to prepare his defense, has been enunciated in situations where disclosure of the prosecution's case has been sought. Here, however, the requested inspection was directed to things in the possession of a third person.
The discovery available to a party in civil litigation is not equally available in criminal proceedings. State ex rel. Mahoney v. Superior Court, 78 Ariz. 74, 275 P.2d 887 (1954). In the federal hierarchy, discovery and inspection of items not within the possession, custody or control of the prosecution is not allowed. United States v. Birrell, 276 F. Supp. 798 (S.D.N.Y. 1967); United States v. Kaskel, 18 F.R.D. 477 (E.D.N.Y. 1956). Some state courts, however, interpret the "inherent power" of the trial court to include an order for production of books and records of a third person. See, e.g., State v. Wilde, 214 La. 453, 38 So.2d 72 (1948), cert. den. 337 U.S. 932, 69 S.Ct. 1484, 93 L.Ed. 1739; Townsend v. City of Helena, 244 Ark. 228, 424 S.W.2d 856 (1968); State v. Boutsikaris, 69 N.J. Super. 601, 174 A.2d 653 (1961). The last case cited points out that the defendant must show that the inspection would reasonably tend to lead to discovery of relevant evidence and recognizes that undue hardship to the inspectee would justify denial of inspection. In Townsend v. City of Helena, supra, the court required a prerequisite showing that the defendant could not obtain the sought-after records himself.
Here, Pueblo Ford asserted a claim of "undue hardship" in that there was no written compilation of purchasers' names and in order to obtain the names of the 850 purchasers of vehicles during the six-month period access to various records was required. Furthermore, defendant neither demonstrated that he could not obtain this information without such inspection nor that the inspection was reasonably calculated to lead to the discovery of relevant evidence. Even if the requested inspection is within the ambit of the trial court's inherent power, we cannot say that its denial of the defendant's motion constituted an abuse of discretion absent a minimal showing by the defendant of "exceptional circumstances." State ex rel. Corbin v. Superior Court, 6 Ariz. App. 414, 433 P.2d 65 (1967).
*215 The defendant contends, for numerous reasons, that the trial court erred in not granting him a new trial as to all the charges.[1] In substance, he complains that he was not afforded fair trials because of lack of an impartial jury, an illegal search and seizure, lack of adequate counsel, and lack of a "fair" judge in the joint trial.
As to the jury, the defendant complains that it was composed of only one man and eleven women, that the man was biased because of his employment and because he had been a victim of a crime similar to one with which the defendant was charged; that one of the women jurors knew a member of the County Attorney's office; and that during the course of the forgery trial one of the jurors had read a newspaper account of the defendant's convictions of embezzlement and obtaining by false pretenses. We summarily dispose of all contentions with regard to the composition of the jury as showing no grounds for reversal in that no showing of actual prejudice has been demonstrated. State v. Webb, 101 Ariz. 307, 419 P.2d 91 (1966); People v. Hess, 104 Cal. App.2d 642, 234 P.2d 65 (1951); Wilson v. State, Okl.Cr., 458 P.2d 315 (1969).
Equally without merit is the "illegal search and seizure" argument for the reason that no evidence was admitted at trial which was the product of the purported illegal search.
Defendant's attack on the adequacy of his representation by counsel is primarily directed to matters of trial strategy and of counsel's judgment. To justify relief on the ground of inadequacy of representation of counsel, an extreme case must be disclosed and it must appear that counsel's lack of diligence or competence reduced the trial to a farce or sham. State v. Bustamante, 103 Ariz. 551, 447 P.2d 243 (1968); State v. Kruchten, 101 Ariz. 186, 417 P.2d 510 (1966), cert. den. 385 U.S. 1043, 87 S.Ct. 784, 17 L.Ed.2d 687. Effective representation of counsel cannot be equated with successful representation. State v. Hill, 104 Ariz. 238, 450 P.2d 696 (1969). Matters of trial strategy and tactics are committed to defense counsel's judgment, and claims of ineffective assistance cannot be predicated thereon. Barron v. State ex rel. Eyman, 7 Ariz. App. 223, 437 P.2d 975 (1968); Loftis v. State ex rel. Eyman, 4 Ariz. App. 3, 417 P.2d 374 (1966).
We have examined the record and find that defendant's attack upon his counsel is completely unwarranted. The fact that they did not agree as to the conduct of the defense does not establish inadequate representation, Craig v. State, 451 P.2d 368 (Nev. 1969), nor does the amount of time defense counsel consulted with the defendant. State v. Knerr, 79 N.M. 133, 440 P.2d 808 (1968). Additionally, we conclude that defendant's attack on appellate counsel is likewise completely unwarranted. As we have indicated, counsel did all that was required of him by the United States Supreme Court and the Supreme Court of Arizona. Anders v. California, supra; State v. Leon, supra. His failure to argue frivolous or groundless matters does not give defendant cause to charge failure of representation. State v. Stevens, 69 Wash.2d 906, 421 P.2d 360 (1966).
It would appear that defendant predicates his attack on the fairness of the trial judge in the joint trial on the fact that the male juror, previously adverted to, was permitted to remain on the jury; that he failed to sequester the jury; that he failed to admonish the prosecuting attorney for saying it was time to make an example of the defendant; that a court reporter was not present during a post-verdict hearing; *216 that the trial judge said the defendant tried the court's patience; and that the sentence was excessive. We have already considered the defendant's contentions with regard to the jury and found them to be without merit. As to the purported remark of the prosecutor, we reiterate the rule that attorneys are given wide latitude in their arguments to the jury. State v. Goodyear, 98 Ariz. 304, 404 P.2d 397 (1965). We have examined the closing arguments in both trials and are unable to find any impropriety.[2]
Defendant complains of the court reporter's absence, and the consequent lack of verbatim transcript when a juror was questioned with regard to her having read a newspaper article during the course of trial. Suffice it to say that due process of law does not mandate a stenographic report of all criminal trials. State v. Crowder, 103 Ariz. 264, 440 P.2d 29 (1968). We have already discussed and rejected the defendant's contention with regard to the effect of the juror's reading the article in question.
As to the trial judge's single comment to the defendant about his patience being tried, it was not made in the presence of the jury, and we can hardly say, after examination of the record, that it was not justified. Throughout the proceedings, the trial judge manifested extreme patience with and consideration for the defendant, and we decline to attribute to this single articulation a connotation of bias. As to the sentences imposed, in view of the defendant's past history, we find no abuse of the trial court's discretion either as to the length of or the consecutive nature of the sentences imposed.
Our examination of the record discloses no error in either trial and we find sufficient evidence of the requisite elements of each offense to sustain the convictions thereof.
For the reasons herein stated, the judgments are affirmed.
HATHAWAY and HOWARD, JJ., concur.
NOTES
[1] The defendant's respective motions for a new trial, filed in propria persona, were filed more than three days after the respective verdicts. Under these circumstances, the trial court lacked jurisdiction to grant a new trial. State v. Hill, 85 Ariz. 49, 330 P.2d 1088 (1958); State v. Vasquez, 98 Ariz. 157, 402 P.2d 574 (1965).
[2] In the trial on the charges of embezzlement and obtaining by false pretenses, the prosecutor pointed out that if practices such as the defendant's in dealing with car customers existed, they had to be stopped. In the trial on the forgery charge, he presented a similar argument, i.e., that "this type of thing should not be condoned and we certainly should put a stop to this type of thing."
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544 F.2d 513
U. S.v.Rivers
No. 76-1253
United States Court of Appeals, Third Circuit
9/17/76
E.D.Pa., 406 F.Supp. 709
AFFIRMED
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473 F.3d 650
Liler Razor GRIFFITH, Personal Representative of the Estate of Arthur L. Partee, Deceased, Plaintiff-Appellant,v.Jim COBURN, Police Chief for Benton Township; Tim Sutherland and William Bradshaw, individually and in their capacity as Benton Township Police Officers, and Benton Township, a municipal corporation, Defendants-Appellees.
No. 05-2720.
United States Court of Appeals, Sixth Circuit.
Argued: November 28, 2006.
Decided and Filed: January 10, 2007.
ARGUED: Amos E. Williams, Detroit, Michigan, for Appellant. G. Gus Morris, Kupelian, Ormond & Magy, Southfield, Michigan, for Appellees. ON BRIEF: George D. Lyons, Detroit, Michigan, for Appellant. G. Gus Morris, Kupelian, Ormond & Magy, Southfield, Michigan, James R. Nelson, Nelson, Kreuger & Schrotenboer, Hudsonville, Michigan, for Appellees.
Before DAUGHTREY and GIBBONS, Circuit Judges; EDMUNDS, District Judge.*
OPINION
MARTHA CRAIG DAUGHTREY, Circuit Judge.
1
The underlying claim in this civil rights action, brought under 42 U.S.C. § 1983, stems from the death of Arthur L. Partee during his arrest by two Benton Township (Michigan) police officers, defendants Tim Sutherland and William Bradshaw. His estate sued the officers, Police Chief Jim Coburn, and the Township, alleging that Partee's death was caused by use of excessive force, in violation of his rights under the Fourth Amendment. The district court granted summary judgment to all defendants, finding as to the arresting officers that there had been no showing that Partee had a clearly established right to freedom from "the use of the vascular neck restraint" or that the officers' use of what is commonly called a "choke hold" was objectively unreasonable, and as to Chief Coburn and the Township that the plaintiff had failed to make out a case of inadequate training. The plaintiff now appeals, but only as to the ruling on Officer Sutherland's liability in this matter.1 We find that there are material disputes of fact concerning the reasonableness of his action in subduing Arthur Partee, and we therefore conclude that summary judgment on the claim against Sutherland must be reversed.
FACTUAL AND PROCEDURAL BACKGROUND
2
Up to a point, the facts in this case are not in dispute. The parties agree that the events that led to Arthur Partee's death began with his mother's trip to the Benton Township police department. Because her son Arthur had been acting strangely, Ethel Partee went there seeking advice about having him hospitalized. Officer Sutherland informed her that Arthur Partee could not be involuntarily committed for evaluation because he did not appear to be a danger to himself or others, but Sutherland did check to see if there were any outstanding warrants for Partee and discovered an outstanding traffic warrant for driving without a license. He then offered to arrest Arthur Partee on the warrant so that he could then be evaluated, and Ethel Partee agreed to this arrangement. She subsequently permitted defendants Bradshaw and Sutherland to enter the home she shared with her son.
3
When the officers arrived, Arthur Partee was sitting on a couch in front of the television. He continued to sit there passively while the officers informed him of the warrant and requested his date of birth. Partee declined to provide his date of birth, protested that the warrant was not for him, and then turned his attention back to the television, ignoring the officers but not resisting them in any way. As he continued to sit staring at the television, one of the officers told him that "it would be foolish for him to fight with [them]." The two officers then moved the coffee table from in front of the couch, which precipitated a struggle with Partee, the details of which are disputed — as outlined below.
4
At the end of the struggle, Partee lay handcuffed and face down on the ground. His mother, having witnessed the entire interaction, realized that her son was in trouble at that point and implored the officers to help him. In response, they told her that Partee was "just faking" and "playing possum." The two officers finally turned Partee over and slapped him in the face, attempting to get him to respond. When he did not, they removed his handcuffs and initiated CPR, but without success. By the time medics were called and arrived at the residence, Partee was no longer breathing and had no detectable pulse. He was pronounced dead on arrival at a local hospital.
5
Dr. Start, the medical examiner who performed Partee's autopsy, concluded that Partee's death was caused by "[a]sphyxia associated with physical restraint."2 According to Dr. Start, a person can become unconscious with significant pressure applied to the neck in 15-20 seconds, and this pressure would need to be consistently applied for two to five minutes for death to result. Another doctor, Dr. Spitz, agreed with Dr. Start that the cause of death was physical restraint — specifically, the improper application of a neck restraint. Dr. Spitz testified that in order to produce death, a neck restraint would need to be maintained for two to three minutes.
Ethel Partee's Version of Events
6
It is undisputed that Arthur Partee's mother, Ethel, was present during the entire interaction between the officers and her son and, indeed, needed to be told to "get back" at one point. According to Officer Bradshaw she was close enough to hand him the handcuffs during the struggle. Hence, there is little doubt that Ethel Partee was in a position to witness what occurred leading up to her son's fatal injury.
7
Ethel Partee testified that after the officers moved the coffee table that was in front of Arthur, Officer Sutherland took his handcuffs out while Arthur remained on the couch, leaning back but resisting only passively by "tr[ying] to put his arm behind his back and . . . refusing to help" or cooperate in any way with the officers' commands. She said that Officer Sutherland "all of a sudden" jumped on her son, put his arm around Arthur's neck, and began choking and wrestling him while Officer Bradshaw stood by watching. She described the struggle as continuing for a period of minutes, with her son crying for help before going limp. She said that Officer Sutherland threw Arthur's limp body onto the floor face down and both officers got on top of him to cuff him. She began screaming that "he was dead," but the officers told her that he was "just faking." When the officers turned Arthur Partee over and slapped him in the face he did not respond.
Officer Sutherland's Version of Events
8
Officer Sutherland testified that when Arthur Partee was told of the warrant and asked about his date of birth, he was initially unresponsive and simply ignored the officers, neither cooperating nor fighting with them. He said that Partee remained withdrawn even after being told he was under arrest and ordered to stand up and be cuffed multiple times. Then, according to Sutherland, Partee "rushed towards" him when Sutherland took his handcuffs out but was immediately pushed back onto the couch. He said that both officers then struggled with Partee, each one trying to grab an arm and cuff it while Partee resisted by holding his arms close to his body and tried to get off the couch and get away.
9
Resisting the officers, Partee moved around on the couch, eventually rolling into a kneeling position with his torso leaning against the sofa and his arms tucked beneath his chest. In his handwritten report made within hours of the incident, Sutherland explained that he and Bradshaw "struggled for several minutes" with Partee before they were finally able to handcuff him. Sutherland added that "[a]t one point during the struggle [Partee] was able to unsnap one of [Sutherland's] two snaps that hold[] in [his] sidearm." However, the report did not mention the use of a neck restraint. Instead, Sutherland wrote, Partee "appeared to have some difficulty breathing" and then "just stopped breathing."
10
In his subsequent deposition, Officer Sutherland provided more detail. He said then that he had reached underneath Partee, trying to grab his arm and pull it out to cuff it but that his own arm became pinned beneath Partee's body. While his arm was immobilized, Sutherland said, he felt Partee reach back with his left hand and reach for his holstered gun. Officer Sutherland testified that he both felt and saw Partee's hand on his holstered gun and that as Partee pulled his arm back underneath his body, he unsnapped one or two snaps of the holster. Fearing that Partee was trying to pull his weapon out, Officer Sutherland said that he used a vascular neck restraint on Partee to cut off the flow of oxygenated blood to his brain. After restraining Partee for "two or three seconds," Sutherland said, he gained control of him and pulled him to the ground to be handcuffed.
11
According to Sutherland's deposition, once Partee was cuffed, he stopped to catch his breath and did not try to talk to Partee or to otherwise see if he was responsive. He said that Bradshaw and a third officer named Koza, who had arrived on the scene around the time Partee was cuffed, lifted Partee to his feet to take him to the squad car, but that Partee was unable to stand on his own. Although he noticed some blood on Partee, Officer Sutherland did not observe anything else abnormal about him and still did not attempt to communicate with him.
12
Sutherland said that when he did notice that Partee's breathing was deteriorating, he radioed for medics. He also agreed that Partee should be uncuffed, and he went to get a CPR kit from his car, returning to find that Partee was not breathing. He said that he initiated "rescue breathing" and, when he lost Partee's pulse, he performed full CPR.
Officer Bradshaw's Version of Events
13
According to Officer Bradshaw, Sutherland instructed Partee to stand up from the couch and place his hands behind his back, and in response Partee stood up and "lunged" toward Officer Sutherland. Partee was pushed back onto the couch and the officers struggled with him in an effort to cuff him. The struggle entailed "[t]he resistance of [Partee] keeping his arms underneath his torso area."
14
Bradshaw testified that although he and Sutherland did not communicate with each other during the struggle, he was in close proximity to his partner throughout it and was in a position to see everything that was going on. However, Bradshaw testified that he did not see Partee reach out to grab Sutherland's weapon or unsnap his holster. In fact, Bradshaw did not see Partee extend his hand at any time except for once when Bradshaw forced it out from behind Partee's back to cuff it but was unable to do so. Bradshaw did not hear Sutherland say anything about Partee reaching for his gun or anything else indicating that Sutherland feared for his safety.
15
In his initial handwritten report made within hours of the incident, Bradshaw — like Sutherland — failed to mention use of a neck restraint; rather, he simply stated that Partee "was then struggled to the floor." Later, Bradshaw admitted that he saw Sutherland use the neck restraint on Partee. He was unable to recall how long Sutherland held Partee in the choke hold but estimated that it was only a matter of a few seconds. During the period of time when Sutherland was utilizing the neck restraint, Bradshaw said, he himself remained on Partee's opposite side, trying to get an arm to cuff. The neck restraint caused Partee to "go limp," according to Bradshaw, thereby enabling him to gain control of Partee's right arm and "take him to the ground."
16
Bradshaw further testified that when he and Koza attempted to lift Partee up, Partee neither helped nor resisted, and Bradshaw noticed Partee's breathing become faint. He said that when ammonia was placed under Partee's nose, he jerked back but then reverted to his previous state. He described how Sutherland rubbed Partee's sternum, an action designed to cause a pain reaction and bring a subject out of unconsciousness, but Partee did not respond. He indicated that attempts at CPR were equally unsuccessful.
17
The district court granted summary judgment for all defendants based on qualified immunity, concluding that "[t]he use of the vascular neck restraint under the circumstances was not objectively unreasonable" because "[t]he undisputed facts of this case reveal that . . . Partee actively and physically resisted arrest" and, "[i]n addition, there is evidence that during the struggle Partee reached for Sutherland's gun." Given the startling discrepancies not only between the eyewitness testimony of Partee's mother, Ethel Partee, and that of the two officers, but also between the testimony of Sutherland and Bradshaw and between the officers' testimony and the forensic evidence presented by the medical experts, we conclude that the district court reached this conclusion only by making wholesale credibility determinations in favor of a single witness, Officer Sutherland. At one point, for example, the district court said in its opinion granting summary judgment to the defendants, "Contrary to Plaintiff's assertions, the credibility of Sutherland's testimony regarding the unsnapping of his holster is not undermined by his written report created shortly after the incident." The district court also concluded that even if Partee's constitutional rights had been violated, they were not clearly established rights, holding that "[t]here simply was no clearly established law prohibiting the use of the vascular neck restraint under the circumstances of this case."
DISCUSSION
18
We review de novo the district court's grant of summary judgment. See Ciminillo v. Streicher, 434 F.3d 461, 464 (6th Cir.2006). Summary judgment is proper where "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." FED.R.CIV.P. 56(c). In reviewing the record the court "must view the facts and any inferences reasonably drawn from them in the light most favorable to the nonmoving party." St. John v. Hickey, 411 F.3d 762, 768 (6th Cir.2005) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). Summary judgment is only appropriate if, viewing the facts and inferences in this light, evidence is so lacking that it would be impossible for "a reasonable jury [to] return a verdict for the nonmoving party." Id. (quotation marks and citations omitted).
19
The plaintiff brought suit under 42 U.S.C. § 1983, arguing that the defendant officers used excessive force against Arthur Partee in violation of his Fourth Amendment rights. "To state a claim under 42 U.S.C. § 1983, a plaintiff must set forth facts that, when construed favorably, establish (1) the deprivation of a right secured by the Constitution or laws of the United States (2) caused by a person acting under the color of state law." Sigley v. City of Parma Heights, 437 F.3d 527, 533 (6th Cir.2006) (citing West v. Atkins, 487 U.S. 42, 48, 108 S.Ct. 2250, 101 L.Ed.2d 40 (1988)) (additional citation omitted). Even when a claim is stated, however, "government officials performing discretionary functions generally are shielded from liability for civil damages 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, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982).
20
In Saucier v. Katz, the Supreme Court established a two-pronged inquiry to determine an official's entitlement to qualified immunity in the context of an excessive force claim. See 533 U.S. 194, 200, 121 S.Ct. 2151, 150 L.Ed.2d 272 (2001). First, the court must determine whether, "[t]aken in the light most favorable to the party asserting the injury, . . . the facts alleged show the officer's conduct violated a constitutional right." Id. at 201, 121 S.Ct. 2151. If so, the court must then determine "whether th[at] right was clearly established on a . . . specific level." Id. at 200, 121 S.Ct. 2151.
21
The Fourth Amendment guarantees citizens the right "to be secure in their persons" and protects "against unreasonable seizures" of a person. U.S. CONST. amend. IV. To determine whether an officer's use of force in effecting an arrest is excessive in violation of the Fourth Amendment, the court must apply an "objective reasonableness" standard. See Graham v. Connor, 490 U.S. 386, 388, 109 S.Ct. 1865, 104 L.Ed.2d 443 (1989). Under this standard, "the question is whether the officers' actions are `objectively reasonable' in light of the facts and circumstances confronting them, without regard to their underlying intent or motivation." Id. at 397, 109 S.Ct. 1865 (citations omitted). The test is "reasonableness at the moment" of the use of force, as "judged from the perspective of a reasonable officer on the scene, rather than with the 20/20 vision of hindsight." Id. at 396, 109 S.Ct. 1865 (citations omitted).
22
The reasonableness determination "requires a careful balancing of the nature and quality of the intrusion on the individual's Fourth Amendment interests against the countervailing governmental interests at stake." Id. at 396, 109 S.Ct. 1865 (quotation marks and citations omitted). The individual's interest in not having the particular force used against them is weighed against the officers' "interest in performing these actions, as gauged by `the severity of the crime at issue, whether the suspect poses an immediate threat to the safety of the officers or others, and whether he is actively resisting arrest or attempting to evade arrest by flight.'" Shreve v. Jessamine County Fiscal Court, 453 F.3d 681, 687 (6th Cir.2006) (quoting Graham, 490 U.S. at 396, 109 S.Ct. 1865). Though these factors are important, they are not exhaustive, as the court must ultimately determine "`whether the totality of the circumstances justifies a particular sort of seizure.'" St. John, 411 F.3d at 771 (quoting Tennessee v. Garner, 471 U.S. 1, 8-9, 105 S.Ct. 1694, 85 L.Ed.2d 1 (1985)).
23
Because determining reasonableness in this context is such a fact-intensive endeavor, summary judgment is improper if the legal question of immunity turns on which version of the facts is accepted, because then "the reasonableness of the use of force is the linchpin of the case." Sova v. City of Mt. Pleasant, 142 F.3d 898, 903 (6th Cir.1998) (citing Brandenburg v. Cureton, 882 F.2d 211, 215-16 (6th Cir. 1989)); see also Cureton, 882 F.2d at 215 (finding summary judgment inappropriate where detective claimed that weapon was pointed "`directly at us,' presumably proving that he or any officer would have a subjective belief in a threat of serious physical harm," because there were "facts which might indicate otherwise" and thus "a reasonable person might believe that [the] detective . . . acted unreasonably in firing the shot"). In short, "[w]here . . . the legal question of qualified immunity turns upon which version of the facts one accepts, the jury, not the judge, must determine liability," and thus summary judgment should not be granted. Sova, 142 F.3d at 903 (citations omitted).
24
In the case before the court, the question of reasonableness — and thus the question of whether a constitutional right was violated — turns completely on which version of the facts one accepts. If Ethel Partee's account of the encounter is credited, i.e., that Officer Sutherland almost immediately and without provocation jumped on Arthur Partee and began choking him, then the force used against Partee is objectively unreasonable. Cf. Cureton, 882 F.2d at 216 ("If the jury determines that [the officer] fired on [decedent] without a belief that someone was in danger of serious bodily injury, then as a legal matter no reasonable officer could believe that such gunfire would not violate another's constitutional rights.").
25
Sutherland's actions must be measured also in light of testimony regarding the training that he received in use of the neck restraint tactic. Although the Township had no written policy on the use of neck restraints, Officers Sutherland and Bradshaw both completed a police academy program that included certification in "Pressure Point Control Tactics," including neck restraints, taught by a certified instructor. The sole publication used in this training was the statewide standard and had been reviewed and accepted by the Michigan Law Enforcement Training Council, and the instructor had little discretion to stray from this manual. The training pertinent to neck restraints included reading the manual, in-class discussion, and hands-on training. Over several days the students practiced the technique on people of different sizes and in different situations.
26
The manual instructed students that "vascular neck restraints are justified when the officer's attempt at lower forms of subject-control have failed, or when the officer believes that lower forms of subject control would not be successful," and that the restraint "is designed to control high levels of resistance." The instructor likewise trained students on when "[t]his . . . high use of force" is appropriate. The certified trainer explained that the neck restraint is a technique that is to be used in situations such as where someone is being "violent" or assaulting an officer: "You wouldn't use this technique on someone who is just sitting there, and saying I'm not going; I'm not going to leave, you wouldn't use this force on someone who is not attacking you or anything. You're going to use this, again, for someone who is highly agitated, who is violent."
27
Police tactics are classified along a "force continuum" and, according to the certified instructor, the vascular neck restraint falls toward "the harder or the more violent part" of this continuum, probably beyond pepper spray, at the "point where you are using batons, or . . . tasers." Police Chief Coburn attested that he is absolutely certain that Officers Sutherland and Bradshaw had pepper spray on their persons when they arrested Partee and that they additionally should have had night sticks.
28
In light of the evidence about the neck restraint's position on the force continuum and the undisputed fact that Partee never actually had possession of Officer Sutherland's gun, let alone threatened anyone with it, we can only conclude that a jury could find Officer Sutherland's use of the neck restraint unreasonable, particularly in light of the mandate "[i]n this circuit . . . that a Fourth Amendment seizure must be effectuated with `the least intrusive means reasonably available.'" St. John, 411 F.3d at 774-75 (quoting United States v. Sanders, 719 F.2d 882, 887 (6th Cir.1983)); see also id. at 772 ("Even if there was evidence of resistance, it would be improper to determine whether the resistance justified the officers' actions because such a determination is for a jury in the first instance.").
29
There is one other relevant factor in this case: the record establishes that the officers who came to the Partee residence knew before their arrival that Arthur Partee was experiencing some sort of mental or emotional difficulty sufficient to cause his mother to seek help from the police department. In a recent Sixth Circuit case in which the first officer arriving on the scene was "informed . . . that [the subject] was mentally ill, but . . . not . . . that [he] was nonverbal and nonresponsive," Champion v. Outlook Nashville, Inc., 380 F.3d 893, 904 (6th Cir.2004), we noted:
30
It cannot be forgotten that the police were confronting an individual whom they knew to be mentally ill or retarded, even though the Officers may not have known the full extent of [his] autism and his unresponsiveness. The diminished capacity of an unarmed detainee must be taken into account when assessing the amount of force exerted. See Deorle v. Rutherford, 272 F.3d 1272, 1283 (9th Cir.2001) ("[W]here it is or should be apparent to the officers that the individual involved is emotionally disturbed, that is a factor that must be considered in determining . . . the reasonableness of the force employed."). For example, in Drummond v. City of Anaheim, 343 F.3d 1052 (9th Cir.2003), officers handcuffed a mentally ill individual and leaned their body weight onto his upper torso. Id. at 1054. The officers then applied a hobble device. Drummond fell into respiratory distress and eventually a coma. Id. at 1055. The court held that the district court's grant of summary judgment on the basis of qualified immunity was not proper because the officers had violated Drummond's clearly established rights. Id. at 1062. It stated, "Any reasonable officer should have known that such conduct constituted the use of excessive force." Id. at 1061.
31
Id. at 904 (emphasis added).
32
Viewing the facts in the light most favorable to the plaintiff, we conclude that a reasonable jury could find that Officer Sutherland used excessive force. That leaves us to consider the second prong of the Saucier inquiry.
33
Even if a plaintiff can establish the violation of a constitutional right by an officer, he must additionally establish that the right was clearly established at the time of violation in order to avoid dismissal on the grounds of immunity. See Saucier, 533 U.S. at 202, 121 S.Ct. 2151. To satisfy this second prong, "the right . . . must have been `clearly established' in a . . . particularized . . . sense: The contours of the right must be sufficiently clear that a reasonable official would understand that what he is doing violates that right." Anderson v. Creighton, 483 U.S. 635, 640, 107 S.Ct. 3034, 97 L.Ed.2d 523 (1987). The dispositive question is "whether the defendants had `fair warning' that their actions were unconstitutional." Cummings v. City of Akron, 418 F.3d 676, 687 (6th Cir.2005) (citations omitted).
34
The mere fact that a court has not held the particular action in question unlawful is insufficient to create immunity. See Anderson, 483 U.S. at 640, 107 S.Ct. 3034 (noting that the rule is not "that an official action is protected by qualified immunity unless the very action in question has been previously held unlawful") (citation omitted). Accordingly, "[n]ovel factual circumstances . . . do not automatically require a finding of qualified immunity." St. John, 411 F.3d at 774 (citations omitted). Rather, "[t]he Court can consider more than merely the factual context of a prior case: `the general reasoning that a court employs' also may suffice for purposes of putting the defendant on notice that his conduct is clearly unconstitutional." Id. (citation omitted).
35
"Cases in this circuit clearly establish the right of people who pose no safety risk to the police to be free from gratuitous violence during arrest." Shreve, 453 F.3d at 688; see also St. John, 411 F.3d at 774 ("the right of a nonviolent arrestee to be free from unnecessary pain knowingly inflicted during an arrest [i]s clearly established"). However, the district court, relying on the Supreme Court's decision in Brosseau v. Haugen, 543 U.S. 194, 125 S.Ct. 596, 160 L.Ed.2d 583 (2004) (per curiam), concluded that the plaintiff failed to show a sufficiently specific clearly established right.
36
In Brosseau the Supreme Court held that an officer was entitled to qualified immunity for shooting "a disturbed felon, set on avoiding capture through vehicular flight, when persons in the immediate area [we]re at risk from that flight." Id. at 200, 125 S.Ct. 596. This holding was based on a determination that no clearly established law prohibited this use of force under the particular circumstances, and that this case was not one in which the general law barring the use of excessive force did not "obvious[ly]" give fair warning. Id. at 199, 125 S.Ct. 596. The Court noted that case law had established that no Fourth Amendment violation occurs "when an officer sho[o]t[s] a fleeing suspect who present[s] a risk to others." Id. at 200, 125 S.Ct. 596 (citations omitted).
37
Brosseau is fundamentally distinct from the present case. In Brosseau there was no factual dispute about the reasonableness of the officer's belief that the suspect posed risk to others. In fact, the plaintiff had already "pleaded guilty to the felony of `eluding[,]' . . . . [and b]y so pleading, he admitted that he drove his Jeep in a manner indicating `a wanton or wilful disregard for the lives . . . of others.'" Id. at 197, 125 S.Ct. 596 (citations omitted); see also id. (Brosseau "later explained that she shot Haugen because she was `fearful for the other officers on foot who [she] believed were in the immediate area, [and] for the occupied vehicles in [Haugen's] path and for any other citizens who might be in the area.'" (citation and additional quotation marks omitted) (alterations in original)); Smith v. Cupp, 430 F.3d 766, 776 (6th Cir.2005) ("Brosseau v. Haugen does not preclude this court from finding the right at issue was clearly established because the Brosseau Court said that undisputed facts showed that the shooting officer believed the suspect had a gun and was fearful for officers in the immediate area.").
38
When the facts in this case are viewed in the light most favorable to the plaintiff, it is clear that Partee posed no threat to the officers or anyone else. It follows that the use of the neck restraint in such circumstances violates a clearly established constitutional right to be free from gratuitous violence during arrest and is obviously inconsistent with a general prohibition on excessive force. Indeed, "[t]he relevant, dispositive inquiry in determining whether a right is clearly established is whether it would be clear to a reasonable officer that his conduct was unlawful in the situation he confronted," Saucier, 533 U.S. at 202, 121 S.Ct. 2151, and if the jury concludes that Officer Sutherland used the neck restraint without an objectively reasonable belief that Partee posed a threat of serious bodily injury, then it is obvious to us that "no reasonable officer could believe that such [use of force] would not violate another's constitutional rights." Cureton, 882 F.2d at 216.
CONCLUSION
39
For the reasons set out above, we conclude that there are significant disputes of material fact concerning the reasonableness of Officer Sutherland's use of a choke hold on Albert Partee. Summary judgment was inappropriately entered as to Sutherland, and we therefore REVERSE that portion of the district court's judgment and REMAND the case for further proceedings.
Notes:
*
The Honorable Nancy G. Edmunds, United States District Judge for the Eastern District of Michigan, sitting by designation
1
At oral argument, counsel for the plaintiff withdrew the appeals as to Police Chief Coburn and Benton Township and conceded that summary judgment as to Officer Bradshaw was appropriate. Those three parties have now been dismissed by stipulation
2
The autopsy reports lists only one cause of death: "Asphyxia associated with physical restraint." It lists three additional "final diagnoses," including "[a]cute psychotic mania." The defendants attempt to attach significance to these additional diagnoses, but in light of expert testimony in the record, we conclude that they are not relevant to the dispositive issue in this appeal. For example, Dr. Start testified that he found multiple indications of lateral compression of the neck and that because acute psychotic mania does not manifest itself physically, this secondary diagnosis was based exclusively on Partee's history as conveyed by others. Dr. Start explained that psychotic mania can cause cardiac arrhythmia, which could have been a contributing factor to the death, but he stated without equivocation that "asphyxia [wa]s the primary cause of death."
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