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855 F.2d 151
26 Fed. R. Evid. Serv. 551, Prod.Liab.Rep.(CCH)P 11,908ROE, Denise B., Individually and as Executrix of the Estateof Gordon A. Roe, Deceased, Appellant,v.DEERE AND COMPANY, INC.
No. 87-5856.
United States Court of Appeals,Third Circuit.
Argued May 2, 1988.Decided Aug. 31, 1988.
Laurence M. Kelly (argued), Kelly & Kelly, Montrose, Pa., Edward C. Roberts, York, Pa., for appellant.
Cody H. Brooks, Henkelman, Kreder, O'Connell & Brooks, Scranton, Pa., J. Wilson McCallister (argued), Law Dept. Deere & Co., Moline, Ill., for appellee.
Before GIBBONS, Chief Judge, and MANSMANN and COWEN, Circuit Judges.
OPINION OF THE COURT
MANSMANN, Circuit Judge.
1
In this appeal we review the conduct of a products liability trial. At issue was the design of an agricultural tractor and whether the fatal injuries sustained by its operator would have occurred if the tractor had been equipped with a particular safety feature. Of particular concern to us is the plaintiff's attempt to present a theory of liability based upon the lack of crashworthiness of the tractor.
2
The crucial inquiry is whether the district court erred in refusing to charge the jury that crashworthiness of the tractor was to be considered in this case. We find, contrary to the district court, that the concept of crashworthiness was one, if not the premiere, premise of liability from the inception and throughout the duration of this action. We conclude that it was incumbent upon the district court to instruct the jury that the tractor could be defective if it caused injuries to be exacerbated due to its lack of crashworthiness. The court's failure to so instruct compels us to vacate the judgment in favor of the defendant and remand the matter to the district court for a new trial.
I.
3
Denise Roe, individually and as executrix of the estate of Gordon Roe, instituted this diversity action, governed by Pennsylvania law, in the United States District Court for the Middle District of Pennsylvania. In her complaint, Mrs. Roe alleged that a tractor, manufactured by defendant, Deere and Company, was defective and caused her husband to sustain grave and serious injuries leading to his death on May 19, 1986. The defect alleged by plaintiff was the absence of a rollover protection structure (ROPS), a seatbelt and rollbar intended to keep the operator within a protected space. It was not disputed that the ROPS was an available feature and could have been implemented as a part of the design of this tractor.
4
The facts leading to the eventual fatal injuries are as follows. On May 17, 1986, Gordon Roe was operating a John Deere agricultural tractor with an attached rotary motor. The tractor apparently struck a large rock protruding from the ground, causing it to roll over down a slope. Gordon either fell or was thrown from the tractor and was pinned under its right rear wheel. There were no witnesses to the accident.
5
After several hours, Gordon was discovered by a neighbor who summoned medical assistance. Gordon was extracted from underneath the tractor and was transported by helicopter to a hospital where he died two days later as a result of the injuries.
6
Trial of the case was bifurcated as to the issues of liability and damages. After three days of testimony on the strict liability issue, the jury returned a verdict in favor of the defendant. Specifically, in response to a special interrogatory, the jury found that the farm tractor was not defective when it left Deere's control.
7
Mrs. Roe filed a motion for new trial raising numerous claims of error. The district court addressed the assignments of error and concluded that the evidence presented strongly supported the jury's verdict. Mrs. Roe appealed from the denial of a motion for a new trial. We have jurisdiction pursuant to 28 U.S.C. Sec. 1291.
8
We review the denial of a motion for a new trial for legal error, including alleged abuse of discretion. Since our primary focus here concerns the failure to instruct the jury on a particular theory of liability, our scope of review of the jury instructions given is governed by the abuse of discretion standard. We must determine whether the charge, taken as a whole and viewed in light of the evidence, fairly and adequately submitted the issues in the case to the jury without confusing or misleading them. United States v. Fischbach and Moore, Inc., 750 F.2d 1183 (3d Cir.1984).II.
9
Although a number of issues have been called to our attention, we reiterate that the most compelling allegation of error concerns the failure of the district court to instruct the jury on the theory of crashworthiness as a basis for a finding of liability on the part of Deere.
10
The district court explained its refusal to so instruct on the grounds that Mrs. Roe's claim throughout the case was that the tractor was defective, not that it lacked crashworthiness. This statement, as will be later discussed, evidences the trial court's erroneous belief that crashworthiness was a cause of action separate and distinct from a strict liability case.
11
The district court acknowledged that all the evidence supported a finding that a ROPS would have protected the decedent in this accident, but concluded that, since the crux of the case was that the tractor was defective without the ROPS, confusion would have resulted if the concept of crashworthiness was introduced, in his opinion, for the first time during jury instruction.
A. Elements of a Crashworthiness Case
12
On the surface, proving a strict liability case under Pennsylvania law appears simplistic: Was the product defective and was the defect the proximate cause of the injury? Berkebile v. Brantly Helicopter Corp., 462 Pa. 83, 337 A.2d 893 (1975). This general expression, however, disguises the intricacies of its exercise, particularly when crashworthiness, a type of defect, is at issue.1
13
In crashworthy cases three elements must be established: (1) proof of an alternative safer design, practicable under the circumstances; (2) the resulting injuries if the safer design had been used; and, as a corollary to the second element, (3) the extent of the enhanced injuries attributable to the defective design. Huddell v. Levin, 537 F.2d 726 (3d Cir.1976).
14
A manufacturer is required to design a product reasonably fit for its intended use. The concept which distinguishes a crashworthiness case is that the manufacturer's liability is not artificially cut off simply because the manufacturer did not intend that its product be involved in a collision. The doctrine "extends liability to situations in which the defect did not cause the accident or initial impact, but rather increased the severity of the injury over that which would have occurred absent the defective design." Barris v. Bob's Drag Chutes & Safety Equipment, Inc., 685 F.2d 94, 99 (3d Cir.1982).
15
Pennsylvania law, as predicted by the federal courts sitting in diversity, has dictated that the manufacturer must take into consideration in the design and manufacture of its product, the possibility that a product may be involved in an accident not of its own making. Jeng v. Witters, 452 F.Supp. 1349 (M.D.Pa.1978), aff'd, 591 F.2d 1335 (3d Cir.1979).2
16
Our review of the pleadings and trial record leads us to conclude that the concept of crashworthiness was present throughout the duration of the case. Although neither the term crashworthiness nor "buzz words" conjuring up the theory appeared in Roe's complaint, the general allegations concerning the defective condition of the tractor were sufficient to place the requisite elements of crashworthiness at issue. Crashworthiness is merely a subset of strict liability, and considering the liberal pleading philosophy of the federal rules, the complaint as pled would not preclude evidence of crashworthiness from being introduced in this case.
17
The evidence at trial was a clear attempt to prove liability based on lack of crashworthiness. Expert testimony on behalf of Roe was presented by John Sevart, president and chief engineer of a company that operates in the area of machine design, testing and certification of mechanical machinery. Sevart testified that the intended purpose of the ROPS was to prevent injury in the event of a tractor upset. The expert opined that since there was no way to design a tractor which would not upset, and considering the serious accidents which occur when a tractor does in fact roll over, the ROPS was necessary to protect the operator in the event of an accident.
18
Sevart next recounted to the jury his reconstruction of the accident. He surmised that the tractor went over a ledge of rock and then made a 270 degree roll, which meant that the tractor had rolled over, landed on its left side and went upside down and came back on its right side where it came to rest with Gordon Roe pinned under its fender. Sevart then gave his professional opinion, within a reasonable degree of engineering certainty, that if the tractor had been equipped with the ROPS, the roll of the vehicle would have been limited to 90 degrees. The witness was not, however, permitted to answer the follow-up question concerning whether he had arrived at an opinion as to the extent of the injuries sustained if the tractor had been equipped with the ROPS.
19
Deere's expert also testified as to the effectiveness of the ROPS in preventing serious injury in the event of a tractor upset. He, however, opined that the ROPS would not have prevented the 270 degree roll which occurred.
20
Did the pleadings and evidence establish a prima facie crashworthiness case under the requisites of Huddell v. Levin?3 The first element--the availability of a practicable safer design--was basically uncontested.4 Proof of the second requisite, the resulting injuries if the safer design theory had been used, and the third corollary factor, the extent of exacerbation attributable to the unsafe design, are less emphatically present. We conclude, however, that the evidence which was admitted concerning the effectiveness of the ROPS was sufficient for the trier of fact to draw the necessary inferences, i.e., that if the tractor had not rolled over and crushed Roe, he would not have sustained the fatal injuries. To reach this conclusion would not require an engineer's expertise. It was not contested that the injuries were caused by the pinning of Roe's body under the tractor, nor was it challenged that these injuries were the cause of death. What probably occurred during the accident, an event to which Sevart did testify, was a question of fact within the jury's province. We thus conclude that the evidence admitted adequately presented a crashworthiness case to the jury.
21
We turn now to the converse argument that certain evidence designed to advance this theory was improperly excluded by the trial judge.
B. Expert Testimony of John Sevart
22
Mrs. Roe's argument that the district court improperly excluded testimony that was to be offered by Sevart can be separated into three categories. First, Mrs. Roe asserts that the district court erred in forbidding Sevart from testifying as to the history of the development of ROPS. Second, Mrs. Roe maintains that it was error to exclude Sevart's reference to studies and statistics regarding the effectiveness of ROPS in preventing injuries resulting from vehicle rollovers. Third, Mrs. Roe claims that the district court was incorrect in sustaining objections to those questions seeking Sevart's opinion on the general effectiveness of ROPS in eliminating roll over injury, and on the specific effect on the decedent's injuries had ROPS been installed on the tractor.
23
While the district court justified its rulings on several grounds, a common thread was the court's mistaken belief that the effectiveness of ROPS was not at issue in the trial. The court noted that Deere had admitted, through its own expert witnesses, that ROPS was an effective device for the prevention of roll overs. Because the defense did not contest the issue of the effectiveness of ROPS, the district court ruled that the evidence in question did not go to what the court perceived as the ultimate issue in the case, namely, whether the tractor was defective without ROPS as standard equipment.
24
We recognize that generally decisions regarding admission of expert testimony rest within the sound discretion of the district court and will be reversed only in the event of an abuse of that discretion. Seese v. Volkswagenwerk A.G., 648 F.2d 833 (3d Cir.), cert. denied, 454 U.S. 867, 102 S.Ct. 330, 70 L.Ed.2d 168 (1981). Where, however, the district court allegedly rests its decision on a misstatement of law, we examine its ruling for legal error. In re Japanese Electronic Products, 723 F.2d 238, 277 (3d Cir.1983), rev'd on other grounds, 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1985). We emphasize that the Federal Rules of Evidence establish a liberal policy of permitting expert testimony which will aid the trier of fact. Knight v. Otis Elevator Co., 596 F.2d 84 (3d Cir.1979). "Helpfulness is the touchstone of Rule 702." Breidor v. Sears, Roebuck & Co., 722 F.2d 1134, 1139 (3d Cir.1983). In determining whether the district court erred by excluding the expert's testimony in this case, we examine the tendered expert testimony and the importance in the context of this case.
25
Since the matter will be retried, we need only address the excluded evidence which was offered to demonstrate the specific effect of the roll over, i.e., the extent of the injuries which would have been sustained if the tractor had been equipped with the ROPS.5 Here, the jury heard the defense concede that the ROPS was effective in preventing serious injury, but this concession did not exclude the possibility that testimony from Sevart regarding the outcome of the accident if the tractor had been ROPS-equipped would have certainly been helpful, if not determinative.
26
In keeping with our conclusion that crashworthiness was a prominent theory in this case, we are compelled to find that refusal to permit Sevart to express an opinion concerning the extent of Gordon Roe's injuries if the tractor had been ROPS-equipped was inconsistent with a sound exercise of the court's discretion, albeit consistent with the court's misperception of Mrs. Roe's theory of recovery.6 Sevart's evidence represented Roe's only effective means of advancing her theory of liability; its importance in the context of this case is that the evidence was paramount to proof of crashworthiness.
C. Jury Instruction
27
Despite the thwart on her attempts to advance the crashworthiness theory through Sevart's testimony, the plaintiff nonetheless requested the district court to instruct the jury on the theory of liability based upon the lack of crashworthiness of the tractor. Mrs. Roe wanted the jury to be told that if they found the tractor was not reasonably crashworthy because of the absence of a ROPS, and that if they found that the death of Gordon Roe would probably have been prevented had the tractor been so equipped, then it may find that Deere was liable for the damages sustained. Deere likewise requested a crashworthy charge, although understandably with a defense-oriented bent.
28
In its memorandum opinion, the district court acknowledged that the defect in the product alleged by Mrs. Roe was the absence of the ROPS. It justified its refusal to instruct the jury by reference to the complaint and by stating that, "plaintiff's claim throughout this matter has been that the tractor was defective, not that it was not crashworthy."
29
The district court continued that the evidence in this case was to the effect that if the tractor had been equipped with the ROPS it would have protected the decedent--in effect, enumerating a prima facie crashworthy case--then inconsistently stated that to charge on crashworthiness would only serve to confuse the jury.
30
We restate that the language of the district court can only be interpreted as a misconstruction of the theory of crashworthiness. Contrary to law, the court characterized the lack of crashworthiness as a separate cause of action, a characterization we have already determined to be incorrect.
31
Deere argues that the general charge by the trial court that absence of a safety device would render the tractor defective cured the omission of a crashworthiness instruction. Considering, as we must, the charge as a whole, we find that nowhere in the court's instruction was the jury told that Mrs. Roe could recover from Deere if she proved that her husband's injuries would not have been so severe if the tractor had been equipped with the ROPS.
32
The undisputed presence of crashworthiness as a theory in this case compelled the court to instruct the jury on its elements. Failure to do so represented reversible error, requiring a re-trial of this matter.
III.
33
To conclude, the error in this case is embodied in the district court's determination that crashworthiness was a distinct cause of action improperly positioned in this products liability case. We have determined, to the contrary, that crashworthiness was the predominant theory of the case, compelling the district court to permit admissible evidence concerning its proof to be heard and to instruct the jury on the requisites for recovery under this theory. We, therefore, will vacate the judgment entered in favor of the defendant and remand for proceedings consistent with this opinion.
1
Although not raised on appeal, because the matter is to be retried, we mention that in a Pennsylvania strict liability action the trial judge must make a threshold legal determination concerning liability, a preliminary step not taken in this matter. Under Pennsylvania law, before the case can be placed before the jury, the trial judge must decide whether the defect alleged, if proven, would render the product "unreasonably dangerous" as the term is defined in the Restatement 2d of Torts Sec. 402a. Azzarello v. Black Bros. Co., 480 Pa. 547, 558, 391 A.2d 1020, 1026 (1978). See also Childers v. Joseph, 842 F.2d 689 (3d Cir.1988); Hon v. Stroh Brewery Co., 835 F.2d 510 (3d Cir.1987)
2
The crashworthiness doctrine as articulated in Huddell v. Levin is applicable to cases governed by Pennsylvania law. See Jeng v. Witters, 452 F.Supp. at 1361. Our research has found that the Pennsylvania Supreme Court has yet to affirm the crashworthiness doctrine by opinion. We note that in a Pennsylvania Superior Court case, although raised in the context of the collateral estoppel effect of a federal court case, the issue of crashworthiness was discussed and while not specifically adopted, the court's language did not suggest that the theory was incompatible with Pennsylvania law. Day v. Volkswagenwerk Aktiengesellschaft, 318 Pa.Super. 225, 464 A.2d 1313 (1983)
3
Although not included as a part of the appendix, we are aware that crashworthiness as a theory of liability was also discussed in Roe's pre-trial brief
4
Although Deere did not dispute that the ROPS was an effective or useful safety feature, it did premise its defense on the fact that ROPS may not be safe or practical for some farm functions and should remain an optional feature
5
We, therefore, do not address the district court's rulings that certain evidence was irrelevant or cumulative
6
As stated by the court:
[W]hether the tractor was defective did not depend upon a showing of what would have happened to the decedent had the tractor been equipped with a ROPS. The plaintiff was not required to show that the decedent would not have been injured or killed had the tractor been equipped with a ROPS.
This statement is at odds with the elements which are central to proof of a crashworthiness case.
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In the
United States Court of Appeals
For the Seventh Circuit
No. 08-2194
U NITED STATES OF A MERICA,
Plaintiff-Appellee,
v.
R ONALD E. W AYLAND,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Illinois.
No. 07 CR 40039—J. Phil Gilbert, Judge.
A RGUED O CTOBER 16, 2008—D ECIDED D ECEMBER 3, 2008
Before R IPPLE, E VANS and T INDER, Circuit Judges.
R IPPLE, Circuit Judge. A jury found Ronald E. Wayland
guilty of making false statements relating to health care
matters, in violation of 18 U.S.C. §§ 1035(a)(2), 24(b). At
sentencing, the district court concluded that Mr.
Wayland used “sophisticated means” to perpetrate the
fraud and, accordingly, applied a two-level upward
adjustment to his offense level, see U.S.S.G. § 2B1.1(b)(9).
The district court sentenced Mr. Wayland to 41 months’
imprisonment; Mr. Wayland filed a timely notice of
2 No. 08-2194
appeal. Because the district court did not clearly err in
determining that Mr. Wayland used sophisticated means
to commit this fraud, we affirm the judgment of the
district court.
I
BACKGROUND
A. Facts
The Illinois Department of Rehabilitation Services (“the
Department”) oversees a program through which Illinois
residents with disabilities can use Medicaid funds to pay
for the services of in-home personal assistants and
thereby avoid transfer to nursing homes. Dorothy
Wayland, a program participant, was essentially incapaci-
tated. Consequently, her son Ronald Wayland, acted on
her behalf under a power of attorney. In that role,
Ronald Wayland defrauded the Department of more
than $108,000 by claiming that a man named Cyril
Sturm was serving as his mother’s personal assistant.
Sturm, in fact, had died in 1983, but Mr. Wayland
persuaded the Department that Sturm was caring for
Dorothy Wayland. Mr. Wayland somehow obtained
Sturm’s social security number and submitted it, along
with identification cards that he created by using a rela-
tive’s photograph, to the Department. Mr. Wayland also
registered a post office box in both his name and Sturm’s,
to which the Department sent correspondence
addressed to Sturm. Mr. Wayland also opened a joint
checking account into which he, and later the Department,
No. 08-2194 3
deposited checks payable to Sturm. The bank let Mr.
Wayland establish the account because he represented
that Sturm was homebound. Because the Department
would pay Sturm to assist Dorothy Wayland only during
those hours in which Mr. Wayland could not be at home,
Mr. Wayland also submitted fraudulent documents
showing that he was employed at local hospitals. Addi-
tionally, Mr. Wayland filed tax returns for Sturm because,
the Government asserts, Mr. Wayland knew that the
Department was withholding taxes on Sturm’s behalf,
and he did not want the scheme to attract the IRS’ at-
tention.
After nine years, the scheme began to unravel. The
Department sent letters to Sturm and to Mr. Wayland
requesting a meeting with Sturm; he never showed up.
The Department pressed Mr. Wayland to document
Sturm’s existence and employment. In three written
responses, Mr. Wayland insisted that Sturm existed and
diligently was looking after Dorothy Wayland and that
all of the identification submitted to the Department was
genuine. These letters formed the basis of his indictment
on three counts of making false statements regarding
health care matters. 18 U.S.C. §§ 1035(a)(2), 24(b). A jury
found Mr. Wayland guilty on each count.
B. Sentencing
The probation officer recommended a two-level upward
adjustment under U.S.S.G. § 2B1.1(b)(9)(C) for Mr.
Wayland’s use of sophisticated means to perpetrate the
fraud. Mr. Wayland disputed that his conduct met this
4 No. 08-2194
standard, but the district court stated: “If this wasn’t a
sophisticated means of perpetrating a fraud, I don’t know
what is.” R.95 at 71. Mr. Wayland’s total offense level of
20 and criminal history category of I yielded an
advisory guidelines range of 31 to 41 months’ imprison-
ment. After considering the sentencing factors set forth
in 18 U.S.C. § 3553(a), the court imposed three concur-
rent prison terms of 41 months.
II
DISCUSSION
We review for clear error a district court’s finding
that the defendant employed sophisticated means.
United States v. Robinson, 538 F.3d 605, 607 (7th Cir. 2008).
The sentencing guidelines call for a two-level upward
adjustment if an individual has perpetrated a fraud
through sophisticated means. See U.S.S.G. § 2B1.1(9)(C).
Application note 8 to U.S.S.G. § 2B1.1 states:
“ ‘[S]ophisticated means’ means especially complex or
especially intricate offense conduct pertaining to the
execution or concealment of an offense.” The note goes
on to provide several examples of such conduct, in-
cluding the use of fictitious entities or corporate shells;
but this list is not exhaustive and merely suggests the
wide variety of criminal behavior covered by the guide-
line. United States v. Allan, 513 F.3d 712, 715 (7th Cir. 2008).
Mr. Wayland contends that fraudulently registering
both a post office box and checking account, as well as
filing false tax returns, are not complex or intricate actions,
No. 08-2194 5
and therefore, are not sophisticated. He relies on two
cases from other circuits holding that sophisticated con-
duct did not extend to fraudulently registering a post
office box, United States v. Hance, 501 F.3d 900, 911 (8th
Cir. 2007), or to filing false tax returns, United States v.
Lewis, 93 F.3d 1075, 1083 (2d Cir. 1996).
Offense conduct is sophisticated if it displays “a greater
level of planning or concealment” than a typical fraud of
that kind. See Robinson, 538 F.3d at 607-08 (finding defen-
dant’s use of false contact information for check counter-
feiting made the scheme sophisticated); United States v.
Fife, 471 F.3d 750, 753-54 (7th Cir. 2006) (holding that
the defendants’ use of detailed planning and more con-
cealment than typical made the tax fraud sophisticated);
Hance, 501 F.3d at 909 (“[T]he government must show that
Hance’s mail fraud, when viewed as a whole, was
notably more intricate than that of the garden-variety
mail fraud scheme.”). We must decide whether
Mr. Wayland’s crime involved a greater level of planning
or concealment than the typical health care fraud case.
Mr. Wayland’s conduct was far more intricate than that
in a typical health care fraud scheme. According to an
agent who investigated the case, a typical fraud of this
kind involves inflated claims of hours actually worked
by a personal assistant. Here, the personal assistant did
not exist. Mr. Wayland submitted false documents so the
Department would believe that Dorothy Wayland had
a personal assistant. He also fraudulently registered a
joint bank account and post office box to facilitate the
Government’s payments and filed fraudulent tax re-
6 No. 08-2194
turns so that the IRS would not alert the Department.
This scheme required a greater level of planning or con-
cealment than the typical health care fraud case. It cer-
tainly was not clear error for the district court to find
that Mr. Wayland’s conduct was sophisticated.
Mr. Wayland also submits that, because he erred in
the design and execution of his fraud, it could not have
been sophisticated. He suggests that his admission that
he shared an account with Sturm was foolish and
that his forgeries must have been amateurish because
investigators quickly were able to uncover the fraud.
However, a sophisticated scheme need not exhibit intelli-
gence or expertise. See Fife, 471 F.3d at 754. It does not
matter that Mr. Wayland might have done a better job
perpetrating and concealing the fraud. See United States
v. Madoch, 108 F.3d 761, 766 (7th Cir. 1997) (noting that,
even though “more elaborate mechanisms” of concealing
fraud were possible, the defendant nevertheless used
sophisticated means to perpetrate fraud). Nor does it
matter that Mr. Wayland’s own sloppiness or errors of
judgment may have contributed to the unraveling of his
scheme. See United States v. Rettenberger, 344 F.3d 702, 709
(7th Cir. 2003). Mr. Wayland’s scheme displayed a
greater level of planning and concealment than the
typical health care fraud and its failings do not suggest
that the district court clearly erred.
Even if Mr. Wayland’s individual actions could be
characterized as unsophisticated, we would follow the
approach of our sister circuits and affirm Mr. Wayland’s
sentence on the ground that his overall scheme, which
No. 08-2194 7
lasted nine years and involved a series of coordinated
fraudulent transactions, was complex and sophisticated.
See United States v. Jackson, 346 F.3d 22, 25 (2d Cir. 2003)
(holding that even if each step in the appellant’s
scheme was not elaborate, an enhancement for em-
ploying “sophisticated means” was nevertheless appro-
priate where “the total scheme was sophisticated in
the way all the steps were linked together”); United States
v. Halloran, 415 F.3d 940, 945 (8th Cir. 2005) (holding that
an enhancement was appropriate where certain aspects
of the appellant’s scheme were not elaborate, but the total
scheme was sophisticated); see also Rettenberger, 344 F.3d
at 709 (affirming a finding of sophisticated means where
the appellant engaged in “[c]areful execution and coordi-
nation over an extended period. . . .”).
Conclusion
For the foregoing reasons, we affirm the sentence im-
posed by the district court.
A FFIRMED
12-3-08
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929 N.E.2d 94 (2010)
MOSTARDI-PLATT ASSOCIATES, INC., d/b/a Mostardi Platt Environmental, Plaintiff-Appellant,
v.
Leonard CZERNIEJEWSKI, Barbara Czerniejewski, A. Dale Anderson & Associates, Inc., d/b/a ADA Resources, Power Holdings of Illinois, LLC, and Unknown Owners and Nonrecord Claimants, Defendants-Appellees.
No. 5-09-0339.
Appellate Court of Illinois, Fifth District.
May 11, 2010.
*95 Jeffrey G. Howard, Howard, Leggans, Piercy & Howard, LLP, Mt. Vernon, IL, E. Paul Lanphier, Lanphier & Kowalkowski, Ltd., Elmhurst, IL, for Appellant.
Terry Sharp, David J. Grindle, The Sharp Law Firm, P.C., Mt. Vernon, IL, for Appellees.
Justice WELCH delivered the opinion of the court:
The plaintiff, Mostardi-Platt Associates, Inc., doing business as Mostardi-Platt Environmental, appeals from a judgment of the circuit court of Jefferson County that dismissed with prejudice its first amended complaint to foreclose on a mechanic's lien it had filed against the defendants, Leonard Czerniejewski, Barbara Czerniejewski, A. Dale Anderson & Associates, Inc., doing business as ADA Resources, Power Holdings of Illinois, LLC, and unknown owners and nonrecord claimants. The circuit court concluded that the services rendered by the plaintiff were not the sort for which a lien could be filed and enforced under the Mechanics Lien Act (the Act) (770 ILCS 60/0.01 et seq. (West 2006)). For reasons that follow, we affirm.
The plaintiff's first amended complaint, filed August 5, 2008, alleges that Leonard and Barbara Czerniejewski were the record owners of 157 acres of real property located in Jefferson County. On or about March 21, 2007, the Czerniejewskis entered into an agreement with A. Dale Anderson & Associates, Inc., doing business as ADA Resources (ADAR), whereby ADAR was granted a 24-month option to purchase the real estate. The agreement further provided that ADAR could assign its rights to any party it selected and that ADAR or its agents could enter upon the property "to conduct such feasibility studies as may be reasonably necessary to enable [p]urchaser to make an election with respect to its exercise of the option."
ADAR had represented that Power Holdings of Illinois, LLC (Power Holdings), would be acquiring the property to construct a coal gasification plant thereon. The complaint alleges that ADAR did assign its option to Power Holdings. Power Holdings then entered into a contract with the plaintiff for the plaintiff to provide "air quality construction permitting and dispersion modeling services." The plaintiff was to focus its permitting application process and efforts on securing construction permit approval for the property. The complaint alleges that the plaintiff completed this work and that all of its work was "necessary for the improvement of the premises as a coal gasification facility."
The complaint further alleges that the plaintiff recorded its mechanic's lien in the office of the Jefferson County recorder and made demand upon Power Holdings to pay the amount due as set forth in that lien claim but that Power Holdings has refused and failed to pay the full amount due. The plaintiff prays for a judgment of *96 foreclosure and that the property be sold to satisfy the lien claim.
On September 3, 2008, the defendants filed a motion to dismiss the first amended complaint pursuant to section 2-619 of the Illinois Code of Civil Procedure (the Code) (735 ILCS 5/2-619 (West 2006)), arguing that the services provided by the plaintiff are not lienable under the Act. The motion alleges that ADAR entered into the agreement with the Czerniejewskis as an agent for Power Holdings, which intended to purchase the property and construct a coal gasification facility thereon if the necessary permits could be obtained. The motion alleges that the option to purchase had not been exercised or assigned, and the property still belonged to the Czerniejewskis.
The motion alleges that the services to be provided by the plaintiff were environmental consulting services to aid Power Holdings in determining if the land would meet the requirements of the Illinois Environmental Protection Agency for a coal gasification facility and that none of the services provided by the plaintiff benefited the land directly or indirectly. According to the motion, the land was and still is used as a farm and is in substantially the same condition as it was before the services provided by the plaintiff. The defendants' motion argues that the plaintiff did not provide any design or construction work and that, accordingly, the services provided by the plaintiff are not lienable under the Act.
The motion to dismiss is supported by the affidavit of Dale Anderson, stating that ADAR had been hired by Power Holdings to act as its agent in securing option agreements and that ADAR was acting in that capacity at the time it entered into the option agreement with the Czerniejewskis. That agreement provided that ADAR or its agents could enter upon the property only to conduct such feasibility studies as were reasonably necessary to enable it to make an election with respect to the exercise of its purchase option. The affidavit states that ADAR's option had not been assigned or exercised.
The motion to dismiss is also supported by the affidavit of Stephen B. Shaw, chief financial officer of Power Holdings, which states that Power Holdings intends to purchase the property to construct a coal gasification facility thereon if the necessary permits are obtained and the plant's feasibility is demonstrated. It further states that the services to be provided by the plaintiff were environmental consulting services to aid Power Holdings in determining if the land would meet the requirements of the Illinois Environmental Protection Agency for a coal gasification facility. According to Shaw's affidavit, the plaintiff was not hired to, and did not, provide any services of design or construction work.
The motion to dismiss is further supported by the affidavit of Leonard Czerniejewski, which states that the land has been and still is used as a farm and that it is in substantially the same condition as it was before the services provided by the plaintiff. Finally, the motion is supported by the transcript of the hearing on the motion to dismiss the plaintiff's original complaint. The circuit court granted that motion, stating on the record as follows:
"[T]he court believes that what was granted was the right to Anderson for the purpose of doing a feasibility study, and based on the cases that [t]he [c]ourt has read, that is akin to a[F]irst [D]istrict case [(Ohrenstein v. Howell, 227 Ill.App. 215 (1922)) ] where an architect has said if we buy this, what different kinds of buildings could be put on it, and he drafted up some rough ideas of several *97 different types of things that could be done with the land.
The [F]irst [D]istrict found that was not lienable under the Mechanic's Lien Act. Here, we have that they were commissioned to do a feasibility study, and [t]he [c]ourt believes on cases, as I understand the act, that that is not lienable under the Mechanic's Lien Act."
On June 24, 2009, the circuit court of Jefferson County entered a final order dismissing with prejudice the plaintiff's first amended complaint for the same reasons as those stated for the dismissal of its original complaint. The circuit court made a factual finding that the services performed by the plaintiff were similar to a feasibility study and that as a matter of law they were not subject to lien under the Act. The plaintiff appeals.
We review de novo the dismissal of a complaint pursuant to section 2-619 of the Code. Porter v. Decatur Memorial Hospital, 227 Ill.2d 343, 352, 317 Ill.Dec. 703, 882 N.E.2d 583 (2008). Our review requires that we take all well-pleaded facts in the amended complaint as true and draw all inferences from those facts which are favorable to the plaintiff. Hester v. Gilster-Mary Lee Corp., 386 Ill. App.3d 1104, 1107, 326 Ill.Dec. 372, 899 N.E.2d 589 (2008). We must interpret all the pleadings and supporting documents in the light most favorable to the plaintiff. Porter, 227 Ill.2d at 352, 317 Ill.Dec. 703, 882 N.E.2d 583. Additionally, we consider whether there is a genuine issue of material fact that precludes a dismissal or, absent a question of fact, whether the dismissal is proper as a matter of law. Hester, 386 Ill.App.3d at 1107, 326 Ill.Dec. 372, 899 N.E.2d 589.
Section 1(a) of the Mechanics Lien Act provides in pertinent part as follows:
"Any person who shall by any contract or contracts, express or implied, or partly expressed or implied, with the owner of a lot or tract of land, or with one whom the owner has authorized or knowingly permitted to contract, to improve the lot or tract of land or for the purpose of improving the tract of land, or to manage a structure under construction thereon[] is known under this Act as a contractor and has a lien upon the whole of such lot or tract of land * * * for the amount due to him or her for the material, fixtures, apparatus, machinery, services[,] or labor * * *." 770 ILCS 60/1(a) (West 2006)
The object and purpose of the Act is to protect those who, in good faith, furnish material or labor for the improvement of real property. Weather-Tite, Inc. v. University of St. Francis, 383 Ill.App.3d 304, 307, 322 Ill.Dec. 802, 892 N.E.2d 49 (2008), aff'd, 233 Ill.2d 385, 330 Ill.Dec. 808, 909 N.E.2d 830 (2009). In order to achieve this purpose, the Act permits a lien upon property where a benefit has been received by the owner and where the value or condition of the property has been increased or improved by reason of the furnishing of the labor or materials. L.J. Keefe Co. v. Chicago & Northwestern Transportation Co., 287 Ill.App.3d 119, 121, 222 Ill.Dec. 634, 678 N.E.2d 41 (1997). The theory underlying the Act is that the owner is benefited by the improvements and should pay for the benefit when that benefit has been induced or encouraged by his act. L.J. Keefe Co., 287 Ill.App.3d at 122, 222 Ill.Dec. 634, 678 N.E.2d 41. The Act attempts to balance the rights and duties of owners, contractors, subcontractors, and material providers. Weather-Tite, Inc., 383 Ill.App.3d at 307, 322 Ill. Dec. 802, 892 N.E.2d 49. The burden of proving that each requisite of the Act has been satisfied is on the party seeking to enforce the lien. Watson v. Watson, 218 *98 Ill.App.3d 397, 400, 161 Ill.Dec. 148, 578 N.E.2d 275 (1991).
In Ohrenstein v. Howell, 227 Ill.App. 215 (1922), an architect was retained to prepare plans for the construction of a building that the defendant, not yet the owner of the lot, desired for the purpose of determining whether to purchase the lot and proceed with construction. The defendant subsequently purchased the lot and proceeded with construction, using a different architect. The original architect attempted to enforce a mechanic's lien against the lot for the value of his services. The court rejected the architect's claim, holding that the contract was entered into before the defendant owned the land and that the services were not rendered under a contract for the improvement of land. Ohrenstein, 227 Ill.App. at 219. The court held that, in order to sustain his claim, the architect must show that his services were rendered to the owner of the lot for the purpose of improving the lot. Ohrenstein, 227 Ill.App. at 219. The court held as follows:
"[T]he services rendered by [the architect] were not for the improvement of the lot[] but were merely for the purpose of furnishing defendant with information tending to show the possibilities of such an improvement. * * *
* * * The alleged contract between the parties did not relate to any plans or specifications for the erection of a building and did not furnish any basis for determining the cost of the same, thereby showing that it was not the intention of the parties that they were to be used in the improvement of the lot, unless made the basis for the final plans and specifications of the proposed structure." Ohrenstein, 227 Ill.App. at 219.
Furthermore, the court found that the contract was not between the lien claimant and the owner of the property or an agent of the owner. Accordingly, the architect's claim did not come within the terms of the Act.
Relying on Ohrenstein, the circuit court in the case at bar found that the plaintiff did not provide services for the improvement of the land under a contract with the landowner or the owner's agent. The court found that the services of the plaintiff amounted to a feasibility study and did not result in any improvement to the land or in any benefit to the landowner. We agree.
The contract between the plaintiff and Power Holdings was not one for the improvement of the land, nor was it a contract between the plaintiff and the "owner" within the meaning of the Act. The contract between the Czerniejewskis and ADAR allowed ADAR or its agents or assigns to conduct only feasibility studies with respect to the land. It did not authorize ADAR or its agents or assigns to make any improvements to the land. Finally, the services provided by the plaintiff resulted in no improvement to the land or in any benefit to the landowner. Instead, those services benefited only Power Holdings.
In L.J. Keefe Co. v. Chicago & Northwestern Transportation Co., 287 Ill.App.3d 119, 222 Ill.Dec. 634, 678 N.E.2d 41 (1997), the owner of the land underlying railway tracks granted a license to Commonwealth Edison Company to install power lines on its land. The plaintiff was retained to perform tunneling work to allow the installation of steel casing and pipe grouting for Commonwealth Edison Company and attempted to enforce a lien against the owner of the land underlying the railway tracks. The court held that no lien was enforceable against the owner of the land when a subcontractor constructs or installs apparatus for a contractor's sole benefit and the work does not improve the land or *99 benefit the landowner. L.J. Keefe Co., 287 Ill.App.3d at 122, 222 Ill.Dec. 634, 678 N.E.2d 41. The court held that there was no contract to improve the land. L.J. Keefe Co., 287 Ill.App.3d at 122, 222 Ill. Dec. 634, 678 N.E.2d 41. Rather, Commonwealth Edison Company had been granted a license to construct an apparatus for its own benefit, not for the benefit of the landowner. L.J. Keefe Co., 287 Ill. App.3d at 122, 222 Ill.Dec. 634, 678 N.E.2d 41. The subcontractor's work was performed solely for the benefit of Commonwealth Edison Company and did not benefit the land or the landowner in any way. L.J. Keefe Co., 287 Ill.App.3d at 122, 222 Ill.Dec. 634, 678 N.E.2d 41.
Similarly, in the case at bar, the services provided by the plaintiff were for the sole benefit of Power Holdings and did not benefit the land or the landowner in any way. There was no contract between the plaintiff and the landowner for the improvement of the land.
The plaintiff argues at length that the services it provided are lienable because they are "necessary" for the construction of a coal gasification facility on the property. However, the proper focus in determining the validity of a mechanic's lien is whether the work actually enhanced the value of the land. Cleveland Wrecking Co. v. Central National Bank in Chicago, 216 Ill.App.3d 279, 285, 160 Ill.Dec. 101, 576 N.E.2d 1055 (1991). It remains true that at the time the plaintiff entered into the contract with Power Holdings and at the time it rendered the services for which it now seeks to enforce its lien, Power Holdings was not the owner of the land and the services rendered did not increase the value of the land or benefit the landowners in any way. It also remains true that the services rendered by the plaintiff were not for the purpose of improving the land but were for the purpose of determining whether Power Holdings should exercise its option to purchase the land and thereafter build a coal gasification facility thereon. These are not the type of services for which a lien may be filed and enforced under the Act.
For the foregoing reasons, the judgment of the circuit court dismissing with prejudice the plaintiff's first amended complaint to enforce a mechanic's lien is hereby affirmed. Upon the prayer of the appellees and pursuant to the powers granted us by Supreme Court Rule 366(a) (155 Ill.2d R. 366(a)), we hereby remand this cause to the circuit court of Jefferson County with directions that it remove the mechanic's lien that is the subject of this lawsuit.
Affirmed; cause remanded with directions.
GOLDENHERSH, P.J., and CHAPMAN, J., concur.
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609 P.2d 663 (1980)
101 Idaho 131
In the Matter of the ESTATE of Dorothy L. BOWMAN, formerly Dorothy L. Cruse, Deceased.
Lyle A. SHAW, Petitioner-Appellant,
v.
William E. BOWMAN, Contestant-Respondent.
No. 12706.
Supreme Court of Idaho.
April 17, 1980.
*664 Wilfred W. Longeteig, Craigmont, and E. Don Copple, Boise, for petitioner-appellant.
William J. Dee and W.C. MacGregor, Jr., Grangeville, for contestant-respondent.
McFADDEN, Justice.
This is an appeal from a portion of a judicial order appointing William E. Bowman, contestant-respondent, the personal representative of the estate of his deceased wife, Dorothy L. Cruse Bowman. Also appealed is the order granting the respondent Bowman a homestead and family allowance from the deceased's separate property. Other parts of the order are not contested.
In 1966, the deceased, while still married to her first husband, Cyril C. Cruse, executed a will leaving certain personal effects to her daughter, Dianna Lee, and the remainder of her estate to her husband, Cyril Cruse. Cruse was named executor of the estate. The will provided that in the event that Cruse should predecease her the estate was to be divided equally between her daughter and son, Cyril Jr.; Lyle A. Shaw, petitioner-appellant, was to be named executor. Mr. Cruse died shortly after the will was executed. The widow married the respondent in 1969. No changes were made in the will during her marriage to the respondent.
Mrs. Bowman died on October 6, 1976, leaving three survivors, namely, her husband, respondent Bowman, and the two children from her first marriage. Shaw, the alternate executor named in the will filed an application for informal probate of the will and sought to be appointed personal representative. The application was granted and Shaw appointed personal representative. Subsequently Bowman filed a petition for adjudication of intestacy, determination of heirs, appointment of administrator and objections to the alleged will. In addition to this petition, he also filed petitions to set aside exempt property, for allowance of a homestead, and for a family allowance.
Following a court trial, the court decreed that Bowman be appointed personal representative, that he receive his share of the estate as though the testatrix died intestate, giving him all of the community property and one-half of the separate property (approximately $8,000).[1] The court set *665 aside $3,500 as an exempt property allowance,[2] $4,000 as a homestead allowance[3] and $500 per month as a family allowance,[4] payable as of the date of decedent's death "but not to exceed in any event Twelve (12) months or a maximum of Six Thousand Dollars ($6,000.00) for such family allowance." The court also decreed that the homestead allowance, exemption of property and family allowance have priority over all claims against the estate and "should come first from the one-half (1/2) share of decedent's property which is not passing to the surviving spouse." The balance of decedent's separate property, if any, was to be distributed to decedent's heirs as named in her last will and testament.
Appellant, the personal representative, presents four issues on this appeal:
1. Whether decedent's will, executed at a time when former I.C. Title 14, Ch. 3, was in effect, was revoked by her subsequent remarriage where her death occurred after the effective date of the Uniform Probate Code (July 1, 1972), insofar as the appointment of a personal representative is concerned.
2. Whether before an award of a homestead allowance (under I.C. § 15-2-401), the applicant for allowance has the burden of proving the statutory prerequisite that "no homestead has been selected during life."
3. Whether the record justifies and supports the award of a family allowance in light of the requirement of I.C. § 15-2-403 that the surviving spouse must have been in fact ... supported by the decedent.
4. Whether Shaw, the appellant, should be awarded attorney fees on appeal.
We will consider these issues in the same order as presented.
I.
Basically, the first issue is whether the trial court erred in appointing Bowman as the personal representative of the estate. The trial court found, on what we consider substantial evidence:
"That the estate is of limited means, and after payment of the family allowance ... and setting aside exempt property and homestead [allowance] there will be little, if any, estate left to distribute to any heirs other than the surviving spouse. That it would be inequitable and an unnecessary hardship on the estate to appoint any other person than the surviving spouse as the personal representative, particularly where it appears, as it does in the present case, that after setting aside such allowances ... that the estate may be inadequate to discharge anticipated unsecured claims."
The court then concluded that Bowman, the surviving spouse, should be appointed personal representative, and entered its decree accordingly. It is our conclusion that the trial court erred in this regard.
Neither party questions whether decedent's will was revoked by the death of her former husband, Mr. Cruse. Nor do either of the parties seriously question, nor do we doubt, that under the facts of this case that the will was not revoked by decedent's subsequent marriage to Bowman. I.C. § 15-2-508 and comments to official text. See Re Estate of Comassi, 107 Cal. 1, 40 P. 15 (1895); Re Burton's Will, 4 Misc. 512, 25 N.Y.S. 824 (1893); Parker v. Foreman, 252 Ala. 77, 39 So.2d 574 (1949); 9 A.L.R.2d 505; Annot. Remarriage as Revoking Will, 9 A.L.R.2d 510.
I.C. § 15-3-203[5] establishes the priority for appointment of personal representatives. *666 It is our conclusion that those provisions are mandatory and not to be disregarded. See Vaught v. Struble, 63 Idaho 352, 120 P.2d 259 (1941), where this court in interpreting the previous probate code (I.C.A. 15-312) held such provisions mandatory and not to be disregarded.
Respondent Bowman, however, asserts that the trial court's ruling that he be appointed as personal representative can be upheld on the theory that by reason of his claim for a family allowance that he is a creditor of the estate within the meaning of I.C. § 15-3-203(b)(1). Assuming that all other conditions to bring that provision into effect are met by this record, we disagree. I.C. § 15-1-201(5) defines for the purpose of the Uniform Probate Code the term "claim." In Estate of Hutchinson, 577 P.2d 1074 (Alaska 1978), the Supreme Court considered whether a family allowance was a "claim" within the meaning of AS 13.06.050(4), which definition in the Alaskan statute is identical to that of I.C. § 15-1-201(5). That court held that a family allowance was not a claim, and in reaching this conclusion the court stated:
"That [the fact that a family allowance is not a claim] is a permissible reading of the section because family allowances are not specifically included there as are, for example, expenses of administration. The wording of AS 13.11.135(a) [same as I.C. § 15-2-403] itself casts doubt on whether family allowances were meant to be included within the meaning of the word `claims.' It states that family allowances have priority over `all claims not all other claims.' Moreover, the recipient of a family allowance is treated by other sections of the code as a `distributee' rather than as a `claimant'" [I.C. §§ 15-3-906, 15-3-909, and XX-X-XXXX]. 577 P.2d at 1076.
The analysis of the Alaskan court is persuasive. Shaw, who was named in the will as the person to serve as the executor, now personal representative, should have been continued in that appointment. Thus the trial court erred in its conclusion of law that respondent Bowman should have been appointed.
2.
The second issue involves the validity of the respondent's claim for a homestead out of the estate. In his petition for allowance of a homestead respondent alleged that he was the surviving spouse of the decedent and that they were domiciled together in Riggins, Idaho County, Idaho, and that he was still domiciled there; that decedent died possessed of community property and certain separate property, i.e., a residence sold during her lifetime for approximately $18,000, as well as a lot in Riggins, and other personal property which was her separate property. In his petition no mention was made of any other homestead ever having been selected during decedent's life. I.C. § 15-2-401[6] provides for the allowance of a homestead to a surviving spouse of $4,000, or of $10,000 if there are dependent issue living with the surviving *667 spouse. At the time of adoption of the Uniform Probate Code, the legislature modified the Uniform Act by adding the first sentence, "[i]f no homestead has been selected during life and set aside... ." Appellant filed no answer or denial of any of the facts alleged in respondent's petition. However, after respondent presented his proof at the hearing on his various petitions, appellant argued that the homestead allowance should be denied on the basis that the statutory requirements had not been put into evidence. He contended that under I.C. § 15-2-401 a showing that no prior homestead had been set aside during life was a prerequisite for claiming a probate homestead under the statute. We disagree with the appellant's contention.
In general, homesteads enjoy a favored status with the courts. Because of such favor, it has been held that all reasonable presumptions consistent with good faith should be indulged in favor of one claiming a homestead. 40 C.J.S. Homesteads § 196 p. 671; 40 Am.Jur.2d Homestead § 11 p. 123. In Smith v. Tang, 100 Ariz. 196, 412 P.2d 697, 704 (1966), the court held that the right to a probate homestead could not be waived by an antenuptial agreement not clear and explicit as to what rights were being waived, the award being a right given by statute with the underlying purpose of such an award to insure a home for the surviving spouse. This court in Simmons v. Ewing, 96 Idaho 380, 529 P.2d 776 (1974), held that even though the homestead allowance interfered with the testator's intent, this was insufficient grounds to defeat the award. (In Ewing, the award of a homestead deprived the two daughters of the deceased of property as is the situation here in the case at hand.) Even the fact that the surviving spouse left the state and continued to reside outside the state has not been held to constitute abandonment such as to deprive one of a homestead allowance. Campbell v. Largilliere Co. Bankers, 44 Idaho 293, 256 P. 371 (1927).
The appellant argues that no prima facie case was made for a homestead award due to the failure to show that no homestead was taken during decedent's lifetime. The essential question is whether the burden is on the claimant to prove the exception, i.e. that no homestead was claimed during the decedent's lifetime or whether the burden is on the objector to show that one was claimed. In Zach v. Pond, 50 Idaho 685, 299 P. 666 (1931), this court addressed the question of who has the burden of proving an exception and adopted the federal rule announced in Grand Trunk Co. v. United States, 229 F. 116 (7 Cir.1916), which stated,
"`If the exception is so incorporated with the clause describing the offense that it becomes in fact a part of the description then it cannot be omitted in the pleading; but if it is not so incorporated with the clause defining the offense as to become a material part of the definition of the offense, then it is a matter of defense and must be shown by the other party though it be in the same section or even in the succeeding sentence.'" Zach v. Pond, 50 Idaho 685, 689, 299 P. 666, 668 (1931).
The conclusion of this court is that the exception here is not part of the definition of the homestead right, but merely allows the contestant the opportunity to refute the homestead allowance. He can interpose an affirmative defense with the burden on him to prove the existence of such a prior declaration.
The appellant failed to present any affirmative defenses. In fact, he did not answer the petition for homestead allowance. Although he protested the award during the hearing, he failed to present to the court any evidence of a prior homestead having "been selected during life and set aside." Therefore, we affirm the holding of the lower court in awarding the respondent a homestead.
3.
The next issue involves whether respondent was entitled to the award of a family allowance. Appellant argues that *668 I.C. § 15-2-403[7] required respondent to establish that prior to his wife's death he was actually supported by her, which he failed to do. However, appellant misreads this statute, which sets out three categories of persons entitled to this family allowance, "[1] the surviving spouse or [2] the surviving spouse and minor children whom the decedent was obligated to support and [3] children who were in fact being supported by him." Here we are only dealing with an allowance to the surviving spouse. I.C. § 32-901 provides that a husband and wife contract towards each other obligations of mutual respect, fidelity and support. Thus one spouse is obligated to support the other under the Idaho code. I.C. § 15-2-403 distinguishes between the situation of surviving spouses and surviving children whom the decedent was obligated to support, and the children who were in fact being supported. The only logical explanation for such distinction lies in the legislative intent to award a family allowance to either the spouse or minor children when the decedent was obligated to support them, as opposed to other children the decedent was not obligated to support but who did during lifetime provide such support.
Support for this conclusion is found in cases from other jurisdictions. In Barry v. Phillips, 329 P.2d 1046 (Okl. 1958), it was argued that a widow who was employed was not entitled to an allowance. The court, in interpreting statutes similar to I.C. § 15-2-403 stated that notwithstanding the widow's present earning power, she was entitled to such reasonable allowance out of the estate as may be necessary for her maintenance during the settlement of the estate. That court pointed out that the purpose of a widow's allowance is to provide for the widow out of the deceased husband's estate until such time as the widow had, in due course of law, received possession and use of her share of the estate. It held even if the widow has independent means, whether from the deceased or otherwise, she is nevertheless entitled to receive the family allowance during the probate of the estate. See In re Pugh's Estate, 22 Wash.2d 514, 154 P.2d 308 (1944); Ware v. Beech, 322 P.2d 635 (Okl. 1957).
The grant of a family allowance is within the discretion of the court as to the amount awarded. The amount of the award depends on the circumstances of the estate and the necessities of the surviving spouse and family. Wellman, Ed. Uniform Probate Code, Practice Manual Vol. I, p. 110. See also comments to the official text, I.C. § 15-2-403. Abuse of discretion is found only when the reviewing court is convinced that the award was clearly arbitrary and manifestly unreasonable. In re Estate of Dillon, 12 Wash. App. 804, 532 P.2d 1189, 1190 (1975); Estate of Glein, 512 P.2d 1151, 1153 (Mont. 1973); Annot. 90 A.L.R.2d 687. See also, Estate of Fleshman, 51 Idaho 312, 5 P.2d 727 (1931). It is thus the conclusion of this court that we find no abuse of discretion by the trial court either in granting the family allowance or in the amount thereof.
*669 Both appellant and respondent seek attorney fees on this appeal. There are two statutes involved in resolution of this issue, I.C. §§ 15-3-720[8] and 12-121.[9] Respondent contends he is entitled to attorney fees from the estate by reason of the provisions of § 15-3-720. However, as previously discussed in this opinion, it is the conclusion of this court that he was not entitled to be appointed as the personal representative of this estate. Thus, his claim for attorney fees on this appeal must be denied. However, while appellant did not specifically claim attorney fees on this appeal under this section, it would appear that from the terms of this statute "he is entitled to receive from the estate his necessary expenses and disbursements, including reasonable attorney's fees incurred." This does not mean, however, that this is a cost to be awarded as against the respondent Bowman herein. If the estate itself, as apart from the personal representative of the estate, is to be entitled to an award of attorney fees against the respondent, it would be necessary for the estate to establish that the defense by respondent to this appeal was being maintained frivolously, unreasonably or without foundation. I.C. § 12-121; I.R.C.P. 54(e)(1, 2 and 3); I.A.R. 40; Minich v. Gem State Developers, Inc., 99 Idaho 911, 591 P.2d 1078 (1979). The record would not sustain such a finding.
In summary, that portion of the order appointing respondent as the personal representative is reversed; that portion of the order granting a homestead allowance is affirmed; that portion of the order granting a family allowance is affirmed. No costs allowed. However, appellant may claim under the provisions of I.C. § 15-3-720, his necessary expenses and disbursements and as reasonable attorney's fees incurred on this appeal, payable out of the estate as a cost of administration, but not as against the respondent.
DONALDSON, C.J., and BAKES and BISTLINE, JJ., concur.
SHEPARD, J., concurs in the result.
NOTES
[1] See I.C. § 15-2-104(a)(4) and (b).
[2] See I.C. § 15-2-402, Exempt property.
[3] See I.C. § 15-2-401, Homestead allowance, n. 6 infra.
[4] See I.C. § 15-2-403, Family allowance, n. 7 infra.
[5] I.C. § 15-3-203:
"(a) Whether the proceedings are formal or informal, persons who are not disqualified have priority for appointment in the following order:
(1) the person with priority as determined by a probated will including a person nominated by a power conferred in a will;
(2) the surviving spouse of the decedent who is a devisee of the decedent;
(3) other devisees of the decedent;
(4) the surviving spouse of the decedent;
.....
(b) An objection to an appointment can be made only in formal proceedings. In case of objection, the priority stated in subsection (a) of this section apply except that
(1) if the estate appears to be more than adequate to meet exemptions and costs of administration but inadequate to discharge anticipated unsecured claims, the court, on petition of creditors, may appoint any qualified person;
..."
[6] I.C. § 15-2-401:
"Homestead allowance. If no homestead has been selected during life and set aside, a surviving spouse of a decedent who was domiciled in this state is entitled to a homestead allowance of four thousand dollars ($4,000) or ten thousand dollars ($10,000) if there are dependent issue living with the surviving spouse. If there is no surviving spouse, each minor child and each dependent child of the decedent is entitled to a homestead allowance amounting to ten thousand dollars ($10,000) divided by the number of minor and dependent children of the decedent if the same condition exists. The homestead allowance is exempt from and has priority over all claims against the estate. Homestead allowance is in addition to any share passing to the surviving spouse or minor or dependent child by the will of the decedent unless otherwise provided, by intestate succession or by way of elective share."
[7] I.C. § 15-2-403:
"Family allowance. In addition to the right to homestead allowance and exempt property, if the decedent was domiciled in this state, the surviving spouse or the surviving spouse and minor children whom the decedent was obligated to support and children who were in fact being supported by him are entitled to a reasonable allowance in money out of the estate for their maintenance during the period of administration, which allowance may not continue for longer than one (1) year if the estate is inadequate to discharge allowed claims. The allowance may be paid as a lump sum or in periodic instalments. It is payable to the surviving spouse, if living, for the use of the surviving spouse and minor and dependent children; otherwise to the children, or persons having their care and custody; but in case any minor child or dependent child is not living with the surviving spouse, the allowance may be made partially to the child or his guardian or other person having his care and custody, and partially to the spouse, as their needs may appear. The family allowance is exempt from and has priority over all claims but not over the homestead allowance.
The family allowance is not chargeable against any benefit or share passing to the surviving spouse or children by the will of the decedent unless otherwise provided, by intestate succession, or by way of elective share. The death of any person entitled to family allowance terminates his right to allowances not yet paid."
[8] I.C. § 15-3-720:
"Expenses in estate litigation. If any personal representative or person nominated as personal representative defends or prosecutes any proceeding in good faith, whether successful or not, he is entitled to receive from the estate his necessary expenses and disbursements including reasonable attorney's fees incurred."
[9] I.C. § 12-121:
"Attorney's fees. In any civil action, the judge may award reasonable attorney's fees to the prevailing party or parties, provided that this section shall not alter, repeal or amend any statute which otherwise provides for the award of attorney's fees."
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321 B.R. 756 (2005)
In the Matter of Yolanda Whitmire ISOM, Debtor.
Yolanda Whitmire Isom, Movant,
v.
eCast Settlement Corporation, Successor to Household Finance Company/Beneficial National Bank, Respondents.
No. 04-70837-PWB.
United States Bankruptcy Court, N.D. Georgia, Atlanta Division.
February 8, 2005.
*757 James R. Jester, Atlanta, GA, for Yolanda Whitmire Isom, Movant.
ORDER DISALLOWING PROOF OF CLAIM NO. 1 OF eCAST SETLEMENT CORPORATION
PAUL W. BONAPFEL, Bankruptcy Judge.
The Debtor has objected to Proof of Claim No. 1 filed by eCAST Settlement Corporation, Successor to Household Finance Company/Beneficial National Bank ("eCAST"). The grounds for the objection are that the proof of claim does not contain evidence that it was signed by an agent authorized to sign for eCAST and that no supporting documents are attached to support the claim.
The proof of claim shows on its face that it is signed by an attorney at law. The authority of an attorney to sign such a paper on behalf of a client is universally recognized, and the Court finds no reason to doubt that the signer actually is an attorney who has authority to submit the proof of claim on behalf of the client. Although the attorney signing the proof of claim is not admitted to practice in this case or in this Court, there is no requirement that an attorney be admitted to this Court's bar in order to be authorized to sign and file a proof of claim on behalf of a client. And there is no requirement that evidence of an individual's authority to act on behalf of a claimant be attached to a proof of claim. FED. R. BANKR.P. 9010(c); see In re Roberts, 20 B.R. 914, 917 n. 2 (Bankr.E.D.N.Y.1982); cf. Trebol Motors Distributor Corp. v. Bonilla (In re Trebol Motors Distributor Corp.), 220 B.R. 500, 502 (1st Cir. BAP 1998); In re White, 168 B.R. 825, 834 (Bankr.D.Conn.1994), appeal dismissed, 183 B.R. 356 (D.Conn.1995). The criminal penalties for submitting a fraudulent proof of claim, 18 U.S.C. §§ 152, 3571, provide a sufficient guard against the signing of a proof of claim by an unauthorized person, and the Debtor has shown nothing to cast any suspicion on the authorization of the person who signed eCast's proof of claim to do so. The proof of claim is not defective or subject to disallowance merely because the authority of the individual signing it is not documented with another piece of paper.
The lack of supporting documents for the proof of claim, likewise, is not a sufficient ground for disallowance of the claim or for requiring its amendment in the absence of a showing of a good faith dispute with regard to the claim, even if the creditor does not respond to an objection. *758 In re Shank, 315 B.R. 799 (Bankr. N.D.Ga.2004). At the hearing, however, the Debtor produced correspondence (copy attached) from the law firm representing eCAST stating that it did not contest disallowance of the claim. Because eCAST's affirmative response to the Debtor's objection is that it does not oppose disallowance, the Court will disallow the claim.
It is, therefore, hereby ORDERED and ADJUDGED that Proof of Claim No. 1 filed by eCAST Settlement Corporation is hereby disallowed.
IT IS SO ORDERED this 8th day of February, 2005.
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65 F.3d 173
NOTICE: Eighth Circuit Rule 28A(k) governs citation of unpublished opinions and provides that no party may cite an opinion not intended for publication unless the cases are related by identity between the parties or the causes of action.Andrew VANYO; Plaintiff-Appellant,Paul B. Mehl; Thomas Mehl; Robert Rudnick; John B.Brennan; Kristen Larson; Michael T. Senger;Rose Senger; Patricia Larson; DaroldLarson; Tim Bagalka; MarieA. Solmon; Plaintiffs,Bernard Holecek; Plaintiff-Appellant,Theodore C. Kjeseth; Ruby M. Kjeseth; Kathryn AnnLindgren; Timothy Lindgren; Jody Clemens; MartinWishnatsky, Plaintiffs,v.FARGO WOMEN'S HEALTH ORGANIZATION, INC., in its corporatecapacity; Jane Bovard, individually and as Administrator ofthe Fargo Women's Health Organization; John T. Goff,individually and as an attorney; Connie Cleveland,individually and as an attorney; Lawrence Leclerc,individually and as an attorney; Frank Racek, individuallyand as an attorney; Georgia Dawson, individually and as anattorney; Donald Rudnick, individually and as Sheriff ofCass County; Cass County, in its corporate capacity; Stateof North Dakota; City of Fargo, in its corporate capacity;Jane Doe, as an individual; Mary Doe, as an individual;Ann Alzheimer, individually and in her official capacity;Kimberly Clark, individually and in her official capacity;Byron Green, individually and in his official capacity; DonLawyer, individually and in his official capacity; ToddOsmundson, individually and in his official capacity;Dennis Pederson, individually and in his official capacity;Leo Rognlin, individually and in his official capacity;Vince Kempf, individually and in his official capacity;Gordon Olson, individually and in his official capacity;Larry Longtine, individually and in his official capacity;Keith Ternes, individually and in his official capacity;Kevin Tweeton, individually and in his official capacity;Sherri Arnold, individually and in her official capacity;Kevin Niemann, individually and in his official capacity;John Sanderson, individually and in his official capacity,Defendants-Appellees.
No. 94-3794ND
United States Court of Appeals,Eighth Circuit.
Submitted: Aug. 21, 1995Filed: Aug. 25, 1995
Before FAGG, LOKEN, and MORRIS SHEPPARD ARNOLD, Circuit Judges.
PER CURIAM.
1
Andrew Vanyo, Bernard Holecek, and seventeen others filed a lawsuit alleging false arrest and false imprisonment following their conviction for disobeying a judicial order that restrained obstruction of the Fargo Women's Health Organization. On motions filed by defendants and several of the plaintiffs, the district court dismissed the complaint with prejudice and imposed the sanction of an admonition, warning that existing law did not support any of the claims or legal theories set forth in the complaint. Vanyo and Holecek appeal from the postdismissal denial of Vanyo's "motion for new trial."
2
The district court correctly denied the untimely postjudgment motion. See Fed. R. Civ. P. 59(a) (motion must be filed within ten days of judgment; new trial may be granted in actions previously tried ); see also Fed. R. Civ. P. 59(e) (ten-day time limit). Accordingly, we affirm. See 8th Cir. R. 47B.
3
Although the appeal is frivolous, the appellees nevertheless chose to file multiple briefs instead of moving for dismissal and summary affirmance. We thus deny the appellees' motions for sanctions.
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323 F.2d 523
CARTER PRODUCTS, INC., and Sullivan, Stauffer, Colwell &Bayles, Inc., Appellants,v.FEDERAL TRADE COMMISSION, Appellee.
No. 19778.
United States Court of Appeals Fifth Circuit.
Sept. 27, 1963.
William L. Hanaway, Breed, Abbott & Morgan, New York City, for petitioners-appellants Carter Products, Inc., and Sullivan, Stauffer, Colwell & Bayles, Inc., Stoddard B. Colby, New York City, of counsel.
Richard W. Whitlock, Atty., J. B. Truly, Asst. Gen. Counsel, James McI. Henderson, Gen. Counsel, F.T.C., Washington, D.C., for Federal Trade Commission.
Before PHILLIPS,* WISDOM and GEWIN, Circuit Judges.
WISDOM, Circuit Judge.
1
Everyone knows that on TV all that glisters is not gold. On a black and white screen, white looks grey and blue looks white: the lily must be painted. Coffee looks like mud. Real ice cream melts much more quickly than that firm but fake sundae. The plain fact is, except by props and mock-ups1 some objects cannot be shown on television as the viewer, in his mind's eye, knows the essence of the objects.
2
The technical limitations of television, driving product manufacturers to the substitution of a mock-up for the genuine article, if they wish to use what they may regard as perhaps their most effective advertising medium, often has resulted in a collision between truth and salesmanship.2 'What is truth?', has been asked before. On television truth is relative. Assuming that collisions between truth and salesmanship are avoidable, i.e., that mock-ups are not illegal per se, the basic problem this case presents is: what standards should the Federal Trade Commission and the courts work out for television commercials so that advertisers will appear to be telling the truth, consistently with Section 5 of the Federal Trade Commission Act prohibiting unfair advertising practices.
3
This case is before us on petition for review of an order issued by the Federal Trade Commission directing the petitioners to cease and desist from engaging in certain unfair methods of competition in violation of Section 5 of the Act, 15 U.S.C.A. 45.3
4
The Commission charges Carter Products, Inc., manufacturer of a popular aerosol shaving cream, 'Rise', and other products, with having falsely represented in television commercials that shaving creams competing with Rise dry out during the course of a shave, while Rise stays moist and creamy. Sullivan, Stauffer, Colwell & Bayles, Inc., an advertising agency handling the Rise account, and S. Heagan Bayles, an executive of the agency, are also charged.
5
The Hearing Examiner found that the advertisement was misleading, unfair, and damaging to competing products of Rise. He dismissed the action against Bayles in his individual capacity. The Commission approved the findings of the Examiner but narrowed the scope of the examiner's cease and desist order.
6
This Court viewed the Rise commercial. It opened with a silhouette of a man shaving with 'ordinary' instant cream. A jagged line followed the rezor down his face. A voice said, 'Guard against razor scratch'. After the picture and the words were repeated, a closeup showed a man shaving in great discomfort; the lather had dried out. Superimposed on this picture were the words, 'Ordinary Lathers Dry Out.' The announcer said: 'The scratches, scrapes and burns you often get with ordinary aerated lathers that dry out on your face * * * and let your whiskers dry out, too. Your rezor tugs and pulls.' The picture then shifted to a can of Rise from which a rich, creamy lather was released onto a man's hands. 'Stays Moist and Cremy' was flashed onto the screen. The next episode showed a man shaving with Rise. He was enjoying this shave. Again 'Stays Moist and Creamy' appeared on the screen followed by the legend, 'the wetter lather that DOESN'T DRY OUT'. Throughout this happy scene the announcer described the virtues or Rise:
7
But now there's a new instant lather * * * that stays moist and creamy * * * keeps your whiskers wet and soft all through your shave * * * gives you closer, more comfortable shaves. It's Rise patented small bubble lather * * * the richest, wettest lather ever made. Instead of drying out on your face * * * Rise wetter lather puts more moisture into whiskers * * * keeps them wet and soft * * * all through your shave. Guards against Razor scratch. * * * Gives you closer, more comfortable shaves in half the time. Shave with Rise * * * the wetter lather that doesn't dry out on your face.
8
As a matter of fact, the 'ordinary lather' used in the commercial was not a lather. It was a mock-up. The white creamy-looking substance simulating shaving cream was made from a special formula consisting of 90 per cent water and a foaming agent known as 'ultrawet 60L'. This imitation 'ordinary lather' did not contain any soaps or fatty acid salts, the ingredients used to keep shaving cream from breaking down. It is not surprising therefore that the 'lather' came out of the can in a good puff and then rapidly disappeared.
9
February 9, 1960, on advice of counsel, Carter Products stopped using that particular television advertisement. The Commission issued a complaint on June 15, 1960, alleging that the use of the simulated lather did 'not (provide) a valid comparison of the respective qualities of 'Rise' and competing products as shaving lathers and tends to disparage competing lathers.'4
10
The petitioners' major defense is that their commercial was not a comparison of Rise with all competing products, but was simply a comparison of the moisture-retaining properties of Rise with the drying-out properties of inferior shaving creams. They contend that practical limitations imposed by television photography and the necessity of completing the commercial within sixty seconds compelled the use of the mock-up.
I.
11
A. First, in considering the Commission's findings and order, the reviewing court must recognize certain fundamental principles. 'The meaning of advertisements of other representations to the public, and their tendency or capacity to mislead or deceived, are questions of fact to be determined by the Commission'. Kalwajtys v. F.T.C., 7 Cir., 1956, 237 F.2d 654, cert. den'd, 1957, 352 U.S. 1025, 77 S.Ct. 591, 1 L.Ed.2d 597. It is the Commission's function to find these facts and a court should not disturb its determination unless the finding is arbitrary or clearly wrong. Kalwaitys v. F.T.C.; Gulf Oil Corp. v. F.T.C., 5 Cir., 1945, 150 F.2d 106, 108. Furthermore, the Commission may draw its own inferences from the advertisement and need not depend on testimony or exhibits (aside from the advertisements themselves) introduced into the record. New Amer. Library of World Literature v. F.T.C., 2 Cir., 1954, 213 F.2d 143; see Zenith Radio Corp. v. F.T.C., 7 Cir., 1944, 143 F.2d 29. The Commission need not confine itself to the literal meaning of the words used but may look to the overall impact of the entire commercial.
12
B. In non-television cases brought under Section 5(a) the law is clear that an advertisement is illegal if it contains a false claim inducing the purchase of a product inferior to the product the consumer bargained for. The false claim may be a quality,5 an ingredient,6 or effectiveness7 the advertised product does not have. Or the advertisement may disparage competing products by attributing to them inferiorities they do not possess.8 In such cases the advertiser acquires a better competitive position in the market as a result of false and unfair practices. As Justice Cardozo said in Federal Trade Commission v. Algoma Lumber Co., 1934, 291 U.S. 67, 54 S.Ct. 315, 78 L.Ed. 655:
13
'The consumer is prejudiced if upon giving an order for one thing, he is supplied with something else. * * * In such matters, the public is entitled to get what it chooses, though the choice may be dictated by caprice or by fashion or perhaps by ignorance. Nor is the prejudice only to the consumer. Dealers and manufacturers are prejudiced when orders that would have come to them if the lumber had been rightly named, are diverted to others whose methods are less scrupulous.' 291 U.S. at 78, 54 S.Ct. at 320, 78 L.Ed. 655.
14
The broad principle expressed by Justice Cardozo in 1934 has not lost any of its vitality.
15
C. In Colgate-Palmolive v. F.T.C., 1 Cir., 1962, 310 F.2d 89, 94, the 'sandpaper' case, the First Circuit formulated the first judicial standards for testing the legality of props and mock-ups in television commercials. Colgate-Palmolive was not a case involving a comparison test and disparagement of competing products. However, we consider the standards worked out in that opinion well-reasoned, in keeping with principles established in non-television cases, and applicable to the case now before us.
16
In Colgate-Palmolive the commercial purported to demonstrate visually the moisturizing qualities of 'Rapid Shave'. It showed an actor applying Rapid Shave to what appeared to be sandpaper. Almost immediately after applying the cream, in one stroke of a razor the actor shaved the 'sandpaper' clean; 'Apply * * * soak * * * and off in a stroke.' On television real sandpaper appears to be plain, colored paper, and cannot be shaved until it has soaked 'upwards of an hour'. As a mock-up, the advertiser used plexiglas covered with a jelly-like substance over which sand was sprinkled.
17
The Commission held that the commercial was deceptive, finding that Rapid Shave could not shave real sandpaper even after an hour's soaking. The Commission went further. It said that the fact no one buys Rapid Shave to scrape sandpaper is besides the point. Even if the commercial truthfully described Rapid Shave's effectiveness, according to the Commission, it was still deceptive and unfair advertising in that it 'misinform(s) the viewer that what he sees being shown is genuine 'tough, dry sandpaper', rather than a plexiglas mock-up.'9 The Commission quoted from Algoma: 'The public is entitled to get what it chooses' and 'substitution would be unfair though equivalence were shown.' Thus, the Commission's view was that any mock-up, except perhaps, for background purposes, was illegal per se.10
18
The First Circuit agreed that the demonstration was deceptive,11 but did not accept the Commission's criteria and set aside the order. Judge Aldrich, for the court, rejected the contention that 'mock-ups, or what the Commission chooses to call demonstrations that are not 'genuine,' were illegal per se.' He was 'unable to see how a viewer is misled in any material particular if the only untruth is one the sole purpose of which is to compensate for deficiencies in the photographic processes.' The Court reasoned:
19
'The Commission properly said that the customer is entitled to get what he is led to believe he will get, whether he is right or wrong in thinking it makes a difference. But where the only untruth is that the substance (the viewer) sees on the screen is artificial, and the visual appearance is otherwise a correct and accurate representation of the product itself, he is not injured. The viewer is not buying the particular substance he sees in the studio; he is buying the product. By hypothesis, when he receives the product it will be exactly as he understood it would be. There has been no material deceit.' 310 F.2d at 94.
20
We agree with that principle, and extend it in this case to demonstrations of competing products. Here, the mock-up was not used simply to compensate for the technical limitations in television. It was an unfair and inaccurate representation which distorted the comparison test and thereby disparaged Carter's competitors.
II.
21
It is clear to us, as it was to the Commission, that there is no merit to Carter's contention that the commercial was designed to combat only the 'ordinary, inferior lathers'. The message is hammered home that 'Rise' is 'the richest, wettest lather ever made,' and that it is 'the lather that doesn't dry out,' coupled with the corollary, 'Instead of drying out on your face * * *' Similarly, the unequivocal statement is made that 'no other lather lets you shave so close * * *.' To this must be added the insistent message, prominently displayed on the screen (and backed by the model with the 'ultra-wet 60L' on his face), that 'Ordinary Lathers Dry Out,' which is accompanied by the verbal assertion as to 'ordinary aerated lathers that dry out on your face.' And, as the Commission pointed out, the commercials do not indicate that the phrase 'that dry out on your face' is intended as a qualification of the term 'ordinary aerated lathers.' In the overall context of the advertisement the comparison refers to all ordinary aerated lathers which compete with Rise and just to inferior ones which dry out.
22
The record shows that the demonstration was false and misleading. There are competing products, some which are based on licenses from Carter, which do not dry out any more than Rise dries out. A vice-president of the advertising agency testified, for example:
23
'Hearing Examiner Poindexter:
24
'But you do not consider the Palmolive Rapid Shave which is Commission's Exhibit 14, and the Gillette Foamy, which is Exhibit 15, break down and dry out?
25
'The Witness:
26
'No. They are well-made lathers. 'Q. Do any of those appear dried out, like this special formula that was used in the television commercials in comparison with Rise? 'A. No. 'Q. Then you would say, would you not, that the television commercials were not a true comparison of the appearance of Rise and Palmolive Rapid Shave and Gillette Foamy; is that correct? 'A. Yes.'
27
At the Hearing Examiner found, neither 'Rise' nor two other competing commercial lathers (Palmolive 'Rapid Shave' and Gillette 'Foamy') dried out as quickly as the special formula 'ultrawet 60L,' and, moreover, seven other lathers (appearing in petitioners' in camera exhibits) did not dry out in one minute as did the 'ultra-wet 60L.' The Commission drew the same inference the Court draws: Carter used 'ultra-wet 60L' because the actual competing lathers would not oblige by coming out of the can with a puff and drying quickly. The graphic visual demonstration was therefore false and misleading in that the artificial substance attributed characteristics to Rise's competing products which they did not possess.
28
In short, 'ultra-wet 60L' deceived the viewer by ascribing false attributes to lathers in competition with Rise. It was not simply to compensate for the limitations in the advertising medium.
29
Substantial evidence and reasonable inferences support the Commission's findings.
III.
30
Carter contends that since it abandoned the commercial four months before the complaint was filed, the order should be set aside. Abandonment of the illegal conduct does not render the controversy moot. Clinton Watch Co. v. F.T.C., 7 Cir., 1961, 291 F.2d 838. This is especially true when the Commission has already acted in the case. Eugene Dietzgen Co. v. F.T.C., 7 Cir. 1944, 142 F.2d 321. In C. Howard Hunt Pen Co. v. F.T.C., 3 Cir., 1952,197 F.2d 273 the order was upheld even though the illegal practices had ceased years before the investigation had started. To the same effect is Spencer Gifts, Inc. v. F.T.C., 3 Cir., 1962, 302 F.2d 267 where the conduct in question had been abandoned several months before the Commission's inquiry began. Here the Commission determined that 'there has been no showing of unusual circumstances which would indicate that entry of an order is unnecessary not does it appear that there has been any change in the competitive conditions which may have influenced respondents to use advertising of the type under consideration.' The petitioners' 'assurance of discontinuance related only to the specific commercials and not to the practices at which the complaint is directed.' See C. Howard Hunt Pen Co. v. F.T.C., 3 Cir., 1952,197 F.2d 273, 281. We cannot say that the Commission abused its discretion in issuing the cease and desist order.
IV.
31
Although we uphold the Commission on the merits, we have difficulty with the order. The order provides in part:
32
'It Is Ordered that respondents * * * do forthwith casee and desist from: '(a) Disparaging the quality or properties of any competing product or products, through the use of false or misleading pictures, depictions or demonstrations either alone or accompanied by oral or written statements. '(b) Representing directly or by implication that pictures, depictions or demonstrations either alone or accompanied by oral or written statements, accurately portray or depict the superiority of any product over competing products when such portrayal or depiction is not a genuine or accurate comparison of such product with competing products. 'And Further, in the advertising, offering for sale, or distributing of 'Rise' shaving cream, or any other shaving cream, in commerce, as 'commerce' is defined in the Federal Trade Commission Act, from misrepresenting the moisture retaining properties of competing shaving creams or otherwise falsely disparaging the quality or merits of competing products.
33
A. In Colgate-Palmolive the Court set aside an order forbidding the petitioners from
34
'representing, directly or by implication, in describing, explaining, or purporting to prove the quality or merits of any product, that pictures, depictions, or demonstrations, either alone or accompanied by oral or written statements, are genuine or accurate representations, depictions, or demonstrations of, or prove the quality or merits or, any product, when such pictures, depictions, or demonstrations are not in fact genuine or accurate representations, depictions, or demonstrations of, or do not prove the quality or merits of, any such products.'
35
Under that order, the use of mashed potatoes to advertise ice cream would be prohibited even though real ice cream would melt under the heat of the photographer's light, and mashed potatoes looks more like ice cream on the screen than ice cream itself. The Court said:
36
'(The order) would prohibit any demonstration even if it did not mistake facts about, or misrepresent the appearance of, the product, if it was not 'genuine' in that the actual substance used in the studio, because of technical problems of photography, was not the product itself. In other words, it would be no defense that, as the examiner found on undisputed testimony here, the shaving of sand-paper, even when in fact accomplished, does not properly reproduce on television and must be simulated to be effective.'
37
The order in this case suffers from the same infirmities. But, argues the Commission, this case, unlike Colgate-Palmolive, is predicated upon disparagement, deceptive comparison of competing products. Although this is true, the words 'genuine or accurate' or open to the interpretation that the actual products used in the comparison must be the real thing.
38
In addition, we are uncertain whether the Commission intended to set up an either-or standard. In context, we take 'accurate' to mean careful conformity to the truth, but it is a relative term permitting some variance from absolute truth. We regard 'genuine' as an absolute term, meaning that the article is authentic.
39
The Carter order bears an obvious resemblance to the Colgate-Palmolive order which was framed at a time when the Commission was unyielding in its hostility to mock-ups. The utility of props and mock-ups in television commercials and the importance of advertising to the television industry suggest that the Commission should redraft the order in this case, in the light of this opinion and the new order in Colgate-Palmolive. See Federal Trade Commission v. Brock & Co., 1962, 368 U.S. 360, 82 S.Ct. 431, 7 L.Ed.2d 353.
40
The new order should focus on the misrepresentation of attributes rather than on substitution of a simulated article for the genuine article. The Commission may wish to consider (1) elimination of the word 'genuine'; (2) recognition of the validity of demonstrations which compensate fairly for the technical limitations of television and communicate fairly to the viewer the actual qualities and characteristics of the objects which are simulated; (3) prohibition of props or mock-ups which distort the actual qualities or characteristics of the objects which are simulated.
41
B. Petitioners further complain that on the basis of the single misstep in relation to the advertisement of Rise the Commission makes its order applicable to all the products which Carter produces. The propriety of such an order depends upon the circumstances. Twice before this suit, Carter has litigated orders dealing with similar offenses. Carter Prods., Inc. v. F.T.C., 7 Cir. 1951, 186 F.2d 821 (deodorant); Carter Prods., Inc. v. F.T.C., 9 Cir., 1959, 268 F.2d 461, cert. den'd, 1959, 361 U.S. 884, 80 S.Ct. 155, 4 L.Ed.2d 120 ('Little Liver Pills'). In Niresk Industries, Inc. v. F.T.C., 7 Cir., 1960, 278 F.2d 337, cert. den'd, 1960, 364 U.S. 883, 81 S.Ct. 173, 5 L.Ed.2d 104 the court said:
42
'The findings of unfair and deceptive practices against petitioners were confined to their advertising and sale of the cooker-fryer, while the order of the Commission enjoins the use of like advertising by petitioners in conjunction with the sale of the fryer or any other product. Petitioners contend that the order must be restricted to their advertisement and sale of the cooker-fryer alone. 'We do not agree with that contention. The Commission has a large discretion in its choice of a remedy which it deems necessary to cope with the unlawful practices found, and the courts may interfere with the Commission's choice only if the remedy selected bears no reasonable relationship to such unlawful practices. * * * Commission orders are not designed to punish for past transgressions, but are designed as a means for preventing 'illegal practices in the future. * * *' 'To the end that the Commission may achieve that purpose, its orders may prohibit not only the further use of the precise practice found to have existed in the past, but also, the future use of related and similar practices. * * * Petitioners market a large number of products in Commerce. They stand adjudged guilty of the use of illegal practices in the advertisement and sale of one product. We think it is entirely reasonable for the Commission to frame its order broadly enough to prohibit petitioners use of identical illegal practices for any purpose, or in conjunction with the sale of any and all products.' 278 F.2d at 342-343.
43
See Consumer Sales Corp. v. F.T.C., 2 Cir., 1952, 198 F.2d 404.
44
The Niresk case is substantially similar to the case before us. The prohibition against disparaging competing products by means of misleading advertisements should apply across the board. See F.T.C. v. Mandel Bros., 1959, 359 U.S. 385, 79 S.Ct. 818, 3 L.Ed.2d 893; F.T.C. v. Ruberoid Co., 1952, 343 U.S. 470, 72 S.Ct. 800, 96 L.Ed. 1081.12 See also F.T.C. v. Henry Broch & Co., 1962, 368 U.S. 360, 82 S.Ct. 431, 7 L.Ed.2d 353.13
45
C. Petitioners assert that the Commission's order is void as being too indefinite as to what is a 'competing product'. We cannot agree. The Commission and the district court have discretion to fit the remedy to the offense. F.T.C. v. Mandel Bros., 1959, 359 U.S. 385, 79 S.Ct. 818, 3 L.Ed.2d 893; see N.L.R.B. v. Seven-Up Bottling Co., 1953, 344 U.S. 344, 73 S.Ct. 287, 97 L.Ed. 377. Should the occasion arise, petitioners would be able to dispute the definition and application of the words. See Jaffe, The Judicial Enforcement of Administrative Orders, 76 Harv.L.Rev. 865, 883-85 (1963).
46
D. This brings us to another argument of the petitioners. The complaint did not, contend the petitioners, contain a proposed order or other indication of the possible breadth which the final order assumed. There is no merit in this contention. In a similar situation, in Colgate, the court noted that the complaint is not happily phrased, but it does lay out the basic elements of the Commission's concern: the use of the mock-up resulting in deception and disparagement. As the government points out, the petitioners had ample opportunity to (and did) contest the 'broad' order of the Hearing Examiner before the full Commission. See F.T.C. v. National Lead Co., 1957,352 U.S. 419, 77 S.Ct. 502, 1 L.Ed.2d 438. Moreover, the plaintiffs realized that the FTC wanted more than simply the cessation of an advertisement which had already been removed from the air. The complaint, sufficiently apprised petitioners of the matter to be litigated and the relief anticipated.
V.
47
Finally, we come to the last contention of the petitioners, namely that the advertising agency should not be included within the terms of the order; as a mere agent the agency should not be held responsible for unknowingly carrying out the orders of its principal.
48
In Colgate-Palmolive the court had 'reservations as to how far it is appropriate to go in the case of an agent,' but said:
49
'Where, as here, the Commission was warranted in finding that the advertising agency was an active, if not the prime, mover, we could not say that the Commission lacked either jurisdiction or discretion. Cf. C. Howard Hunt Pen Co. v. F.T.C., supra 197 F.2d at 281; Chas. A. Brewer & Sons v. F.T.C., 6 Cir., 1946, 158 F.2d 74; see also National Cash-Register Co. v. Leland, 1 Cir., 1899, 94 F. 502, 507, cert. den. 175 U.S. 724, 20 S.Ct. 1021, 44 L.Ed. 337.'
50
Howard Hunt Pen Co. v. F.T.C., 3 Cir.1952, 197 F.2d 273, and Chas. A. Brewer & Sons, v. F.T.C., 6 Cir., 1946, 158 F.2d 74, involved situations where the offending manufacturers had put devices in the hands of sellers whereby they were enabled to engage in unfair competition. Hence, the principle to be drawn from these cases is that where the alleged offender has made available resources whereby another may commit unfair acts, he is subject to an order. Here we are concerned with a different situation: Is one carrying out the will of another to be held responsible for the results of his actions? It appears to us that the proper criterion for deciding this question should be the extent to which the advertising agency actually participated in the deception. This is essentially a problem of fact for the Commission.
51
It is clear from the record that the advertising agency here was deeply involved. The chairman of the board of the agency testified that he himself did not know that 'ultra-wet 60L' was to be used in the commercial. However, this agency had worked for Carfter for years and had handled the Rise account before that product had a name. The chairman also testified his agency conceived the idea that the thing to push in advertising Rise was the wetness approach. They agreed with Carter on the motif of the program, wrote the storyboards, and assigned the job to the film producer in Hollywood.
52
In these circumstances, we cannot say that the Commission abused its discretion. We would suggest, however, that the effect of the order on the advertising agency should be limited to Carter's products.
53
Judgment will be entered setting aside the order of the Commission, further proceedings to be in accordance with this opinion.
*
Of the Tenth Circuit, sitting by designation
1
'In advertising a 'prop' or 'mock-up' is an object or device used in a television commercial for a particular purpose relevant to the commercial message. Frequently it is something made solely for use in the commercial and often it is made to simulate a real object.' Comment, Illusion or Deception: The Use of 'Props' and 'Mock-ups' in Television Advertising, 72 Yale L.J. 145 (1962)
2
'As to the asserted technical limitations of the medium, the Commission is inclined to be somewhat skeptical. We doubt that the skills and resources available in television photography, in an industry which has made such striking technological advances in recent years, are as inadequate as they have been portrayed to us by the counsel for respondents. However, assuming it to be the fact that there are indeed such limitations in television photography, the Commission can appreciate that these 'technical' difficulties could give rise to problems for sponsors and agencies in determining how most effectively to use television in advertising their products. The limitations of the medium may present a challenge to the creative ingenuity and resourcefulness of copywriters; but surely they could not constitute lawful justification for resort to falsehoods and deception of the public. The argument to the contrary would seem to be based on the wholly untenable assumption that the primary or dominant function of television is to sell goods, and that the Commission should not make any ruling which would impair the ability of sponsors and agencies to use television with maximum effectiveness as a sales or advertising medium
'Stripped of polite verbiage, the argument boils down to this: Where truth and television salesmanship collide, the former must give way to the latter. This is obviously an indefensible proposition. The notion that a sponsor may take liberties with the truth in its television advertising, while advertisers using other media must continue to be truthful, is patent nonsense. The statutory requirements of truth in advertising apply to television no less than to other media of communication. Adherence to the truth should be no more of an impediment to effective advertising in television than in any other medium.' Opinion of the Commission in Colgate-Palmolive, No. 7736, Dec. 29, 1961; 3 Trade Reg. 15,643.
3
The pertinent provisions of the Act are: 'Sec. 5(a)(1) Unfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce, are hereby declared unlawful.' 66 Stat. 632 (1952), 15 U.S.C. 45(a)(1) (1958)
'Sec. 5(a)(6) The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations, * * * from using unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce.' 66 Stat. 632 (1952), 15 U.S.C. 45(a)(6) (1958).
'Sec. 5(c) * * * the findings of the Commission as to the facts, if supported by evidence shall be conclusive.' 52 Stat. 112 (1938), 15 U.S.C. 45(c) (1958).'
4
The Commission found:
'When viewed and heard in its entirety, there can be no doubt that the commercial compares 'Rise' with all other competing aerated shaving creams. Neither the word 'ordinary' nor any other part of the commercial indicates that (petitioners) are distinguishing between low quality and high quality lathers. Insofar as the viewer can determine from the advertising an ordinary shaving cream is merely a shaving cream other than 'Rise.' Consequently, we believe that (petitioners') advertising conveys the impression that all aerated lathers competing with 'Rise' dry out. Since the record shows that this is untrue, the representation is a false disparagement of those aerated shaving creams that do not dry out during the course of a shave. * * * Although it is true that (petitioners) represented that 'Rise' is superior to a dried-out lather, it is equally clear that they also represented that 'Rise' is superior to competing aerated shaving lathers because these lathers dry out and 'Rise' does not. The demonstration in the advertising purported to show why 'Rise' is superior. The viewer could observe and see for himself that other lathers dry out while 'Rise' remains 'moist and creamy'. To remove any doubts that this was the purpose of the demonstration, the words 'Ordinary Lathers Dry Out' were super-imposed on the picture. Since the product which was shown as dried out in the demonstration was a substance other than a shaving cream, having none of the characteristics of a shaving cream except the property of foaming, the demonstration did not show that competing lathers dry out faster than 'Rise', although it conveyed the impression that it did. The demonstration did not prove what it purported to prove and was therefore, false and deceptive.'
5
In F.T.C. v. Algoma Lumber Co., 1934, 291 U.S. 67, 54 S.Ct. 315, 78 L.Ed. 655, the advertisement used the words 'California white pine' to describe a less desirable yellow pine, 'pinus ponderosa'
6
In Jacob Siegel Co. v. F.T.C., 1946, 327 U.S. 608, 66 S.Ct. 758, 90 L.Ed. 888, an advertisement of fur coats featured the name 'Alpacuna' when the product contained no vicuna fur
7
In Carter Products, Inc. v. F.T.C., 9 Cir., 1959, 268 F.2d 461, cert. den'd 361 U.S. 884, 80 S.Ct. 155, 4 L.Ed.2d 120, the court enforced an order requiring Carter Products Co. to delete the word 'Liver' from the trade name of its 'Little Liver Pills', when it was shown that the product had no curative or active effects upon the liver
8
In Perma-Maid Co. v. F.T.C., 6 Cir., 1941, 121 F.2d 282 manufacturers of steel cooking ware were enjoined from advertising the food prepared in aluminum utensils causes ulcers and cancers
9
Opinion of the Commission, No. 7736, December 29, 1961; 3 Trade Reg.Rep. 15,643, at 20,480
10
It was not always thus. Earl W. Knitner, former Chairman of the Commission has said:
'We realize that it is often difficult to impart true life quality to a product when it is photographed for television. * * * Where the use of props does not result in a material deception, the Federal Trade Commission would have no reason to complain. * * * Obviously, we recognize that it is impossible to photograph ice cream properly under hot lights. If you have to use shaving cream to get the kind of head which is normal on a glass of beer, this probably would not represent a material deception, unless, of course, it was carried beyond a reasonable point. If a glass goblet glistens too much, we still aren't likely to be alarmed.' Advertising Age, Nov. 23, 1959.
In this very case the Hearing Examiner said:
'Reasonable latitude is and should be granted to advertisers and advertising agencies in the use of 'make-up' where necessary to meet the technical requirements of photography.'
11
'We see no objection to obvious fancy, provided there is no underlying misrepresentation. But respondents' difficulty is that they do not come under any such principle. They went far beyond generalities and eye-catching devices into asserting as a fact that the cream enables sandpaper to be shaved forthwith, and that this fact 'proved' the cream's properties for shaving humans. They cannot now suggest that ability to shave sandpaper forthwith was an irrelevant fact and an irrelevant representation. We agree with the Commission that it is immaterial that the cream may in fact have adequate shaving qualities. If a misrepresentation is calculated to affect a buyer's judgment it does not make it a fair business practice to say the judgment was capricious.' 310 F.2d at 92
12
'The Commission is not limited to prohibiting the illegal practice in the precise form in which it is found to have existed in the past. If the Commission is to attain the objectives Congress envisioned, it cannot be required to confine its roadblock to the narrow lane the transgressor has traveled; it must be allowed effectively to close all roads to the prohibited goal, so that its order may not be by-passed with impunity.' 343 U.S. at 473, 72 S.Ct. at 803, 96 L.Ed. 1081
13
'Upon any future enforcement proceeding, the Commission and the Court of Appeals will have ready at hand interpretive tools * * * for use in tailoring the order, in the setting of a specific asserted violation, so as to meet the legitimate needs of the case. They will be free to construe the order as designed strictly to cope with the threat of future violations indentical with or like or related to the (earlier) violations * * *.' 368 U.S. at 366, 82 S.Ct. at 435, 7 L.Ed.2d 353
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21 F.3d 432NOTICE: Eighth Circuit Rule 28A(k) governs citation of unpublished opinions and provides that no party may cite an opinion not intended for publication unless the cases are related by identity between the parties or the causes of action.
N. Walter GOINS, Appellant,v.Donald R. JOHNSTON, Trustee of the Bankruptcy Estate of KTMAAcquisition Corp.; Wesley B. Huisinga, Appellees.N. Walter Goins, Appellant,v.Donald R. Johnston, Trustee of the Bankruptcy Estate of KTMAAcquisition Corp.; Wesley B. Huisinga, UnitedStates Trustee, Appellees.
No. 93-2675.
United States Court of Appeals,Eighth Circuit.
Submitted: April 6, 1994.Filed: April 12, 1994.
Before MAGILL, Circuit Judge, JOHN R. GIBSON, Senior Circuit Judge, and BEAM, Circuit Judge.
PER CURIAM.
1
N. Walter Goins appeals from the district court's1 order dismissing, in part, his bankruptcy appeal as moot and affirming three separate orders of the bankruptcy court.2 For reversal, Goins asserts that the district court incorrectly determined that his appeal was moot and incorrectly concluded that the bankruptcy court's findings of fact were not clearly erroneous. We affirm.
2
When reviewing bankruptcy court decisions, this court acts as a second court of review. This court reviews questions of law de novo, and factual findings for clear error. See Graven v. Fink (In re Graven), 936 F.2d 378, 382 (8th Cir. 1991).
3
We agree with the district court's conclusion that Goins's appeal from the bankruptcy court's orders approving the sale of the debtor's assets and the assignment of executory contracts is moot because he failed to obtain a stay of the sale pending appeal. See Ewell v. Diebert (In re Ewell), 958 F.2d 276, 279 (9th Cir. 1992); Van Iperen v. Production Credit Assoc. (In re Van Iperen), 819 F.2d 189, 191 (8th Cir. 1987); 11 U.S.C. Sec. 363(m). In addition, the district court properly rejected Goins's argument that the bankruptcy court clearly erred in finding that the November 30, 1988 letter agreement between the debtor and two other companies had been terminated by the parties prior to the commencement of the Chapter 11 proceeding. We also agree with the district court's conclusion that the bankruptcy court properly denied Goins's claim and his motion to strike.
4
We need not address Goins's argument that the bankruptcy court lacked power to modify its order regarding the terms of the sale because he raises this argument for the first time on appeal and has not shown that manifest injustice will otherwise result. See Ryder v. Morris, 752 F.2d 327, 332 (8th Cir.), cert. denied, 471 U.S. 1126 (1985).
5
Accordingly, the judgment of the district court is affirmed.
1
The Honorable David S. Doty, United States District Judge for the District of Minnesota
2
The Honorable Robert J. Kressel, United States Bankruptcy Judge for the District of Minnesota
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448 F.Supp.2d 1275 (2006)
GREAT AMERICAN INSURANCE COMPANY, Plaintiff,
v.
WOODSIDE HOMES CORPORATION, Kathleen Clark, Ali S. Yazd, Parvin Yousefi, Wilma Parkinson, Defendants.
No. 1:02 CV 161.
United States District Court, D. Utah, Northern Division.
August 28, 2006.
*1276 Bryan H. Booth, Rinehart & Fetzer, Salt Lake City, UT, Peter J. Whalen, Duane Morris, San Francisco, CA, for Plaintiff.
Damon J. Georgelas, Erik A. Christiansen, David R. Hall, Parsons Behle & Latimer, Salt Lake City, UT, Matthew L. Cookson, Joseph L. Oliva, Todd J. Eastman, Oliva & Dranan ALC, Sane Diego, CA, Raymond B. Rounds, Ogden, UT, Ron J. Noyes, Provo, UT, for Defendants.
ORDER AND MEMORANDUM DECISION
CAMPBELL, District Judge.
Great American Insurance Co. filed this lawsuit seeking a declaration that it has no duty to defend or otherwise provide coverage to its insured, Woodside Homes Corp., in relation to three state lawsuits that involve allegations of defective home construction. Woodside filed a counterclaim, arguing that Great American breached the insurance contract, or alternatively, that the contract should be reformed to provide Woodside coverage for the state claims. Additionally, Woodside named an insurance broker, The Buckner Group, as a third-party defendant, claiming that if Great American prevails in this action, The Buckner Group is liable to Woodside for failing to procure requested insurance coverage.
Woodside and Great American have filed cross motions for summary judgment, each claiming that the plain language of the insurance contract supports their respective position concerning whether the claims alleged in the state suits are covered by the policy. Woodside additionally contends that the operative contractual language is, at best, ambiguous and that the court should look beyond the four corners of the contract to discern the parties' intent. Also pending are cross motions for summary judgment addressing the potential liability of The Buckner Group. Woodside concedes, however, that any liability on the part of The Buckner Group is dependant on a finding that no coverage under the insurance contract exists.
Background
Woodside develops single-family homes in multiple states. Almost all of the construction work on these homes is performed by subcontractors working on Woodside's behalf. Because Woodside relies *1277 heavily on subcontractors, it attempts to secure insurance that provides coverage for damage caused by or arising out of the completed work of its subcontractors.
Woodside and The Buckner Group claim that they were previously able to secure such coverage from Travelers Indemnity Co. But when they could no longer obtain coverage from Travelers, The Buckner Group and Woodside began to explore the possibility of obtaining coverage from Great American. The Buckner Group served as an intermediary between Woodside and Great American while the sides negotiated the issuance of an insurance policy. Ultimately, Great American agreed to issue a general commercial liability, policy to Woodside and the parties maintained their relationship for many years.[1]
The present dispute arose after Woodside was named as a defendant in three separate civil actions: (1) Clark v. Woodside Homes Corp., Weber County Second District Court Civil No. XXXXXXXXX (the "Clark action"); (2) Yazd v. Woodside Homes Corp., Utah County Fourth District Court Civil No. XXXXXXXXX (the "Yazd action"); and (3) Parkinson v. Woodside Homes Corp., Utah County Fourth District Court Civil No. XXXXXXXXX (the "Parkinson action") (collectively, the "underlying actions"). Each of the underlying actions involve allegations of defective home construction, although the specific causes of action vary.
After becoming aware of the claims, Woodside tendered its defense to Great American, citing the relevant commercial general liability policies. Great American rejected each of Woodside's tenders and denied coverage. Great American then filed this suit seeking a declaration of its duties under the liability policies.
Legal Standard Governing Summary Judgment
Federal Rule of Civil Procedure 56 permits the entry of summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.'" Fed.R.Civ.P. 56(c); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-51, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir.1998). The court must "examine the factual record and reasonable inferences therefrom in the light most favorable to the party opposing summary judgment." Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.1990). "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient [to overcome a motion for summary judgment]; there must be evidence on which the jury could reasonably find for the plaintiff." Liberty Lobby, 477 U.S. at 252, 106 S.Ct. 2505; see also Anderson v. Coors Brewing Co., 181 F.3d 1171, 1175 (10th Cir.1999) ("A mere scintilla of evidence supporting the nonmoving party's theory does not create a genuine issue of material fact.").
Analysis
The manner in which the dispute between Great American and Woodside is resolved could have a potentially dispositive *1278 effect on the cross motions for summary judgment addressing the possible liability of The Buckner Group. Accordingly, the court will address Great American's obligations under the insurance polices before turning to Woodside's claims against The Buckner Group.
I. Obligations and Duties Under the Insurance Policies
An insurance company's duty to defend is broader than its duty to indemnify. Deseret Fed. Say. & Loan Ass'n v. United States Fidelity & Guar. Co., 714 P.2d 1143, 1146 (Utah 1986). If the duty to defend attaches to any claim alleged in a complaint, the insurer is obligated to undertake the defense of its insured for all claims raised in the complaint. See Overthrust Constructors, Inc. v. Home Ins. Co., 676 F.Supp. 1086, 1091 (D.Utah 1987) ("Once an insurer has a duty to defend an insured under one claim brought against the insured, the insurer must defend all claims brought at the same time, even if some of the claims are not covered by the policy."); accord West Am. Ins. Co. v. AV&S, 145 F.3d 1224, 1230 (10th Cir.1998).
"An insurer's duty to defend is determined by reference to the allegations in the underlying complaint. When those allegations, if proved, could result in liability under the policy, then the insurer has a duty to defend." Nova Casualty Co. v. Able Constr., Inc., 1999 UT 69, 118, 983 P.2d 575. Accordingly, to resolve the parties present dispute, a review of the allegations in the underlying actions is necessary.
A. The Underlying Actions
1. The Clark Action
The complaint in the Clark action fails to expressly allege any specific cause of action. It alleges that the home the Clarks purchased from Woodside is practically uninhabitable due to "structural decay and damage, walls splitting, floors cracking, driveway sliding, and many other problems to[o] numerous to mention." (Amended Complaint ¶ 5, attached as Ex. 6 to Aff. of Glen Ison, Feb. 15, 2006 (dkt.# 156-1) ("Ison Aff.").) The Clarks allege on information and belief that the problems with the residence were the result of the builders' failure to adequately account for water run-off. (See id. ¶ 7.)
In their prayer for relief, the Clarks request that "[t]he Court find that the Defendants have breached their written and verbal contracts and agreements with the Plaintiffs and that the home is substandard or uninhabitable; therefore, the home needs to be replaced and/or repaired in great detail." (Id. 2-3.)
2. The Yazd Action
The complaint in the Yazd action alleges that the house the plaintiffs purchased from Woodside quickly developed "cracks in the foundation[,] . . . the basement floor and the driveway." (Complaint ¶ 10, attached as Ex. 7 to Ison Aff.) Additionally, the plaintiffs allege that "[d]oors throughout the House ha[ve] shifted and [are] hard to open and close." (Id.) The plaintiffs claim that they are entitled to recover damages from Woodside, expressly stating the following claims: (1) Fraudulent Concealment, (2) Fraudulent Nondisclosure, (3) Breach of Warranty, (4) Mutual Mistake, and (5) Unilateral Mistake. (See id. at 6-11.)
The first two causes of action in the Yazd action allege wrongdoing on the part of Woodside itself and not its subcontractors. (See id. at 6-8.) Specifically, the complaint states that Woodside was aware of troublesome soil conditions and neglected to inform the home buyers. (See id.) The third cause of action expressly refers to the written contract entered into between the parties and alleges a breach of *1279 that contract. (See id. at 8.) Causes of action four and five address the assumed quality of the home. (See id. at 9-11.) In the fourth cause of action, the plaintiffs claim mutual mistake, asserting that the parties mistakenly believed that the home was of the requisite quality at the time of its completion. (See id. at 9.) In the fifth cause of action, plaintiffs allege that they mistakenly accepted the house at the time of its completion because no construction defects were apparent at that time. (See id. at 10-11.)
3. The Parkinson Action
The complaint in the Parkinson action alleges two causes of action against Woodside: (1) Fraudulent Nondisclosure, and (2) Fraudulent Concealment. (Complaint 4-5, attached as Ex. 8 to Ison Aff.) The plaintiffs allege that the foundation of the home they purchased from Woodside began cracking within a year from the date of sale. (See id. ¶ 8.) The plaintiffs' claims are confined to allegations that Woodside had knowledge of a troublesome soil report and failed to inform the plaintiffs about that report. (See id. at 2-4.)
B. The Insurance Contract
Having described the nature of the allegations in the underlying actions, it is now necessary to compare those allegations with the coverage provided by the insurance policy[2] to determine if Great American's duty to defend is triggered by the underlying complaints.
The critical policy language appears in a form created and copyrighted by the Insurance Services Office, Inc. ("ISO") and which Great American and Woodside adopted without alteration. The insuring agreement contained in the policy provides that Great American will
pay those sums that the insured becomes obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any suit seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.
(Commercial General Liability Coverage Form ("CGL") 1, attached as Ex. B to Memo. in Supp. of Third-Party The Buckner Group's Mot. for Summ. J. (dkt.# 141).) The policy then provides that coverage will be provided only if "the `bodily injury' or `property damage' is caused by an `occurrence' that takes place in the `coverage territory.'" (Id.) The policy defines an "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Id. at 14.)
*1280 Woodside argues that the property damage claimed in the underlying actions resulted from faulty work performed by its subcontractors. According to Woodside, that faulty work constitutes an occurrence triggering coverage. Great American responds by arguing that faulty work performed by subcontractors is not an "accident" under Utah law and is therefore not an "occurrence" under the insurance policy.
In support of its position, Great American relies on H.E. Davis & Sons, Inc. v. North Pacific Insurance Co., 248 F.Supp.2d 1079 (D.Utah 2002). In that case, the court held that Utah law does not consider negligent work performed by an insured to be an occurrence because the consequences of negligent work are reasonably foreseeable and therefore no "accident" resulting from that work can occur. Id. at 1084 ("Plaintiff failed to adequately compact the soil, with natural and foreseeable results. So long as the consequences of plaintiff's work were natural, expected, or intended, they cannot be considered an `accident[.]'"). But while H.E. Davis directly answers the question of whether an insured's negligent work can be considered an accident under a commercial general liability policy, that case does not address the question here: whether faulty work performed by an insured's subcontractor can be considered an accident, and therefore an occurrence.
Courts that have addressed the question of whether deficient subcontractor work should be considered an occurrence under a general contractors insurance policy have reached different results. For example, in Nabholz Construction Corp. v. St. Paul Fire & Marine Insurance Co., 354 F.Supp.2d 917 (E.D.Ark. 2005), the court held that the faulty work of a subcontractor should not be considered an occurrence because the faulty work is not an accident from the standpoint of the general contractor. Id. at 921. In that case, "[t]he Court agree[d] that a contractor's obligation to repair or replace its subcontractor's defective workmanship should not be deemed `unexpected' on the part of the contractor, and therefore, fails to constitute an `event' for which coverage exists." Id.
The court in Nabholz also expressed its opinion that reaching a contrary result would inadvisably convert a commercial general liability policy into a performance bond. See id. at 922 ("The purpose of a CGL policy is to protect an insured from bearing financial responsibility for unexpected and accidental damage to people or property. It is not intended to substitute for a contractor's performance bond, the purchase of which is to insure the contractor against claims for the cost of repair or replacement of faulty work."); see also Bituminous Cas. Corp. v. R.C. Altman Builders, Inc., No. 2:01-4267-DCN, 2006 WL 2137233, at *4 (D.S.C. July 28, 2006) ("Finding coverage would penalize the general contractor's carrier rather than the negligent party, the subcontractor. Further, affording coverage to a general contractor for damage to a residence stemming from its subcontractor's defective work would not encourage general contractors to more carefully select their subcontractors.").
In contrast, the court in Archon Invs., Inc. v. Great Am. Lloyds Ins. Co., 174 S.W.3d 334 (Tx.Ct.App.2005), concluded that faulty work performed by subcontractors is properly considered an occurrence under a commercial general liability policy. See id. at 340 ("Because Archon could not have intended that the negligent work of its subcontractors cause physical damage to Braden's home, damage to Braden's property due to the negligence of Archon's subcontractors falls within the scope of an occurrence under the language of the CGL policy. . . ."); see also Lee Builders, Inc. *1281 v. Farm Bureau Mut. Ins. Co., 137 P.3d 486, 495 (Kan.2006) ("The damage in the present case is an occurrence . . . because the faulty materials and workmanship provided by Lee's subcontractors caused continuous exposure . . . to moisture. The moisture in turn caused damage that was both unforeseen and unintended.").
While a review of case law from other jurisdictions that addresses this topic is helpful, the resolution of this case requires an analysis of Utah law. See Lee Builders, 137 P.3d at 491 ("Our obligation . . . is not to address all the arguments and other holdings from all the other jurisdictions or to analyze all the competing expert commentary on the subject. Rather, our task is to decide the question of `occurrence' in this case based upon Kansas law, to the extent possible.").
In Utah, whether an "accident" has occurred is determined from the viewpoint of the insured, not the actor causing injury. See Hoffman v. Life Ins. Co. of N.A., 669 P.2d 410, 416 (Utah 1983) ("[A] person is a victim of an accident when, from the victim's point of view, the occurrence causing the injury or death is not a natural and probable result of the victim's own acts."); Archon Invs., Inc., 174 S.W.3d at 340 ("The insured's standpoint controls in determining whether there has been an `occurrence' that triggers the duty to defend.").
As discussed, Utah case law indicates that an insured's own faulty or negligent work is not fairly characterized as an occurrence under a commercial general liability policy. See, e.g., H.E. Davis, 248 F.Supp.2d at 1084. But it appears that no court has yet applied Utah law to the exact situation presented here: whether faulty work by a subcontractor is an occurrence from the standpoint of an insured employing that subcontractor. The Utah Supreme Court's holding in Hoffman, though not dealing with construction liability, is nevertheless instructive. In Hoffman, the court held that "a person is a victim of an accident when, from the victim's point of view, the occurrence causing the injury . . . is not a natural and probable result of the victim's own acts." Id. at 416 (first emphasis in original, second emphasis added). Given the Utah Supreme Court's focus on the acts of the insured when determining whether there has been an occurrence, it follows that the negligent acts of Woodside's subcontractors can be considered an occurrence from Woodside's "point of view," id.; cf. O'Shaughnessy v. Smuckler Corp., 543 N.W.2d 99, 103 (Minn.Ct.App.1996) ("A general contractor has minimal control over the work of its subcontractors by definition.").
Great American seeks to avoid this result by arguing that a commercial general liability policy is not intended to be a performance bond and that policy considerations weigh against providing coverage in the context presented by this case. The court in Bituminous cited such concerns in determining that faulty subcontractor work should not be considered an occurrence. See 2006 WL 2137233, at *4. But "the fact that the general contractor receives coverage will not relieve the subcontractor of ultimate liability for unworkmanlike or defective work. In such a case, an insurer will have subrogation rights against the subcontractor who performed the defective work." O'Shaughnessy, 543 N.W.2d at 103. Further, while disallowing coverage for faulty subcontractor work would arguably increase the level of care general contractors take when selecting subcontractors, there are several other practical factors that already serve this function. A general contractor's concern about business reputation and the understandable desire to avoid time consuming repair workregardless of whether the general contractor must foot the bill for *1282 such workare two such factors that are readily apparent.
Further, the conclusion that defective subcontractor work can be considered an occurrence harmonizes other provisions contained in the policy that might otherwise be in tension. "An insurance policy is merely a contract between the insured and the insurer and is construed pursuant to the same rules applied to ordinary contracts." Alf v. State Farm Fire & Cas. Co., 850 P.2d 1272, 1274 (Utah 1993). When interpreting a contract, "a court must attempt to construe the contract so as to harmonize and give effect to all of its provisions." Green River Canal Co. v. Thayn, 2003 UT 50, ¶ 31, 84 P.3d 1134 (internal quotation and brackets omitted).
Here, the policy excludes coverage for "`[p]roperty damage to `your work' arising out of it or any part of it and included in the `products-completed operations hazard.'" (CGL 4.) The policy goes on to provide that "[t]his exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor." (Id.) In Lee Builders, the court commented that this exclusionary languageand the exception to that exclusionsupports the determination that defective subcontractor work is covered under policies like that at issue here. 137 P.3d at 493-94. In Lee Builders, the court approved the analysis of the exclusionary language previously undertaken by the Kansas Court of Appeals. See id. Specifically, the Kansas Supreme Court agreed that if the term "occurrence" is given a narrow construction, the subcontractor exception to the "your work" exclusion "would be rendered meaningless." Id. at 494 (internal quotation omitted).
Great American argues that at least one commentator has managed to articulate a situation in which the subcontractor exception would operate even when the term "occurrence" is given the narrow construction that it urges in this case. See Christopher Burke, "Exposing the Faulty PremiseThe Insurer's Interpretation of `Occurrence' Does Not Render the Subcontractor Exception to the `Your Work' Exclusion Meaningless," Mealey's Litigation Report: Construction Defects Insurance, vol 2, no. 11, pg. 21 (Dec.2005). The two examples there "deal with the situation when work or operations performed pursuant to one contract cause damage to work performed under a separate contract." See id. at 24-25 (giving examples involving the construction of two neighboring homes and a townhouse). Despite the two admittedly plausible situations described in commentary, it is undeniable that excluding faulty subcontractor work from the definition of "occurrence" would reduce the operation of the subcontractor exception so drastically that the language would virtually cease to be of any meaningful effect.
Additionally, although the court rests its conclusion on the language of the policy itself[3], the interpretation put forward by Woodside comports with the drafting history of the commercial general liability *1283 policy form used by Great American. See 9A Couch on Ins. § 129.18 ("Due to the increasing use of subcontractors on construction projects, many general contractors were not satisfied with the lack of coverage provided under commercial general liability policies where the general contractor was not directly responsible for the defective work. In 1976 the insurance industry responded by the introduction of the Broad Form Property Damage Endorsement, which extended coverage to insureds for property damage caused by the work of their subcontractors. [The endorsement] was added directly to the body of the policy in 1986."); see also "Broad Form Property Damage Coverage Explained," Insurance Services Office, Jan. 29, 1979 (explaining the broad form property damage coverage extends previously existing coverage by "modify[ing] the application of the property damage exclusion")
Certainly, different jurisdictions have approached and answered the question presented in this case in various ways. But the better-reasoned approach, and the approach that is most consistent with Utah law, views faulty subcontractor work as an occurrence from the standpoint of the insured. Nevertheless, the allegations contained in the underlying actions are not entirely confined to allegations of defective subcontractor work. Accordingly, a comparison between the complaints in the underlying actions and the coverage provided by the commercial general liability policy is necessary.
C. Comparison Between the Insurance Agreement and the Underlying Complaints
1. The Parkinson Action Alleges Only Intentional Wrongdoing on the Part of Woodside
Great American argues that any claims of fraudulent concealment or fraudulent misrepresentation are outside the scope of the insurance agreement because they involve allegations of intentional conduct on the part of Woodside itself and therefore do not involve an "occurrence" under the policy. Because the Parkinson action alleges only nondisclosure on the part of Woodside, Great American argues that coverage cannot be triggered and therefore it has no duty to defend Woodside in that action. Utah case law supports Great American's argument.
Nova Casualty, 1999 UT 69, 983 P.2d 575, is particularly instructive here. That case involved a situation where developers allegedly informed home buyers that restrictive covenants previously placed on the property would not prevent the home buyers from running a psychotherapy business in the home. Id. ¶¶ 3-4. According to the home buyers, that representation was false. Id. ¶ 4. Citing the restrictive covenants, the subdivision sued the home buyers and compelled them to shut down their business. See id. ¶ 3. The home buyers then sued the developers, who, in turn, tendered the suit to their insurance provider. Id. ¶ 5. The insurance company refused to defend the developers and the Nova Casualty litigation followed.
The Utah Supreme Court concluded that the insurance company was not obligated to defend the developers because the complaint alleged an intentional act on the part of the developers themselves. The court stated that "it appears that the closing down of the . . . business was the natural and probable consequence of [the developers'] representations and that it was very likely such result would occur if its representations were to be untrue, as they seem to have been." Id. ¶ 15 (internal quotation and quotation marks omitted). The court then noted that other jurisdictions had similarly concluded that intentional misrepresentations cannot properly be considered *1284 an "occurrence" under an insurance policy. See id. ¶ 14 (citing Safeco Ins. Co. v. Andrews, 915 F.2d 500, 502 (9th Cir. 1990) (misrepresentations are not an occurrence under an insurance policy); Dykstra v. Foremost Ins. Co., 14 Cal. App.4th 361, 17 Cal.Rptr.2d 543, 545 (intentional or fraudulent acts are purposeful rather than accidental and are therefore not a covered occurrence); M.L. Foss, Inc. v. Liberty Mut. Ins. Co., 885 P.2d 284, 285 (Colo.Ct.App.1994) (misrepresentations are not an occurrence under an insurance policy); First Wyoming Bank v. Continental Ins. Co., 860 P.2d 1094, 1100 (Wyo.1993) (no duty to defend against claims that insured made misrepresentations)).
Gran v. State Farm Fire & Casualty Co., 2005 UT App 564, 127 P.3d 1279, is similarly instructive. In that case, developers sought insurance coverage against claims brought by a purchaser of a home who asserted that the developers intentionally or negligently failed to disclose material information and breached an implied warranty. Id. ¶ 7. Specifically, the home buyer alleged that the developers were aware of, but did not disclose, a report issued by a soils engineer that discussed the risk of a landslide in the area. See id. ¶¶ 3, 7. A landslide did occur several years after the developers sold the home. See id. ¶¶ 2, 5.
The Utah Court of Appeals concluded that the allegations in the underlying complaint did not give rise to a duty to defend. The court reasoned that
[t]he essence of Fennell's complaint is that he was damaged by Green's failure to disclose. However, it must be conceded that Fennell does not claim that any failure to disclose caused the landslide. Further, we have already concluded that a failure to disclose, whether intentional or negligent, is not an `occurrence' under the Policy. Coverage cannot be restored by characterizing the landslide as an `accident' and therefore, an `occurrence' under the Policy, when the landslide did not result from the failure to disclose, but from other causes.
Id. ¶ 30.
Under the rationale of Nova Casualty and Green, the allegations in the Parkinson action cannot result in insurance coverage because the claims in that case are confined to fraudulent and negligent non-disclosure. Even though the home in the Parkinson action may have suffered damage flowing from faulty construction, the complaint in the Parkinson action, like the situation in Green, seeks recovery for damage caused by nondisclosure, not damage caused by faulty construction.
2 The Yazd Complaint Contains Allegations that Could Trigger Coverage and the Duty to Defend Therefore Applies
As already discussed, the complaint in the Yazd action alleges: (1) fraudulent concealment, (2) fraudulent nondisclosure, (3) breach of warranty, (4) mutual mistake, and (5) unilateral mistake. While the fraudulent concealment and fraudulent nondisclosure claims do not trigger Great American's duty to defend for the same reasons applicable to the Parkinson action, the other claims in the Yazd action warrant analysis.
Great American claims that the breach of warranty claim in the Yazd complaint does not trigger the duty to defend because it is a contract claim to which the insurance policy is inapplicable. Great American rests this assertion on language in the insuring provisions of the policy that limits coverage to damages the insured is "legally obligated to pay" and "liability imposed by law." (CGL 1.) Great American contends that this language confines coverage to liability arising from tort actions. *1285 Great American cites VBF, Inc. v. Chubb Group of Insurance Cos., 263 F.3d 1226 (10th Cir.2001), in support of this proposition. In VBF, the Tenth Circuit, applying Oklahoma law, concluded that "[t]he phrases `legally obligated to pay' and `liability imposed by law' refer only to tort claims and not contract claims." Id. at 1231 (citing Natol Petroleum Corp. v. Aetna Ins. Co., 466 F.2d 38, 39-42 (10th Cir.1972); Action Ads, Inc. v. Great Am. Ins. Co., 685 P.2d 42, 42-45 (Wyo.1984); Lee. R. Russ & Thomas F. Segalla, 7 Couch on Insurance § 103:14 (3d ed.2000)).
While VBF appears categorical in its statement that the insuring language here imposes liability on the insurer only to the extent a tort claim is pursued against the insured, other authority does not make such a clear distinction. See, e.g., Malecki & Flitner, Commercial General Liability 6 (6th ed. 1997) ("The expression `legally obligated' connotes legal responsibility that is broad in scope. It is directed at civil liability [that] can arise from either unintentional tort, under common law, statute or contract."); 9 Couch on Insurance § 126:3 (3d ed. 1997) ("Whether a particular legal claim falls within the coverage afforded by a liability policy is not affected by the form of the legal proceeding. Accordingly, the legal theory asserted by the claimant is immaterial to the determination of whether the risk is covered."). In fact, the case law indicates that the distinction drawn between claims for tort and contract recovery has typically been used as a shorthand method for determining whether the event underlying the damage was caused by an occurrence the policy was meant to cover. See Natol Petroleum, 466 F.2d at 42 ("[T]he phrase of liability `imposed by law' describe[s] the the kind of liability' which the insurer agreed to insure against."). As a result, while the distinction between contract and tort liability may serve as a useful general rule, coverage will turn on the insuring agreement itself and the particular form of a claim will not govern the issue of coverage. See 2 Insurance Claims & Disputes 4th § 11:7 ("Could an insurer successfully argue that [breach of warranty] claims are not covered because a breach of warranty claim is a type of contract claim? The correct answer should be no. Again, if there has been an occurrence and property damage, and no exclusion applies, there should be coverage.").
Gibbs M. Smith, Inc. v. U.S. Fidelity & Guaranty Co., 949 P.2d 337 (Utah 1997), also supports this conclusion. In that case, the Utah Supreme Court addressed the effect of a contractual liability exclusion clause in a commercial general liability policy. See id. at 340-341. The court noted that the clause in question excluded coverage for liability assumed by the insured under contract. See id. at 341. The court accepted the insurer's argument that the exclusion applied only to indemnification and hold-harmless agreements and stated that if "the provision does not apply to the insured's breaches of its own contracts, such breaches are not excluded and coverage applies." Id. Gibbs M. Smith indicates that Utah has not adopted wholesale the notion that commercial general liability polices confine the insurer's liability to tort actions alone, but that Utah law looks to the substance of a particular claim not its form. See id. at 342 ("If the contract exclusion clause excluded all liability associated with a contract made by the insured, commercial liability insurance would be severely limited in its coverage.").
The substance of the breach of warranty claim contained in the Yazd complaint is that the plaintiffs are entitled to recover from Woodside as a result of the negligent construction of its subcontractors. Having already determined that faulty work performed by Woodside's sub-contractors *1286 can constitute an "occurrence" under the liability policy, it follows that the allegations in the Yazd's complaint give rise to a duty to defend.
Great American also argues that the claims of mutual mistake and unilateral mistake alleged in the Yazd complaint do not give rise to coverage or a duty to defend because only equitable relief is available for those claims. But "[o]nce an insurer has a duty to defend an insured under one claim brought against the insured, the insurer must defend all claims brought at the same time, even if some of the claims are not covered by the policy." Overthrust Constructors, Inc., 676 F.Supp. at 1091. Accordingly, the court need not address the merits of Great American's assertion regarding the mistake claims pleaded in the Yazd complaint.
3. The Clark Action Contains Allegations that Could Trigger Coverage and Therefore the Duty to Defend Applies
Although the complaint governing the Clark action does not expressly state any particular cause of action, when viewed as a whole, the allegations in the complaint, if proven, could trigger coverage under the policy. The critical language in the Clark complaint appears in the plaintiffs' prayer for relief. Specifically, plaintiffs request that "[t]he Court find that the Defendants have breached their written and verbal contracts and agreements with the Plaintiffs and that the home is substandard or uninhabitable; therefore, the home needs to be replaced and/or repaired in great detail." (Amended Complaint 2-3, attached as Ex. 6 to Ison Aff.) As with the allegations in the Yazd complaint, the complaint governing the Clark action asserts that Woodside is liable to the plaintiffs for damage caused by the faulty work of Woodside's subcontractors. Accordingly, for the reasons already discussed, insurance coverage may be implicated and the duty to defend applies.
II. Liability of The Buckner Group
Woodside and The Buckner Group have filed cross motions for summary judgment concerning potential liability of The Buckner Group to Woodside for failure to procure requested insurance coverage.[4] Although the court concluded that Great American is not obligated to defend all of the underlying actions, The Buckner Group is nevertheless entitled to summary judgment.
The failure of an insurance broker to procure coverage that a potential insured represents to a broker as being essential can result in liability against the broker. See Harris v. Albrecht, 2004 UT 13, ¶¶ 11-13, 86 P.3d 728. But the undisputed facts in this case establish that The Buckner Group delivered an insurance policy to Woodside that met Woodside's expectations. Leonard Arave, the chief financial officer and vice president of Woodside, testified at his deposition as follows:
Q. And so after you got your policy from Great American, did you feel that you got in the policy what you and [The Buckner Group] had discussed getting?
A. Yes.
Q. And the only thing that's changed since then is the fact that Great American has apparently construed the policy in a manner different that and [The Buckner Group] intended?
*1287 A. And I believe what the policy says, but yes, they have gotten very creative.
Q, And I take it you understand [The Buckner Group] doesn't control the insurance company, obviously?
A. No. You know, Iagain, I think [The Buckner Group] was honest and forthcoming and Iyou know, I think we gotas far as [The Buckner Group] is concerned, what's there is there. I think it's pretty obvious what's there is there. But no, I understand that.
. . . .
Q. But the language you wanted was [The Buckner Group] got you what language you wanted?
A. As we looked at it and discussed things, and as I did my research and as I listened to [The Buckner Group's] recommendations, yes, we got what we wanted.
(Depo. of Leonard K. Arave, pp. 104-05, attached as Ex. G to Memo. in Supp. of The Buckner Group's Mot. for Summ. J. (dkt.# 141-1)).
Woodside desired a commercial general liability policy that included broad form property damage coverage that would provide Woodside coverage for faulty work performed by its subcontractors. The policy that The Buckner Group secured for Woodside contained industry-standard language that the parties understood would provide that coverage. As the court has already held, the policy does, in fact, provide coverage for the faulty work of subcontractors. All the record evidence points in one direction: The Buckner Group used reasonable care in attempting to secure insurance coverage for Woodside and both The Buckner Group and Woodside were satisfied with the insurance policy they ultimately obtained from Great American.
To the extent Woodside claims that The Buckner Group was obligated to secure an insurance policy that provided Woodside coverage for its own, non-accidental acts like those at issue in the Parkinson actionWoodside's argument must be rejected. Beyond the axiomatic fact that a commercial general liability policy is only applicable to accidental events, there is nothing in the record that indicates that Woodside expected insurance coverage that would insulate it from claims that it fraudulently concealed or misrepresented material facts to home buyers. Accordingly, The Buckner Group is entitled to summary judgment on Woodside's claims.
Conclusion
The complaints in the Clark action and the Yazd action seek recovery for damage caused by the faulty work of Woodside's subcontractors. As discussed, those claims could trigger coverage under the insurance agreement between Great American and Woodside. Because those actions implicate insurance coverage, Great American is not entitled to summary judgment on Woodside's claim that Great American breached the implied covenant of good faith and fair dealing. But Great American is entitled to summary judgment chat it has no obligation to defend or indemnify Woodside for the claims raised in the Parkinson action.
Further, because the undisputed facts establish that The Buckner Group procured the insurance coverage that Woodside requested, The Buckner Group is entitled to summary judgment on Woodside's claims against it.
Consistent with the foregoing analysis, the court orders as follows:
(1) Third-Party Defendant The Buckner Group's Motion for Summary Judgment (dkt.# 140) is GRANTED.
*1288 (2) Defendant-'Counter-Claimant/Third Party Plaintiff Woodside Homes Corporation's Motion for Partial Summary Judgment Against Third Party Defendant The Buckner Group (dkt.# 142) is DENIED.
(3) Defendant/Counter-Claimant/Third Party Plaintiff Woodside Homes Corporation's Motion for Partial Summary Judgment Against Plaintiff/Counter-Defendant Great American Insurance Company (dkt.# 147) is GRANTED in part and DENIED in part.
(4) Great American's Motion for Summary Judgment (dkt.# 154) is GRANTED in part and DENIED in part.
(5) Motion to Strike or Disregard Inadmissible Evidence (dkt.# 162) is DENIED as moot.
NOTES
[1] Great American issued the following polices naming Woodside as an insured: Policy No. PAC XXX-XX-XX-XX, effective December 12, 1996, through December 12, 1997; Policy No. PAC XXX-XX-XX-XX, effective December 12, 1997, through December 12, 1998; Policy No. PAC XXX-XX-XX-XX, effective December 12, 1998, through December 12, 1999; Policy No. PAC XXX-XX-XX-XX, effective December 12, 1999, through December 12, 2000; Policy No. PAC XXX-XX-XX-XX, effective December 12, 2000, through December 12, 2001.
[2] Although Great American issued several policies to Woodside, the provisions relevant to the current action remained virtually unchanged from year to year. For ease of discussion, the court simply discusses the language of "the policy" without making a distinction between policy years. One notable distinction, however, is that the policies in effect from 1998 to 2001 contained an expanded definition of the term "occurrence." During those years, the policies defined an "occurrence" as
[a]n accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results in bodily injury or property damage which first manifests on or after the inception of this policy period, as shown in the Declarations Page of the policy but prior to the earlier of the date of expiration or cancellation of this policy.
(Endorsement CG 8210, attached as Ex. 0 to Aff. of Matthew L. Cookson (dkt.# 152)). Regardless of the definition of "occurrence" considered in analyzing the parties' claims, the outcome is the same.
[3] Great American has filed a motion to strike all evidence submitted by Woodside and The Buckner Group that purports to shed light on the proper interpretation of the insurance agreement. Great American argues that the consideration of such evidence is impermissible absent a finding that the insurance contract is ambiguous. As noted by the Tenth Circuit in Flying J., Inc. v. Comdata Network, Inc., 405 F.3d 821 (10th Cir.2005), there is an apparent conflict in Utah case law concerning whether extrinsic evidence may be considered by the court when determining whether a contract is ambiguous. See id. at 831-32. Because the court rests its decision on the language contained within the four corners of the contract, there is no need to address this apparent conflict and Great American's motion is moot.
[4] The court notes that Woodside requested that its motion for summary judgment against The Buckner Group "be considered only if the Court denies Woodside's Motion for Partial Summary Judgment against . . . Great American[.]" (Memo. in Supp. of Woodside Homes Corp.'s Mot. for Part. Summ. J. Against The Buckner Group 1 (dkt.# 143).)
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974 So.2d 397 (2008)
STORMS
v.
STATE.
No. 2D07-2196.
District Court of Appeal of Florida, Second District.
February 8, 2008.
Decision without published opinion. Affirmed.
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Filed 4/30/13 In re Z.W. CA4/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
In re Z.W., a Person Coming Under the
Juvenile Court Law.
RIVERSIDE COUNTY DEPARTMENT
OF PUBLIC SOCIAL SERVICES, E056879
Plaintiff and Respondent, (Super.Ct.No. SWJ1100626)
v. OPINION
J.W.,
Defendant and Appellant.
APPEAL from the Superior Court of Riverside County. Donna L. Crandall,
Judge. (Retired judge of the Orange Super. Ct. assigned by the Chief Justice pursuant to
art. VI, § 6 of the Cal. Const.) Dismissed.
Samantha A. Greene, under appointment by the Court of Appeal, for Defendant
and Appellant.
Pamela J. Walls, County Counsel, Carole A. Nunes Fong, Deputy County
Counsel, for Plaintiff and Respondent.
1
No appearance for Minor.
At a jurisdiction and disposition hearing, the juvenile court found Z.W. (Minor),
came within the court‟s jurisdiction due to Minor‟s sibling being abused or neglected
and therefore creating a substantial risk that Minor would be abused or neglected.
(Welf. & Inst. Code, § 300, subd. (j).)1 The juvenile court found Minor was not an
Indian child and that the Indian Child Welfare Act (ICWA) did not apply in Minor‟s
case. At the detention hearing, the juvenile court reserved ruling on the status of
defendant and appellant J.W. (Father) as Minor‟s father. At the jurisdiction hearing, the
court did not make a determination concerning Minor‟s paternity.
Father asserts the juvenile court erred by concluding ICWA does not apply in
this case because the Riverside County Department of Public Social Services (the
Department) did not comply with the ICWA notice and inquiry provisions. Father
contends he has standing to raise the ICWA issue because he was treated like a
presumed father at the juvenile court. We conclude Father does not have standing and
dismiss his appeal.
FACTUAL AND PROCEDURAL HISTORY
Minor is male and was born May 2012. Shortly thereafter, the Department filed
a petition alleging (1) Minor‟s mother L.B. (Mother), had an open case with the
Department for another child, Sibling (Sibling), and she was not complying with that
case plan due to failing to participate in drug treatment and failing to drug test;
1All subsequent statutory references will be to the Welfare and Institutions
Code, unless otherwise indicated.
2
(2) Father had an open case with the Department, also related to Sibling, and Father was
not in compliance with his case plan due to missing drug tests and not participating in a
psychological evaluation; (3) Father has an “extensive history of substance abuse and,
by his own admission, continues to abuse substances including but not limited to
marijuana”; and (4) Father has unresolved anger issues and has not benefited from anger
management classes, as evidenced by his becoming irate in a hospital maternity ward
and needing to be escorted out of the building by security. The Department asserted
Minor was at risk of suffering abuse or neglect similar to that of his sibling, Sibling.
(§ 300, subd. (j).) The petition does not reflect Father‟s status as Minor‟s father, as
none of the boxes are checked next to “legal,” “biological,” “presumed,” or “alleged.”
On May 1, 2012, Mother and Father verbally denied having any Native
American ancestry, and they both stated Father was Minor‟s father. On May 4, 2012,
Father filed a “Parental Notification of Indian Status” form (ICWA-020) reflecting he
had no Native American ancestry as far as he knew. Also on May 4, 2012, Father filed
a “Statement Regarding Parentage.” (JV-505.) Father marked the box indicating that
he believed himself to be Minor‟s father; however, Father did not mark a box explaining
why he believed he was Minor‟s father. For example, Father did not mark the box
indicating (1) he already completed a voluntary declaration of parentage, (2) the child
lived with him, (3) someone told him he was the child‟s father, (4) he participated in
activities with the child, (5) he gave money or objects to the child, or (6) the child spent
time with Father‟s family. Father only wrote, “I am the father”—no explanation was
given for this belief.
3
Mother gave her responses to the paternity inquiry. Mother declared a paternity
test had not been conducted, there was not an order for child support, and she was not
married to Father. However, Mother wrote that Father was Minor‟s father. Mother
declared that no other man could be Minor‟s father. Mother indicated Minor went to
Father‟s home when Mother “go[es] with [Minor] to visit his father.”
At the detention hearing on May 4, Father was present in court. The juvenile
court reserved ruling on the issue of paternity. The juvenile court found ICWA might
apply in Minor‟s case, because Father had indicated in Sibling‟s case that he might have
Native American ancestry. The court ordered that the Department provide Mother and
Father with drug testing, substance abuse treatment, parenting classes, and counseling.
The court granted Mother and Father two-hour visits with Minor two times per week.
On May 22, 2012, at a hearing for Sibling, the juvenile court found ICWA did not apply
to Sibling.
Father‟s attorney did not permit the Department to contact Father regarding the
allegations in the petition concerning Minor Father was arrested on May 16, 2012, due
to a probation violation. Father posted bail and was released on May 19, but failed to
appear in court on May 21, and a bench warrant was issued. Father went to the
Department‟s offices to visit with Minor and Sibling on June 5. Father had not been
participating in drug testing, parenting classes, anger management classes, nor had he
attended his psychological evaluation.
4
The juvenile court held a jurisdiction and disposition hearing on July 18, 2012.
Father was not present at the hearing; Father‟s attorney attended the hearing. Father‟s
attorney said, “I would personally acknowledge receipt, waive reading, advisement,
offer no comment.” The juvenile court found Minor came within the court‟s
jurisdiction due to Minor‟s sibling being abused or neglected and therefore creating a
substantial risk that Minor would be abused or neglected. (§ 300, subd. (j).) The court
found ICWA did not apply. The court ordered Minor continue to be placed outside of
Mother‟s and Father‟s physical custody and ordered Mother and Father to participate in
reunification services. The court found Father was not involved in the development of
the case plan because Father was “unable, unavailable, or unwilling to participate.” The
court ordered Mother, but not Father, to return to court for the six-month review
hearing. (§ 366.21, subd. (e).)
DISCUSSION
Father contends the juvenile court erred by concluding ICWA does not apply in
Minor‟s case, because the Department sent tribes incomplete identifying information.
Father asserts he has standing to raise this issue because he was treated like a presumed
father at the juvenile court. We conclude Father lacks standing to raise the ICWA issue.
Standing is an issue of law which we review de novo. (Scott v. Thompson (2010)
184 Cal.App.4th 1506, 1510.) “California law distinguishes „alleged,‟ „biological,‟ and
„presumed‟ fathers. [Citation.]” (Gabriel P. v. Suedi D. (2006) 141 Cal.App.4th 850,
857.) “An „alleged‟ father refers to a man who may be the father of a child, but whose
biological paternity has not been established . . . .” (Francisco G. v. Superior Court
5
(2001) 91 Cal.App.4th 586, 596.) In order to raise ICWA issues, a father must be a
biological or presumed father. An alleged father cannot raise ICWA issues “because,
absent a biological connection, the child cannot claim Indian heritage through the
alleged father.” (In re E.G. (2009) 170 Cal.App.4th 1530, 1533.)
Father was never found to be more than Minor‟s alleged father. At the detention
hearing the juvenile court reserved ruling on the paternity issue. At the jurisdiction and
disposition hearing, Father did not request a ruling on the paternity issue and the
juvenile court did not issue a ruling on the matter. Since a determination was never
made regarding Father‟s status, he is an alleged father. (In re Paul H. (2003) 111
Cal.App.4th 753, 760.) As an alleged father, Father lacks standing to raise the ICWA
issue. (In re Daniel M. (2003) 110 Cal.App.4th 703, 707-709.) As a result, Father‟s
appeal must be dismissed. (Id. at p. 709.)
Father asserts he has standing to raise the ICWA issue on appeal because he was
treated as more than an alleged Father at the juvenile court. As an example, Father
explains that he was granted reunification services, which are typically not granted to
alleged fathers. A juvenile court must order services for a presumed father, and it may
order services for a biological father if the court finds services will benefit the child.
(§ 361.5, subd. (a).) Accordingly, Father is correct that he was treated as more than an
alleged father. As an alleged father, Father was not entitled to receive reunification
services. Nevertheless, there is not a legal equivalency for presumed father status. A
finding must be made in order for Father to achieve natural or presumed father status.
Since a determination was never made by the juvenile court, Father remains an alleged
6
father who lacks standing to raise the ICWA issue. (In re Paul H., supra, 111
Cal.App.4th at p. 760 [a determination must be made in order for a father‟s status to
change]; see also § 361.5, subd. (a) [there must be a finding of paternity].)
Next, Father contends he has standing to raise the ICWA issue because he is
Minor‟s biological father. As a biological father, Father could have standing to raise the
ICWA issue. (In re E.G., supra, 170 Cal.App.4th at p. 1533.) However, the record
reflects Father is an alleged father, not a natural father, and a DNA test was not
conducted. Father does not provide a citation to the record where the juvenile court
recognizes him as Minor‟s natural/biological father. (Cal. Rules of Court, rule
8.204(a)(1)(C) [record citations required].) Thus, we are not persuaded that Father has
standing to raise the issue as a natural/biological father, because the record does not
support standing on this basis.
Father goes on to argue that (1) he is listed on Minor‟s birth certificate, and
(2) he completed a statement of parentage, so therefore he should be afforded standing
because he took affirmative steps to establish paternity. In order “to be considered a
„parent‟ under the ICWA, an unwed father‟s paternity must be „acknowledged or
established.‟ (25 U.S.C. § 1903(9) . . . .)” (In re Daniel M., supra, 110 Cal.App.4th at
p. 708.) “[I]n California an alleged father may acknowledge or establish paternity by
voluntarily signing a declaration of paternity at the time of the child‟s birth, for filing
with the birth certificate (Fam. Code, § 7571, subd. (a)), or though blood testing (Fam.
Code, § 7551.)” (Id. at pp. 708-709, fn. omitted.)
7
Father‟s argument is not persuasive because on the “Statement Regarding
Parentage” Father needed to explain why he believed himself to be Minor‟s Father.
Father did not explain why he believed himself to be Minor‟s father. Importantly,
Father left empty the box next to the option reading, “I have already established
parentage of the child by . . . voluntary declaration signed by me on (date): ________.”
In Father‟s opening brief, he does not contend that he filed a voluntary declaration of
paternity in the hospital, which was witnessed by hospital staff and forwarded to the
Department, per the voluntary declaration requirements of Family Code section 7571,
subdivision (a).
Rather, Father asserts his “Statement Regarding Parentage” and Mother‟s
responses to the “Paternity Inquiry” should suffice for the voluntary declaration of
paternity. Father‟s argument is not persuasive because the statutory rules are clear as to
the requirements for a voluntary declaration of paternity; there is nothing in the
statutory language indicating that an amalgamation of documents can work to
circumvent the declaration requirements. (In re B.L. (2012) 204 Cal.App.4th 1111,
1116 [if the statutory language is not ambiguous the plain meaning controls].) Thus, we
conclude Father is an alleged father without standing to raise the ICWA issue on appeal.
8
DISPOSITION
The appeal is dismissed.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
MILLER
J.
We concur:
KING
Acting P. J.
CODRINGTON
J.
9
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905 F.2d 1528Unpublished Disposition
NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.Jesse E. BOYER, Sr., Plaintiff-Appellant,v.T.E. CAMPBELL, Officer; D.M. Groves, Officer; Robert E.Miller, Magistrate; Charleston County PoliceDepartment; Arvid Lesemann, Jr.,Attorney; Thomas E. Lynn,Prosecutor,Defendants-Appellees.
No. 89-1831.
United States Court of Appeals, Fourth Circuit.
Submitted May 7, 1990.Decided May 16, 1990.Rehearing and Rehearing In Banc Denied June 25, 1990.
Appeal from the United States District Court for the District of South Carolina, at Charleston. Falcon B. Hawkins, District Judge. (C/A No. 87-1637-2-8)
Jesse E. Boyer, Sr., appellant pro se.
James Albert Stuckey, Jr., Stuckey & Kobrovsky, Charleston, S.C., for appellees.
D.S.C.
AFFIRMED.
Before ERVIN, Chief Judge, and CHAPMAN and WILKINS, Circuit Judges.
PER CURIAM:
1
Jesse E. Boyer, Sr. appeals from the district court's order denying relief under 42 U.S.C. Sec. 1983. Our review of the record and the district court's opinion accepting the recommendation of the magistrate discloses that this appeal is without merit. Accordingly, we affirm on the reasoning of the district court. Boyer v. Campbell, CA-87-1637-2-8 (D.S.C. Oct. 18, 1989). Appellant's motions relating to the handling and content of particular tapes and transcripts are denied. 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.
2
AFFIRMED.
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656 S.W.2d 684 (1983)
280 Ark. 77
Hoyt Franklin CLINES, James William Holmes, Darryl V. Richley and Michael Ray Orndorff, Appellants,
v.
STATE of Arkansas, Appellee.
No. CR 82-54.
Supreme Court of Arkansas.
July 5, 1983.
Rehearing Denied October 3, 1983.
*685 Marshall N. Carlisle, Fayetteville, Donald R. Huffman, Bentonville, Priscilla Karen Pope, Fayetteville, and Thomas J. Tucker, Siloam Springs, for appellants.
Steve Clark, Atty. Gen. by Dennis R. Molock, Deputy Atty. Gen., Little Rock, for appellee.
HAYS, Justice.
These four appellants were jointly tried and convicted of the January 8, 1981 capital murder of Don Lehman, a Rogers householder, and of the aggravated robbery of his wife and daughter. They were sentenced to death by electrocution on the capital murder charge and to life sentences on the two aggravated robbery charges. On appeal they allege a number of errors of law and procedure as grounds for reversal. Finding no error, we affirm the convictions and the sentences imposed.
I.
THE TRIAL COURT ERRED IN FINDING THE ARKANSAS CAPITAL MURDER STATUTE CONSTITUTIONAL.
Appellants make a four-fold attack on the constitutionality of the Arkansas felony murder statute, Ark.Stat.Ann. § 41-1501(1)(a) (Repl.1977), which provides that capital murder occurs if a person, acting alone or with others, commits one of several felonies, including robbery, in the course of which either he or an accomplice causes the death of any person under circumstances manifesting extreme indifference to the value of human life. Appellants argue that the statute is vague and overbroad; that it denies equal protection of the law inasmuch as there are currently twenty-three men, but no women, on death row; that the imposition of the death penalty is arbitrary and capricious because the prosecuting attorney is given discretionary power to waive the death penalty and because the jury must return a death verdict if they find aggravating circumstances outweigh mitigating circumstances; and finally that our statutory scheme does not require the jury to consider the culpability of each individual defendant.
The vagueness argument has been raised and answered more than once. In Cromwell v. State, 269 Ark. 104, 598 S.W.2d 733 (1980), we pointed out that in the definition of criminal offenses some generalization is both unavoidable and desirable so that prosecutors and juries may have leeway to lighten the punishments that might be imposed for conduct that falls within overlapping offenses. (See Cromwell at p. 107, 598 S.W.2d 733).
The claim that the equal protection clause of the constitution is offended because men are given the death penalty disproportionately *686 to women is raised initially on appeal and, beyond that, is supported by argument alone.
We disagree that juries are bound under our statutory scheme to return a verdict of death if they find aggravating circumstances outweigh mitigating circumstances. We have pointed out in several cases that whatever the jury may find with respect to aggravation versus mitigation, it is still free to return a verdict of life without parole, simply by finding that the aggravating circumstances do not justify a sentence of death. [See Williams v. State, 274 Ark. 9, 621 S.W.2d 686 (1981), and Ark.Stat.Ann. § 41-1302(2)(c)]. Additionally, because the capital murder statute and the first degree murder statute overlap in appropriate cases, the jury may refuse consideration of both the death penalty and life without parole, by returning a guilty verdict as to the charge of murder in the first degree. Wilson v. State, 271 Ark. 682, 611 S.W.2d 739 (1981). This jury had that option.
The argument that prosecutorial discretion in seeking the death penalty is arbitrary and capricious has been dealt with by the Supreme Court of the United States (Bordenkircher v. Hayes, 434 U.S. 357, 359, 98 S.Ct. 663, 665, 54 L.Ed.2d 604 (1978)); and by us (Miller v. State, 269 Ark. 341, 605 S.W.2d 430 (1980)). It needs no further review.
The claim that our statutory scheme does not require the jury to separately weigh each defendant's role in a crime involving capital murder, so as to determine individual culpability, might be disposed of on procedural grounds, as the argument was not clearly raised below, i.e. we find no objection to the capital murder instructions, nor did the appellants tender to the trial court an instruction consistent with their view of the law. Schwindling v. State, 269 Ark. 388, 602 S.W.2d 639 (1980). However, we choose to consider the merits of the argument.
Appellants cite Enmund v. Florida, ___ U.S. ___, 102 S.Ct. 3368, 73 L.Ed.2d 1140 (1982). There, the Supreme Court held that death was a cruel and unusual punishment for one who had participated in a robbery during which murders were committed, but was not present at the killings and did not intend that the victims be killed. The court noted that the record supported no more than an inference that Enmund, the petitioner, was the person waiting in a car near the scene of a robbery. Two others had gone to the rear of a nearby farmhouse and, on a pretext of having car trouble, coaxed the victim outside to rob him. When the victim called for help his wife came out and shot one of the robbers. The two victims were killed in a gun battle and the robbers fled with their money to a waiting car.
Relying on the Eighth Amendment, the court held that one who does not intend that a robbery victim be killed, is not present when the killing occurs, and does not contemplate that lethal force will be used in carrying out the robbery, is not subject to the death penalty. A Florida jury had found Enmund and a co-defendant guilty and recommended the death penalty for both defendants, which the trial court imposed. Acknowledging the absence of any direct evidence that Enmund was present at the killings, the Supreme Court of Florida affirmed, explaining that the interaction of the felony murder rule and the law of principals combine to make a felon generally responsible for the lethal acts of his co-felons. As it did with death as a penalty for rape (see Coker v. Georgia, 433 U.S. 584, 97 S.Ct. 2861, 53 L.Ed.2d 982 (1977)), the court reasoned that an overwhelming number of states and of American juries would repudiate the death penalty for crimes such as Enmund's.
Significant comments are in the opinion, first, that there was no evidence that Enmund had any intention of participating in, or facilitating, a murder and, second, the court emphasized that "[i]t would be very different if the likelihood of a killing in the course of a robbery were so substantial that one should share the blame for the killing if he somehow participated in the felony." Here, a number of distinguishing factors immediately appear. At about 9:45 p.m., after he and his family had retired for the *687 evening, Don Lehman answered a knock at his front door. He asked who was there and someone answered "David." His daughter, Vickie, also responding to the knocking, said as her father unlocked the door the four appellants, masked and armed, burst into the room with such force that her father was knocked backward off his feet and the doorknob of the front door was jammed through a closet door behind. Two or three of the appellants struggled with her father toward the bedroom, where Mr. Lehman was wrestled onto the bed and a fatal shot to the head and one to the abdomen were delivered.
There was direct evidence from more than one source that appellants had discussed among themselves the necessity of murder if they met resistance; at least two of the appellants were armed with pistols, perhaps three of them, and the fourth with a lethal weapon fashioned from a metal chain. All four wore ski masks and all four burst into the Lehman home when the latch was opened. The proceeds, some $1,200, were presumably divided to the appellants' liking. It must be noted, too, that Lehman was given no opportunity to yield, he was immediately attacked by appellants, sustaining blows to his head and face from the metal chain and a mortal wound to the chest before reaching the bedroom.
Although perhaps only two of the appellants were in the bedroom when Mr. Lehman was killed, it cannot be ignored that when a group of individuals agree to execute a criminal enterprise involving the forced, nighttime entry of a private dwelling, known to be occupied, wearing masks and armed with pistols, intent on robbery, it follows that murder is a most probable consequence. We think the likelihood of a homicide under the circumstances is so substantial as to bring this case clearly within the quoted exception of the Enmund decision, on those circumstances alone. Added to that is the evidence that murder was plainly contemplated by the appellants. We conclude the blame for Don Lehman's murder rests with near equality on all of the appellants.
As a final response to this phase of the argument, we point out that there are added safeguards in our system against the arbitrary imposition of the death penalty. In Collins v. State, 261 Ark. 195, 548 S.W.2d 106 (1977), we noted the power of the trial court to reduce a death sentence to life imprisonment and in that opinion we committed this court to a policy of comparative review, by examining the death penalty in every case on a comparable basis. We have demonstrated our readiness to modify the death sentence where it is imposed capriciously (see Sumlin v. State, 273 Ark. 185, 617 S.W.2d 372 (1981)), or where the culpability of co-felons is disproportionate [see Henry v. State, 278 Ark. 478, 647 S.W.2d 419 (1983) ], or where death is unduly harsh under the circumstances [Neal v. State, 274 Ark. 217, 623 S.W.2d 191 (1981) and Giles v. State, 261 Ark. 413, 549 S.W.2d 479 (1977) ].
We are not overlooking the suggestion that Michael Orndorff's participation in the crime was half-hearted; that he may have asked to be taken home as the appellants were leaving the Baker residence; and that after the shooting he disclaimed any wish to be involved in a murder. But the jury unanimously rejected as a mitigating factor that any appellant played a minor role. Too, Orndorff's request to be taken home may have been due to Steve Baker's having declined to go along, rather than because of any compunctions over the undertaking. And his belated comment that he didn't want to be a part of a murder must be judged from the standpoint that it came after the fact and against the uncontradicted proof that he burst into the Lehman home along with the others, masked and intent on robbing, killing, if need be, anyone who resisted. We need not repeat what we have already said about the shared culpability for Don Lehman's death under the circumstances of this case. To selectively exclude this appellant from the penalty imposed by the jury for conduct readily assumed by all of them would be to arbitrarily excuse him from the predictable consequences of his own actions, consequences which the proof showed he expressly recognized.
*688 II.
THE TRIAL COURT ERRED IN REFUSING TO GRANT A SEPARATE TRIAL FOR EACH DEFENDANT.
Prior to the adoption of the Arkansas Rules of Criminal Procedure in 1976, defendants in capital cases were entitled to severance as a matter of right pursuant to Ark.Stat.Ann. § 43-1802 (Repl.1977). However, A.R.Cr.P. Rule 22.3 superseded § 43-1802 and gives discretion to the trial court to try the defendants jointly in capital cases. Hallman and Martin v. State, 264 Ark. 900, 575 S.W.2d 688 (1979).
Appellants submit that our recent decision in McDaniel and Gookin v. State, 278 Ark. 631, 648 S.W.2d 57 (1983), requires a reversal of this case, but the argument cannot be sustained. There are fundamental differences between the two cases and in McDaniel we did not disturb the rule that severance of defendants rests within the sound discretion of the trial court. We pointed out that such discretion is broad, though to be exercised judiciously in capital cases, with careful scrutiny to be given to a number of elements which could affect the fairness of the trial. (See McDaniel and Gookin v. State, page 638, 648 S.W.2d 57). In McDaniel, the defenses of the defendants were utterly antagonistic, each defendant claiming the murder was committed unexpectedly by the other. No such similarity exists here. It is argued that the defenses in this case are antagonistic, but that claim cannot be supported. We find no effort among the defendants to point to another defendant as the murderer; the proof on behalf of each defendant (only one of whom testified) was aimed for the most part at proving he was not in the bedroom, where the murder occurred. These defenses are not in the least antagonistic in the same sense as in McDaniel.
The final and essential difference is that the McDaniel case had the added element that where culpability was distinctly disproportionate, the jury was admittedly unable to decide which of the two defendants committed a heinous act, resulting in two defendants being convicted of a capital crime for which only one may have been guilty. Whereas here, there is substantial evidence, indeed overwhelming evidence, that all four appellants planned and executed a robbery, expressly deliberating on murder as a possible consequence. Nothing in this record suggests that for these appellants to be tried jointly resulted in substantial injustice and we find no abuse of discretion in the trial court's refusal to grant separate trials.
III.
THE USE OF A DEATH QUALIFIED JURY IN THE INSTANT CASE DENIED THE APPELLANTS AN IMPARTIAL JURY ON THE ISSUES OF GUILT AND PUNISHMENT AS REQUIRED BY THE SIXTH AND FOURTEENTH AMENDMENTS TO THE CONSTITUTION.
The gist of this argument is that when those members of a jury panel holding religious or conscientious scruples against capital punishment are eliminated, the cross-section of the population which remains is not impartial and unbiased on the issues of guilt and punishment. They are, it is urged, favorable to the prosecution and, hence, guilt prone. The argument is not new and needs no reiteration. It has been considered and rejected here as well as in the Supreme Court of the United States. Witherspoon v. Illinois, 391 U.S. 510, 88 S.Ct. 1770, 20 L.Ed.2d 776 (1968); Miller v. State, 269 Ark. 341, 605 S.W.2d 430 (1980).
IV.
THE JURY SELECTED IN THE INSTANT CASE WAS NOT SELECTED IN ACCORDANCE WITH THE STANDARD PRESCRIBED IN WITHERSPOON AND HOBBS.
The Witherspoon rule, as interpreted in Hobbs v. State, 273 Ark. 125, 617 S.W.2d 347 (1981) permits the exclusion of persons as prospective jurors only if they irrevocably oppose or favor the death penalty regardless of the evidence. Appellants insist that two of the veniremen, Mrs. Kaiser and Mrs. Dick should not have been excused for cause because of their uncertainty as to capital punishment and Mr. Harley Wood, *689 who showed some preference for it, should have been excused for cause.
We have examined the questions asked in voir dire and the responses given and, typically, no clear conclusion can be drawn. The answers are tentative or equivocal, and the trial court is in a better position than we are to gauge the attitude of the veniremen and decide whether each will weigh the evidence and, if appropriate, will consider all the penalties provided by law. We cannot say his discretion was used wrongly in any instance complained of. Hulsey v. State, 268 Ark. 312, 595 S.W.2d 934 (1980); McCree v. State, 266 Ark. 465, 585 S.W.2d 938 (1979).
V.
THE TRIAL COURT ERRED IN LIMITING THE APPELLANTS TO A TOTAL OF TWELVE PEREMPTORY CHALLENGES.
The trial court limited the four defendants to a total of twelve peremptory challenges, which they claim is error. We have held in three cases that where defendants are tried jointly each defendant is not entitled to the full allotment of peremptory challenges, but a challenge by one is a challenge by all. Williams v. State, 267 Ark. 527, 593 S.W.2d 8 (1979); Lewis v. State, 220 Ark. 914, 251 S.W.2d 490 (1952); Hearne v. State, 121 Ark. 460, 181 S.W.2d 291 (1915).
No absolute right to peremptory challenges exists under the constitution, see Stilson v. United States, 250 U.S. 583, 40 S.Ct. 28, 63 L.Ed. 1154 (1919) and we see no prejudice resulting from the position we have taken in the earlier decisions. The right to challenge a prospective juror on peremptory grounds may be exercised simply because counsel has reservations that certain groups might be skeptical of its theory of the case; it is a very general response and such criteria as occupation, education, age, residence, social background, sex, and even facial expression, may influence its use, depending on the nature of the case. But ordinarily these considerations are applicable to the defendants as a whole and not individually. Here, it appears the peremptory challenges were exercised collectively by the defense, as might be expected, and no argument is offered that for a specific reason one prospective juror was objectionable to one of the defendants, though not to the others. We adhere to our holding in Williams v. State, supra.
VI.
CALLING A FIVE DAY RECESS AT THE CLOSE OF TESTIMONY WAS AN ABUSE OF THE COURT'S DISCRETION.
Appellants allege that it was an abuse of discretion for the trial court to order a five day recess as the trial was nearing a close. The recess occurred, evidently, between the taking of testimony and the instructions and arguments, because of the trial judge's scheduled participation in a meeting of the Arkansas Judicial Council. The trial seems to have commenced well in advance of the meeting, but moved at a slower pace than expected. Such matters as recesses and sequestration of the jury are not amenable to inflexible rules and must be governed to a great extent by the exigencies of the day and the calendar. We see no reason why it would work to the appellants' greater prejudice to recess from Wednesday to Monday, than from Friday to Monday, as often occurs in trials. We find no abuse of discretion.
VII.
IT WAS ERROR FOR THE JURY TO FIND THE AGGRAVATING CIRCUMSTANCE THAT, "IN THE COMMISSION OF THE CAPITAL MURDER, EACH OF THE APPELLANTS KNOWINGLY CREATED A GREAT RISK OF DEATH TO A PERSON OTHER THAN THE VICTIM."
Citing Williams v. State, 274 Ark. 9, 621 S.W.2d 686 (1981), appellants contend that because Vickie Lehman and Virginia Lehman were victims of the underlying felony of aggravated robbery to the capital murder of Don Lehman, the evidence will not warrant a finding as an aggravating circumstance that appellants knowingly created *690 a great risk of death to a person other than the victim. Appellants assert that Williams v. State, supports the argument, but fail to explain how. The holding there has no particular relevance to this case. Williams' death sentence was reduced because one of the aggravating circumstances found by the jury, commission of a prior felony, did not involve violence as required by Ark.Stat.Ann. § 41-1303 (Repl.1977). The decision also holds that where a jury finds no mitigating circumstances and three aggravating circumstances, one of which is erroneous, we will not regard the error as harmless simply because two aggravating circumstances remain, as we are not in a position to speculate as to what a jury would do on a finding of two aggravating factors instead of three.
The appellee submits that this point was not preserved by an objection to the instructions or to the verdict forms. Without implying that the point is otherwise meritorious, we decline to consider it for the lack of proper objections.
VIII.
IT WAS ERROR FOR THE TRIAL COURT TO PERMIT THE INTRODUCTION OF EVIDENCE OF OTHER CRIMES AND ACTS AGAINST APPELLANTS CLINES AND ORNDORFF.
Mrs. Tammy Baker was called by the state to prove that the appellants had been at her home the evening of the Lehman murder, drinking beer and playing cards with her husband, Steve Baker. She said when she answered the door the four appellants were there, that one was wearing a ski mask and stuck a gun in her face. She was ordered to "stick `em up'," before realizing that a joke was being played. The four stayed until about 9:30 p.m. and she overheard discussions involving the robbery of someone who lived nearby.
On cross-examination she was asked by counsel for one of the defendants, Clines, whether her husband was then facing charges of robbery committed the night before the Lehman crime. She said he was and was then asked if any of the appellants were involved and she said Orndorff and Clines were. Orndorff's objections to this line of questioning were overruled and when Steve Baker followed his wife to the stand the state was permitted to go into the incident in greater detail.
Appellants Clines and Orndorff complain that the admission of this evidence, as well as a statement by Billy Weaver that Darrell Richley told him he was the one who shot Don Lehman, that he had been involved in "stealing and robbing," violate the rule against admitting evidence of prior bad acts, citing, Alford v. State, 223 Ark. 330, 266 S.W.2d 804 (1954). But the Weaver comment was admitted with an admonition to the jury in accordance with the purposes of Rule 404(b), Uniform Rules of Evidence, and the Baker testimony has to be examined in light of the fact that it was Clines' lawyer who pointedly asked the questions that brought the evidence into the trial. Whether the object was to discredit Tammy and Steve Baker's testimony by showing that Baker was charged with similar conduct is speculation, but we are not persuaded that reversible error occurred. It is entirely possible that the evidence would have been received by the trial court under Rule 404(b) had it been offered for the purpose of proving identity, opportunity, intent, preparation, or absence of mistake. Certainly the evidence of a robbery involving similar methods committed in close timing with the offense on trial had probative value. The prejudicial aspect is not so obvious that we can say the court was clearly wrong.
IX.
IT WAS ERROR FOR THE COURT TO ALLOW THE JURY, IN THE SENTENCING PHASE, TO FIND APPELLANTS CLINES AND ORNDORFF HAD "PREVIOUSLY COMMITTED ANOTHER FELONY, AN ELEMENT OF WHICH WAS THE USE OR THREAT OF VIOLENCE TO ANOTHER PERSON OR CREATING A SUBSTANTIAL RISK OF DEATH OR SERIOUS PHYSICAL INJURY TO ANOTHER PERSON" ON THE UNCORROBORATED TESTIMONY OF AN ACCOMPLICE.
After the appellants' guilt had been established and the penalty phase of the *691 trial was in progress the state was permitted to prove one of the seven aggravating circumstances listed in Ark.Stat.Ann. § 41-1303 (Repl.1977) by the testimony of Steve Baker that he, Clines and Orndorff had previously committed another felony by the use or threat of violence. Baker said the three of them robbed Barry Cobbs and Tim Pettyjohn at gunpoint on January 7, 1981.
Appellants charge that since Steve Baker was an accomplice in the alleged robbery the penalty procedure violated the rule incorporated in Ark.Stat.Ann. § 43-2116, that a conviction cannot be had in any case upon the testimony of an accomplice unless there is corroboration by other evidence. As Steve Baker's testimony was not corroborated, appellants claim that error resulted. The argument cannot be sustained, if for no other reason than the fact that § 43-2116 deals with grounds for conviction, whereas § 41-1303 deals with proving that a crime of violence was previously committed. Beyond that, in Miller v. State, supra, we held that the same degree of proof is not required to sustain a finding that an aggravating or mitigating circumstance exists, as would be required to sustain a conviction if that circumstance was a separate crime. (Miller, 269 Ark. at p. 355, 605 S.W.2d 430). We said that if there was evidence of an aggravating or mitigating circumstance, however slight, it is sufficient to submit that issue to the jury.
X.
THE TRIAL COURT ERRED IN ADMITTING THE TENNIS SHOES OF THE APPELLANT CLINES.
We need not delay unduly with the issue raised by this argument, as the admission of the evidence itself was of little or no consequence. An investigating officer testified that he took an impression of a foot print from a flower bed of the Lehman home; that there was a high degree of probability that it matched Hoyt Clines' tennis shoe, however, he said it was impossible to be absolutely certain. But Clines' presence at the scene in company with the other appellants was amply evidenced by other proof and no objection to this evidence was offered until the trial, as required by A.R. Cr.P. Rule 16.2.
XI.
THE TRIAL COURT ERRED IN NOT GRANTING A MISTRIAL FOR TESTIMONY CONCERNING IMPLICATING OUT-OF-COURT STATEMENTS OF A CO-DEFENDANT, DARRYL V. RICHLEY, REGARDING APPELLANT CLINES.
Freddie Barker was called by the state to prove that Darryl Richley came to his home a day or two after the crime involving the Lehman family to ask his help in selling the guns taken from the Lehman home. Richley, he said, talked about his part in the murder, and told him four of them went to the door with ski masks and "busted on in", that one of the four started whipping Lehman with a motor chain belt, who made a break for the bedroom "and the guy pulled his mask off and kept hitting him. He said he got on the bed and that [Richley] shot him and said the guy kept going for a gun above the bed and he said he put the gun up to his head and shot him." The questioning continued at length, with no other reference to the removal of a mask, and not until the state fully completed its interrogation was any objection made. At that point counsel for Hoyt Clines moved for a mistrial on the grounds that there was previous testimony that it was Clines who had removed his mask and hence Clines was deprived of his right to confront opposing witnesses. This argument lacks merit, as objections must be timely, Earl v. State, 272 Ark. 5, 612 S.W.2d 98 (1981), and mistrials should be declared only when the trial court is certain the trial cannot, in fairness, continue. Floyd v. State, 278 Ark. 86, 643 S.W.2d 555 (1982).
XII.
THE EVIDENCE OBTAINED FROM THE SEARCH OF APPELLANT RICHLEY'S CAR AND APARTMENT SHOULD HAVE BEEN SUPPRESSED, BECAUSE THE SEARCH WARRANT WAS NOT BASED ON PROBABLE CAUSE AND THE CONSENT TO SEARCH GIVEN BY RICHLEY WAS NOT GIVEN VOLUNTARILY.
Appellant Richley urges that the affidavit for the search warrant was deficient *692 in that no underlying circumstances for the affiant's conclusions were stated. He also argues that his consent was not voluntary. However, the search warrant and affidavit are not abstracted, as required by our rules, and the trial court found the appellant did give a lawful consent to the search. An independent determination of that issue has been made on review and we are satisfied the trial court's finding was entirely consistent with the evidence, particularly in view of Richley's testimony.
Finally, under A.R.Cr.P. Rule 36.24, and our rule 11(f), we find the treatment of other objections of appellants which were overruled, as well as rulings adverse to appellants, do not constitute reversible error. On a comparative basis we are not disposed to say the death penalty in this case is so wantonly, arbitrarily or freakishly imposed, or so excessive in relation to the crime, that we are compelled to modify the verdicts. There was sufficient evidence to support the findings of aggravating circumstances which were not outweighed by mitigating circumstances. We are satisfied the jury's verdict was relatively free of passion or prejudice. Accordingly, the judgments and sentences are affirmed.
DUDLEY, J., concurs in part and dissents in part.
PURTLE, J., dissents.
DUDLEY, Justice, concurring in part, dissenting in part.
The State adduced overwhelming evidence that the four appellants were guilty of jointly committing a capital murder and two robberies. Their individual defenses were not mutually antagonistic. Although the charges were joined and the appellants were jointly tried, the appellants as well as the State were afforded a just and fair proceeding through the accusatorial phase of the bifurcated capital murder trial.
However, that holding does not mandate the conclusion that the due process protections were sufficiently afforded at the joint sentencing phase of the capital murder trial. The two phases of the bifurcated trial serve vastly differing purposes. The essence of the accusatorial phase is the formal adversary presentation of evidence relative to guilt. The adversary concept places the State and the accused on an equal footing and so, in fairness to the State, joint trials are oftentimes required through this stage. Markedly different, the essence of the sentencing phase is the search for relevant information to choose which of the two penalties, life without parole or death, is appropriate for the person already found guilty. This second phase search for information is not based upon the same adversary concept. Our applicable statute provides that mitigating circumstances may be presented regardless of their admissibility under the rules of evidence while aggravating circumstances may be presented only when they are admissible under the rules of evidence. Ark.Stat.Ann. § 41-1301(4) (Repl.1977). The underlying reason for this is that the penalty of death is qualitatively different from all other punishments.
When the death penalty is sought, justice demands individual, not joint, sentencing. It is for this same reason that mandatory death sentences for particular crimes have been declared unconstitutional. Gregg v. Georgia, 428 U.S. 153, 96 S.Ct. 2909, 49 L.Ed.2d 859 (1976). It is only after a structured exercise of discretion which guarantees individualized sentencing that the death sentence may be imposed. Proffitt v. Florida, 428 U.S. 242, 96 S.Ct. 2960, 49 L.Ed.2d 913 (1976); Woodson v. North Carolina, 428 U.S. 280, 96 S.Ct. 2978, 49 L.Ed.2d 944 (1976). Accordingly, after a finding of guilty of capital murder, juries in this State may impose a sentence of death only after considering aggravating and mitigating circumstances. Ark.Stat.Ann. §§ 41-1301 & 1302 (Repl.1977). Aggravating circumstances are principally related to the personal history of the individual defendant and not to the nature of the crime committed. Ark.Stat.Ann. § 41-1303 (Repl.1977). Mitigating circumstances are totally related to the personal background of the defendant. *693 Id. Individualized sentencing requires structured detailed consideration of the personal history of the guilty person before the death sentence may be imposed. Any impediment to that individualized exercise of discretion is violative of the protection of due process.
The clear issue is whether the joint sentencing procedure used in this case afforded each appellant the structured and detailed consideration of his individual background which is required before the sentence of death may be imposed. Surely no one can doubt that when the jury was sent out of the courtroom to fix the punishment for four equally guilty persons at one sitting, that after fixing the penalty for the first three at death, there was a great reluctance to give the fourth a lesser sentence. Such reluctance alone might arbitrarily mandate a fourth death penalty for the particular crime regardless of the guilty person's personal history. This impediment to the individual exercise of discretion violates due process and the prohibition against arbitrary death sentences.
Such a scenario may well have occurred in the case at bar. In the sentencing phase appellant Clines was shown to have pleaded guilty in 1978 to burglary, a non-violent crime. No other convictions or felonious actions were shown to have been committed by him during this stage of the trial. The only other proof of a prior bad action, for which there was no conviction, came during the accusatorial phase of the trial when an accomplice gave uncorroborated testimony on a collateral matter. Yet, he, too, was given the death sentence.
For this reason I dissent from that part of the well written majority opinion which affirms the joint proceeding to fix the punishments at death. I concur in that the part of the opinion affirming the life sentences for the aggravated robberies.
PURTLE, Justice, dissenting.
I believe at least one of the appellants, Michael Orndorff, was prejudiced by the trial court's refusal to give him a separate trial. To grant him a separate trial would have in no way selectively excluded him from culpability in regard to the crime for which he was convicted. In fact it seems to me that holding him to trial with the actual murderers practically insured his conviction. Guilt by association is a common human error and in this case I have no doubt it played a big part in the minds of the jury who meted out identical convictions and uniform penalties to all four appellants.
When each of the appellants attempted to place himself outside the bedroom where decedent was shot the result was that each defendant put before the same jury a defense inconsistent with the other defendants' defenses.
The majority opinion seems to infer some type of guilt from some of the appellants' failure to testify. If the trial court did this we would vote unanimously to reverse and remand. The trial court should have granted a severance.
A total of twelve peremptory challenges were allowed the four defendants. One of them did not get to exercise a single peremptory challenge. Had they been tried separately each would have been allowed twelve challenges. Therefore, these appellants were denied rights which are extended to others tried separately on identical charges. There is nothing to prevent a trial judge from allowing more than twelve peremptory challenges if fairness and impartiality demand it.
Furthermore, it was clearly prejudicial to allow evidence of crimes for which the appellants had not been convicted even though this was during the sentencing phase of the bifurcated trial. What happened to the old law that held every individual is presumed innocent? Soon it will be legal for the state to charge an accused of spurious crimes in order to help secure a conviction. For all we know none of the appellants were or will ever be found to have committed the alleged crime which was used during the sentencing phase.
I am still of the opinion that a death qualified jury is not comprised of a cross-section *694 of the population as required by the Constitutions of Arkansas and the United States. It appears to me that there is a misunderstanding of the Witherspoon doctrine when prospective jurors are excluded because of religious or moral scruples against the death penalty. Perhaps some member or members of this very court have religious or moral scruples against the death sentence, yet we affirm such sentences if we find no reversible error. One who does not believe in the death sentence may honestly and conscientiously vote for such a sentence in upholding the law. For these reasons I must dissent to the majority opinion.
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931 F.2d 52
U.S.v.U.S. Currency Contained in Certificate of Deposit#48050052-8, in Name of Kim (Bong Y.), at Firstrust SavingsBank, 701 Hamilton Mall, Allentown, Pa. 18101, Certificateof Deposit #06-65-017164, in Name of Kim (Bong Y.), at HillFinancial Savings Associations, 400 Main Street, Red Hill,Pa., Savings Account #823581709, Checking Account #15134933,Both Accounts in Name of Kim (Bong Y.), at Meridian Bank,7th and Hamilton Sts., Allentown, Pa., 18101
NO. 90-1784
United States Court of Appeals,Third Circuit.
MAR 18, 1991
Appeal From: E.D.Pa.,
Reed, J.
1
AFFIRMED.
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283 B.R. 783 (2002)
In re John Marceau RICHARDSON and Dorothy Evelyn Richardson, Debtors.
No. 97-21561-13.
United States Bankruptcy Court, D. Kansas.
October 8, 2002.
*784 *785 Eric C. Rajala, Overland Park, KS, for Debtors.
MEMORANDUM OPINION[1]
JOHN T. FLANNAGAN, Bankruptcy Judge.
John and Dorothy Richardson filed their Chapter 13 petition on June 6, 1997. *786 Their plan was confirmed on October 10, 1997. Ten months later, and fourteen months after their case was filed, their adult son died, leaving them $400,000 as beneficiaries of his life insurance policy. The Richardsons claimed the insurance proceeds exempt under 11 U.S.C. § 522(b), which provides that "an individual debtor may exempt from property of the estate property listed in . . . this subsection." (Emphasis added.) No one objected to the exemption.
Are the insurance proceeds property of the estate that can be exempted under § 522(b)? The court answers in the negative. Although no one objected to the exemption, before property can be exempted from property of the estate, it must first be property of the estate. As this opinion will explain, these insurance proceeds were never property of the estate, thus they cannot be exempted from it. The result is that the insurance proceeds are outside the estate and not within reach of the trustee for payment through the plan.
When the Richardsons completed their plan payments, they moved for a discharge.[2] The Chapter 13 Standing Trustee, William H. Griffin, objected. Among other things, he maintained that the insurance proceeds were disposable income that should be paid through the plan.[3]
Are the insurance proceeds disposable income that should be paid through the plan? The court rules that the insurance proceeds are not disposable income payable through the plan because they are not the debtors' projected disposable income nor property devoted to the plan. Therefore, the trustee's objection lacks merit and does not bar a discharge. And all this notwithstanding, the Chapter 13 trustee has no statutory authority to recover the insurance proceeds from the debtors.
I. Motion for Partial Summary Judgment
These questions are before the court because the Richardsons filed a motion for partial summary judgment in response to the trustee's objection to discharge. The summary judgment motion seeks a ruling that the insurance proceeds are exempt.[4]
In the trustee's objection to discharge, he also complained that following confirmation, the Richardsons misrepresented their income and expenses and acted in bad faith.[5] The Richardsons did not address this aspect of his objection in their motion for partial summary judgment, however. Therefore, this aspect of the trustee's objection is not before the court.
This proceeding is core under 28 U.S.C. § 157. The court has jurisdiction under 28 U.S.C. § 1334 and the general reference order of the District Court effective July 10, 1984 (D. Kan. Rule 83.8.5).
II. Undisputed Facts
The summary judgment motion contains the requisite statement of uncontroverted material facts, to which the trustee has responded. The relevant, undisputed facts are:
The Richardsons filed their Chapter 13 petition on June 6, 1997.[6] Their plan proposed *787 to pay the trustee $64,800 over 36 months at $1,800 per month. They began making the plan payments on July 10, 1997, and on October 10 of that year, the court confirmed their plan.
On August 14, 1998, approximately 14 months after the petition filing date and 10 months after the confirmation date, the Richardsons' adult son, John C. "Chris" Richardson, died from injuries suffered in an automobile accident.[7] In due course, the Richardsons received the benefits of a life insurance policy on his life in the amount of $400,000.
The following documents attached to the memorandum in support of the motion for partial summary judgment and referred to in the statement of uncontroverted facts support these events: (1) a letter to the trustee from the Richardsons' attorney dated May 31, 2000; (2) a U.S. Financial Beneficiary's Statement and Payment Direction form; (3) a State of Colorado death certificate; and (4) a funeral notice.[8]
On May 8, 2000, the Richardsons filed Supplemental Schedules B and C,[9] listing the insurance proceeds and claiming them exempt under Kansas Statutes Annotated § 40-414 in the following terms: "Life Insurance Death Benefit Proceeds Paid on Death of Chris Richardson" having a fair market value of $400,000.
The trustee did not object to the Richardsons' claim of exemption.[10]
In August 2000, the Richardsons filed a motion for discharge. In their motion for discharge, the Richardsons maintained that they had completed the payments according to the plan terms. The trustee filed a timely objection to the their motion, alleging (in part) that the insurance proceeds should be deemed disposable income and made available for payment of claims under the plan.
III. Discussion
A. The Debtors' Exemption Contention
The only contention in the Richardsons' brief on summary judgment is that the insurance proceeds are exempt property. There is no dispute that the trustee failed to object to the exemption claim. Nor does the trustee deny that he received notice of the supplemental schedules claiming the exemption or that he failed to object to the exemption. The Richardsons therefore point to the rule announced by the United States Supreme Court in Taylor v. Freeland & Kronz.[11]Taylor holds that failure to object to an exemption of property from the estate within the allowed time validates the exemption claim. Consequently, the Richardsons argue that the trustee's failure to object renders the exemption valid.[12]
*788 Furthermore, they argue that even if the Taylor rule were not applicable, Kansas law allows them the exemption. Kansas, like most states, has opted to apply its own exemption statutes in bankruptcy cases, as § 522(b) permits. The specific Kansas exemption statute applicable to life insurance is K.S.A. § 40-414. And it does grant the Richardsons an exemption for life insurance proceeds.[13]
Unfortunately, neither party has addressed the express condition of § 522(b) requiring that before property can be exempted from the estate, it must be in the estate: "[A]n individual debtor may exempt from property of the estate the property listed in either paragraph (1) or . . . paragraph (2) of this subsection." (Emphasis added.) The court's research discloses that the interplay between two Code sections, § 1306(a)(1) and § 1327(b), forces the conclusion that the insurance proceeds are not property of the estate subject to exemption.
B. The Relevant Code Sections
1. Section 1306(a)
Section 1306(a) addresses property of the estate in a Chapter 13 case. Subsection (a)(1) includes within the estate all property that the debtor acquires from the commencement of the case until the case is closed, dismissed, or converted. Subsection (a)(2) includes earnings from the debtor's services performed before the case is closed, dismissed, or converted:
(a) Property of the estate includes, in addition to the property specified in section 541 of this title
(1) all property of the kind specified in such section that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title whichever occurs first; and
(2) earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first.[14]
Obviously, § 1306(a)(1) can be read to include the insurance proceeds within the Chapter 13 estate. The insurance proceeds are, after all, property the Richardsons acquired while the case was not closed, dismissed, or converted. Under this reading of § 1306(a)(1), the insurance proceeds would be property of the estate, and both the Kansas statute and the Taylor v. Freeland & Kronz decision would exempt them from the estate.
2. Section 1327(b)
But, another Code section influences the meaning of § 1306(a) and the scope of property of the estate in a Chapter 13 case. Section 1327(b) "vests all of the property of the estate in the debtor" upon confirmation:
(b) Except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor.[15]
Numerous courts have given consideration to this Code section in relation to § 1306(a)(1) and to the way the two sections *789 interact to determine the scope of a Chapter 13 estate.
C. The Tenth Circuit Bankruptcy Court Cases
Within the Tenth Circuit, several bankruptcy courts have opined on the interrelationship of §§ 1306(a)(1) and 1327(b). The first such decision, In re Adams,[16] emphasizes that Chapter 13 does not prevent certain creditors from reaching property of the debtor. In this 1981 decision, the Hon. Ralph R. Mabey, a Utah bankruptcy judge, held that the automatic stay did not bar the collection of nondischargeable alimony and child support from property that was vested in the debtor by confirmation of the Chapter 13 plan.
Before filing for Chapter 13 relief, Mr. Adams had incurred an alimony and child support obligation in a divorce. After Adams's Chapter 13 plan was confirmed, his ex-spouse initiated state court proceedings to collect past due alimony and child support. In response, Adams sought a show cause order against her in the bankruptcy case for violating the automatic stay.
Under § 362(b)(2)(B), the automatic stay does not stay "the collection of alimony, maintenance, or support from property that is not property of the estate."[17] Therefore, the question confronting the court was, in Judge Mabey's words, "[W]hat property, if any, was not property of the Chapter 13 estate and, therefore, was available for satisfaction of this nondischargeable debt"?[18]
Judge Mabey noted that taken together, § 1306(a) and § 541(a) prescribe that virtually no property remains as property of the debtor in a Chapter 13 from the date of filing until confirmation of the plan. But upon confirmation, the property of the estate changes because § 1322(b)(9) permits the plan to vest property of the estate in the debtor,[19] and § 1327(b) dictates that confirmation vests all property of the estate in the debtor unless the plan or order confirming the plan provide otherwise. Furthermore, under § 1327(c), property vesting in the debtor under subsection (b) is free and clear of any claim or interest of any creditor provided for by the plan, unless the plan or the order confirming the plan provide otherwise.
Thus, Judge Mabey said, "[T]he expansive definition of `property of the estate' found in Section 1306 is pruned dramatically at confirmation."[20] Upon confirmation, property that has not been designated in the plan or order confirming the plan as necessary for the execution of the plan vests in the debtor and becomes property of the debtor. Wages over and above those paid to the trustee or creditors under a plan and any property that the debtor does not propose to use in funding the plan return to the debtor and become subject to the reach of an ex-spouse under § 362(b) because the stay does not apply.
There are four bankruptcy court decisions from states within the Tenth Circuit that have followed the In re Adams analysis of § 1306(a)(1) and § 1327(b) one from Utah,[21] two from *790 Colorado,[22] and one from Kansas.[23] Two other Colorado bankruptcy cases have acknowledged the validity of the analysis while deciding on other grounds.[24]
D. The Tenth Circuit Court of Appeals Decision
In 1997, the Tenth Circuit Court of Appeals itself considered the vesting issue in United States v. Richman (In re Talbot).[25] In this case, the IRS held a lien on the debtor's residence securing a claim to be paid through the plan. Following confirmation, the residence was sold, but to clear the title, the debtor was forced to pay off the IRS lien.
When the trustee learned of the pay off, she sought an order of disgorgement against the IRS, arguing that the residence was part of the bankruptcy estate and that the automatic stay barred collection from its sale proceeds. The bankruptcy court ordered disgorgement. On appeal, the Tenth Circuit reversed, holding that under § 1327(b), confirmation of the Chapter 13 plan vested the residence in the debtor, removing it from property of the estate and allowing the IRS to collect its lien from the sale proceeds.
E. The Eleventh Circuit Court of Appeals Decision
More recently, the Eleventh Circuit also adopted this view in Telfair v. First Union Mortgage Corp., a 2000 decision authored by Senior Circuit Judge Phyllis A. Kravitch.[26]
First Union Mortgage Corporation was an oversecured creditor.[27] Its mortgage documents entitled it to expenses and attorneys' fees incurred in protecting the secured property, whether from default, foreclosure, or litigation. The Telfair plan cured existing mortgage arrearages with payments through the plan. But it paid the regular monthly mortgage payments directly to the mortgagee outside the plan.
Following confirmation, Telfair defaulted several times on the regular monthly mortgage payments due the mortgagee outside the plan. As a result, First Union filed several motions for stay relief to recoup the defaulted payments, incurring attorneys' fees in the process. Furthermore, Telfair failed to maintain insurance on the property. This required First Union to "force place" insurance on the property at a high premium cost.
To recover the fees and costs, First Union deducted them from Telfair's mortgage *791 escrow account. This caused Telfair to initiate an adversary action against First Union on several theories, one of which was stay violation. But the bankruptcy court dismissed the adversary on First Union's motion for summary judgment, and the district court affirmed.
On appeal, the Eleventh Circuit Court of Appeals also affirmed. In considering the appeal, Judge Kravitch recognized three models that courts have followed in resolving the conflict between §§ 1306 and 1327:(1) the estate termination approach, under which "all property of the estate becomes property of the debtor upon confirmation and ceases to be property of the estate"; (2) the estate preservation approach, under which "all property of the estate remains property of the estate after confirmation until discharge, dismissal, or conversion"; and (3) the estate transformation approach, under which "only that property necessary for the execution of the plan [remains] property of the estate after confirmation."[28]
Adopting the third model, Judge Kravitch quoted Chief Judge Posner of the Seventh Circuit in Black v. United States Postal Service (In re Heath)[29] in reading "the two sections, 1306(a)(2) and 1327(b), to mean simply that while the filing of the petition for bankruptcy places all the property of the debtor in the control of the bankruptcy court, the plan upon confirmation returns so much of that property to the debtor's control as is not necessary to the fulfillment of the plan."[30] Judge Kravitch thus held that confirmation of Telfair's plan had removed the mortgage payments from the estate, allowing First Union to collect the attorneys' fees and costs by charging the debtor's account without violating the automatic stay.
Finally, Judge Kravitch announced that the "estate transformation approach . . . should be the law of this circuit."[31]
In the Heath case, cited by Judge Kravitch in support of the estate transformation approach, Chief Judge Posner made a convincing argument against the estate preservation approach. He pointed out that it creates a jurisdictional nightmare for the bankruptcy courts. Under that approach, all property of the Chapter 13 estate remains in the estate after confirmation until discharge, dismissal, or conversion. Judge Posner pointed out, however, that under that approach, any disputes arising during the plan term that were arguably related to property of the estate would confer jurisdiction on the bankruptcy court and embroil it in even the pettiest of controversies.
F. The Eleventh Circuit Bankruptcy Court Decision
Taking to heart Judge Kravitch's endorsement of the estate transformation approach, a bankruptcy judge within the Eleventh Circuit, the Hon. Benjamin Cohen of Alabama, has amplified Telfair in a comprehensive and illuminating decision entitled EconoLube N' Tune, Inc. v. Frausto (In re Frausto).[32]
As he was bound to do, Judge Cohen adopted the estate transformation approach, but went on to expound on the theory of Chapter 13 and to comprehensively catalogue (in a footnote) numerous *792 cases employing the different vesting models explained by Judge Kravitch.
The facts of the Frausto case are straightforward. Frausto filed for Chapter 13 relief in September 1996 and obtained confirmation of his plan in November of that year. Approximately 18 months after confirmation, he became a franchisee of EconoLube N' Tune, Inc. When Frausto breached the franchise agreement, EconoLube N' Tune brought an adversary complaint against him in bankruptcy court and obtained a default judgment of $94,438.09.
Before Frausto filed his bankruptcy petition, he had sued Subway Restaurants, Inc., and others, in Alabama state court for a monetary recovery. When he filed his bankruptcy petition, the trustee purported to succeed to his state court cause of action. At about the same time that EconoLube N' Tune obtained its default judgment against Frausto, the trustee settled the state court action against Subway for $100,000, and the bankruptcy court approved the settlement. The settlement money was paid to the trustee, who placed the funds in an interest-bearing account.
Seeing these funds in the hands of the trustee, EconoLube N' Tune issued a writ of garnishment against the trustee to collect its $94,438.09 judgment out of the $100,000 settlement proceeds.
Judge Cohen ruled that property of the estate as defined in §§ 541 and 1306 "`vests . . . in the debtor' . . . `free and clear of any claim or interest of any creditor provided for in the plan' (section 1327(c)) (emphasis added) upon confirmation."[33] He therefore held that the $100,000 in the possession of the trustee was not property of the bankruptcy estate, but was instead property of the debtor subject to EconoLube N' Tune's garnishment.
Summarizing his view, Judge Cohen announced that the Chapter 13 scheme contemplates the payment of the debtor's prepetition creditors from future earnings in lieu of from property owned at filing or acquired thereafter:
This statutory scheme is simple and unambiguous. It provides for the payment of claims out of future earnings, in lieu of payment from property which a debtor either owns when filing bankruptcy or acquires afterwards. As a result, at confirmation all such property vests in the debtor. At that time, the debtor's pre-petition creditors lose their claims to, or interest in, that property, whether the property was acquired by the debtor before or after filing bankruptcy. And after confirmation, they are bound to accept the periodic payments provided for under the terms of the debtor's confirmed plan in full satisfaction of their claims.[34]
Expanding on this theme, Judge Cohen explained that Chapter 13 does not authorize collection, liquidation, and distribution of property. Rather, Chapter 7 is the vehicle for collecting, liquidating and distributing a debtor's assets. Chapter 7 does not contemplate the debtor retaining any property of the estate, except exempt property and property acquired after the debtor has filed the case. In short, Chapter 7 involves a debtor who will sacrifice property. Therefore, a Chapter 7 trustee is authorized by § 704(1) to "collect and reduce to money the property of the estate for which such trustee serves. . . . "[35]
*793 This is not the case with Chapter 13. Chapter 13 involves a debtor who will retain property. Consequently, "a Chapter 13 trustee, unlike a Chapter 7 trustee, has no statutory obligation, right, duty or power to sell, use, lease, collect, liquidate or distribute any property, whether that property is denominated `property of the estate' or `property of the debtor.'"[36] Section 1302(b)(1) deletes from the duties of a Chapter 13 trustee the responsibility "to collect and reduce to money the property of the estate" that § 704(1) delegates to Chapter 7 trustees. And a Chapter 13 trustee has no access to § 726(a), "which either permits or directs the distribution of `property of the estate' or which specifies how `property of the estate shall be distributed'"[37] Rather, the Chapter 13 trustee is directed by § 1302(b)(3) merely "to dispose of . . . moneys received or to be received in a case. . . . "[38]
These limitations are inherent in the theory and purpose of Chapter 13. A Chapter 13 filing is a voluntary process into which no one can force the debtor. No involuntary petition under this chapter can be filed against the debtor. And once the debtor files a Chapter 13 case, no one can force a liquidation of the debtor's assets, except by requesting and obtaining conversion of the case to Chapter 7 under the conditions expressed in § 1307(c).
The debtor retains possession of the property that remains in a Chapter 13 estate after confirmation the future earnings and income necessary to fulfill the plan until the debtor pays those monies to the trustee: "The Chapter 13 debtor, rather than the trustee, is specifically endowed, pursuant to section 1303, with the authority, `exclusive of the trustee,' to use, sell or lease property of the estate. 11 U.S.C. § 1303 (emphasis added). Section 1306(b) mandates that `the debtor shall remain in possession of all property of the estate.' 11 U.S.C. § 1303 (emphasis added)."[39] In Frausto's case, according to the plan, the estate after confirmation consisted of $270,000, his projected future earnings of $4,500 per month times 60 months.
G. The Confirmation Order
The question remains, given the rationale of these cases, whether the plan or confirmation order in this case affect the vesting of property under § 1327(b). As the prior discussion indicates, § 1327(b) provides for the vesting of property of the estate in the debtor upon confirmation, "[e]xcept as otherwise provided in the plan or in the order confirming the plan. . . . "
This exception in § 1327(b) permits a plan to embrace non-income property of the estate that would otherwise vest in the debtor at confirmation. As to income, debtors' plans must "provide for the submission of . . . future income of the debtor to the supervision and control of the trustee as is necessary for the execution of the plan. . . ."[40] But the statute does not require debtors to submit non-income property to the plan. Debtors may, however, voluntarily submit non-income property to the plan, and when they do, the exception to § 1327(b) prevents that property from vesting in them at confirmation, and it remains in the post-confirmation estate. But, unless a plan states otherwise, confirmation vests in debtors all property not devoted to the plan.
*794 In addition to allowing the plan to alter vesting under § 1327(b), the exception in § 1327(b) also allows the confirmation order to do the same. The addition of the confirmation order as a means of negating vesting under § 1327(b) merely recognizes a common procedure for amending plans in restructuring cases. The procedure allows the court to permit modification of a plan without requiring the debtor to file an amended plan. For example, a debtor's initial plan might fail to meet the best-interest-of-creditors test for confirmation unless the debtor volunteers to add non-income property to the plan. If a debtor wishes to offer the additional property, a motion to modify the plan can be filed, appropriate notice given, and the plan amendment approved by the court with directions to memorialize the ruling in the confirmation order. By allowing the amendment to be expressed in the confirmation order, the debtor is saved from filing an amended plan and confirmation can be completed with dispatch.
In this division of the Kansas bankruptcy court, a confirmation order is the final result of the following process: A Chapter 13 plan is filed. An objection to confirmation, if any, is presented in written form and is brought before the court for hearing on a monthly docket day. After any objection is resolved by ruling or agreement, the trustee advises the court as to whether the plan satisfies the prerequisites to confirmation required by the Code, and if so, the judge finds in open court that the plan is confirmed.
Sometime after the hearing, the trustee submits to the Bankruptcy Clerk a form confirmation order for filing. In most cases, as in this one, the form confirmation order bears the trustee's facsimile stamped signature of approval, but no approval signature by debtor's counsel. The Clerk stamps the order with a facsimile of the judge's signature. The judge does not personally sign the confirmation order. In fact, the judge does not see the order unless some issue is later raised about its contents. This procedure has evolved to accommodate the voluminous number of confirmation orders processed in this division and it is the procedure by which the confirmation order in this case was entered and filed.
Unless the court directs at the confirmation hearing that a specific ruling should be memorialized in the confirmation order, the only information necessary for inclusion in the confirmation order is a statement mirroring Form 15 of the Official Bankruptcy Forms.[41] That form, adaptable from Chapter 11 cases to Chapter 13 cases, presents a brief three-line statement that (1) the plan [as modified, if applicable] was filed on a certain date; (2) the court determined after hearing on notice that the requirements for confirmation set forth in the statute were satisfied, and (3) the plan is confirmed.
In this case, the trustee's form confirmation order, filed three weeks after the confirmation hearing, contains additional information. It contains a paragraph numbered 8, itself consisting of two sentences that appear to change both the terms of plan payments and the timing of vesting under § 1327(b).
All property of the estate, including any income earnings or other property which may become a part of the estate during the administration of the case which property is not proposed, or reasonably contemplated, to be distributable to claimants under the plan shall revest in the debtor(s); provided no property received by the Trustee for purposes of *795 distribution under the plan shall revest in the debtor except to the extent such property may be in excess of the amount needed to pay in full all allowed claims as provided by the plan.
Such property as may revest in the debtor(s) shall so revest upon the approval by the Court of the Trustee's Final Report and Account.[42]
The first clause of the first sentence addresses vesting and is consistent with § 1327(b). The second clause is inconsistent with § 1327(b); it alters the treatment of claims contemplated by the plan by adding the phrase "to pay in full all allowed claims as provided by the plan." (Emphasis added.) The plan in this case did not purport to pay all allowed claims 100%. It merely proposed to pay $1,800 per month for 36 months, a total of $64,800! The second sentence, set off from the first, is likewise inconsistent with § 1327(b); it changes the vesting date from the date of confirmation to the date the court approves the Trustee's Final Report and Account.
In this case, the issue addressed in paragraph 8 was not presented to the court at the hearing conducted to obtain confirmation of the plan. Debtors' counsel was not given notice and an opportunity for hearing on the issues raised by the language of the paragraph. The confirmation order does not bear the approval signature of debtors' counsel. It is merely a form order filed by the trustee approximately three weeks after the court announced that the plan was confirmed.
No one filed a pleading asking the court to rule on whether the vesting time under § 1327(b) should be delayed or whether the amount paid on allowed claims should be expanded. And the court did not direct that paragraph 8's language be included in the confirmation order. Rather, the addition of this paragraph to the confirmation order was made without this judge's specific knowledge or approval.
Proper procedure would require a motion to bring the issue before the judge, appropriate notice to interested parties, a ruling by the judge, approval of the court's order by debtors' counsel and others, and the judge's signature on the confirmation order. But the confirmation order in this case is not the product of such a procedure.
Furthermore, the confirmation order language conflicts with the purpose of § 1327(b), which is to allow for expression of the property that will remain in the estate for distribution by the plan. The addition of paragraph 8 to the order fails to accomplish this purpose. Rather, it alters the plan payment terms and changes the time of vesting without a specific ruling to that effect by the court. Congress did not intend the exception language in § 1327(b) to permit either of these alterations without a judge's formal ruling.
Having now looked closely at this language in the context of § 1327(b), and having now gained a better understanding of the theory of Chapter 13 exhibited in the cases discussed above, the court believes that inserting this language in the confirmation order denied the debtors due process of law. For this reason, although the order contains language purporting to delay the vesting time beyond confirmation, the court finds that the § 1327(b) exception language in this case should not permit the trustee to increase plan payments on claims nor should it prevent property from vesting in the debtors upon confirmation. Paragraph 8 is inappropriate and is hereby stricken from the confirmation *796 order nunc pro tunc and given no effect.
The trustee has cited a Kansas bankruptcy appeal that applies language identical to the paragraph under discussion here. The case, In re Hoffmeister,[43] holds that that language altered the vesting time of § 1327(b). Nevertheless, this court declines to follow that case because the propriety of the paragraph language was not at issue before the district judge and because this court disagrees with the opinion in other respects.
In Hoffmeister, when the debtors filed their Chapter 13 petition in January 1993, they claimed their automobile exempt, and no one objected. The vehicle was encumbered by the security interest of Super Chief Credit Union securing a debt of $8,000. The automobile value was $2,600 on the filing date. The plan provided for payment of both the secured claim and the unsecured claim through the trustee. When the court confirmed the plan in April of 1993, the debtors commenced plan payments to creditors, including Super Chief.
Later, the car suffered hail damaged and the hail insurance company tendered a $1,101.36 check payable jointly to Super Chief and the debtors. The debtors then moved the court to determine the distribution of the insurance proceeds. They claimed that Super Chief's remaining $338.56 secured claim should be paid from the insurance funds and the balance paid to them. Super Chief argued that the balance of the check should be paid to unsecured creditors, of which it was one.
The bankruptcy court heard the debtors' motion in April 1995. Debtors' counsel argued that the hail insurance check was paid for damages to exempt property; therefore, the check proceeds were exempt. In response, "the bankruptcy court opined that the proceeds were exempt only if the debtor intended to use them towards the repair of the exempt car; otherwise, the balance of the proceeds should be paid to the estate for distribution."[44] The court then allowed the debtors five days to file a memorandum of authorities supporting their position.
In the debtors' supplemental brief, they cited the Kansas exemption law and two federal court decisions as support for their claim that the exemption vested in them and that the insurance proceeds did not remain property of the estate. They argued that the insurance proceeds were the product of the exempt car and therefore belonged to them, subject to the credit union's remaining lien.
On May 22, 1995, the bankruptcy judge ruled from the bench that since the insurance policy was property of the estate and the debtors did not intend to use the funds to repair the car, the insurance proceeds were estate property that must be paid to unsecured creditors through the plan.
In affirming the bankruptcy court, the district judge took a different tack from that of the bankruptcy court. The district court applied confirmation order language identical to the language in this case to hold, in effect, that none of the property of the estate vested in the debtors upon confirmation under § 1327(b): "Such property as may revest in the debtor(s) shall so revest upon the approval by the Court of the Trustee's Final Report and Account."[45]
Hoffmeister notwithstanding, however, this court cannot hold that the trustee's *797 form confirmation order language in this case furnishes a proper legal foundation for changing the vesting time expressed in § 1327(b). In Hoffmeister, while the district court applied the language of paragraph 8 of the trustee's form confirmation order, no one had questioned the procedural legality of that confirmation order language. Nor was the district court familiar with the genesis of that language in the bankruptcy system as this court is. Therefore, the district court applied the confirmation order language with the assumption that the order had been entered according to procedural due process of law. It assumed that the trustee had obtained authority from the court to include the language in the form order after proper notice and opportunity for hearing to the debtor and interested parties and after the court had ruled that the language could be included in the order. This is not the case here, as pointed out above.
This court's own research reveals that the Hoffmeisters appealed the district court decision to the Tenth Circuit, and in an unpublished opinion, the Circuit Court affirmed the lower court decision.[46] Nevertheless, this court respectfully declines to find that the Tenth Circuit opinion requires a similar result in this case. First, the Tenth Circuit ruling in Hoffmeister is not a binding precedent since 10th Cir. R. 36.3(A) provides, "Unpublished orders and judgments of this court are not binding precedents, except under the doctrines of law of the case, res judicata, and collateral estoppel."
Second, like the district court, the appellate court had no reason to address the procedural legality of the trustee's form confirmation order language. And the appellate court did not base its decision on the language of the form order, as the district court did, although the appellate court did mention the district court's rationale in a footnote.
Third, the various decisions within the Tenth Circuit discussed above, including the Circuit level decision in In re Talbot, which was decided after the Hoffmeister appeals, cast a different light on the extent to which § 1306(a) can be viewed as bringing property into a Chapter 13 post-confirmation estate. Also, since the projected disposable income approach championed later in this opinion departs significantly from the approach taken by numerous other courts, these subjects may be sufficiently debatable to warrant further scrutiny at the Circuit level.
The language contained in paragraph 8 of the form order entered in this case will no longer be approved in Chapter 13 confirmation orders issued in cases before this judge, unless the court rules in a properly processed contested matter that such language is appropriate for inclusion in the order.
H. The Trustee's Disposable Income Contention
The trustee contends that the life insurance proceeds at issue are "disposable income" that the Richardsons must pay through the plan. By this contention, he seems to equate the concept of "projected disposable income" with the concept of actual disposable income the income actually received by the debtors during the plan payment term above living expenses.
According to § 1325(b)(1), as amended in 1984, a plan cannot be confirmed unless it pays objecting unsecured creditors in full; or in the alternative, unless the plan, as of the date of confirmation, "provides that all of the debtor's projected disposable income to be received in the three-year *798 period beginning on the date that the first payment is due under the plan will be applied to make payments under the plan."[47]
But the trustee has distorted the true meaning of the phrase "projected disposable income" appearing in § 1325(b)(1). Under this section, the words "projected disposable income" have a much different meaning than the meaning the trustee advances. "Disposable income" does not mean actual future income; rather, it is defined in § 1325(b)(2) to mean income remaining after deducting maintenance or support and income from engaging in business, if the debtor is so engaged:
. . . income which is received by the debtor and which is not reasonably necessary to be expended
(A) for the maintenance or support of the debtor or a dependent of the debtor, . . . and
(B) if the debtor is engaged in business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business.[48]
The phrase "projected disposable income" means that, as of the date of confirmation, the debtor, trustee and the court must project what the debtor's income will be over a three-year period. Then, subsistence and self-employment business expenses, if any, are deducted to reach the "projected disposable income" figure and this amount must be devoted to the plan in order to obtain confirmation. After confirmation, the trustee can expect to receive this projected amount over the next three years, not the actual disposable income received by the debtor, which could be a greater amount.
This interpretation of § 1325 has been adopted by the Ninth Circuit in Anderson v. Satterlee (In re Anderson), a 1994 decision in which the Chapter 13 trustee unsuccessfully maintained that the debtors were required to pay all of their actual disposable income during the life of the plan. The court held, however, that the Chapter 13 debtors' obligation under § 1325(b)(1)(B) was to pay their projected disposable income over the course of the plan, not their actual income.[49] The debtors' plan proposed to pay $800 per month for 36 months, which would not have paid their creditors in full.
At the § 341 meeting, the trustee presented the debtors with a Best Efforts Certificate, which constituted an agreement by the debtors to pay the trustee their actual disposable income over 36 months. The certificate also provided that the trustee would determine by periodic review of their financial status what the actual disposable income would be; then he would automatically adjust their payments. Because the debtors refused to sign the Certificate, the bankruptcy court refused to confirm their plan.
On appeal to the district court, the debtors maintained, as they had in the lower court, that the $800 per month represented an accurate estimate of their projected disposable income over three years of the plan; therefore, their plan was confirmable. The district court nevertheless affirmed the bankruptcy judge.
On appeal, however, the Ninth Circuit adopted the plain language of § 1325(b)(1)(B) requiring only the "`payment of all projected disposable income' as calculated at the time of confirmation. . . ." *799 [50] And the court endorsed a two-part process for determining this amount that was suggested by the Fifth Circuit in Matter of Killough.[51] Under this process, the first step in arriving at projected disposable income is to multiply the debtor's monthly income by 36. The next step is to determine the amount of the debtor's income that is disposable.[52]
The trustee argued that the $800 projection did not assure that the Andersons would pay all actual disposable income during the life of the plan. But the court saw this argument as flawed because the plain language of the statute did not require the payment of actual disposable income. Furthermore, the court found the trustee's effort to force an agreement to a periodic payment adjustment without a court order to be inconsistent with the procedures for modifying a plan after confirmation.
Like the Anderson court, this court believes that the phrase "projected disposable income" must be given its obvious meaning. Before a plan is confirmed, the debtor, the trustee, and the court must look to see what the plan offers in payments from projected disposable income that will predictably flow to the debtor. If income is foreseeable at confirmation, it is included within projected disposable income. The determination of projected disposable income must be made before confirmation of the plan, not as fortuitous, unforeseen receipts arise during the course of the plan. Contrary to the trustee's view here, the post-confirmation receipt of life insurance benefits as a beneficiary is neither earnings nor other property that was devoted to the plan and therefore not accessible to him for payment to creditors through the plan.
I. The Chapter 13 Scheme
In re Adams and its progeny teach that from the date of the Chapter 13 petition until the date the court confirms a plan, there is no property of the debtor; there is only property of the estate. Property of the estate includes the property defined by § 541, plus earnings, income from engaging in business, and other property the debtor acquires between the date of the petition and the date of confirmation.
A debtor must provide in the plan "for the submission of that part of projected disposable income to the supervision and control of the trustee as is necessary for the execution of the plan."[53] But the debtor may also voluntarily assign to the plan tangible property of the estate. This may sometimes be necessary, but not mandatory, in order to meet the best-interest-of-creditors test. The debtor may choose whether to include the tangible property in the plan or not, albeit failure to do so may result in denial of confirmation.
When the court confirms a Chapter 13 plan, § 1327(b) vests the debtor with the property of the estate that is not devoted to the plan. With this vesting, the property becomes property of the debtor and no longer property of the estate. Those persons who become post-confirmation creditors of the debtor or who hold unstayed, nondischargeable prepetition causes of action against the debtor can collect their claims in state court from the property of the debtor.
*800 Prepetition creditors, on the other hand, cannot satisfy their claims from property of the debtor. They are entitled only to the debtor's projected disposable income paid according to the plan. Confirmation of the plan is the court's approval of a new contract with the debtor's prepetition creditors limiting them to recovery of the remaining property of the estate the debtor's projected disposable income designated by the plan for payment to prepetition creditors and any tangible property committed to the plan.
The debtor's obligation is to pay that projected disposable income to the trustee for distribution according to the terms of the plan. The debtor remains in possession of the income, however, until it is paid to the trustee for payment on claims as the plan dictates.[54] When the debtor completes paying the projected disposable income, the plan obligation is satisfied and the debtor is due a mandatory discharge.[55]
The role of the standing Chapter 13 trustee is merely to receive the projected disposable income and to disburse it to prepetition allowed claims according to the terms of the plan. The Code does not otherwise authorize the standing Chapter 13 trustee to collect, liquidate, or distribute property as it does a Chapter 7 trustee. Furthermore, if a debtor is delinquent in paying the projected disposable income, the trustee's remedy as the receiving agent of this income is to seek dismissal of the case, not to act as a collection agent for the creditors.
If after plan confirmation, a debtor receives a windfall sufficient to pay the projected disposable income, but fails to do so, the trustee should move to dismiss the case, not try to pursue the windfall. Dismissal will deny the debtor a discharge and allow his or her creditors freedom to collect their full claims from the windfall under state law.
In addition to the form confirmation order, the trustee in this case has generated a form plan that many debtors' counsel often use. The language of the form plan in this case, at least, states, "All plans must run a minimum of 36 months or pay all creditors filing claims 100%."[56] This statement distorts § 1325(b)(1)(A) and (B). Certainly, if a creditor objects to a Chapter 13 plan, the plan cannot be confirmed if it does not pay the creditor's allowed claim in full or if the debtor does not propose to pay into the plan three years' worth of his or her projected disposable income. But the statute does not say that this payment must be made over a 36-month period. All it says is that the debtor's projected disposable income, i.e., his income projected over that time period less his living expenses, must be paid. Nothing in the Code says this payment could not be made the day after confirmation if the debtor were lucky enough to receive a windfall sufficient to allow payment in advance, so long as the windfall came to the debtor from some outside, independent source, not property over which the debtor had control before filing. Thus, under the projected disposable income approach, in contrast to the actual income approach, the 36 months of projected income pledged to the plan can be paid before the expiration of the 36-month period.
If after obtaining confirmation of a plan, a debtor receives a windfall and *801 proposes to pay the total projected disposable income before the end of the plan term, the trustee should accept the money, distribute it according to the plan, and grant the debtor a discharge. Confirmation is the court's approval of a contract, in effect, between the debtor and the creditors. The debtor pledges his or her projected disposable income and the Code gives that money to the creditors, even though that amount may not pay their claims in full. This is the statutory allowance that all the prepetition creditors are entitled to receive under the Code. The focus must be on this confirmed statutory contract. There is nothing in the Code that says the debtor must suffer through three years of paying projected disposable income if good fortune would allow him or her to make an earlier payoff. The object of the Code provision is not to force the debtor to make payments over a period of time; the object is to give creditors some recovery on their claims, even though it may not be full recovery. Allowing a payoff accomplishes this purpose.
But, the Code does not say there should then be a denial of discharge because of the debtor's good fortune. The law's original intent was that the debtor would pay creditors from projected disposable income and be allowed to retain other property. If this approach to a windfall is thought by some as unfair to creditors or as insufficiently punitive to the debtor, let Congress provide the remedy that it has so far not provided.
J. The Result in This Case
In § 1306(a), the Chapter 13 estate is said to include "property specified in § 541." Subsection (a)(5)(C) of § 541 includes within property of the estate a beneficiary's interest in a life insurance policy if the interest is acquired within 180 days after the petition date. Since the Richardsons acquired their interest in the insurance proceeds well after 180 days after the petition date, however, § 541(a)(5)(C) did not bring those benefits into the Chapter 13 estate.
Before confirmation, the Richardsons' Chapter 13 estate consisted of three components: (1) their interest in property held at the date of the filing of the petition;[57] (2) their interest in property acquired between the date of filing the petition and the date of confirmation;[58] and (3) their interest in projected disposable income from earnings and income from engaging in business.[59] The Richardsons' plan did not provide that either of the first two components be paid to creditors. Rather, it pledged the third component, the Richardsons' projected disposable income of $1,800 per month times 36 months, a total of $64,800. Consequently, upon confirmation, all estate property except the projected disposable income necessary to fulfill the plan was vested in the Richardsons and became property of the debtors.
But what of the insurance proceeds? Their receipt after confirmation makes this case factually different from all of the other cases discussed in this opinion. In the cases cited, the property vested in the debtor by § 1327(b) was property of the estate from the commencement of the case. In Frausto, for example, although the $100,000 recovery did not come into the trustee's possession until after confirmation, it was indeed the product of a prepetition cause of action that was in existence, albeit contingent and unliquidated, *802 on the date of the petition. Therefore, it was property of the estate that confirmation vested in the debtor.
But the insurance proceeds in this case were not property of the estate at the time the Richardsons' plan was confirmed. The Richardsons did not acquire the insurance proceeds until well after confirmation. This fact anticipates the argument that § 1306(a)(1) remains operative to bring the insurance proceeds into the estate. The proceeds were, after all, acquired by the Richardsons before the case was closed, dismissed, or converted, albeit after confirmation.
But in this court's view, that argument lacks merit. It makes no sense to hold that § 1306(a)(1) brings the insurance proceeds into the Chapter 13 estate after confirmation when property that was in the estate at confirmation vests in the debtors and leaves the estate. In this court's view, § 1327(b) negates the language of § 1306(a)(1) that would otherwise bring into the estate post-confirmation property acquired by the debtors before the closing, dismissal, or conversion of the case.
The court therefore rules that the insurance funds are not property of the estate; they are property of the debtors available only to satisfy the claims of the Richardsons' postpetition creditors. Property acquired by the debtors after confirmation, like property vested in them upon confirmation, is property of the debtors.
K. The Trustee's Inability to Modify
Although the trustee has no power to collect or liquidate property, § 1329 allows him to seek modification of a plan: "At any time after confirmation of the plan but before the completion of payments under such plan, the plan may be modified, upon request of the debtor, the trustee, or the holder of an allowed unsecured claim. . . ."[60] Since the debtors have completed their plan payments in this case, the trustee can no longer obtain modification of the plan to effect the result he desires.
L. The Debtors' Entitlement to Discharge
The plan calls for monthly payments of $1,800 for 36 months. This totals $64,800, which amount constitutes the Chapter 13 estate available for plan creditors. In their motion for discharge, the Richardsons maintained that they had completed the payments according to the plan terms.[61] In the motion, they reviewed the status of their 36-month plan payments and noted that an additional payment of $3,519.02 would complete their payments and entitle them to a discharge under § 1328(a).
This is correct since the trustee's records in the file, of which the court takes judicial notice, show that he received a $3,519.02 payment on September 5, 1997. Additionally, the records show that with this payment, the Richardsons exceeded their $64,800 plan obligation by $400.
The Richardsons have paid their plan obligation and therefore would be entitled to a discharge under § 1328(a), unless the trustee's misrepresentation and bad faith objection would require otherwise, which seems unlikely since the conduct complained of appears to have occurred post-confirmation. If the conduct occurred post-confirmation, by the theory of this opinion it would not prevent discharge.
IV. Conclusion
The Richardsons' Motion for Partial Summary Judgment is granted since the *803 insurance proceeds, although not exempt property, are not property of the estate. The trustee's objection to discharge is denied insofar as it contends that the insurance proceeds are estate property or projected disposable income. And the trustee has no power to retrieve the insurance monies and is not now entitled to modify the plan.
A judgment reflecting this ruling will be entered on a separate document in compliance with Fed. R. Bankr.P. 9021 and Fed.R.Civ.P. 58.
IT IS SO ORDERED.
NOTES
[1] Debtors John Marceau Richardson and Dorothy Evelyn Richardson appear by their attorney, Eric C. Rajala, Overland Park, Kansas. The Chapter 13 Standing Trustee, William H. Griffin, appears by his attorney, Cynthia F. Grimes of Grimes & Rebein, L.C., Lenexa, Kansas.
[2] Debtors' Motion for Discharge filed August 30, 2000 (Doc. # 47).
[3] Trustee's Objection to Motion for Discharge filed September 8, 2000 (Doc. # 50), para. 7 at 3-4.
[4] Debtors' Motion for Partial Summary Judgment filed April 3, 2001 (Doc. # 75).
[5] Trustee's Objection to Motion for Discharge filed September 8, 2000 (Doc. # 50), para. 4 at 2.
[6] "Plaintiff's Statement of Uncontroverted Material Facts" in Debtors' Memorandum in Support of Motion for Partial Summary Judgment filed April 3, 2001 (Doc. # 76), para. 1 at 3.
[7] "Plaintiff's Statement of Uncontroverted Material Facts" in Debtors' Memorandum in Support of Motion for Partial Summary Judgment filed April 3, 2001 (Doc. # 76), para. 3 at 4.
[8] Exhibit 1 attached to Debtors' Memorandum in Support of Motion for Partial Summary Judgment filed April 3, 2001 (Doc. # 76).
[9] Debtors' Supplemental Schedule B-Personal Property and Schedule C-Property Claimed as Exempt filed May 8, 2000 (Doc. # 40).
[10] "Plaintiff's Statement of Uncontroverted Material Facts" in Debtors' Memorandum in Support of Motion for Partial Summary Judgment filed April 3, 2001 (Doc. # 76), para. 4 at 4.
[11] Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S.Ct. 1644, 118 L.Ed.2d 280 (1992).
[12] Kwiecinski v. Community First Nat'l Bank of Powell (In re Kwiecinski), 245 B.R. 672 (10th Cir. BAP 2000).
[13] See K.S.A. § 40-414; Osment v. Trout (In re Trout's Estate), 156 Kan. 120, 123, 131 P.2d 640 (1942); see also In re Douglas, 59 B.R. 836, 837 (Bankr.D.Kan.1986); In re Chadwick, 113 B.R. 540, 545 (Bankr.W.D.Mo.1990).
[14] 11 U.S.C. § 1306(a)(1) & (2) (emphasis added).
[15] 11 U.S.C. § 1327(b) (emphasis added).
[16] In re Adams, 12 B.R. 540 (Bankr.D.Utah 1981).
[17] § 362(b)(2)(B) (emphasis added).
[18] In re Adams, 12 B.R. 540, 541 (Bankr.D.Utah 1981).
[19] "[T]he plan may . . . (9) provide for the vesting of property of the estate, on confirmation of the plan or at a later time, in the debtor or in any other entity. . . ."
[20] In re Adams, 12 B.R. 540, 542 (Bankr.D.Utah 1981) (emphasis added).
[21] In re Johnson, 36 B.R. 958 (Bankr.D.Utah 1983) (holding that the Office of Recovery Services of the Utah Dept. of Social Services was free to collect its postpetition debt for child support from a tax refund that was not dedicated to the plan and therefore vested in the debtors upon confirmation).
[22] In re Root, 61 B.R. 984 (Bankr.D.Colo.1986) (holding that confirmation vests in the debtor property of the estate not dedicated to the plan); In re Thompson, 142 B.R. 961 (Bankr.D.Colo.1992) (vesting property of the estate in the debtor upon confirmation).
[23] In re Gyulafia, 65 B.R. 913 (Bankr.D.Kan.1986) (holding confirmation vested property in the debtor and therefore property of the estate was not liable for post-confirmation taxes incurred by debtor).
[24] McCray v. McCray (In re McCray), 62 B.R. 11 (Bankr.D.Colo.1986) (acknowledging that confirmation of the plan vests property of the estate in the debtor, but since the plan had not yet been confirmed, the automatic stay barred proceeding against the property of the estate); Providian Nat'l Bank v. Vitt (In re Vitt), 250 B.R. 711 (Bankr.D.Colo.2000) (acknowledging that confirmation vests property of the estate in the debtor but interpreting plan to require surrender).
[25] United States v. Richman (In re Talbot), 124 F.3d 1201 (10th Cir.1997).
[26] Telfair v. First Union Mortgage Corp., 216 F.3d 1333 (11th Cir.2000).
[27] 11 U.S.C. § 506(b).
[28] Telfair, 216 F.3d at 1340.
[29] Black v. United States Postal Service (In re Heath), 115 F.3d 521, 524 (7th Cir.1997).
[30] Telfair, 216 F.3d at 1340, quoting In re Heath, 115 F.3d at 524.
[31] Telfair, 216 F.3d at 1340.
[32] EconoLube N' Tune, Inc. v. Frausto (In re Frausto), 259 B.R. 201 (Bankr.N.D.Ala.2000).
[33] Frausto, 259 B.R. at 211 (emphasis in original).
[34] Id. at 207.
[35] 11 U.S.C. § 704(1).
[36] Frausto, 259 B.R. at 211.
[37] Id.
[38] 11 U.S.C. § 1302(b)(3).
[39] Frausto, 259 B.R. at 211 (emphasis in original).
[40] § 1322(a)(1) (emphasis added).
[41] Official Bankruptcy Form 15, Order Confirming Plan.
[42] Order Confirming Plan filed October 10, 1997 (Doc. # 19) at 2.
[43] 191 B.R. 875 (D.Kan.1996).
[44] Id. at 876.
[45] Hoffmeister, 191 B.R. at 878.
[46] 98 F.3d 1349, 1996 WL 560797 (10th Cir.(Kan.)).
[47] § 1325(b)(1)(B) (emphasis added).
[48] 11 U.S.C. § 1325(b)(2) (emphasis added).
[49] Anderson v. Satterlee (In re Anderson), 21 F.3d 355 (9th Cir.1994).
[50] Anderson, 21 F.3d at 358.
[51] Id. at 357, citing Matter of Killough, 900 F.2d 61 (5th Cir.1990) (per curiam).
[52] Anderson, 21 F.3d at 357, citing Killough, 900 F.2d at 64.
[53] 11 U.S.C. § 1322(a)(1).
[54] § 1306(b).
[55] § 1328(a).
[56] Chapter 13 Plan filed June 6, 1997 (Doc. # 2), at 2.
[57] 11 U.S.C. § 541(a).
[58] In re Adams, 12 B.R. 540 (Bankr.D.Utah 1981).
[59] 11 U.S.C. § 1306(a).
[60] 11 U.S.C. § 1329(a) (emphasis added).
[61] Debtors' Motion for Discharge filed August 30, 2000 (Doc. # 47), at 6.
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561 P.2d 1299 (1977)
98 Idaho 266
Lyle SMITH and Shayne Linderman, Plaintiffs-Respondents (# 11936, # 11937), Plaintiffs-Appellants (# 11938),
v.
GREAT BASIN GRAIN CO., a corporation, and R. Kent Heileson, Individually and as Statutory Trustee, Defendants-Appellants (# 11936), Defendants-Respondents (# 11937, # 11938), and
Millers National Insurance Company of Illinois, a corporation, Defendant-Appellant (# 11937), Defendant-Respondent (# 11936, # 11938), and
Ralph A. Heileson et al., Defendants-Respondents (# 11936, # 11937, # 11938).
No. 11936-11938.
Supreme Court of Idaho.
March 9, 1977.
*1302 Mary Smith and J.D. Hancock, Smith & Hancock, Rexburg, for appellants and respondents Lyle Smith and Shayne Linderman.
Larry M. Boyle, Hansen & Boyle, Idaho Falls, for respondents and appellants Great Basin Grain Co. and R. Kent Heileson.
Robert J. Fanning, Fanning & Woolf, Idaho Falls, for respondent and appellant Millers National Insurance Company of Illinois.
W. Lynn Hossner, Ashton, for respondent Ralph A. Heileson.
W. Brent Eames, Jolley & Eames, Rexburg, for respondents Allan E. Mecham and Craig W. Mecham.
SCOGGIN, District Judge (retired).
These three appeals, consolidated for decision here, arose from separate actions *1303 brought by Lyle Smith and Shayne Linderman, two grain farmers, against a warehouse corporation, its directors and purported statutory trustees, and its surety for an alleged conversion of grain placed in storage. Following special jury verdicts finding for the plaintiff farmers and entry of judgment, the district court granted the defendants' motions for a new trial unless the plaintiffs would accept remittiturs. Plaintiffs refused the remittiturs. The district court then entered an order for a new trial. These appeals followed, challenging various rulings and orders made below. For the reasons discussed herein, we affirm the order granting a new trial and remand the cases for further proceedings.
I.
Lyle Smith and Shayne Linderman are grain farmers in Teton County. In 1970, between May 5 and July 31, Lyle Smith (hereinafter Smith) "stored" with Great Basin Grain Co. (hereinafter Great Basin) wheat and barley which had a total value of $56,870.34. The storage of this grain was evidenced by non-negotiable warehouse receipts issued by Great Basin over R. Kent Heileson's (hereinafter Kent Heileson) signature. These receipts bear along the left-hand margin the label "grain settlement." All the receipts indicate a scale ticket number, a delivery date and a gross, tare and net weight. The receipts for the wheat "stored" also show figures on the test, grade and protein quality of the grain. The receipts in the record show a price per bushel or hundredweight and a total value for the grain represented by the receipt at the price listed.
Checks from Great Basin payable to Smith show that he received a total of $41,915.00 in payment, described on Great Basin's statements of remittance advice attached to the checks as "advance[s] on grain." Smith claimed, and the special jury verdict awarded, only $10,431.04. "Off-setting" charges of $4,524.30 for other services by Great Basin make up the difference.
Shayne Linderman's (hereinafter Linderman) claim in his case arose out of two distinct sets of transactions. The first involves wheat (60,103 lbs.) and barley (20,870 lbs.) "stored" with Great Basin in the fall of 1968, which Linderman claimed had a total value of $1,820.22. There are no checks in evidence which relate to this grain.
The second Linderman transaction involves 610,957 pounds of spring wheat, valued at $18,158.36. This wheat was apparently stored in Linderman's personal elevators in Tetonia, located near Great Basin's elevators. In August of 1970 Great Basin loaded that wheat onto railroad cars. Great Basin issued one of its non-negotiable warehouse receipts for this wheat. In addition, however, this receipt lists Union Pacific railroad car numbers instead of scale ticket numbers and printed at the top of the receipt are the words "contract # 85." In evidence is a document bearing Great Basin's letterhead, addressed to "Shane [sic] Linderman," which recites, "We confirm purchase from, or sale to you of... ." The words "purchase from" are circled. The document is numbered "85." The total of Linderman's claim in this case, and the amount awarded by the special jury verdict is $19,978.58. The proper legal characterization of the transactions behind these figures and receipts is the heart of the disputes in these cases.
Great Basin was incorporated in April of 1968 as an Idaho corporation by the defendants Kent Heileson, Ralph A. Heileson, Craig W. Mecham, and Allan E. Mecham. They were Great Basin's sole stockholders, directors and officers. Great Basin took over the business of Colorado Milling and Elevator which had been managed for many years by Ralph Heileson, Kent Heileson's father. Great Basin leased the property, buildings and equipment it operated from a Utah investment partnership, owned by Kent Heileson and Craig Mecham, which bought them from Colorado Milling and Elevator. Kent Heileson was the resident manager of Great Basin, apparently assisted by his father Ralph Heileson. The officers and directors of Great Basin were required to be stockholders.
*1304 Great Basin operated as a corporation until November 30, 1970, when the Idaho Secretary of State ordered its corporate charter forfeited for failure to file a 1970 annual statement. It is disputed whether Allan Mecham effectively resigned as a director in 1969; whether Craig Mecham effectively resigned as an officer and director in the spring of 1970; and, whether Ralph Heileson effectively resigned as an officer and director in July of 1970. Whether these individuals were directors on November 30, 1970, and therefore statutory trustees of the defunct corporation under I.C. § 30-611, is also disputed. In addition, it is disputed whether Craig Mecham, Ralph Heileson and Allan Mecham sold their ownership interests in Great Basin.
Great Basin, or Kent Heileson acting on its behalf, allegedly filed a voluntary petition for bankruptcy on February 21, 1971. The trustee of the bankrupt's estate was discharged, and the estate was closed, in December of 1973. A formal discharge of Great Basin as a bankrupt was apparently not obtained. Smith and Linderman were named as unsecured creditors in the bankrupt's schedule of creditors, but never filed a claim in the bankruptcy proceedings. These actions were filed in December of 1971, following demand upon the surety Millers National Insurance Company of Illinois (hereinafter Millers).
Great Basin operated its grain warehouse and elevators as a bonded warehouse, licensed under state law by the department of agriculture. Title 69, Ch. 2, "Bonded Warehouse Law," Idaho Code; I.C. § 69-203. As part of the licensing requirements of Chapter 2, an applicant for a license must execute a bond. Accordingly, Great Basin executed a Warehouseman's Bond with Millers as surety, in the amount of $24,500.00, effective May 1, 1968, until May 1, 1969, and for succeeding yearly periods unless cancelled. The bond was in force during all times pertinent to these cases. Millers was named as a defendant and alleged to be liable for a purported conversion of Smith's and Linderman's grain by Great Basin. I.C. § 69-209. The plaintiffs also claimed attorney's fees from Millers pursuant to I.C. § 41-1839.
Generally, Smith's and Linderman's amended complaints took the position that all of the grain was in "storage" with Great Basin and was converted by it. Great Basin, its directors and purported statutory trustees, and its surety contended that the grain was sold to Great Basin, that plaintiffs are merely unpaid sellers, and that they, the defendants, are therefore not liable for any conversion. The defendants especially insisted that the plaintiffs' actions on these debts were barred by Great Basin's bankruptcy.
The testimony at trial was in much conflict. Kent Heileson testified that Great Basin purchased all the grain in question from Smith and Linderman. Smith testified that his grain was originally delivered for storage and only later was it offered to Great Basin for "conditional sale." Linderman took the position that the small portion of his grain held in storage by Great Basin was never offered for sale. He also testified that the much larger amount of grain held in his own elevators was offered to Great Basin for "conditional sale" on terms like those testified to by Smith.
This was the basic evidence presented at trial. In addition, there was evidence introduced about the manner in which Great Basin as a corporation conducted its business, about the role of the individual directors in Great Basin's management, and about the circumstances of the purported resignations as directors of Ralph Heileson, Craig Mecham and Allan Mecham. Before trial the parties agreed the trial court would decide the liability of the individual defendants as directors and statutory trustees after the trial was completed. At the close of the plaintiffs' evidence, the trial court granted motions to dismiss by Ralph Heileson and Craig Mecham on their liability as directors, reserving until after trial the question of their liability as statutory trustees. The jury was then presented with special verdict forms concerned solely with *1305 the issues whether plaintiffs' grain was stored and converted, or sold, and if stored and converted, what the extent of their damages was.
The jury's verdict with respect to Smith found that Smith stored wheat "and/or" barley with Great Basin between May 5, 1970, and July 31, 1970; that the amount of grain stored was "all" wheat and "none" barley; that Smith sold wheat "and/or" barley to Great Basin between May 5 and July 31, 1970; that the amount of grain sold was "wheat all but $10,431.04" and "Barley all"; that Great Basin converted wheat "and/or" barley belonging to Smith after May 5, 1970; and, that Smith sustained damages of $10,431.04.
With respect to Linderman the jury found that Linderman stored wheat "and/or" barley with Great Basin between September 12, 1969, and August 18, 1970; that Linderman stored 60,103 lbs. of wheat and 20,870 lbs. of barley; that Linderman did not sell wheat "and/or" barley to Great Basin between September 12, 1969, and August 18, 1970; that Great Basin converted wheat "and/or" barley belonging to Linderman after September 12, 1969; and, that Linderman sustained damages of $19,978.58.
Following the trial and the return of the jury's verdicts, the defendants moved for judgment notwithstanding the verdict or in the alternative for a new trial. The trial court denied the motion for judgment n.o.v.
In its final judgment, the trial court held that the individual defendants were not liable as statutory trustees, and that the plaintiffs were entitled to attorney's fees of $12,500.00 from defendant Millers. Judgment on the special verdicts was entered against Great Basin, Kent Heileson and Millers, but a new trial was ordered unless the plaintiffs accepted remittiturs reducing the amounts of the judgments as set by the trial court within ten days. Plaintiffs did not accept the remittiturs, and an order for a new trial was entered. Plaintiffs, Smith and Linderman, appealed, as did defendants Great Basin, Kent Heileson and Millers. The other individual defendants appear as respondents upon the plaintiffs' appeal.
II.
APPEAL OF GREAT BASIN, KENT HEILESON AND MILLERS (NOS. 11936, 11937)
After the plaintiffs filed their complaints, all the defendants filed motions for summary judgment based upon the pleadings and the record, which included depositions and affidavits. The district court granted the motion for summary judgment made by defendant Millers on the pleadings alone and granted leave to the plaintiffs to amend their complaints. Plaintiffs amended their complaints, and defendant Millers later moved to dismiss the amended complaints which it claimed stated a new cause of action against it. Great Basin, Kent Heileson and Millers assign error to the district court's denial of Millers' motion.
The changes in the amended complaints do reflect a new legal theory of recovery against defendant Millers. There is no problem with this, however, since the basic facts giving rise to a right of recovery remain unaltered. The mandate of I.R.C.P. 15(a) is that leave to amend "shall be freely given when justice so requires". The United States Supreme Court has said that the mandate of the comparable federal rule is to be heeded. We agree with this conclusion.
"If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of any apparent or declared reason such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendment previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. the leave sought should, as the rules require, be `freely given.'" Foman v. *1306 Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962).
See Simons v. United States, 497 F.2d 1046, 1049 (9th Cir.1974); Sherman v. Hallbauer, 455 F.2d 1236, 1242 (5th Cir.1972); 3 Moore's Federal Practice ¶ 15.08[3], at 888 (2d ed. 1974). Cf. Hessing v. Drake, 90 Idaho 67, 71-72, 408 P.2d 180, 182-83 (1965). Great Basin, Kent Heileson and Millers have shown no reason why leave to amend should not have been granted, nor is any apparent. The cases cited above have uniformly permitted amendments to state new or alternative theories of recovery. In the absence of an abuse of discretion by the district court in granting (or denying) leave to amend, which is the case here, this Court will not disturb the ruling of the trial court.
Before trial the defendants moved for summary judgment or to dismiss the amended complaints on the ground that the plaintiffs' claims were barred by the bankruptcy of Great Basin. Error is assigned to the denial of those motions. We do not agree that there was error. Great Basin's trustee in bankruptcy was discharged and the estate of the bankrupt was closed. But nothing in the record even suggests that Great Basin was discharged as a bankrupt, and thus that it was released from its provable debts. Bankruptcy Act § 17, 11 U.S.C.A. § 35(a)(2) (1976 Cum.Supp.). We need not consider whether the plaintiffs' claims are "provable debts" and thus "dischargeable." Bankruptcy Act § 17, 11 U.S.C.A. § 35(c)(2) (1976 Cum.Supp.). Of course, even if Great Basin had been discharged, this would not affect the personal liability of Great Basin's directors and purported statutory trustees, or of its surety. Bankruptcy Act §§ 4, 16, 11 U.S.C.A. §§ 22(b), 34 (1953).
It is appropriate to note here that, upon remand, the district court should dismiss Great Basin as a party to these actions. Great Basin forfeited its corporate charter in this state in November of 1970, over a year before these actions were filed. A corporation which has forfeited its corporate charter can not be sued and judgment can not be entered against it in its corporate name. It is not properly a party. Jolley v. Puregro Company, 94 Idaho 702, 705, 496 P.2d 939, 942 (1972). This conclusion does not affect the personal liability of Great Basin's directors, its statutory trustees, if any, or of its surety.
During the course of this litigation Great Basin, Kent Heileson, Ralph Heileson and Millers made motions for summary judgment, directed verdict and judgment notwithstanding the verdict. (Defendant Millers also made a motion for judgment on the pleadings. Inasmuch as this motion was made on the basis of the pleadings and the record, it was properly treated as a motion for summary judgment. I.R.C.P. 12(c); Cook v. Soltman, 96 Idaho 187, 525 P.2d 969 (1974). Disposition of the issue raised by the denial of this motion is thus subsumed under our treatment of the defendants' motions for summary judgment.) All of these motions were denied by the district court. Great Basin, Kent Heileson and Millers have assigned error to the district court's denials of these motions.
Summary judgment is not to be granted where there exists a genuine issue of material fact. I.R.C.P. 56(c); Fairchild v. Olsen, 96 Idaho 338, 339-40, 528 P.2d 900, 901-02 (1974); Langroise v. Becker, 96 Idaho 218, 221, 526 P.2d 178, 181 (1974). It suffices to point out that at the time these motions were made there existed a factual dispute among the parties whether the grain in question was in storage with or sold to Great Basin, whether the grain had been converted by the defendant Great Basin and its officers, whether the individual defendants were directors of Great Basin at the time of the alleged conversion, and whether the individual defendants were personally liable for the alleged conversion as directors and statutory trustees of Great Basin. On this state of the record, it was not error to deny the motions for summary judgment.
The defendants made their motions for a directed verdict at the close of the *1307 plaintiffs' cases and at the end of the presentation of all the evidence. The motions for judgment n.o.v. were made after the return of the jury's special verdicts and in conjunction with an alternative motion for a new trial. In a jury case these three motions are governed by the same standard:
"On a motion for directed verdict pursuant to I.R.C.P. 50(a) or for judgment notwithstanding the verdict, pursuant to I.R.C.P. 50(b), the moving party admits the truth of the adverse evidence and every inference that may be legitimately drawn therefrom. .. . Neither motion should be granted if there is substantial evidence to justify submitting the case to the jury or to support the verdict once it has been returned." Barlow v. International Harvester Co., 95 Idaho 881, 886, 522 P.2d 1102, 1107 (1974); Mann v. Safeway Stores, Inc., 95 Idaho 732, 736, 518 P.2d 1194, 1198 (1974).
Applying that standard to the plaintiffs' cases-in-chief first, we hold that the district court did not err in denying the defendants' motions for a directed verdict.
There is substantial evidence that the plaintiffs' grain, at least in part, was in storage and that the plaintiffs did not receive payment in full when the grain was authorized for sale because it had previously been converted by Great Basin. There was also substantial evidence of conversion with respect to that portion of Linderman's grain held by him in his own elevators to justify submitting the case to the jury, under the legal theories of the defendants' liability decided below.
We also hold that the district court did not err in denying defendants' motions for a directed verdict at the close of the case and for judgment notwithstanding the verdict. The evidence in these cases was in considerable conflict at the close of the trial. However, we continue to adhere to the following guidelines:
"By substantial, it is not meant that the evidence need be uncontradicted. All that is required is that the evidence be of such sufficient quantity and probative value that reasonable minds could conclude that the verdict of the jury was proper." (Emphasis in original.) Mann v. Safeway Stores, Inc., supra, 95 Idaho at 736, 518 P.2d at 1198.
At the end of the presentation of the evidence, the jury could reasonably have concluded that the plaintiffs' grain had been converted, and that the defendants were liable. Our determination of these issues is supported not only by the evidence discussed above, but by the law applicable to these cases which we set out below.
III.
APPEAL OF SMITH AND LINDERMAN (NO. 11938)
The district court was also presented with motions by the defendants for a new trial. These motions were granted by the district court unless the plaintiffs would accept remittiturs in the amounts of their judgments, reducing Linderman's judgment from $19,978.58 to $1,820.22, and Smith's judgment from $10,431.04 to $2,500.00. The remittiturs were refused by the plaintiffs, and the district court then entered its order of a new trial. On their appeal, the plaintiffs assign error to the district court's orders of remittiturs and a new trial.
The plaintiffs argue that the district court erred in ordering remittiturs because the defendants' motions for a new trial did not allege that the jury's verdicts were excessive, and because the district court did not carefully review the evidence to determine that the verdicts were excessive as required by Idaho law. However, we need not consider these contentions inasmuch as Smith and Linderman rejected the remittiturs, and our disposition of the new trial issue renders the issue of the remittiturs moot.
The plaintiffs assign error to the order of a new trial in two respects. First, they argue that the defendants' motions were defective because the grounds stated *1308 for the motions were broad generalities and not particularized references to the alleged insufficiencies in the evidence, or to the way in which the verdict was contrary to the weight of the evidence. Second, plaintiffs argue that the trial court's order of a new trial did not adequately specify its reasons, that is the conflicts in the special interrogatories which necessitated a new trial. Our consideration of these issues is narrowed by the rule that where the order granting a new trial expressly states the ground upon which it is granted, the issue on appeal will turn on whether the particular ground stated would justify the granting of the motion. Dawson v. Olson, 95 Idaho 295, 298, 507 P.2d 804, 807 (1973); Rosenberg v. Toetly, 93 Idaho 135, 139, 456 P.2d 779, 783 (1969); Ricard v. Gollen, 91 Idaho 335, 336, 421 P.2d 130, 131 (1966); Sanchotena v. Tower Co., 74 Idaho 541, 545, 264 P.2d 1021, 1023 (1953).
If the sole ground for the order of a new trial had been the insufficiency of the evidence, the defendants' motion for a new trial would be defective under the accepted standard. Paullus v. Liedkie, 92 Idaho 323, 326, 442 P.2d 733, 736 (1968). However, the trial court also ordered a new trial on the ground that the answers in the special jury verdicts were internally inconsistent. The defendants' motions do allege that the verdicts were uncertain, inconsistent and contradictory and that the motions were made on the basis of the evidence adduced at trial. Although the defendants' allegations are close to being deficient, in the unique circumstances of these cases, where the trial court and all the parties were aware of a problem with at least the Smith verdict as soon as the verdicts were read in court, we hold that the defendants' motions were not defective. They met the purposes of the requirement of specifications: identifying the relevant facts relied upon and giving notice to the opposing party. Fignani v. City of Lewiston, 94 Idaho 196, 198, 484 P.2d 1036, 1038 (1971). I.R.C.P. 61 also supports our rejection of the plaintiffs' argument on this point.
There is no dispute that the trial court gave the grounds for its order of a new trial in the order entered after the hearing on the motion and by reference in the final judgment and order. Plaintiffs object to the alleged inadequacy of the reasons given by the trial court for its decision. We have previously held that a trial court is not required to specify its reasons for granting a new trial, Deshazer v. Tompkins, 93 Idaho 267, 270, 460 P.2d 402, 405 (1969), although we encourage trial courts to do so. Examination of the record shows that the trial court here did set out its reasoning at some length. We agree with the trial court that the answers in the special verdicts returned by the jury were inconsistent. The Smith verdict was inconsistent in that it first found that Smith had stored all of his wheat and barley, and then found that he had sold all of the barley and all but $10,431.04 of the wheat. The Linderman verdict was inconsistent because it first found that Linderman had stored only the amount of grain worth $1,820.22, but then found that $19,978.58 worth of grain had been converted.
Although the ground stated by the trial court in its order of a new trial is not explicitly set forth in the statutes or rules, it is encompassed within the language of former I.C. § 10-608 (repealed effective March 31, 1975, S.L. 1975, ch. 242, § 1; see I.R.C.P. 59(d)) and I.R.C.P. 49(b). The trial court is entrusted with a sound judicial discretion to be exercised in granting or refusing to grant a new trial. The exercise of that discretion will not be disturbed on appeal unless it clearly appears to have been manifestly abused. Blaine v. Byers, 91 Idaho 665, 671, 429 P.2d 397, 403 (1967); Sanchotena v. Tower Co., supra, 74 Idaho at 547, 264 P.2d at 1024. We do not find the trial court's discretion to have been manifestly abused. It is apparent that the trial court understood the cases clearly and saw the inconsistency in the jury's special verdicts. The more liberal rule applied to orders granting a new trial recognizes the advantage enjoyed by the trial court in *1309 reviewing the case because of the court's active participation in the trial. Walker v. Distler, 78 Idaho 38, 45, 296 P.2d 452, 456 (1956). The record here amply demonstrates the proper exercise of that advantage. Therefore we affirm the order granting a new trial.
Plaintiffs also assign error to the trial court's failure in its order granting a new trial to specify the issues to be tried upon re-trial. A determination of the issues to be retried after the granting of a new trial is committed to the discretion of the trial court. I.R.C.P. 59(a); Mendenhall v. MacGregor Triangle Co., 83 Idaho 145, 151, 358 P.2d 860, 863 (1961). In these actions the trial to the jury concerned solely the factual issue of the storage and conversion, or sale, of the plaintiffs' grain. The remaining factual issues on the liability of the individual defendants as directors and statutory trustees of Great Basin were left to the trial court. Clearly the factual issue tried by the jury must be retried, and because of our disposition of the remaining issues, they also must be retried. While it would have been a better practice for the trial court to have clearly specified the issues to be retried in its order of a new trial, the failure to do so was not an abuse of discretion. Nor does the trial court's failure here amount to error requiring reversal of its order. I.R.C.P. 61.
ISSUES NECESSARY TO REMAND OF THE ACTIONS
Because our affirmance of the order granting a new trial necessitates a remand, we must consider and decide certain questions of law raised by the parties to these actions. I.C. § 1-205; Messmer v. Ker, 96 Idaho 75, 524 P.2d 536 (1974).
IV.
The focal dispute in these cases has been conceived by the parties to be whether the plaintiffs' grain was stored with and converted by Great Basin, or sold to Great Basin. The reason for this concern is based upon the perception that the liability of the surety, Millers, on Great Basin's warehouseman's bond, turns upon the answer given to the central factual issue. The evidence outlined above is given different interpretations by the contending parties. Plaintiffs contend the evidence showed that their grain was converted; defendants argue that the plaintiffs' grain was sold to Great Basin.
If, upon the retrial, the trier of fact, or the court upon an appropriate motion, finds that each portion of Smith's and Linderman's grain was in fact converted prior to the time of any purported sale of the grain to Great Basin, then it is clear that the surety Millers is liable upon Great Basin's warehouseman's bond. I.C. §§ 69-208, -209. Particular attention should be given to the status of that portion of Linderman's grain held in his own elevator, as the record before us is indefinite as to the agreement between Linderman and Great Basin. The warehouse receipts-settlement sheets issued by Great Basin for said grain show weights in and grade, but are inconclusive on the existence of any agreement or course of trade between Linderman and Great Basin for the use of Linderman's elevator by Great Basin. This issue is open to proof upon the retrial. On the record before us, we intimate no opinion whether Great Basin could have converted that grain, or whether Great Basin's warehouseman's bond covers grain not held in Great Basin's facilities.
If, on the other hand, there is a question on when the so-called conversion took place, if at all, and it is determined by the trier of fact, or the trial court upon an appropriate motion, that there was in fact no conversion of any portion of the grain but that each portion was sold in the usual course of business, then the trial court must make two further determinations. First, the court must find the terms and conditions of the sale and determine the results following therefrom under the applicable provisions of the UCC, I.C. §§ 28-2-101 et seq., 28-7-101 et seq. Second, the court must decide *1310 whether in the event of a sale the surety Millers is liable on Great Basin's warehouseman's bond in view of the provisions of Title 69, Chapter 2, and Title 22, Chapter 14, Idaho Code, and any applicable rules and regulations of the Department of Agriculture promulgated thereunder.
V.
The plaintiffs on their appeal also raise questions about the district court's decisions dismissing Ralph Heileson and Craig Mecham from the lawsuits in their individual capacity as directors of Great Basin and holding none of the individual defendants liable as statutory trustees of Great Basin. These decisions are important because the damages claimed exceed the limit of the surety's potential liability on its bond. Two questions are presented with respect to the defendants' liability as directors. First, under what circumstances and by what steps may a director of a private corporation resign? Second, what duty is owed to a warehouse corporation's depositors and creditors by the corporation's directors? Our holdings on these legal questions will remain to be applied to the facts of these cases as they are determined by the fact finder upon re-trial.
A.
Plaintiffs argue that the attempted resignations of defendants Ralph Heileson and Craig Mecham as directors of Great Basin were ineffective because no successors were ever elected to fill their positions on Great Basin's board of directors. They rely upon a section of the Business Corporation Act, Title 30, Chapter 1, Idaho Code, § 30-101 et seq., and upon a provision in Great Basin's articles of incorporation. I.C. § 30-139(1) provides in pertinent part: "A director shall hold office for the term for which he was named or elected and until his successor is elected and qualified." Article IX of Great Basin's articles of incorporation reads in part: "The following persons shall be the officers and directors of this corporation ... until their successors are duly elected and qualified... . Any officer or director may resign his office by written resignation filed with, or mailed to the Secretary of the corporation."
The last quoted provision of Article IX of Great Basin's articles of incorporation is permissive. Failure to properly submit a written resignation will not render an otherwise valid resignation ineffective. It should be noted that if there were a mandatory statutory provision or mandatory language in the articles of incorporation controlling the form and procedure for submission of a resignation, those provisions would be strictly followed. See, e.g., Dillon v. Berg, 326 F. Supp. 1214, 1223-24 (D.Del. 1971), affirmed, 453 F.2d 876 (3rd Cir.1971). However, in the absence of statutory provisions or mandatory requirements of articles of incorporation or by-laws, a resignation of a corporate director is effective at common law whether made orally or in writing, is effective immediately unless made conditional, and is effective without acceptance by the corporation. Briggs v. Spaulding, 141 U.S. 132, 154, 11 S.Ct. 924, 931, 35 L.Ed. 662 (1891); Hall v. Gulf South Utilities, 48 So.2d 637, 638 (Miss. 1950); Hoffman Beverage Co. v. Forrest Mart Tid Bit Shop, 135 N.Y.S.2d 795, 797 (N.Y.City Ct. 1954). It is sufficient that a director give notice to the corporation of intent to resign and thereafter refrain from acting as a director of the corporation. B.F. Goodrich Rubber Co. v. Helena Motor Car Co., 53 Mont. 526, 165 P. 454, 455 (1917); Annot., 20 A.L.R. 267 (1922).
Plaintiffs place the greatest reliance on the statutory provision that a director remains in office until a successor is elected and qualified. No decision of this Court has interpreted the crucial language. However, the majority interpretation, which we accept, is that this language provides for a director to hold over in office after the expiration of his or her term until a successor is elected and qualified. It does not prevent an earlier resignation by a director *1311 made in good faith. Briggs v. Spaulding, supra; Schuckman v. Rubenstein, 164 F.2d 952, 956 (6th Cir.1947), cert. denied, 333 U.S. 875, 68 S.Ct. 905, 92 L.Ed. 1151 (1948) (applying Ohio law); Modern Heat & Power Co. v. Steamotor Corp., 239 Iowa 1267, 34 N.W.2d 581, 585 (1948); 2 Fletcher Cyc. Corp. § 345, at 141 (perm. ed. 1969 rev.). We also note that Great Basin's articles of incorporation (Article VIII) require officers and directors to be stockholders. Any voluntary, good faith transfer of a director's entire interest in the corporation's stock operates both to disqualify him or her to hold the office of director and to divest him or her of title to the office. Chemical National Bank v. Colwell, 132 N.Y. 250, 30 N.E. 644, 645-46 (1892). Whether a director has resigned, or has ceased to be qualified to hold or to hold title to, office as a director, are questions of fact to be determined from the circumstances of each case. Modern Heat & Power Co. v. Bishop Steamotor Corp., supra.
While the ability of a corporate director to resign is nearly unlimited in many respects, we must state here an important limitation. A corporate director is a fiduciary to the corporation and must discharge the accompanying responsibilities in good faith and with reasonable diligence and skill. I.C. § 30-142.
B.
If it is determined that the directors of a bonded warehouse corporation have not resigned and are in office, the question then arises of what duty is owed by the directors to the corporation's depositors and creditors. Separate treatment is required for depositors first and then creditors. If it is found that the plaintiffs' claims against the directors individually arise because of a conversion of stored grain by the corporation, the directors' duty of care has been decided by this Court before. Although there is authority to the contrary or which applies a less exacting standard to the conduct in office of bonded warehouse corporation directors, we believe the standard announced by this Court over sixty years ago has been, and continues to be, an appropriate one in this area. On retrial the trial court is directed to follow our decision in Frontier Mill. etc. Co. v. Roy White etc. Co., 25 Idaho 478, 490-91, 138 P. 825, 829 (1914), and instruct the jury accordingly, if there is evidence of a conversion of the grain. See generally: 3A Fletcher Cyc. Corp., § 1140 (perm. ed. 1975 rev.); Annot., 29 A.L.R.3d 660 (1970); Annot., 25 A.L.R.3d 941 (1969); Annot., 152 A.L.R. 696 (1944).
However, if the plaintiff's claims arise from a failure of the bonded warehouse corporation to pay the purchase price of the plaintiff's grain, two broad categories must be distinguished. The first category takes in those cases where the grain has been consigned to the warehouse corporation to be sold on commission, or for the consignor's open account. When the proceeds from a sale of the grain are then received by the warehouse corporation from the buyer, the corporation holds the proceeds as an agent of the producer-seller and must account for them. The officers and directors of the corporation who knowingly participate in the intentional misapplication of the proceeds, or who knowingly permit the corporation or other officers and directors to do so, are jointly and severally individually liable, along with the corporation, for the loss to the producer-seller. American Agricultural Chemical Co. v. Barnes Co., 28 F. Supp. 73, 74-75 (E.D.S.C. 1939); Darling & Co. v. Fry, 24 S.W.2d 722, 723-24 (Mo. App. 1930); Cone v. United Fruit Growers' Ass'n, 171 N.C. 530, 88 S.E. 860, 861-62 (1916); Olin Mathieson Chemical Corp. v. Planters Corp., 236 S.C. 318, 114 S.E.2d 321, 325-27 (1960); Hawkins v. Lane, 3 Tenn. App. 221 (1926); Dodson v. Economy Equipment Co., 188 Wash. 340, 62 P.2d 708, 709 (1936); 3A Fletcher Cyc. Corp., § 1142 (perm. ed. 1975 rev.). See Duncan v. Williamson, 18 Tenn. App. 153, 74 S.W.2d 215, 218-19 (1933).
The second general category takes in those situations where the grain is sold directly to the warehouse corporation and *1312 there exists a debtor-creditor relationship between the corporation as buyer and the producer as seller. Upon the failure of the corporation to perform its promise to pay on the contract of sale, the seller's remedy is an action in damages against the corporation for breach of the contract. The general rule is that corporate directors are not personally liable to creditors on corporate debts or contracts. 19 Am.Jur.2d "Corporations," § 1341 (1965). If the corporation has forfeited its corporate charter, the seller must pursue his claim against the corporation in an action against the statutory trustees, see I.C. § 30-611 and discussion in Section VI, infra.
An area of potential director liability exists in those cases in which the corporation cannot meet its obligations to its creditors because the directors have caused the assets of the corporation to be appropriated to their own use or distributed to the stockholders, to the injury of the corporation's creditors. The essence of the creditor's claim for relief in such cases is that the actions of the directors, or of those directors who knowingly permit or who under all the circumstances should have known of such use of the corporation's assets, work a fraud on the corporation's creditors. As this Court said over fifty years ago:
"... It may be conceded that generally in an action for deceit or fraud the facts constituting the same must be specifically alleged and proven. But this rule has no application to the case of an officer of a corporation obtaining a preference for himself by appropriating to his own use the assets of his company, to the injury of its other creditors. Such acts are fraudulent and void in law, irrespective of the intent of such officer.
"In Riley v. Callahan, 28 Idaho 525, 155 P. 665, it is said that the directors and officers of a corporation hold the funds in trust, and any attempt on their part to divert the use of such funds to their personal profit or interest is a violation of the trust imposed by virtue of their office... .
.....
"... In the instant case, the president, who is also the general manager and a director of a corporation, as such officer caused the corporation to enter into a contract with himself in his individual capacity, by which all of the then remaining assets of the corporation were transferred to him to discharge its obligation to him. Even though such obligation is founded on a valid consideration, such as the advancement of money, which appears to be conceded in this case, his subsequent sale of this property under foreclosure proceedings and his purchase of the same at the sale was in legal effect an unlawful conversion of this property to his own use, and he becomes liable to account for the same to any creditor of the company who has suffered loss by reason of such wrongful act. The transaction, entirely aside from his good faith, is fraudulent in law and voidable at the instance of a creditor." Nelson v. Jones, 38 Idaho 664, 669-71, 224 P. 435, 437-438 (1924).
See Associated Fruit Co. v. Idaho-Oregon Fruit Growers' Ass'n, 44 Idaho 200, 204-05, 256 P. 99 (1927); Weil v. Defenbach, 31 Idaho 258, 262-63, 170 P. 103 (1918); 3A Fletcher Cyc. Corp., § 1185 (perm. ed. 1975 rev.). See also 3A Fletcher Cyc. Corp., §§ 1180-1183 (perm. ed. 1975 rev.).
VI.
Plaintiffs also challenge the decision of the district court holding none of the individual defendants liable as statutory trustees of Great Basin. Statutory trustees are provided for as follows by I.C. § 30-611:
"§ 30-611. Trustees for defaulting corporation and stockholders. In all cases of forfeiture under the provisions of this chapter, the directors or managers in office of the affairs of any domestic corporation whose charter may be so forfeited, or of any foreign corporation whose right to do business in this state may be so forfeited, or any other person or persons who may be appointed by any court of competent jurisdiction to perform that *1313 duty, are deemed to be trustees of the corporation and stockholders or members of the corporation whose power or right to do business is forfeited, and have full power to settle the affairs of the corporation, and to maintain or defend any action or proceeding then pending in behalf of or against any of said corporations, or to take such legal proceedings as may be necessary to fully settle the affairs of said corporation, and such directors or managers, as such trustees, may be sued in any of the courts of this state after such forfeiture by any person having a claim against any of said corporations."
A limitation on the liability of statutory trustees is that only those directors "in office" on the date the corporate charter is forfeited become statutory trustees. Directors who have effectively resigned under the standards stated above, see V.A., are not "in office."
Although a corporation which has forfeited its charter cannot have a judgment entered against it or be made a party to an action, Jolley v. Puregro Co., supra, the statutory trustees of such a corporation may properly be sued on any claim against the corporation and judgment may be entered against them in their capacity as trustees. Fortner v. Cornell, 66 Idaho 512, 518-19, 163 P.2d 299, 301 (1945); Caxton Printers, Ltd. v. Ulen, 59 Idaho 688, 692-93, 86 P.2d 468, 469-70 (1939); Mitchell v. Munn Warehouse Co., 59 Idaho 661, 675, 86 P.2d 174, 179-80 (1938) (any implication in the language of Mitchell v. Munn Warehouse Co. contrary to Jolley v. Puregro Co., supra, is expressly disapproved).
The statutory trustees may also be personally liable for any breach of their fiduciary obligation to wind up the affairs of the corporation, collect its assets, pay the creditors, and distribute the balance, if any, rateably among the stockholders. See I.C. §§ 30-611, 30-610, 30-159, 8-601(5) and 8-602. Cf. Fortner v. Cornell, supra; Associated Fruit Co. v. Idaho-Oregon Fruit Growers' Ass'n, 44 Idaho 200, 204-05, 256 P. 99 (1927); Nelson v. Jones, 38 Idaho 664, 668-71, 224 P. 435 (1924); Weil v. Defenbach, 31 Idaho 258, 262-63, 170 P. 103 (1918); Riley v. Callahan Mining Co., 28 Idaho 525, 538, 155 P. 665 (1916); Wilson v. Baker Clothing Co., 25 Idaho 378, 387, 137 P. 896 (1913); King v. Coosa Valley Mineral Products Co., 283 Ala. 197, 215 So.2d 275, 279 (1968); Whatley v. Wood, 157 Colo. 552, 404 P.2d 537, 541 (1965); Dick v. Petersen, 90 Colo. 83, 6 P.2d 923, 926 (1931); Word v. Union Bank & Trust Co., 111 Mont. 279, 107 P.2d 1083, 1083, 1085 (1940); Heaney v. Riddle, 343 Pa. 453, 23 A.2d 456, 458 (1942); 16A Fletcher Cyc. Corp. §§ 8174, 8186 (perm. ed. 1962 rev.). In addition, if after the forfeiture of the corporate charter the trustees continue to conduct the business of the corporation, they may become personally liable for any obligations incurred. See I.C. § 30-610; Borbein, Young & Co. v. Cirese, 401 S.W.2d 940, 943 (Mo. App. 1966). Cf. Sullivan Construction Co. v. Twin Falls Amusement Co., 44 Idaho 520, 528, 258 P. 529 (1927); Ferguson Fruit & Land Co. v. Goodding, 44 Idaho 76, 88, 258 P. 557 (1927); Trower v. Stonebraker-Zea Live Stock Co., 17 F. Supp. 687, 689-90 (N.D.Okl. 1937); Todd Shipyards Corp. v. Lomm, 190 So.2d 125, 128-29 (La. App. 1966); Word v. Union Bank & Trust Co., supra; 3A Fletcher Cyc. Corp. § 1249, at 408 (perm. ed. 1975 rev.). Whether any of the statutory trustees may become personally liable to the plaintiffs will depend upon the facts of the case.
VII.
The last question of law we must address is the issue of whether plaintiffs are entitled to recover attorney's fees against the surety, defendant Millers. Great Basin, Kent Heileson and Millers assign error to the district court's decision awarding plaintiffs $12,500.00 as attorney's fees. Defendants argue that plaintiffs were not entitled to attorney's fees under the Bonded Warehouse Law which should control over the provisions of the general insurance statutes, that the amount of attorney's fees awarded did not bear a reasonable relationship to the amounts of the *1314 judgments, and that the district court erred in awarding attorney's fees before their motions for new trial had been ruled upon.
We point out first that the award of attorney's fees was not made prior to the entry of final judgment, but was made at the same time. The defendants' motions for a new trial were not pending. They had been granted unless the plaintiffs would accept remittiturs. Dawson v. Olson, 94 Idaho 636, 642, 496 P.2d 97, 103 (1972). There was no error by the trial court in holding a hearing prior to the entry of final judgment to determine the amount of attorney's fees to be awarded, and in awarding the attorney's fees at the time final judgment was entered.
We must also disagree with defendants' argument that the amount of an award of attorney's fees must bear a reasonable relationship to the amount of the judgment. It is the rule in this jurisdiction that where attorney's fees are to be awarded the amount thereof is to be that sum which the trial court in its discretion determines is reasonable. The factors to be considered have been previously stated by this Court:
"What is a reasonable attorneys' fee is a question for the determination of the court, taking into consideration the nature of the litigation, the amount involved in the controversy, the length of time utilized in preparation for and the trial of the case and other related factors viewed in the light of the knowledge and experience of the court as a lawyer and judge; it is not necessary in this connection that he hear any evidence on the matter although it is proper that the court may have before it the opinion of experts." Halliday v. Farmers Insurance Exchange, 89 Idaho 293, 300, 404 P.2d 634, 638 (1965) (quoting Penrose v. Commercial Travelers Insurance Co., 75 Idaho 524, 539, 275 P.2d 969, 978 (1954)).
At the hearing held in these cases on the amount to be awarded plaintiffs as attorney's fees, evidence on these factors was introduced and considered by the trial court. Upon the event of the re-trial in these cases the trial court will again have to determine what amount is a reasonable attorney's fee, if attorney's fees are to be awarded.
The argument most strenuously urged by the defendants is that plaintiffs are not entitled to attorney's fees in their action against the surety because the Bonded Warehouse Law did not explicitly provide for the award of attorney's fees in such actions until 1974. In that year I.C. § 69-209, the section providing for an action by an injured person against the surety on the warehouseman's bond, was amended by the addition of the following sentence: "Any person who sues and obtains a judgment against the warehouseman and/or his surety for payment of such damages under this section shall be entitled to recover a reasonable attorney's fee." S.L. 1974, ch. 82, § 1, effective July 1, 1974. Defendants argue that the omission of a provision for attorney's fees in the Bonded Warehouse Law as it was in effect at the commencement of these trials must control over the general provision for attorney's fees, I.C. § 41-1839, in the insurance code, Title 41, Idaho Code, § 41-101 et seq. I.C. § 41-1839, the relevant insurance code provision, states:
"41-1839. Allowance of attorney fees in suits against insurers. (1) Any insurer issuing any policy, certificate or contract of insurance, surety, guaranty or indemnity of any kind or nature whatsoever, which shall fail for a period of thirty (30) days after proof of loss has been furnished as provided in such policy, certificate or contract, to pay to the person entitled thereto the amount justly due under such policy, certificate or contract, shall in any action thereafter brought against the insurer in any court in this state for recovery under the terms of the policy, certificate or contract, pay such further amount as the court shall adjudge reasonable as attorney's fees in such action.
(2) In any such action, if it is alleged that before the commencement thereof, a *1315 tender of the full amount justly due was made to the person entitled thereto, and such amount is thereupon deposited in the court, and if the allegation is found to be true, or if it is determined in such action that no amount is justly due, then no such attorney's fees may be recovered.
(3) This section shall not apply as to actions under the workmen's compensation law which are subject to section 72-611, Idaho Code. This section shall not apply to actions against surety insurers by creditors of or claimants against a principal and arising out of a surety or guaranty contract issued by the insurer as to such principal, unless such creditors or claimants shall have notified the surety of their claim, in writing, at least sixty (60) days prior to such action against the surety. The surety shall be authorized to determine what portion or amount of such claim is justly due the creditor or claimant and payment or tender of the amount so determined by the surety shall not be deemed a volunteer payment and shall not prejudice any right of the surety to indemnification and/or subrogation so long as such determination and payment by the surety be made in good faith. Nor shall this section apply to actions against fidelity insurers by claimants against a principal and arising out of a fidelity contract or policy issued by the insurer as to such principal unless the liability of the principal has been acknowledged by him in writing or otherwise established by judgment of a court of competent jurisdiction."
We do not agree with defendants' argument. The language of I.C. § 41-1839 is broad and by its very terms applies to "Any insurer issuing any policy, certificate or contract of insurance, surety, guaranty or indemnity of any kind or nature whatsoever. ..." (Emphasis supplied.) An "insurer" includes a surety. I.C. § 41-103. Chapter 18 applies to "all insurance contracts," which includes surety bonds. I.C. §§ 41-1801, 102 and 2601 et seq. The exemptions of § 41-1839(3) and § 41-1801 are so specific that only the legislature could add to them. Moreover, § 41-1839(3) explicitly contemplates the application of the section to actions against surety insurers where sixty days' notice has been given.
Finally, we do not agree with defendants' argument that the addition of a provision for attorney's fees to I.C. § 69-209 in 1974 gives rise to the inference that prior to the amendment no attorney's fees were to be awarded in actions on warehousemen's bonds. The silence of the legislature prior to 1974, in the face of I.C. § 41-1839, is hardly indicative of an intent not to award attorney's fees in such actions. In our view I.C. § 41-1839 is more probably evidence that the legislature did not think it necessary to provide specifically for attorney's fees in such actions. It is also possible that the 1974 amendment to § 69-209 was prompted more by the legislature's reaction to conflicting language in several of our opinions interpreting the requirements of I.C. § 41-1839, than by the thought that the amendment was necessary to provide for attorney's fees in actions on warehousemen's bonds. Under I.C. § 69-209, as amended, the only requirement for entitlement to an award of attorney's fees is success in obtaining a judgment. We conclude that the plaintiffs are entitled to attorney's fees under I.C. § 41-1839, if the requirements of that section are met. In Associates Discount Corp. of Idaho v. Yosemite Ins. Co., 96 Idaho 249, 526 P.2d 854 (1974), we resolved conflicts among the prior cases and held that:
"under I.C. § 41-1839, any person who has a claim under a policy of insurance and who furnishes proof of loss as provided in the statute may recover attorney fees against the insurer if the amount ultimately recovered in the action exceeds the amount tendered by the insurer before the commencement of the action." 96 Idaho at 257, 526 P.2d at 862.
Upon retrial, should the facts or situation warrant, the court can also consider I.C. § 12-120(2):
"12-120. Attorney fees in civil actions.
.....
*1316 "(2) In any civil action to recover on an open account, account stated, note, bill, negotiable instrument, or contract relating to the purchase or sale of goods, wares, or merchandise, unless otherwise provided by law, the prevailing party shall be allowed a reasonable attorney fee to be set by the court, to be taxed and collected as costs."
The amount of attorney's fees to be awarded is left to the discretion of the trial court, subject to the requirement that they be reasonable in the light of the factors stated above.
The order granting a new trial is affirmed and the cases are remanded for further proceedings. No costs allowed.
McFADDEN, C.J., and SHEPARD and DONALDSON, JJ., concur.
BAKES, Justice, concurring in part and concurring in the result in part:
I concur in Parts I, IV, V, VI, and VII, and concur in the result in Parts II and III of the opinion of Judge Scoggin.
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(2007)
Michael KAYE, Plaintiff,
v.
BOARD OF TRUSTEES OF the SAN DIEGO COUNTY PUBLIC LAW LIBRARY, et al., Defendants.
Case No. 07cv921 WQH (WMc).
United States District Court, S.D. California.
December 11, 2007.
ORDER
HAYES, District Judge:
The matter before the Court is the Motion for Partial Remand, filed by Plaintiff Michael Kaye. (Doc. # 7).
Background
On April 18, 2007, Plaintiff filed a Complaint in the Superior Court of California against the San Diego County Public Law Library ("Law Library"), Board of Trustees of the Law Library ("Board of Trustees"), Robert Riger, individually and in his official capacity as Director of the Law Library, and Joan AllenHart, individually and in her official capacity as Assistant Director of the Law Library (collectively "Defendants"). Notice of Removal, p. 1-2. (Doc. # 1).
The Complaint alleges that Plaintiff was employed by the Law Library as a fulltime reference librarian. The Complaint alleges that on March 5, 2006, Plaintiff disseminated a nine-page email ("Email") to Defendant AllenHart and all full-time reference librarians on the Law Library reference staff which addressed "several matters of public concern," including the discontinuance by Law Library management of library classroom programs for the education of self-represented litigants. Id. at 3. The Complaint alleges that on or about March 21, 2006, Defendants initiated disciplinary proceedings against Plaintiff for insubordination and misconduct in connection with the Email. Id. at 4. The Complaint alleges that on or about August 1, 2006, Defendants issued a letter of termination which notified Plaintiff that his employment at the Law Library would end effective August 3, 2006. Id. at 6. The Complaint alleges that Plaintiff filed a post-termination administrative appeal with the Board of Trustees. Id. at 5. The Complaint alleges that on or about December 18, 2006, the Board of Trustees issued a formal written decision sustaining Plaintiff's termination. Id. at 10.
The Complaint alleges the following causes of action: (1) Defendants terminated Plaintiff without providing a pre-termination or post-termination evidentiary hearing, in violation of his procedural due process rights as protected by the Fifth and Fourteenth Amendments of the United States Constitution, and in violation of the California Constitution and the California Labor Code, (2) Defendants did not permit Plaintiff to inspect his personnel file, in violation of his due process rights as protected by the Fifth and Fourteenth Amendments of the United States Constitution, and in violation the California Constitution and the California Labor Code, (3) the library administration, instead of the Board of Trustees, terminated Plaintiff, in violation of section 6345 of the California Business and Professions Code, (4) Defendants failed to comply with the notice and open session requirements governing public employee disciplinary proceedings, in violation of the Ralph M. Brown Act, section 54957 of the California Government Code, (5) Defendants terminated Plaintiff based on his protected public employee speech, in violation of Article I, section 2(a) of the California Constitution, and (6) Defendants did not honor the whistle blower protections of the California False Claims Act, section 12653 of the California Government Code. Plaintiff seeks a judicial declaration that Defendants violated Plaintiffs statutory and constitutional rights, a peremptory writ of mandate commanding Defendants to reinstate Plaintiff to his former position as a reference librarian at the Law Library, and damages.
On May 22, 2007, Defendants filed a Notice of Removal under 28 U.S.C. section 1441(a). (Doc. # 1). The Notice of Removal asserts federal question jurisdiction under 28 U.S.C. section 1331. Defendants contend that the Complaint alleges violations of the Fifth and Fourteenth Amendments of the United States Constitution, and the Federal Civil Rights Act of 1871, 42 U.S.C. section 1983. Defendants contend that the Court should assert supplemental jurisdiction over any state law claims raised in the Complaint under 28 U.S.C. section 1367(a). Notice of Removal, p. 2.
On August 6, 2007, Plaintiff filed a Motion for Partial Remand. Plaintiff contends that the Court should decline supplemental jurisdiction over the Complaint's third, fourth and fifth causes of action on grounds that they raise novel or complex issues of state law and that considerations of economy, convenience, fairness and comity counsel in favor of remand. On August 31, 2007, Defendants filed a Response in Opposition to the Motion to Remand. (Doc. # 9). On September 10, 2007, Plaintiff filed a Reply to Defendant's Opposition to the Motion to Remand, which requested for the first time that the Court remand the Complaint's sixth cause of action in addition to the third, fourth and fifth causes of action. (Doc. # 11). On November 29, 2007, the Court granted Defendants leave to file any response to Plaintiff's request to remand the sixth cause of action by December 10, 2007. (Doc. # 19). On December 10, 2007, Defendants filed a Reply to Response to Motion re Motion for Partial Remand, which opposed Plaintiffs request to remand the Complaint's sixth cause of action. (Doc. # 22).
Standard of Review
Under 28 U.S.C. section 1441(a), "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States ...." 28 U.S.C. § 1441(a). Pursuant to 28 U.S.C. section 1367, "in a civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution." 28 U.S.C. § 1367(a).
Federal courts have broad authorization under 28 U.S.C. section 1367 to assert supplemental jurisdiction over state law claims when the state and federal claims, derive from a "common nucleus of operative fact," the claims are such that the plaintiff "would ordinarily be expected to try them all in one judicial proceeding," and the federal issues are substantial. Executive Software North America, Inc. v. U.S. Dist. Court for Cent. Dist. of California, 24 F.3d 1545, 1552 (9th Cir.1994). However, "[i]t has consistently been recognized that [supplemental] jurisdiction is a doctrine of discretion." Id. at 1556.
Under section 1367(c), a court can decline to assert supplemental jurisdiction over a pendant claim if one of the following four categories applies:
(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction,
(3) the district court has dismissed all claims over which it has original jurisdiction, or
(4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.
28 U.S.C.A. § 1367(c); Executive Software, 24 F.3d at 1557. In making its determination, the court should be guided by considerations of "judicial economy, convenience, fairness and comity." Id. If the exercise of supplemental jurisdiction does not advance these considerations, "a federal court should hesitate to exercise jurisdiction over state law claims." Id.
Discussion
I. The Complaint's Fifth Cause of Action
Plaintiff moves to remand the Complaint's fifth cause of action on grounds that it raises novel and complex issues of state law because it "presents an issue of first impression under Article I section 2(a) of the California Constitution concerning protection of public employees for the things they say or write in the course of performing their job duties." Id. at 8. Plaintiff contends that no California state court has defined "the scope of protection that applies under Article I, section 2(a) of the California Constitution to statements made by a public employee while performing his official duties." Mot. to Remand, p. 8. Plaintiff further contends that the United States Supreme Court's recent decision in Garcetti v. Ceballos, 547 U.S. 410, 126 S.Ct. 1951, 164 L.Ed.2d 689 (2006), "abruptly altered the landscape of First Amendment law for public employees," by eliminating protection of on-the-job expression, see Pickering v. Board of Education, 391 U.S. 563, 88 S.Ct. 1731, 20 L.Ed.2d 811 (1968). Plaintiff contends that "[i]t is not self-evident that the California courts would choose to march in lockstep with the United States Supreme Court's newly minted standard of sterile constitutional values." Mot. for Remand, p. 5.
Defendants contend that the Garcetti decision did not make drastic changes to employee free speech law, but simply applied the framework established in Pickering to different facts:
The distinction between Pickering and Garcetti is clear. The first involved comments made by a community member as part of a public debate who also happened to be a government employee. The later involved communications made by a public employee as part of fulfilling the responsibilities of his position and did not involve a public debate.
Opposition, p. 6-7; see Garcetti, 126 S.Ct. 1951; Pickering, 391 U.S. 563, 88 S.Ct. 1731. Defendants contend that "an established framework governs California state law relating to employee free speech issues." Opposition, p. 8; see Bogacki v. Board of Supervisors, 5 Cal.3d 771, 97 Cal.Rptr. 657, 489 P.2d 537 (1971); Bagley v. Washington Township Hospital District, 65 Cal.2d 499, 55 Cal.Rptr. 401, 421 P.2d 409 (1966). Defendants contend that the Complaint's fifth cause of action does not raise novel or complex issues of state law because there is ample California state law on point which is consistent with established federal law.
The United States Supreme Court has addressed the protections afforded by the First Amendment of the United States Constitution to public employee speech, and held that the First Amendment prohibits the termination of a public employee who exercises his right to speak on issues of public importance. Pickering, 391 U.S. at 573, 88 S.Ct. 1731. Conversely, "when public employees make statements pursuant to their official duties, the employees are not speaking as citizens for First Amendment purposes, and the Constitution does not insulate their communications from employer discipline." Garcetti, 126 S.Ct. at 1960.
The rights guaranteed by the California Constitution are independent of those guaranteed by the United States Constitution. Cal. Const., Art. I § 2(a). The California courts "have indicated that the liberty of speech clause [Art. I, section 2(a) of the California Constitution] is broader and more protective than the free speech clause of the First Amendment." Los Angeles Alliance for Survival v. City of Los Angeles, 22 Cal.4th 352, 366, 93 Cal. Rptr.2d 1, 993 P.2d 334 (2000). The "California Constitution is independent and ... federal decisions interpreting the First Amendment are not controlling." Id.
Defendants rely on the California Supreme Court's decisions in Bogacki and Bagley to support their contention that public employee speech issues are not novel or complex under California law, emphasizing that the California Supreme Court consistently considers (1) whether the political restraints rationally relate to the enhancement of the public service, (2) whether the benefits which the public gains by the restraints outweigh the resulting impairment of constitutional rights, and (3) whether there exist alternatives that are less subversive of constitutional rights when determining whether restrictions on public employee rights are permissible under the California Constitution. Bagley, 65 Cal.2d at 502, 55 Cal.Rptr. 401, 421 P.2d 409; Bogacki, 5 Cal.3d at 778, 97 Cal.Rptr. 657, 489 P.2d 537. Although California courts have addressed restrictions on public employee rights generally, the facts of this case specifically involve the scope of protection provided by Article I, section 2(a) of the California Constitution to the statements made by public employees in the course of their employment. Defendants also rely on the California Court of Appeal's decision in Norton v. City of Santa Ana, 15 Cal.App.3d 419, 426, 93 Cal.Rptr. 37 (1971), to support their contention that California state courts apply the same framework as federal courts to public employee free speech issues on grounds that the reasoning in Norton is consistent with Garcetti. Opposition, p. 9. Although Norton addressed the question of whether a police officer may be terminated for making "vicious charges against his chief," the plaintiff in Norton challenged his termination under the First Amendment, not the California Constitution. 15 Cal.App.3d at 426, 93 Cal.Rptr. 37. Norton therefore did not address the framework that applies to public employee free speech issues under Article I section 2(a) of the California Constitution.
The Court concludes that the Complaint's fifth cause of action raises a novel or complex issue of State law under section 1367(c) and is appropriately resolved by the state courts.
II. The Complaint's Remaining Causes of Action
The Complaint's third, fourth and sixth causes of action allege violations of Plaintiffs rights as protected by state law. See supra, p. 2. These state law causes of action require inquiry into Defendants' reasons for terminating Plaintiff and whether the process by which Plaintiff was terminated violated specific sections of the California Business and Professions Code, the California Government Code and the California Constitution. The Complaint's first and second causes of action allege violations of Plaintiffs rights as protected by both federal and state law. See id. These causes of action require inquiry into whether Plaintiff was unlawfully denied a pre-removal and post-removal evidentiary hearing and whether Plaintiff was unlawfully denied the right to inspect his personnel records. The Court finds that Plaintiff's purely state law claims, raised in the Complaint's third, fourth and sixth cause of action, require inquiry into different facts than those that underlie the Complaint's first and second causes of action, which raise both federal and state claims. The Court further finds that remand of the Complaint's third, fourth and sixth causes of action would "most sensibly accommodate" the values of judicial economy, convenience, comity and fairness. See Executive Software North America, Inc. v. U.S. Dist. Court for Cent. Dist. of California, 24 F.3d 1545, 1554 (9th Cir.1994). The Court concludes that the Complaint's third, fourth and sixth causes of action raise factually distinct and complex issues of state law under section 1367(c), and are appropriately resolved by the state courts.
Conclusion
IT IS HEREBY ORDERED that the Motion for Partial Remand (Doc. # 7) filed by Plaintiff Michael Kaye is GRANTED.
IT IS FURTHER ORDERED that the Court declines to exercise supplemental jurisdiction over the Complaint's third, fourth, fifth and sixth causes of action, and REMANDS the Complaint's third, fourth, fifth and sixth causes of action to the state court. The Court retains jurisdiction over the Complaint's first and second causes of action.
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462 So.2d 1327 (1985)
Bruce FOURROUX, Plaintiff-Appellant,
v.
NORTH-WEST INSURANCE COMPANY, Defendant-Appellee.
No. 84-37.
Court of Appeal of Louisiana, Third Circuit.
January 30, 1985.
Writ Denied March 22, 1985.
*1328 Bernard F. Duhon, Abbeville, for plaintiff-appellant.
Mouton, Roy, Carmouche, Bivins, Judice & Henke, Alan K. Breaud, Lafayette, for defendant-appellee.
Before DOUCET, YELVERTON and KNOLL, JJ.
KNOLL, Judge.
Bruce Fourroux appeals a judgment in favor of his employer, P & A Well Service, and its insurer, North-West Insurance Company, denying Fourroux workmen's compensation benefits for total and permanent disability; he also seeks medical expenses and penalties and attorney's fees. The determinative issue is whether the trial court erred in finding that Fourroux failed to prove by a preponderance of the evidence that his back injury resulted from a work-related accident. We affirm, finding Fourroux failed to carry his burden of proof, therefore, we pretermit the remaining assignments of error.
FACTS
We are benefited by the learned trial judge's well considered written reasons for ruling that sets forth the factual setting as follows:
"Plaintiff, a twenty-one year old male, has alleged that he and a fellow employee left their employer's New Iberia office in a company vehicle around 5:30 a.m. on the morning of December 14, 1982. The pair traveled to a remote location near Cameron, Louisiana where they were to load pipe onto their truck. The pipe was raised by a wench operated by Warren Ellender. Plaintiff was assigned to make certain that the pipe remained balanced while it was being raised. It was while he was engaged in this process that plaintiff alleges he felt a sharp pain in his lower back. Plaintiff states that he immediately called out to Mr. Ellender that he had been hurt. Mr. Ellender purportedly replied that plaintiff's injury was inconsequential and that the two of them should continue working in order to complete the job as soon as possible. At trial, plaintiff testified that the truck and wench were very noisy and that it was possible that Mr. Ellender did not hear his complaint. Plaintiff also testified that he complained to Mr. Ellender several times during the return trip to New Iberia.
Plaintiff further states that he continued to work in pain while loading the remaining pipe and that upon returning to his employer's office he notified his toolpusher of the injury and filled out an accident report. Thereafter, plaintiff left work and went home to clean up. From there he went immediately to the office of his family physician to seek treatment."
In determining whether Fourroux met his burden of proving his case by a preponderance of the evidence, the trial judge applied the correct standard as stated in his reasons herein:
"The law is clear that although procedural rules are construed liberally in favor of the claimant in a workmen's compensation suit, the burden of proof nevertheless rests on plaintiff to prove his case by a preponderance of the evidence, as is required in other civil cases. [See Crochet v. American Tobacco Co., 407 So.2d 1330 (La.App. 3rd Cir.1981).] The testimony as a whole must show that more probably than not a work-connected accident occurred, and that it had a causal relationship to the claimant's disability. Prim vs. City of Shreveport, 297 So.2d 421 (La.1974), Calais vs. Petroleum Helicopters, Inc., 330 So.2d 408 (3rd Cir. 1976).
The law is equally well settled that the testimony of a plaintiff alone in a workmen's compensation case is sufficient to establish the occurrence of an accident, if there is nothing to discredit his account thereof and where his statements are supported by the surrounding circumstances. [See White v. Freeport Chemical *1329 Company, 319 So.2d 563 (La.App. 4th Cir.1975), writ denied, 323 So.2d 132; Crochet, supra.] In evaluating the evidence, the Court should accept as true and uncontradicted testimony of a witness, even though the witness is a party, at least in the absence of circumstances casting suspicion on the reliability of this testimony. West vs. Bayou Vista Manor, Inc., 371 So.2d 1146 (La.1979), Williams vs. Offshore Food Service, Inc., 417 So.2d 475 (1st Cir.1982), Jones vs. Alexander, 399 So.2d 216 (2nd Cir. 1981), [writ denied, 400 So.2d 1383], Hall vs. Georgia-Pacific Corp., 390 So.2d 948 (2nd Cir.1980), Walker vs. Balden [sic] Corp., 331 So.2d 167 (3rd Cir.1976).
Our jurisprudence also requires that when the plaintiff has had several prior injuries to the same part of his body and has had considerable experience in making workmen's compensation claims, the Court will look with great suspicion on the asserted claim and will examine the claim with particular care. Sinegal vs. Travelers Insurance Co., 319 So.2d 866 (3rd Cir.1975), Hand vs. Reeves, 378 So.2d 1064 (2nd Cir.1979), [writ denied, 380 So.2d 72 (La.1980)]."
The trial judge applied this well established standard to the present case as follows:
"The Court finds that the above rule applies to this case in light of plaintiff's history of back injury and experience in making workmen's compensation claims. In this case the plaintiff was the only witness to the alleged accident. The Court finds that the following factors tend to cast suspicion on plaintiff's testimony:
(1) Plaintiff continued with his assigned duties even though he had allegedly been involved in an injury producing accident. Furthermore, plaintiff never mentioned his accident to any of his co-employees. Although plaintiff testified that he reported the accident to Warren Ellender, Mr. Ellender denied under oath that plaintiff told him of the accident prior to the time they returned to New Iberia. See: Hand vs. Reeves, supra at 1065-1066, Walker vs. Balden [sic] Corp. at 170, Calais vs. Petroleum Helicopters, Inc., supra at 409, White vs. Freeport Chemical Co., 319 So.2d 563 at 565 (4th Cir.1975), [writ denied 323 So.2d 132], and Carter vs. Casulty [sic] Reciprocal Exchange, 163 So.2d 855 at 856 (2nd Cir.1964).
(2) No unusual or restricted movement was noted in plaintiff by any of his fellow employees following the alleged accident. Plaintiff continued to work in a normal manner while with Mr. Ellender and also after returning to his employer's New Iberia office. See: Jones vs. Alexander, 399 So.2d 216 at 217 (2nd Cir.1981), Hand vs. Reeves, supra, at 1066, and Carter vs. Casulty [sic] Reciprocal Exchange, supra, at 856.
(3) The veracity of plaintiff's testimony was severly attacked by defendant's counsel. His testimony revealed several instances of inconsistencies and apparent contradictions. Jones vs. Alexander, supra, at 217, and Carter vs. Casulty [sic] Reciprocal Exchange, supra, at 857.
(4) Plaintiff has a history of back injuries including prior employment related back injuries for which he received workmen's compensation benefits. Plaintiff's history also reveals several automobile and motorcycle accidents which may have resulted in lower back injuries. See: Jones vs. Alexander, supra, at 219, Meador vs. International Paper Co., 348 So.2d 997 at 998 (2nd Cir.1977) and Sinegal vs. Travelers Insurance Co., supra, at 866.
(5) Plaintiff did not report his prior injuries or workmen's compensation claims to his employer either on his employment application or during a post-injury interview. Plaintiff's failure to make a full disclosure of his back injuries and statement that he did not have to tell the truth at a post-injury interview because he was not under oath shows a tendency on *1330 his part to provide only the information that he finds is in his best interest. See: Meador vs. International Paper Co., supra, at 999, and Hall vs. Georgia-Pacific Corp., supra, at 948 and 951.
(6) The testimony at trial indicated that the nature of plaintiff's job duties at the time of the accident was not strenuous. See: Hall vs. Georgia-Pacific Corp., supra, at 951.
Furthermore, Dr. John Thibodeaux, the doctor who examined plaintiff on December 14, 1982, found no objective symptoms of plaintiff's injury and did not attribute plaintiff's complaints of pain to a recent injury. Dr. Louis Blanda did discover objective indications of plaintiff's injury in February and April, 1983. However, Dr. Blanda stated that if plaintiff had had leg pain and neurological symptoms previously, then there would be no way to correlate these objective findings with the particular incident plaintiff had described. (Dr. Blanda's deposition at Page 22). In fact the plaintiff did complain of leg pain and neurological symptoms as a result of a back injury he sustained while working for another employer in 1981. Therefore, the medical evidence does not corroborate the plaintiff's assertion that an accident occurred."
It is well settled that a reviewing court must give great weight to factual conclusions of the trier of fact, particularly when they involve a determination of the credibility of witnesses, thus a reviewing court should not disturb this factual finding in the absence of manifest error. Crochet, supra; Calais, supra; Canter v. Koehring Company, 283 So.2d 716 (La. 1973).
After a careful review of the record, we find that Fourroux failed to meet his burden of proving his case by a preponderance of the evidence. We likewise find that the record does not support that the trial judge committed manifest error.
For the foregoing reasons, the judgment of the trial court is affirmed.
AFFIRMED.
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649 F.2d 863
Jewell Ridge Coal Corp.v.Honaker
80-1593
UNITED STATES COURT OF APPEALS Fourth Circuit
3/26/81
1
Ben.Rev.Bd.
AFFIRMED
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NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
MONTANO ELECTRICAL CONTRACTOR,
Plaintiff-Appellant
v.
UNITED STATES,
Defendant-Appellee
______________________
2014-5133
______________________
Appeal from the United States Court of Federal
Claims in No. 1:13-cv-00435-CFL, Judge Charles F.
Lettow.
______________________
Decided: April 13, 2015
______________________
JOSE A. MONTANO, Madison, AL, pro se.
BARBARA E. THOMAS, Commercial Litigation Branch,
Civil Division, United States Department of Justice,
Washington, DC, for defendant-appellee. Also represented
by JOYCE R. BRANDA, ROBERT E. KIRSCHMAN, JR., BRIAN A.
MIZOGUCHI.
______________________
Before CHEN, BRYSON, and HUGHES, Circuit Judges.
2 MONTANO ELECTRICAL CONTRACTOR v. US
PER CURIAM.
Jose Montano appeals from the final decision of the
United States Court of Federal Claims (Claims Court)
granting the Government’s motion to dismiss for lack of
jurisdiction and denying Mr. Montano’s motion to trans-
fer. Montano Electrical Contractor v. United States, 114
Fed. Cl. 675 (2014). We affirm.
BACKGROUND
In 1999, the Army Corps of Engineers (the Corps)
awarded a contract to American Renovation & Construc-
tion Company (ARC) for the design and construction of
family housing at Redstone Arsenal in Huntsville, Ala-
bama. ARC then subcontracted the electrical work on the
project to Mr. Montano. At some point, ARC apparently
defaulted on its contract with the Corps, which resulted in
ARC’s surety, St. Paul Mercury Insurance Company (St.
Paul), assuming ARC’s obligations under the contract and
arranging for Soltek Pacific (Soltek) to complete the
project as completion contractor. As part of this transi-
tion, Mr. Montano’s subcontract was assigned to Soltek
and Mr. Montano continued to perform under the subcon-
tract.
Thereafter, Mr. Montano filed a claim with St. Paul,
seeking payment for electrical work he performed at
Redstone Arsenal. After St. Paul rejected this claim, Mr.
Montano repeatedly sought assistance from the contract-
ing officer at the Corps. Each time, the contracting officer
explained that he was unable to provide the requested
assistance because Mr. Montano did not have a contract
with the government, and thus the government was not a
party to the dispute. The contracting officer also ex-
plained that Mr. Montano should pursue any such claim
MONTANO ELECTRICAL CONTRACTOR v. US 3
against the prime contractor under the Miller Act, 40
U.S.C. § 3133. 1
In response, Mr. Montano filed a request with the
Armed Services Board of Contract Appeals (ASBCA)
seeking assistance resolving his contract matter. The
ASBCA docketed Mr. Montano’s request as an appeal and
dismissed the appeal for lack of subject matter jurisdic-
tion.
Mr. Montano then filed an action in the Claims Court
seeking monetary relief from the government for the
money owed on his subcontract. In addition, Mr. Montano
asserted that the government was liable for the tortious
conduct of the contracting officer. Specifically, Mr. Mon-
tano asserted that the contracting officer breached his
purported duty to inform Mr. Montano of his cause of
action against the prime contractor under the Miller Act
before the limitations period expired. The Claims Court
concluded that it lacked jurisdiction over Mr. Montano’s
contract claim because he was not in privity with the
government. The Claims Court also determined that it
lacked jurisdiction over Mr. Montano’s tort claim because
claims brought under the Federal Tort Claims Act (FTCA)
are expressly excluded from the Claims Court’s jurisdic-
tion. Finally, the Claims Court concluded that it could
not transfer Mr. Montano’s FTCA claim because Mr.
1 The Miller Act requires a Government contractor
to post a payment bond “for the protection of all persons
supplying labor and material in the prosecution of the
work provided for” in the contract. 40 U.S.C. § 3131(b)(2).
The Act then provides that a person who has furnished
labor or material under that contract—i.e., a subcontrac-
tor—and has not been paid in full within 90 days after the
last labor was performed, may initiate a law suit in feder-
al district court on the payment bond for the unpaid
amount. 40 U.S.C. § 3133.
4 MONTANO ELECTRICAL CONTRACTOR v. US
Montano had failed to file an administrative claim and
therefore no district court could exercise jurisdiction over
the claim. The present appeal followed. We have juris-
diction under 28 U.S.C. § 1295(a)(3).
DISCUSSION
We review a dismissal for lack of subject matter juris-
diction de novo. Brandt v. United States, 710 F.3d 1369,
1373 (Fed. Cir. 2013). Although we generally review a
decision by the Claims Court not to transfer a matter
under 28 U.S.C. § 1631 for abuse of discretion, the under-
lying determination that no transferee court would pos-
sess jurisdiction over the matter is reviewed de novo.
Rick’s Mushroom Serv., Inc. v. United States, 521 F.3d
1338, 1342–43 (Fed. Cir. 2008).
A
In his complaint, Mr. Montano first seeks relief for
the money he is owed under his subcontract for the per-
formance of electrical work at Redstone Arsenal. The
Tucker Act authorizes the Claims Court to exercise juris-
diction over claims against the government involving “any
express or implied contract with the United States.” 28
U.S.C. § 1491(a)(1). Similarly, the Contract Disputes Act
permits a contractor to bring an action challenging an
adverse decision by a contracting officer in the Claims
Court. 41 U.S.C. § 7104(b)(1). Because a subcontractor
ordinarily lacks privity with the government, however, a
subcontractor generally cannot bring such an action
unless the prime contractor sues the government on the
subcontractor’s behalf. E.R. Mitchell Const. Co. v. Danzig,
175 F.3d 1369, 1370 (Fed. Cir. 1999).
In this case, Mr. Montano acknowledges that he was
not in privity with the government. In addition, Mr.
Montano cannot assert that he nevertheless can bring the
suit through the prime contractor because neither St.
Paul nor Soltek are plaintiffs in this action. Thus, the
MONTANO ELECTRICAL CONTRACTOR v. US 5
Claims Court correctly concluded that it lacked jurisdic-
tion over Mr. Montano’s contract claims.
B
Mr. Montano next seeks monetary relief for damages
suffered as a result of the contracting officer’s alleged
negligence. Specifically, he argues that the contracting
officer acted negligently in failing to timely advise Mr.
Montano of his rights under the Miller Act. The sole
vehicle for asserting such a tort claim is the FTCA. 28
U.S.C. § 1346(b). The FTCA explains, however, that
the district courts . . . shall have exclusive juris-
diction of civil actions on claims against the Unit-
ed States, for money damages . . . for injury or loss
of property, or personal injury or death caused by
the negligent or wrongful act or omission of any
employee of the Government while acting within
the scope of his office or employment . . . .
Id. § 1346(b)(1). Likewise, the Tucker Act expressly
excludes any claims “sounding in tort,” from the Claims
Court’s jurisdiction. 28 U.S.C. § 1491(a)(1). Thus, the
Claims Court correctly concluded that it lacked jurisdic-
tion to adjudicate Mr. Montano’s claims alleging tortious
conduct by the contracting officer.
C
Finally, Mr. Montano argues that, the Claims Court
erred in refusing to transfer his FTCA claim to an appro-
priate district court. When a court concludes that it lacks
jurisdiction to hear an action, 28 U.S.C. § 1631 permits
that court to transfer the action “to any other such court
in which the action or appeal could have been brought at
the time it was filed . . . .” A court may not, however,
transfer an action to a court that would itself lack juris-
diction. Jan’s Helicopter Serv., Inc. v. Fed. Aviation
Admin., 525 F.3d 1299, 1303 (Fed. Cir. 2008) (“A case
6 MONTANO ELECTRICAL CONTRACTOR v. US
may be transferred under section 1631 only to a court
that has subject matter jurisdiction.”).
Although the FTCA permits tort claims seeking mon-
etary relief from the government to be filed in district
court, any person making such a claim must first—as a
jurisdictional prerequisite—file the asserted tort claim
with the appropriate agency. 28 U.S.C. § 2675(a); Dal-
rymple v. United States, 460 F.3d 1318, 1324 (11th Cir.
2006). Here, before a district court could exercise its
jurisdiction over a tort claim by Mr. Montano under the
FTCA, Mr. Montano was first required to file his claim
asserting negligence by the contracting officer with the
Corps. The only claim in this record, however, is the
claim that Mr. Montano filed with the ASCBA. Nothing
in the record suggests that this claim related in any way
to the alleged negligent conduct of the contracting officer.
Thus, Mr. Montano has failed to establish this jurisdic-
tional predicate to filing a claim under the FTCA. We
agree with the Claims Court that no district court would
have possessed jurisdiction over Mr. Montano’s FTCA
claim at the time he filed it in the Claims Court and,
therefore, affirm the Claims Court’s decision that it could
not transfer Mr. Montano’s case.
CONCLUSION
We have considered Mr. Montano’s remaining argu-
ments and find them unpersuasive.
AFFIRMED
No costs.
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[Cite as State v. Mayer, 2016-Ohio-520.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
DARKE COUNTY
STATE OF OHIO :
: Appellate Case No. 2014-CA-14
Plaintiff-Appellee :
: Trial Court Case No. 14-CRB-001-
v. : 0167
:
DEBORAH L. MAYER : (Criminal Appeal from
: Darke County Municipal Court)
Defendant-Appellant :
:
...........
OPINION
Rendered on the 12th day of February, 2016.
...........
MARK E. HEGGIE, Atty. Reg. No. 0015441, Darke County Municipal Prosecutor’s Office,
100 Washington Avenue, Post Office Box 1158, Greenville, Ohio 45331
Attorney for Plaintiff-Appellee
JAMES S. ARMSTRONG, Atty. Reg. No. 0020638, 131 North Ludlow Street, Suite 386,
Dayton, Ohio 45402
Attorney for Defendant-Appellant
.............
FAIN, J.
{¶ 1} Defendant-appellant Deborah Mayer appeals from a judgment entry of
conviction and sentencing requiring her to pay, as part of her probation, costs from a
separate case that was dismissed by agreement of the parties as well as costs and fines
-2-
on “ALL cases.” Mayer contends that she did not agree to the payment of those costs.
{¶ 2} We conclude that the record before us does not support the trial court’s order
to pay costs in the other, dismissed case. Furthermore, the record demonstrates that
the trial court was not certain what cases it was including in the term “ALL cases.” From
the record before us, we cannot tell if this involved other prior dismissed cases.
Accordingly, that part of the judgment is Reversed, the judgment is Affirmed in all other
respects, and this cause is Remanded for further proceedings.
I. The Course of Proceedings
{¶ 3} Mayer was charged in this case, No. 14-CRB-001-0167 in the Darke County
Municipal Court, with Disorderly Conduct, in violation of R.C. 2917.11(A)(2), as a result
of conduct occurring on March 17, 2015. Counsel was appointed to represent Mayer,
who ultimately entered a plea of guilty to the charge.
{¶ 4} At sentencing, Mayer was given a one-year probation term conditioned upon
payment of costs and fines, and upon her compliance with her psychiatrist’s
recommendations and taking her prescribed medications. Of relevance hereto, Mayer
was fined $100, and was assessed total court costs of $251. On the sentencing entry
form, beside the handwritten court costs figure of $251, were the hand-written words “+
dismissal CCs from 13.CRB.001.0057.” Under the section entitled “Terms of Probation
(for suspended sentence): * * * (2) pay fine and costs,” the trial court entered a hand-
written notation that Mayer must pay $25 per month. The trial court also made a hand-
written note that Mayer had to pay the $25 per month “until ALL [fines and costs] on ALL
-3-
cases are [paid in full].” The trial court noted that if Mayer failed to comply with the terms
of the probation, she would be required to serve 20 days in jail.
{¶ 5} From the judgment, Mayer appeals. Appointed counsel filed an appellate
brief pursuant to Anders v. California, 386 U.S. 738, 87 S.Ct. 1396, 18 L.Ed.2d 493
(1967), in which counsel stated that no meritorious errors were noted. This court found
that the appeal was not wholly frivolous – that there was one potential assignment of error
having arguable merit involving the imposition, as part of the sentence, of court costs in
a different criminal case. New counsel was appointed, and three assignments of error
were asserted.
II. The Record Does Not Support the State’s Claim that Mayer Agreed
To Pay the Court Costs in a Previous, Dismissed Case and in
Other Prior Cases; and those Costs May Not Be Imposed
in this Case in the Absence of Such an Agreement
{¶ 6} Mayer’s First and Second Assignments of Error state:
THE TRIAL COURT ERRED IN ORDERING COURT COSTS FOR A
DISMISSED CASE WITH A DIFFERENT CASE NUMBER, AND APPELLANT DID
NOT AGREE TO PAY SAID COSTS.
THE TRIAL COURT ERRED IN ORDERING COURT COSTS FOR OLDER
CLOSED CASES AS A TERM OF PROBATION AND CONDITION OF THE
SUSPENDED JAIL SENTENCE.
{¶ 7} Mayer contends that the trial court did not have authority to impose court
-4-
costs related to any different cases, as part of the costs in the case before us.
{¶ 8} In general, a conviction is “usually a prerequisite for the imposition of court
costs.” Cleveland Hts. v. Machlup, 8th Dist. Cuyahoga No. 93086, 2009-Ohio-6468, ¶
15. “In fact, R.C. 2947.23 authorizes a trial court to assess the costs related to a
prosecution only when a defendant has been found guilty and sentenced.” City of
Willoughby v. Sapina, 11th Dist. Lake Nos. 2000-L-138, 2000-L-139, 2001 WL 1602651,
* 2 (Dec. 14, 2001). Thus, in the absence of an agreement to pay court costs, a trial
court errs by imposing court costs against a criminal defendant from a case that has been
dismissed. Machlup, ¶ 19.
{¶ 9} Here, the State contends that the parties agreed that in exchange for the
dismissal of case number 13-CRB-001-0057, Mayer would plead guilty to the charge of
Disorderly Conduct in the case before us, and would pay the court costs in both this case
and the dismissed case. Mayer denies this. The transcripts of the plea and sentencing
hearings contain no evidence to suggest that, as part of the plea arrangement, Mayer
would be responsible for the costs of the dismissed case. Indeed, from our reading of
the sentencing transcript, Mayer appears to object to including those costs, by indicating
that she thought that older cases and costs were being dismissed. Thus, while it is
possible that the parties did have such an understanding, the record does not so indicate.
{¶ 10} We further find no authority for imposing costs from a dismissed case as
part of the probation terms in a separate case. Thus, based upon the record before us,
we find that Mayer’s argument has merit.
{¶ 11} We also note that the order requires Mayer to pay costs and fines from
other prior cases. Again, there is nothing in this record to indicate that Mayer agreed to
-5-
the payments of such fines and costs as part of her plea bargain. Further, from the
record before us, we cannot discern the meaning of the phrase “ALL cases,” and whether
it includes prior dismissed cases, or even what cases are referenced. It is clear that the
trial court was not even certain as to what cases, costs and fines were being referenced.
Thus, we conclude, based upon the record before us, that the trial court erred in including
any prior case costs and fines as part of the disposition of this case.
{¶ 12} Accordingly, the First and Second Assignments of Error are sustained.
III. The Issue of Ineffective Assistance of counsel Is Rendered Moot
{¶ 13} Mayer’s Third Assignment of Error is as follows:
APPELLANT WAS DENIED THE EFFECTIVE ASSISTANCE OF
COUNSEL BY COUNSEL’S FAILURE TO OBJECT TO THE COURT’S
IMPOSITION OF COURT COSTS FOR AN UNRELATED AND DISMISSED
CASE AND SEVERAL OLDER CLOSED CASES.
{¶ 14} Mayer contends that her trial court counsel was ineffective for failing to
object to the imposition of the court costs stemming from the prior dismissed case and
from other prior cases. Given our disposition of the First and Second Assignments of
Error, this argument has been rendered moot.
{¶ 15} The Third Assignment of Error is overruled as moot.
IV. Conclusion
{¶ 16} Mayer’s First and Second Assignments of Error having been sustained, and
her Third Assignment of Error having been overruled as moot, that part of the judgment
-6-
of the trial court imposing court costs in Mayer’s previous, dismissed case, as well as in
any other unspecified prior cases is Reversed, the judgment is Affirmed in all other
respects, and this cause is Remanded for further proceedings consistent with this opinion.
.............
FROELICH, J., and HALL, J., concur.
Copies mailed to:
Mark E. Heggie
James Armstrong
Hon. Julie L. Monnin
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333 P.2d 879 (1958)
65 N.M. 137
Violet MITCHELL, Plaintiff-Appellee,
v.
Edd PETTIGREW, d/b/a Glenrio Bar, Defendant-Appellant.
No. 6470.
Supreme Court of New Mexico.
December 30, 1958.
*880 Emmett C. Hart, Tucumcari, for appellant.
Rowley, Breen & Bowen, Tucumcari, for appellee.
SHILLINGLAW, Justice.
Plaintiff (appellee) Violet Mitchell filed a complaint in the District Court of Quay County against the defendant (appellant) Edd Pettigrew alleging damages in the amount of $12,000 by reason of the defendant's negligence as a result of which she fell into a hole and broke her ankle. We must rely upon the facts submitted by the appellant inasmuch as the appellee's independent statement of facts cannot be entertained under Supreme Court Rule 15, subd. 15(3).
The accident climaxed an evening of gaiety enjoyed by the plaintiff Violet, her girlfriend Frieda, and four gentlemen friends. The festivities commenced at a bar in San Jon, New Mexico, about 5 p.m. on the 24th of May 1957. The party remained at the San Jon bar for several hours, enjoying each other's companionship as well as several bottles of beer, Violet having five, six, or possibly seven. A good time was being had except that Violet and Frieda for some unknown reason had developed an antagonistic attitude toward each other and at times they became quite combative.
Around 10 p.m. all seem to have developed an appetite for solid food and they departed in two cars for Glenrio, New Mexico, where they ate at a cafe on the Texas side of this hamlet located on U.S. Highway 66 at the Texas-New Mexico line. While the party dined one energetic member of the group prevailed on the defendant's bartender to open up the Glenrio Bar, it having already closed at about 10 p.m. that evening. Violet's party of six, and another party which was dining at the cafe recrossed the state line to the New Mexico side, Violet's party of six all going in one car. At the Glenrio Bar most of the party enjoyed another drink or two, Violet herself having one creme de menthe with soda. The girls renewed their feuding and Violet went outside to sit in the car. Shortly thereafter the bartender advised the group he was closing and the rest of the party went outside, Frieda inadvertently poking her hand through a glass door on the way out. Two of the men preceded the general exodus and they got in the car with Violet and drove back to the cafe to pick up the other car. In the meantime, the bartender meant what he said. He checked his cash, turned out the lights, locked the door and left the premises. All of the patrons, including the balance of Violet's party and the other group which had come from the cafe, lingered on the porch and driveway exchanging pleasantries and casually preparing for their departure.
Across the front edge of the porch were eight pillars made of three-inch pipe, supporting the roof of the porch. Remember that Frieda and one or two of her gentlemen friends were awaiting the return of the two cars. "The devil," they say, "finds *881 work for idle hands to do," and this was especially true for Frieda who, incidentally, seems to have been most exhilarated of the party. She proceeded to swing from one pole to the next, going from east to west. It was apparent to at least one of her gentlemen friends that she would soon run out of poles and that the result would be very funny indeed. True enough as she left the last pole she swung through the air and landed on a mound of freshly dug earth off the west end of the porch.
We now pause to describe the layout of the Glenrio Bar and the parking area in front of it. The bar fronts on U.S. Highway 66 and the building measures about 66-feet from east to west with a long porch, about 6 to 8 feet in width, extending across the entire front. The building sits back from the highway and a parking area is in front. The porch is practically level with the parking area except on the west where there is a dropoff, now supported by a retaining wall which was under construction at the time of the accident and was then only level with the parking area. The dropoff at the street end of the wall was negligible but it gradually increased until there was a three or four foot drop at the west end of the porch. There was a large hole at the southwest corner of the porch which had been dug for the base of a huge sign to be erected. The mound of earth was from the freshly dug hole and was of sufficient height to be level with the parking area. The whole area is perfectly level except for the dropoff to the west of the retaining wall then under construction. There was no barricade of any kind on the west end of the porch or on the driveway. With this description of the area, we return to the girls.
Frieda is sprawled atop the mound of dirt as Violet and her friend return to the bar. We cannot fathom the thoughts racing through Violet's mind as she viewed the desperate plight of Frieda lying prostrate on the ground pinpointed in the car headlights. Her counsel suggests she may have been shaken up with remorse, remembering the harsh words so recently passing between them. Violet herself testified she was plum "scared." Her first impulse, naturally, was to rescue Frieda from the cruel fate that confronted her. She leaped from the car, running to the aid of fallen Frieda. The thoughtless gentlemen who observed the episode were roaring with laughter, one of them rolling on the ground in mirthful glee. But Violet, fired with the sudden peril, failed to observe the sudden dropoff at the edge of the driveway or the deep hole at the base of it. Her rescue mission failed as she dropped from sight into the deep dark hole in the ground and she herself then became the object of a fishing expedition.
How was she to know that Frieda was unharmed? How was she to know that her mission of mercy was to end up with herself in a hole in the ground, suffering from a broken ankle from which a Quay County jury was to award her $2311 damages against Edd Pettigrew, owner of the Gleniro Bar?
Such are the grave questions confronting us on this appeal and to which we now direct our attention. Appellant contends in his three points relied upon for reversal that (1) appellee was a trespasser on the defendant's premises at the time of the accident, which precluded recovery, (2) appellee, even if an invitee on the premises, was guilty of contributory negligence as a matter of law by going upon unfamiliar premises in the dark, and (3) she was guilty of contributory negligence as a matter of law in that she would not have fallen if she had observed where she was running.
First we must bear in mind that the jury was properly instructed by the learned trial judge who skilfully presided at the trial of this case; the appellant made no objections to the instructions and the jury found the issues presented in favor of the appellee. Therefore, before we can find for the appellant on his first point, we must say as a matter of law that, while the appellee drove down the street three or four blocks to the state of Texas and returned approximately ten minutes later to join her *882 companions for the purpose of transporting them to their respective homes, she lost her favored position as a business invitee and became a trespasser. This we cannot do. Admittedly the problem has caused us considerable concern but we conclude that it was a proper question for the jury to decide in this particular instance. Young Men's Shop v. Odend'Hal, 73 App.D.C. 354, 121 F.2d 857.
Appellant further contends that as a matter of law the appellee was off the part of the premises to which her original invitation applied. In view of the appellant's failure to properly protect and barricade the business invitee from the sudden drop off the porch we think appellant cannot avail himself of that defense, his failure to barricade and protect being the very act by which he was negligent.
We will decide appellant's second and third points together. In support of his position that appellee was guilty of contributory negligence as a matter of law, appellant cites our own case of Boyce v. Brewington, 49 N.M. 107, 158 P.2d 124, 163 A.L.R. 583, as well as the cases of Dominguez v. Southwestern Greyhound Lines, 49 N.M. 13, 155 P.2d 138, and Seal v. Safeway Stores, Inc., 48 N.M. 200, 147 P.2d 359. The cited cases might compel us to hold for the appellant were it not for the factor of sudden peril as it developed in this case.
As stated by the annotator at 19 A.L.R. 4, 5:
"The rule is well settled that one who sees a person in imminent and serious peril through the negligence of another cannot be charged with contributory negligence, as a matter of law, in risking his own life, or serious injury, in attempting to effect a rescue, provided the attempt is not recklessly or rashly made. * * * [T]he fact that the injury is sustained in attempting to save human life is a proper element for consideration upon the question of contributory negligence, and * * * the latter question ordinarily is one for the jury, and not for the court."
See, also, annotation at 158 A.L.R. 208; Vigil v. Atchison, T. & S.F. Ry. Co., 28 N.M. 581, 215 P. 971; Vigil v. Atchison, T. & S.F. Ry. Co., 8 Cir., 261 F. 313.
From the foregoing it is apparent that the appellant's points are without merit. Thus falls the curtain on this evening's exciting and manyfold activities. The judgment of the court below is affirmed and
It is so ordered.
LUJAN, C.J., McGHEE and COMPTON, JJ., and DAVID W. CARMODY, D.J., concur.
SADLER, J., not participating.
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United States Court of Appeals
For the Eighth Circuit
___________________________
No. 16-1793
___________________________
Richard A. Torti, Sr., As Successor Trustee of the Stuart Family 1997 Trusts
lllllllllllllllllllll Plaintiff - Appellant
v.
Debra Hoag; Gentry Partners Limited
lllllllllllllllllllll Defendants
John Hancock Life Insurance Company, USA
lllllllllllllllllllll Defendant - Appellee
____________
Appeal from United States District Court
for the Eastern District of Arkansas - Little Rock
____________
Submitted: January 12, 2017
Filed: August 17, 2017
____________
Before COLLOTON, GRUENDER, and KELLY, Circuit Judges.
____________
KELLY, Circuit Judge.
Richard A. Torti, as Trustee of the Stuart Family Trusts, brought a lawsuit
against Debra Hoag, Gentry Partners Limited (Gentry) and the John Hancock Life
Insurance Company, USA (Hancock), alleging claims of breach of fiduciary duty,
breach of contract, and negligence.1 After Torti settled with Hoag and Gentry,
Hancock moved pursuant to Federal Rule of Civil Procedure 12(b)(6) for dismissal
of the breach of contract and negligence claims remaining against it. The district
court2 granted Hancock’s motion, dismissing Torti’s second amended complaint
(SAC) with prejudice. Because we agree that Torti failed to plead sufficient facts to
state a plausible claim for breach of contract or negligence, we affirm.3
I. Background
This is an appeal from the district court’s grant of a motion to dismiss, so we
draw the relevant facts from Torti’s SAC. See Neubauer v. FedEx Corp., 849 F.3d
400, 403 (8th Cir. 2017). We also consider the exhibits attached to the SAC,
including the trust agreement and the Hancock insurance policy. See id. On August
8, 1997, Layton P. Stuart, as trustor, established the Stuart Family 1997 Trusts (the
Trusts) by a written trust agreement. At the time, Stuart was Chief Executive Officer
of One Bank & Trust (One Bank) in Little Rock, Arkansas. Pursuant to the trust
agreement, Michael Heald, the Chief Operating Officer (COO) of One Bank, was
appointed trustee. The trust agreement granted Heald certain powers of
administration, including the authority “to apply for and to own policies of insurance
on the life of the trustor.”
1
Hancock is an insurance company with its principal place of business in
Boston, Massachusetts. Hoag is a citizen of Illinois and, and at all relevant times,
was the president of Gentry, a foreign corporation with its principal place of business
in Chicago, Illinois.
2
The Honorable J. Leon Holmes, United States District Judge for the Eastern
District of Arkansas.
3
We have jurisdiction under 28 U.S.C. § 1291.
-2-
Heald, as trustee, applied for a $20 million variable life insurance policy on
Stuart’s life, which was issued by Hancock on August 12, 1997. As relevant here,
Paragraph 11 of the policy gave the trustee authority to apply for loans against the
cash value of the policy “on receipt at [the Hancock] Home Office of a completed
form satisfactory to [Hancock] assigning the policy as the only security for the loan.”
Paragraph 24 of the policy allowed the policy to be assigned without the consent of
any revocable beneficiary but stated that Hancock would not be on notice of any
assignment unless it was provided notice “in writing” and “a duplicate of the original
assignment has been filed at [the Hancock] Home Office.” Paragraph 28 of the policy
stated in relevant part:
The written application for the policy is attached at issue. The entire
contract between the applicant and [John Hancock] consists of the
policy and such application. However, additional written applications
for policy changes . . . may be submitted to [Hancock] after issue and
such additional applications may become part of the policy. . . . Other
changes in this policy may be made by agreement between [the Trusts]
and [Hancock]. Only the President, Vice President, the Secretary, or an
Assistant Secretary of the Company has authority to waive or agree to
change in any respect any of the conditions or provisions of the policy,
or to extend credit or to make an agreement for [Hancock].
Hoag, an insurance broker acting as Hancock’s agent, facilitated the Trusts’ purchase
of the policy. The confirmation page of the policy named the “Stuart Family Trust,
Mike Heald, Trustee” as the owner of the policy with an address of 300 W. Capitol
Avenue, Little Rock, Arkansas, 72201. The premium for the policy was $350,000 per
year for ten years.
To finance the premiums, Heald, on behalf of the Trusts, entered into a split-
dollar agreement with One Bank, effective August 12, 1997. One Bank agreed to pay
the annual premiums for the life insurance policy, to be reimbursed upon Layton
Stuart’s death out of the insurance proceeds. As consideration for the payment of
-3-
premiums, the Trusts assigned the Hancock policy to One Bank. Paragraph 6 of the
split-dollar agreement prohibited the trustee from “transfer[ing], assign[ing],
encumber[ing] or terminat[ing] the Insurance Policy . . . [d]uring the term of this
Agreement,” including by applying for loans against the cash value of the policy,
which was to “remain available (subject to provisions of the Insurance Policy) to
satisfy the amount payable to [One Bank].” The split-dollar agreement was signed
by Heald on behalf of both parties—as COO of One Bank and as trustee of the Trusts.
In an August 15, 1997, letter to Heald, Hoag acknowledged that the premium for the
policy would be funded via the split-dollar agreement.
Nearly fourteen years later, on June 2, 2011, Heald retired as trustee and
appointed Hoag as successor trustee. On June 3, 2011, Hoag requested a loan against
the full cash value of the policy on a Hancock “Request for Policy Loan” form, using
the Hancock insurance policy as collateral. The request form identified Hoag as the
trustee and the Trusts as the owner of the policy with an address of 300 W. Capitol
Avenue, Little Rock, Arkansas, 72201. Though the request form provided signature
lines for assignees of the insurance policy (here, One Bank), the form was signed only
by Hoag, as trustee, on behalf of the Trusts.
On June 7, 2011, Hancock issued a check in the amount of $1,761,000.00
payable to the “Stuart Family Trusts.” The check was sent by FedEx to 300 W.
Capitol Avenue, Little Rock, Arkansas, 72201. Hancock allowed the check to be
paid after it was endorsed by Layton Stuart, who used the proceeds for non-trust
related purposes.
Hoag resigned as trustee on October 25, 2012, and appointed Torti as successor
trustee. Stuart died on March 24, 2013. In May 2013, Hoag notified Torti that before
Hancock would pay the insurance proceeds, Torti would have to sign a release,
releasing Hancock from any “demands, claims and causes of action . . . relating to or
arising out of the Policy or the payment of any benefits thereunder.” Torti refused
-4-
and Hancock transferred the net death benefits owing under the policy—a sum of
$17,693,837.10—to a segregated account. On June 17, 2013, the United States
Attorney notified the Trusts that the net death benefit proceeds had been seized.
On June 2, 2014, Torti filed suit against Hoag, Gentry, and Hancock. After the
complaint was amended, Torti’s claims against Hancock were dismissed without
prejudice on October 17, 2014. Hancock was brought back into the lawsuit over a
year later, on December 9, 2015, when Torti filed the SAC. Attached to the SAC
were 13 exhibits, including the split-dollar agreement, the Hancock insurance policy,
and “forms utilized by Hancock . . . in administering the Policy,” which the SAC
alleged “form[ed] a part of the contract of insurance.” These forms were identified
as Exhibits E-1 (instructions for completing a request for a policy loan); E-2 (a blank
request for policy loan form); and E-3 (a checklist to be filled out by a Hancock
employee upon receipt of a loan request) (collectively, “loan forms”). The SAC
alleged breach of contract and negligence against Hancock. The district court granted
Hancock’s motion to dismiss, and this appeal follows.
II. Discussion
We review the district court’s grant of a motion to dismiss de novo, “accepting
as true all factual allegations in the complaint and drawing all reasonable inferences
in favor of the nonmoving party.” Neubauer, 849 F.3d at 404 (quotation omitted).
“To survive a motion to dismiss for failure to state a claim, the complaint must show
the plaintiff ‘is entitled to relief,’ . . . by alleging ‘sufficient factual matter, accepted
as true, to state a claim to relief that is plausible on its face.’” In re Pre-Filled
Propane Tank Antitrust Litig., 860 F.3d 1059, 1063 (8th Cir. 2017) (en banc)
(quoting Fed. R. Civ. P. 8(a)(2) and Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). To
avoid dismissal, “[a] plausible claim must plead ‘factual content that allows the court
to draw the reasonable inference that the defendant is liable for the misconduct
alleged.’” Id. (quoting Iqbal, 556 U.S. at 678). But a complaint must allege “more
-5-
than labels and conclusions, and a formulaic recitation of the elements of a cause of
action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Courts
“are not bound to accept as true a legal conclusion couched as a factual allegation,”
and “[f]actual allegations must be enough to raise a right to relief above the
speculative level.” Id. (internal quotation omitted).
A. Breach of contract claim
Torti alleges the district court erred in holding that the SAC failed to state a
claim for breach of contract against Hancock. Because our jurisdiction is based on
diversity of citizenship, we apply federal procedural rules but Arkansas substantive
law. See Ashley Cty. v. Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009). Our review
of the district court’s interpretation of Arkansas law is de novo. Hortica-Florists’
Mut. Ins. v. Pittman Nursery Corp., 729 F.3d 846, 852 (8th Cir. 2013).
In Arkansas, “[i]nsurance policies are to be interpreted like other contracts.”
Agric. Ins. v. Ark. Power & Light Co., 361 S.W.2d 6, 12 (Ark. 1962). “In order to
state a cause of action for breach of contract, the complaint need only assert the
existence of a valid and enforceable contract between the plaintiff and the defendant,
the obligation of defendant thereunder, a violation by the defendant, and damages
resulting to plaintiff from the breach.” Farris v. Conger, 512 S.W.3d 631, 634 (Ark.
2017). When interpreting a contract, courts “must, if possible, ascertain and give
effect to the intention of the parties.” Harris v. Stephens Prod. Co., 832 S.W.2d 837,
840 (Ark. 1992). This is done by looking “to the contract as a whole and the
circumstances surrounding its execution.” First Nat’l Bank of Crossett v. Griffin, 832
S.W.2d 816, 820 (Ark. 1992). Arkansas courts “consider the sense and meaning of
the words used by the parties as they are taken and understood in their plain, ordinary
meaning.” Id. at 819 (quoting Farm Bureau Mut. Ins. v. Milburn, 601 S.W.2d 841,
842 (Ark. 1980)). Finally, courts read different clauses of the contract together,
construing it “so that all of its parts harmonize, if that is at all possible.” Id. (quoting
-6-
Cont’l Cas. Co. v. Davidson, 463 S.W.2d 652, 655 (Ark. 1971)). “A construction that
neutralizes any provision of a contract should never be adopted, if the contract can
be construed to give effect to all provisions.” Tyson Foods, Inc. v. Archer, 147
S.W.3d 681, 686 (Ark. 2004).
Torti asserts that, in concluding that the loan forms were not part of the
insurance policy between Hancock and the Trusts, the district court failed to read the
policy as a whole. The court relied primarily on two sentences from Section 28:
“The written application for the policy is attached at issue. The entire contract
between the applicant and [Hancock] consists of the policy and such application.”
Torti claims this reliance was in error because Section 28 expressly contemplates that
“additional written applications for policy changes . . . may be submitted to
[Hancock] after issue and such additional applications may become part of the
policy.” In addition, Torti asserts, Section 11 of the policy specifically references the
loan forms by allowing the trustee to borrow money on the cash value of the policy
upon submitting “a completed form satisfactory to [Hancock].” Had the district court
read the contract in its entirety, Torti alleges, it would have concluded the loan forms
are “additional written application[s] for policy changes” because “the loan request
was in writing; the loan request was an application for a loan against the policy; and
the loan technically changed the terms of the policy.”
Arkansas courts recognize that “[w]hen a contract refers to another writing and
makes the terms of that writing a part of the contract, the two documents become a
single agreement between the parties and must be construed together.” Dye v.
Diamante, 510 S.W.3d 759, 765 (Ark. 2017) (alteration in original) (quoting
Ingersoll-Rand Co. v. El Dorado Chem. Co., 283 S.W.3d 191, 196 (Ark. 2008)). In
order for a separate writing to become part of the contract, however, Arkansas courts
require that the reference in the contract to the other writing “be clear and
unequivocal, and the terms of the incorporated document . . . be known or easily
available to the contracting parties.” Ingersoll-Rand, 283 S.W.3d at 196 (quotation
-7-
omitted). “The document to be incorporated must be described in such terms that its
identity may be ascertained beyond reasonable doubt,” and “it must be clear that the
parties to the agreement had knowledge of and assented to the incorporated terms.”
Id. (internal quotations omitted).
We agree with the district court that the language of the policy is unambiguous
in describing what the parties intended their contract to be—the policy itself and the
written application for the policy. Not only does Section 28 clearly identify the
written application as part of the policy, but the written application is attached to the
policy. In contrast, Section 11 does not specifically reference any of the loan forms,
and the loan forms are not attached to the policy. Though Torti is correct that Section
28 of the policy contemplates that other documents may become part of the policy,
it also requires that any changes to the policy be approved by specified Hancock
officers. The SAC does not allege that any Hancock officer approved the loan forms
as changes to the policy. Other than asserting that the loan forms are part of the
insurance policy, the SAC fails to allege any facts that allow an inference that the
parties clearly and unequivocally intended the loan forms to become part of their
contract.4 Though “[c]ourts must accept a plaintiff’s factual allegations as true[,]
[they] need not accept a plaintiff’s legal conclusions.” Retro Television Network,
Inc. v. Luken Commc’ns, LLC, 696 F.3d 766, 768–69 (8th Cir. 2012).
In the district court, Torti offered an alternative argument: that Hancock was
on notice that the policy had previously been assigned to One Bank, and it breached
its obligation to act in good faith by making a loan it knew violated the split-dollar
agreement. The district court concluded that Hancock was not on notice of the
4
Torti urges us to find that the policy is at least ambiguous as to whether the
parties intended the loan forms to become part of the contract. But in order for a
separate writing to become part of a contract, Arkansas courts require the reference
in the contract to the other writing “be clear and unequivocal,” not ambiguous.
Ingersoll-Rand, 283 S.W.3d at 196 (quotation omitted).
-8-
collateral assignment because Section 24 of the insurance policy expressly provided
Hancock would not be “on notice of any assignment unless it is in writing, nor will
we be on notice until a duplicate of the original assignment has been filed in our
Home Office.” The district court found that the SAC did not allege that either
condition was satisfied.
Torti does not dispute this finding on appeal, but instead asserts the SAC
sufficiently alleges that Hancock had actual notice of the split-dollar agreement.
Even if Torti could circumvent the terms of the policy by asserting Hancock had
actual knowledge (as compared to notice under the policy), the breach of contract
claim still fails. The claim is premised on the assumption that the loan forms are part
of the contract: Torti alleges that because Hancock had actual knowledge of the split-
dollar agreement, it acted in breach of its duty to administer the insurance policy “in
a prudent manner consist [sic] with its forms and procedures,” i.e., the loan forms,
which Torti says “expressly provide what is required for a loan request form to be
considered . . . ‘satisfactory.’” Because the loan forms are not part of the insurance
policy, this argument cannot resuscitate the breach of contract claim.5
B. Negligence claim
Torti contends the district court also erred in dismissing his negligence claim
against Hancock. “Under Arkansas law, in order to prevail on a claim of negligence,
the plaintiff must prove that the defendant owed a duty to the plaintiff, that the
defendant breached that duty, and that the breach was the proximate cause of the
5
Torti also argues that the SAC alleges sufficient facts to reasonably infer that
Hancock either intended to waive strict compliance with Section 24 of the policy or
should be estopped from asserting failure of strict compliance. Because Torti did not
plead waiver or estoppel in his SAC and did not argue it in district court, we do not
consider this argument on appeal. See Kruger v. Neb., 820 F.3d 295, 306 (8th Cir.
2016).
-9-
plaintiff’s injuries.” Yanmar Co. v. Slater, 386 S.W.3d 439, 449 (Ark. 2012). “The
question of the duty owed to the plaintiff alleging negligence is always one of law.”
Arloe Designs, LLC v. Ark. Capital Corp., 431 S.W.3d 277, 281 (Ark. 2014).
The district court dismissed Torti’s negligence claim in part because it found
that Hancock did not have a duty to ensure that the loan proceeds reached the correct
recipient.6 On appeal, Torti argues the district court misconstrued the allegations in
the SAC. Torti claims Hancock had a duty to abide by its own policies and guidelines
in processing and approving Hoag’s loan request. According to Torti, “the issue is
the manner and speed in which Hancock processed and approved the loan, and issued
the loan check.” Had Hancock followed its own procedures, Torti contends, it would
have realized that Hoag was requesting an improper loan and that her conduct would
likely result in damages to the Trust.
Arkansas courts recognize that “[a] duty of care may arise out of a contractual
relationship between two parties.” See Tackett v. Merchant’s Sec. Patrol, 44 S.W.3d
349, 353 (Ark. Ct. App. 2001). But like Torti’s breach of contract claim, his
negligence claim relies on the loan forms—forms that contain Hancock’s alleged
policies, procedures, and guidelines—being part of the insurance contract. As we
have determined, the loan forms were not part of the insurance contract entered into
by the parties. Accordingly, we agree with the district court that Torti’s SAC fails to
state a claim against Hancock for negligent performance of the contract.7
6
The court also concluded that, to the extent the SAC alleged Hancock
breached an implied duty of good faith and fair dealing, Arkansas law does not
recognize a separate claim in tort for breach of that duty. See Mountain Home Flight
Serv., Inc. v. Baxter Cty., 758 F.3d 1038, 1043 (8th Cir. 2014). We do not
understand Torti to be challenging this holding.
7
Torti alleges that the SAC states a claim against Hancock for aiding and
abetting a tort and a negligence claim based on the allegedly actionable conduct of
Gentry. Because the SAC does not allege these claims and Torti makes this argument
-10-
III. Conclusion
For the foregoing reasons, we affirm the district court’s dismissal of Torti’s
second amended complaint.
______________________________
for the first time on appeal, we will not consider these issues. See Kruger, 820 F.3d
at 306.
-11-
| {
"pile_set_name": "FreeLaw"
} |
Filed 2/18/16
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
DEIRDRE HILL et al.,
Petitioners,
A145893
v.
THE SUPERIOR COURT OF ALAMEDA (Alameda County
COUNTY, Super. Ct. No. RP12630780)
Respondent.
FRANK E. STAGGERS, JR. et al.,
Real Parties in Interest.
Petitioners in this writ proceeding are Deirdre Hill and Vincent G. Hughes
(collectively petitioners), co-executors of their mother’s estate. They filed a proceeding
against their stepfather, Frank Staggers, Sr., to recover property belonging to the estate,
which among other things requested a judgment for twice the value of the property
recovered, as provided for by Probate Code section 859 (usually, double damages).
Petitioners’ stepfather died, and his son was substituted as his successor. He moved for
summary adjudication on the double damages claim, on the basis that those damages
could not be recovered against him. The motion was based on Code of Civil Procedure
section 377.42, which excepts from recovery against a successor “damages recoverable
under Section 3294 of the Civil Code or other punitive or exemplary damages.”
The superior court granted summary adjudication against petitioners, concluding
that the double damages sought were precluded under Code of Civil Procedure section
1
377.42. We conclude otherwise and we grant the writ, ordering the superior court to
vacate its order granting the motion and to enter a new order denying it.
BACKGROUND
On March 25, 2013, petitioners filed a petition against their stepfather, Frank
Staggers Sr., to recover property belonging to their mother’s estate. The prayer of the
petition requested among other things “[t]hat the court determine whether Frank Staggers
acted wrongfully in bad faith concealing assets of the estate from petitioners as co-
executors, and if so, compelling Frank Staggers to pay a penalty of twice the value of the
assets recovered.” The basis of the claim for twice the value of the property was Probate
Code section 859, 1 which provides in pertinent part as follows: “If a court finds that a
person has in bad faith wrongfully taken, concealed, or disposed of property belonging
to . . . an elder, . . . or the estate of a decedent, or has taken, concealed, or disposed of the
property by the use of undue influence in bad faith or through the commission of elder or
dependent adult financial abuse, as defined in Section 15610.30 of the Welfare and
Institutions Code, the person shall be liable for twice the value of the property recovered
by an action under this part. In addition, . . . the person may, in the court’s discretion, be
liable for reasonable attorney’s fees and costs. The remedies provided in this section
shall be in addition to any other remedies available in law to a person authorized to bring
an action pursuant to this part.”
Frank Staggers Sr. died during the proceeding, and his son, Frank Staggers, Jr.
(real party), was substituted in as the respondent in the probate proceeding.
On April 8, 2015, real party filed a motion for summary adjudication that the
claim for double damages had no merit because those damages cannot be recovered
against him as the successor to his father. The basis of the motion was Code of Civil
Procedure section 377.42, which states in its entirety as follows: “In an action or
proceeding against a decedent’s personal representative or, to the extent provided by
statute, against the decedent’s successor in interest, on a cause of action against the
1
All undesignated statutory references are to the Probate Code.
2
decedent, all damages are recoverable that might have been recovered against the
decedent had the decedent lived except damages recoverable under Section 3294 of the
Civil Code or other punitive or exemplary damages.” The memorandum of points and
authorities supporting the motion cited one case: Estate of Young (2008)
160 Cal.App.4th 62 (Young).
Petitioners filed their memorandum in opposition, which also relied on one case:
Jahns v. Nolting (1866) 29 Cal. 507 (Jahns).
Real party filed his reply, and the matter came on for argument on July 14, prior to
which the court had issued a tentative ruling favorable to real party. After conclusion of
argument, the trial court confirmed the tentative ruling and entered a minute order
granting the motion. The sole substantive paragraph of the order read as follows:
“Double damages provided in Probate Code Section 859 are punitive in nature. Estate of
Young (2008) 160 Cal.App.4th 88. The court finds that the attorney’s fees provision in
Probate Code Section 859 is also punitive in nature as it is intended to be awarded in
addition to the double damages after a finding of bad faith. The court does not find Jhans
[sic] v. Nolting (1866) 29 Cal. 507 controlling as the analysis is based on a predecessor
statute.” (Italics added.)
Petitioners sought a writ in this court, arguing essentially that Jahns is controlling
authority and that the superior court erred in following what was mere dictum in Young.
On September 29, we issued an alternative writ, stating that “respondent superior court
erred when it held that Probate Code section 859 is a punitive-damage statute,” and
commanded the superior court “to set aside and vacate its order of July 14, 2015, and to
enter a new and different order denying real party’s Motion for Summary Adjudication;
or, in the alternative, to appear and show cause before Division Two . . . .”
On October 6, the superior court advised that it would take no action in response
to the alternative writ, and would let real party file a return. On October 23, real party
filed a return to the petition for peremptory writ. On November 5, petitioners filed a
reply and opposition to the return.
3
DISCUSSION
As quoted, Code of Civil Procedure section 377.42 allows one to recover against a
decedent’s successor in interest “all damages . . . that might have been recovered against
the decedent . . . except damages recoverable under Section 3294 of the Civil Code or
other punitive or exemplary damages.”
The question here is whether double damages provided for under section 859 are
within that exception. We conclude they are not.
Civil Code section 3294, subdivision (a) provides in pertinent part as follows: “In
an action for the breach of an obligation not arising from contract, where it is proven by
clear and convincing evidence that the defendant has been guilty of oppression, fraud, or
malice, the plaintiff, in addition to the actual damages, may recover damages for the sake
of example and by way of punishing the defendant.” This is the statute that allows
recovery of punitive, sometimes referred to as exemplary, damages. The purpose of
punitive damages is to punish defendant and to deter future misconduct by making an
example of him or her. (PPG Industries, Inc. v. Transamerica Ins. Co. (1999) 20 Cal.4th
310, 317.) The purpose “is a purely public one. The public’s goal is to punish
wrongdoing and thereby to protect itself from future misconduct, either by the same
defendant or other potential wrongdoers.” (Adams v. Murakami (1991) 54 Cal.3d 105,
110.)
Witkin has an exhaustive discussion of “[p]unitive or [e]xemplary [d]amages.”
(See 6 Witkin, Summary of Cal. Law (10th ed. 2005) Torts §§ 1559–1623, pp. 1035–
1137.) In the course of that discussion, the author makes several observations pertinent
here, which begin in a section entitled “Statutory Penalties Distinguished.” (Italics
added.) The discussion first observes that “[s]ometimes a statute imposes a penalty in an
arbitrary sum irrespective of actual damage suffered.” (Id., § 1569, p. 1057.) The next
section says that “[a]nother type of statue allows treble damages, i.e., on proof of actual
damage, an award of three times the amount may be given.” (Id., § 1570, pp. 1059–
1060.) And then comes section 1571. It is entitled “Recovery of Both Penalty and
Punitive Damages,” and it says this: “Dual Remedies Permitted. The fact that a statutory
4
penalty or even criminal liability is imposed for a particular wrongful act does not
preclude recovery of punitive damages in a tort action where the necessary malice or
oppression is shown, and it is possible that the defendant may be punished criminally and
forced to respond in punitive damages for the same act. [Citations.]” (Id., § 1571,
pp. 1060–1061.)
Many cases illustrate the point, including Greenberg v. Western Turf Assn. (1903)
140 Cal. 357, where the Supreme Court authorized both punitive damages under Civil
Code section 3294 and a statutory penalty, both in addition to actual damages. The court
distinguished between punitive damages that depend upon a showing of malice or
oppression by the plaintiff, and a penal provision awarded to the plaintiff because a “law
has been violated and its majesty outraged.” (Id. at p. 364.)
Marshall v. Brown (1983) 141 Cal.App.3d 408, 418–419, is similar. There, the
court stated that “[b]oth plaintiff and defendants concur on appeal that statutory damages
and punitive damages arising out of the same cause of action are not mutually exclusive.
‘The fact that such a statutory penalty [treble damages] . . . is imposed for a particular
wrongful act does not preclude recovery of punitive damages in a tort action where the
necessary malice or oppression is shown . . . .’ ”
In sum, statutory damages awarded as a penalty are “distinguished” from punitive
damages. And recovery of both is “permitted.”
That double damages under section 859 are not punitive “damages recoverable
under Section 3294 of the Civil Code” is also demonstrated by the many differences
between them. For example:
The proof required for punitive damages includes that plaintiff show oppression,
fraud, or actual malice. (Davis v. Hearst (1911) 160 Cal. 143, 162; Food Pro. Internat.,
Inc. v. Farmers Ins. Exchange (2008) 169 Cal.App.4th 976, 984.) Section 859 does not.
The proof required for punitive damages is “clear and convincing evidence.” The
proof required under section 859 is not.
5
The proof required to recover punitive damages requires that plaintiff provide
evidence of defendant’s net worth. (Baxter v. Peterson (2007) 150 Cal.App.4th 673, 679;
Kelly v. Haag (2006) 145 Cal.App.4th 910, 916.) Section 859 has no such requirement.
As quoted above, Civil Code section 3294 always requires proof of some form of
aggravated misconduct. As also quoted above, section 859 provides for double damages
if a person has in “bad faith” done certain things and also if the wrongdoer has “taken,
concealed, or disposed of the property by the use of undue influence in bad faith or
through the commission of elder or dependent adult financial abuse, as defined in Section
15610.30 of the Welfare and Institutions Code . . . .” (Italics added.) So, the last
alternative of section 859 allows for double damages without any requirement that
petitioners show any aggravated misconduct—only financial elder abuse.
And to the extent the alternative bases of recovery under section 859 require proof
of any such misconduct, the section requires only a showing of “bad faith,” which is not
the equivalent of malice required under Civil Code section 3294. Rather, “bad faith” can
be many different things, depending on the context. For example:
The general rule is that an agent is not liable on a written contract in the name of
the principal. So, if the agent has no authority to make the contract, the usual remedy of
the third party is on the warranty of authority. But if, in addition to the lack of authority,
there is “bad faith”—that is, the agent enters into the contract without believing, in good
faith, that he or she has authority to do so—the California rule makes the agent liable on
the contract as a principal. (Civ. Code, § 2343, subd. (2); Nichols Grain & Milling
Co. v. Jersey Farm Dairy Co. (1933) 134 Cal.App. 126, 129–130.)
Code of Civil Procedure section 580b is the anti-deficiency statute, shielding a
mortgagor from liability in damages. However, if the mortgagor commits waste in “bad
faith,” he or she can be liable for damages. (Hickman v. Mulder (1976) 58 Cal.App.3d
900, 907–908.)
The most frequent application of “bad faith” is in insurance cases, the concept
based on a tortious breach of the covenant of good faith and fair dealing. (See generally
Chateau Chamberay Homeowners Assn. v. Associated Internat. Ins. Co. (2001)
6
90 Cal.App.4th 335, 345.) And in the insurance context, bad faith and punitive damages
are not coextensive, as held in Silberg v. California Life Ins. Co. (1974) 11 Cal.3d 452,
462–463, where the Supreme Court was careful to point out that an insurer’s breach of
the implied covenant of good faith—that is, bad faith—did not automatically justify an
award of punitive damages. Rather, a separate showing of “oppression, fraud or malice”
within the meaning of Civil Code section 3294, subdivision (a) was required. (Ibid.)
Finally, and not incidentally, section 859 ends with this sentence: “The remedies
provided in this section shall be in addition to any other remedies available in law to a
person authorized to bring an action pursuant to this part.”
Jahns, the old Supreme Court case relied on by petitioners, lends support to our
conclusion. Jahns involved application of former section 116 of the 1851 Act to
Regulate the Settlement of the Estates of Deceased Persons (Probate Act), which
provided as follows: “If any person before the granting of Letters Testamentary or of
Administration shall embezzle or alienate any of the moneys, goods, chattels, or effects
of any deceased person, he shall stand chargeable and be liable to the action of the
Executor or Administrator of the estate, for double the value of the property so
embezzled or alienated, to be recovered for the benefit of the estate.” The issue in Jahns
was whether section 116 of the Probate Act provided a basis for the administrator’s
action against the defendant, which meant the court had to determine whether section 116
was punitive or remedial.
The trial court found that the defendant did not “ ‘embezzle or alienate and convert
to his own use.’ ” Plaintiff took exception to the finding on the ground, among others,
that defendant took and carried away the property. The court rejected plaintiff’s position,
and plaintiff moved for a new trial, which was denied. In the Supreme Court’s words:
“In denying the plaintiff’s motion for a new trial, the Court was of the opinion that the
action was for embezzlement, and was brought under section one hundred and sixteen of
the Probate Act, which alone gave the plaintiff a remedy for the alleged wrong, and that
under the allegations of the complaint, the plaintiff was not entitled to recover for the
wrongful conversion, as in the action of trover at common law—that he must prove the
7
embezzlement or fail in the action. The counsel for the defendant holds to the same
views, and offers as a further reason why the plaintiff could not recover, as in trover,
upon the complaint in the cause, that the action given by section one hundred and sixteen
is a penal action.” (Jahns, supra, 29 Cal. at p. 510.)
The Supreme Court reversed, holding that a statute is penal if it “imposes a
penalty, or creates a forfeiture as the punishment for the neglect of some duty, or the
commission of some wrong, that concerns the good of the public, and is commanded or
prohibited by law.” (Jahns, supra, 29 Cal. at p. 512.) The court explained that a statute
that does not create any new rights of action or remedies but simply enhances the
damages is remedial—and that section 116 was a remedial, not punitive, statute.
(Id. at p. 513.) We perceive no meaningful difference between the language used in
section 859, and the language in former section 116.
Real party’s return asserts that “[t]he First District has long held that the enhanced
remedies for cutting and removing timber provided for section [sic] Civil Code § 3346
are punitive,” citing Drewry v. Welch (1965) 236 Cal.App.2d 159, 176 (Drewry) and
Hassoldt v. Patrick Media Group, Inc. (2000) 84 Cal.App.4th 153, 169 (Hassoldt). And,
real party continues, “[a]pplying these principles, modern courts that have considered the
character of the double damages in Probate Code § 859 have held that they are punitive
damages. Estate of Young (2008) 160 Cal.App.4th 62, 68. Estate of Krause [sic] (2010)
184 Cal.App.4th 103, 112 [(Kraus)] (citing Garrett v. Coast & Southern Fed. Sav. &
Loan Assn. (1973) 9 Cal.3d 731, 739; County of San Diego v. Milotz (1956) 46 Cal.2d
761, 766; People v. Union Pacific R. [sic] Co. (2006) 141 Cal.App.4th 1228, 1257–58.)
See also In re Pereira and Melo Dairy (2005) 325 B.R. 1.”
Real Party’s assertions are more than slightly misleading. While Drewry on
occasion used the word “punitive,” it also used other words, like “remedial” and “penal.”
(Drewry, supra, 236 Cal.App.2d at p. 172.) Hassoldt is not a First District case. And
neither Young nor Kraus holds that section 859 damages are punitive damages.
Young will be discussed in detail below. And the actual language of Kraus—the
case from which real party apparently gets all his cited authorities save Young—is this:
8
“Section 859 provides for recovery of twice the value of property taken in bad faith.
[Citations, including Young.] . . . Some version of this civil penalty statute has been
operative since 1850. [Citing Young.] Section 859 is punitive in nature. (Estate of
Young, supra, 160 Cal.App.4th at p. 88; cf. Garrett v. Coast & Southern Fed. Sav. &
Loan Assn. (1973) 9 Cal.3d 731, 739; County of San Diego v. Milotz (1956) 46 Cal.2d
761, 766; People v. Union Pacific Railroad Co. (2006) 141 Cal.App.4th 1228, 1257–
1258 [civil penalties are punitive in character].) The section 859 penalty is imposed
when an interested party establishes both that the property in question is recoverable
under section 850 and that there was a bad faith taking of the property. (Estate of Young,
supra, 160 Cal.App.4th at p. 89; In re Pereira and Melo Dairy, supra, 325 B.R. at p. 5.)”
(Kraus, supra, 184 Cal.App.4th at pp. 111–112.)
Punitive in nature, Kraus said. Not punitive damages. Kraus does not support
real party. To the contrary, Kraus supports our conclusion here.
In Kraus, decedent’s brother David had acted in bad faith, and the trial court
awarded double damages against him. (Kraus, supra, 184 Cal.App.4th at pp. 115–116.)
On appeal, David made several arguments in which he referred to the award against him
as “ ‘exemplary damages’ ” or “ ‘punitive damages.’ ” (Id. at p. 116.) The Court of
Appeal rejected all of David’s arguments, ending its discussion with this: “David
generally mischaracterizes this case as involving an award of actual and exemplary
damages to a nonparty. But the probate court did not award damages. It ordered David to
hand over misappropriated funds together with a statutory penalty for his bad faith
conduct. . . .
“David further asserts the ‘punitive damage award’ must be reversed because the
amount of ‘actual or compensatory damages’ awarded to the beneficiaries (zero) bore no
rational relation to the ‘punitive damages’ ($ 394,804). This argument proceeds from a
misdescription of the underlying facts. No actual or compensatory damages were
awarded to anyone. . . .
“David argues the section 859 penalty would be excessive because it is
disproportionate to his ability to pay, but the trust beneficiaries did not introduce
9
evidence of David’s financial condition. The ability to pay argument was not raised in
the probate court. Even if the issue were properly raised, we would conclude David’s
financial condition under these circumstances was not a relevant consideration. The
Courts of Appeal have held evidence of a defendant’s financial status is not essential to
the imposition of statutory penalties, and financial inability to pay is a matter to be raised
in mitigation. [Citations.] The trust beneficiaries had no obligation to present evidence
of David’s financial condition or his ability to pay the mandatory statutory penalty.
(Kraus, supra, 184 Cal.App.4th at p. 118.)
In short, Kraus makes two points noted above: section 859 double damages are
not punitive damages, and the proof required for punitive damages is not required for
section 859 damages.
Young, too, has no holding favorable to real party. Young was a section 850
proceeding by an administrator of decedent’s estate against two individuals and a trust
(called objectors) to return property, based on claims of fraud and undue influence.
(Young, supra, 160 Cal.App.4th at pp. 67–68.) As described by the Court of Appeal,
“The amended petition requested an accounting of all revenues and expenses for the three
operational or business trusts . . . . Entitlement to punitive damages was pled, along with
an order holding Objectors liable to the Estate ‘for twice the value of the property
recovered hereby,’ under section 859.” (Id. at p. 73.) The court adjudged double
damages against objectors, but no damages were awarded due to lack of supporting
evidence as to the value of the property. Both sides appealed, the objectors claiming lack
of substantial evidence, and the estate claiming that the trial court erroneously denied it
the opportunity to present evidence of the value of the real property taken. (Id. at p. 68.)
It was in connection with the estate’s appeal that the language real party relies on
appears.
Setting the stage for that discussion, the Court of Appeal began its discussion with
language demonstrating that section 859 double damages and punitive damages are
different. Thus: “The Estate challenges the judgment with respect to the trial court’s
rulings on the double damages issues. First, it contends that when the trial court agreed
10
to bifurcate the issue of net worth for punitive damages purposes, at the request of
Objectors, this amounted to an implied bifurcation ruling regarding liability and damages
as to another type of damage request that is also punitive in nature, i.e., double damages
under section 859.” (Young, supra, 160 Cal.App.4th at p. 82, italics added.) The next
page then again describes the petition: “Orders were requested directing Objectors to
transfer to the Estate any remaining personal property. Breach of fiduciary duty was
pled, and an accounting of all revenues and expenses for the three operational or business
trusts was sought. Punitive damages were sought, along with an order holding Objectors
liable to the Estate ‘for twice the value of the property recovered hereby’ under section
859.” (Id. at p. 83, italics added, fn. omitted.)
Nowhere, we note, does the Court of Appeal say that punitive damages and double
damages are the same. Or duplicative.
The Court of Appeal then went on for 10 pages discussing the proceedings below,
and the statutory scheme of section 859 and its predecessors. After all that, the Court of
Appeal made its comments—comments unnecessary to its holding—about section 859
damages being “punitive in nature” (Young, supra, 160 Cal.App.4th at p. 88) and having
a “punitive effect upon Objectors.” (Id. at p. 90.) The court then made its holding, that
the estate prevail in its claim for a separate damage phase. And so the court concluded:
“For all of these reasons, we determine that the trial court erred in its statutory
interpretation that an element of the Estate’s claim under section 859 was proof of value
of the subject real estate at the liability phase of adjudicating the petition. Rather, the
more appropriate approach was to determine the merits of the petition to reestablish title
to the real property in the Estate, and then to defer the valuation process until the
accounting phase of the proceedings; it is not possible to double an amount without
knowing what it is. Further, double damages are punitive in nature, or a ‘species’ of
punitive damages, and therefore section 859 should be read to allow these issues to be
addressed separately. At all times, bifurcation and the order of proof remain in the
discretion of the trial court, and we express no opinion on whether these issues could
sometimes be tried together, upon an appropriate case. We decide only that under the
11
circumstances of this case, the trial court should have allowed the evidence to be
reopened for the purpose of valuing the property and then setting a double damages
amount under section 859, since the remainder of the requirements for such damages had
previously been established.” (Id.at p. 92.)
“[P]unitive in nature.” “[P]unitive effect.” Maybe. But not punitive damages.
Whatever the observations about “punitive,” they were just that—observations. They
were dicta. Young merely concluded that there should have been a bifurcation of the
liability and damages phases because it would save the estate from incurring the costs of
appraisals before prevailing on the liability issue. Whether the double damages were
remedial or punitive was irrelevant to the holding.
DISPOSITION
The order is reversed, and the matter is remanded to the superior court with
instructions to vacate the order granting the motion for summary adjudication and to
enter an order denying the motion. Petitioners shall recover costs.
_________________________
Richman, J.
We concur:
_________________________
Kline, P.J.
_________________________
Stewart, J.
12
Trial Court: Alameda Superior Court
Trial Judge: Honorable Sandra K. Bean
Attorneys for Petitioners: Michael Ryan Dougherty, Steven Jay Rood
Attorneys for Real Parties in Interest: Triay Law Office, Paul D. Epstein, Charles
A. Triay; Kong Law Firm, Miguel O.
Barquera
13
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11TH COURT OF APPEALS
EASTLAND, TEXAS
JUDGMENT
Valerie Renee Barrera, * From the 42nd District Court
of Taylor County
Trial Court No. 27089A.
Vs. No. 11-18-00035-CR * January 16, 2020
The State of Texas, * Memorandum Opinion by Wright, S.C.J.
(Panel consists of: Bailey, C.J.,
Stretcher, J., and Wright, S.C.J.,
sitting by assignment)
(Willson, J., not participating)
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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Case: 11-13694 Date Filed: 09/05/2012 Page: 1 of 30
[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 11-13694
________________________
D.C. Docket No. 1:10-cv-24513-JLK
JEAN RESNICK, et al.,
Plaintiffs,
JUANA CURRY,
WILLIAM MOORE,
Plaintiffs - Appellants,
versus
AVMED, INC.,
a Florida corporation,
Defendant - Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(September 5, 2012)
Before WILSON, PRYOR and MARTIN, Circuit Judges.
Case: 11-13694 Date Filed: 09/05/2012 Page: 2 of 30
WILSON, Circuit Judge:
Juana Curry and William Moore (collectively “Plaintiffs”) appeal the district
court’s dismissal of their Second Amended Complaint (“Complaint”) for failure to
state a claim upon which relief may be granted. The district court held that among
its other deficiencies, the Complaint failed to state a cognizable injury. We find
that the complaint states a cognizable injury for the purposes of standing and as a
necessary element of injury in Plaintiffs’ Florida law claims. We also conclude
that the Complaint sufficiently alleges the causation element of negligence,
negligence per se, breach of contract, breach of implied contract, breach of the
implied covenant of good faith and fair dealing, and breach of fiduciary duty under
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955 (2007), and
Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937 (2009). The Complaint similarly
alleges facts sufficient to withstand a motion to dismiss on the restitution/unjust
enrichment claim. However, the Complaint fails to allege entitlement to relief
under Florida law for the claims of negligence per se and breach of the implied
covenant of good faith and fair dealing. We therefore reverse in part, affirm in
part, and remand the case to the district court for further proceedings.
I
We state the facts as alleged in the Complaint, accept them as true, and
2
Case: 11-13694 Date Filed: 09/05/2012 Page: 3 of 30
construe them in the light most favorable to Plaintiffs. Lanfear v. Home Depot,
Inc., 679 F.3d 1267, 1271 n.4 (11th Cir. 2012). AvMed, Inc. is a Florida
corporation that delivers health care services through health plans and government-
sponsored managed-care plans. AvMed has a corporate office in Gainesville,
Florida, and in December 2009, two laptop computers were stolen from that office.
Those laptops contained AvMed customers’ sensitive information, which included
protected health information, Social Security numbers, names, addresses, and
phone numbers. AvMed did not take care to secure these laptops, so when they
were stolen the information was readily accessible. The laptops were sold to an
individual with a history of dealing in stolen property. The unencrypted laptops
contained the sensitive information of approximately 1.2 million current and
former AvMed members.
The laptops contained personal information of Juana Curry and William
Moore. Plaintiffs are careful in guarding their sensitive information and had never
been victims of identity theft before the laptops were stolen. Curry guards physical
documents that contain her sensitive information and avoids storing or sharing her
sensitive information digitally. Similarly, Moore guards physical documents that
contain his sensitive information and is careful in the digital transmission of this
information.
3
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Notwithstanding their care, Plaintiffs have both become victims of identity
theft. Curry’s sensitive information was used by an unknown third party in
October 2010—ten months after the laptop theft. Bank of America accounts were
opened in Curry’s name, credit cards were activated, and the cards were used to
make unauthorized purchases. Curry’s home address was also changed with the
U.S. Postal Service. Moore’s sensitive information was used by an unknown third
party in February 2011—fourteen months after the laptop theft. At that time, an
account was opened in Moore’s name with E*Trade Financial, and in April 2011,
Moore was notified that the account had been overdrawn.
II
In November 2010, five named plaintiffs seeking to represent the class of
individuals whose information was stored on the unsecured laptops filed this case
in Florida state court, captioned Jean Resnick et al. v. AvMed, Inc. AvMed
removed the case to federal court pursuant to the Class Action Fairness Act of
2005, 28 U.S.C. § 1332(d) and filed a motion to dismiss for failure to state a claim.
See Fed. R. Civ. P. 12(b)(6). The initial plaintiffs then amended their complaint to
address the identified deficiencies and filed a new complaint. The First Amended
Complaint added Curry as a named plaintiff. AvMed again filed a motion to
dismiss under Rule 12(b)(6), which the district court granted without prejudice on
4
Case: 11-13694 Date Filed: 09/05/2012 Page: 5 of 30
the ground that the plaintiffs failed to state a cognizable injury. Specifically, the
district court reasoned that the plaintiffs sought to “predicate recovery upon a mere
specter of injury: a heightened likelihood of identity theft.” The court explicitly
declined to analyze whether the plaintiffs’ complaint failed to allege a cognizable
injury for the purposes of standing, see Lujan v. Defenders of Wildlife, 504 U.S.
555, 122 S. Ct. 2130 (1992), or under state law, see Pisciotta v. Old National
Bancorp, 499 F.3d 629 (7th Cir. 2007). The court found that to the extent the
plaintiffs alleged actual identity theft, they failed to satisfy the pleading standards
established by the Supreme Court in Twombly. Plaintiffs then filed a Second
Amended Complaint—the Complaint at issue in this appeal—in which they added
Moore and dropped the original five named plaintiffs who did not allege actual
identity theft.
In the Complaint at issue, Plaintiffs seek to represent the class of AvMed
customers whose sensitive information was stored on the stolen laptops and a
subclass of individuals whose identities have been stolen since the laptop theft.
Plaintiffs brought seven counts against AvMed under Florida law. Plaintiffs allege
that AvMed was negligent in protecting their sensitive information and negligent
per se when it violated section 695.3025 of the Florida Statutes, which protects
medical information. Plaintiffs also allege that AvMed breached its contract with
5
Case: 11-13694 Date Filed: 09/05/2012 Page: 6 of 30
Plaintiffs, and alternatively that AvMed breached its implied contract with
Plaintiffs. In the alternative to the breach of contract claim, Plaintiffs also allege a
claim for restitution/unjust enrichment. Finally, Plaintiffs allege that AvMed
breached the implied covenant of good faith and fair dealing, and that AvMed
breached the fiduciary duty it owed to Plaintiffs.
AvMed filed a motion to dismiss the Complaint for failure to state a claim,
and the district court granted the motion, stating only that “[a]mong its other
deficiencies, Plaintiffs’ Second Amended Complaint again fails to allege any
cognizable injuiry.” Plaintiffs appeal.
III
Prior to making an adjudication on the merits, we must assure ourselves that
we have jurisdiction to hear the case before us. Anago v. Shaz, 677 F.3d 1272,
1275 (11th Cir. 2012) (citing Arbaugh v. Y&H Corp., 546 U.S. 500, 514, 126 S. Ct.
1235, 1244 (2006)). Litigants must show that their claim presents the court with a
case or controversy under the Constitution and meets the “irreducible
constitutional minimum of standing.” Lujan, 504 U.S. at 560, 112 S. Ct. at 2136.
To fulfill this requirement, a plaintiff must show that:
(1) it has suffered an “injury in fact” that is (a) concrete and
particularized and (b) actual or imminent, not conjectural or
hypothetical; (2) the injury is fairly traceable to the challenged action
of the defendant; and (3) it is likely, as opposed to merely speculative,
6
Case: 11-13694 Date Filed: 09/05/2012 Page: 7 of 30
that the injury will be redressed by a favorable decision.
Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180–
81, 120 S. Ct. 693, 704 (2000). “At the pleading stage, general factual allegations
of injury resulting from the defendant’s conduct may suffice” to establish standing.
Lujan, 504 U.S. at 561, 112 S. Ct. at 2137.
Whether a party claiming actual identity theft resulting from a data breach
has standing to bring suit is an issue of first impression in this Circuit. Plaintiffs
allege that they have become victims of identity theft and have suffered monetary
damages as a result. This constitutes an injury in fact under the law. 1 Via Mat
Int’l S. Am. Ltd. v. United States, 446 F.3d 1258, 1263 (11th Cir. 2006) (finding
economic harm sufficient to create standing); see also Lambert v. Hartman, 517
F.3d 433, 437 (6th Cir. 2006).
We must next determine whether Plaintiffs’ injury is fairly traceable to
AvMed’s actions. A showing that an injury is “fairly traceable” requires less than
a showing of “proximate cause.” Focus on the Family v. Pinellas Suncoast Transit
Auth., 344 F.3d 1263, 1273 (11th Cir. 2003). Even a showing that a plaintiff’s
1
Some of our sister Circuits have found that even the threat of future identity theft is
sufficient to confer standing in similar circumstances. Krottner v. Starbucks Corp., 628 F.3d
1139, 1142–43 (9th Cir. 2010) (finding an injury in fact where plaintiffs alleged a data breach
and threat of identity theft, but no actual identity theft); Pisciotta v. Old Nat’l Bancorp, 499 F.3d
629, 634 (7th Cir. 2007) (same). As Plaintiffs have alleged only actual—not speculative—
identity theft, we need not address the issue of whether speculative identity theft would be
sufficient to confer standing.
7
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injury is indirectly caused by a defendant’s actions satisfies the fairly traceable
requirement. Id. Plaintiffs allege that AvMed failed to secure their information on
company laptops, and that those laptops were subsequently stolen. Despite
Plaintiffs’ personal habits of securing their sensitive information, Plaintiffs became
the victims of identity theft after the unencrypted laptops containing their sensitive
information were stolen. For purposes of standing, these allegations are sufficient
to “fairly trace” their injury to AvMed’s failures.
Finally, Plaintiffs must show that a favorable resolution of the case in their
favor could redress their alleged injuries. Friends of the Earth, Inc., 528 U.S. at
180–81, 120 S. Ct. at 704. Plaintiffs allege a monetary injury and an award of
compensatory damages would redress that injury. Plaintiffs have alleged sufficient
facts to confer standing, and we now turn to the merits of their appeal.
IV
We review a district court’s dismissal of a complaint for failure to state a
claim upon which relief may be granted de novo. Spain v. Brown & Williamson
Tobacco Corp., 363 F.3d 1183, 1187 (11th Cir. 2004).
V
AvMed contends that the Complaint fails to allege a cognizable injury under
Florida law and that the Complaint fails to allege facts sufficient to establish
8
Case: 11-13694 Date Filed: 09/05/2012 Page: 9 of 30
causation under the federal pleading standards. We address each argument in turn.
A
AvMed contends that Plaintiffs’ injuries are not cognizable under Florida
law because the Complaint alleges only “losses,” not “unreimbursed losses.” This
is a specious argument. On a motion to dismiss, we review the pleadings and draw
“reasonable inference[s]” from the facts alleged. Iqbal, 556 U.S. at 678, 129 S. Ct.
at 1949. Under the notice-pleading standard, we no longer require the hyper-
technical code pleadings of ages past, see id. at 678–79, 129 S. Ct. at 1950, and we
“draw on [our] judicial experience and common sense” when construing the
allegations in a complaint, id. at 679, 129 S. Ct. at 1950.
The Complaint specifically alleges that both Curry and Moore suffered
financial injury (D.E. 31 ¶¶ 47, 48, 49, 51, 63, 66); monetary loss is cognizable
under Florida law for damages in contract, quasi-contract, negligence, and breach
of fiduciary duty. See, e.g., Capitol Envtl. Servs., Inc. v. Earth Tech, Inc., 25 So.
3d 593 (Fla. Dist. Ct. App. 2009) (contract); Young v. Becker & Poliakoff, P.A., 88
So. 3d 1002, 1006, 1008 (Fla. Dist. Ct. App. 2012) (fiduciary duty). Plaintiffs
have therefore alleged a cognizable injury under Florida law.
B
At the pleading stage, a complaint must contain a “short and plain statement
9
Case: 11-13694 Date Filed: 09/05/2012 Page: 10 of 30
of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
Plaintiffs must plead all facts establishing an entitlement to relief with more than
“labels and conclusions” or “a formulaic recitation of the elements of a cause of
action.” Twombly, 550 U.S. at 555, 127 S. Ct. at 1965. The complaint must
contain enough facts to make a claim for relief plausible on its face; a party must
plead “factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678, 129 S.
Ct. at 1949 (citing Twombly, 556 U.S. at 570, 127 S. Ct. at 1965).
Following the approach suggested by the Supreme Court in Iqbal, we begin
our analysis by identifying “pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth.” 556 U.S. at 680, 129 S.
Ct. at 1950. We then turn to the “well-pleaded factual allegations” and, assuming
their veracity, “determine whether they plausibly give rise to an entitlement to
relief.” Id.
First, we determine what must be pled for each cause of action. Plaintiffs
brought seven counts against AvMed, all under Florida law. Of the seven causes
of action alleged, Florida law requires a plaintiff to show that the defendant’s
challenged action caused the plaintiff’s harm in six of them: negligence,
negligence per se, breach of fiduciary duty, breach of contract, breach of contract
10
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implied in fact, 2 and breach of the implied covenant of good faith and fair dealing.
A negligence claim requires a plaintiff to show that (1) defendants owe plaintiffs a
duty, (2) defendants breached the duty, (3) defendants’ breach injured plaintiffs,
and “(4) [plaintiffs’] damage [was] caused by the injury to the plaintiff as a result
of the defendant’s breach of duty.” Delgado v. Laundromax, Inc., 65 So. 3d 1087,
1089 (Fla. Dist. Ct. App. 2011) (emphasis added). Similarly, under Florida law, an
action for negligence per se requires a plaintiff to show “violation of a statute
which establishes a duty to take precautions to protect a particular class of persons
from a particularly injury or type of injury.” Davis v. Otis Elevator Co., 515 So.
2d 277, 278 (Fla. Dist. Ct. App. 1987) (citing de Jesus v. Seaboard Coast Line
R.R., 281 So. 2d 198, 200–01 (Fla. 1973)). As part of this showing, plaintiffs must
establish “that the violation of the statute was the proximate cause of [their]
injury.” de Jesus, 281 So. 2d at 201 (emphasis added). The elements of a cause of
action for breach of fiduciary duty in Florida include “damages flowing from the
breach.” Crusselle v. Mong, 59 So. 3d 1178, 1181 (Fla. Dist. Ct. App. 2011).
2
Plaintiffs do not specify whether they intend to bring an action for breach of contract
implied in law or impilied in fact. The Complaint suggests that they intend to allege a contract
implied in fact, and we analyze it as such. See D.E. 31 ¶¶ 118–119 (“In order to benefit from
Defendant’s healthcare plan, Plaintiffs . . . disclosed Sensitive Information . . . . By providing
that Sensitive Information and upon Defendant’s acceptance of such information, Plaintiffs . . .
and Defendant . . . entered into implied contracts . . . .”). To the extent Plaintiffs allege a
contract implied in law, such contracts must be pled in the same way as unjust enrichment
claims, discussed infra. See Hull & Co. v. Thomas, 834 So. 2d 904, 906–07 (Fla. Dist. Ct. App.
2003).
11
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The contract claims also require a showing of causation. In Florida, a breach
of contract claim requires a party to show that damages resulted from the breach.
Rollins, Inc. v. Butland, 951 So. 2d 860, 876 (Fla. Dist. Ct. App. 2006). Florida
courts use breach of contract analysis to evaluate claims of breach of contract
implied in fact 3 and breach of the covenant of good faith and fair dealing. See
Baron v. Osman, 39 So. 3d 449, 451 (Fla. Dist. Ct. App. 2010) (per curiam)
(contract implied in fact); Hospital Corp. of Am. v. Fla. Med. Ctr., Inc., 710 So. 2d
573, 575 (Fla. Dist. Ct. App. 1998) (per curiam) (implied covenant of good faith
and fair dealing).
In discussing causation, Plaintiffs allege that “AvMed’s data breach caused
[Plaintiffs’] identity theft,” that the facts Plaintiffs allege have “sufficiently shown
that the data breach caused [the] identity theft,” and that “but for AvMed’s data
breach, [Plaintiffs’] identit[ies] would not have been stolen.” Although at this
stage in the proceedings we accept plaintiffs’ allegations as true, we are not bound
to extend the same assumption of truth to plaintiffs’ conclusions of law. Twombly,
550 U.S. at 555, 127 S. Ct. at 1965; see also Iqbal, 556 U.S. at 678, 129 S. Ct. at
1950. These claims state merely that AvMed was the cause of the identity theft—a
conclusion we are not bound to accept as true.
3
In Florida, whether a contract is implied in fact is “inferred from the facts and
circumstances of the case.” Eskra v. Provident Life & Accident Ins. Co., 125 F.3d 1406, 1413
(11th Cir. 1997).
12
Case: 11-13694 Date Filed: 09/05/2012 Page: 13 of 30
We now consider the well-pleaded factual allegations relating to causation to
determine whether they “plausibly suggest an entitlement to relief.” Iqbal, 556
U.S. at 681, 129 S. Ct. at 1951. The complaint alleges that, prior to the data
breach, neither Curry nor Moore had ever had their identities stolen or their
sensitive information “compromised in any way.” It further alleges that “Curry
took substantial precautions to protect herself from identity theft,” including not
transmitting sensitive information over the Internet or any unsecured source; not
storing her sensitive information on a computer or media device; storing sensitive
information in a “safe and secure physical location;” and destroying “documents
she receives in the mail that may contain any of her sensitive information, or that
contain any information that could otherwise be used to steal her identity, such as
credit card offers.” Similarly, Moore alleges in the complaint that he “took
substantial precautions to protect himself from identity theft,” including not
transmitting unencrypted sensitive information over the internet or any other
source, storing documents containing sensitive information “in a safe and secure
physical location and destroy[ing] any documents he receives in the mail” that
include either sensitive information or information that “could otherwise be used to
steal his identity.” Plaintiffs became victims of identity theft for the first time in
their lives ten and fourteen months after the laptops containing their sensitive
13
Case: 11-13694 Date Filed: 09/05/2012 Page: 14 of 30
information were stolen. Curry’s sensitive information was used to open a Bank of
America account and change her address with the United States Post Office, and
Moore’s sensitive information was used to open an E*Trade Financial account in
his name.
Our task is to determine whether the pleadings contain “sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Iqbal, 556 U.S. at 681, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 570, 127
S. Ct. at 1966.) A claim is facially plausible when the court can draw “the
reasonable inference that the defendant is liable for the misconduct alleged” from
the pled facts. Id. Taken as true, these factual allegations are consistent with
Plaintiffs’ conclusion that AvMed’s failure to secure Plaintiffs’ information caused
them to become victims of identity theft. After thorough consideration, we
conclude that the allegations are sufficient to cross the line from merely possible to
plausible. See id.
Generally, to prove that a data breach caused identity theft, the pleadings
must include allegations of a nexus between the two instances beyond allegations
of time and sequence. In an unpublished opinion on summary judgment, the Ninth
Circuit found that a plaintiff sufficiently showed a causal relationship where “(1)
[plaintiff] gave [the defendant] his personal information; (2) the identity fraud
14
Case: 11-13694 Date Filed: 09/05/2012 Page: 15 of 30
incidents began six weeks after the hard drives containing [defendant’s] customers’
personal information were stolen; and (3) [plaintiff had] previously not suffered
any such incidents of identity theft.” Stollenwerk v. Tri-West Health Care
Alliance, 254 F. App’x 664, 667 (9th Cir. 2007) (emphasis added). There, the
court stated that these three facts, in conjunction with the inference a jury could
make that the type of information stolen was the same type of information needed
to open the fraudulent accounts, were sufficient to defeat a motion for summary
judgment brought on the basis of a failure to establish causation. Id. at 667–68.
Even with this close connection in time, the court recognized that allegations only
of time and sequence are not enough to establish causation: “purely temporal
connections are often insufficient to establish causation. . . . [H]owever, proximate
cause is supported not only by the temporal[] but also by the logical[] relationship
between the two events.” Id. at 668 (citation omitted).
Plaintiffs in the present case have pled facts indicating causation similar to
those pled in Stollenwerk, but the inferential leap they ask us to make from the
initial data breach to the stolen identities includes a time span more than six times
greater than the one in Stollenwerk. Rather than a six-week gap between the initial
data breach and the identity theft, Plaintiffs here allege gaps of ten and fourteen
months between the two events. As the Stollenwerk court stated, a mere temporal
15
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connection is not sufficient; Plaintiffs’ pleadings must indicate a logical connection
between the two incidents. Here, Plaintiffs allege a nexus between the two events
that includes more than a coincidence of time and sequence: they allege that the
sensitive information on the stolen laptop was the same sensitive information used
to steal Plaintiffs’ identity. (D.E. 31 ¶¶ 2, 41, 46, 61.) Plaintiffs explicitly make
this connection when they allege that Curry’s identity was stolen by changing her
address and that Moore’s identity was stolen by opening an E*Trade Financial
account in his name because in both of those allegations, Plaintiffs state that the
identity thief used Plaintiffs’ sensitive information. (D.E. 31 ¶¶ 46, 61) We
understand Plaintiffs to make a similar allegation regarding the bank accounts
opened in Curry’s name even though they do not plead precisely that Curry’s
sensitive information was used to open the Bank of America account. The
Complaint states that Curry’s sensitive information was on the unencrypted stolen
laptop (Id. ¶ 7), that her identity was stolen, and that the stolen identity was used to
open unauthorized accounts (Id. ¶ 44). Considering the Complaint as a whole and
applying common sense to our understanding of this allegation, we find that
Plaintiffs allege that the same sensitive information that was stored on the stolen
laptops was used to open the Bank of America account.4 Thus, Plaintiffs’
4
Our interpretation of the Complaint is reasonable when considering the allegation
16
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allegations that the data breach caused their identities to be stolen move from the
realm of the possible into the plausible. Had Plaintiffs alleged fewer facts, we
doubt whether the Complaint could have survived a motion to dismiss. However,
Plaintiffs have sufficiently alleged a nexus between the data theft and the identity
theft and therefore meet the federal pleading standards. Because their contention
that the data breach caused the identity theft is plausible under the facts pled,
Plaintiffs meet the pleading standards for their allegations on the counts of
negligence, negligence per se, breach of fiduciary duty, breach of contract, breach
of implied contract, and breach of the implied covenant of good faith and fair
dealing.
C
Plaintiffs’ unjust enrichment claim does not have a causation element, so we
analyze the sufficiency of the Complaint on that claim separately. In the
Complaint, Plaintiffs allege that AvMed cannot equitably retain their monthly
insurance premiums—part of which were intended to pay for the administrative
costs of data security—because AvMed did not properly secure Plaintiffs’ data, as
evinced from the fact that the stolen laptop containing sensitive information was
contained two paragraphs later in paragraph 46, “Curry’s sensitive information was also used to
change her home address with the U.S. Postal Service.” Use of the word “also” indicates that
Plaintiffs intended the allegation made in paragraph 44, that “Curry’s identity was stolen and . . .
used” to mean that Curry’s sensitive information was stolen and used.
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unencrypted. AvMed argues that the district court correctly dismissed the
Complaint because Plaintiffs’ alleged injuries are not cognizable under the law and
because Plaintiffs paid AvMed not for data security but for health insurance.
To establish a cause of action for unjust enrichment/restitution, a Plaintiff
must show that “1) the plaintiff has conferred a benefit on the defendant; 2) the
defendant has knowledge of the benefit; 3) the defendant has accepted or retained
the benefit conferred; and 4) the circumstances are such that it would be
inequitable for the defendant to retain the benefit without paying fair value for it.”
Della Ratta v. Della Ratta, 927 So. 2d 1055, 1059 (Fla. Dist. Ct. App. 2006).
Plaintiffs allege that they conferred a monetary benefit on AvMed in the
form of monthly premiums, that AvMed “appreciates or has knowledge of such
benefit,” that AvMed uses the premiums to “pay for the administrative costs of
data management and security,” and that AvMed “should not be permitted to retain
the money belonging to Plaintiffs . . . because [AvMed] failed to implement the
data management and security measures that are mandated by industry standards.”
Plaintiffs also allege that AvMed either failed to implement or inadequately
implemented policies to secure sensitive information, as can be seen from the data
breach. Accepting these allegations as true, we find that Plaintiffs alleged
sufficient facts to allow this claim to survive a motion to dismiss.
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VI
AvMed argues that we can affirm the district court because the Complaint
fails to allege an entitlement to relief under Florida law on each count. On review,
we find that two of the pled causes of action do not allow Plaintiffs to recover
under Florida law. We address only the two claims that fail: negligence per se, and
breach of the covenant of good faith and fair dealing.
A
Plaintiffs allege that AvMed was negligent per se when it violated section
395.3025 of the Florida Statutes by disclosing “Plaintiffs’ health information
without authorization.” Plaintiffs state that this statute was enacted “to protect the
confidentiality of medical information of Florida residents . . . and expressly
provides that a person’s medical information must not be disclosed without his or
her consent.” Plaintiffs contend that they are a part of the class of people the
statute sought to protect and that the harm they suffered was the type of harm the
statute sought to avoid, thereby concluding that AvMed was negligent per se.
Florida Statute section 395.3025(4) states that “[p]atient records are
confidential and must not be disclosed without the consent of the patient.” This
statute is contained in a chapter regulating the licensure, development,
establishment, and minimum standard enforcement of hospitals, ambulatory
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surgical centers, and mobile surgical facilities. Fla. Stat. § 395.001. Because
AvMed is an integrated managed-care organization and not a hospital, ambulatory
surgical center, or mobile surgical facility, AvMed is not subject to this statute.
See Hendley v. State, 58 So. 3d 296, 298 (Fla. Dist. Ct. App. 2011) (finding that
Fla. Stat. § 395.3025 only applies to licensed facilities defined in § 395.002(16)
and not to pharmacies). Section 395.3025 does not purport to regulate AvMed’s
behavior, and so AvMed’s failure to comply with the statute cannot serve as a basis
for a negligence per se claim.
B
While “every contract contains an implied covenant of good faith and fair
dealing” under Florida law, a breach of this covenant—standing alone—does not
create an independent cause of action. Centurion Air Cargo, Inc. v. United Parcel
Serv. Co., 420 F.3d 1146, 1151 (11th Cir. 2005). The duty of good faith must
“relate to the performance of an express term of the contract and is not an abstract
and independent term of a contract which may be asserted as a source of breach
when all other terms have been performed pursuant to the contract requirements.”
Ins. Concepts & Design, Inc. v. Healthplan Servs., Inc., 785 So. 2d 1232, 1235
(Fla. Dist. Ct. App. 2001) (per curiam) (emphasis omitted) (quoting Hospital Corp.
of Am. v. Fla. Med. Center, Inc., 710 So. 2d 573, 575 (Fla. Dist. Ct. App. 1998)).
20
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A claimant asserting a cause of action for breach of the implied covenant must
allege “a failure or refusal to discharge contractual responsibilities, prompted not
by an honest mistake, bad judgment or negligence; but, rather by a conscious and
deliberate act, which unfairly frustrates the agreed common purpose and
disappoints the reasonable expectations of the other party.” Tiara Condo. Ass’n,
Inc. v. Marsh & McLennan Cos., Inc., 607 F.3d 742, 747 (11th Cir. 2010)
(applying Florida law) (quoting Shibata v. Lim, 133 F. Supp. 2d 1311, 1319 (M.D.
Fla. 2000)).
Plaintiffs here allege that AvMed breached the express provision of the
service contract, which required AvMed to “ensure the ‘confidentiality of
information about members’ medical health condition being maintained by the
Plan and the right to approve or refuse the release of member specific information
including medical records, by AvMed, except when the release is required by
law.’” However, Plaintiffs do not allege that AvMed’s failures to secure their data
resulted from a “conscious and deliberate act, which unfairly frustrates the agreed
common purpose” as required under Florida law. Id.
From the language used in the Complaint—that AvMed “did not honor” its
obligations and that it “failed to safeguard[,] . . . fail[ed] to promptly and
sufficiently notify[,] . . . [and] fail[ed] to fully comply with the proscriptions of
21
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applicable statutory law”—we do not understand Plaintiffs to allege that AvMed’s
shortcomings were conscious acts to frustrate the common purpose of the
agreement. We find therefore that AvMed failed to meet the pleading standard in
this claim as well.
VII
In this digital age, our personal information is increasingly becoming
susceptible to attack. People with nefarious interests are taking advantage of the
plethora of opportunities to gain access to our private information and use it in
ways that cause real harm. Even though the perpetrators of these crimes often
remain unidentified and the victims are left to clean up the damage caused by these
identity thieves, cases brought by these victims are subject to the same pleading
standards as are plaintiffs in all civil suits. Here, Plaintiffs have pled a cognizable
injury and have pled sufficient facts to allow for a plausible inference that
AvMed’s failures in securing their data resulted in their identities being stolen.
They have shown a sufficient nexus between the data breach and the identity theft
beyond allegations of time and sequence. However, the Complaint fails to
sufficiently allege an entitlement to relief under Florida law on the allegations of
negligence per se and breach of the implied covenant of good faith and fair
dealing. We therefore affirm in part, reverse in part, and remand to the district
22
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court for further proceedings.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
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PRYOR, Circuit Judge, dissenting:
I agree with the majority opinion that Curry and Moore have standing to sue,
but Curry and Moore’s complaint should be dismissed for failure to state a claim.
Their complaint fails to allege a plausible basis for finding that AvMed caused
them to suffer identity theft, and their claim of unjust enrichment fails as a matter
of law.
Because of the paucity of well-pleaded facts about the cause of the identity
thefts, the majority opinion “doubt[s] whether the Complaint could have survived a
motion to dismiss” if Curry and Moore had “alleged fewer facts,” Majority
Opinion at 17, but Curry and Moore’s threadbare allegations about causation fail to
“nudge[] [the] claims” relating to identity theft “across the line from conceivable to
plausible,” Ashcroft v. Iqbal, 556 U.S. 662, 680, 129 S. Ct. 1937, 1951 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1974
(2007)). “To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Iqbal, 556 U.S. at 678, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at
570, 127 S. Ct. at 1974). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. “The plausibility standard is not
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akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that
a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556, 127 S.
Ct. 1955). “Where a complaint pleads facts that are ‘merely consistent with’ a
defendant’s liability, it ‘stops short of the line between possibility and plausibility
of ‘entitlement to relief.’” Id. (quoting Twombly, 550 U.S. at 557, 127 S. Ct. at
1955). “[C]ourts may infer from the factual allegations in the complaint ‘obvious
alternative explanation[s],’ which suggest lawful conduct rather than the unlawful
conduct the plaintiff would ask the court to infer.” Am. Dental Ass’n v. Cigna
Corp., 605 F.3d 1283, 1290 (11th Cir. 2010) (quoting Iqbal, 556 U.S. at 682, 129
S. Ct. at 1951–52).
The parties do not dispute that laptops containing the sensitive information
of Curry and Moore was stolen from AvMed, but Curry and Moore’s second
amended complaint fails to plead enough facts to allow a factfinder to draw a
reasonable inference that the sensitive information identity thieves used to open the
fraudulent accounts in their names was obtained from AvMed. In an attempt to
bridge this gap, Curry and Moore allege that they have both been very careful to
protect their sensitive information. For example, Curry alleges that she “destroys
any documents she receives in the mail that contain any of her Sensitive
Information, or that contain any information that could otherwise be used to steal
25
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her identity, such as credit card offers,” Compl. ¶ 55, and Moore alleges that he
“destroys any documents he receives in the mail that contain any of his Sensitive
Information, or that contain any information that could otherwise be used to steal
his identity,” Compl. ¶ 71. But the manner in which Curry and Moore care for the
sensitive information they receive from third parties tells us nothing about how the
third parties care for that sensitive information before or after they send it to Curry
and Moore.
The factual allegations in the second amended complaint present “obvious
alternative explanation[s],” Am. Dental Ass’n, 605 F.3d at 1290 (quoting Iqbal,
556 U.S. at 682, 129 S. Ct. at 1951–52), regarding the cause of the identity theft
that Curry and Moore suffered. An unscrupulous third party that possessed the
sensitive information of Curry and Moore might have sold that information to
identity thieves or a careless third party might have lost the information that then
found its way into the hands of the identity thieves who opened the fraudulent
accounts. Although it is conceivable that the unknown identity thieves used the
sensitive information stolen from AvMed to open the fraudulent accounts, it is
equally conceivable, in the light of the facts alleged in the complaint, that the
unknown identity thieves obtained the information from third parties. Curry and
Moore do not allege any facts that make it plausible that the unknown identity
26
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thieves who opened the fraudulent accounts obtained the sensitive information
necessary to do so from AvMed.
The majority opinion attempts to salvage the complaint by asserting that it
alleges that the sensitive information used to steal their identities was obtained
from AvMed, Majority Opinion at 16, but the complaint alleges no such thing. The
majority opinion cites six paragraphs of the complaint to support its conclusion
that the complaint plausibly alleges that the sensitive information used to steal their
identities was obtained from the stolen laptop:
• On or about December 10, 2009, two unencrypted laptop computers
were stolen from AvMed’s Gainesville, Florida corporate office . . . .
The laptops contained private, personal information including, but not
limited to, protected health information . . . , Social Security numbers .
. . , medical information and other information (collectively,
“Sensitive Information”) of approximately 1.2 million AvMed
enrollees;
• As a result of AvMed’s failure to implement and follow basic
security procedures, Plaintiffs’ Sensitive Information is now in the
hands of thieves. Plaintiffs now face a substantial increased risk of
identity theft; in fact, Curry and Moore have already experienced
repeated instances of identity theft since the data breach. . . .
• Curry’s Sensitive Information was contained on an unprotected and
unencrypted laptop computer that was stolen in the data breach. As a
result of the data breach, Curry’s identity was stolen.
• Curry’s identity was stolen and, in or around October 2010, it was
used to open bank accounts with Bank of America and activate cards
in her name;
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• Curry’s Sensitive Information was also used to change her home
address with the U.S. Postal Service;
• The E*Trade Financial bank account was opened by an individual
using Moore’s Sensitive Information.
Compl. ¶¶ 2, 3, 7, 44, 46, & 61; see also Majority Opinion at 16−17. But these
paragraphs do not plausibly allege that the identity thieves gained access to Curry
and Moore’s sensitive information from the stolen laptop. At most, the complaint
alleges that AvMed lost Curry and Moore’s sensitive information on December 10,
2009, and about a year later, unidentified third parties obtained unspecified
sensitive information from an unidentified source and used that unspecified
information to engage in identity theft. The complaint, in the words of the majority
opinion, alleges nothing “more than a coincidence of time and sequence.” Majority
Opinion at 16.
The majority opinion assures us that Curry and Moore have, in fact, alleged
something “more than a coincidence of time and sequence” between the stolen
laptops and the identity theft because “Plaintiffs state that the identity thief used
Plaintiffs’ sensitive information” to open the fraudulent accounts, id., but that
circular reasoning fails. No one disputes that unknown identity thieves used the
plaintiffs’ sensitive information to open fraudulent accounts in their names. The
28
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dispute is whether the unknown identity thieves obtained that sensitive information
from the laptops stolen from AvMed.
The complaint fails to allege a plausible basis for inferring that the unknown
identity thieves obtained the sensitive information of Curry and Moore from
AvMed. The complaint, for example, does not allege that only AvMed possessed
the sensitive information used to open the fraudulent accounts. The complaint does
not even allege what sensitive information was used to open financial accounts in
the plaintiffs’ names. The complaint alleges, for example, that the sensitive
information stolen from AvMed included health and medical information, but the
complaint fails to allege that this kind of information was used to open financial
accounts in the plaintiffs’ names.
“Determining whether a complaint states a plausible claim for relief [is] a
context-specific task that requires the reviewing court to draw on its judicial
experience and common sense,” Iqbal, 556 U.S. at 679, 129 S. Ct. at 1950, and that
experience reveals that vast numbers of individuals, businesses, and governmental
bodies possess our sensitive information, e.g., our names, social security numbers,
health information, and other personal data. Technology allows this information to
be copied quickly and transmitted over the Internet in an instant. Because of the
nature of sensitive information—a social security number and a name are the same
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regardless of who possesses that information—it may be difficult to pinpoint the
source of the sensitive information that is used to commit identity theft. But that
difficulty does not relieve Curry and Moore of their burden under Rule 8 to plead a
plausible basis for inferring that the sensitive information used by the identity
thieves was obtained from AvMed.
The complaint also fails to state a claim of unjust enrichment under Florida
law. “Florida courts have held that a plaintiff cannot pursue a quasi-contract claim
for unjust enrichment if an express contract exists concerning the same subject
matter.” Diamond “S” Dev. Corp. v. Mercantile Bank, 989 So. 2d 696, 697 (Fla.
Dist. Ct. App. 2008); see also Am. Safety Ins. Serv., Inc. v. Griggs, 959 So. 2d
322, 331 (Fla. Dist. Ct. App. 2007) (“A plaintiff may recover under quasi-contract
where there is no express or implied-in-fact contract, but the defendant received
something of value or benefited from the service supplied.”). The parties do not
dispute that they entered into an enforceable contract; they dispute whether the
contract has been breached. In that circumstance, a claim of unjust enrichment
cannot be maintained.
I respectfully dissent.
30
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534 P.2d 3 (1975)
In re SUPREME COURT ADJUDICATION OF INITIATIVE PETITIONS IN NORMAN, OKLAHOMA NUMBERED 74-1 AND 74-2.
No. 47773.
Supreme Court of Oklahoma.
March 4, 1975.
Rehearing Denied April 22, 1975.
Jim Ikard, Oklahoma City, for proponents.
Maurice H. Merrill, Fielding D. Haas, Norman, for protestants, City of Norman, and Certain Citizens.
Harold L. Heiple, Norman, for protestants, Norman Chamber of Commerce.
*5 LAVENDER, Justice:
Two initiative petitions were properly prefiled, circulated for signatures, and filed with the City Clerk of Norman, Oklahoma. Thereafter proponents of the said initiative petitions sought in this court a count of the presumptively valid signatures on the respective petitions, in accordance with 34 O.S.Supp. 1973, § 8. The matter was referred to James D. Giles, Referee of this court, to conduct proceedings, make findings of fact and conclusions of law, and report to this court with his recommendation for disposition. Hearing was held by Referee Giles on October 18, 1974. He has made findings of fact and conclusions of law which were reported to this court including his recommendation for disposition. These matters were considered and form the basis for this opinion.
The number of signatures on each petition was determined by this court and those respective determinations were by order communicated to the municipal clerk with direction to publish a notice of the filing of the respective initiative petitions, notice of the signature count, and notice of the clerk's determination concerning the sufficiency or insufficiency of such initiative petitions to accomplish the purposes of the petitioners, in accord with Section 8, supra.
The petition number 74-1, proposed an ordinance fixing utility rates and charges, and was determined by the City Clerk to be insufficient on the grounds:
(1) that the proposed enactment is not one subject to and is outside the scope of the initiative petition under the constitution and laws of the State of Oklahoma;
(2) that the proposed legislation therein set out is administrative and is not subject to the initiative;
(3) that, as a single proposition to be voted upon by the electors, said initiative petition commingles and joins together a multiplicity of subjects and subject matter without giving to the voter a choice between such subjects and subject matter under separate propositions.
The petition proposing the charter amendment, numbered 74-2, was also found insufficient by the City Clerk on the grounds:
(1) the proposed enactment therein set out conflicts with authority granted to municipalities of the State by the Constitution of Oklahoma;
(2) the proposed enactment would effectively repeal numerous portions of the Charter of the City of Norman without provision for an effective alternative therefor in derogation of the Oklahoma Constitution and laws of the State;
(3) the proposed enactment would forbid or limit the exercise of the full control of its utilities by the municipal governing body in violation of Article 18 of the Constitution of Oklahoma, and the laws of said state in such cases made and provided.
The determination so made by the City Clerk is within the power exercised by that office under 34 O.S. 1973 Supp. § 8, 34 O.S. 1971 § 51 and Hughes v. Bryan, Okl., 425 P.2d 952 (1967). The determination was duly published with notice of the right to lodge timely protests in this court.
*6 Protests were timely filed and hearing held before the referee. His report determined the basis for any protest before this court was only legal and no fact issues were joined. That report contained conclusions of law upholding the decision of the City Clerk denying the sufficiency of initiative petition 74-1, as to the ordinance; but reversing that city official's decision on initiative petition 74-2, as to the charter amendment, holding it to be sufficient. We adopt the recommendation of the referee to deny the sufficiency of initiative petition 74-1; but uphold the sufficiency of initiative petition 74-2.
Initiative petition numbered 74-1 seeks to submit to a vote of the municipal electorate for adoption or rejection an ordinance fixing rates for municipally furnished public utilities, which, if adopted, would provide a lower rate for these services, a rate which had been in effect prior to relatively recent amendment of the ordinance by the municipal legislative authority raising such rates. Initiative petition numbered 74-2 seeks to submit to a vote of the electorate of the city for adoption or rejection of an amendment to the municipal charter forbidding enactment of any ordinance by the municipal legislative authority increasing rates for utilities furnished by the municipality without such ordinance first having been submitted to the town electorate at an election and at such election having been approved by a majority of votes cast. The two petitions hereafter will be referred to as either 74-1 or 74-2.
Challenges by the municipality to the initiative petitions were timely filed in this court and a separate challenge was filed by the Chamber of Commerce of Norman.
The issues raised by the challenge by the municipality as to 74-1 (the ordinance proposal) are:
(a) the proposed ordinance is administrative in character and is not a proper subject of the initiative process;
(b) the proposed ordinance improperly joins a multiplicity of subjects and subject matter.
The municipality challenged 74-2 on the ground the proposed charter amendment:
(a) conflicts with the constitutional grant of power to municipalities;
(b) proposes to amend numerous parts of the charter without provision of effective alternatives, in derogation of constitutional "principles";
(c) seeks to construe the home rule clause to permit charter inhibition of those powers conferred by Constitution Article 18.
The challenge by the Norman Chamber of Commerce assails both petitions on the basis:
(a) the municipal power to own and operate public utilities carries the implicit power to fix rates as an administrative function not subject to initiative process;
(b) the proposed charter amendment is restrictive on charter government power without provision of alternatives;
(c) the proposals jeopardize the municipalities' revenue bonds now outstanding which were lawfully issued and sold.
The contention of proponents is two-fold:
(a) that rate fixing for municipally furnished utilities is legislative and not administrative, and is a proper subject for initiative process;
(b) that initiative petition 74-1 (the ordinance) covers a single subject and is therefore not in conflict with the related constitutional and statutory provisions on multiplicity of purposes in legislative enactments.
The subject matter in both initiative petitions concerns the operation, by adoption of rates or restrictions relating there, of an utility municipally owned and operated by the City of Norman. This subject matter is local in nature. Lackey v. State, 29 Okl. 255, 116 P. 913, 918 (1911) discusses a local matter. In referring to the charter *7 form of government adopted by Oklahoma City it said:
"* * * but, whether the powers of such city are exercised by a mayor and a city council, or by a board of commissioners, (as provided by the charter form), is purely a matter of municipal and local concern. It in no manner interferes with or infringes upon matters of the state at large, or affects its people generally; and, in the absence of such provision of the charter being in conflict with any provision of the Constitution, it supersedes the statute." (explanation added)
We have before us a matter of municipal and local concern. It is not one which interferes with or infringes upon matters of the state at large, or affects its people generally.
A rate structure established for municipally provided utility service is administrative as a necessary and incidental adjunct to the power constitutionally granted municipalities to own and operate a public utility. Rate structures, so fixed, are nevertheless subject to judicial review to relieve any proven instance of unjust discrimination in fixing such rates, to assure equal protection of the laws, and due process of law. In Oklahoma City Hotel and Motor Hotel Association v. City of Oklahoma City, Okl., 531 P.2d 316 (1974), this court agreed with the general rule, as therein contended by the city, the courts would not interfere with the fixing of rates of a municipally owned utility in the absence of a clear showing that the rates were unjust, unreasonable, or discriminatory. The opinion did not determine, as therein contended by the city, the fixing of rates of municipally owned utilities was solely a legislative function. By syllabus, we said:
"Courts have the duty to determine questions relating to rates charged by municipality for its utility services where challenge is based upon unreasonableness, unjustness, or discrimination of the rates."
The basis for the judicial review there is not an issue in this case. That case is not controlling upon the issue of rate fixing being a legislative or administrative function.
The constitutional reservation of power to the citizenry of municipal corporations, Const. Art. 18 § 4(a), encompasses all municipal legislative power but does not encompass administrative power. In Yarbrough v. Donaldson, 67 Okl. 318, 170 P. 1165 (1918), this court refused to require the application of the referendum process to a resolution of the city council approving the sale of the city's electric light plant authorized by statute. Syllabus by the court states in part:
"* * * such action is not legislative, but administrative action involving administrative discretion and not within the referendum powers reserved to the people of municipalities * * *."
The initiative petition number 74-1 for the adoption of the proposed city ordinance is found to be insufficient.
We now consider initiative petition numbered 74-2. It is different from the initiative petition seeking the adoption of an ordinance. Petition 74-2 amends the charter of the City of Norman. It would amend through the initiative process the organic law of that city's government. The initiative and referendum power is reserved in favor of the people of "every municipal corporation now existing or which shall hereafter be created with this State, with reference to all legislative authority which it may exercise, and amendments to charters for its own government in accordance with the provisions of this Constitution."[1] (Emphasis added) Const. Art. 18 § 4(a). Municipal charters as granted or as amended cannot contravene constitutional provision. City of Ponca City v. Edwards, Okl., 460 P.2d 418 (1969); 11 O.S. 1971 § 564.
*8 Through the reserved power of the initiative process the people of the City of Norman have the right to amend the charter for its own government. The referee of this court found initiative petition 74-2 to be adequate from a procedural matter in accordance with the constitutional and statutory provisions. The proposed amendment to the charter must not contravene any constitutional provision. Const. Art. 18 § 6 provides a municipality has the right to engage in any business which may be engaged in by a person, firm, or corporation through a franchise from that municipality. This would include a public utility. The charter granted that power to the municipal corporation of the City of Norman. That charter cannot be amended so as to prevent the City of Norman from operating its municipally owned utilities. Any amendment of the charter accomplishing that would be in contravention of Art. 18 § 6, supra. Such an amendment would not be valid. It could not come to a vote of the people under their reserved initiative power.
The proposed amendment to the charter of the City of Norman requires submission (to that city's people) and approval (by a majority of votes cast) of an ordinance increasing rates for utilities furnished by the city before such an ordinance could be passed by the legislative authority of the city. This amendment to the charter changes the method of operating the municipally owned utility. It limits the legislative authority of the city in that manner only. It does not prevent the operations of the utilities per se. Such a limitation in the utility operation of the city could be burdensome and most unwise. That decision is for the people of Norman and not this court. We cannot assume facts not before us that operation of the utility under the amendment creates an undue burden so as to negate and destroy the power of the municipality of the City of Norman to engage in the business of a municipal utility. The proposed amendment to the charter does not contravene the constitution. This is the test. This is the limitation placed upon a home rule charter either as originally proposed or as amended. The proposed amendment does not contravene Art. 18 § 6, supra.
The argument is made the proposed amendment repeals portions of the Norman city charter without provisions of an effective alternative. See Wyatt v. Clark, Okl., 299 P.2d 799 (1966) and other cases in which Wyatt, supra, has been cited. That argument is not available in this case. No repeal of any portion of the charter is involved. The amendment proposed does not repeal the charter provision allowing Norman to operate a municipally owned utility. It is an added provision to the charter. The amendment sets out one manner in which the municipal utility shall be operated. The required mode of operations under the proposed amendment would be a change from that presently in effect. It is not a repeal of the right to operate the utility without an effective alternative.
Both the proponents and opponents of these initiative petitions have argued the constitutional questions. In considering the sufficiency of these petitions, this court was made cognizant of its statement as to consideration of the constitutionality of an initiative petition in Oklahomans for Modern Alcoholic Beverage Control v. Shelton, Okl., 501 P.2d 1089 (1972). There Threadgill et al. v. Cross, 26 Okl. 403, 190 P. 558 (1919) was cited. Under present initiative procedure, 34 O.S.Supp. 1973 § 8, administrative duties formerly placed on administrative officials have been legislated directly to this court. We believe this court is not limited solely to the duties of an administrative officer or act. It may consider the constitutionality of matters to be considered under the initiative and referendum process as to procedure form and subject matter, when raised, and if in this court opinion such a determination could prevent a costly and unnecessary election.
The initiative petition numbered 74-2 is determined to be sufficient.
*9 WILLIAMS, C.J., and DAVISON, BERRY, SIMMS and DOOLIN, JJ., concur.
HODGES, V.C.J., and IRWIN, J., concur as to petition No. 74-1 and dissent as to petition No. 74-2.
BARNES, J., did not participate.
NOTES
[1] 5 Okla.L.Rev. 151 Constitutional Home Rule, Maurice H. Merrill.
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481 F.3d 578
Sally HIGGINS, Plaintiff-Appellant,v.Alberto GONZALES, Attorney General of the United States of America, Defendant-Appellee.
No. 06-2556.
United States Court of Appeals, Eighth Circuit.
Submitted: December 15, 2006.
Filed: March 20, 2007.
Stephanie E. Pochop, argued, Gregory, SD, for appellant.
Mary Trippler, Asst. U.S. Atty., Minne-apolis, MN, for appellee.
Before BYE, COLLOTON, and BENTON, Circuit Judges.
BYE, Circuit Judge.
1
Sally Higgins, a Native American, was employed by the District of South Dakota (DSD) as an Assistant United States Attorney (AUSA). After her resignation, Higgins brought an action under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2000e-17 (Title VII) alleging racial discrimination and retaliation. The district court1 granted summary judgment on both claims finding Higgins failed to establish a prima facie case under McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). We affirm.
2
* Higgins is an enrolled member of the Oglala Sioux Tribe. In July 1999, she began a two-year term AUSA position2 in the United States Attorney (USA) office in Rapid City, South Dakota. At the time, the Rapid City office employed five AUSAs in addition to Higgins—Jeannine Huber, Gregg Peterman, Diana Ryan, Mary Thorstensen, and Mark Vargo—as well as Deputy USA Mara Kohn. Higgins was the only Native American AUSA in the Rapid City office and was one of three Native American employees in the state. Her duties were split evenly between the CIRCLE Project3 and prosecuting criminal cases. She alleges her direct supervisor, Kohn, discriminated against her based on race and thereafter retaliated against her for complaining about such discrimination.
3
During her two-year term, Higgins alleges Kohn made several comments about Native Americans either in her presence or within her earshot. Specifically, in March 2000, during the trial of tribal members for misspending monies, she contends Kohn asked in her presence: "Aren't there any honest Indians anywhere?" Higgins and another Native American employee, Barbara Dull Knife, informally complained to Ryan, the Equal Employment Opportunity (EEO) contact person in the Rapid City office. Over a year later, Higgins reported this statement to Interim USA Michelle Tapken, shortly after Tapken became Interim USA. Tapken testified she did not investigate EEO policies or advise Higgins to lodge a complaint as she believed too much time had passed. She did confront Kohn about the allegation and asked her to submit a written response. In her response, Kohn denied making the statement. In addition to the "honest Indians" comment, Higgins claims Kohn asked "doesn't anybody work down there?" when trying to call the Department of Public Safety for the Oglala Sioux Tribe and asked "don't they have any cars down there?" referring to the reservation. When Higgins's term was about to expire, she claims Kohn stated: "Your time is almost up. I wouldn't want to be in your shoes." Higgins construed this to mean Kohn felt sorry for her because she assumed Higgins would go to work on the reservation. Finally, she contends Kohn talked with her about two Native American witnesses, stating if they wanted to buy alcohol they would "find a way," and she could get them arrested if they failed to comply with their subpoenas.
4
Throughout her two-year term, Higgins alleges Kohn failed to provide her with appropriate mentoring, supervision or training, thus "setting her up to fail" as an AUSA. She claims Kohn had an obligation to show her the ropes when she was first hired. She also claims Kohn was nicer to Huber, a new Caucasian AUSA, and provided her with more mentoring and assistance. There was no formal mentoring system in place in the DSD during Higgins's tenure. The record reflects at least some AUSAs believed Kohn did not provide Higgins with appropriate supervision given her lack of trial experience. Peterman testified Higgins made some significant trial mistakes due to her inexperience, and Kohn did not provide her with appropriate support and training post these mistakes having occurred. He also testified, however, he worked with Higgins on these issues after being assigned as her mentor in August 2000. Ryan testified Kohn treated Higgins like a child and treated Huber with more respect. She also testified, however, Kohn treated all of the AUSAs "very badly" and "everybody said [Kohn] treats me like a child. Jeannine [Huber] said it, [Appellant] said it, Gregg [Peterman] said it. She treated everybody like they had no brain and no law degree and we could not function without her." (Appellee App. at 358). Vargo testified Kohn was reluctant to supervise Higgins, but also that "Kohn's style as a supervisor was offensive to all of us" and she was condescending and criticized "whatever you had done." (Appellee App. at 382).
5
During her tenure, Higgins attended at least five training seminars. Although it is alleged she was denied the privilege of attending an appellate advocacy training seminar, she conceded during her deposition that when she requested permission, the course was not available. The next time it was offered, she was "busy with a trial or something." She did not request permission to attend the course the following year. In August 2000, after a year in her position, Higgins complained to an evaluation team about the lack of a formal mentor. In response, Kohn assigned Peterman to mentor Higgins. Although Peterman's evaluations of Higgins are in the record, and he testified about the mentoring relationship, Higgins testified she was never informed he was her mentor but was simply told by Kohn she was to go to Peterman with questions. Peterman evaluated Higgins's performance in June 2001 in a memo to Tapken. He indicated Higgins was a "very slow learner" with regards to trial practice and procedure and she was not ready to prosecute serious offenses. He did note she had done an adequate job prosecuting juveniles and lower level felonies. He noted: "She will also need to work overtime hours if she wants to attain the level of competency necessary."
6
Higgins assembled a reasonably good trial record. She handled twenty-five criminal cases during her term, obtaining twenty-one guilty pleas, two convictions in three jury trials, and tried a bench trial which resulted in an acquittal. In 1999 and 2000, she received formal performance evaluations by Kohn which indicated her performance in all categories "meets to exceeds expectations." Higgins argues she was denied a mid-year review in 2001 which affected her pay raise and promotion opportunities. In South Dakota, however, salary increases are determined according to the Administratively Determined Pay Plan under which AUSAs are eligible for pay increases based on their annual reviews rather than their mid-year reviews. Higgins also contends she was denied an annual review in 2001, though such a review would not have been due until early in 2002 and she resigned in October 2001. When Higgins was hired, she was classified as a Grade 25 based on her five years of experience. With locality pay, her salary was $55,052. During her tenure, she received the same cost-of-living pay raises as the other AUSAs and additionally received a promotion from Grade 25 to Grade 27, increasing her total salary to $62,885—a raise substantially greater than the raise given to the other AUSA ranked as "meets to exceeds expectations" during the annual cycle.
7
During her term in the Rapid City office, Higgins claims Kohn kept a "shadow file" on her where she documented Higgins's progress and kept copies of her draft work product. Kohn testified she kept notebooks and draft work product for each AUSA. There is some evidence in the record of Kohn having "stepped up" her documentation of Higgins after she learned Higgins told Peterman about the "honest Indians" comment and told employees in the Pierre office as to Kohn being a racist. Higgins also claims Kohn "papered" her file with complaints. Specifically, she notes Kohn reported to then-USA Ted McBride about both: 1) an alleged racially discriminatory remark Higgins made about white people, and 2) Higgins's alleged leak of confidential information in a drug case. In addition, Kohn sent a memo to Tapken (at her request) denying she made the "honest Indians" statement. Higgins's file also contains two memos to Kohn drafted by Peterman regarding complaints lodged against Higgins by a magistrate judge as to her trial performance.
8
Higgins contends Kohn specifically kept track of when she came in and left the office. Other AUSAs testified Kohn had the receptionist keep track of everyone's whereabouts. Finally, Higgins claims Kohn made demeaning comments about her performance. She contends Kohn's comments impacted her career potential in the new term position she was seeking in the Pierre office, discussed below, because her new supervisor, Deputy USA David Zuercher, was poisoned by Kohn's characterization of Higgins's work. Zuercher testified he was familiar with Higgins's Rapid City work through his discussions with other AUSAs and Kohn and was reluctant to have her work for him because of concerns about her skills and the judicial complaints made about her. After she was hired in Pierre, however, Zuercher assigned her a mentor and testified he was "terribly surprised" when she resigned. In addition, Higgins's new mentor, Randy Seiler, testified positively about her performance after she began her term in Pierre.
9
Higgins's term position was set to expire on August 17, 2001, and, because Congress cancelled additional funding for the CIRCLE Project, her specific position could not be renewed. In June 2001, the Justice Department Executive Offices announced a hiring freeze for any district not having a permanent USA. The DSD was impacted by the hiring freeze, as it did not have a permanent USA then, but rather an Interim USA—Tapken. In spite of the hiring freeze, Tapken sought and obtained permission to offer Higgins a new two-year term AUSA position in Pierre, South Dakota, starting in August 2001. Tapken testified she conducted a need-study of the USA offices in South Dakota to determine where the position would be located. Higgins alleges Kohn recommended Tapken "terminate" Higgins. There is no evidence in the record to support this allegation.4 Higgins accepted the Pierre term position on August 15, 2001. She did not experience a change in salary or benefits, and her new position consisted exclusively of prosecuting cases. Shortly after her move to Pierre, Higgins filed a discrimination complaint with the EEOC. On October 20, 2001, she resigned and accepted a higher paying position with the U.S. Department of the Interior in New Mexico.
II
10
We review the district court's grant of summary judgment de novo, affirming only if there is no genuine issue of material fact and the government is entitled to judgment as a matter of law. Wallace v. Sparks Health Sys., 415 F.3d 853, 858 (8th Cir.2005). In reviewing the evidence, we draw all reasonable inferences in favor of Higgins, the non-moving party, id., and "[w]e are mindful summary judgment should seldom be utilized in employment cases." Stidham v. Minn. Mining & Mfg., Inc., 399 F.3d 935, 937-38 (8th Cir.2005).
11
* "Under the McDonnell Douglas framework, a presumption of discrimination is created when the plaintiff meets [her] burden of establishing a prima facie case of employment discrimination. A minimal evidentiary showing will satisfy this burden of production." Davis v. KARK-TV, Inc., 421 F.3d 699, 704 (8th Cir.2005). To establish her prima facie case of racial discrimination, Higgins must show: 1) she is a member of a protected class; 2) she met her employer's legitimate expectations; 3) she suffered an adverse employment action; and 4) similarly situated employees who were not members of the protected class were treated differently. Id. The district court found Higgins failed to show she suffered an adverse employment action and thus has not made out a prima facie case under the McDonnell Douglas burden-shifting framework. We agree.
12
"[An] adverse employment action must be one that produces a material employment disadvantage." Kerns v. Capital Graphics, Inc., 178 F.3d 1011, 1016-17 (8th Cir.1999) (internal quotation marks omitted). "Termination, cuts in pay or benefits, and changes that affect an employee's future career prospects are significant enough to meet the standard, as would circumstances amounting to a constructive discharge." Id. (internal citation omitted). Minor changes in duties or working conditions, even unpalatable or unwelcome ones, which cause no materially significant disadvantage do not satisfy the prong. Baucom v. Holiday Cos., 428 F.3d 764, 767 (8th Cir.2005).
13
In support of her claim of racial discrimination, Higgins alleges several adverse employment actions by Kohn, claiming she: 1) was removed from a primary job duty on the CIRCLE Project; 2) was denied supervision, mentoring, and training; 3) was subjected to a shadow file and "whisper campaign" about her performance; 4) was formally complained about; 5) was not given an annual or mid-year progress review in 2001; 6) was recommended for termination by Kohn; and 7) was transferred to a different office with an unwilling supervisor. She argues, even if these actions are insufficient when viewed separately, when taken together their cumulative force constitutes an adverse employment action. We will consider each action in turn and thereafter evaluate the cumulative force of those actions.
14
Higgins first argues her removal from her CIRCLE project duties for a few weeks in early 2000 constitutes an adverse employment action. This court has held, however, a job reassignment involving no corresponding reduction in salary, benefits, or prestige is insufficient to establish an adverse employment action. See, e.g., Harlston v. McDonnell Douglas Corp., 37 F.3d 379, 382 (8th Cir.1994) (holding job reassignment involving "nothing more disruptive than a mere inconvenience or an alteration of job responsibilities," without any "diminution in . . . title, salary, or benefits" is insufficient to establish an adverse employment action). The record shows McBride removed Higgins from her duties on the CIRCLE project for a few weeks in early 2000. He testified he did so because of tribal tensions, and Higgins concedes tribal members were angry with her for reporting misuse of CIRCLE project funds. She does not allege her benefits or pay changed during this period and further admits she took leave to study for the bar exam during this time. During this period she was still responsible for her prosecutorial duties. She is not alleging she was given more or less desirable duties. Like in Harlston, Higgins describes "nothing more disruptive than a mere inconvenience or an alteration of job responsibilities." 37 F.3d at 382. As such, this does not constitute an adverse employment action.
15
Higgins next claims she was systematically denied supervision, mentoring and training so as to be "set up for failure" as an AUSA. Again, she makes no claim this denial led to a decrease in her pay or benefits or affected her future career prospects, thus this alone cannot constitute an adverse employment action. This alleged denial fails to qualify as an adverse employment action for a more fundamental reason, as she did not ultimately "fail" as evidenced by her new term AUSA position in Pierre. In spite of a few performance complaints, she had a good trial record and was given average ("meets to exceeds expectations") performance reviews. Furthermore, the record reflects she was assigned a mentor after complaining about a lack of assistance. Any lack of mentoring or supervision simply does not rise to the level of an adverse employment action, as she cannot establish the absence had any effect on her employment situation. As for the alleged denial of training, she argues as to being denied training which, by her assessment, "contribute[s] to promotion and pay increases." We have held "an employer's denial of an employee's request for more training is not, without more, an adverse employment action." Box v. Principi, 442 F.3d 692, 697 (8th Cir.2006) (quoting Griffith v. Des Moines, 387 F.3d 733, 737 (8th Cir.2004)). In Box, the plaintiff made only one request for additional training and actually received 200 hours of job training for her position. So too here, the record shows Higgins was never actually denied a training opportunity she requested. She testified as to not attending her desired appellate advocacy course because of scheduling difficulties. The record also shows she attended several other training seminars during her term. Although she makes the bald assertion of being denied training which would have contributed to promotion and pay increases, however, she fails to allege ever being denied a promotion or a raise because of a lack of training. During her twenty-six month tenure at the DSD, her pay increased by more than fourteen percent. As such, her alleged denial of training does not constitute an adverse employment action.
16
Higgins next contends Kohn kept a "shadow file" about her and started a "whisper campaign of demeaning comments about her performance." Kohn testified she kept files on all of the AUSAs and kept their draft pleadings if she thought they would be beneficial for evaluation purposes. The record does not reflect Higgins was singled out for bad treatment. Even if Higgins could show Kohn only kept a "shadow file" on her, she does not claim the notebook and alleged whisper campaign affected her pay or benefits. She attempts to tie Kohn's whisper campaign to Zuercher's reluctance to accept her in the Pierre office. There is evidence Zuercher was hesitant about Higgins because of discussions he had with employees in the Rapid City office, including Kohn, as to Higgins's trial skills and a magistrate judge's complaints. These were his feelings prior to her assuming the Pierre position. There is no evidence, as Higgins asserts, the "well was poisoned" at her new position. There is no evidence Zuercher would not supervise her or treated her poorly or differently in her new position. Zuercher testified he immediately assigned Higgins a mentor, and was surprised when she resigned. There is also no evidence, aside from her resignation to accept a higher paying position, that she was unhappy in her new position. Because Higgins does not establish she was, in any way, adversely affected by Kohn's record keeping and alleged "whisper campaign," this cannot constitute an adverse employment action.
17
Higgins next argues Kohn's various complaints about her constitute an adverse employment action. The record provides very limited information about these complaints. Even if there was evidence the complaints were false and retaliatory, Higgins does not allege they led to a material change in her employment status. The record shows no negative consequence to her because of these complaints. As such, they cannot constitute an adverse employment action.
18
Higgins also claims the DSD's failure to give her a mid-year and annual review in 2001 constitute an adverse employment action. In the DSD, annual progress reports were conducted either in January or February after the year reviewed; mid-year reports appear to be conducted in June. Only the annual reports influence pay increases. It is true Higgins did not receive a mid-year report in June 2001. This was two months before her term was set to expire. This court has often held "[a]n unfavorable evaluation is actionable only where the employer subsequently uses the evaluation as a basis to detrimentally alter the terms or conditions of the recipient's employment." Turner v. Gonzales, 421 F.3d 688, 696 (8th Cir.2005) (citation omitted). It logically follows that Higgins must show the absence of a mid-year evaluation led to a change in the terms and conditions of her employment. She has not made such a showing. In fact, two months after she was supposed to be evaluated, she was given a new position with the same pay and benefits in Pierre. She did not receive an annual report in 2001 because she resigned in October— approximately three months before such a review was due.
19
Higgins next claims Kohn recommended her termination and this qualifies as an adverse employment action. As noted above, the record does not support this allegation. Even if Kohn did make this recommendation, Higgins was not terminated. After her term expired, Higgins was offered the new term position in Pierre. As there was no resulting material change in Higgins's employment situation, this alleged recommendation cannot rise to the level of an adverse employment action.
20
Finally, Higgins argues her "transfer" to the Pierre office constitutes an adverse employment action. As an initial matter, technically she was not transferred. Her term expired and, in spite of a hiring freeze in place, Tapken sought and was granted permission to offer her a new term position. Should we accept Higgins's characterization of the new position being a transfer, she points to no evidence her title, salary and benefits changed or that her job responsibilities decreased.5 See Turner, 421 F.3d at 697 (holding a transfer to a new city is not by itself an adverse employment action where the plaintiff's title, salary and benefits are not affected, and the only adversity the plaintiff can claim are "normal inconveniences associated with any transfer" such as the necessity of "establishing one's professional connections in a new community"); Zhuang v. Datacard Corp., 414 F.3d 849, 854 (8th Cir.2005) (holding the plaintiff failed to raise a genuine issue of material fact where it was uncontested her pay and benefits remained the same after a change in job responsibilities); Meyers v. Neb. Health & Human Serv., 324 F.3d 655, 660 (8th Cir.2003) (holding a significant change in working conditions occurs where there is "a considerable downward shift in skill level required to perform [the employee's] new job responsibilities"). In Turner, we ultimately found there was a genuine issue of material fact as to whether the work to which the plaintiff was assigned after her transfer was a considerable downward shift from her responsibilities prior to the transfer. Turner, 421 F.3d at 697. Unlike in Turner, Higgins has failed to present sufficient evidence to raise a genuine issue of material fact as to whether her new position constitutes a demotion. She baldly asserts the Pierre position was "a demotion in substance if not in form" because Zuercher testified it was a "completely different position" and he was, prior to her transfer, hesitant about working with her. What is glaringly absent from her brief is reference to evidence in the record about her job duties in Pierre. The record shows her new position involved prosecuting criminal cases—the same work she was doing in Rapid City. She was immediately assigned a mentor who testified positively about her work. Higgins presents no evidence of being displeased by her workload in Pierre or that it represented a considerable downward shift from her responsibilities prior to the transfer. As such, her "transfer" cannot constitute an adverse employment action.
21
Higgins contends, even if the alleged actions do not individually constitute an adverse employment action, taken together they cumulatively rise to the level of an adverse employment action. She relies on Phillips v. Collings, 256 F.3d 843 (8th Cir.2001) and Kim v. Nash Finch Co., 123 F.3d 1046, 1060 (8th Cir.1997) for the proposition about actions short of termination or a decrease in pay or benefits still constituting an adverse employment action.6 In both Phillips and Kim, we found an adverse employment action where the plaintiffs were not fired and did not suffer a change in pay or benefits. Each of these cases presents a particularly extreme set of facts. In Phillips, a supervisor prepared a four-page evaluation of the plaintiff in which she recommended termination specifically based, in part, on his religious beliefs. After this negative evaluation was revised by others, the recommendation of "termination" was changed to "needs improvement." In response, the supervisor drafted a new, fifty-three page evaluation criticizing "virtually every aspect of [the plaintiff's] job performance." This evaluation contained an extensive "Corrective Action Plan" which included remedial training. Phillips, 256 F.3d at 846. We concluded this was tantamount to an adverse employment action, noting:
22
Indeed the record clearly reveals that [the supervisor], who could not unilaterally terminate [the plaintiff], nor deny his transfer, did everything she could to disrupt his employment. Had [her] corrective action plans been implemented they would signify a tangible change in [the plaintiff's] duties or working conditions that constitute a material disadvantage."
23
Id. at 849 (internal citations omitted). Likewise, in Kim, immediately after complaining about age and race discrimination, after more than ten exemplary years with the company, the plaintiff was stripped of more desirable foreman duties, was given much lower performance evaluations, was orally warned about his poor "attitude," was placed under constant surveillance at work, was excluded from work meetings, was issued written reprimands for alleged race-based incidents, and was required to attend special retraining in spite of his seniority. We found "[t]hese are the kind of serious employment consequences that adversely affected or undermined Kim's position, even if he was not discharged, demoted or suspended" and held, as a matter of law, such systematic retaliatory conduct collectively constituted an adverse employment action. Kim, 123 F.3d at 1060.
24
In this case, the record does not show the level of systematic bad treatment adversely affecting Higgins's employment situation which is evident in Phillips and Kim. She was not forced into a remedial retraining program. The alleged "shadow file" apparently had no impact at all on her position, and did not impact her performance evaluations by which the DSD determined her pay. The record contains absolutely no evidence of a "poisoned well" in Pierre. Although there is evidence Zuercher had some hesitancy about supervising Higgins because of complaints about her job performance, there is no evidence these feelings continued after Higgins started working in the Pierre office. Although Kohn's treatment of Higgins was harsh and unprofessional, even cumulatively, the alleged adverse employment actions do not show a material employment disadvantage. Each of the claimed adverse employment actions falls far short of constituting an adverse employment action. Taking these actions together does not correct such insufficiency.
B
25
Higgins also contends the district court erred in holding she failed to establish an adverse employment action in her Title VII retaliation claim. Because the district court found her as not having established an adverse employment action in the context of her Title VII race discrimination claim, it assumed she had failed to establish this prong in her Title VII retaliation claim. Higgins argues, in light of the Supreme Court's recent broadening of the retaliation prima facie case in Burlington N. & Santa Fe Ry. Co. v. White, ___ U.S. ___, 126 S.Ct. 2405, 165 L.Ed.2d 345 (2006)7, she established her prima facie case. We disagree.
26
As in a Title VII discrimination claim, in a retaliation claim the plaintiff bears the burden of establishing a prima facie case. After Burlington Northern, to establish such a claim, Higgins must show: 1) she engaged in protected conduct; 2) a reasonable employee would have found the challenged retaliatory action materially adverse; and 3) the materially adverse action was causally linked to the protected conduct. Burlington N., 126 S.Ct. at 2415; cf. Singletary v. Mo. Dept. of Corrs., 423 F.3d 886, 892 (8th Cir.2005) (articulating old standard where, to satisfy the second prong, the plaintiff was required to show he suffered an adverse employment action).
27
Until recently, as part of their prima facie case, we required plaintiffs claiming unlawful retaliation under Title VII—like those claiming unlawful discrimination—to show an "adverse employment action" which produced a "material employment disadvantage" by cutting the employee's pay or benefits, depriving employment opportunities, or affecting future career prospects. Baucom, 428 F.3d at 767. As the standard in both types of Title VII actions was identical, if a plaintiff failed to establish the adverse employment action prong in the discrimination claim, we would automatically find failure to make out the prong in the retaliation claim. See id. at 768 (summarily dispensing with plaintiff's retaliation claim after finding he had failed to demonstrate an adverse employment action in his discrimination claim). In Burlington Northern, the Supreme Court announced a different standard for determining whether a plaintiff has established a retaliation prima facie case. Because "[t]he scope of the anti-retaliation provision extends beyond workplace-related or employment-related retaliatory acts and harm," a plaintiff need not show an adverse employment action related to the terms and conditions of employment. Id. at 2414. Instead, "the challenged action [must be] materially adverse, which in th[e] context [of a retaliation claim] means that it well might have dissuaded a reasonable worker from making or supporting a charge of discrimination." Id. at 2415 (citation and internal quotation marks omitted). The standard is thus objective, requiring us to consider whether a reasonable employee in the plaintiff's position might have been dissuaded from making a discrimination claim because of the employer's retaliatory actions. Id. at 2412-13. The Court explained the action against the plaintiff must still be "materially adverse" noting: "[w]e speak of material adversity because we believe it is important to separate significant from trivial harms," Id. at 2415, and "Title VII . . . does not set forth `a general civility code for the American workplace.'" Id. (quoting Oncale v. Sundowner Offshore Servs., Inc., 523 U.S. 75, 80, 118 S.Ct. 998, 140 L.Ed.2d 201 (1998)). As such, certain behavior continues to be non-actionable under the retaliation provision such as "petty slights or minor annoyances that often take place at work and that all employees experience," "personality conflicts at work that generate antipathy," and "snubbing by supervisors and co-workers." Burlington N., 126 S.Ct. at 2415.
28
The Burlington Northern Court held there was sufficient evidence to support a jury verdict for retaliation where the plaintiff was reassigned to job duties which, although they fit within the same job description as a previous position, were "by all accounts more arduous and dirtier." Id. at 2417 (quotation marks omitted). Prior to her reassignment, she had been assigned to a forklift operator position which required more qualifications, was more prestigious, and was "objectively considered a better job." Id. The Court concluded a jury could reasonably conclude this reassignment of responsibilities would have been materially adverse to a reasonable employee. Id. The Court also found the plaintiff's thirty-seven day, investigatory suspension with backpay was materially adverse under the new standard. Id.
29
This is our first opportunity to address Burlington Northern, and apply the Court's reformulation of the retaliation prima facie case. Applying the new standard, we find Higgins has not met her burden. Unlike the plaintiff in Burlington Northern, she has not shown Kohn's retaliatory actions were materially adverse such that a reasonable employee in her situation would have been dissuaded from complaining about discrimination. In her briefs, she essentially confines the arguments to two alleged actions: Kohn's lack of mentoring and supervision and her "transfer" to Pierre. With regard to the mentoring and supervision claim, she contends "floundering should be recognized as an adverse employment action" and argues Kohn's behavior can be compared to "the supervisor who pointedly excludes an employee from networking lunches." Kohn's lack of mentoring or supervision might constitute an adverse employment action under the new standard if Higgins could establish she was actually left to "flounder" or was negatively impacted by the lack of supervision or mentoring.8 But she has not alleged, and the record does not support, such a claim. Although the record reflects she had a personality conflict with Kohn, there is nothing to suggest this conflict created a situation so unbearable or bleak that a reasonable employee would have been dissuaded from complaining about discrimination in such an environment.
30
As for the claim her "transfer" to the Pierre office was a materially adverse action, again it bears mention Higgins was not terminated from her position in Rapid City, nor was she actually transferred to Pierre; Higgins's two-year term position ended by the content of its terms. She was then, after considerable effort by Tapken, offered another two-year term AUSA position in Pierre, which she accepted. It is difficult to characterize this as an adverse action, let alone a materially adverse one. She does not allege the new position was qualitatively more difficult or less desirable than the one she held in Rapid City. As noted above, there is essentially no information in the record about her new position once she moved to the Pierre office. Zuercher testified he was surprised when Higgins resigned. Her mentor, Seiler, testified positively about her performance in Pierre. If anything, the record suggests her situation improved in Pierre. She argues the Pierre job "mandated [her] to leave her case files, start all over with [sic] different cases and move to a new school setting with her family." This court has, prior to Burlington Northern, found such arguments to be wanting. See Turner, 421 F.3d at 697 (holding, where the plaintiff argued a transfer required her to develop new contacts and start her career over, "[w]e are not persuaded as to the normal inconveniences associated with any transfer, such as establishing one's professional connections in a new community, are sufficient, without more, to demonstrate a significant change in working conditions"). Burlington Northern does not change this result. Under Higgins's logic, any move would qualify as a materially adverse action because it would force an employee to start over in a new city. We are unwilling to set such a definite line. Here, even if we were to accept the premise that her move was a retaliatory action—which we do not—we cannot conclude the move was materially adverse. There is no evidence her new duties were more difficult, less desirable or less prestigious. In this context, even given the inconvenience of a move, this action does not rise to the level of a materially adverse action.
31
Finally, Higgins points to Ryan's failure to bring a retaliation claim against Kohn as proof Ryan was dissuaded by Kohn's behavior towards Higgins. The standard under Burlington Northern is objective and asks us to consider what a reasonable employee would do in Higgins's shoes. She would like us to look at Ryan's failure to file a complaint against Kohn, and treat her as the proverbial "reasonable employee"—clearly if the EEO contact person would not file a claim, a reasonable employee would likely be dissuaded from filing a claim. We are unwilling to stray from the Supreme Court's objective standard. Furthermore, the record does not support Higgins's contention that Ryan was dissuaded from complaining because of Kohn's treatment of Higgins. Kohn was not Ryan's supervisor, as she was a civil specialist, rather than a criminal one. Therefore, Ryan was unlikely to be dissuaded by Kohn's negative treatment of Higgins because Kohn could not have similarly impacted her career with the DSD. Nevertheless, under Burlington Northern, we must look at Higgins's situation objectively to determine whether a reasonable employee in her shoes would be dissuaded from bringing a complaint. She cannot make her claim based on personality conflicts, bad manners, or petty slights and snubs. It is clear she had a serious personality conflict with her supervisor. The record also shows Kohn was angry with her after she told others Kohn was a racist. What is absent from the record is evidence showing Kohn's anger and related actions materially and adversely affected Higgins's life such that a reasonable employee in her shoes would be dissuaded from complaining.
III
32
For the foregoing reasons, we affirm the district court.
Notes:
1
The Honorable Lawrence L. Piersol, United States District Judge for the District of South Dakota
2
Higgins's position was always a two-year term position. She was informed at the outset of her term it would expire in August 2001 and she would have to apply for a new position in order to continue working for the DSD. Nevertheless she did not apply for another position with the DSD
3
The Comprehensive Indian Resources for Community and Law Enforcement (CIRCLE) Project was a Department of Justice initiative designed to enhance tribal justice systems
4
Ryan testified Tapken stated it might be easier if she let Higgins's term expire. The only evidence in the record which might support the allegation that Kohn recommended Higgins's termination is Kohn's testimony she called someone in administration—Paul Ross—to ask about the procedure she should follow when a term position expires because "[n]obody knew in [the Rapid City] office because it had never happened before."
5
It is true Higgins's new position did not include work for the CIRCLE project, however, Congress (and not the DSD) was responsible for terminating the project
6
Higgins also relies onBassett v. Minneapolis, 211 F.3d 1097, 1105 (8th Cir.2000). In Bassett however, the adverse employment action prong was not at issue, as the plaintiff was terminated.
7
The Supreme Court rendered its decision inBurlington Northern subsequent to the district court's decision in this case.
8
It also bears mention that, even if Higgins could establish Kohn's actions were materially adverse, she does not allege a causal relationship between Kohn's lack of supervision and mentoring and Higgins's informal discrimination complaints
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714 F.2d 120
Brownv.Philadelphia Naval Shipyard
82-1802
UNITED STATES COURT OF APPEALS Third Circuit
5/23/83
E.D.Pa., McGlynn, J.
AFFIRMED
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Slip Op. 05-98
UNITED STATES COURT OF INTERNATIONAL TRADE
____________________________________
x
Dixon Ticonderoga Company, :
Plaintiff, :
Court No. 04-00027
v. : Before: Judith M. Barzilay, Judge
United States Customs and Border :
Protection
and Robert C. Bonner, :
Defendants. :
____________________________________x
MEMORANDUM ORDER
[Defendants’ USCIT R. 59 Motion for Rehearing denied.]
Decided: August 18, 2005
Gray Robinson, P.A. (A. Anthony Giovanoli), Guy S. Haggard for Plaintiff.
Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; (Jeanne E. Davidson),
Deputy Director; (David S. Silverbrand), Trial Attorney, U.S. Department of Justice, Civil
Division, Commercial Litigation Branch; Charles Steuart, Office of Chief Counsel, United States
Customs & Border Protection, of counsel, for Defendant.
BARZILAY, JUDGE:
On April 4, 2005, this court entered a Judgment Order granting plaintiff Dixon
Ticonderoga Co.’s (“Dixon’s”) Motion for Judgment on the Agency Record. Dixon Ticonderoga
Co. v. United States Customs and Border Protection, Slip Op. 2005-46.1 Now defendants,
United States Customs and Border Protection and Robert C. Bonner (collectively “Defendant”)
ask this court to reconsider the above-mentioned judgment and opinion, to grant a rehearing, and
1
Familiarity with this prior opinion is presumed.
04-00027 Page 2
to dismiss Dixon’s cause of action pursuant to USCIT Rule 59(a)(2). After having considered
Defendant’s arguments to the contrary, the court finds no fundamental or significant mistake
resulting in manifest error. Therefore, Defendant’s motion is denied.
Rule 59(a)(2) allows this Court to order a rehearing in an action finally determined, for
any of the reasons that United States courts have granted rehearings in suits in equity. The
granting or denying of a motion for rehearing rests within the sound discretion of the court. See
Ammex, Inc. v. United States, 201 F. Supp. 2d 1374, 1375 (CIT 2002); Mitsubishi Heavy Indus.,
Ltd. v. United States, 112 F. Supp. 2d 1170, 1171 (CIT 2000). Reconsideration is appropriate
when meant to rectify a fundamental or significant flaw in the original proceeding that results in
a manifest error. Mitsubishi, 112 F. Supp. 2d at 1171 (citations and quotations omitted).
Defendant argues in this motion, as it did in opposition to Dixon’s Motion for Judgment
on the Agency Record, that Dixon was not substantially prejudiced by Defendant’s late published
notice. As Defendant points out, prejudice means injury to an interest that the statute, regulation,
or rule in question was designed to protect. Deft.’s R. 59 Mot. for Rehearing at 5 (citing
Intercargo Ins. Co. v. United States, 83 F.3d 391, 394 (Fed. Cir. 1996) (quotations omitted)). As
explained in the opinion, Dixon, being a domestic pencil manufacturer, had an interest in
applying for and receiving a distribution pursuant to the Continued Dumping and Subsidy Offset
Act of 2000 (“CDSOA”), also known as the Byrd Amendment. Both the CDSOA and the
Customs regulation at issue, 19 C.F.R. § 159.62(a), were designed to protect this interest.
Furthermore, none of the cases Defendant cites in its motion shed any new light on the
matter at hand. In Cathedral Candle Co., et. al. v. United States International Trade Comm’n,
04-00027 Page 3
et. al., 400 F.3d 1352 (Fed. Cir. 2005), the Federal Circuit considered a case where Customs
complied with 19 C.F.R. § 159.62(a) and provide timely notice. In that case Customs granted
discretion to the International Trade Commission’s (“ITC”) resolution of a conflict between the
confidentiality requirements of 19 U.S.C. § 1677f and the notice requirements of the Byrd
Amendment, 19 U.S.C. § 1675c. Therefore, the Court held that where the plaintiffs did not
waive the confidentiality they had originally opted for, the timely published notice did not violate
the Byrd Amendment when it failed to include plaintiffs on the list of affected domestic
producers.2 Cathedral Candle, 400 F.3d at 1367, 1372.
Also distinguishable is this Court’s recent opinion in Candle Artisans, Inc. v. United
States International Trade Comm’n, et. al., 29 CIT __, 362 F. Supp. 2d 1352 (2005). Similar to
the facts of Cathedral Candle3 and in contrast to those presented in this case, Customs published
timely notice of its intent to distribute, but did not include plaintiffs’ names on the list because
they had not waived confidentiality. In both Cathedral Candle and Candle Artisans, the
plaintiffs’ inability to obtain notice was not due to any fault or omission on the part of Customs.
Rather, Customs was held to have made a reasonable interpretation of two seemingly conflicting
statutes, and its decision not to publish the names of domestic producers who had not waived
confidentiality was accorded deference by the Courts. In the present case, Customs failed to
2
Although not relevant to the issues at hand, integral to the Federal Circuit’s holding in
Cathedral Candle were the additional determinations that section 4 of the Administrative
Procedure Act (“APA”) was not applicable to the facts in that case, and that the ITC was not
required under section 3 of the APA to publish Federal Register notice indicating that it was only
submitting the names of those persons that indicated public support for the petition. 400 F.3d at
1369, 1371-72.
3
As noted by the Court in Candle Artisans, 326 F. Supp. 2d at __, n.1.
04-00027 Page 4
abide by its own regulations by failing to provide timely notice to all affected domestic producers
of the CDSOA distribution for fiscal year 2003.
As explained in the court’s earlier opinion, Slip Op. 2005-46, because the Customs
regulations at issue in this matter were found to be merely procedural aids, Dixon could prevail
on its claim only if it demonstrated substantial prejudice. Id. at 9 (citing Kemira Fibres Oy v.
United States, 61 F.3d 866 (Fed. Cir. 1995) (citations omitted)). Because it was one of the
petitioners in Certain Cased Pencils from the People’s Republic of China, 59 Fed. Reg. 66909
(Dec. 28, 1994), Dixon was an intended beneficiary of the CDSOA and its accompanying
regulations, including 19 C.F.R. § 159.62(a). Therefore, Dixon was substantially prejudiced by
Customs’ late published notice. Unlike the plaintiff in Intercargo Insurance Co. v. United
States, 83 F.3d 391 (1996), Dixon does not complain of a technical defect which, if disregarded,
would deprive Dixon of relief. Rather, Dixon’s interest in receiving its share of the distribution,
as an intended beneficiary of the CDSOA, was injured by Customs’ failure to provide timely
notice. Cf. Intercargo, 83 F.3d at 396 (“Prejudice means injury to an interest that the statute,
regulation or rule in question was designed to protect.”). In other words, Dixon was squarely
within the interest intended to be protected by both the statute involved and the timing
regulations implicated in this case, and was prejudiced when Customs failed to properly
administer that statute and accompanying regulation. Cf. Kemira, 61 F.3d at 875-76.
On April 29, 2005, the parties submitted a joint status report pursuant to the court’s order
directing the parties to confer regarding a remedy and to advise the court of this proposed
remedy. In this status report, the parties indicated their agreement that, “if after all opportunities
04-00027 Page 5
for rehearing and/or appeal have been exhausted, [this court’s April 4, 2005 opinion] is the final
court decision upon this action, Dixon would be entitled to distribution from Customs of
$618,896.03 in CDSOA funds for fiscal year 2003.” Thus, the court orders Customs to take
appropriate action to the extent authorized by law and to effect a distribution of $618,896.03 to
Dixon. Furthermore, the court notes that because the only interest available pursuant to 19
U.S.C. § 1675c(d)(3) is statutory interest charged on antidumping and countervailing duties at
liquidation, the sum to be distributed to Dixon does not include interest accrued. See 19 C.F.R. §
159.74(e). Accordingly, it is hereby
ORDERED that defendant’s USCIT R. 59 motion for rehearing is denied; and it is further
ORDERED that defendant will effect a distribution of $618,896.03 to plaintiff in
CDSOA funds for fiscal year 2003.
August 18, 2005 /s/ Judith M. Barzilay
______________________________ _________________________________
New York, NY Judith M. Barzilay, Judge
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14 F.3d 606
Bell (Larry A.)v.Johannson (Mike)
NO. 93-1754United States Court of Appeals,Eighth Circuit.
Apr 06, 1993
Appeal From: S.D.Iowa
1
DISMISSED.
2
(The decision of the Court is referenced in a 'Table of Decisions Without Reported Opinions' appearing in the Federal Reporter. The Eighth Circuit has prescribed criteria for publication of opinions and directs that unpublished opinions may not be cited or otherwise used except when the cases are related by virtue of an identity between the parties or the causes of action. Eighth Circuit Rules, Rule 28A(k), 28 U.S.C.A.)
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142 P.3d 608 (2006)
STATE v. RIVERA.
No. 77971-6.
Supreme Court of Washington, Department I.
September 6, 2006.
Disposition of petition for review denied.
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111 N.H. 186 (1971)
TOWN OF BETHLEHEM
v.
MILDRED ROBIE AND BERNARD ROBIE.
No. 6165.
Supreme Court of New Hampshire.
June 1, 1971.
Dodge, Moulton and Smith (Mr. Peter W. Smith orally) for the plaintiff.
Mussman and Shepatin (Mr. David B. Shepatin orally) for the defendants.
PER CURIAM.
The town of Bethlehem by this bill in equity seeks to restrain the defendants from placing a mobile home on their lot on Agassiz Street in Bethlehem after being denied a permit by the zoning board of adjustment. Mobil homes are not specifically prohibited by the ordinance but the board denied the permit under section 1 which prohibits in District 1 the erection, construction, reconstruction, alteration, repair or use of any building "of a design, materials or for a purpose or use inconsistent with, detrimental or injurious to, buildings and purposes or uses of the same, upon adjoining lands." Defendants contend that this provision is void because of vagueness and because it includes no valid standards to guide the selectmen or board of adjustment.
In June of 1969 defendants sought a building permit from the selectmen to place a mobile home on the lot in question which *187 they had just purchased. The permit was denied but a hearing was arranged before the zoning board of adjustment which, after hearing, by a tie vote of 2 to 2 denied the permit. When defendants gave indications that they intended to move the mobile home onto the property, this petition was filed and a temporary injunction was issued. After hearing, a permanent injunction was decreed restraining defendants from erecting a mobile home on their property and defendants' exceptions were transferred by Johnson, J.
The Bethlehem zoning ordinance divides the town into two districts. District 1, in which the land in question is located, comprises the center or compact part of the town and is defined as the area within the limits of the Bethlehem Village District which is about two square miles. The village district supplies water and sewer, among other services. The rest of the town comprises District 2, and there was testimony that this was between 60 and 70 square miles in area.
The trial court found that other mobile homes are located in District 1, some as a result of approval of permits by prior boards of selectmen, some without any approval, and one with the zoning board of adjustment's approval. It was also found that the board of adjustment's finding that a mobile home would be "detrimental" was "reasonable, just and lawful." The trial court rejected the contention that "adjoining lands" as used in section 1 of the ordinance applied only to land directly adjacent to the project and in effect ruled that they meant "neighborhood."
Section 1, upon which the validity of the denial of the permit and the issuance of the injunction must rest, reads as follows: "No buildings or parts thereof, of any description shall be erected, constructed, reconstructed, altered, repaired, or used, upon land fronting on Main Street, less than two stories in height, or within sixty (60) feet of the center of said street; and fronting on any other street in said District within fifty (50) feet of the center thereof; nor of a design, materials or for a purpose or use inconsistent with, detrimental or injurious to, buildings and purposes or uses of the same, upon adjoining lands."
It is our opinion that this section is not void for vagueness. The standard of what is "detrimental or injurious" to adjoining property furnishes a sufficient criterion for the guidance of the selectmen and the board of adjustment. Similar standards have been upheld here. Rockingham Hotel Co. v. North Hampton, 101 N.H. 441, 146 A.2d 253 (1958); State v. Dean, 109 N.H. *188 245, 248 A.2d 707 (1968); Deering v. Tibbetts, 105 N.H. 481, 202 A.2d 232 (1964); see Plainfield v. Hood, 108 N.H. 502, at 506, 240 A.2d 60 (1968). There was evidence before the trial court that a mobile home on a lot would diminish the value of adjoining property and hence be detrimental, and the trial court was correct in finding that the action of the town officials was not unreasonable, unjust or unlawful. We also agree with the trial court that the zoning ordinance was designed to protect neighborhoods and land values, and the granting or denial of a permit is not dependent upon the consent or objection of present owners of adjoining property. The decree of the trial court was proper.
Exception overruled; remanded.
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521 F.Supp.2d 592 (2007)
Robert H. FALLIN, et al., Plaintiffs
v.
COMMONWEALTH INDUSTRIES, INC. CASH BALANCE PLAN, et al., Defendants.
Civil Action No. 3:07CV-196-H.
United States District Court, W.D. Kentucky, at Louisville.
November 9, 2007.
*593 *594 Michael D. Grabhorn, Grabhorn Law Office, PLLC, Louisville, KY, for Plaintiffs.
Keith L. Pryatel, Kenneth M. Haneline, Kastner Westman & Wilkins, LLC, Akron, OH, Lira A. Johnson, Dinsmore & Shohl L LP, Louisville, KY, for Defendants.
MEMORANDUM OPINION
JOHN G. HEYBURN, II, Chief Judge.
Plaintiffs are a group of former employees of Commonwealth Industries, Inc. ("Commonwealth") who allege that various changes to Commonwealth's employee retirement benefit plan (the "Plan") adopted both in 1994 and 1998 violate ERISA. Defendants have moved to dismiss on the grounds that the applicable statute of limitations bars all claims. This requires the Court to determine (1) the applicable state law limitations period, (2) the time when any claim accrues and the statute begins to run under federal law, and (3) whether the running of the applicable statute of limitations would be tolled under any circumstances.
I.
Plaintiffs' complaint alleges that the 1994 and 1998 amendments to the Plan, as well as the Plan's refusal to provide them with the amounts to which they claim entitlement under the plan as amended, violate § 502 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132. Plaintiffs received their benefits in a lump sum upon their retirement between 1998 and 2002, but now seek injunctive and "other equitable" relief, arguing that the amendments improperly reduced the amounts to which they believe they were entitled under the unamended plan, and that even under the amended plan, they were not provided with certain amounts to which they were entitled. Plaintiffs seek remedies under ERISA's enforcement provisions, 29 U.S.C. § 1132(a)(1)(B) and (a)(3).
II.
Because ERISA contains no independent statute of limitations for claims of this sort,[1] federal courts must seek out *595 "the most clearly analogous state statute of limitations." Santino v. Provident Life & Accident Ins. Co., 276 F.3d 772, 776 (6th Cir.2001). Plaintiffs argue that the fifteen (15) year limitation contained in Ky.Rev. Stat. § 413.090 applies; Defendants prefer the five (5) year limitation contained in Ky.Rev.Stat. § 413.120.
Here, Plaintiffs' complaint expressly alleges that Defendants' plan amendments violate various ERISA provisions. Thus, Plaintiffs' complaint arises more specifically from ERISA's statutory protections rather than from an independent promise or contract. Cf. Salyers v. Allied Corp., 642 F.Supp. 442, 443-44 (E.D.Ky. 1986) (finding that "the most analogous statute [of limitations]" for an ERISA claim was not necessarily the fifteen (15) year limitation contained in Ky.Rev.Stat. § 413.090, even though "[s]everal circuits" have applied such statutes of limitations to ERISA actions, and even though "a strong argument can be made for characterizing an action brought under [ERISA] as one for breach of a written contract."). It is true that an ERISA claim can itself involve contractual elements because an ERISA plan contains a set of promises, often unilateral ones. Nevertheless, ERISA is a statutory edifice. Federal law applies to its enforcement. Indeed, Plaintiffs' case arises almost entirely from that statutorily created enforcement scheme, thus making Ky.Rev.Stat. § 413.120(2), which, places a five-year limitation period on "[a]n action upon a liability created by statute, when no other time is fixed by the statute creating the liability," the clearly appropriate limitations period.
The same result obtains as to Plaintiffs' so-called "Level Income Option" claim, which alleges that the Plan's terms promised payment of certain benefits which have not been paid (as opposed to the other claims, which solely allege that the amended terms of the plan violate ERISA). Just as in Plaintiffs' other claims, this claim expressly invokes ERISA as providing its cause of action, explicitly stating that Plaintiffs seek relief "pursuant to ERISA § 502(a)(3)." This leads the Court to conclude that this claim is also most appropriately subjected to Ky. Rev.Stat. § 413.120(2)'s five-year statute of limitations.[2]
The Sixth Circuit's application of Michigan's, Santino, 276 F.3d at 776, and Ohio's, Meade v. Pension Appeals & Review Comm., 966 F.2d 190, 194-95 (6th Cir. *596 1992), fifteen-year contract statutes of limitations to ERISA cases does not change this Court's view. In neither case did the court face the question presented here: whether a statute covering liabilities created by statute or one covering contracts is most analogous.[3] Thus, the Santino and Meade logic is not particularly persuasive on this issue. Moreover, the limitations which ERISA does establish (for breaches of fiduciary duties) are more closely analogous to the five-year limit than is the fifteen-year contractual limit. For all these reasons, the Court believes that its choice of the five-year limit is well grounded.
III.
Determining the applicable statute of limitations is only the beginning of the analysis to determine whether Plaintiffs' claims are time-barred; the Court still must consider when Plaintiffs' claims accrued and whether the running of the statute can be tolled.
A.
Federal law determines the time that any cause of action would accrue, Wallace v. Kato, ___ U.S. ___, 127 S.Ct. 1091, 1095, 166 L.Ed.2d 973 (2007), and these claims will accrue when Plaintiffs "can file suit and obtain relief." Cooey v. Strickland, 479 F.3d 412, 419 (6th Cir. 2007). Here, there appear to be three general possibilities for the dates of accrual: (1) the date on which the most recent amendments to the Plan were adopted, (2) the dates on which Plaintiffs received their Plan benefits, the latest of which was March 18, 2002,[4] or (3) the dates in 2007 when Plaintiffs' administrative appeals were denied by the Plan administrator.
It is important to note that within the Sixth Circuit, an ERISA plaintiff generally must exhaust his administrative remedies prior to bringing a claim in federal court. See, e.g., Ravencraft v. UNUM Life Ins. Co. of America, 212 F.3d 341 (6th Cir.2000); Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410, 418 (6th Cir.1998); Baxter v. C.A. Muer Corp., 941 F.2d 451, 453 (6th Cir.1991).[5] This so-called "exhaustion requirement" is more typically an issue where a defendant benefit plan invokes failure to exhaust as dictating dismissal of a plaintiff's ERISA suit. See, e.g., Fallick, 162 F.3d at 417-18. Here, by contrast, it is Plaintiffs who invoke the exhaustion requirement and argue that no claim could *597 have accrued until exhaustion had occurred.
One approach this Court might take is that urged upon it by Plaintiffs, who argue that because ERISA plan beneficiaries must exhaust their administrative remedies before seeking federal relief, their causes of action cannot (and in theory might never[6]) accrue until their administrative appeals are formally denied by the Plan administrator, and that such formal denial did not occur until March 2007. That is, the statute of limitations would never begin to run until after the exhaustion of administrative remedies, no matter how late such exhaustion occurred.
The Sixth Circuit disagrees with this approach to accrual, however. It has said that "[t]he rule governing when a cause of action accrues is the `clear repudiation' rule. This rule provides that when a fiduciary gives a claimant clear and unequivocal repudiation of benefits[,] that alone is adequate to commence accrual, regardless of whether the repudiation is formal or not." Morrison v. Marsh & McLennan Cos., Inc., 439 F.3d 295, 302 (6th Cir.2006) (holding that a claim first brought in any form outside the relevant limitations period was time-barred). Most noteworthy about this language is the distinction it makes between a "clear and unequivocal repudiation of benefits" and a "formal" repudiation, which indicates that (A) the former is something different, and likely broader, than the latter, and (B) the former is the relevant point in time for purposes of accrual.[7]
Here, there can be no question that Plaintiffs received "clear and unequivocal" notice of the amount of benefits they would be receiving no later than when they received their lump-sum distributions. Any expectation of a sum greater than what was received was "repudiated" at that time, and could not reasonably have been maintained beyond that point. Plaintiffs received no further payments or indication that further payments would be forthcoming during the years between the lump-sum payments and the filing of this action. This Court finds it difficult to imagine how such a set of facts could constitute anything other than a "clear and unequivocal repudiation" of the "benefits" Plaintiffs now claim. Therefore, the Court finds that Plaintiffs' claims accrued at the time when each Plaintiff received his or her lump-sum payment.
B.
The Court must next resolve the seemingly inherent tension between the exhaustion requirement, which, as noted above, is also a well-settled principle within the Sixth Circuit, and the limitations period, which began running at the date of accrual just determined. To do so involves the issue of tolling, which is determined under state law.
*598 The most reasonable reconciliation of these two equally important legal principles is as follows: where the administrative appeals process was commenced (but not yet exhausted) within the limitations period, the running of the limitations period should be tolled until that process is exhausted. Cf. Hoffman v. Central States Se. & Sw. Areas Pension Fund, 1992 WL 336376 (N.D.Ill. May 8, 1992) ("a policy favoring exhaustion of remedies is undermined unless the statute of limitations is tolled during the period of exhaustion"). Under this approach, any federal action that (A) follows an administrative action brought within the period of limitations, exclusive of any tolling period, and (B) is brought within the aggregate of the period of limitations plus any applicable toll, would be timely.[8] The Court emphasizes that a claim brought in federal court following an administrative appeal initially brought outside the relevant limitations period would not be able to seek protection from this rule, which should alleviate the Defendants' concerns regarding unending liability as to each potential plaintiff. See, e.g., Veltri v. Bldg. Serv. 32B-J Pension Fund, 393 F.3d 318, 326 (2d Cir.2004) (noting that tolling "is an extraordinary remedy [which] if applied too liberally . . . threatens to undermine the purpose of statutes of limitations of allowing potential defendants predictability and ultimate repose").
Kentucky courts have never directly considered such a question. However, this Court's resolution creates the most equitable conciliation of the exhaustion and accrual concepts. It prevents the exhaustion requirement from eviscerating statutes of limitations; it is consistent with traditional ERISA principles, which seek to provide a federal forum for claims against employee benefit plans. It assures all of this without exposing employers and benefit plans to potentially limitless liability as to each and every beneficiary. Additionally, it parallels the approach taken in Farrell v. Auto. Club of Mich., 870 F.2d 1129 (6th Cir.1989), where the Sixth Circuit refused to hold that an ERISA claim filed in federal court was time-barred given that the same claim had been timely filed in state court under an apparent good faith (though inaccurate) belief that state court was the proper forum. See also Burnett v. N.Y. Cent. R. Co., 380 U.S. 424, 85 S.Ct. 1050, 13 L.Ed.2d 941 (1965) (holding that a Federal Employers' Liability Act action filed outside the relevant limitations period was not time-barred where the same action had been timely filed in state court before being dismissed based on improper venue); Fox v. Eaton Corp., 615 F.2d 716 (6th Cir.1980) (holding that a Title VII action filed outside the relevant limitations period was not time-barred where the same action had been timely filed in state court before being dismissed for lack of jurisdiction).[9]Farrell's *599 logic, which might be characterized as giving credit to those who in good faith attempt to begin the process of challenging their benefit determinations within the relevant limitations period, reinforces this Court's view that tolling the limitations period for the duration of an administrative appeal filed within the relevant limitation period is appropriate. The Court is convinced that Kentucky courts would adopt such a fair and equitable tolling rule.
Defendant argues that it is unfair to allow a claimant to effectively extend the limitations period by filing a "last-minute" administrative appeal. See, e.g., Farrell, 870 F.2d at 1134 ("the primary purpose of statutes of limitations is to promote fairness to defendants by preventing prosecution of stale claims and the loss of relevant evidence and by encouraging diligence by plaintiffs") (internal citations omitted). Without tolling, however, plan officials could easily "run out the clock" on claimants by delaying an administrative review. Moreover, an administrative appeal filed late need not delay final resolution for an overly lengthy time, as experience shows that administrative appeals can be handled in a timely manner. An ERISA plan could address this particular concern by setting a reasonable time period within which a claimant must file an administrative appeal.[10] Finally, allowing some flexibility in the statute of limitations for seemingly good-faith efforts to comply is more likely to further "the broad remedial purpose of ERISA protection of participants in private pension plans," id, than to result in significantly increased liability for Plan administrators and sponsors.
IV.
This analysis leads the Court to conclude that any Plaintiff who failed at least to begin the process of appealing the determination of his or her benefit payment within five years of the date on which his or her claim accrued is barred from bringing this action. By this Court's reckoning, all Plaintiffs began their administrative appeals in late January of 2007, which means that with the exception of the claims of Plaintiff Donald Corley, all claims of Plaintiffs are time-barred, having begun more than five years from the date of their payments, which were issued between April 1998 and December 2001.
V.
Plaintiffs also argue that their claim for equitable relief under 29 U.S.C. 1132(a)(3) is not barred on the substantive grounds asserted by Defendants. This Court concludes, however, that a recent Sixth Circuit decision bars all Plaintiffs' *600 claims under this section. See West v. A.K. Steel Corp., 484 F.3d 395 (6th Cir.2007). These Plaintiffs have already received their benefits and are not in a position to claim injunctive relief, a remedy available only to others who have not "`cashed out' of their participation in the Plan." Id. at 403.
The parties have spent only a few pages arguing `the merits of Plaintiffs' anti-cut-back claims, and as a result the Court concludes that it is not well enough informed on this issue to rule at this time. The pending motions as to that issue are remanded for reconsideration at a later date.
The Court will enter an order consistent with this Memorandum Opinion.
ORDER
Defendants have moved to dismiss all Plaintiffs' claims in their entirety based on the statute of limitations, and to dismiss all Plaintiffs' claims (A) arising under 29 U.S.C. § 1132(a)(3) and/or (B) alleging reduction of their accrued benefits by amendments to the Plan, for failure to state a claim upon which relief may be granted.
Having considered all arguments in the accompanying memorandum opinion and being otherwise sufficiently advised,
IT IS HEREBY ORDERED that Defendants' motions for summary judgment are SUSTAINED IN PART:
(1) All claims of Plaintiffs Robert H. Fallin, Charles Johnson, Claudette Logsdon, Joseph G. Russelburg, Clarence E. Simon, Jr., William M. Gilmore, Eric Clark, and Steve J. Smith are DISMISSED WITH PREJUDICE.
(2) The claims of Plaintiff Donald W. Corley arising under 29 U.S.C. § 1132(a)(3) are DISMISSED WITH PREJUDICE.
IT IS FURTHER ORDERED that Defendants' motion for summary judgment is DENIED IN PART and Plaintiff Donald W. Corley's claims under 29 U.S.C. § 1132(a)(1)(B) REMAIN.
All other motions are REMANDED at this time. This is NOT a final order.
NOTES
[1] ERISA imposes a statute of limitations (the earliest of six years from the last action constituting part of the breach or three years after the plaintiff acquired actual knowledge of breach; in cases of fraud or concealment, no more than six years after discovery of the breach) on actions alleging a breach of the fiduciary duties required by ERISA, 29 U.S.C. § 1113, but such allegations are not before the Court in this action.
[2] Other provisions of the Plan provide other, though, less convincing reasons for a five-year limitation period. For example, the funds used to pay benefits are held in trust for the beneficiaries. Though "benefits under the Plan [may be provided] by means of an insurance contract or policy, such as a group annuity contract," the ultimate payor of benefits to beneficiaries is the trustee of the funds, a point Plaintiffs have not disputed. Thus this claim could also be characterized, as in Salyers, as "an action for damages for withholding personal property or . . . an action for detaining personal property," Salyers, 642 F.Supp. at 444, either of which would be subject to a five-year statute of limitations under Ky.Rev.Stat. §§ 413.120(5) and 413.120(6), respectively. Therefore even if the applicable statute of limitations for Plaintiffs' so-called "Level Income Option" claim is not that of Ky.Rev.Stat. § 413.120(2), it would certainly be that applicable to lain action for the profits of or damages for withholding real or personal property," as articulated in Ky.Rev.Stat. § 413.120(5), or "[a]n action for an injury by a trustee to the rights of a beneficiary of a trust," as articulated in Ky.Rev.Stat. § 413.120(6), and so under any analysis the Court concludes that the five-year limitations period in Ky.Rev.Stat. § 413.120 is the "most clearly analogous state statute of limitations" for all of Plaintiffs' claims.
[3] In Meade, Ohio had no statute equivalent to Ky.Rev.Stat. § 413.120(2). The Court's choices were whether to apply Ohio's statute of limitations regarding written contracts or to find instead that no analogous statute of limitations existed and to apply Ohio's statute of limitations regarding non-contractually-based injuries. Meade, 966 F.2d at 194. In Santino, the court similarly did not have before it the possibility of choosing to apply a statute such as Ky.Rev.Stat. § 413.120(2). Santino, 276 F.3d at 776.
[4] All Plaintiffs reportedly received their benefits in a lump sum, rather than spread over a number of years.
[5] Though exhaustion is generally a prerequisite to bringing suit in federal court, it is not always required. See, e.g., Costantino v. TRW, Inc., 13 F.3d 969, 974 (6th Cir.1994) (acknowledging exceptions to [t]raditional exhaustion principles, such as when resort to the administrative route is futile or the remedy inadequate.") (internal citations omitted). Yet regardless of when or whether exhaustion is required, Costantino certainly does not stand for the proposition that the prospective plaintiff has the entire burden of determining whether and when the exhaustion requirement applies. Nor does it imply that it is appropriate to use the exhaustion requirement against a plaintiff in the manner urged by Defendant, i.e. by punishing a plaintiff for guessing incorrectly as to whether exhaustion is required.
[6] It is noteworthy that under the terms of the Plan, there appears to be no limitation period within which benefit claims must be brought before the Plan's administrator. See Plaintiffs' Response, Exhibit K, at 61.
[7] In arriving at this conclusion, the Sixth Circuit cited to Bennett v. Federated Mutual Ins. Co., 141 F.3d 837, 839 (8th Cir.1998) ("an ERISA beneficiary's cause of action accrues before a formal denial, and even before a claim for benefits is filed when there has been a clear repudiation by the fiduciary which is clear and made known to the beneficiary") (internal quotations and citations omitted), and. Wilkins v. Hartford Life, 299 F.3d 945, 949 (8th Cir.2002) ("When an ERISA claim is governed by a state statute of limitations the cause of action accrues, for limitations purposes, when the plan administrator formally denies the claim for benefits, unless there was a repudiation by the fiduciary which is clear and made known to the beneficiary").
[8] Defendant argues that tolling the statute of limitations during the time period within which administrative appeals brought within the limitations period are exhausted (or otherwise extending the limitations period) "would mean that an administrative application for benefits first filed 20 years after Plaintiffs' [sic] admittedly received their lump sum pension distributions would render any subsequent ERISA court challenge as timely. . . . [and] would also mean that [Plaintiffs] are in sole control of the commencement of the running of [the] limitations period, since they alone are in control when, and even if, they will file an administrative claim for benefits." Defendant's Reply at 10. The Court rejects this characterization, which ignores the Court's critical point that tolling is only justified where a plaintiff has taken action to commence his administrative appeal within the relevant limitations period.
[9] Contrary to Defendant's assertions at oral argument, Wallace certainly does not foreclose the approach that this Court adopts. While Wallace does indeed note that state law is generally looked to for tolling rules, Wallace, ___ U.S. at ___, 127 S.Ct. at 1098, the Supreme Court seemed primarily troubled by the lack of authority, at the state level or elsewhere, for the idea of tolling "in even remotely comparable circumstances" to those before it in Wallace, and based on this lack of authority, the Supreme Court was unwilling to craft a tolling provision where doing so would create significant uncertainty. Id. at 1099.
Here, in contrast, the Sixth Circuit has evinced a willingness to toll statutes of limitations in analogous circumstances, and the clarity of the rule (which simply asks whether administrative appeals were commenced within the relevant statutory period), should minimize any concern' that tolling will create the sort of confusion feared by the Supreme Court in Wallace. Therefore, the fact that Kentucky courts have not considered this issue should not prevent this Court from finding that a narrow allowance for tolling is appropriate.
[10] As noted above, this particular plan contains no such internal limitation. Cf. Morrison, 439 F.3d at 302 (upholding a limitations period articulated in an ERISA plan where it was reasonable) (internal citations omitted).
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235 F.2d 112
Benjamin F. BIRDWELL, Petitioner,v.COMMISSIONER OF INTERNAL REVENUE, Respondent.
No. 15974.
United States Court of Appeals Fifth Circuit.
June 28, 1956.
Herman M. Baginsky, Cobb & Wright, New Orleans, La., for petitioner-appellant.
Charles K. Rice, Asst. Atty. Gen., Dept. of Justice, Lee A. Jackson, Atty., Dept. of Justice, John Potts Barnes, Chief Counsel, Internal Revenue Service, Charles E. Lowery, Sp. Atty., Internal Revenue Service, Harry Baum, Atty., Dept. of Justice, Stanley P. Wagman, Washington, D. C., for respondent.
Before HUTCHESON, Chief Judge, and RIVES and BROWN, Circuit Judges.
PER CURIAM.
1
When this cause was submitted to the Tax Court on a stipulation of the facts, the question presented for decision and argued there was whether, despite the contrary holdings of the courts of appeals,1 the Tax Court should adhere to its prior ruling that payments of the kind in question were not "periodic payments" within the meaning of Section 22(k) I.R.C.1939, 26 U.S.C.A.
2
With a constancy and fidelity deserving of a better cause and fate, the tax court judge stood fast and, declaring in an unreported opinion, "The question is answered in the affirmative by John A. Isfalt, 24 T.C. 407 [497], from which this proceeding is indistinguishable in principle", he sustained the commissioner's determination.
3
Declaring that by failure to include in his assignments of error the commissioner's penalty determinations, petitioner was foreclosed from contesting them, the Tax Court, going on to say that on their merits the contentions with respect to them must be rejected, sustained these determinations too.
4
Here, in a brief, discussing and analyzing the stipulated facts and marshaling the authorities in support, petitioner urges upon us that the decision was ill-advised throughout and must be reversed.
5
Stating in his brief, "In view of the contrary holdings of the courts of appeals, the commissioner no longer relies upon" the ground put forward by the tax court judge for his decision, that the payments were not periodic, and, seizing, as a ground for affirmance, upon the verbal trial balloon2 tentatively sent up by the judge, but expressly rejected by him as a ground for his decision, a ground affirmatively shown by the stipulation to be contrary to the record, the commissioner urges upon us that the order should nevertheless be affirmed.
6
We cannot at all agree. As the commissioner correctly states in his brief, "the facts dispositive of whether the payments in question were made subsequent to the decree have been stipulated". The stipulation declares in paragraph 5(D), (I), (J), and (K), that the properties were transferred and the payments made to his wife, "pursuant to the agreement of the parties and the judgment of the Jefferson Circuit Court in the divorce proceedings", and there was not, as of course there could not be without amending the stipulation or setting it aside, any proof or sound basis for a conclusion to the contrary.
7
Besides, the deficiencies were determined by the commissioner, and the case was tried and determined below upon the theory which the stipulation of the parties and the common sense view of what the parties must for their own protection have done inescapably shows to have been correct, that deed and payments were made pursuant to the decree, and it is not open to the commissioner to have another try at it on another theory.
8
The decision of the tax court was wrong throughout. It is reversed with directions to disallow the deficiencies and penalties claimed. Parturient montes nascetur ridiculus mus.
9
Reversed with directions.
Notes:
1
Baker v. Commissioner, 2 Cir., 205 F.2d 369; Davidson v. Commissioner, 9 Cir., 219 F.2d 147; Myers v. Commissioner, 9 Cir., 212 F.2d 448; Prewett v. Commissioner, 8 Cir., 221 F.2d 250; Scofield v. Greer, 5 Cir., 185 F.2d 551
2
"Because it is not discussed by the parties we are reluctant to rest the present result on another phase of the matter. But the fact seems to be that the payments of cash and conveyance of property took place on Dec. 6 and Dec. 7, 1950, whereas the decree was not entered until Dec. 19. The statute expressly requires that, to be deductible, payments must be `received subsequent to such decree.' In fact, the burden of an affirmative showing in this respect rested upon petitioner. Smith's Est[ate] v. Commissioner [3 Cir.], 208 F.2d 349. Certainly this has not been discharged. In any event, for the reason first discussed we reject the assertion that any payments under the divorce decree were deductible." (Emphasis supplied.)
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United States Court of Appeals
For the First Circuit
No. 15-1378
UNITED STATES,
Appellee,
v.
EDGAR ACEVEDO,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]
Before
Howard, Chief Judge,
Souter, Associate Justice,*
and Lipez, Circuit Judge.
Lenore Glaser, with whom Law Office of Lenore Glaser was on
brief, for appellant.
Randall E. Kromm, Assistant United States Attorney, with whom
Carmen M. Ortiz, United States Attorney, was on brief, for
appellee.
June 2, 2016
* Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
SOUTER, Associate Justice. Edgar Acevedo appeals the
below-Guidelines sentence he received after pleading guilty to
conspiracy to commit kidnapping. We affirm.
I
The indictment charged Acevedo with violating 18 U.S.C.
§ 1201(c) by conspiring with Alfred Vazquez and Alberto Moreno,
among others, to kidnap one John Doe and hold him for ransom. It
alleged that the group seized Doe at gunpoint in Boston and that
Vazquez, Moreno, and Acevedo later met at Vazquez's house to hide
the ransom money.
When Acevedo pleaded guilty, he acknowledged that he had
read the indictment and did not object to its description of the
offense. The Government set out what it would have proven if the
case had gone to trial, and Acevedo confirmed that he did not
dispute anything the Government said. According to the Government,
two men pulled Doe from a car in Boston, one of them, Moreno, armed
with a gun. They dragged Doe into a nearby van, driven by Acevedo,
and sped off to Lawrence. Vazquez subsequently called Doe's wife
to demand a ransom. After Doe had been held for several days at
a house in Lawrence, he was rescued by the FBI. Three witnesses,
the Government explained, would have identified Acevedo as a member
of the group that kidnapped and held the victim.
Following the guilty plea, the Probation Office prepared
a Presentence Report (PSR) based on information developed by the
- 2 -
investigating agents and four cooperating co-conspirators. Among
the additions to the story were that Vazquez, who dealt in drugs
but also ran an auto shop, was hired by another drug dealer to
kidnap Doe (whom the PSR identified as JP) to collect a drug debt.
It was Vazquez who recruited Moreno, Acevedo, and others to plan
and do the kidnapping. Acevedo was a friend of Moreno's and at
the time was living with him while working at Vazquez's auto shop.
To commit the crime, according to the PSR, Acevedo
stopped the van behind a car in which JP was riding, which was
blocked by another car in front. Moreno and the other conspirator
jumped out of the van, pulled JP from the car at gunpoint, and
shoved him into the van, which headed for Lawrence and an
unoccupied house where Vazquez had once lived. Vazquez told JP
that he could pay the drug debt and be released, or fail to pay
and he and his family would be killed. In a series of phone calls
over the next few days, Vazquez demanded the money from JP's wife.
In the PSR account, Acevedo was present at various times in the
house where JP was being held.
The PSR reported that JP's family called the FBI, which
led the recovery effort. Agents coated marked ransom money with
fluorescent powder that is normally invisible but glows in black
light. After a ransom drop observed by the FBI, Vazquez and Moreno
brought some of the marked bills to Moreno and Acevedo's apartment.
- 3 -
Thence the three went to Vazquez's residence, where agents arrested
Vazquez and Acevedo, whose hands glowed under a black light.
The agents rescued JP and collected further evidence.
According to the PSR, cellphone analysis revealed that, during the
period beginning three weeks before the kidnapping and ending one
day after JP's recovery, Vazquez's and Acevedo's phones were in
contact 114 times for a total of some three hours. Over the same
period, Moreno's and Acevedo's phones were in contact 89 times for
a total of about an hour and a half.
The PSR calculated a total offense level of 37 under the
U.S. Sentencing Guidelines Manual § 2A4.1(a), starting from a base
offense level of 32 for conspiracy to commit kidnapping. To this,
the PSR added a six-level enhancement under § 2A4.1(b)(1) for
making a ransom demand and a two-level enhancement under
§ 2A4.1(b)(3) for using a firearm; the PSR then reduced the offense
level by three under § 3E1.1 for acceptance of responsibility.
The resulting offense level, coupled with a criminal history score
of zero, yielded a Guidelines imprisonment range of 210 to 262
months.
Acevedo filed objections to the PSR, some of them going
to particular details, such as his involvement in planning the
kidnapping. He said that he drove a tow truck for Vazquez's auto
shop, so there was nothing unusual about being told to drive into
Boston on the day of the kidnapping, and, by his account, he did
- 4 -
not learn that he was there for a kidnapping until he was already
in the city. He also disputed that he was present in the house
where JP was held, and that he handled the ransom money. He thus
urged that he deserved a two-level reduction because of his "minor
role" in the conspiracy.
Acevedo objected further to the PSR's offense-level
calculation for its inclusion of the ransom-demand enhancement, on
the ground that this was impermissible "double counting," a ransom
demand being an element of the substantive kidnapping offense.
And he also contested the firearm enhancement on the ground that
he could not reasonably have foreseen that any of his co-
conspirators would possess a gun.
Both Acevedo and the Government submitted sentencing
memorandums, Acevedo's reiterating his objections to the PSR. He
did not, however, submit any relevant evidentiary support for his
assertions1 or request an evidentiary hearing. The Government,
for its part, endorsed the PSR and filed a transcript of grand
jury testimony and a police report supporting the claim that
cooperating witnesses identified Acevedo at both a planning
meeting in advance of the kidnapping and the house where JP was
1Among the documents attached to his memorandum were private
investigatory reports indicating that some of the ransom money may
not have made it to Moreno and Acevedo's apartment. Nothing in
the reports, however, calls into question the PSR's statement that
some of the money was, in fact, brought to the apartment.
- 5 -
held. The Government requested a 210-month sentence, at the bottom
of the Guidelines range.
At sentencing, the district court overruled Acevedo's
objections and adopted the Government's and Probation Office's
positions. The court (i) ruled that a ransom demand was not
required for a conviction under the statute and thus was an
additional fact that could be the basis of an enhancement, (ii)
found that Acevedo could reasonably have foreseen that a gun would
be used, and (iii) rejected Acevedo's request for a minor-role
reduction: even without considering the contested assertions that
Acevedo guarded JP and handled the ransom money, the court
determined that driving the abduction van was not a "minor role."
The PSR's Guidelines range of 210 to 262 months was accordingly
adopted.
Nevertheless, the district court found that a Guidelines
sentence was longer than necessary to satisfy the sentencing
objects under 18 U.S.C. § 3553(a)(2) and imposed a below-Guidelines
term of 192 months. It is from this sentence that Acevedo appeals.
II
Acevedo first argues that the district court failed to
resolve factual disputes that bore on his sentence, in violation
of Federal Rule of Criminal Procedure 32(i)(3)(B) ("[T]he court
must--for any disputed portion of the presentence report or other
controverted matter--rule on the dispute or determine that a ruling
- 6 -
is unnecessary either because the matter will not affect
sentencing, or because the court will not consider the matter in
sentencing . . . ."). Acevedo says that this rule required the
district court to hold a hearing to resolve the factual disputes
he raised. "We review a district court's compliance with Fed. R.
Crim. P. 32 de novo," United States v. González-Vélez, 587 F.3d
494, 508 (1st Cir. 2009), and "[w]e review the court's denial of
an evidentiary hearing for abuse of discretion," United States v.
Jimenez Martinez, 83 F.3d 488, 498 (1st Cir. 1996).
There was no error here. As we have said, "The defendant
may object to facts in the PSR, but 'if his objections to the PSR
are merely rhetorical and unsupported by countervailing proof, the
district court is entitled to rely on the facts in the PSR.'"
United States v. Prochner, 417 F.3d 54, 66 (1st Cir. 2005)
(alterations omitted) (quoting United States v. Cyr, 337 F.3d 96,
100 (1st Cir. 2003)). We have also explained that "the failure to
ask the district court to convene an evidentiary hearing ordinarily
spells defeat for a contention that one should have been held."
United States v. Cheal, 389 F.3d 35, 45 (1st Cir. 2004) (quoting
United States v. Tardiff, 969 F.2d 1283, 1286 (1st Cir. 1992)).
Here, Acevedo neither made a relevant evidentiary proffer nor
requested a hearing to present it before or during his sentencing.
Even so, he was treated more favorably than the Guidelines
calculation called for, and even in reaching a Guidelines range
- 7 -
the district court declined to consider certain disputed facts.
In any event, as explained below, there is ample support not only
in the PSR on the authority of Prochner but elsewhere in the record
for the court's sentencing decisions.
III
Acevedo next contends that the trial court made three
errors in calculating his offense level. "We review the district
court's interpretation of the guidelines de novo and its fact
finding for clear error." United States v. Reyes-Rivera, 812 F.3d
79, 85 (1st Cir. 2016).
A
Acevedo says that the district court erred in applying
the ransom-demand enhancement. His challenge has both a legal and
a factual component.
1
According to Acevedo, the ransom-demand enhancement
amounted to impermissible double counting because a ransom demand
was already baked into his conviction. His conclusion, however,
does not follow from his premise. It is true that his conviction
for conspiracy to kidnap includes having the object of demanding
ransom; this was charged in the indictment and he pleaded guilty
without limitation. But the relevant question is whether the
ransom demand is an element of the crime of kidnapping per se, or
- 8 -
is a fact subject to being added to the basic offense and is so
treated by the Guidelines. It clearly is the latter.
As the trial judge correctly read the pertinent portion
of the statute, it is an offense to kidnap not only for ransom but
for "reward or otherwise." 18 U.S.C. § 1201(a). Obtaining ransom
is thus only one among other possibly illicit objectives of
kidnapping numerous enough to justify the catch-all of "otherwise"
to cover their conceivable variety. There is consequently no
textually based limitation on treating a kidnapping for ransom
more severely than some or all other sorts, and this is just what
the Guidelines do. Not only that, but the applicable provision,
§ 2A4.1, sets a base offense level of 32, U.S. Sentencing
Guidelines Manual § 2A4.1(a), and that provision (as Acevedo
himself concedes) applies to crimes other than kidnapping, many of
which do not involve payment of ransom, see id. § 2A4.1 cmt.
statutory provisions. Hence, the Guidelines separately provide
for a six-level increase "[i]f a ransom demand . . . was made."
Id. § 2A4.1(b)(1). The Guidelines thus recognize that "[f]ederal
kidnapping cases generally encompass three categories of conduct,"
only one of which involves "ransom," and accordingly provide "[a]n
enhancement . . . when the offense is committed for ransom." Id.
§ 2A4.1 cmt. background.
Treating the ransom objective as justification for
enhancement is therefore not double counting, but merely and
- 9 -
unremarkably cumulative, based on this distinct set of facts, and
the law's subtle tolerance for treating one fact as significant
for multiple sentencing objectives, see United States v. Fiume,
708 F.3d 59, 61 (1st Cir. 2013), is not even implicated here.
2
Next, Acevedo argues that even if the object of demanding
ransom is not barred as double counting, there was no evidence
that he knew about the ransom demand or that it was reasonably
foreseeable to him. See U.S. Sentencing Guidelines Manual
§ 1B1.3(a)(1)(B)(iii) (conspiracy defendant's offense level can be
determined on basis of co-conspirators' acts that were "reasonably
foreseeable in connection with th[e] criminal activity").
The district court did not clearly err in rejecting
Acevedo's argument. To begin with, the indictment to which Acevedo
pleaded expressly charged him with conspiracy to kidnap for ransom,
and the ransom demand was mentioned without objection during the
plea colloquy. But even setting that to one side, the nature of
this kidnapping shows how reasonably foreseeable the ransom demand
must have been to Acevedo. To be sure, certain types of kidnapping
are inherently unlikely to involve ransoms. This would be true,
for example, where a parent absconds across state lines with his
child in violation of a custody order. The instant gangland
kidnapping, by contrast, has the marks of one done for gain.
Seizing an individual in broad daylight on a city street would be
- 10 -
an inept way of gaining control over a victim one intends to kill;
a more likely objective would be to profit.
B
Foreseeability is the crux of Acevedo's further claim
that he could not reasonably have foreseen Moreno's use of a gun
and should not have received the firearm enhancement. The
Guidelines indicate that reasonable foreseeability can turn on
"the nature of the offense" alone. See id. § 1B1.3 cmt. n.3(D).
While we need not, and do not, hold that use of a firearm
is reasonably foreseeable in every kidnapping, it was in this one.
The abduction was carried out by the orchestrated seizure of a
victim from a car, where a struggle was obviously to be avoided,
and where there was some risk that bystanders might try to
interfere. A gun would promise efficiency, not only in the seizure
itself, but afterward in controlling JP, since the plot called for
him to be driven some distance and held for ransom. This ready
foreseeability of a gun as a control mechanism is confirmed by the
undisputed record that Moreno wielded the gun almost immediately
upon leaving the van that Acevedo was driving. Hence, it was
hardly clear error to apply the enhancement.
C
Acevedo's next assignment of error goes not to applying
an enhancement, but to refusing to reduce his offense level under
Guidelines § 3B1.2(b) on the ground that he was only "a minor
- 11 -
participant" in the kidnapping, the sort of reduction intended for
"a defendant who plays a part in committing the offense that makes
him substantially less culpable than the average participant in
the criminal activity," id. § 3B1.2 cmt. n.3(A). "To qualify for
this adjustment, a defendant must show that he is both less
culpable than most of his [confederates] in the particular criminal
endeavor and less culpable than the mine-run of those who have
committed similar crimes." United States v. Meléndez-Rivera, 782
F.3d 26, 28 (1st Cir. 2015).
"[B]attles over a defendant's role in the offense 'will
almost always be won or lost in the district court,'" id. at 29
(quoting United States v. Graciani, 61 F.3d 70, 75 (1st Cir.
1995)), and the district court's judgment in this case is
defensible. When the district court said there was nothing "minor"
about driving the abduction vehicle, that was a fair comment on
Acevedo's undisputed actions in driving Moreno and another man to
the scene of the seizure and transporting the abductors and victim
to the hideaway, all of which made him a central actor in the
elements of the crime charged.
IV
Finally, Acevedo complains of undue disparity between
his sentence and the sentences received by his co-conspirators, in
violation of 18 U.S.C. § 3553(a)(6) ("The court, in determining
the particular sentence to be imposed, shall consider the need to
- 12 -
avoid unwarranted sentence disparities among defendants with
similar records who have been found guilty of similar
conduct . . . ."). We review the district court's application of
§ 3553(a) considerations for abuse of discretion. See, e.g.,
United States v. Rodríguez-Lozada, 558 F.3d 29, 45 (1st Cir. 2009)
This concern about sentencing disparity "is primarily
aimed at national disparities, rather than those between co-
defendants." Reyes-Rivera, 812 F.3d at 90 (internal quotation
marks omitted) (quoting United States v. Marceau, 554 F.3d 24, 33
(1st Cir. 2009)). Thus, while avoidance of disparities among co-
defendants may be considered, it would be too glib to argue that
a defendant is "entitled to a lighter sentence merely because his
co-defendants received lighter sentences" "[u]nless two
identically situated defendants receive different sentences from
the same judge, which may be a reason for concern." Id. (internal
quotation marks omitted) (quoting United States v. Rivera-
Gonzalez, 626 F.3d 639, 648 (1st Cir. 2010)). In most cases, "the
myriad factors that come into play at sentencing make it difficult
to isolate identically situated co-defendants. We have noted, for
example, the permissible distinction . . . between those who
cooperate and those who do not . . . ." United States v. Reyes-
Santiago, 804 F.3d 453, 467 (1st Cir. 2015) (citations and internal
quotation marks omitted).
- 13 -
This distinction is apropos here, and fatal to Acevedo's
claim. He fails even to try to show that he and his co-defendants
were identically situated, and he simply ignores the fact that he
did not cooperate, while many of his co-defendants did.
V
The district court's judgment is AFFIRMED.2
2 Our affirmance of the district court's judgment forecloses
Acevedo's argument that his case should be remanded to a different
judge.
- 14 -
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REVISED - August 4, 1999
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 98-50810
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
SERGIO ALBERTO ORTEGON-UVALDE, a.k.a. Sergio Garcia-Leal,
Defendant-Appellant.
Appeal from the United States District Court
for the Western District of Texas
July 1, 1999
Before SMITH, DeMOSS, and STEWART, Circuit Judges.
CARL E. STEWART, Circuit Judge:
After a bench trial, Defendant-Appellant Sergio Alberto Ortegon-Uvalde (“Ortegon”) was
convicted of illegal reentry into the United States, after having been deported after a conviction for
an aggravated felony, in violation of 8 U.S.C. § 1326(b)(2) (1994). On appeal, Ortegon advances
two challenges to his conviction. First, he contends that the government must prove specific intent
when prosecuting a violation of § 1326. Second, he argues that he was enti tled to a defense of
entrapment-by-estoppel because he was misled about the time that he had to remain absent from the
United States. For the reasons set forth below, we decline to accept Ortegon’s arguments and thus
affirm.
FACTUAL & PROCEDURAL BACKGROUND
On June 6, 1989, Ortegon was convicted in state court of an aggravated felony offense –
delivery of cocaine – and sentenced to eight years’ imprisonment. After a hearing, Ortegon was
deported from the United States to Mexico on January 29, 1990.
On June 23, 1997, Special Agent Jan Baumgardner o f the Immigration and Naturalization
Service (“INS”) learned that Ortegon was in the Bell County Jail in Belton, Texas. Baumgardner
interviewed Ortegon, and, after a records check, it was learned that Ortegon had been previously
deported. On February 10, 1998, Ortegon was indicted on one count of illegal reentry into the
United States in violation of § 1326(b)(2). On May 18, he waived his right to a trial by jury and
proceeded to a bench trial. At trial, Ortegon stipulated to all of the underlying facts supporting the
offense: he conceded that he had been previously convicted of a drug offense in 1989, that he had
been deported in 1990 to Mexico, and that he was found in the United States, without permission of
the Attorney General, in June 1997.
The major issue at trial was whether the warning given to Ortegon when he was deported
permitted him the defense of entrapment-by-est oppel. The defendant testified that when he was
deported in 1990, he “was told”1 that he could not return to the United States until 1995. A written
warning provided Ortegon at the time of his deportation advised:
This is a warning. Please read carefully.
It has been ordered that you be deported to Mexico. You will be informed
when departure arrangements are complete. If needful, we will assist you as
much as possible arranging your personal affairs for departure.
Should you wish to return to the United States you must write this office or
the American Consular Office nearest your residence abroad as to how to
obtain permission to return after deportation. By law (Title 8 of the United
States Code, Section 1326) any deported person who within five years returns
without permission is guilty of a felony. If convicted he may be punished by
imprisonment of not more than two years and/or a fine of not more than
$1,000.00.2
Ortegon maintained that he had relied on this language and that he believed he could return to the
United States after 1995. On direct examination, he insisted that he had returned to the United States
1
Although Ortegon used the words “was told,” he does not indicate who told him this. It appears
that he relied on the warnings in the papers from the INS.
2
Both parties agree that this language is incorrect. Under §1326, it is a crime to reenter the United
States at any time after deportation without permission, and the actual potential sentence is 20 years.
2
after 1995. On cross-examination, however, Ortegon admitted that he had actually been in the United
States continuously since 1991.3
Before the trial and during closing arguments, Ortegon presented a motion for a judgment of
acquittal. The court took the matter under advisement, but on May 20, 1998, it found Ortegon guilty
of violating § 1326 and sentenced him to 92 months’ imprisonment and a three-year term of
supervised release. Ortegon filed a timely notice of appeal.
DISCUSSION
I
Ortegon first argues that this court should require the government to prove specific intent
under § 1326. He admits that intent is not specifically set forth in t e statute. He points out,
h
however, that criminalizing conduct normally requires some level of intent. He maintains that cases
in which no mens rea is required are limited generally to statutes regulating dangerous devices or
harmful waste materials. Ortegon alleges that the crime with which he was charged is not a public
welfare offense, in which the interest of society as a whole may outweigh the need for the individual
to act with specific intent. Additionally, Ort egon points out that this is a crime subject to harsh
penalties, which should justify a specific intent requirement. Finally, Ortegon argues that people
would not normally expect that punishment for an illegal border crossing could mean 20 years in
prison. Given these factors and his perception that the INS continues to misstate the elements of
illegal reentry to deported aliens, Ortegon contends that a specific intent requirement should be
imposed.
Ortegon’s argument is not without force; indeed, one circuit has adopted his view. See
United States v. Anton, 683 F.2d 1011 (7th Cir. 1982). Every other circuit to consider the issue,
3
Ortegon was evasive with the trial court when he was asked when he had returned to the United
States during his bench trial. He first stated that he had not returned to the United States until after
1995. After reasserting this on cross-examination, he was asked whether he understood the meaning
of perjury. Ortegon then stated that he did not see why he should have to answer whether he had
returned to the United States before or after 1995 because he was not questioned by the INS until
1997. Only after the court ordered him to answer did he admit that he had returned before 1995.
3
however, has taken the contrary position. See United States v. Gonzalez-Chavez, 122 F.3d 15, 17-
18 (8th Cir. 1997); United States v. Henry, 111 F.3d 111, 114 (11th Cir. 1997); United States v. Soto,
106 F.3d 1040, 1041 (1st Cir. 1997); United States v. Ayala, 35 F.3d 423, 426 (9th Cir. 1994); United
States v. Espinoza-Leon, 873 F.2d 743, 746 (4th Cir. 1989); United States v. Hernandez, 693 F.2d
996, 1000 (10th Cir. 1982); United States v. Newton, 677 F.2d 16, 17 (2nd Cir. 1982); United States
v. Hussein, 675 F.2d 114, 116 (6th Cir. 1982). In fact, as Ortegon concedes, a panel of this circuit has
confronted this very issue and adopted the majority approach. See United States v.
Trevino-Martinez, 86 F.3d 65, 68 (5th Cir. 1996). In Trevino-Martinez, we held that a showing of
specific intent was not required to find an individual guilty under § 1326. See 86 F.3d at 68; see also
United States v. Asibor, 109 F.3d 1023, 1036 (5th Cir. 1997). As a panel, we are without authority
to overrule the decision of another panel of this circuit. See United States v. Taylor, 933 F.2d 307,
313 (5th Cir. 1991). Accordingly, Ortegon’s effort to change the law of this circuit is appropriate only
in a motion for rehearing en banc.
II
Ortegon also argues that he was entitled to claim the defense of entrapment-by-estoppel. In
essence, he contends that the government’s warning led him mistakenly to believe that he could
reenter the United States after five years without fear of prosecution. Because he was charged with
illegal entry in 1997, more than five years after his 1990 deportation, Ortegon submits that his
prosecution was invalid. Because the district court erred in considering the fact that he entered the
country before 1995, Ortegon maintains that he should be acquitted of his crime and released from
his sentence. He further maintains that the government cannot rely on the fact that he entered the
United States before 1995 because he was not charged with illegal conduct in those years. Finally,
he argues, without support, that while a citizen of the United States might be presumed to know and
understand the laws of this country, no such presumption should apply to a citizen of Mexico.4
4
Ortegon cites United States v. Spires, 79 F.3d 464 (5th Cir. 1996), for this proposition. While
Spires discusses the defense of entrapment-by-estoppel, it does not raise the issue of presumed legal
knowledge. See id. at 466-67.
4
“The [entrapment-by-estoppel] defense applies when a government official tells a defendant
that certain conduct is legal and the defendant commits what would otherwise be a crime in
reasonable reliance on the official’s representation.” United States v. Baptista-Rodriguez, 17 F.3d
1354, 1368 n.18 (11th Cir. 1994). “The estoppel argument was held to establish a valid defense in
Cox v. Louisiana, 379 U.S. 559 . . . (1965) and Raley v. Ohio, 360 U.S. 423 . . . (1959).” United
States v. Bruscantini, 761 F.2d 640, 641 (11th Cir. 1985).5 The district court considered this defense
when it took Ortegon’s case under advisement. It looked to the fact that Ortegon returned to the
United States shortly after he was deported and did not again return to Mexico before his 1997
incarceration. The co urt found that Ortegon’s actions evidenced “extreme bad faith” because he
returned to the United States so early despite the warning that was given him.
We review de novo the district court's application of constitutional standards to Ortegon’s
claim. See United States v. Perez-Torres, 15 F.3d 403, 406 (5th Cir. 1994) (citing United States v.
Shaw, 920 F.2d 1225, 1228 (5th Cir. 1991)). This is not the first time we have had to consider the
entrapment-by-estoppel defense in the context of erroneous INS warnings. In Perez-Torres, the
defendant argued that his sentence of 60 months was improper because the INS warning mistakenly
stated t hat the potential sentence for illegal reentry was two years. See 15 F.3d at 405-06. We
observed there that “‘[e]stoppel is an equitable doctrine.’” Id. at 407 (quoting Heckler v. Community
Health Services of Crawford County, Inc., 467 U.S. 51, 59 & n.12 (1984)). Consequently, “he who
comes into equity must come with clean hands, and thus the doors of equity are closed to one tainted
with inequitableness or bad faith relative to the matter in which he seeks relief, however improper may
5
In Raley, the petitioners were convicted of contempt for refusing to answer questions before the
Unamerican Activities Commission of the State of Ohio. See Raley, 360 U.S. at 424. The
Commissioner advised them, contrary to Ohio law, that they had a right to claim their privilege
against self incrimination. See id. at 425. The Supreme Court held that it was “an indefensible sort
of entrapment by the State -- convicting a citizen for exercising a privilege which the State had clearly
told him was available to him.” Id. at 425-26.
In Cox, the petitioner had received permission to hold a demonstration across the street from a
courthouse but was later arrested for refusing to disperse. See 379 U.S. at 570-71. The Court held
that a conviction under such circumstances violated the Due Process Clause. See id. at 571-72.
5
have been the behavior of the other party.” Id. (internal quotation marks omitted) (quoting Precision
Instrument Mfg. Co. v. Automotive M.M. Co., 324 U.S. 806 (1945)).
Ortegon cannot avail himself of the entrapment-by-estoppel defense because he did not
actually rely on the INS’ erroneous warning. Ortegon admitted on cross-examination that he
reentered the United States within five years and remained undetected until he was discovered on
June 23, 1997. Ortegon’s actions in returning to the United States within five years of his deportation
contradict his assertion that he reasonably relied on the INS warning, and critically undermines his
argument that he thought he could return after five years without committing a felony. Moreover,
we decline Ortegon’s invitation to introduce a perverse incentive for deported persons to remain in
the United States in violation of their deportation order simply because they manage to go undetected
outside the “ambiguous” five years expressed in the warning. Accordingly, we reject Ortegon’s
second basis for relief as well.
CONCLUSION
For the reasons set forth above, we AFFIRM Ortegon’s conviction.
6
| {
"pile_set_name": "FreeLaw"
} |
934 P.2d 421 (1997)
325 Or. 81
Howard G. SCHULTZ and Ann C. Schultz, Petitioners on Review,
v.
BANK OF THE WEST, C.B.C., Respondent on Review, and
Robert W. Muir and June E. Muir, Respondents on Review, and
John H. Gateley and David E. Gateley, dba Gateleys' Fairway Motors, Defendants.
CC 93CV0201; CA A85556; SC S42658.
Supreme Court of Oregon.
Argued and Submitted May 3, 1996.
Decided March 27, 1997.
*422 Stephen Mountainspring of Dole, Coalwell & Clark, P.C., Roseburg, argued the cause and filed the briefs for petitioners on review.
Frank C. Rote, III of Brown, Hughes, Bird, Lane & Rote, Grants Pass, argued the cause and filed the brief for respondent on review Bank of the West, C.B.C.
Thomas J. Peterson, Eugene, argued the cause for respondents on review Robert W. Muir and June E. Muir.
Before CARSON, C.J., and GILLETTE, VAN HOOMISSEN, FADELEY, GRABER and DURHAM, JJ.[*]
GILLETTE, Justice.
The issue in this case is whether a consumer, who purchases a used motor home from a dealer who was selling the motor home on consignment, acquires that vehicle free of a creditor's prior perfected security interest in it. For the reasons that follow, we hold that the consumer does take the motor home free of the security interest.
The facts are undisputed. In 1987, defendants (the Muirs) bought a motor home. In 1988, the Muirs created, and defendant Bank of the West (the Bank) acquired and perfected, a security interest in the motor home. In 1992, the Muirs entered into an agreement with Gateleys' Fairway Motors (Gateleys) by which Gateleys would sell the motor home on consignment. Gateleys was in the business of selling motor homes. Gateleys sold the motor home to plaintiffs, the Schultzes. Plaintiffs did not know that the motor home was being sold on consignment or that a security interest was attached to it. Gateleys failed to remit any of the sale money to the Muirs and, subsequently, filed for bankruptcy.
After learning of the Bank's security interest, plaintiffs brought the present action, seeking a declaration that they owned the motor home free of the security interest. The trial court granted summary judgment in plaintiffs' favor. The Bank appealed, and the Court of Appeals reversed the trial court, holding that the Bank's security interest remained in force. Schultz v. Bank of the West, 135 Or.App. 359, 897 P.2d 1204 (1995). We allowed plaintiffs' petition for review and now reverse the decision of the Court of Appeals.
Whether or not a buyer takes goods free of a prior perfected security interest is governed by Article 9 of the Uniform Commercial Code (the UCC), as codified in ORS chapter 79. The specific question for decision here is whether plaintiffs are entitled to the special protection afforded to consumers by UCC section 9-307 (codified as ORS 79.3070(1)). That section provides in part:
"A buyer in ordinary course of business as defined in ORS 71.2010(9) * * * takes free of a security interest created by the seller even though the security interest is perfected * * *."
The cross-referenced section, ORS 71.2010(9), defines "buyer in ordinary course." It provides:
"`Buyer in ordinary course of business' means a person who in good faith and without knowledge that the sale to the person is in violation of the ownership rights or security interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker."
If plaintiffs can show that they come within the terms of ORS 79.3070(1), they own the motor home free of the Bank's security interest. To do so, the parties here agree that plaintiffs must show two things: (1) They *423 were a "buyer in ordinary course" when they bought the motor home from Gateleys, and (2) the seller of the motor home was the one who created the security interest. Plaintiffs argue that they qualify as "buyers in ordinary course," because they bought the motor home from the Muirs' agent, Gateleys, and Gateleys was in the business of selling used motor homes. Plaintiffs also argue that, as "buyers in ordinary course," they take free of the Bank's security interest that was created by the Muirs, whom plaintiffs claim were the seller. The trial court adopted this position in granting summary judgment in plaintiffs' favor.
The Bank argues that both ORS 79.3070(1) and 71.2010(9) require a "seller" and that the seller must be the same party under both provisions. The Bank argues that, if Gateleys qualified as the "seller," then, although plaintiffs would be "buyers in the ordinary course," they could not take free of the Bank's security interest, because Gateleys (as the seller, for the purposes of ORS 71.2010(9)) did not create the security interestthe Muirs didand ORS 79.3070(1) requires that, for it to apply, the "seller" must have created the security interest. Alternatively, the Bank argues that, if the Muirs qualify as the "seller" (for the purposes of ORS 79.3070(1)), then plaintiffs could not qualify as buyers in the ordinary course, because the Muirs were not in the business of selling used motor homes as is required under ORS 71.2010(9).
This case brings to mind the military adage that all battles are fought at the corner of two maps. It requires us to interpret both ORS 79.3070(1) and 71.2010(9) and to explain how those two statutes work together. Because plaintiffs cannot attempt to invoke the protection of ORS 79.3070(1) unless they first can show that they qualify as "buyers in ordinary course," we begin with the text of ORS 71.2010(9).
1. Were plaintiffs buyers in the ordinary course of business?
As always, in construing an Oregon statute, this court's task is to discern the intent of the legislature. PGE v. Bureau of Labor and Industries, 317 Or. 606, 610, 859 P.2d 1143 (1993). In doing so, this court looks first to the text and context of the statute. Ibid.
Here, the relevant text from ORS 71.2010(9) states that a buyer in ordinary course "buys * * * from a person in the business of selling goods of that kind." (Emphasis added.) Clearly, the plaintiffs bought from Gateleys, which was in the business of selling goods of that kind. But does the text require that the "person in the business of selling goods" have title to the specific goods that the buyer buys, i.e., be the "seller" of the goods.[1] This inquiry is important, because Gateleys disposed of the Muirs' motor home on consignmentit did not have title.
The text does not require that the "person" from whom the goods are purchased have title. This is clear, first, from the text itself. Use of the word, "person," instead of "seller" in a law as carefully crafted as the UCC is a conscious choice. That choice recognizes that there will be those who hold out goods for sale who do not have title, e.g., consignees such as Gateleys, in circumstances in which the stability of the marketplace would be undermined if good faith purchases from those parties were not valid. This point is made even more clear by the textual exclusion of "pawnbroker"a special kind of consigneefrom the definition. Finally, the text of ORS 71.2010(9) recognizes that a sale to a buyer in ordinary course may be "in violation of the ownership rights * * * of a third party." Any ownership rights in a third party would mean that the "person in the business" did not have title to the goods. Thus, the text of ORS 71.2010(9) indicates that "person" does not mean "seller."
If there were any doubt about the foregoing conclusion, the UCC provides other contextual clues to flesh out the concept of a buyer in ordinary course for the purposes of ORS 71.2010(9). ORS 72.4030(3), which is a part of the "sales" chapter of the UCC, provides that "[a]ny entrusting of possession of goods to a merchant who deals in goods of that kind gives the merchant power to transfer *424 all rights of the entruster to a buyer in ordinary course of business." (Emphasis added.) And, as already noted, another section in that chapter, ORS 72.1060(1), defines a "sale" as "the passing of title from the seller to the buyer for a price." When those two sections are read together, it becomes clear that the UCC presumes that a buyer can qualify as a buyer in the ordinary course when the buyer purchases goods from a dealer who only possesses, but does not have legal title to, those goods.[2]
Moreover, in examining context, we also look to the UCC commentary and to the decisions of other jurisdictions. See Security Bank v. Chiapuzio, 304 Or. 438, 445 n. 6, 747 P.2d 335 (1987) (so stating).[3] The UCC commentary does not address explicitly the question whether a buyer who buys from a consignment dealer qualifies as a buyer in the ordinary course. However, the commentary apparently presumes that such a buyer can so qualify. Most jurisdictions similarly have presumed that buyers who buy from consignment dealers can qualify as buyers in the ordinary course. See, e.g., Martin v. Nager, 192 N.J.Super. 189, 469 A.2d 519 (1983); American Lease Plans, Inc. v. R.C. Jacobs Plumbing, Heating & Air Conditioning, Inc., 274 S.C. 28, 260 S.E.2d 712 (1979); Williams v. Western Sur. Co., 6 Wash.App. 300, 492 P.2d 596 (1972); Kranich & Bach v. Miller, 3 UCC Rep Serv 449, 1966 WL 8947 (N.Y.Sup.Ct.1966); Al's Auto Sales v. Moskowitz, 203 Okla. 611, 224 P.2d 588 (1950) (illustrating proposition).[4]
The Court of Appeals concluded that plaintiffs were not buyers in the ordinary course for purposes of ORS 79.3070(1). However, in so concluding, the Court of Appeals defined "buyer in ordinary course" by reference to the terms of ORS 79.3070(1) itself, rather than by reference to the definition in ORS 71.2010(9). That approach was erroneous. ORS 79.3070(1) does not define buyer in ordinary course, nor does it have any effect on whether a buyer buys in ordinary course. To the contrary, ORS 79.3070(1) requires as a precondition that there already have been a finding that buyers bought in ordinary course "as defined in ORS 71.2010(9)".[5] (Emphasis added.)
The text and context of ORS 71.2010(9) demonstrate that a buyer of consignment goods who buys from a consignment dealer can be a buyer in ordinary course for the purposes of that statute. There is no dispute here that plaintiffs meet the other requirements for being buyers in ordinary course. Consequently, we conclude that plaintiffs were buyers in ordinary course when they bought the consigned motor home at Gateleys.
2. Was the security interest created by the seller?
We now turn to ORS 79.3070(1). It provides that "[a] buyer in ordinary course of business * * * takes free of a security interest created by the seller even though the security interest is perfected and even though the buyer knows of its existence." (Emphasis added.) Here, the Muirs created *425 the security interest, but plaintiffs' dealings were with Gateleys. In order to prevail, plaintiffs must show that, in spite of the fact that they dealt with Gateleys, the Muirs were "the seller" for the purposes of this provision. In our view, that issue turns on whether the seller is the party whose title to the goods was transferred.[6]
On its face, the text is not decisive, because it does not say whether, for the purpose of the provision, the concept of "seller" is limited to the party with legal title to the goods or whether, instead, the seller is simply the party that physically performs the exchange of goods for money with the buyer. Context, however, answers the question. As we have noted elsewhere, ORS 72.1060(1) provides that "[a] `sale' consists in the passing of title from the seller to the buyer for a price." (Emphasis added.) Nothing in ORS 79.3070(1) suggests that this definition, which specifically states that it is the seller who transfers title, is inapplicable. We hold that "seller," as that term is used in ORS 79.3070(1), refers to the legal owner of the goods purchased by a buyer in ordinary course. Gateleys, with whom plaintiffs dealt, did not itself transfer title to the goods. Thus, it was not the "seller," for the purposes of ORS 79.3070(1). The true seller of the motor home was the party that ultimately parted with titlethe Muirs. And, because the Muirs created the security interest, plaintiffs took the motor home free of the Bank's security interest.[7]
The dissent objects that, for UCC purposes, the concept of "seller" should be unitary throughout the code provisions that we address here. That may be true, but our opinion does no violence to that concept. We simply hold that, under our construction of the pertinent statutes, a buyer in ordinary course is not required to buy directly from the "seller." Instead, a buyer may buy in ordinary course, so long as the person who holds out the goods for sale is one who is in the business of selling goods of that kind. It is not necessary that the person holding the goods out for sale have actual title to the goods; as in this case, the seller may entrust the goods to the person. But, when it comes to the security interest, ORS 79.3070(1) requires that the "seller"i.e., the person who had titlebe the one who "created" the security interest. Here, that is precisely what the titleholders (the Muirs) did. Our conclusion thus respects the wording of both ORS 71.2010(9) and 79.3070(1).
We hold that plaintiffs are entitled to the protection of ORS 79.3070(1), because they were buyers in the ordinary course of business and the seller created the security interest. The Court of Appeals erred in reaching a contrary result.
The decision of the Court of Appeals is reversed, and the judgment of the circuit court is affirmed.
*426 GRABER, Justice, dissenting.
I dissent.
The issue before us is whether a person who bought a used motor home acquired it free of a bank's prior perfected security interest, under ORS 79.3070(1), a part of the Uniform Commercial Code (UCC). If so, the buyer took the motor home free of the bank's perfected security interest. If not, the bank's security interest in the motor home continues.
In answering that question, the majority fails to follow the applicable statutes in three key respects:
(1) The majority fails to use the statutory definition of "sale," ORS 72.1060, to inform the meaning of the related terms "seller" and "selling" in the statute that we are called on to interpret.
(2) The majority fails to give effect to the structure of Article 9 of the UCC, under which ORS 79.3070(1) is an exception to the general rule that a security interest continues in collateral despite a sale or other disposition of that collateral.
(3) The majority fails to parallel the holdings of other jurisdictions despite the statutory directive, ORS 71.1020(2)(c), to make the law uniform among jurisdictions.
As always, in construing an Oregon statute, this court's task is to discern the intent of the legislature. PGE v. Bureau of Labor and Industries, 317 Or. 606, 610, 859 P.2d 1143 (1993). In doing so, this court looks first to the text and context of the statute. Ibid.
ORS 79.3070(1) provides:
"A buyer in ordinary course of business as defined in ORS 71.2010(9), other than a person buying farm products from a person engaged in farming operations[,] takes free of a security interest created by the seller even though the security interest is perfected and even though the buyer knows of its existence." (Emphasis added.)
ORS 71.2010(9), which the foregoing section incorporates by reference, provides in part:
"`Buyer in ordinary course of business' means a person who in good faith and without knowledge that the sale to the person is in violation of the ownership rights or security interest of a third party in the goods buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker." (Emphasis added.)
Under the UCC as enacted in Oregon, ORS 79.3070(1) is an exception to the general rule, set forth elsewhere in Article 9, that a security interest continues in collateral despite a sale or other disposition of that collateral.
"ORS 79.3060(2) provides:
"`Except where ORS 79.1010 to 79.5070 otherwise provide, a security interest continues in collateral notwithstanding sale, exchange or other disposition thereof unless the disposition was authorized by the secured party in the security agreement or otherwise, and also continues in any identifiable proceeds including collections received by the debtor.'
"This section states as a general rule that after collateral is sold, a security interest continues in the collateral. This general rule is subject to two exceptions: (1) where ORS 79.1010 to 79.5070 (chapter 79) otherwise provide; and (2) when the secured party authorizes the disposition.
"ORS 79.3070 * * * will, in certain situations, operate to cut off a security interest." Matteson v. Harper, 297 Or. 113, 116, 682 P.2d 766 (1984).
See also ORS 79.2010 (except as the UCC otherwise provides, "a security agreement is effective according to its terms * * * against purchasers of the collateral").
The wording of the exception found in ORS 79.3070(1)which is section 9-307(1) of the UCCcontains
"six conditions for one to take free of a prior perfected security interest:
"(1) The person must be a buyer in the ordinary course,
"(2) who does not buy in bulk and does not take its interest as security for or in total or partial satisfaction of a pre-existing debt (that is, the buyer must give some form of `new' value),
*427 "(3) who buys from one in the business of selling goods of that kind (that is, cars from a car dealer, i.e. inventory),
"(4) who buys in good faith and without knowledge that the purchase is in violation of others' ownership rights or security interests, and
"(5) does not buy farm products from a person engaged in farming operations, and
"(6) the competing security interest must be one `created by his seller'.
"Several of these conditions come from subsection (9) of 1-201 which defines the words `buyer in ordinary course of business.'"
White and Summers, 4 Uniform Commercial Code § 33-13, 352 (4th ed 1995) (footnote omitted). This case calls into play the third and sixth conditions: To take advantage of the special protection of UCC § 9-307(1), a person must buy from one who is in the business of selling goods of the kind involved, and the competing security interest must be one created by the person's seller.
For present purposes, the key concept in the text of UCC § 9-307(1) (codified as ORS 79.3070(1)) is "sale." That term is statutorily defined. ORS 79.1050(3)(L) provides that the word "sale" has the definition provided in ORS 72.1060, for the purpose of Article 9 of the UCC in Oregon, unless the context otherwise requires. ORS 72.1060 provides that "[a] `sale' consists in the passing of title from the seller to the buyer for a price." The definition of "sale" carries with it the linguistically and logically related concepts of "seller" and "selling." ORS 79.3070(1) uses the noun "seller" in a sentence that incorporates by reference the definition in ORS 71.2010(9). In turn, ORS 71.2010(9) uses the phrase "person in the business of selling" and the noun "sale." The context of ORS 79.3070(1) does not require that "sale" and its variants have a different meaning than the statutory one. Accordingly, the definition of "sale" in ORS 72.1060 is (pursuant to ORS 79.1050(3)(L)) to inform the meaning of ORS 79.3070(1) and the definitional section incorporated by reference therein.
Under the statutory definition, the Muirs were the "seller" of the motor home and also were the "person * * * selling" the motor home, ORS 71.2010(9), because they passed title to the motor home, for a price, to a buyer. Indeed, the Muirs alone had title to the motor home, and they alone were capable of passing that title to someone else. As this court held in Belmont International v. American International, 313 Or. 112, 117, 831 P.2d 15 (1992), in a consignment, "under normal circumstances, `the absolute ownership of the property is in the consignor.'" (Citation omitted.) See also Henry J. Bailey III, 3 The Oregon Uniform Commercial Code § 9.121, 367-68 (2d ed 1990) (consigned goods are not technically the property of the consignee); Central Wash. Bank v. Mendelson-Zeller, 113 Wash.2d 346, 779 P.2d 697, 702 (1989) (consignee who agrees to sell goods for another does not buy or take title to the goods and thus is not a buyer in ordinary course under UCC § 9-307(1); because security interest was created by prior seller to its immediate consignor, consignee could not qualify under that statute even if viewed as a buyer from consignor).
Although the Muirs were the seller, they were not "in the business of selling goods of that kind," ORS 71.2010(9), that is, motor vehicles.[8] That being so, plaintiffs did not buy from a category of seller that would enable them to take advantage of the special "buyer in ordinary course" protection afforded by ORS 79.3070(1), notwithstanding their good faith and lack of knowledge of a violation of the bank's security interest.
The foregoing interpretation is consistent with the context provided by Article 9, as well as with the text of ORS 79.3070(1) itself. ORS 79.3020 relates to the filing of financing statements, which ordinarily must be done in order to perfect security interests. ORS 79.3020(3)(b) provides in part:
"The filing of a financing statement otherwise required by ORS 79.1010 to 79.5070 *428 and 79.8010 is not necessary or effective to perfect a security interest in property subject to:
"* * * * *
"(b) * * * the Oregon Vehicle Code; but during any period in which collateral is inventory held for sale by a person who is in the business of selling goods of that kind, the filing provisions of ORS 79.4010 to 79.4080 apply to a security interest in that collateral created by the person as debtor."
That section of Article 9 of the UCC segregates for special treatment security interests in motor vehicles when (1) the seller of those vehicles "is in the business of selling" motor vehicles and (2) that same seller as debtor creates the security interest in the vehicles. See also ORS 803.097(1) and (4) (except when "the debtor who granted the security interest is in the business of selling vehicles and the vehicle constitutes inventory held for sale," "the exclusive means for perfecting a security interest in a vehicle is by application for notation of the security interest on the title in accordance with this section").
Those provisions suggest that, at least with respect to motor vehicles, the legislature has carved out a narrow class of sellers as to whom special Article 9 rules apply. The Muirs do not fit the definition, because they are not in the business of selling vehicles. Gateleys does not fit the definition, because it was not the debtor that created the security interest.
In examining the context of a provision of the Oregon UCC, the court also looks to the UCC commentary and to the decisions of other jurisdictions concerning the parallel UCC provision. Security Bank v. Chiapuzio, 304 Or. 438, 445 n. 6, 747 P.2d 335 (1987). The reason why the court does so is that the legislature has specified, ORS 71.1020(2)(c), that an underlying purpose of the UCC in Oregon is to make the law among the various jurisdictions uniform. U.S. National Bank v. Boge, 311 Or. 550, 560-61, 814 P.2d 1082 (1991). The commentary and the case law from other jurisdictions support the textual interpretation of UCC § 9-307(1) tentatively arrived at above.
The commentary and most of the decided cases involve successive passing of title, rather than consignment sales. In that situation, the owner of the goods who created the security interest has sold the goods to another party, who in turn sells the goods to a buyer in ordinary course. One commentator asserts that a buyer does not take free of the security interest in that situation, because he or she does not buy from a seller who created the security interest. Hawkland, Lord & Lewis, Uniform Commercial Code Series § 9-307:02 (Art 9), at 105-06 (1991).
White and Summers explain that UCC § 9-307(1) "is designed principally for * * * the case of one who gives new value to purchase out of the seller's inventory." White and Summers, § 33-13 at 352; see also Ronald A. Anderson, 9 Anderson on the Uniform Commercial Code (3d ed 1994), §§ 9-307:9 at 353, 9-307:31 at 367-68 (one who buys in the ordinary course of business "items taken from the seller's inventory" takes free of a security interest in that inventory when the security interest was "created by the seller"); Bailey, § 9.109 at 339 (an ordinary buyer of an inventory item from a seller who is in the business of selling such items of inventory does not expect to answer monetarily to the person financing the seller with respect to such inventory items). In such a situation, the seller whose inventory is involved both passes title to the buyer and creates the security interest in that inventory. The person with whom the buyer deals directly is the same person who is the debtor with respect to the security interest that the buyer is able to defeat.
Jurisdictions are split over whether, in that circumstance of successive passing of title, the buyer takes free of the security interest. Compare, e.g., Martin Bros. Implement Co. v. Diepholz, 109 Ill.App.3d 283, 64 Ill.Dec. 768, 440 N.E.2d 320, 324 (1982); National Shawmut Bank of Boston v. Jones, 108 N.H. 386, 236 A.2d 484, 485-86 (1967) (agreeing with official commentary) with C & J Leasing II Ltd. v. Swanson, 439 N.W.2d 210, 213-14 (Iowa 1989); Adams v. City Nat. Bank & Trust Co. of Norman, 565 P.2d 26, 30-31 (Okla.1977) (rejecting position of official commentary). However, the majority of jurisdictions *429 have held that the buyer does not take free of a security interest in the situation involving successive sales. See Uniform Commercial Code Case Digest, ¶¶ 9307.10 and 9307.15 (collecting cases). In Matteson, 297 Or. at 116-19, 682 P.2d 766, this court embraced that majority position.
Even though the commentary and most of the reported cases treat the situation of successive passing of title, rather than consignment sales, the commentary and the cases serve as useful context in two ways. First, the two major themes of the commentary and cases are of some assistance in resolving the present issue: (1) that UCC § 9-307(1) is an exception to the general rule of Article 9 that a perfected security interest follows the collateral, and (2) that, in order for a buyer to take advantage of that exception, the buyer's immediate seller must be in the business of selling goods of that kind and must be the one creating the security interest in question.
Second, the successive-sale cases and the commentary demonstrate that the majority's view yields an anomalous result. Had the Muirs sold the motor home to Gateleys instead of consigning it, the Muirs would not qualify for the special protection of ORS 79.3070(1), and the bank's security interest in the motor home would continue. There is no reason to be found in the wording of the statute, in the policies underlying UCC section 9-307(1), or in logic why the lienholder should be in a worse position when the Muirs consigned the motor home to Gateleys.
Additionally, some of the cases from other jurisdictions do involve consignments or entrustments and are quite close to the situation presented here. For example, in Security Pacific National Bank v. Goodman, 24 Cal.App.3d 131, 100 Cal.Rptr. 763 (1972), the Redingers bought a boat. They borrowed money from a bank to buy the boat, giving the bank a security interest, which the bank then duly perfected. Thereafter, the Redingers "entrusted possession of the boat to Jeffries, who was a merchant dealing in such boats." 100 Cal.Rptr. at 767. Jeffries knew of the outstanding bank loan. Jeffries sold the boat to Goodman and Hicks. They knew that the boat was used, but they did not know of the bank's security interest. The question before the court was whether, under UCC § 9-307(1), Goodman and Hicks took the boat free of the bank's security interest and, more specifically, whether they were buyers in ordinary course of business. Id. at 766. The court answered that question "no":
"If [Goodman and Hicks] are to qualify as buyers `in ordinary course of business,' they must have purchased `from a person in the business of selling goods of that kind,' i.e., a dealer. Jeffries was such a person. The statute gives [Goodman and Hicks] the property free of a security interest created by their selleri.e.created by Jeffries. The bank's interest was created by the Redingers. If we were to construe the transaction as a sale from the Redingers to [Goodman and Hicks], the statute would still be inapplicable for the reason that the Redingers were not in the boat-selling business." Id. at 767.
The court held that the bank was entitled to possession of the boat. Id. at 767.
In Ocean Cty. Nat'l Bank v. Palmer, 188 N.J.Super. 509, 457 A.2d 1225 (1983), a marina sold a boat to Palmer. The marina retained a security interest that it assigned to Ocean County National Bank, which then perfected its security interest. Later, Palmer returned the boat to the marina with the understanding that the boat would be sold on his behalf and that Ocean County's loan would be satisfied on Palmer's behalf from the proceeds of the sale. 457 A.2d at 1226. The marina resold the boat to Hess but failed to pay off Palmer's loan, instead assigned a purported new security interest to First Commercial Corporation. Id. at 1226-27. When Palmer discovered what had happened, he stopped making payments on the loan to Ocean County. Ocean County repossessed the boat from Hess, the marina filed for bankruptcy, and Ocean County filed an action to determine the priorities and rights of the parties. Id. at 1227.
The court held, among other things, that Hess (who bought the boat from the marina after Palmer entrusted it to the marina for resale) was not entitled to the protection of UCC section 9-307(1), even though Hess was as innocent as the lienholder, Ocean County. Id. at 1227-29. The court concluded that *430 section 9-307(1) refers exclusively to inventory "floor plan" financing. Id. at 1228, 1229 n 3. The court relied on the wording of the statute and on cases from other jurisdictions and added:
"[L]enders must have protection for their liens despite subsequent resale of the collateral in order to induce them to finance consumer purchases. Allowing the resale through a dealer to overcome a lien held by a third party, other than one financing a floor plan, would make it too easy to defeat such liens." Id. at 1229.
See also Kusler v. Cipriotti, 221 N.J.Super. 654, 535 A.2d 567 (1987) (holding that a buyer did not take free of a security interest when the buyer bought from a consignee but the consignor had created the security interest).
A leading treatise has explained the operation of UCC section 9-307(1) in the same way as the foregoing cases, giving the following example and rationale for the statutory rule:
"A final requirement of 9-307(1) likely to cause a few difficult moments is that the security interest of which the buyer takes free be `created by his seller.' In the usual case where the buyer purchases an automobile from a dealer's inventory, the dealer created the security interest in the dealer's lender. But what of the case where Mrs. Jones purchases a new automobile and gives a security interest to Bucks, her lender; then Mrs. Jones trades the automobile in to Puff (without telling him about the security interest), an automobile dealer who in turn sells the automobile to Mr. Sucker. Ultimately, Bucks attempts to recover the automobile from Mr. Sucker. Because the security interest was not created by Mr. Sucker's seller, Puff, Mr. Sucker is not qualified for the coverage under 9-307(1), and his interest will be subordinate to the security interest created by Mrs. Jones.The language and the intention of the Code seem clear enough. The difficulty is that the policy of 9-307 would seem to cover Mr. Sucker. That is, he is neither more nor less than a garden variety purchaser who pays cash and buys out of the inventory of a dealer. Perhaps the drafters intended that as between two innocent parties the ultimate loss should fall on the party who dealt most closely with the `bad guy.' After Mr. Sucker buys from Puff, both he and Bucks are innocent parties. Mr. Sucker will have a cause of action against Puff for breach of warranty of title; Puff will have a similar cause of action against Mrs. Jones, and so on up the line until the `bad guy' is made to pay. If Mrs. Jones cannot pay or is otherwise out of the picture but Puff is solvent, the ultimate loss will land on Puff."
White and Summers, § 33-13 at 356-57 (footnotes omitted). That example is roughly analogous to the situation before us.
There is no doubt that a case of this kind presents a conundrum, neither answer to which is particularly satisfying. Perhaps the reason why neither answer is satisfying is that we must decide which of two innocent parties loses.[9] But I conclude that the text and context make clear the legislature's intent. Under ORS 79.3070(1), the Muirs were the seller of the motor home, but they were not in the business of selling motor homes. Accordingly, plaintiffs are not entitled to the protection of ORS 79.3070(1), and the bank's perfected security interest in the motor home continues.
For the foregoing reasons, I respectfully dissent.
VAN HOOMISSEN, J., joins in this dissenting opinion.
NOTES
[*] Unis, J., retired June 30, 1996, and did not participate in this decision.
[1] ORS 72.1060(1) defines "sale" as "the passing of title from the seller to the buyer for a price."
[2] A commentator on the Oregon Uniform Commercial Code concludes that a buyer qualifies as a buyer in the ordinary course of business when he or she buys from a merchant who has been entrusted with goods by the owner of the goods. Henry J. Bailey, 1 The Oregon Uniform Commercial Code § 1.23, 40-41 (2d ed 1990).
[3] Reliance on decisions from other jurisdictions and on the commentary to the UCC is based on the fact that the Oregon legislature adopted the UCC with little debate and, at least in part, intended to further the goal of uniform treatment of commercial matters covered by the code. Security Bank, 304 Or. at 445 n. 6, 747 P.2d 335.
[4] Even the case on which the Court of Appeals relied to conclude that plaintiffs were not buyers in the ordinary coursefor purposes of ORS 79.3070(1)acknowledged that a buyer of consignment goods who was unaware of the consignment arrangement qualifies as a buyer in the ordinary course of business. See Kusler v. Cipriotti, 221 N.J.Super. 654, 535 A.2d 567, 568-69 (1987) (so stating) (citing Martin v. Nager, 192 N.J.Super. 189, 469 A.2d 519 (1983)).
[5] The Court of Appeals recognized that principle when it rejected plaintiffs' reliance on another statute on the ground that that "statute does not create buyers in the ordinary course of business, but applies only to buyers in the ordinary course of business." 135 Or.App. at 365 n. 8, 897 P.2d 1204 (emphasis in original). Similar reasoning applies here.
[6] We are not presented with a somewhat similar situation that has been addressed by both commentary to the UCC and by case law in other jurisdictions, viz., that in which the owner of the goods who created the security interest has sold (not consigned) the goods to another party, who in turn sells the goods to a buyer in the ordinary course. One commentary asserts that a buyer does not take free of the security interest in that situation, because he or she does not buy from a seller who created the security interest. White and Summers, 4 Uniform Commercial Code § 33-13, 356-57 (4th ed 1995). Remarkably, however, jurisdictions are split over whether, even in those circumstances (i.e., where the person in the business of selling goods of that kind actually had and transferred title to the goods), the buyer takes free of the security interest. See, e.g., National Shawmut Bank of Boston v. Jones, 236 A.2d 484, 108 N.H. 386 (1967); Martin Bros. Implement Co. v. Diepholz, 109 Ill.App.3d 283, 64 Ill.Dec. 768, 440 N.E.2d 320 (1982) (accepting the interpretation of the commentary); contra,C & J Leasing II Ltd. v. Swanson, 439 N.W.2d 210 (Iowa 1989); Adams v. City Nat. Bank & Trust Co. of Norman, 565 P.2d 26 (Okla.1977) (rejecting the commentators' interpretation). It is important to note that, in the situation described in this footnote, legal ownership has been transferred from the original owner, who created the security interest, to a subsequent owner who did not. In that situation, it cannot be gainsaid that the original owner plays no role in the sale of the goods between the subsequent owner and the buyer.
[7] The same result would obtain under the theory that plaintiffs argued below, viz., that Gateleys became the Muirs' agent when the Muirs consigned their motor home to Gateleys. As a consequence of that agency relationship, plaintiffs argued, the two parties became one for the purposes of ORS 79.3070(1). For purposes of this decision, we need not define that relationship or its legal effects.
[8] See also ORS 803.097(4) ("if the debtor who granted the security interest" in a vehicle" is in the business of selling vehicles and the vehicle constitutes inventory held for sale," a security interest in the vehicle "is subject to the perfection provisions under ORS chapter 79" instead of the special perfection provisions of ORS 803.097(1)).
[9] Arguably, the bank is the more innocent party here. The bank did everything that the law requires and everything that the law allows, in order to create and perfect its security interest. Plaintiffs, at least in theory, could have demanded to see the title to the motor home. Had they done so, they would have learned of the bank's security interest in the motor home, because the bank had perfected its interest as required by ORS 803.097(1) by having that interest noted on the title.
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582 P.2d 663 (1978)
The PEOPLE of the State of Colorado, Plaintiff-Appellee,
v.
Nick Ernest WARREN, Defendant-Appellant.
No. 27797.
Supreme Court of Colorado, En Banc.
July 3, 1978.
Rehearing Denied August 28, 1978.
J. D. MacFarlane, Atty. Gen., David W. Robbins, Deputy Atty. Gen., Edward G. Donovan, Sol. Gen., Lynne Ford, Asst. Atty. Gen., Denver, for plaintiff-appellee.
Nicholas J. Bourg, Colorado Springs, for defendant-appellant.
CARRIGAN, Justice.
Nick Ernest Warren appeals his convictions by a jury of second-degree burglary,[1] conspiracy to commit burglary,[2] felony theft,[3] aggravated robbery,[4] conspiracy to *664 commit aggravated robbery,[5] and use of a deadly weapon in the commission of robbery, a "crime of violence."[6] We reverse the convictions and remand for a new trial.
The crimes charged were allegedly committed by six persons, the appellant Warren, Johnson, Girard, Albers, and two juveniles, Hendricks and Jones. The two juveniles testified that by mutual agreement the six had burglarized the home of Johnson's father, stealing several items, including guns which were used later the same evening to rob a liquor store.
According to the testimony, Warren, Jones, and Hendricks robbed the liquor store at gunpoint, then fled in Girard's car, in which Girard and the two others were waiting. The storekeeper followed and fired several shots, whereupon the car hit a fence and the six occupants fled on foot.
Three of the participants, Girard, Albers and Hendricks, were arrested later that night when they went to the police station to report Girard's car as stolen. This report was apparently an attempt to provide a "cover story" for use of the car in the robbery. Another participant, Jones, was found and arrested during a consent search of Hendricks' apartment. Jones described the appellant to police and gave an address where he thought the appellant could be found. About two blocks from the suggested address, two officers saw a person matching the description given by Jones. One officer greeted the person by the appellant's name. When he responded to that name, and his movements caused the officers to observe a revolver on his person, the officers arrested him.
After repeated pretrial motions for severance were denied,[7] Warren, Girard, and Albers were jointly tried before a jury. Warren and Albers both testified. Each stated in essence that he was not at the scene of either crime. Girard did not testify, but he too presented a defense intended to show that he had not participated in the crimes. The defendants' motions to sever were renewed and denied at the close of the prosecution's case and again at the conclusion of all the evidence.
The jury found the appellant Warren guilty of all charges, including the "crime of violence." Girard was convicted of all charges except the "crime of violence." Albers was acquitted of all charges except conspiracy to commit robbery. Each has brought a separate appeal to this court.[8]
In this case, the appellant raises the following issues: (1) whether the trial court erred in denying severance of defendants; (2) whether a mistrial should have been declared when one witness referred to the appellant's prior record; (3) whether section 16-10-104, C.R.S.1973, dealing with peremptory challenges, is unconstitutional; (4) whether the appellant's arrest was based on probable cause; and (5) whether other errors had the cumulative effect of denying a fair trial. We agree with the appellant's first contention, that the trial court should have granted separate trials, and therefore reverse and remand for a new trial. Because of this disposition of the case, we need not address the other issues.
The standards for relief from joinder of defendants are established in Crim.P. 14, as follows:
"If it appears that a defendant or the prosecution is prejudiced by a joinder of offenses or of defendants in any indictment or information, or by such joinder for trial together, the court may order an election or separate trials of counts, grant a severance of defendants, or provide whatever other relief justice requires.
*665 However, upon motion any defendant shall be granted a separate trial as of right if the court finds that the prosecution probably will present against a joint defendant evidence, other than reputation or character testimony, which would not be admissible in a separate trial of the moving defendant. . ."
A motion for severance is directed to the sound discretion of the trial court,[9] and absent an abuse of that discretion resulting in prejudice to the moving defendant, denial of the motion will not be disturbed on appeal. People v. Maestas, 183 Colo. 378, 517 P.2d 461 (1973); People v. Trujillo, 181 Colo. 350, 509 P.2d 794 (1973).
Factors to be considered in determining whether denial of severance constitutes an abuse of discretion include the following: (1) whether the number of defendants or the complexity of evidence is such that the jury will probably confuse the evidence and law applicable to each defendant; (2) whether, despite admonitory instructions, evidence admissible against one defendant will improperly be considered against another; and (3) whether the defenses presented are antagonistic. People v. Maestas, supra. See also Eder v. People, 179 Colo. 122, 498 P.2d 945 (1972); A.B.A. Standards for Criminal Justice Relating to Joinder and Severance (1968).
In this case, we conclude that a number of factors, each of which standing alone might not require severance, combined to deny this appellant "a fair determination of guilt or innocence." Eder v. People, supra.
First of all, the appellant elected to take the stand and testify in his own behalf, while the co-defendant, Girard, did not. Obviously, the appellant's attorney could not comment on Girard's silence, for to do so would have violated Girard's Fifth Amendment rights. Nonetheless, as we recognized in Eder v. People, supra, there is a distinct element of unfairness, albeit not always prejudicial, in denying one co-defendant any favorable inference to be drawn from the other's silence, for it prohibits him from urging upon the jury every point favorable to his case. See also DeLuna v. United States, 308 F.2d 140 (5th Cir. 1962), reh. denied 324 F.2d 375 (5th Cir. 1963).
Second, although the three co-defendants' defenses were not inherently antagonistic[10] in that all three denied any participation in the crimesthe conduct of those defenses at trial clashed seriously. For example, testimony elicited by counsel for co-defendant Girard, intended to impeach a prosecution witness and place Girard at a location away from the crime scene, had the incidental effect of identifying the appellant as one who had "come up with the idea" of the burglary and robbery. Since Girard's guilt would not have been at issue in a separate trial of Warren, this testimony would have been irrelevant, and the problem would not have arisen. As counsel for the appellant pointed out, he was being prosecuted both by the district attorney and by a co-defendant who sought to exonerate himself and identify the appellant as the apparent "ringleader."
With similar effect, in closing argument co-defendant Albers' attorney contrasted his client with the appellant and Girard, implying that Albers' participation, if any, was simply the result of association with "bad company." Again, this type of conflict would not have risen had separate trials been granted.
Other examples could be listed, but the point is that, despite the apparently consistent defenses of all three co-defendants, trial tactics which were perfectly valid for each co-defendant resulted in adverse implications regarding the appellant. The circumstances reflected by the record in this particular case, combined with the fact that *666 two co-defendants testified while one did not, lead us to conclude that the appellant was denied a fair trial.
Accordingly, the trial court's judgment is reversed, and the cause is remanded for a new trial.
KELLEY, J., dissents. HODGES, J., does not participate.
NOTES
[1] Section 18-4-203, C.R.S.1973.
[2] Section 18-1-201, C.R.S.1973.
[3] Section 18-4-401, C.R.S.1973.
[4] Section 18-4-302, C.R.S.1973.
[5] Section 18-1-201, C.R.S.1973.
[6] Section 16-11-309, C.R.S.1973 (1977 Supp.).
[7] One count against the appellantpossession of a weapon by a previous offenderwas severed for trial. A nolle prosequi was later entered as to this count, and it is not involved in this appeal.
[8] Our opinions in the other two cases are announced contemporaneously with this opinion. People v. Girard,Colo. ___, 582 P.2d 666 (S.Ct.No.28021); People v. Albers, Colo. ___, 582 P.2d 667 (S.Ct.No.28022).
[9] Crim.P. 14, Supra, provides that in certain conditions severance is a matter of right. The People had obtained a statement which, if used at trial, might have required severance, but they agreed prior to trial that the statement would not be offered as evidence. Therefore the trial did not involve the problem of evidence admissible against only one defendant.
[10] Cf. Eder v. People, supra.
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101 F.3d 620
12 IER Cases 411
Pete BENAVIDEZ, Plaintiff-Appellant,v.ALBUQUERQUE, CITY OF; Lawrence Rael, Chief AdministrativeOfficer, in his official capacity, Defendants-Appellees;Robert H. SMITH, Jr., Plaintiff-Appellant,v.ALBUQUERQUE, CITY OF; Lawrence Rael, Chief AdministrativeOfficer, in his official capacity, Defendants-Appellees.
Nos. 95-2117, 95-2118.
United States Court of Appeals,Tenth Circuit.
Nov. 14, 1996.
Paul S. Livingston, Albuquerque, NM, for Plaintiffs-Appellants.
Charles W. Kolberg, Assistant City Attorney, Albuquerque, NM, for Defendants-Appellees.
Before KELLY, BRISCOE and LUCERO, Circuit Judges.
PAUL KELLY, Jr., Circuit Judge.
1
Plaintiffs-Appellants Pete Benavidez and Robert H. Smith, Jr., appeal from the grant of summary judgment in favor of Defendants-Appellees, the City of Albuquerque and its chief administrative officer, on their civil rights claim under 42 U.S.C. § 1983. Plaintiffs were City of Albuquerque employees. They claim they were unreasonably subjected to urinalysis drug testing in violation of the Fourth Amendment, and that the City's pre- and post-termination procedures denied them due process in violation of the Fourteenth Amendment. We exercise jurisdiction under 28 U.S.C. § 1291 and affirm.
Background
2
Plaintiffs Smith and Benavidez worked as field service operators with the City of Albuquerque's Public Works Department. Mr. Smith was Mr. Benavidez's crewleader. On April 22, 1992, while on duty, they drove in a City vehicle to the home of one of Mr. Smith's friends, another City employee. Plaintiffs did not know that Albuquerque police were already at the house, executing a search warrant for drugs. Mr. Smith remained in the vehicle drinking a beer and sent Mr. Benavidez to the back door of the house allegedly to borrow money from Mr. Smith's friend. Sgt. L. Saiz, an undercover police officer, answered the door, and asked Mr. Benavidez if he wanted a "sixteenth." A "sixteenth" is common street parlance for a sixteenth of an ounce of cocaine. The officer then offered him a baggie containing a white powder, which Mr. Benavidez refused. Mr. Benavidez later testified that he said sixteen would be fine, thinking he was borrowing $16.00. While Mr. Benavidez was at the house, another police officer approached the City vehicle and observed Mr. Smith with the beer. When asked, Mr. Smith admitted he had been drinking.
3
Both Plaintiffs were detained for several hours, but not arrested. After releasing them, Sgt. Saiz informed William Otto, a City Public Works official, that Plaintiffs were questioned during a drug raid, and that Mr. Benavidez admitted that he was there "to score coke." Sgt. Saiz also advised Mr. Otto that Mr. Smith had directed Mr. Benavidez to purchase the drugs. Mr. Otto and Sam Walker, another Public Works official, interviewed Plaintiffs around midnight. Mr. Walker smelled alcohol on Mr. Smith's breath, but Mr. Otto stated that he did not believe Plaintiffs appeared to be "impaired." Because of this lack of obvious impairment, an on-duty drug counselor advised Mr. Otto not to test them.
4
Approximately thirty-six hours later, on April 24, 1992, City Police Chief Stover received a memo about the incident. The memo specifically stated the following: while on duty, Mr. Smith and Mr. Benavidez had arrived in a City vehicle at the residence of a fellow City employee, which was the scene of a drug raid; Mr. Smith admitted that he had been drinking a beer in the vehicle; and Mr. Benavidez admitted going to the residence to buy cocaine. Chief Stover contacted the City's Chief Administrative Officer, who contacted the City's Director of Risk Management, who decided that Plaintiffs should be tested. Mr. Smith tested positive for cocaine, while Mr. Benavidez's tests were negative.
5
The City notified Plaintiffs that they were entitled to a pre-termination hearing. The notice informed Plaintiffs of the alleged violations, that they could respond orally or in writing, that they could be represented by counsel, and that they could face disciplinary action, including termination. Both Plaintiffs attended the hearing, accompanied by a union representative. Plaintiffs were terminated as of May 12, 1992.
6
The City held full post-termination evidentiary hearings on July 14, 1992 for Mr. Smith and on July 15, 1992 for Mr. Benavidez. Plaintiffs, while not represented by counsel, were again accompanied by a union representative. After these hearings, the City Personnel Hearing Board affirmed Mr. Smith's termination, and modified Mr. Benavidez's termination to a 90-day suspension without pay followed by reinstatement. Plaintiffs had the right to appeal in state district court, but chose not to do so. Instead, Plaintiffs Smith and Benavidez filed suit under 42 U.S.C. § 1983, claiming that their Fourth Amendment rights were violated by an unreasonable search and that their Fourteenth Amendment Due Process rights were violated by the City's pre- and post-termination grievance procedures. Summary judgment was granted for the City on both claims.
Discussion
7
We review the grant or denial of summary judgment de novo, applying the same legal standard used by the district court. Wolf v. Prudential Ins. Co. of Am., 50 F.3d 793, 796 (10th Cir.1995). Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(c). The substantive law determines which facts are material. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Rivendell Forest Prod. v. Georgia-Pacific Corp., 28 F.3d 1042, 1045 (10th Cir.1994).
I. Fourth Amendment Claims
8
It is well established that a urinalysis drug test required by a government employer for the purpose of detecting illegal drug use is a search subject to the Fourth Amendment, and therefore must be reasonable. National Treasury Employees Union v. Von Raab, 489 U.S. 656, 678-79, 109 S.Ct. 1384, 1397-98, 103 L.Ed.2d 685 (1989); Skinner v. Railway Labor Executives' Ass'n, 489 U.S. 602, 617-18, 109 S.Ct. 1402, 1413-14, 103 L.Ed.2d 639 (1989); Rutherford v. Albuquerque, 77 F.3d 1258, 1260 (10th Cir.1996). It is equally well settled that in the government employment context, as opposed to the criminal law context, a warrant will not be required where the intrusion is based on either reasonable suspicion or "special needs." Skinner, 489 U.S. at 619, 623-24, 109 S.Ct. at 1414, 1416-17; Saavedra v. City of Albuquerque, 73 F.3d 1525, 1531-32 (10th Cir.1996). The Supreme Court has recognized that " 'when special needs, beyond the normal need for law enforcement, make the warrant and probable cause requirement impracticable,' " it will be dispensed with. Skinner, 489 U.S. at 619, 109 S.Ct. at 1414 (quoting Griffin v. Wisconsin, 483 U.S. 868, 873, 107 S.Ct. 3164, 3168, 97 L.Ed.2d 709 (1987)). This "special needs" exception permits drug testing of employees in safety-sensitive positions, pursuant to a random or uniform selection process, and does not require probable cause or even reasonable suspicion that an employee might be impaired. Von Raab, 489 U.S. at 679, 109 S.Ct. at 1397-98; Skinner, 489 U.S. at 633-34, 109 S.Ct. at 1421-22; Ford v. Dowd, 931 F.2d 1286, 1289 (8th Cir.1991). In the absence of a "special needs" random or uniform selection process, drug testing of a government employee does not require a warrant, but must be based on individualized suspicion, i.e., a reasonable suspicion that the employee was engaging in unlawful activity involving controlled substances. Saavedra, 73 F.3d at 1532, aff'g 917 F.Supp. 760, 762 (D.N.M.1994); Jackson v. Gates, 975 F.2d 648, 652-53 (9th Cir.1992), cert. denied, 509 U.S. 905, 113 S.Ct. 2996, 125 L.Ed.2d 690 (1993); Dowd, 931 F.2d at 1289.
9
Since we are not dealing with a "special needs" random or uniform selection process, our inquiry is whether the City had reasonable suspicion to order the urinalysis drug tests of Smith and Benavidez. Reasonable suspicion depends both upon the content of information possessed and its degree of reliability. Alabama v. White, 496 U.S. 325, 330, 110 S.Ct. 2412, 2416, 110 L.Ed.2d 301 (1990). Thus, the only material facts at issue concern what information the City possessed at the time it ordered Plaintiffs tested, and whether that information was reliable. If the information possessed by the City when it ordered the tests would create a reasonable suspicion that Plaintiffs used, possessed, or were impaired by illegal drugs on the job, then the resulting drug tests did not violate their Fourth Amendment rights. Saavedra, 73 F.3d at 1532. There is no dispute as to what information the City officials had at the time they ordered the drug tests of Mr. Smith and Mr. Benavidez--they had the incriminating information contained in Sgt. Saiz's memo to the police chief. Although Plaintiffs deny that they admitted to attempting to buy drugs, in light of the other information contained in the memo, this factual dispute is immaterial because it will not affect the outcome of the case. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510; Rivendell, 28 F.3d at 1045.
10
The parties disagree over the types of information that will support reasonable suspicion drug testing. Plaintiffs argue that such testing must be based only on direct observation and/or physical evidence that the employee's ability to perform his job was impaired because he was under the influence of a drug. We disagree. Direct observation or physical evidence of on-duty impairment, while important, is not the only information which will support such testing. Rather, information which would lead a reasonable person to suspect non-safety-sensitive employees, such as Mr. Smith and Mr. Benavidez, of on-the-job drug use, possession or impairment is sufficient under the Fourth Amendment. See National Treasury Employees Union v. Yeutter, 918 F.2d 968, 974 (D.C.Cir.1990) (Constitution requires reasonable suspicion of on-duty drug use or drug-impaired work performance); see also Gates, 975 F.2d at 653; Dowd, 931 F.2d at 1292-93. The mere fact that the drug counselor, a lower level employee, initially decided against testing due to the lack of obvious impairment did not prevent the City from later testing when it obtained more information.
11
Plaintiffs also attack the reliability of the City's information. They claim that Sgt. Saiz was not a reliable and independent source, and that his memo was suspicious, unauthorized, and written out of anger and frustration. No specific facts support this claim. Under the totality of circumstances, City officials had reasonable suspicion to order the drug tests of Plaintiffs Smith and Benavidez.
12
Plaintiffs contend that the City's own drug testing policy requires observation of actual on-duty impairment before reasonable suspicion drug testing can be ordered.1 We need not decide whether Administrative Instruction No. 123 imposed upon the City a higher standard than the Fourth Amendment, because a violation of a municipal administrative directive does not give rise to a § 1983 claim. Malek v. Haun, 26 F.3d 1013, 1016 (10th Cir.1994).
II. Fourteenth Amendment Due Process Claims
13
Plaintiffs contend that the City's termination proceedings violated their Fourteenth Amendment Due Process rights. Specifically, Plaintiffs claim that (1) they were required to proceed first and bear the burden of proof in their post-termination hearings; (2) the Hearing Officer failed to make adequate findings of fact and conclusions of law; (3) the hearings violated city ordinances in that they were conducted without rules of procedure, the findings and conclusions were not provided to Plaintiffs prior to the Personnel Board's decision, and the Hearing Officer was not qualified; (4) the meeting at which the Board made its decision was closed in violation of the State Open Meetings Act; and (5) the Hearing Officer and Personnel Board considered the positive drug test conclusive, thereby depriving Plaintiff Smith of a meaningful opportunity to challenge the test.
14
We reject all of Plaintiffs' due process claims, which are identical to those raised and decided in Saavedra, 73 F.3d at 1533, and Rutherford, 77 F.3d at 1264, and we elaborate on why placing the burden of proof on Mr. Smith and Mr. Benavidez in their post-termination administrative hearings did not violate the Fourteenth Amendment's Due Process Clause.
15
Plaintiffs point to no controlling authority to support their argument that the Fourteenth Amendment forbids public employers from placing the burden of proof on terminated employees. On the other hand, the district court and the City cite Lavine v. Milne, 424 U.S. 577, 96 S.Ct. 1010, 47 L.Ed.2d 249 (1976), for the proposition that it is irrelevant whether the public employer or former employee bears the burden of proof at a post-termination hearing. The Supreme Court stated in Lavine that "[o]utside the criminal law area, where special concerns attend, the locus of the burden of persuasion is normally not an issue of federal constitutional moment." 424 U.S. at 585, 96 S.Ct. at 1016. Lavine is distinguishable, however, in that it addresses who should bear the burden of proof prior to the conferral of a benefit, that is, at the time the individual applies for the property rights, see id. at 586, 96 S.Ct. at 1016, whereas the instant case involves deprivation of a benefit already conferred.
16
Other than the suggestion in Lavine, few courts have directly addressed this question. Some courts have held that placing the burden of showing lack of just cause upon the public employee is unconstitutional, e.g., Soles v. City of Raleigh Civil Service Comm'n, 119 N.C.App. 88, 457 S.E.2d 746 (1995); Cole v. Litz, 562 S.W.2d 795, 799 (Mo.App.1978); cf. University of Tex. Medical Sch. at Houston v. Than, 874 S.W.2d 839, 851 n. 10 (Tex.App.1994) (violation of due process to place burden upon student accused of cheating to show he did not cheat). Other courts have reached the opposite conclusion, e.g. Vanelli v. Reynolds Sch. Dist. No. 7, 667 F.2d 773, 780 n. 13 (9th Cir.1982); Chung v. Park, 514 F.2d 382, 387 (3d Cir.1975); Sherris v. City of Portland, 41 Or.App. 545, 599 P.2d 1188, 1193 (1979). We conclude the question must be answered by applying the balancing test of Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976), which was "first conceived to address due process claims arising in the context of administrative law." Medina v. California, 505 U.S. 437, 444, 112 S.Ct. 2572, 2576, 120 L.Ed.2d 353 (1992).
17
Mathews set out a three-part test to determine the type and amount of procedure required by the Due Process Clause in an administrative proceeding:
18
[I]dentification of the specific dictates of due process generally requires consideration of three distinct factors: First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.
19
424 U.S. at 335, 96 S.Ct. at 903.
20
As to the first Mathews factor, the Supreme Court recognized the significant private interest in retaining employment and "the severity of depriving a person of the means of livelihood," explaining that "[w]hile a fired worker may find employment elsewhere, doing so will take some time and is likely to be burdened by the questionable circumstances under which he left his previous job." Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 543, 105 S.Ct. 1487, 1494, 84 L.Ed.2d 494 (1985). The strength of the private interest in retaining employment is the same in this case.
21
The second Mathews factor weighs the risk of an erroneous deprivation and the value of additional procedures. Loudermill recognized that dismissals for cause will often involve factual disputes, and that even when the facts are clear, the appropriateness or necessity of the discharge may not be. 470 U.S. at 543, 105 S.Ct. at 1493-94. In addressing the specific question of what process is due a government employee faced with termination for cause, Loudermill applied Mathews to determine the appropriate pre-termination process, but it based its evaluation of the constitutionality of that process in large part on the presence of significant post-termination procedures. Id. at 546, 105 S.Ct. at 1495. Similarly, we must evaluate the constitutionality of post-termination process in light of the pre-termination procedures it follows.
22
When the pre-termination process offers little or no opportunity for the employee to present his side of the case, the procedures in the post-termination hearing become much more important. Such a post-termination hearing represents the only meaningful opportunity the employee has to challenge the employer's action, and requiring a dismissed employee to prove in this context that he was terminated without just cause may increase the risk of an erroneous deprivation. It is often difficult to prove a negative, and where the pre-termination process has been minimal, the employee's fate may depend entirely upon the post-termination hearing. Cf. Lavine, 424 U.S. at 585, 96 S.Ct. at 1016 (recognizing that "[w]here the burden of proof lies on a given issue is, of course, rarely without consequence and frequently may be dispositive"); Speiser v. Randall, 357 U.S. 513, 525, 78 S.Ct. 1332, 1342, 2 L.Ed.2d 1460 (1958) (acknowledging that "where the burden of proof lies may be decisive of the outcome"). In contrast, when the employee has had a meaningful opportunity to explain his position and challenge his dismissal in pre-termination proceedings, the importance of the procedures in the post-termination hearing is not as great. In this type of post-termination hearing, simply giving the employee "some opportunity" to present his side of the case "will provide a meaningful hedge against erroneous action." See Loudermill, 470 U.S. at 543 n. 8, 105 S.Ct. at 1494 n. 8.
23
We must therefore assess the sufficiency of the pre-termination procedures provided to Mr. Smith and Mr. Benavidez to determine whether due process requires the City to carry the burden of proof in the post-termination hearings. It is an "essential principle of due process ... that a deprivation of ... property 'be preceded by notice and opportunity for hearing appropriate to the nature of the case,' " Loudermill, 470 U.S. at 542, 105 S.Ct. at 1493 (quoting Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 313, 70 S.Ct. 652, 656, 94 L.Ed. 865 (1950)). The hearing "need not be elaborate;" indeed, " 'something less' than a full evidentiary hearing is sufficient." Id. at 545, 105 S.Ct. at 1495. The key requirement is that the employee is entitled to a pre-termination opportunity to respond; more specifically, "to oral or written notice of the charges against him, an explanation of the employer's evidence, and an opportunity to present his side of the story." Id. at 546, 105 S.Ct. at 1495. Because it is followed by post-termination proceedings, the pre-termination hearing is not meant to resolve definitively the propriety of the discharge, but only to determine whether there are reasonable grounds to believe the charges are true and the action is correct. Id. at 546-47, 105 S.Ct. at 1495-96.
24
Had the City's pre-termination procedures been cursory and informal, Plaintiffs would have a stronger argument in favor of requiring the City to bear the burden of proof in the post-termination hearings. Here, however, they received adequate, even extensive, pre-termination procedures. The district court found:
25
[I]t is undisputed that the City sent each plaintiff written notice of the pretermination hearing approximately seven days in advance of the hearing. The notice informed plaintiffs of the alleged violations, that they could respond in writing or orally to the charges, that they were free to retain counsel and that they could face disciplinary action, including termination. Plaintiffs attended the pretermination hearings and both were represented by Joseph Chavez, an AFSCME Council Representative. Subsequently, the City terminated both Mr. Smith and Mr. Benavidez as of May 12, 1992.
26
Append., doc. 19 at 244. Given these pre-termination procedures, the risk of an erroneous deprivation was minimized, tipping the balance in favor of a post-termination process in which Plaintiffs were only entitled to "some opportunity" to present their side of the case. The City's post-termination process included hearings at which Plaintiffs could be represented by counsel, had the opportunity to present evidence, and were allowed to cross-examine witnesses. Mr. Smith and Mr. Benavidez had the right to appeal the Board's decision to the state district court, but chose not to do so.
27
The third Mathews factor weighs the City's interest, including any burden imposed by additional procedures. Allocating the burden of proof to the City would require no additional hearings or investigation because the City already is required to provide a post-termination hearing and it already should have investigated the alleged misconduct and compiled evidence to support its proposed disciplinary action. Nevertheless, the City has a strong interest in maintaining a drug-free workplace. See Von Raab, 489 U.S. at 674, 109 S.Ct. at 1395 (American workplaces are not immune from "drug abuse [which] is one of the most serious problems confronting our society today."); Rutherford, 77 F.3d at 1264. It is also a "common-sense realization that government offices could not function if every employment decision became a constitutional matter." Von Raab, 489 U.S. at 666, 109 S.Ct. at 1391 (quoting Connick v. Myers, 461 U.S. 138, 143, 103 S.Ct. 1684, 1688, 75 L.Ed.2d 708 (1983)).
28
The outcome of the Mathews test in this case ultimately turns on the nature of the pre-termination protections afforded Mr. Smith and Mr. Benavidez. Combined with the City's elaborate pre-termination proceedings, the post-termination hearings provided Mr. Smith and Mr. Benavidez with all the process they were due. Accordingly, Plaintiffs' procedural due process rights were not violated by the City requiring them to bear the burden of proof at their post-termination hearings.
29
AFFIRMED.
1
The City's Administrative Instruction No. 123 states:
Reasonable Suspicion Substance Abuse Testing
Reasonable suspicion that an employee is under the influence of alcohol or of substances which could impair job performance and/or safety means that the employee is affected by the use of drugs or alcohol in an objectively detectable manner. It is supported by objective evidence, based upon known specific, articulable and observable facts that would lead a reasonable person to believe that the employee is under the influence of alcohol or other substances. In assessing whether reasonable suspicion exists, the employee's ordinary individual characteristics will be taken into consideration ...
Aplt. Opening Brief at 14-15.
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758 F.2d 696
244 U.S.App.D.C. 376, 9 Soc.Sec.Rep.Ser. 176,Medicare&Medicaid Gu 34,572
HUMANA, INC., et al., Appellants,v.Margaret M. HECKLER, Secretary, Department of Health andHuman Services. (Four Cases)HUMANA OF SOUTH CAROLINA, INC., doing business asColeman-Aimar Hospital, a corporation, Appellant,v.Margaret M. HECKLER, Secretary, Department of Health andHuman Services.
Nos. 82-1986, 82-1987, 82-1989, 82-1994 and 82-1995.
United States Court of Appeals,District of Columbia Circuit.
Argued April 22, 1983.Decided April 2, 1985.As Amended April 26, 1985.
Appeals from the United States District Court for the District of Columbia (D.C. Civil Action Nos. 78-00175, 81-01311, 75-00302, 81-00853, 78-00584)
Lee Calligaro, Washington, D.C., with whom Thomas H. Brock, Washington, D.C., was on the brief, for appellants.
David B. Palmer, Atty. Dept. of Health and Human Services, Washington, D.C., of the Bar of the District of Columbia Court of Appeals, pro hac vice, by special leave of Court, with whom Juan A. del Real, Gen. Counsel and Lynne K. Zusman, Deputy Gen. Counsel, Dept. of Health and Human Services, and Henry R. Goldberg, Atty. Dept. of Health and Human Services, Washington, D.C., were on the brief for appellee.
Stanley S. Harris, U.S. Atty., Washington, D.C., at the time the brief was filed, Royce C. Lambert, R. Craig Lawrence and Nathan Dodell, Asst. U.S. Attys., Washington, D.C., entered appearances for appellee.
Before WALD and SCALIA, Circuit Judges, and BAZELON, Senior Circuit Judge.
Opinion for the Court PER CURIAM.
PER CURIAM:
1
Petitioners Humana, Inc. and sixty-four of its subsidiary acute care proprietary hospitals appeal from a district court decision limiting reimbursement under the Medicare Act, Title XVIII of the Social Security Act.1 Humana argues that reimbursement should be calculated by means of a formula based on all of the costs it actually incurred in providing services to Medicare beneficiaries. The district court, upholding the decision of the Secretary of Health and Human Services (the Secretary), held that certain of these costs were not necessary in the efficient delivery of needed health services and therefore denied reimbursement.
2
We affirm disallowance of reimbursement for 1) stock maintenance costs, 2) income taxes, and 3) the inclusion of income tax liability in the calculation of equity capital. We also find that the rate of return on equity capital prescribed by the Secretary was reasonable. We vacate the district court's holding disallowing reimbursement for stock acquisition costs when an acquired corporation is liquidated or merged into the acquiring corporation.
I. BACKGROUND
A. The Medicare Statutory Scheme
3
In 1965, Congress enacted the Medicare Act2 (the Act), which created an extensive program of health insurance for the aged and disabled. Part A of the Act3 entitled participating hospitals to reimbursement for the reasonable costs of medical services with such costs being limited to "the cost actually incurred, excluding therefrom any part of the incurred cost found to be unnecessary in the efficient delivery of needed health services."4 Under the statutory scheme, reimbursable costs include both direct and indirect costs of patient care.5 Direct costs are those directly related to patient care such as nursing services and medication. Indirect costs include such items as return on equity capital and depreciation of plant and equipment. The Secretary is charged with developing regulations "establishing the methods or method to be used and the items to be included in determining [reasonable] costs."6
4
These appeals challenge the Secretary's determinations regarding certain of these indirect costs: 1) reimbursement of stock maintenance costs, 2) reimbursement of income taxes, 3) the treatment of tax liability in calculating equity capital, 4) the allowable rate of return on equity, and 5) stock acquisition costs.
B. Proceedings Below
5
All of these appeals, with the exception of Humana of South Carolina v. Mathews,7 began as the subject of administrative proceedings before the Provider Reimbursement Review Board (PRRB).8 While Humana of South Carolina was pending, Humana's fiscal intermediaries9 disallowed the reimbursement of certain costs to the hospitals. The hospitals appealed to the PRRB challenging the fiscal intermediaries' disallowance in three areas: 1) the cost of federal and state income taxes, 2) stock maintenance costs, and 3) costs incurred in acquiring new facilities by purchasing one hundred percent of the capital stock of another corporation.
6
The PRRB held that: 1) Humana was not entitled to reimbursement for income taxes, nor could it exclude income tax liability from the calculation of equity capital; 2) it was entitled to reimbursement for stock maintenance costs; and 3) subsequent to the acquisition of one hundred percent of the capital stock of other hospitals, five of the hospitals in question were entitled to increase their asset valuation while seven were not. The Administrator of the Health Care Financing Administration (HCFA) later reviewed and reversed the portions of the PRRB's decision which ruled in Humana's favor. Humana appealed these adverse decisions of both the PRRB and the HCFA and filed identical claims for the fiscal years ending in 1974 and 1975. In August 1979, Humana amended its complaint10 to include additional claims in which the PRRB decision represented final agency action.11 The district court issued its memorandum opinion in August 1982, affirming the Secretary's decision on all issues.
II. ANALYSIS
A. Standard of Review
7
The Medicare Act itself12 incorporates the standard of review set out in section 706 of the Administrative Procedure Act.13 As a reviewing court, we are permitted to set aside the Secretary's decision only if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law."14 It is undisputed that Congress, in the statute, granted broad discretion to the Secretary to develop the "reasonable cost" concept through regulations.15 The Secretary's interpretations of the statutes that she administers are entitled to great deference.16 With this standard of review in mind, we consider each of the claims.
B. Proprietary Costs
8
Proprietary costs are those expenses incurred solely as a result of a hospital's for-profit status. These include the costs associated with attracting private investment capital. The specific proprietary costs at issue here are stock maintenance costs, income taxes, the inclusion of tax liability in calculating equity capital and the rate of return on equity capital. Humana seeks an amount of reimbursement for proprietary costs "limited to a level sufficient to recoup its 'costs,' " including the expenses of attracting investment capital.17 It argues that all other government programs, except Medicare, allow for reimbursement of all of these costs.18
9
The Secretary contends that these proprietary costs are not costs of patient care as allowed under 42 U.S.C. Sec. 1395x(v)(1)(A).19 The costs are, in addition, not necessary in the efficient delivery of needed health services as required by 42 C.F.R. Sec. 405.451(a) (1983). The Secretary also maintains that Congress has included recognition of proprietary costs in the allowable rate of return on equity capital, which is based on one and a half times the interest on debt obligations issued by the Federal Hospital Insurance Trust Fund (FHITF).20 Therefore, in the Secretary's view, no reimbursement for proprietary costs was intended under 42 U.S.C. Sec. 1395x(v)(1)(A), the "reasonable costs" provision of the Act.
1. Stock Maintenance Costs
10
Stock maintenance costs include Security and Exchange Commission (SEC) filing fees, stock transfer fees, and the costs of shareholder meetings and reports.21 Humana contends that "these expenses are no different in substance than either incorporation fees or other corporate expenses, which are reimbursed under the Program, or the transaction costs associated with attracting debt financing, which are similarly reimbursed."22 It cautions that the Secretary's disallowance of reimbursement for these expenses will result in cross-subsidization, the shifting of Medicare costs to non-Medicare patients, which is prohibited under the Act.23
11
The guiding precedent in this circuit is American Medical International, Inc., v. Secretary of Health, Education and Welfare (AMI).24 In AMI, the provider hospitals challenged the Secretary's denial of reimbursement for various expenses, including stock maintenance costs. The district court drew, and we affirmed, the distinction between reimbursable and nonreimbursable costs based on the purpose they served:
12
A crucial distinction must be drawn between costs which are necessary for the maintenance of a corporate structure and those which are necessary for providing medical services. Stock maintenance costs are necessary for a corporation to exist, but medical services can be provided without the corporate form.25
13
Today we reaffirm this distinction. The purpose of the Medicare reimbursement scheme is to refund the cost of providing medical services. These services can be provided in a variety of settings, both proprietary and nonprofit. It is the Secretary's task to ferret out those costs incurred by proprietary hospitals which actually relate to medical care.
14
The regulations implementing the Act allow reimbursement for both direct and indirect costs.26 At some point, however, certain indirect costs become too attenuated to be regarded as for the provision of medical services. To make these distinctions, the Secretary employs the primary purpose test,27 determining the primary purpose of a given activity and its associated cost.
15
In the case of stock maintenance costs, submitting SEC filings, paying stock transfer fees, and conducting and reporting on shareholder meetings all serve to protect the shareholders and to enhance their investment.28 While the indirect effect of stock maintenance activities may sometimes benefit medical services, the connection is too indirect. The Act gives no preference to one particular organizational structure. It should not, therefore, subsidize the continuing costs of a provider's choice of corporate structure.
16
Humana disputes the distinction between stock maintenance costs and incorporation fees and the transaction costs of attracting debt financing.29 Again, we find the Secretary has rationally exercised her line-drawing authority. The Act is structured to encourage the creation of medical facilities. Incorporation and the securing of adequate debt financing bring such facilities into existence. Reimbursement for these expenses is consistent with the intent of the Act. Once a facility is in existence and medical services are being rendered, however, stock maintenance costs inure primarily to the benefit of shareholders, not patients.
17
We find Humana's contention that disallowance of stock maintenance costs will result in illegal cost-shifting to non-Medicare patients to be without merit. The prohibition against cross-subsidization applies solely to costs relating to patient care. Since we have determined that stock maintenance costs relate to maintenance of the corporate entity as opposed to the reasonable cost of providing medical care, no cost-shifting has occurred. The Secretary's basis of distinguishing between the costs of patient care and other nonreimbursable costs is both logical and rational.30
2. Income Taxes
18
Humana claims to be entitled to reimbursement for the funds expended in satisfying its federal and state income tax liability. It argues that income taxes are a cost of doing business for investor-owned facilities and are always reimbursed by other government programs.31 In addition, Humana contends that the income tax liability, if not reimbursed, will be passed on to non-Medicare patients, resulting in prohibited cross-subsidization.32
19
The Secretary contends that income taxes do not act to increase the cost of providing medical care, only to decrease proprietary facilities' profits.33 We affirm the Secretary's determination. Income taxes, like any other claimed expense, must be evaluated under the reasonable cost standard of 42 U.S.C. Sec. 1395x(v)(1)(A) (1982). Reasonable costs include only those expenses incurred in the efficient delivery of needed health services. The very concept of income taxes, a tax on earned profits, refutes Humana's claim for reimbursement. Relying on the AMI court's approach of looking at the purpose of a given expense, we conclude that income tax liability is not a necessary cost of rendering medical care.34
20
As discussed earlier, medical services are provided in both proprietary and in nonprofit facilities. Liability for income taxes comes about only when a proprietary hospital earns a profit. The cost is associated with enhancing the shareholders' investment, not with the provision of medical care.35 Humana claims that to disallow income tax reimbursement is to differentiate unfairly between proprietary and nonprofit hospitals. The statute and its implementing regulations, however, do not require that all hospitals be treated identically, only equitably.36 Moreover, the allowance of income tax reimbursement could result in extremely disparate treatment among proprietary facilities themselves. The amount of tax owed can depend on a variety of factors, including financial structure, carryover of past losses, or corporate organization. Two hospitals may offer the same medical services and charge the same fees, yet have vastly different tax liabilities.
21
The fact that certain other governmental programs provide reimbursement for income tax expenses is not an adequate rationale for providing them under Medicare. Humana's argument focuses on public utility case law, an area not analogous to Medicare reimbursement. First, a hospital's decision to enter into a contract with Medicare is voluntary. Hospitals are in no way compelled to participate in the program. In contrast, public utilities are forced to operate within a tightly regulated scheme if they are to operate at all. Second, public utilities are strictly prohibited from setting rates that recoup past losses.37 Unlike ratemaking in the utility industry, Medicare reimbursements have until recently--and at all times relevant to this litigation--been entirely retrospective and based on actual costs.
22
We find Humana's contention that denial of reimbursement for income taxes results in cross-subsidization to be without merit. The subsidization prohibited by regulation38 refers to the shifting of the costs of providing medical services between Medicare and non-Medicare patients. Since income taxes do not fall into this "reasonable cost" category, no cross-subsidization has occurred. Whether income taxes are a cost of doing business for proprietary hospitals and whether they are a cost of providing medical services are two wholly distinct issues. We refuse to take the quantum leap required by Humana's argument of equating the two.
23
Humana asserts that if income taxes are not reimbursed as part of "reasonable costs," the same tax liabilities must not be included in the calculation of equity capital.39 Humana would then be entitled to a return on equity capital for the funds used to pay income taxes. The Secretary responds that only net working capital actually available for patient care may properly be included in the calculation of each provider's equity capital.40 We affirm.
Equity capital includes
24
(1) the provider's investment in plant, property, and equipment related to patient care ... and
25
(ii) Net working capital maintained for necessary and proper operation of patient care activities....41
26
Under 42 C.F.R. Sec. 405.429(a) (1983), return on equity capital, based on one and one-half times the interest on debt obligations issued by the Federal Hospital Insurance Trust Fund (FHITF), is allotted for proprietary providers. In order to calculate the net working capital component of equity capital, the provider's current liabilities are subtracted from its current assets. The sole question here is whether income tax liability must also be subtracted from net working capital.
27
This question was fully addressed in AMI. Explaining why the hospitals' argument against inclusion of income tax liability was inapposite42 the district court stated:
28
This approach misses the mark. These regulations do clearly establish that a return on equity capital is only allowed on that portion of equity capital related to patient care. Therefore, liabilities not related to patient care (such as ... taxes based on net income) must be subtracted from working capital to arrive at the net working capital necessary and proper for patient care services. This is accomplished by including the ... tax liability in the return on equity capital computation.43
29
Income taxes must be subtracted from the hospitals' current assets to arrive at the actual net working capital invested in patient care.44
C. Rate of Return on Equity Capital
30
Humana insists that the rate of return on equity capital permitted by the Secretary,45 based on one and one-half times the interest on debt obligations issued by FHITF, consistently fails to meet the true cost of attracting capital.46 It claims that a proprietary hospital's return must be paid under 42 U.S.C. Sec. 1395x(v)(1)(A) (1976), the "reasonable costs" provision, rather than under 42 U.S.C. Sec. 1395x(v)(1)(B) (1976), the subsection dealing with extended care facilities.47 The reasonable cost provision contains no such fixed formula for a rate of return on equity. Rather, under this provision the amount of each hospital's reimbursement must be evaluated separately. Humana requests an individualized hearing on the rate of return to which it is entitled.48
31
The Secretary responds that a proprietary hospital's rate of return can be claimed only under the extended care facility provision and not under the reasonable cost provision of the Act.49 Under that section, she argues, HHS lacks statutory authority for individualized rate-making on a hospital-by-hospital basis. We agree with the Secretary's interpretation.
32
Although the House and Senate conferees who approved the 1966 amendment enacting the extended care facility provision50 expected the Secretary to "apply similar or comparable principles in determining reasonable costs for reimbursement of proprietary hospitals for services furnished by them,"51 the plain language of Sec. 1395x(v)(1)(B) must be our guide. On this point, we are bound by our prior opinion in AMI, which explicitly affirmed the district court's conclusion that the return on equity capital provision in Sec. 1395x(v)(1)(B) "constitutes the sole exception to the basic Medicare principle that reimbursement be limited to those costs actually incurred in providing patient care services."52 Since AMI precludes a finding that return on equity is payable under Sec. 1395x(v)(1)(A), and since Sec. 1395x(v)(1)(B) authorizes the Secretary to set a single, universal rate of return, we hold that Humana is not entitled to an individual determination of a "reasonable" return on equity.
D. Stock Acquisition Costs and Liquidation
33
In separate transactions conducted between May 17, 1969, and June 18, 1971, Humana acquired 100 percent of the corporate stock of twelve health care facilities, eight of which were subsequently merged or dissolved into Humana or a subsidiary. Humana argues that each of the twelve facilities was "purchased as an ongoing operation" within the meaning of 42 C.F.R. Sec. 405.415(g) (1983),53 which entitles it to reimbursement for capital costs--including depreciation,54 interest on loans used to finance the acquisitions,55 and return on equity56--based on its purchase price rather than the cost of the assets to the acquired entities. For transactions in which the acquired facilities remained separate corporations, this claim is foreclosed by AMI, which upheld the Secretary's denial of such reimbursement "with respect to the purchase ... of 100 percent of the stock of the [acquired] hospitals...."57 Humana seeks to distinguish AMI on the ground that the "district court evaluated the reimbursement claims on the basis of its interpretation of Sec. 405.415(a)-(b), and not under Sec. 405.415(g)."58 However, AMI's analysis of non-liquidating stock transactions in fact turned on the statutory requirement that only health care providers be reimbursed for their reasonable costs of patient care,59 and the court's reasoning controls the case before us:
34
To participate in the Medicare program and to be eligible for Medicare payments, a provider must file an agreement with the Secretary pursuant to 42 U.S.C. Sec. 1395cc. While the agreement is in effect, the Secretary will reimburse the provider for its reasonable costs of providing patient care to beneficiaries eligible under the program. Such costs are reimbursable only to the extent that they are "actually incurred." 42 U.S.C. Sec. 1395x(v)(1)(A). The providers in this case are the [acquired] plaintiff hospitals, not Chanco. Both before and after the stock transfer, plaintiff hospitals, not their owners, were and are the providers of medical services within the meaning of the Medicare Act. Only their reasonable costs in rendering medical services to beneficiaries can be reimbursed.
35
... [I]t would only make sense to allow plaintiff hospitals to be reimbursed for the depreciation costs of assets that the plaintiff hospitals themselves acquired because the statute only permits reimbursement for costs "actually incurred." 42 U.S.C. Sec. 1395x(v)(1)(A). This must mean "actually incurred" by the provider because it is the provider that is being reimbursed. Reimbursement for depreciation from a cost established by the expenditure of Chanco, the stockholder, would be to allow reimbursement for costs not "actually incurred" by plaintiff hospitals, the providers, and would, therefore, be contrary to the Act. The regulations reflect this by permitting reimbursement only for the acquisition of facilities, 42 C.F.R. Sec. 405.415....60
36
The Secretary's construction of Sec. 405.415(g) is thus reasonable, and indeed is required by the underlying statute.61
37
Humana next argues that a step-up in basis is appropriate for the eight transactions in which the stock acquisition was part of a two-step transfer of assets to the acquiror, citing Pacific Coast Medical Enterprises v. Harris (PCME).62 In that case, PCME acquired 100 percent of the stock of Community Hospital of Los Angeles (Community) in an arms-length transaction, liquidating the acquired company approximately nine months later. The Secretary refused to characterize the transaction as a single purchase of an ongoing provider, but treated the stock purchase and liquidation as distinct events. The stock purchase was analyzed using 42 C.F.R. Sec. 405.626(c) (1979),63 which established that a transfer of corporate stock "would not, in itself, constitute a change of ownership" requiring the filing of a new Medicare provider agreement.64 Similarly, the Secretary reasoned, a stock transfer does not constitute a change in ownership of assets for purposes of Medicare reimbursement. The Secretary then analyzed the liquidation of Community under 42 C.F.R. Sec. 405.427(c)(2) (1983), which states that when a provider obtains facilities from an organization owned or controlled by the provider, the allowable basis is the cost of the facilities to the owned or controlled entity.65
38
The Ninth Circuit found "[t]he common usage and understanding of this transaction [to be] overwhelmingly contrary to the Secretary's characterization."66 Common business practice, generally accepted accounting principles, the Internal Revenue Service, the Securities and Exchange Commission, and the California Commissioner of Corporations all recognized that PCME's 100 percent stock purchase and liquidation was in substance an acquisition of assets,67 and was therefore a purchase of an ongoing operation entitling the acquiror to a new cost basis. The same principles govern our decision today.68 As in PCME, the Secretary separately analyzes Humana's stock purchases and subsequent liquidations. And as in PCME, "the Secretary's characterization of [a liquidating] transaction as two independent events, instead of a single purchase of an ongoing provider, [is] arbitrary, erroneous and irrational."69 While permitting reimbursement for asset purchases but not 100 percent stock acquisitions is "reasonable in light of the statute,"70 it is not reasonable to deny reimbursement for integrated transactions that are, in substance, asset acquisitions. The only possible basis we see for distinguishing Humana's transactions from straightforward asset purchases would be absence of a consistent intent to acquire assets. In PCME, the acquiror had intended from the outset of the transaction eventually to transfer to itself the assets of the acquired company.71 If there is no such intent, then the two-step acquisition is not an integrated transaction, and the Secretary's bifurcated analysis is reasonable, if not flatly required by statute.
39
This analysis is consistent with this court's holding in Richey Manor, Inc. v. Schweiker,72 which involved the purchase of 100 percent of the stock of a for-profit Medicare provider and its subsequent conversion into a not-for-profit corporation. The conversion's only effect
40
was to shift ownership of the assets from a for-profit corporation to a not-forprofit corporation.... [A]lthough the providers' stock changed hands, the assets remained in the hands of the [acquired] corporate entity.... And, although the corporate entities are not identical, the asset ownership continues to rest with a corporation separate and distinct from the purchaser of the stock.73
41
So characterized, the transaction closely resembled the kind of stock acquisitions for which courts had previously denied stepped-up treatment.74
42
Richey Manor held only that the conversion of the acquired company to non-profit status was not the equivalent of an asset acquisition for purposes of Medicare reimbursement. The panel in dicta, however, criticized PCME, and therefore the rationale of our holding today, for failing to take proper account of the "recapture problem" in liquidating transactions, a concern which is also the focus of the Secretary's argument in this case. Depreciation payments to providers are necessarily based on estimates. If the estimated depreciation on an asset exceeds the actual depreciation (due, e.g., to a faulty estimate of an asset's useful life), the provider may recognize gain upon disposition of the depreciated asset, whereupon the Secretary can "recapture" the excess depreciation payments under 42 C.F.R. Sec. 405.415(f) (1983).75 The Richey Manor court was worried that, since this recapture provision does not apply to sales of stock (which is not a depreciable asset), allowing a step-up in basis following a 100 percent stock acquisition would "destroy the symmetry of the regulatory scheme by divorcing a step up in basis [for the purchaser] from depreciation recapture [from the seller]."76
43
The scope of this "recapture problem" is not at all clear. The recapture regulations expressly apply only to the "disposal of a depreciable asset [that] results in a gain or loss...."77 Since a corporation acquired in a simple stock transaction neither sells depreciable assets nor generally recognizes gain upon a subsequent merger or dissolution, treating a two-step transaction as a stock purchase for purposes of the recapture rules would indeed seem to create the "loophole" feared by the Secretary (and the Richey Manor panel). However, if integrated two-step transactions are characterized as asset purchases for purposes of both basis computations and recapture, they would trigger recapture obligations for the "selling" corporation.78 The Secretary suggests that collecting these obligations would present administrative problems. If the acquired corporation is deemed to have sold assets and thereby to have incurred recapture liability, then following a liquidation this liability devolves upon the shareholders who received the "sale proceeds" (which in fact was payment for their stock). These shareholders may be difficult to locate, and would also no doubt be distressed at the prospect of paying their old corporation's "recapture obligations," especially if the characterization of the transaction as an asset sale depends upon the acquiror's intent to acquire assets rather than their intent to sell stock. Even these problems can be avoided, however, if one views two-step transactions as sui generis for purposes of the Medicare scheme, sharing attributes of both stock and asset acquisitions. That is, if the transaction is characterized as an asset purchase for purposes of generating a recapture obligation, and as a stock purchase for purposes of determining the incidence of the liability, then the acquiror is simply liable for the recapture obligation its transaction generated. On this mixed analysis, the only stockholder--and hence the only party responsible for depreciation recapture--of the liquidating corporation following a 100 percent stock acquisition, is the acquiror. In the event of a post-acquisition merger, the surviving corporation (i.e., the acquiror) would inherit the recapture liability of the seller under general principles of corporate law. Thus, though we do not here decide the point, we note that the crisis envisioned by the Secretary and the Richey Manor panel is not necessarily imminent. Moreover, as far as the present case is concerned, Humana has agreed to assume any recapture liability of the acquired facilities, and the Provider Reimbursement Review Board conditioned its favorable determinations for Humana on the reimbursement issue upon "the Providers' assuming the responsibility to see that the obligations under the Program relating to any gain to the sellers and appropriate recapture of depreciation are met."79 But even if the existing regulations do not permit collection of recapture, or would make such collection administratively difficult, that seems to us a problem of the Secretary's own creation, which she must remedy. We believe that the requirements of fair reimbursement should determine the character of the recapture regulations, not vice versa.80
III. CONCLUSION
44
On all issues other than that of a stepped-up basis for liquidating transactions we affirm the rulings of the District Court, which upheld the determinations of the Secretary. As to that issue, we hold that a stepped-up basis was required for liquidations intended at the time of acquisition. This, we may note, is not precisely the test applied by the Provider Reimbursement Review Board in its decision which the Secretary reversed on other grounds. That decision accorded a stepped-up basis to specified acquisitions which the Board found to have been followed by "subsequent merger or liquidation within a reasonable time."81 As we hold, however, under the applicable law and regulations the timing of the transaction, while a powerful indicator of intent to liquidate, was not necessarily sufficient either to require or preclude a stepped-up basis, but the totality of circumstances bearing upon intent should have been considered. In any event, since the Secretary reversed the decision of the PRRB on other grounds, we cannot say that its findings, even as to "reasonable time," were those of the agency. Accordingly, we remand this case to the District Court with instructions that it remand to the agency for determination of the requisite intent and for calculation and payment of any additional sums accordingly due.
45
So ordered.
1
42 U.S.C. Secs. 1395-1395xx (1982)
2
Id
3
Id. Secs. 1395c to i-2 (1982)
4
Id. Sec. 1395x(v)(1)(A)
5
Id
6
Id
7
419 F.Supp. 253 (D.D.C.1976), aff'd in part, rev'd in part, 590 F.2d 1070 (D.C.Cir.1978). This case was filed directly in the district court. The suit challenged the Secretary's method of calculating the rate of return on equity capital to be paid to proprietary hospitals. The district court remanded the case to the Secretary to conduct a study of the factors affecting the economics of proprietary hospitals. 419 F.Supp. at 262. On appeal, this court held that the district court did not have jurisdiction to hear challenges to the rate of return for the post-1973 fiscal years. See Humana of South Carolina v. Califano, 590 F.2d 1070 (D.C.Cir.1978). Humana was first required to submit its claims to the primary jurisdiction of the PRRB. On remand, the case was consolidated with two others then pending in the district court
8
See 42 U.S.C. Sec. 1395oo (1982)
9
Fiscal intermediaries, like the Blue Cross Association, are assigned to review providers' claims and to make the payments on behalf of the Secretary. Id. Sec. 1395h (1982). The provider hospitals file claims for payment annually with the fiscal intermediaries. 42 C.F.R. Sec. 405.454(f) (1983). The fiscal intermediary then determines which costs are allowable under the Act and how much reimbursement the provider is entitled to for the year. Id. If a provider wishes to contest the intermediary's determination, a hearing before the PRRB may be requested. 42 U.S.C. Sec. 1395oo (1982). The PRRB's decision constitutes final agency action unless the Secretary, acting through the Administrator or Deputy Administrator of the Health Care Financing Administration (HCFA), modifies or reverses the PRRB's determination. Id. This final decision is then subject to judicial review pursuant to 42 U.S.C. Sec. 1395oo(f)(1) (1982)
10
Humana, Inc. v. Schweiker, C.A. No. 81-0853 and Humana v. Schweiker, C.A. No. 81-1311 raise identical issues for the fiscal years ending in 1976 and 1977. These claims were disallowed by the Administrator and are included in this appeal
11
Appellee alleges that this court lacks subject matter jurisdiction for Humana's pre-1973 claims. Appellee's Brief at 7a. Since appellants limit their appeal to reimbursement for fiscal years ending 1973 through 1977, we do not find it necessary to address the jurisdictional issue. See Appellant's Brief at 4
12
42 U.S.C. Sec. 1395oo(f)(1) (1982)
13
5 U.S.C. Secs. 701-706 (1982)
14
Id. Sec. 706(2)(A)
15
Richey Manor, Inc. v. Schweiker, 684 F.2d 130, 134 (D.C.Cir.1982). See Springdale Convalescent Center v. Mathews, 545 F.2d 943 (5th Cir.1977)
16
Villa View Community Hospital, Inc. v. Heckler, 728 F.2d 539 (D.C.Cir.1984) (per curiam)
17
Appellants' Brief at 30
18
Id
19
Appellee's Brief at 40
20
42 U.S.C. Sec. 1395x(v)(1)(B) (1982)
21
Appellants' Brief at 12
22
Id
23
Id
24
677 F.2d 118 (D.C.Cir.1981) (per curiam). Although this opinion dealt largely with the issue of collateral estoppel, it explicitly affirmed the portion of the district court's opinion dealing with stock maintenance costs. "For reasons amply delineated by the District Court, we agree that the costs in question are not reimbursable because they were not necessarily incurred in the provision of health-care services to Medicare patients, as is required by the Medicare Act." Id. at 119 (footnotes omitted)
25
AMI, 466 F.Supp. 605, 612-13 (D.D.C.1979), aff'd, 677 F.2d 118 (D.C.Cir.1981) (per curiam)
26
Id. at 610; see supra note 4
27
Id. at 615
28
See, e.g., duPont v. Wyly, 61 F.R.D. 615, 632 (D.Del.1973)
29
See supra note 22
30
See Sun Towers, Inc. v. Heckler, 725 F.2d 315 (5th Cir.1984) (disallowing reimbursement for stock maintenance costs based on the reasoning set forth in AMI )
31
Appellants' Brief at 14
32
Id
33
Appellee's Brief at 76
34
The court in AMI was faced with slightly different facts than those before us today. In that case, state franchise taxes rather than federal and state income taxes were at issue. By using the analysis already affirmed by this court in its treatment of stock maintenance costs, the district court denied reimbursement for the franchise taxes. The basis for the tax, the generation of net income, was held to be the decisive factor
A connection between the tax and the rendering of medical services is essential. Whether such a connection exists can only be determined by a consideration of why the tax is imposed.
AMI, 466 F.Supp. 605, 626 (D.D.C.1979), aff'd, 677 F.2d 118 (D.C.Cir.1981) (per curiam).
35
The Court of Claims, in a recent case involving the reimbursement of California franchise taxes, stated:
We cannot read the regulations as plaintiffs would have us do to require the Medicare program to protect profits from the effects of taxation.
Sierra Vista Hospital v. United States, 687 F.2d 422, 427, 231 Ct.Cl. 587 (1982).
36
42 C.F.R. Sec. 405.402(b)(5) (1983)
37
City of Piqua v. Federal Energy Regulatory Comm'n, 610 F.2d 950, 954 (D.C.Cir.1979)
38
42 U.S.C. Sec. 405.402(a) (1983)
39
Appellants' Brief at 67
40
Appellee's Brief at 55
41
42 C.F.R. Sec. 405.429(b)(1) (1983)
42
The arguments made against inclusion of income tax liability in AMI were parallel to the arguments before us in this case
43
AMI, 466 F.Supp. 605, 627 (D.D.C.1979) (emphasis in original), aff'd, 677 F.2d 118 (D.C.Cir.1981)
44
See also Sierra Vista Hospital, Inc. v. United States, 687 F.2d 422, 427, 231 Ct.Cl. 587 (1982) (holding that income taxes must be subtracted from assets in calculating working capital)
45
42 C.F.R. Sec. 405.429(a) (1983)
46
Appellants' Brief at 8-9
47
This provision, applicable to nursing homes, states:
Such regulations in the case of extended care services furnished by proprietary facilities shall include provision for specific recognition of a reasonable return on equity capital, including necessary working capital, invested in the facility and used in the furnishing of such services, in lieu of other allowances to the extent that they reflect similar items. The rate of return recognized pursuant to the preceding sentence for determining the reasonable cost of any services furnished in any fiscal period shall not exceed one and one-half times the average of the rates of interest, for each of the months any part of which is included in such fiscal period, on obligations issued for purchase by Federal Hospital Insurance Trust Fund.
(emphasis added.)
48
Appellants' Brief at 8-9, 12-13
49
42 U.S.C. Sec. 1395x(v)(1)(B) (1982)
50
Pub.L. No. 89-713, Sec. 7, 80 Stat. 1107, 1111 (1966)
51
H.R.Rep. No. 2317, 89th Cong., 2d Sess. 3 (1966)
52
466 F.Supp. at 613 (emphasis added), aff'd, 677 F.2d at 118
53
At all times relevant to this litigation, the portion of the regulation relied on by Humana read:
(g) Establishment of cost basis on purchase of facility as an ongoing operation. In establishing the cost basis for a facility purchased as an ongoing operation after July 1, 1966, the price paid by the purchaser shall be the cost basis where the purchaser can demonstrate that the sale was a bona fide sale and the price did not exceed the fair market value of the facility at the time of the sale.
20
C.F.R. Sec. 405.415(g) (1971)
54
See 42 C.F.R. Sec. 405.415
55
See id. Sec. 405.419
56
See id. Sec. 405.429
57
466 F.Supp. at 622
58
Reply Brief for Appellants at 4i
59
See 42 U.S.C. Secs. 1395f, 1395cc (1982)
60
466 F.Supp. at 622-23 (emphasis in original)
61
Humana suggests that Sec. 405.415(g) can include stock transactions if generally accepted accounting principles dictate a step-up in basis on the books of the acquired corporation following the acquisition. But regardless of the appropriate accounting procedures, the acquired company (i.e., the provider) incurs no actual expenses by being acquired. Similarly, the use of the word "purchaser" instead of "provider" in Sec. 405.415(g) does not bolster Humana's case, since under 42 U.S.C. Sec. 1395f (1982), the "purchaser" must be the "provider" in order to be reimbursed. When only stock is purchased, the acquired company remains the "provider" for which reimbursement claims are recognized. See West Seattle Gen. Hosp. v. United States, 674 F.2d 899, 901, 230 Ct.Cl. 132 (1982); Pacific Coast Medical Enter. v. Harris, 633 F.2d 123, 127 n. 9, 129 n. 21 (9th Cir.1980); 42 C.F.R. Sec. 489.18(a)(3) (1983)
62
633 F.2d 123 (9th Cir.1980)
63
Effective May 5, 1980, 42 C.F.R. Sec. 405.626(c) was recodified as amended at 42 C.F.R. Sec. 489.18(a)(3) (1983). See 45 Fed.Reg. 22,935 (1980)
64
42 C.F.R. Sec. 405.626(c) (1979). The policy that "[a] transfer of ownership of a provider of services ... render[s] such agreement invalid as between the Secretary and the transferee," 42 C.F.R. Sec. 405.625(a) (1979), was changed effective May 5, 1980. See 45 Fed.Reg. 22,935 (1980). The regulations now provide that "[w]hen there is a change of ownership ..., the existing provider agreement will automatically be assigned to the new owner." See 42 C.F.R. Sec. 489.18(c) (1983)
65
The Secretary has promulgated regulations, prospectively effective February 5, 1979, see 44 Fed.Reg. 6912-13 (1979), that explicitly deny a step-up in basis or reimbursement for interest in two-step statutory mergers. See 42 C.F.R. Sec. 405.415(l ) (1983); id. at Sec. 405.419(d)(1)(ii)
66
633 F.2d at 132
67
Id
68
Needless to say, common business, accounting and legal understanding cannot compel an interpretation contrary to the evident intent of Congress, see Richey Manor, Inc. v. Schweiker, 684 F.2d 130, 135 (D.C.Cir.1982). But it is the normal point of departure in assessing that intent where the object of the statute is to give effect to the economic reality of a transaction. That is the situation we confront here, where "the congressional policy that those who participate in Medicare be able to receive reimbursement for reasonable costs," PCME, 633 F.2d at 132-33, refers to costs that are in economic reality borne by the provider
69
633 F.2d at 136
70
AMI, 466 F.Supp. at 624
71
See 633 F.2d at 127. See also American Medicorp, Inc., v. Schweiker, 714 F.2d 68, 70 (9th Cir.1983) ("AMI's intent was to acquire the assets of Estudillo"); West Seattle General Hospital, Inc. v. United States, 674 F.2d 899, 903 (Ct.Cl.1982) ("[i]t is undisputed that it was always the intention of GHS to follow the stock purchase with a merger"); Chateau Gardens, Inc. v. Harris, 497 F.Supp. 133, 135-36 (E.D.Mich.1980) ("Plaintiff had the intent throughout of acquiring the assets as a whole and using them to provide health care services")
72
684 F.2d 130 (D.C.Cir.1982)
73
Id. at 134
74
See Homan & Crimen, Inc. v. Harris, 626 F.2d 1201, 1210-12 (5th Cir.1980), cert. denied, 450 U.S. 975, 101 S.Ct. 1506, 67 L.Ed.2d 809 (1981); AMI, 466 F.Supp. at 621-24
75
Section 405.415(f) reads in part:
(1) General. Depreciable assets may be disposed of through sale, scrapping, trade-in, exchange, demolition, abandonment, condemnation, fire, theft, or other casualty. If disposal of a depreciable asset results in a gain or loss, an adjustment is necessary in the provider's allowable cost. The amount of a gain included in the determination of allowable cost shall be limited to the amount of depreciation previously included in Medicare allowable costs. The amount of a loss to be included shall be limited to the undepreciated basis of the asset permitted under the program. The treatment of the gain or loss depends upon the manner of disposition of the asset as specified in paragraphs (f)(2) through (f)(6) of this section.
(2) Bona fide sale or scrapping. (i) Except as specified in paragraph (f)(3) of this section, gains and losses realized from the bona fide sale or scrapping of depreciable assets are included in the determination of allowable cost only if the sale or scrapping occurs while the provider is participating in Medicare. The extent to which such gains and losses are included is calculated by prorating the basis for depreciation of the asset in accordance with the proportion of the assets [sic ] useful life for which the provider participated in Medicare....
....
(3) Sale within 1 year after termination. Gains and losses realized from a bona fide sale of depreciable assets within 1 year immediately following the date on which the provider terminates participation in the Medicare program are also included in the determination of allowable cost, in accordance with the procedure specified in paragraph (f)(2) of this section....
76
684 F.2d at 135
77
42 C.F.R. Sec. 405.415(f)(1)
78
See Chateau Gardens, Inc. v. Harris, 497 F.Supp. at 136
79
Hearing Decision No. 77-D89 at 11 (Dec. 1, 1977), J.A. 322 (decision for cost reporting period ending August 31, 1973)
80
See PCME, 633 F.2d at 135 n. 39. Richey Manor disapproved this position in dicta. See 684 F.2d at 135 n. 5 ("there [may be] ways of rewriting the regulations so that a two-step transaction need not prevent recapture, but we deal with the regulations as they stand and see no reason to force Medicare to write different regulations which may raise problems of administration we cannot foresee"). However, we deal in the first instance with the reimbursement regulations, and we see no reason to allow an unreasonable application of these regulations in order to forestall potential problems on a collateral matter. See Chateau Gardens, Inc. v. Harris, 497 F.Supp. at 136
81
Hearing Decision No. 77-D89 at 10, J.A. 321 (emphasis added)
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IN THE COURT OF APPEALS OF THE STATE OF IDAHO
Docket No. 45985
STATE OF IDAHO, )
) Filed: January 18, 2019
Plaintiff-Respondent, )
) Karel A. Lehrman, Clerk
v. )
) THIS IS AN UNPUBLISHED
COLTON HUNTER MARLEY, ) OPINION AND SHALL NOT
) BE CITED AS AUTHORITY
Defendant-Appellant. )
)
Appeal from the District Court of the Fourth Judicial District, State of Idaho,
Elmore County. Hon. Nancy Baskin, District Judge.
Judgment and sentence and order of probation, affirmed.
Eric D. Fredericksen, State Appellate Public Defender; Sally J. Cooley, Deputy
Appellate Public Defender, Boise, for appellant.
Hon. Lawrence G. Wasden, Attorney General; Lori A. Fleming, Deputy Attorney
General, Boise, for respondent.
________________________________________________
Before HUSKEY, Judge; LORELLO, Judge;
and BRAILSFORD, Judge
________________________________________________
PER CURIAM
Colton Hunter Marley entered an Alford 1 plea to felony driving under the influence of
alcohol. I.C. § 18-8004(1)(a). The district court sentenced Marley to a unified ten-year
sentence, with three years determinate, and after a period of retained jurisdiction, suspended the
sentence and placed Marley on probation for ten years. Marley appeals, contending that the
district court abused its discretion by imposing an excessive sentence and by placing Marley on
probation for a period of ten years.
1
See North Carolina v. Alford, 400 U.S. 25 (1970).
1
Sentencing is a matter for the trial court’s discretion. Both our standard of review and the
factors to be considered in evaluating the reasonableness of a sentence are well established and
need not be repeated here. See State v. Hernandez, 121 Idaho 114, 117-18, 822 P.2d 1011, 1014-
15 (Ct. App. 1991); State v. Lopez, 106 Idaho 447, 449-51, 680 P.2d 869, 871-73 (Ct. App.
1984); State v. Toohill, 103 Idaho 565, 568, 650 P.2d 707, 710 (Ct. App. 1982). When reviewing
the length of a sentence, we consider the defendant’s entire sentence. State v. Oliver, 144 Idaho
722, 726, 170 P.3d 387, 391 (2007).
Applying the foregoing standards, and having reviewed the record in this case, we cannot
say that the district court abused its discretion either in imposing the original sentence or by
placing Marley on probation for a term of ten years. Therefore, the original sentence and the
order placing Marley on probation are affirmed.
2
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COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
§
The City of El Paso, § No. 08-18-00216-CV
Appellant, § Appeal from the
v. § County Court at Law No. 5
Guadalupe Ramirez, Norma Ramirez, § of El Paso County, Texas
Ramirez Pecan Farms, LLC, William H.
Boutwell, Jackie Boutwell, Raul § (TC# 2007-2568)
Zamorano, Jr., Amy K. Zamorano, Patricia
Wynn, Individually ans as Trustee of the §
Wynn Family Living Trust, Larry Webb,
Maria L. Webb, James R. Raley, Yariela §
G. Raley, Rusell T, Sturgeon, Kerry L.
Sturgeon, Kenneth A. Johnson and Julie R. §
Johnson,
§
Appellees.
§
§
ORDER
The Court GRANTS the Appellant’s third motion for extension of time within which to
file the brief until March 8, 2019. NO FURTHER MOTIONS FOR EXTENSION OF TIME TO
FILE THE APPELLANT’S BRIEF WILL BE CONSIDERED BY THIS COURT.
1
It is further ORDERED that the Hon. Jose E. De La Fuente, the Appellant’s attorney,
prepare the Appellant’s brief and forward the same to this Court on or before March 8, 2019.
IT IS SO ORDERED this 4th day of March, 2019.
PER CURIAM
Before McClure, C.J., Rodriguez and Palafox, JJ.
2
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29 F.Supp.2d 869 (1998)
UNITED STATES of America, Plaintiff,
v.
James R. CLARK, Tracy Davis, Defendants.
No. CR-2-98-152(1,2).
United States District Court, S.D. Ohio, Eastern Division.
November 30, 1998.
*870 Michael J. Burns, United States Attorney's Office, Columbus, OH, for plaintiff.
Richard Cline, Columbus, OH, for James Clark.
Paul R. Hensley, Federal Public Defender, Columbus, OH, for Tracy Davis.
MEMORANDUM ORDER
SARGUS, District Judge.
This matter is before the Court on the motions to suppress anticipated trial testimony filed by defendants Tracy Davis (Doc. 23) and James R. Clark (Docs.35, 40). Defendant Davis, in particular, moves to exclude the testimony of a confidential source to whom he delivered crack cocaine. Through these motions, defendants argue that the Court should preclude the testimony of any witness testifying against them who has been given anything of value in exchange for their testimony because such conduct violates the federal bribery statute, 18 U.S.C. § 201(c)(2).[1]
I.
Defendants rely extensively upon the decision and reasoning of United States v. Singleton, 144 F.3d 1343 (10th Cir.1998), in which a panel of the Court of Appeals for the Tenth Circuit found that the prosecutor in that case had violated § 201(c)(2) by entering into a cooperation agreement with an accomplice in which the accomplice agreed to testify truthfully in return for leniency. The Singleton decision, however, was vacated ten days after it was issued and an en banc review ordered. See United States v. Singleton, 144 F.3d 1343 (10th Cir.1998).
The reasoning in Singleton is undermined by legislation passed by Congress after the enactment of the anti-bribery statute, which recognizes, approves, and encourages the very deal-making at issue in Singleton. See 18 U.S.C. § 3553(e); 18 U.S.C. §§ 6001-6005; 28 U.S.C. § 994(n); U.S.S.G. § 5K1.1; Fed.R.Crim.P. 35(b). Plea agreements are essential to the administration of justice and are to be encouraged by the courts. See Santobello v. New York, 404 U.S. 257, 260, 92 S.Ct. 495, 30 L.Ed.2d 427 (1971). The recommendation of leniency in exchange for testimony is a recognized and established activity of federal prosecutors in the investigation and prosecution of criminal activity. "No practice is more ingrained in our criminal justice system than the practice of the government calling a witness who is an accessory to the crime for which the defendant is charged and having that witness testify under a plea bargain that promises him a reduced sentence." United States v. Cervantes-Pacheco, 826 F.2d 310, 315 (5th Cir. 1987) (en banc), cert. denied, 484 U.S. 1026, 108 S.Ct. 749, 98 L.Ed.2d 762 (1988). This traditional prosecutorial granting of leniency has, throughout history, been sanctioned by the courts as well. See, e.g., United States v. Ford, 99 U.S. 594, 604, 25 L.Ed. 399 (1878) (The Whiskey cases) (holding that a public prosecutor is permitted to induce a witness to fully and fairly testify to the guilt of his associates in exchange for the prosecutor's recommendation for executive clemency). The case law is replete with instances of this well-known practice. See, e.g., United States v. Medina, 90 F.3d 459, 464 n. 8 (11th Cir. 1996); United States v. Garcia Abrego, 141 F.3d 142, 151 (5th Cir.1998); United States v. Garcia, 66 F.3d 851, 857 n. 6 (7th Cir.1995); United States v. Locascio, 6 F.3d 924, 930 (2d Cir.1993); cert. denied, 511 U.S. 1070, 114 S.Ct. 1645, 128 L.Ed.2d 365 (1994); *871 United States v. Benny, 786 F.2d 1410, 1418 (9th Cir.1986). As recognized by Judge Learned Hand almost five decades ago, "[c]ourts have countenanced the used of informers from time immemorial; in cases of conspiracy, or in other cases when the crime consists of preparing for another crime, it is usually necessary to rely upon them or upon accomplices because the criminals will almost certainly proceed covertly." United States v. Dennis, 183 F.2d 201, 224 (2d Cir.1950), aff'd, 341 U.S. 494, 71 S.Ct. 857, 95 L.Ed. 1137 (1951), and cited with approval in Hoffa v. United States, 385 U.S. 293, 311, 87 S.Ct. 408, 17 L.Ed.2d 374 (1966).
In short, the practice of accomplice or informer testimony is a recognized and established "prerogative interest or title," and the government is therefore presumptively excluded from the application of § 201(c)(2). Nardone v. U.S., 302 U.S. 379, 58 S.Ct. 275, 82 L.Ed. 314 (1937). The Singleton court's holding deprives the United States of a crucial means of obtaining convictions in criminal cases and thereby obstructs the government's interest in enforcing federal law. The Singleton interpretation of § 201(c)(2) adopted by these defendants directly "deprive[s] the sovereign of a recognized or established prerogative title or interest." Id. at 383, 58 S.Ct. 275.
Furthermore, applying § 201(c)(2) to government plea agreements entered to procure future testimony would "work obvious absurdity," Nardone, 302 U.S. at 384, 58 S.Ct. 275, because without such testimony, the government would be unable to enforce drug laws, prosecute organized crime figures under RICO, or otherwise effectively proceed in the thousands of cases each year in which it relies on witnesses who testify in return for leniency. In addition, the Singleton rationale also would place in violation of § 201(c)(2) federal judges who, to reward a defendant for testimony provided, departed downward beyond the government's recommendation when faced with a § 5K1.1 motion under the Sentencing Guidelines. Based on these absurd potential results, this Court rejects the reasoning in Singleton.
This position is consistent with the conclusion reached by nearly all district courts to have considered this issue. See, e.g., United States v. White, 27 F.Supp.2d 646, 647 (E.D.N.C.1998) (§ 201(c)(2) is inapplicable to government plea bargains designed to encourage witnesses to testify against other criminal defendants); United States v. Hammer, 25 F.Supp.2d 518, 535 (M.D.Pa.1998) (Singleton was "an erroneous decision"); United States v. Juncal, 1998 WL 525800, *1 (S.D.N.Y. Aug.20, 1998) (rejecting reasoning of the Tenth Circuit in Singleton); United States v. Gabourel, 9 F.Supp.2d 1246, 1247 (D.Col. Aug.17, 1998) (holding that the agreements made with the government's witnesses did not violate the anti-gratuity statute); United States v. Guillaume, 13 F.Supp.2d 1331, 1333 (S.D.Fla. Aug.3, 1998) (application of § 201(c)(2) to federal prosecutors would result in "an obvious absurdity"); United States v. Eisenhardt, 10 F.Supp.2d 521, 522 (D.Md. July 30, 1998) (Singleton opinion was "amazingly unsound" and "nonsensical"); United States v. Reid, 19 F.Supp.2d 534, 536 (E.D.Va.1998) (to prohibit prosecutors from making promises in exchange for testimony works an "absurd" result); United States v. Arana, 18 F.Supp.2d 715, 717 (E.D.Mich. 1998) (application of § 201(c)(2) to federal prosecutors negotiating plea agreements "would create an absurdity"); United States v. Duncan, 1998 WL 419503 (E.D.La. July 15, 1998) (denying motion to suppress based on vacated status of Singleton); but see, United States v. Lowery, 15 F.Supp.2d 1348 (S.D.Fla.1998) (finding that § 201(c)(2) applies and excluding testimony of cooperating witness); and United States v. Fraguela, 1998 WL 560352 (E.D.La.).
To the extent defendants offer Singleton, Lowery, and Fraguela in support of their arguments, this Court finds that Singleton offers no precedential value since it was vacated by the Tenth Circuit on July 10, 1998. Further this Court does not find persuasive the district court opinions in Lowery and Fraguela. Thus, defendants' motions lack any supporting legal authority. Accordingly, the Court DENIES defendants' motion to suppress testimony of government witnesses (Docs.23, 35, 40).
IT IS SO ORDERED.
NOTES
[1] The federal criminal bribery statute provides:
Whoever ... directly or indirectly, gives, offers, or promises anything of value to any person, for or because of the testimony under oath or affirmation to be given by such person as a witness upon a trial, hearing, or other proceeding, before any court ... authorized by the laws of the United States to hear evidence or take testimony ... shall be fined under this title or imprisoned for not more than two years or both.
18 U.S.C. § 201(c)(2).
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United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT August 12, 2004
Charles R. Fulbruge III
Clerk
No. 04-60040
Summary Calendar
H.W. BAILEY; J. DENNIS DAVID,
Petitioners
versus
HUBERT HYMEL; DIRECTOR, OFFICE OF WORKER’S COMPENSATION PROGRAMS
U.S. DEPARTMENT OF LABOR,
Respondents.
--------------------
Petition for Review of the Decision and Order of the Benefits
Review Board
BRB No. 03-0643
--------------------
Before BARKSDALE, EMILO M. GARZA, and DENNIS, Circuit Judges.
PER CURIAM:*
The petition for review is denied for the reasons given by the
Benefits Review Board.**
*
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.
**
See 5th Cir. R. 47.6.
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790 F.Supp. 649 (1992)
RESOLUTION TRUST CORPORATION, as Receiver for Oak Tree Savings Bank, S.S.B. and as Conservator of Oak Tree Federal Savings Bank
v.
Nadalyn Miller COTTEN, et al.
No. 91-4656.
United States District Court, E.D. Louisiana.
April 7, 1992.
As Amended May 11, 1992.
Raymond P. Ward, Jerome R. Lepsich, Anthony Dunbar, Sessions and Fishman, and Paul J. Mirabile, Middleberg, Riddle and Gianna, New Orleans, La., for RTC.
Eric A. Holden, Patricia Garcia, New Orleans, La., for Nadalyn Miller Cotten, et al.
Thomas F. Daley, LaPlace, La., for Roger C. Cotten, Testamentary Trust.
ORDER AND REASONS
DUPLANTIER, District Judge.
The Resolution Trust Corporation as Receiver for Oak Tree Savings Bank, S.S.B. filed a motion to dismiss the counterclaim against it. For the following reasons, the motion is DENIED.
The issue is whether after a federally insured financial institution has been placed in receivership a district court must dismiss a suit filed against the institution prior to the appointment of the receiver, requiring the claimant to pursue administrative remedies and if unsuccessful then to return to court with a new suit. I have not found, nor has my attention been called, to any United States Supreme Court or Fifth Circuit decision on point. One district court decision supports R.T.C.'s position that the counterclaim should be dismissed, but I disagree with its reasoning. Homeyer v. Yorkville Federal Savings and Loan Association, 1991 WL 274226, 1991 U.S.Dist. Lexis 17939 (S.D.N.Y. December 12, 1991).
The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIERRA), Pub.L. No. 101-73 (1989), established, among other things, administrative procedures for adjudicating claims against the receiver of a failed bank and defined the jurisdiction of federal district courts to review claims which were disallowed. The statute contains the following provisions pertinent here:
the filing of a claim with the receiver shall not prejudice any right of the claimant to continue any action which was filed before the appointment of a receiver.
12 U.S.C. § 1821(d)(5)(F)(ii).
* * * * * *
Before the end of the 60-day period beginning on the earlier of
*650 (i) the end of the period described in paragraph (5)(A)(i)[1] with respect to any claim against a depository institution for which the Corporation is receiver; or
(ii) the date of any notice of disallowance of such claim pursuant to paragraph (5)(A)(i),
the claimant may request administrative review of the claim ... or file suit on such claim (or continue an action commenced before the appointment of the receiver) in the district ... court of the United States for the district within which the depositary institution's principal place of business is located ... (and such court shall have jurisdiction to hear such claim).
12 U.S.C. § 1821(d)(6)(A).
Mover contends that the counterclaim filed against it must be dismissed even though it was filed prior to the date the receiver was appointed, arguing that the receiver's appointment deprived this court of jurisdiction over the claim during the pendency of the administrative claim. Such a construction requires that those portions of the statute referring to the continuation of an action commenced before the appointment of the receiver must be read out of the statute and rendered meaningless. If the filing of an administrative claim deprives the district court of jurisdiction over a claim filed before a receiver is appointed, then such claims are treated identically to those filed after a receiver is appointed. If pre-receiver claims must be dismissed, there would be no need for the provisions relating to continuation of actions: there would be no action to continue. Once the action was dismissed a new suit would have to be filed in order to obtain judicial review of the administrative decision.
Moreover, no purpose is served by dismissing the counterclaim. Counterclaimant's administrative claim was filed January 17, 1992. Nearly one-half of the 180 day stay period has elapsed. Nothing mandates that the R.T.C. use the entire 180 day period to determine a claim. If a determination of the claim is made promptly, and the determination is adverse to counterclaimant, a dismissal of the counterclaim now would result in a new suit shortly thereafter. The counterclaim would then be back in its present posture but as a separate action.
I construe the applicable provisions as requiring a stay of the counterclaim pending the administrative ruling. Staying the counterclaim in no way prejudices the RTC and eliminates the additional expenditure of time and money by all parties that would result from a dismissal and refiling of the action. Had Congress intended that suits filed prior to the receivership must be dismissed pending determination of the administrative claim by the RTC, it could easily have stated that. In the absence of such an explicit provision and considering the interests of judicial economy, I stay all further proceedings on the counterclaim until such time as the RTC issues a determination on the administrative claim or the expiration of the 180 day stay period, whichever occurs first. If it becomes necessary in the interest of justice to stay the main demand so as not to produce the inequitable result of a final judgment in the main demand prior to an adjudication of the counterclaim, I will stay the main demand for a like period on motion of either party.
NOTES
[1] 12 U.S.C. § 1821(5)(A)(i) provides: Before the end of the 180-day period beginning on the date any claim against a depository institution is filed with the Corporation as receiver, the Corporation shall determine whether to allow or disallow the claim and shall notify the claimant of any determination with respect to the claim.
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355 F.Supp.2d 482 (2005)
Fawzi Khalid Abdullah Fahad Al ODAH, et al. Plaintiffs,
v.
UNITED STATES of America, et al., Defendants.
Mahmoad Abdah, et al., Petitioners,
George W. Bush, President of the United States, et al., Respondents.
Nos. CIV.A. 02-CV0828 (CKK), CIV.A. 04-CV1254 (HHK).
United States District Court, District of Columbia.
February 7, 2005.
Thomas B. Wilner, Neil H. Koslowe, Shearman and Sterling LLP, David H. Remes, Covington & Burling, Washington, DC, Marc D. Falkoff, Covington & Burling, New York City, for Plaintiffs.
*483 Brian David Boyle, Preeya M. Noronha, Terry Marcus Henry, Robert J. Katerberg, Lisa Ann Olson, U.S. Department of Justice, Robert D. Okun, United States Attorney's Office, Washington, DC, for Defendants.
Charles B. Gittings, Jr., Manson, WA, pro se.
ORDER DENYING MOTION FOR RCONSIDERATION OF ORDER GRANTING STAY PENDING APEAL
JOYCE HENS GREEN, District Judge.
Upon consideration of the Motion for Reconsideration of Order Granting Stay Pending Appeal filed by the plaintiff-petitioners in Al Odah v. Busk, 02-CV-0828 (CKK), and joined by the petitioners in Abdah v. Bush, 04-CV-1254 (HKK), in light of the substantial resources that would be expended and the significant burdens that would be incurred should this litigation go forward, and upon recognition that a reversal of this Court's January 31, 2005 rulings would avoid the expenditure of such resources and incurrence of such burdens, it is hereby
ORDERED that the Motion for Reconsideration of Order Granting Stay Pending Appeal is DENIED.
IT IS SO ORDERED.
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 03-1131
WILLIE H. MITCHELL, JR.,
Plaintiff - Appellant,
versus
JO ANNE B. BARNHART, COMMISSIONER OF SOCIAL
SECURITY,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Elizabeth City. Terrence W. Boyle,
Chief District Judge. (CA-02-4)
Submitted: March 20, 2003 Decided: March 27, 2003
Before WILLIAMS and TRAXLER, Circuit Judges, and HAMILTON, Senior
Circuit Judge.
Affirmed by unpublished per curiam opinion.
Willie H. Mitchell, Jr., Appellant Pro Se. Rudolf A. Renfer, Jr.,
Assistant United States Attorney, Barbara Dickerson Kocher, OFFICE
OF THE UNITED STATES ATTORNEY, Raleigh, North Carolina, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
Willie H. Mitchell, Jr., appeals the district court’s order
denying review of the Commissioner of Social Security’s denial of
Supplemental Security Income benefits. Mitchell contends only that
the district court overlooked the Commissioner’s failure to
consider the report of a consultative physician as required by
Social Security Ruling 96-6p (“SSR 96-6p”). We affirm.
This court reviews the Commissioner’s final decision to
determine whether it is supported by substantial evidence and
whether the correct law was applied. Pass v. Chater, 65 F.3d 1200,
1203 (4th Cir. 1995). Because the Commissioner’s decision indicates
that the opinion of the consultative physician was considered and
provides reasons for the weight accorded to that physician’s
report, we find no violation of SSR 96-6p. See 20 C.F.R. §
416.927(f) (2002).
Accordingly, we affirm the district court’s order denying
judicial review of the Commissioner’s decision. We dispense with
oral argument because the facts and legal contentions are
adequately presented in the materials before the court and argument
would not aid the decisional process.
AFFIRMED
2
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United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT May 12, 2005
Charles R. Fulbruge III
Clerk
No. 04-11234
Summary Calendar
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
MELVIN R. HASSELL,
Defendant-Appellant.
--------------------
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:04-CR-312-ALL-G
--------------------
Before WIENER, BENAVIDES, and STEWART, Circuit Judges.
PER CURIAM:*
Melvin R. Hassell appeals from his criminal contempt
conviction and sentence imposed in a bench proceeding for
violating the district court’s order not to interfere in a tax
sale of his property. Hassell argues that the district court
retaliated against him for exercising his constitutional rights,
lacked subject matter jurisdiction, conspired with a Department
of Justice attorney, and denied him a jury trial. The Government
moves to dismiss the appeal as frivolous.
*
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. 04-11234
-2-
A conviction for criminal contempt is authorized under 18
U.S.C. § 401(3) upon proof beyond a reasonable doubt of 1) a
reasonably specific order; 2) violation of the order; and 3) the
willful intent to violate the order. United States v. Landerman,
109 F.3d 1053, 1068 (5th Cir.), modified in part on other
grounds, 116 F.3d 119 (5th Cir. 1997). A criminal contempt need
not be charged by indictment. See United States v. Nunn, 622
F.2d 802, 803-04 (5th Cir. 1980); FED. R. CRIM. P. 42(a).
Further, a jury is required only if the contempt action carries a
penalty of more than six months of imprisonment. See National
Maritime Union v. Aquaslide 'N' Dive Corp., 737 F.2d 1395, 1400
(5th Cir. 1984).
We conclude that Hassell was given proper notice of the
contempt proceeding and that the district court’s finding of
guilt was not erroneous. Hassell’s appeal is without arguable
merit and is frivolous. See Howard v. King, 707 F.2d 215, 219-20
(5th Cir. 1983). Because the appeal is frivolous, the
Government’s motion to dismiss is granted and the appeal is
dismissed. See 5TH CIR. R. 42.2.
MOTION GRANTED; APPEAL DISMISSED.
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Case Information: 70300
Short Caption:KILLE, SR. VS. THE EIGHTH JUD. DIST. CT.Classification:Original Proceeding - Civil - Proper Person Writ Petition
Related Case(s):69817
Lower Court Case(s):Clark Co. - Eighth Judicial District - A711733Case Status:Disposition Filed
Disqualifications:Panel Assigned:
Panel
Replacement:
To SP/Judge:SP Status:
Oral Argument:Oral Argument Location:
Submission Date:How Submitted:
+
Party Information
RoleParty NameRepresented By
PetitionerDavid August Kille, Sr.
In Proper Person
RespondentThe Eighth Judicial District Court of the State of Nevada, in and for the County of ClarkAdam Paul Laxalt
(Attorney General/Carson City)
+
Due Items
Due DateStatusDue ItemDue From
08/08/2016OpenRemittitur
Docket Entries
DateTypeDescriptionPending?Document
05/03/2016Filing FeeFiling Fee due for Petition.
05/03/2016Petition/WritFiled Proper Person Petition for Writ of Mandamus.16-13771
05/03/2016MotionFiled Proper Person Motion. Ex Parte Application to Proceed In Forma Pauperis.16-13774
05/03/2016Notice/OutgoingIssued Notice to Pay Supreme Court Filing Fee. No action will be taken on this matter until filing fee is paid. Due Date: 10 days.16-13777
05/19/2016Order/ProceduralFiled Order Waiving Filing Fee. Petitioner seeks waiver of the filing fee for this petition, asserting that he is indigent and unable to pay it. Good cause having been demonstrated, this motion is granted, and thus, no filing fee is due for this petition.16-15811
07/13/2016Order/DispositionalFiled Order Denying Petition For Writ of Mandamus. "ORDER the petition DENIED." NNP16D-MC/MD/MG.16-21813
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658 F.3d 100 (2011)
AIRFRAME SYSTEMS, INC., f/k/a Airline Software, Inc., Plaintiff, Appellant/Cross-Appellee,
v.
L-3 COMMUNICATIONS CORPORATION, Defendant, Appellee/Cross-Appellant, and
Raytheon Company, Defendant.
Nos. 10-2001, 11-1169.
United States Court of Appeals, First Circuit.
Heard July 25, 2011.
Decided September 14, 2011.
*102 John J. Dabney, with whom Neal E. Minahan, Michael E. Shanahan, and McDermott Will & Emery LLP were on brief, replacing Bruce I. Afran, for appellant/cross-appellee.
Adam J. Kessel, with whom Kurt L. Glitzenstein, Jeffrey D. Weber, and Fish & Richardson P.C. were on brief, for appellee/cross-appellant.
Before TORRUELLA, BOUDIN, and DYK,[*] Circuit Judges.
DYK, Circuit Judge.
In this copyright infringement case, plaintiff-appellant Airframe Systems, Inc. ("Airframe") appeals from a decision of the United States District Court for the District of Massachusetts. The district court granted defendant-cross-appellant L-3 Communications Corp.'s ("L-3") motion for summary judgment. L-3 cross-appeals, challenging the court's denial of its motion for attorney's fees. We affirm in both respects.
I.
In 1979, Airframe began developing proprietary aircraft maintenance tracking software known as the Airline Resource Management System ("ARMS"). Since that time, Airframe has continually modified and expanded the source code of its ARMS software to create updated versions of the program. "Source code" is the original version of a computer program that is *103 written in human-readable words and symbols. Source code must be compiled into machine-readable "object code" before a computer can read and execute the software. A program in source code format can be modified by a computer programmer, whereas a program in object code format cannot be easily modified.
In July 2003, Airframe registered and deposited with the United States Copyright Office copies of four versions of its ARMS source code: (1) an "IBM version," created and published in 1981 (Reg. No. TX 5-970-284); (2) a "PC version," created and published in 1984 (Reg. No. TX 5-970-282); (3) a "UNIX version," created and published in 1988 (Reg. No. TX 5-970-280); and (4) a "2003 version," created and published in 2003 (Reg. No. TX 5-970-279). App. to Br. of Appellant, at 267-74. Airframe's copyright registrations became effective on April 16, 2004.
Airframe began licensing its ARMS software to L-3[1] in 1986. L-3's license was limited to the use of ARMS in compiled object code format. Nonetheless, while performing system maintenance for L-3 at some time in either 1997 or 1998, Airframe's (now former) employee John Stolarz ("Stolarz") allegedly acted without Airframe's authorization and copied some unspecified version of the ARMS source code files onto L-3's computer system. Stolarz allegedly used the source code to modify the ARMS software so that it could run on L-3's newer computersactions not authorized under L-3's license.
In August 2003, Airframe's president Gordon S. Rosen ("Rosen") discovered the unspecified version of the ARMS source code on L-3's computer system while performing system maintenance. When Rosen demanded an explanation for why L-3 possessed the source code, L-3 sent Airframe a letter explaining that the code must have been installed by Airframe's employee Stolarz. L-3 contends that it then deleted the ARMS source code files from its system at Rosen's request.
Following Rosen's discovery of the ARMS source code in L-3's possession, Airframe initiated a series of copyright infringement actions against L-3 in the Southern District of New York and the District of Massachusetts.[2] This appeal arises from the third of these actions, which Airframe filed in the District of Massachusetts in November 2008.
Airframe alleged in the present case that L-3 copied the ARMS source code to create a replacement aircraft maintenance program titled "M3." Airframe contended that L-3 created the M3 program by merely translating the ARMS source code from its original RPG programming language to the PHP language. Airframe further alleged that L-3 incorporated other copyrighted elements of the ARMS software into its M3 program, including proprietary report formats, menu terms and headings, and the ARMS user interfaces.[3]
*104 L-3 moved for summary judgment, contending that Airframe had failed to produce sufficient evidence to support a prima facie case of copyright infringement. In opposing summary judgment, Airframe relied on the undisputed fact that L-3 had unauthorized access to some unspecified version of the ARMS source code on its computer system until at least August 2003. Airframe additionally offered a single declaration by Rosenthe principal designer of the ARMS softwarein support of its infringement allegations. Rosen stated that he had examined the allegedly infringing M3 source code and compared it to the most current version of Airframe's ARMS source code (the 2009 version). After comparing about 15 percent of the source code, Rosen reported in his declaration that the programs shared "almost complete identicality down to the use of improper hyphenation and misspelled words that appeared in the original ARMS program." App. to Br. of Appellant, at 578. Rosen further reported finding programmers' comments[4] in the M3 source code that evidenced copying, including statements such as "I do not know what this code is used for so I will leave it here anyway." Id.
L-3 urged that the Rosen declaration was insufficient because the ARMS source code version which Rosen compared to the M3 programand which was the only version that Airframe produced during discoverywas an updated version of the ARMS program created in 2009. L-3 contended that the updated 2009 version of the ARMS source code was not registered and was insufficient to establish the content of the prior source code versions covered by Airframe's copyright registrations (including the 1981 IBM version, the 1984 PC version, the 1988 UNIX version, and the 2003 version). As such, L-3 argued, Airframe could not prove there was "substantial similarity" between the M3 source code and the registered source code that was allegedly infringed.
The district court agreed, and it granted summary judgment for L-3. The court concluded that Airframe "ha[d] not produced the relevant source code" and that it was Airframe's "burden to prove the [allegedly infringed source] code in its original form." Tr. of Mot. Hr'g, Airframe Sys., Inc. v. L-3 Commc'ns Corp., No. 1:08-CV-11940, ECF No. 109, at 4, 8 (D.Mass. July 21, 2010) (Airframe III). The court further stated that "a comparison of updated [ARMS] source code [to the allegedly infringing M3 code] simply as a matter of logic won't do." Id. at 7. Accordingly, the court concluded that Airframe had failed to establish a prima facie *105 case of copyright infringement.[5]
Airframe appealed. We have jurisdiction pursuant to 28 U.S.C. § 1291.
II.
We review the district court's entry of summary judgment de novo. Summary judgment is appropriate if the record reveals "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R.Civ.P. 56(a).
On appeal, Airframe almost exclusively argues that the district court improperly held that its copyright registrations were invalid for failure to deposit copies of the allegedly infringed source code with the Copyright Office. But the district court did not find Airframe's copyright registrations invalid. The court focused solely on the issue of whether Airframe had produced sufficient evidence to establish a prima facie case of copyright infringement. See Airframe Sys., No. 1:08-CV-11940, ECF No. 109. While we might properly affirm the district court because of Airframe's failure to address the issue actually decided below, we think the best course is to address the merits of the district court's summary judgment decision. In doing so, some understanding of the structure of the Copyright Act is necessary.
While "registration is not a condition of copyright protection," 17 U.S.C. § 408(a),[6] the Copyright Act makes registration a precondition to filing a valid copyright infringement claim under the federal statute, id. § 411. Although the Supreme Court in Reed Elsevier, Inc. v. Muchnick, ___ U.S. ___, 130 S.Ct. 1237, 176 L.Ed.2d 18 (2010), recently held that the Copyright Act's registration requirement "does not implicate the subject-matter jurisdiction of federal courts," id. at 1248, proof of registration of the allegedly infringed work remains an "element[] of a cause of action" for copyright infringement, id. at 1243-44.
In addition to the registration requirement, a plaintiff alleging copyright infringement has the burden of proving two elements: "(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original." Situation Mgmt. Sys., Inc. v. ASP. Consulting LLC, 560 F.3d 53, 58 (1st Cir.2009) (quoting Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 360, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991)). We focus solely on the element of copying.
The element of "copying" itself involves a bifurcated inquiry, because all "copying does not invariably constitute copyright infringement." Johnson v. Gordon, 409 F.3d 12, 18 (1st Cir.2005); see also Coquico, Inc. v. Rodriguez-Miranda, 562 F.3d 62, 66 (1st Cir.2009). To establish actionable copying for the purposes of copyright infringement, the plaintiff must prove both: "(a) that the defendant actually copied the work as a factual matter," and "(b) that the defendant's copying of the copyrighted material was so extensive that it rendered the infringing and copyrighted works `substantially similar.'" *106 Situation Mgmt., 560 F.3d at 58 (quoting T-Peg, Inc. v. Vt. Timber Works, Inc., 459 F.3d 97, 108 (1st Cir.2006)) (internal quotation marks omitted). Proof of "[b]oth species of copying [is] essential for the plaintiff to prevail." 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.01[B], at 13-10 (2011). In other words, "[n]ot all `factual' copying constitutes legally actionable copyright infringement"; the actual copying must be extensive enough to render the works "substantially similar." Creations Unlimited, Inc. v. McCain, 112 F.3d 814, 816 (5th Cir.1997). "Conversely, even when two works are substantially similar with respect to protectable expression, if the defendant did not copy as a factual matter, but instead independently created the work at issue, then infringement liability must be denied." 4 Nimmer & Nimmer, Nimmer on Copyright § 13.01[B], at 13-10.
Substantial similarity between the copyrighted work and the allegedly infringing work "is assessed by comparing the protected elements of the plaintiff's work as a whole against the defendant's work." Situation Mgmt., 560 F.3d at 59. The fact finder gauges this element by applying the "ordinary observer" test, under which substantial similarity is found "if a reasonable, ordinary observer, upon examination of the two works, would `conclude that the defendant unlawfully appropriated the plaintiff's protectable expression.'" T-Peg, Inc., 459 F.3d at 112 (quoting Johnson, 409 F.3d at 18).[7] However, before the foregoing comparison can take place, the plaintiff must necessarily establish the content of the copyrighted work that it contends was infringed. Thus, to survive summary judgment in the present case, Airframe was required to present sufficient evidence of copying (including substantial similarity) with respect to at least one of the ARMS source code versions covered by its copyright registrations.
Here, the only evidence of copying Airframe presented was Rosen's declaration. Rosen made no direct comparison between the allegedly infringing M3 program and the ARMS source code versions covered by Airframe's copyright registrations, as would normally be done. Rather, he compared the M3 program to the updated 2009 version of the ARMS source code. While this would support a finding of substantial similarity between the M3 program and Airframe's "current" source code (i.e., the 2009 ARMS source code), there is no claim that the 2009 source code was itself registered or that the 2009 version is the same as one of Airframe's earlier registered versionsthe 1981 "IBM version," 1984 "PC version," or 1988 "UNIX version."[8] Rosen's declaration said nothing about similarities between the 2009 ARMS version and Airframe's earlier registered ARMS versions. Indeed, Airframe *107 admits that they are in fact not the same, because the 2009 source code is a version "that had been updated by Airframe in the ordinary course of business." Appellant's Br. 15. Having presented no evidence sufficient to prove the content of its registered source code versions, Airframe cannot show that any of its registered works is substantially similar to the allegedly infringing M3 program, and Airframe has failed to create a genuine issue of material fact as to its claim of copyright infringement.
This court previously addressed this precise issue in Unistrut Corp. v. Power, 280 F.2d 18 (1st Cir.1960). In Unistrut, the plaintiff sought to prove infringement of the 1942 version of its catalog that it had registered with the Copyright Office, but the only evidence the plaintiff produced was an unregistered 1943 edition of the catalog "which admittedly contained some, unspecified, additions." Id. at 23. Though the "1943 edition ... was clearly shown to have been pirated," the court dismissed the plaintiff's case "for want of proof" because the plaintiff had offered "no proof that the infringed material was contained in the [allegedly infringed] 1942 edition." Id.
The Fifth Circuit addressed a similar situation in Bridgmon v. Array Sys. Corp., 325 F.3d 572 (5th Cir.2003), which like the present case involved computer source code. Because the plaintiff had offered no admissible evidence that could prove the content of his copyrighted source code, the district court found the evidence "insufficient to create a genuine issue of material fact as to whether [the copyrighted and accused programs] are `substantially similar.'" Id. at 576. The Fifth Circuit affirmed, holding that the plaintiff's "failure to adduce evidence to allow a comparison between the [copyrighted source code] and the allegedly infringing program vitiates his claim." Id. at 577. The plaintiff's failure to produce sufficient evidence to prove the element of "substantial similarity" was fatal to his infringement claim, even though there may have been "evidence of direct copying." Id.[9]
Here, Airframe has produced insufficient evidence to create a genuine issue of material fact regarding the necessary element *108 of substantial similarity. As such, we affirm the district court's grant of summary judgment in favor of L-3.[10]
III.
We turn next to L-3's cross-appeal contending that the district court erred in denying its motion for attorney's fees. We review a district court's determination regarding attorney's fees for abuse of discretion. Spooner v. EEN, Inc., 644 F.3d 62, 66 (1st Cir.2011). "Apart from mistakes of lawwhich always constitute abuses of a court's discretionwe will set aside a fee [determination] only if it clearly appears that the trial court ignored a factor deserving significant weight, relied upon an improper factor, or evaluated all the proper factors (and no improper ones), but made a serious mistake in weighing them." Gay Officers Action League v. Puerto Rico, 247 F.3d 288, 292-93 (1st Cir.2001) (internal citations omitted).
Under the so-called "American Rule," litigants customarily bear responsibility for their own legal fees. Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). The Copyright Act, however, creates an exception to this general rule by providing that a district court, "in its discretion," may "award a reasonable attorney's fee to the prevailing party" in a copyright infringement action. 17 U.S.C. § 505.
In Fogerty v. Fantasy, Inc., 510 U.S. 517, 521, 534, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994), the Supreme Court interpreted § 505 as requiring an "evenhanded" approach under which "[p]revailing plaintiffs and prevailing defendants are to be treated alike." The Court expressly rejected the practice of requiring a showing of frivolousness or bad faith before a prevailing defendant could be awarded attorney's fees. Id. at 531-32, 114 S.Ct. 1023. The Court however further noted that "attorney's fees are to be awarded to prevailing parties only as a matter of the court's discretion." Id. at 534, 114 S.Ct. 1023. While the Court found there was "no precise rule or formula" for exercising such discretion, the Court "suggested several nonexclusive factors" that courts could consider, including:
frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.
Id. at 534 n. 19, 114 S.Ct. 1023 (internal citation omitted).
We have interpreted Fogerty as allowing an award of attorney's fees to a prevailing party if the opposing party's claims are "objectively quite weak." See Garcia-Goyco v. Law Envtl. Consultants, Inc., 428 F.3d 14, 20-21 (1st Cir.2005) (noting that "this court has applied the Fogerty factors in affirming awards of attorney's fees where the plaintiff's copyright claim was neither frivolous nor instituted in bad faith," but was "objectively quite weak"); see also Latin Am. Music Co. v. ASCAP, *109 629 F.3d 262, 263 (1st Cir.2010); InvesSys, Inc. v. McGraw-Hill Cos., 369 F.3d 16, 20-21 (1st Cir.2004) (holding that "dishonesty is not required for an award [of attorney's fees]; even a case that is merely objectively quite weak can warrant such an award").
L-3 contends that the district court applied an incorrect attorney's fees standard. This is not a case like the Supreme Court's decision in Fogerty, 510 U.S. at 531-32, 114 S.Ct. 1023, or this court's decision in Edwards v. Red Farm Studio Co., 109 F.3d 80, 82 (1st Cir.1997), where the district court denied fees solely on the basis that the claim was not frivolous or brought in bad faith. Rather, the district court here quoted verbatim the factors that the Supreme Court suggested in Fogerty, and, as the Supreme Court recommended, it considered other factors as well. See Order, Airframe Sys., Inc. v. L-3 Commc'ns Corp., No. 1:08-CV-11940, ECF No. 122, at 1-2 (D.Mass. Feb. 8, 2011) (quoting Fogerty, 510 U.S. at 534 n. 19, 114 S.Ct. 1023). L-3 nonetheless argues that the court erred because it "did not cite, discuss, or quote from any of [the First Circuit's] precedents" which have interpreted Fogerty as permitting a district court to award attorney's fees when the opposing party's claims are "objectively quite weak." Appellee's Br. 49. We disagree. This court's opinions in Garcia-Goyco, 428 F.3d at 20, InvesSys, 369 F.3d at 20, and Latin Am. Music Co., 629 F.3d at 263, applied the Fogerty standard. As such, the district court's recitation of the standard as stated by the Supreme Court in Fogerty was an accurate statement of the law, and the court was not required to elaborate by citing First Circuit opinions that have applied the Fogerty standard. We see no reason here to presume that the district court failed to understand the contours of the standard that it recited and applied.
L-3 also contends that, even if the district court did apply the correct standard, the court abused its discretion in declining to award L-3 attorney's fees because Airframe's claims were in fact "objectively quite weak." L-3 argues that Airframe's claims were "doomed to fail for lack of proof from the outset" because "Airframe could not meet its burden of proof to show infringement of [the] copyrighted source code absent evidence of the source code in question." Appellee's Br. 51. However, L-3 ignores two important points.
First, while the Fogerty standardas interpreted in Garcia-Goyco and other casespermits a court to award attorney's fees when the opposing party's claims are objectively weak, it does not require the court to do so. A district court has discretion to decline to award attorney's fees even when the plaintiff's copyright infringement case is quite weak.[11]
Second, there has been no showing that the district court abused its discretion in declining to award L-3 attorney's fees on the facts of this case. As this court recently held in Latin American Music Co. v. ASCAP, 642 F.3d 87 (1st Cir.2011):
Our review of a fee award to a prevailing party is extremely deferential. We *110 will disturb a ruling under section 505 only if the record persuades us that the trial court indulged in a serious lapse in judgment.
Id. at 91 (internal citations and quotation marks omitted). Here, the court expressly considered the fact that "Airframe's claims in the present case ultimately failed to survive summary judgment due to a lack of admissible evidence on certain essential elements" of its infringement claim. Airframe Sys., ECF No. 122, at 2. The court however went on to apply each of the Fogerty factors and concluded that, despite the failure of proof issue, there were "no particular circumstances [that] agitate[d] in favor of compensation by way of attorney's fees." Id. The court did "not consider Airframe's claims to have been frivolous, improperly motivated, or objectively unreasonable," and it further emphasized that the "contentious nature" and "reasonably swift resolution" of the case weighed against a fees award. Id.
While a district court may, under some circumstances, abuse its discretion in declining to award attorney's fees, see, e.g., Mag Jewelry Co. v. Cherokee, Inc., 496 F.3d 108, 122-24 (1st Cir.2007), each of these cases depends on its own particular facts. Given the early stage at which the present case was resolved and the fact that evidence may have been available to support Airframe's claim, we cannot say that the district court abused its discretion in denying L-3's motion for attorney's fees.
IV.
For the foregoing reasons, we affirm both the district court's order granting summary judgment in favor of L-3 and its order denying L-3's motion for attorney's fees.
Affirmed.
No costs.
NOTES
[*] Of the Federal Circuit, sitting by designation.
[1] The original 1986 license was actually to E-Systems, Inc., one of L-3's predecessors in interest. E-Systems was acquired by Raytheon in 1995 and became part of Raytheon's Aircraft Integration Systems ("AIS") division. The assets of Raytheon's AIS division, including the license to Airframe's ARMS software, were acquired by L-3 in March 2002. For simplicity, we refer to L-3 and all of L-3's predecessors in interest as "L-3."
[2] See Airframe Sys., Inc. v. L-3 Commc'ns Corp., No. 05-CV-7638, 2006 WL 2588016 (S.D.N.Y Sept. 6, 2006) (Airframe I) (dismissing Airframe's complaint for failure to state a claim); see also Airframe Sys., Inc. v. Raytheon Co., 520 F.Supp.2d 258 (D.Mass.2007), aff'd, 601 F.3d 9 (1st Cir.2010) (Airframe II) (finding Airframe's claims res judicata as to acts of infringement alleged to have occurred prior to the dismissal of Airframe I).
[3] While the action below (Airframe III) was pending in the District of Massachusetts, Airframe additionally filed an action against the United States in the United States Court of Federal Claims (Airframe IV) pursuant to 28 U.S.C. § 1498(b). In its complaint, Airframe claimed that the United States was liable for copyright infringement on the grounds that (a) the United States contracted with L-3 to develop a proprietary aviation maintenance software program; (b) that L-3 made the allegedly infringing M3 program in its capacity as a government contractor and delivered the M3 program to the United States; and (c) that the United States has used the accused M3 program without Airframe's authorization since June 2006. After the district court granted summary judgment for L-3 in Airframe III, the United States moved to dismiss the Airframe IV action on preclusion grounds. The Claims Court heard oral argument on the motion to dismiss, but it has not yet ruled.
[4] In computer programming, a "comment" is an annotation left in the source code which is ignored by the computer when compiling and executing the program. Programmers typically leave comments for explanatory purposes to make the code easier to understand.
[5] Because Airframe voluntarily dismissed its complaint in Airframe II, which alleged that L-3 infringed by modifying ARMS to run on its new computers, 601 F.3d at 14, the district court also ruled that Airframe's claim was res judicata as to infringing acts prior to the dismissal of Airframe II. See Tr. of Mot. Hr'g, Airframe Sys., Inc. v. L-3 Commc'ns Corp., No. 1:08-CV-11940, ECF No. 31 (D.Mass. July 23, 2009). Airframe has not appealed this ruling.
[6] Copyright registration may be obtained "[a]t any time during the subsistence of the first term of the copyright in any published or unpublished work in which the copyright was secured before January 1, 1978." Id. § 408(a).
[7] Where, as here, the copyrighted work involves specialized subject matter such as a computer program, some courts have held that the "ordinary observer" is a member of the work's "intended audience" who possesses "specialized expertise." Dawson v. Hinshaw Music Inc., 905 F.2d 731, 735-36 (4th Cir.1990); see also Kohus v. Mariol, 328 F.3d 848, 857 (6th Cir.2003); Computer Assoc. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 713 (2d Cir.1992); Whelan Assocs., Inc. v. Jaslow Dental Lab., Inc., 797 F.2d 1222, 1232-33 (3d Cir. 1986). This court has yet to directly address this issue, and it is unnecessary to do so here.
[8] We do not understand Airframe to be alleging that L-3 copied the registered "2003 version" of the ARMS source code, Reg. No. TX 5-970-279, as this version was created over five years after L-3 gained unauthorized access to some unspecified version of the ARMS source code in either 1997 or 1998.
[9] In Bridgmon, the plaintiff had attempted to offer a "reconstruction" of his original source code made by his expert, but the district court excluded the reconstruction under the Best Evidence Rule. Id. at 576 n. 5. The Best Evidence Rule requires that a party seeking to prove the "content" of a writing must introduce the "original" or a "duplicate" of the original, unless it is established that (1) all originals have been lost or destroyed (absent bad faith by the proponent); (2) the original cannot be obtained; (3) the original is in the possession of an opposing party who refuses to produce it; or (4) the writing is not closely related to a controlling issue. See Fed. R.Evid. 1001-1004; see also Seiler v. Lucasfilm, Ltd., 808 F.2d 1316, 1319 (9th Cir.1986) (excluding a "reconstruction" of plaintiff's allegedly infringed Star Wars artwork under the Best Evidence Rule, and further noting: "The dangers of fraud in this situation are clear. The [Best Evidence Rule] ensure[s] that proof of the infringement claim consists of the works alleged to be infringed. Otherwise, `reconstructions' which might have no resemblance to the purported original would suffice as proof for infringement of the original."). We note that, if the Best Evidence Rule is satisfied, evidence other than the original may be sufficient to establish the content of a copyrighted work. See Data East USA, Inc. v. Epyx, Inc., 862 F.2d 204, 207 & n. 3 (9th Cir.1988) (evidence sufficient where plaintiff sought to prove the content of a video game by offering still photographs of the game being played); Seiler, 808 F.2d at 1319 (noting that plaintiff must "produce the original or show that it is unavailable through no fault of his own") (emphasis added). Airframe has made no effort to satisfy the requirements of the Best Evidence Rule here.
[10] While this case was pending on appeal, Airframe informed this court that it had filed a motion with the district court seeking to set aside the court's judgment under Fed.R.Civ.P. 60(b). In its Rule 60(b) motion, Airframe informed the district court that it has since obtained copies of its registered source code deposits from the Copyright Office. Airframe apparently asserted that its third-party expert and Mr. Rosen concluded that at least one of Airframe's registered source code versions is substantially similar to L-3's allegedly infringing M3 program. The district court denied Airframe's Rule 60(b) motion on August 22, 2011. We express no opinion as to the merits of Airframe's failed motion, and we decide the present appeal based solely on the record before us.
[11] See Garcia-Goyco, 428 F.3d at 20 (holding that "attorney's fees are to be awarded to prevailing parties only as a matter of the court's discretion" and noting that fees have been awarded in instances "where the claim was `objectively weak'") (emphasis added) (citation omitted); see also Latin Am. Music Co., 629 F.3d at 263 (holding that the Fogerty standard "permits courts, in their discretion, to award reasonable attorney's fees" when the opponent's claims are "objectively weak") (emphasis added); InvesSys, 369 F.3d at 21 (holding that a case that is "objectively quite weak can warrant [a fees] award") (emphasis added).
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103 F.3d 143
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.Benjamin Ifeanyi UBA, Defendant-Appellant.
No. 96-55580.
United States Court of Appeals, Ninth Circuit.
Submitted Dec. 2, 1996.*Decided Dec. 06, 1996.
Before: SNEED, TROTT, and THOMAS, Circuit Judges.
1
MEMORANDUM**
2
Federal prisoner Benjamin Ifeanyi Uba appeals pro se the district court's denial of his 28 U.S.C. § 2255 motion to vacate his conviction and sentence. Uba contends that: (1) the district court violated Rule 11; (2) his guilty plea was the product of ineffective assistance of counsel; (3) his sentence was the product of ineffective assistance of counsel; (4) the district court increased his offense level based on its erroneous finding that he played a managerial role in the offense; (5) the government breached the plea agreement by failing to request a departure under U.S.S.G. § 5K1.1; (6) the district court erred by failing to grant his motion for substitution of counsel; (7) the government did not comply with U.S.S.G. § 1B1.3 with regard to the quantity of drugs that should have been attributed to him; (8) the district court should have applied the safety valve provision in determining his sentence; and (9) he did not have the opportunity to review or object to his presentence report ("PRS").1 We have jurisdiction pursuant to 28 U.S.C. §§ 1291 and 2255. We review de novo the district court's denial of Uba's motion, Sanchez v. United States, 50 F.3d 1448, 1451-52 (9th Cir.1995), and affirm.
3
Uba contends that the district court violated Fed.R.Crim.P. 11(e)(2) by failing to advise him that he could not withdraw his guilty plea if the government failed to file a motion requesting a downward departure for substantial assistance pursuant to U.S.S.G. § 5K1.1. Because neither Rule 11(e)(2) nor U.S.S.G. § 5K1.1 requires a district court to inform a defendant that he cannot withdraw his plea if the government fails to file a substantial assistance motion, Uba's claim is without merit. See Fed.R.Crim.P. 11(e)(2); U.S.S.G. § 5K1.1.
4
Uba contends that his guilty plea was the involuntary product of his initial counsel's ineffective assistance, and that counsel induced him to plead guilty by telling him that he had secured a lenient sentence for him.
5
Where a defendant enters a guilty plea upon the advice of counsel, the voluntariness of the plea depends on whether the defendant received effective assistance of counsel. See Hill v. Lockhart, 474 U.S. 52, 56-57 (1985). In order to prevail on an ineffective assistance of counsel claim, a defendant must show that counsel's performance was deficient and that this deficient performance prejudiced the defendant. Strickland v. Washington, 466 U.S. 668, 687 (1984); see also Hill, 474 U.S. at 57. "[T]he defendant must show that there is a reasonable probability that, but for counsel's errors, he would not have pleaded guilty and would have insisted on going to trial." Hill, 474 U.S. at 59.
6
Here, Uba provides nothing more than bald assertions that his counsel was ineffective. Accordingly, he has failed to make the requisite showing that his counsel's performance affected the voluntariness of his plea. See id.
7
Uba contends that his counsel at resentencing provided ineffective assistance because: he did not object to the PSR; he failed to investigate; he did not present an argument regarding the correct amount of drugs; and he did not demand a sentence at the low end of the guidelines. If it is possible to dispose of an ineffective assistance of counsel claim on the ground of lack of sufficient prejudice, we may do so without examining the performance prong. See Strickland, 466 U.S. at 697. Because Uba has failed to show that he was in any way prejudiced by his resentencing counsel's alleged deficiencies, his ineffectiveness claim is without merit. See id.
8
Uba has previously raised his fourth, fifth, and sixth claims on direct appeal, and this court rejected them. Accordingly, we will not review them again in this collateral proceeding. See United States v. Redd, 759 F.2d 699, 700-01 (9th Cir.1985) (per curiam); Egger v. United States, 509 F.2d 745, 748 (9th Cir.1975).
9
We generally will not review nonconstitutional claims of sentencing error when a defendant has not raised them on direct appeal. See United States v. Schlesinger, 49 F.3d 483, 485 (9th Cir.1995). Accordingly, we will not review Uba's seventh and eighth claims. See id.
10
Because Uba did not raise his ninth claim in his section 2255 motion, we will not consider it here. See United States v. Johnson, 988 F.2d 941, 945 (9th Cir.1993).
11
AFFIRMED.
*
The panel unanimously finds this case suitable for decision without oral argument. Fed.R.App.P. 34(a); 9th Cir.R. 34-4. Bacause we affirm the district court's judgment under the former 28 U.S.C. § 2255, we do not address the applicability of the Antiterrorism and Effective Death Penalty Act of 1996 to this appeal
**
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3
1
In his reply brief, Uba appears to raise a claim that the government is withholding from him information about an informant. We will not address this claim because Uba did not raise it in his opening brief. See United States v. Birtle, 792 F.2d 846, 848 (9th Cir.1986)
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IN THE COURT OF CRIMINAL APPEALS
OF TEXAS
NO. AP-76,265
EX PARTE STANLEY WAYNE KIRKPATRICK, Applicant
ON APPLICATION FOR A WRIT OF HABEAS CORPUS
CAUSE NO. 2004-474-C2 IN THE 54TH DISTRICT COURT
FROM MCLENNAN COUNTY
Per curiam. Price, J., filed a concurring opinion in which Johnson, Keasler
and Cochran, JJ., joined.
O P I N I O N
Pursuant to the provisions of Article 11.07 of the Texas Code of Criminal Procedure, the
clerk of the trial court transmitted to this Court this application for a writ of habeas corpus. Ex parte
Young, 418 S.W.2d 824, 826 (Tex. Crim. App. 1967). Applicant was convicted of possession of a
controlled substance and sentenced to two years’ imprisonment.
Applicant contends that he was denied his right to an appeal. On September 16, 2009, we
remanded this application for findings of fact and conclusions of law and specifically directed the
trial court to order counsel to file an affidavit in response to Applicant’s claim. On November 23,
2009, we remanded this application for further findings and conclusions because the trial court failed
to order counsel to file an affidavit. On the second remand, counsel responded in an affidavit that
after Applicant was sentenced, counsel told the trial court that Applicant intended to appeal and
requested that the trial court appoint appellate counsel. He also said that the trial court granted his
motion to “substitute out.” Counsel did not file a notice of appeal, however, and the trial court did
not appoint appellate counsel until April 21, 2009, well after the deadline for filing a timely notice
of appeal. The trial court made findings of fact and concluded that counsel’s performance was not
deficient and that Applicant “could be entitled to an out-of-time appeal.”
We conclude that counsel’s performance was deficient and that Applicant is entitled to an
out-of-time appeal. See Ex parte Axel, 757 S.W.2d 369, 374 (Tex. Crim. App. 1988) (“We also hold
that trial counsel, retained or appointed, has the duty, obligation and responsibility to consult with
and fully to advise his client concerning meaning and effect of the judgment rendered by the court,
his right to appeal from that judgment, the necessity of giving notice of appeal and taking other steps
to pursue an appeal, as well as expressing his professional judgment as to possible grounds for
appeal and their merit, and delineating advantages and disadvantages of appeal”); Jones v. State, 98
S.W.3d 700, 703 (Tex. Crim. App. 2003) (“If the defendant decides to appeal, the attorney must
ensure that written notice of appeal is filed with the trial court”).
We find that Applicant is entitled to the opportunity to file an out-of-time appeal of the
judgment of conviction in Cause No. 2004-474-C2 from the 54th Judicial District Court of
McLennan County. Applicant is ordered returned to that time at which he may give a written notice
of appeal so that he may then, with the aid of counsel, obtain a meaningful appeal. All time limits
shall be calculated as if the sentence had been imposed on the date on which the mandate of this
Court issues. We hold that, should Applicant desire to prosecute an appeal, he must take affirmative
steps to file a written notice of appeal in the trial court within 30 days after the mandate of this Court
issues.
Delivered: December 16, 2009
Do Not Publish
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310 F.Supp.2d 11 (2004)
Stephen D. FREEMAN, Lorraine A. Fairchild, Plaintiffs,
v.
Allen P. FALLIN et al., Defendants.
No. CIV.A.02-0386(RMU).
United States District Court, District of Columbia.
February 26, 2004.
*12 Stephen Freeman, Norco, CA, Pro se.
Lorraine A. Fairchild, Norco, CA, Pro se.
Peter David Blumberg, U.S. Attorney's Office, Washington, DC, for Defendants.
MEMORANDUM OPINION
URBINA, District Judge.
DENYING THE DEFENDANTS' MOTION TO ALTER OR AMEND JUDGMENT
I. INTRODUCTION
This matter comes before the court on the defendants' motion to alter or amend the court's judgment pursuant to Federal Rule of Civil Procedure 59(e). Pro se plaintiffs Stephen Freeman and Lorraine Fairchild ("the plaintiffs") are former *13 criminal investigators with the Office of the Inspector General ("OIG") of the United States Environmental Protection Agency ("EPA"). The plaintiffs brought suit against several current and former OIG officials (collectively, "the defendants") in their individual capacities.[1] The plaintiffs claim that the defendants deprived them of their Fourth Amendment rights by subverting EPA's suspicionless drug testing procedures to gather evidence of alleged drug use for use in criminal proceedings. After the court denied the defendants' motion to dismiss, the defendants filed the pending motion. Because the court concludes that there is no intervening change of law, new evidence, or need to correct a clear error or prevent manifest injustice, the court denies the defendants' motion.
II. BACKGROUND
The allegations set forth by the plaintiffs are as follows. From 1999 to 2000, both plaintiffs worked as criminal investigators for OIG, with Mr. Freeman in the San Francisco office and Ms. Fairchild in the District of Columbia office. Freeman v. Fallin, 254 F.Supp.2d 52, 54 (D.D.C.2003). As criminal investigators engaged in law enforcement and authorized to carry firearms, both plaintiffs were subject to random drug urinalysis testing. Id. According to the plaintiffs, at some time during fall 1999 and winter 2000, then-AIG for Investigations Fallin and Deputy AIG for Investigations Dashiell received what the plaintiffs describe as frivolous and unsubstantiated allegations concerning the plaintiffs' off-duty drug use. Id. The plaintiffs assert that AIG Fallin and Deputy AIG Dashiell then conferred with AIG for Management Jones, the coordinator for agency drug testing, to design a "random" drug test that would include the plaintiffs. Id. Instead of following EPA policy by drawing a random sampling based on a neutral criterion, AIG Fallin allegedly chose last names beginning with the letter F, thereby ensuring that the plaintiffs would be among those tested. Id.
In February 2000, Ms. Fairchild received notice that she had been selected for random drug urinalysis testing. Id. Although Ms. Fairchild reported to the testing facility, she successfully evaded the test. Id. Unbeknownst to Ms. Fairchild, however, her efforts to evade the test allegedly were reported to AIG Fallin, Deputy AIG Dashiell, and AIG Jones. Id. The plaintiffs allege that AIG Dashiell subsequently asked Investigator Hymons to conduct an investigation. Id. In early March 2000, Investigator Hymons interviewed Ms. Fairchild's former boyfriend, who implicated Ms. Fairchild in drug use. Id. The following day, at a meeting between Investigator Hymons, AIG Jones, and OIG Counsel Bialek, AIG Jones indicated that both plaintiffs were scheduled to undergo testing, and OIG Counsel Bialek asked Investigator Hymons to present the matter to the U.S. Attorney. Id. at 54-55. Investigator Hymons allegedly briefed an assistant U.S. attorney ("AUSA") for the Southern District of Maryland, who indicated that he would make a decision regarding prosecution once the test results were available. Id. at 55.
During the next two weeks, both plaintiffs underwent urinalysis testing. In San Francisco, Mr. Freeman provided a sample without incident. Id. In the District of Columbia, Ms. Fairchild reported twice for testing, ultimately providing a sufficient sample. Id. In late March 2000, AIG Jones allegedly informed Investigator Hymons that test results for both plaintiffs were *14 negative and Investigator Hymons reported the results to the AUSA, who indicated that he would not prosecute. Id.
Based on these events, the plaintiffs filed a complaint alleging that the defendants deprived them of their Fourth Amendment rights by subverting EPA's suspicionless drug testing procedures to gather evidence of alleged drug use for use in criminal proceedings. Id. In response, the defendants moved to dismiss for, inter alia, failure to state a claim on which relief may be granted. Id. Specifically, the defendants asserted that the plaintiffs failed to allege a violation of their constitutional rights, and raised a defense of qualified immunity. Id. at 59. The court denied the defendants' motion, concluding that the plaintiffs had alleged an actual Fourth Amendment right to protection against the use of agency suspicionless drug testing procedures to gather evidence for criminal proceedings, and that the right was clearly established at the time of the defendants' actions. Id. at 60-61.
Subsequently, the defendants filed the pending motion to alter or amend judgment, alleging that the court erred because "[i]t was not clearly established during 1999-2000[ ] that manipulation of random drug testing procedures to gather evidence of alleged drug use in criminal proceedings was a Fourth Amendment violation." Defs.' Mot. to Alter or Amend J. ("Defs.' Mot.") at 5. The court now turns to the defendants' motion.
III. ANALYSIS
A. Legal Standards
1. Rule 59(e) Motion to Alter or Amend Judgment
Under Rule 59(e), a party may file a motion to alter or amend the court's judgment within 10 days of entry of the judgment at issue.[2] Fed. R. Civ. P. 59(e); see also Mashpee Wampanoag Tribal Council, Inc. v. Norton, 336 F.3d 1094, 1098 (D.C.Cir.2003) (discussing the measurement of the 10-day period). While the court has considerable discretion in ruling on a Rule 59(e) motion, the reconsideration and amendment of a previous order is an unusual measure. Firestone v. Firestone, 76 F.3d 1205, 1208 (D.C.Cir.1996) (per curiam); McDowell v. Calderon, 197 F.3d 1253, 1255 (9th Cir.1999). Rule 59(e) motions "need not be granted unless the district court finds that there is an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice." Ciralsky v. Cent. Intelligence Agency, 355 F.3d 661, 671 (D.C.Cir.2004) (quoting Firestone, 76 F.3d at 1208). Moreover, "[a] Rule 59(e) motion to reconsider is not simply an opportunity to reargue facts and theories upon which a court has already ruled," New York v. United States, 880 F.Supp. 37, 38 (D.D.C.1995), or a vehicle for presenting theories or arguments that could have been raised previously. Kattan v. District of Columbia, 995 F.2d 274, 276 (D.C.Cir.1993); W.C. & A.N. Miller Cos. v. United States, 173 F.R.D. 1, 3 (D.D.C.1997).
2. Bivens Claims and the Qualified Immunity Defense
A plaintiff may bring a civil action for money damages against a federal official in his or her individual capacity for violation of the plaintiff's constitutional rights. Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388, *15 389, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). Federal officials, however, may be entitled to a defense of qualified immunity. Wilson v. Layne, 526 U.S. 603, 614, 119 S.Ct. 1692, 143 L.Ed.2d 818 (1999) (citing Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982)). Qualified immunity "shield[s officials] 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. It "provides not simply a defense to liability, but also an entitlement not to stand trial or face the other burdens of litigation." Farmer v. Moritsugu, 163 F.3d 610, 613 (D.C.Cir.1998) (quoting Mitchell v. Forsyth, 472 U.S. 511, 526, 105 S.Ct. 2806, 86 L.Ed.2d 411 (1985)).
In evaluating a Bivens claim to which a defendant has raised the qualified immunity defense, the court must follow a two-pronged analysis. Butera v. District of Columbia, 235 F.3d 637, 646 (D.C.Cir.2001) (citing Wilson, 526 U.S. at 609, 119 S.Ct. 1692). First, as a threshold matter, the court must determine whether the plaintiff has alleged the deprivation of an actual constitutional right. Id.; Saucier v. Katz, 533 U.S. 194, 201, 121 S.Ct. 2151, 150 L.Ed.2d 272 (2001). In defining an "actual constitutional right," a court must be careful to avoid defining the right in overly general terms "lest [it] strip the qualified immunity defense of all meaning." Butera, 235 F.3d at 646. Instead, the court must identify the right with the appropriate level of specificity so as to allow officials to reasonably anticipate when their conduct may give rise to liability for damages. Id. (quoting Anderson v. Creighton, 483 U.S. 635, 639, 107 S.Ct. 3034, 97 L.Ed.2d 523 (1987)). Second, the court must decide whether the constitutional right was clearly established at the time of the defendant's action. Id. A right is "clearly established" if "the contours of that right [are] sufficiently clear that a reasonable official would understand that what he is doing violates that right." Id. (quoting Wilson, 526 U.S. at 614-15, 119 S.Ct. 1692); see Crawford-El v. Britton, 523 U.S. 574, 591, 118 S.Ct. 1584, 140 L.Ed.2d 759 (1998) (stating that "[i]f the law was clearly established, the immunity defense ordinarily should fail, since a reasonably competent public official should know the law governing his conduct"). Although courts need not have held the specific action in question to be unlawful, the action's unlawfulness in light of pre-existing law must have been apparent to the defendant. Butera, 235 F.3d at 646 (quoting Anderson, 483 U.S. at 640, 107 S.Ct. 3034).
B. The Court Denies the Defendants' Motion to Alter or Amend Judgment[3]
In their motion, the defendants contend that "[i]t was not clearly established during 1999-2000[ ] that manipulation of random drug testing procedures to gather evidence of alleged drug use in criminal proceedings was a Fourth Amendment violation." Defs.' Mot. at 5. Specifically, the defendants argue that there is no case law addressing whether manipulation of random drug testing procedures violates the Fourth Amendment. Id. at 8. Moreover, the defendants assert that "at least four Supreme Court Justices, in 2001, believed that the taking of a urine sample may not amount to a search in violation of the Fourth Amendment at all, even without any application of the special-needs *16 doctrine." Id. at 10 (referring to Ferguson v. City of Charleston, 532 U.S. 67, 121 S.Ct. 1281, 149 L.Ed.2d 205 (2001)). Noting that the defendants are not required to be constitutional scholars, the defendants urge the court to conclude that the applicable law was not clearly established at the time of the events alleged by the plaintiffs.[4]Id. at 12.
In response, the plaintiffs argue that the defendants' motion is a transparent attempt to relitigate old matters by raising arguments that they could have raised in their motion to dismiss. Pls.' Opp'n at 1. The plaintiffs go on to stress that "[t]he central issue remains whether police officers engaged in a criminal investigation can avoid the warrant and probable cause requirements of the Fourth Amendment by subverting a mandatory, administrative drug testing procedure to gather evidence of a crime," whether or not a criminal prosecution actually took place.[5]Id. at 3. In fact, the plaintiffs assert that they established a prima facie case of unreasonableness by alleging that the defendants did not randomly administer the drug test. Id. Finally, the plaintiffs argue that the defendants have a responsibility to keep abreast of constitutional developments in criminal law. Id.
The court concludes that there is no intervening change of law, new evidence, or need to correct a clear error or prevent manifest injustice that would warrant granting the defendants' motion. Firestone, 76 F.3d at 1208. At the time of the defendants' alleged actions in 1999-2000, there was no question that agencies could subject federal employees engaged in certain safety-sensitive tasks to suspicionless drug testing under the "special needs" doctrine. Nat'l Treasury Employees Union v. Von Raab, 489 U.S. 656, 679, 109 S.Ct. 1384, 103 L.Ed.2d 685 (1989); Skinner v. Ry. Labor Executives' Ass'n, 489 U.S. 602, 624, 109 S.Ct. 1402, 103 L.Ed.2d 639 (1989); Hartness v. Bush, 919 F.2d 170, 172 (D.C.Cir.1990). At the same time, the Supreme Court had made clear through a string of decisions issued in 1989, 1995, and 1997 that special-needs testing could not be undertaken for purposes of criminal prosecution. Vernonia School Dist. 47J v. Acton, 515 U.S. 646, 658, 115 S.Ct. 2386, 132 L.Ed.2d 564 (1995) (noting that results from the school's drug-testing program were "not turned over to law enforcement authorities"); Von Raab, *17 489 U.S. at 666, 109 S.Ct. 1384 (observing that under the Customs Service's drug-testing program, "[t]est results [could] not be used in a criminal prosecution of the employee without the employee's consent"); Skinner, 489 U.S. at 620-21, 109 S.Ct. 1402 (commenting that the Federal Railway Administration's drug-testing program was "not to assist in the prosecution of employees"); cf. Chandler v. Miller, 520 U.S. 305, 312, 318, 117 S.Ct. 1295, 137 L.Ed.2d 513 (1997) (stating with approval that Georgia's statute requiring drug testing for candidates for state office barred disclosure of test results to law enforcement, but striking down the statute for lack of a "special need" justification).
The defendants argue, however, that this case law does not define the constitutional right at the "appropriate level of specificity." Defs.' Mot. at 8-9 (citing Wilson, 526 U.S. at 615, 119 S.Ct. 1692). But the specificity requirement does not mean "that an official action is protected by qualified immunity unless the very action in question has previously been held unlawful." Hope v. Pelzer, 536 U.S. 730, 739, 122 S.Ct. 2508, 153 L.Ed.2d 666 (2002). In fact, the Supreme Court has "expressly rejected a requirement that previous cases be `fundamentally similar,'" concluding that "officials can still be on notice that their conduct violates established law even in novel factual circumstances." Id. at 741, 122 S.Ct. 2508. The question thus turns on whether "in the light of pre-existing law the unlawfulness [was] apparent." Id. at 739, 122 S.Ct. 2508 (quoting Anderson, 483 U.S. at 640, 107 S.Ct. 3034). Accepting the plaintiffs' allegations as true, the court concludes that here, the state of the law certainly would have given the defendants fair warning that their actions were unconstitutional. Id. at 741, 122 S.Ct. 2508. In its string of decisions, the Court whose binding precedent clearly "establishes" the law made clear that the special-needs doctrine permits suspicionless drug testing of certain employees by agencies as long as the testing is performed for reasons unrelated to law enforcement. Hobson v. Wilson, 737 F.2d 1, 26 (D.C.Cir.1984), overruled in part on other grounds, 507 U.S. 163, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993); Ferguson v. City of Charleston, 532 U.S. 67, 79-80 n. 15, 121 S.Ct. 1281, 149 L.Ed.2d 205 (2001). For example, in Von Raab, the Court upheld the Custom Service's drug testing program for employees required to carry firearms because the program "[was] not designed to serve the ordinary needs of law enforcement." Von Raab, 489 U.S. at 664-65, 109 S.Ct. 1384. Against this background, and given the similarity between the Customs Service program and the defendants' urinalysis program, the unlawfulness of the defendants' alleged actions in 1999-2000 should have been "apparent" to the defendants.[6]Hope, 536 U.S. at 739, 122 S.Ct. 2508.
*18 IV. CONCLUSION
For the foregoing reasons, the court denies the defendants' motion to alter or amend judgment. An order consistent with this Memorandum Opinion is separately and contemporaneously issued this 26th day of February, 2004.
NOTES
[1] The defendants are former OIG Assistant Inspector General ("AIG") for Investigations Allan Fallin, OIG Deputy AIG for Investigations Emmett Dashiell Jr., OIG AIG for Management John Jones, OIG Counsel to the Inspector General Mark Bialek, and Department of Defense Criminal Investigator Arthur Hymons. See generally Compl.
[2] Because "[d]enial of a qualified immunity claim is ... appealable at once," the court's denial of the defendants' motion to dismiss constitutes a judgment for purposes of Rule 59(e). Martin v. Malhoyt, 830 F.2d 237, 246 (D.C.Cir.1987); Fed. R. Civ. P. 54(a), 59(e).
[3] The defendants filed their motion within the 10-day window prescribed by Rule 59(e). FED. R. CIV. P. 59(e).
[4] In their reply, the defendants raise an additional argument that focuses on the sufficiency of the plaintiffs' allegations. Defs.' Reply at 3-8. Examining the chronology set forth in the complaint and focusing only on Ms. Fairchild the defendants state that "[t]he criminal/law enforcement nexus alleged by plaintiffs did not arise until after Ms. Fairchild attempted to evade her test," and thus that "the patent insufficiency of plaintiffs' claim of a constitutional violation becomes clear." Id. at 6-7. Not only is this argument raised for the first time in the defendants' reply, but it clearly is one that the defendants could have raised previously in their motion to dismiss. The court therefore declines to consider it. Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 195 (D.C.Cir.1992); Kattan, 995 F.2d at 276; W.C. & A.N. Miller Cos., 173 F.R.D. at 3.
[5] The defendants initially stated that "there was no criminal investigation nor any criminal prosecution in this case," and that "at no time[ ] were drug test results provided to the United States Attorney's Office for criminal prosecution." Defs.' Mot. at 4. The plaintiffs disputed the defendants' statement, arguing that an affidavit by Investigator Hymons submitted in a related case shows that there was a criminal investigation. Pls.' Opp'n at 1-2. Subsequently, in a footnote in their reply, the defendants indicated that they "incorrectly stated that `at no time were drug test results provided to the United States Attorneys' Office.'" Defs.' Reply at 2 n.2.
[6] In arguing that the law was not clearly established, the defendants make much of the fact that in Ferguson the 2001 decision in which the Court reviewed its special-needs cases Justice Kennedy filed a concurring opinion and Justice Scalia filed a dissenting opinion in which Chief Justice Rehnquist and Justice Thomas joined in part. Defs.' Mot. at 9 (citing Ferguson v. City of Charleston, 532 U.S. 67, 121 S.Ct. 1281, 149 L.Ed.2d 205 (2001)). First, the defendants argue that "at least four Supreme Court Justices, in 2001, believed that the taking of a urine sample may not amount to a search in violation of the Fourth Amendment at all," implying that the law does not clearly establish that the urinalysis testing at issue here qualifies as a search. Id. at 10. Perhaps recognizing the weakness of that argument, the defendants modify this argument in their reply, asserting that "[a]ny fair reading of the Ferguson opinion shows that the area of the interplay between `special needs' searches and law enforcement is one that was and remains, to say the least, fraught with difficulty and still elicits diverse opinions from the justices of the Supreme Court." Defs.' Reply at 8. Assuming that the defendants present this modified argument to support their initial argument that the law was not clearly established, the court notes that the law may be clearly established notwithstanding the presence of "diverse" opinions among the justices. E.g., Hobson, 737 F.2d at 28 (citing Scales v. United States, 367 U.S. 203, 81 S.Ct. 1469, 6 L.Ed.2d 782 (1961), a 5-4 Supreme Court decision, as establishing that under the First Amendment the government cannot punish a person for membership in any organization absent proof that the person intends to accomplish the organization's illegal aims).
| {
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} |
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Michael Kenney, Pharm.D., :
Petitioner :
:
v. : No. 10 C.D. 2018
: Argued: November 13, 2018
Bureau of Professional and Occupational :
Affairs, State Board of Pharmacy, :
Respondent :
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
OPINION
BY PRESIDENT JUDGE LEAVITT FILED: February 8, 2019
Michael Kenney, Pharm.D. (Kenney), petitions for review of an
adjudication of the Bureau of Professional and Occupational Affairs, State Board of
Pharmacy (Pharmacy Board), denying his petition to lift the restriction on his
pharmacy license and end his probation. Kenney argues that the Pharmacy Board
erred and abused its discretion in denying his petition because he presented
uncontroverted evidence that he has successfully completed his treatment programs;
has fully satisfied the terms of his probation; and is ready to resume his profession
as a fully-licensed pharmacist. For the reasons that follow, we vacate the Board’s
order and remand this matter to the Board for further proceedings consistent with
this opinion.
Background
In 2014, Kenney applied for a license to practice as a pharmacist in
Pennsylvania. In the application, he informed the Pharmacy Board that he was a
licensed pharmacist in the State of Florida and that he was enrolled in the Florida
Professional Resource Network, referred to as the impaired practitioner program,1
as a consequence of his 2008 arrest for driving under the influence of alcohol.
On September 16, 2014, Kenney entered into a voluntary consent
agreement (Voluntary Agreement) with the Pennsylvania Bureau of Professional
and Occupational Affairs (Bureau). The Voluntary Agreement provided that the
Pharmacy Board would issue Kenney a pharmacy license; suspend the license for
three years; and stay the suspension in favor of probation for three years, i.e., until
September 16, 2017. Voluntary Agreement, 9/16/2014, at 4, ¶7.e; R.R. 8. During
the period of probation, Kenney was required to abstain from consuming alcohol and
undergo a mental health evaluation, drug treatment and random drug testing. The
probation included monitoring by the Voluntary Recovery Program, which is a part
of the Pharmacy Board’s Professional Health Monitoring Program (PHMP).2 On
November 18, 2014, the Pharmacy Board issued Kenney a pharmacy license in
accordance with the terms of the Voluntary Agreement.
On December 10, 2015, Kenney settled an administrative complaint
with the Florida Board of Pharmacy that was prompted by Kenney’s failure to
comply with Florida’s impaired practitioner program. Kenney agreed to a
suspension of his Florida license, until he appeared before the Florida Board of
Pharmacy and demonstrated that he could safely practice pharmacy. Following
reinstatement of his license, Kenney agreed to have his license placed on probation
for two years and comply with certain conditions.
1
The Florida impaired practitioner program monitors the evaluation, care, and treatment of
healthcare professionals impaired by drug or alcohol use. Florida Administrative Complaint at 2,
¶7; Reproduced Record at 73 (R.R. __).
2
The PHMP assists licensed professionals who are suffering from a mental or physical disorder to
receive treatment and monitoring so that they can safely practice. The PHMP operates two
programs: the Voluntary Recovery Program and the Disciplinary Monitoring Unit.
2
In response to Florida’s administrative complaint, the Pharmacy Board
initiated its own administrative enforcement action against Kenney, which was
resolved with a Consent Order dated December 15, 2015. The Consent Order
acknowledged that on May 9, 2014, Kenney voluntarily enrolled in a program
operated by the Secundum Artem Reaching Pharmacists with Help (SARPH) that is
approved by the Pharmacy Board. Since November 2014, Kenney has been
monitored by the Pharmacy’s Board’s PHMP. The Consent Order suspended
Kenney’s license for three years and stayed the suspension in favor of three years of
probation. During probation, Kenney agreed to continue to comply with the
monitoring set forth in the Voluntary Agreement.
In May 2017, Kenney requested a release from continued monitoring
and a full reinstatement of his license.3 On July 11, 2017, the Pharmacy Board held
a hearing on Kenney’s request that was conducted by the Pharmacy Board’s counsel.
At the hearing, Kenney testified about his work as a pharmacist in
Florida and Pennsylvania. Although Kenney was arrested in 2008 for driving under
the influence of alcohol, he has never been impaired while working as pharmacist.
Kenney testified that in 2011, he entered into a five-year monitoring
contract with the Florida impaired practitioner program. He had completed two
years when the pharmacy where he had been working closed. Kenney decided to
relocate to Costa Rica. Prior to departing, he executed the documents necessary to
withdraw from the practice of pharmacy in Florida.
In November 2013, he returned to Philadelphia, Pennsylvania in order
to care for his ailing father. Two months later, Kenney contacted the Florida
impaired practitioner program and learned that he had violated the program by not
3
The Bureau did not file a response to Kenney’s petition.
3
reporting his return to the United States within two days of his arrival. In December
of 2015, he resolved this matter with the Florida Board of Pharmacy by placing his
Florida license on probation. It has since been reinstated.
On May 9, 2014, Kenney voluntarily entered into the 36-month contract
with SARPH. The program required him to check in daily; attend three recovery
meetings every week; and pass random and observed drug tests. He has successfully
completed this program. His last Board-approved psychiatric evaluation was
favorable, stating that: “alcohol dependence in extended full remission, no indication
for use of any psychotropic medications, no indication for specific treatment for any
history of addiction problems and fit to practice pharmacy with the reasonable skill
and satiety.” Notes of Testimony, 7/11/2017, at 22 (N.T. __); R.R. 111.
Kenney testified that since enrolling in the SARPH program, he has
paid more than $7,000 for Pharmacy Board costs; $2,400 for the required psychiatric
evaluations; and over $10,000 for the drug screening tests. In the meantime, he has
been working at a lower-paying pharmacy job because of his probation. Since 2011,
he has attended over 800 recovery meetings and passed 140 random drug tests.
Kenney asked the Pharmacy Board to reinstate his license for the following reasons:
I pose no threat to the health or safety of the public. I passed
every drug screen, and I’ve attended every meeting, paid every
fine and disclosed to every employer the embarrassment of my
DUI’s monitoring requirements.
I have matured a great deal since my last drink five and a half
years ago, working the steps, having a sponsor, participating in
weekly recovery meetings, and adhering to the monitoring
program guidelines over this length of time will indeed impart a
great deal of wisdom strength and serenity to those who allow
the spirit to guide them.
I am so eager to put this part of my life behind me with a new
chapter of my life. I[,] therefore, humbly request, based on the
4
extensive results of my monitored recovery, medical evaluations
and length of time since the DUI offense that the Board
considered [sic] dismissing my consent agreement at this time….
N.T. 23-24; R.R. 112-13.
On behalf of Kenney, Kathie Simpson, Executive Director of the
SARPH program, testified.4 She confirmed that Kenney has fully complied with the
program. Kenney has passed 84 drug tests; maintained contact with his sponsor;
actively participated in the 12-step meetings; and provided reports verifying his
attendance. Simpson testified that Kenney has been working at a pharmacy since
June 2015 and that his employer reports exemplary performance on quarterly written
reports. Kenney has been free of any psychoactive substances and alcohol since
October 2011. Simpson opined that Kenney had “demonstrated rehabilitation.”
N.T. 14; R.R. 103.
In addition to her testimony, on July 10, 2017, Simpson submitted a
letter supporting Kenney’s request to be released from his probation. In her four-
page letter, Simpson detailed all that Kenney had done to comply with all SARPH
and PHMP monitoring over the course of many years. She described Kenney “as a
model participant in our program” and “an asset to the pharmacy profession.” R.R.
88. Her letter stated that, “[w]e believe that he has demonstrated rehabilitation to
the extent that the likelihood” of a future violation is minimal. Id.
At the hearing, Simpson stood by her support for Kenney but
acknowledged an error in her letter. Specifically, the penultimate paragraph of her
letter stated that the Bureau’s Prosecution Division joined her in not opposing the
restoration of Kenney’s unrestricted license as of September 16, 2017, when his
4
Simpson stated that her program works “in conjunction with the [PHMP] if clients receive a
consent agreement or a [Pharmacy] Board order, but we also monitor participants who reach out
to [SARPH] on their own[.]” N.T. 9; R.R. 98.
5
monitoring under his Voluntary Agreement ended by its own terms. At the hearing,
Simpson requested that this sentence in the letter be deleted because the PHMP
opposed an early termination of Kenney’s probation. The Pharmacy Board accepted
Simpson’s letter, as revised.
On behalf of the Bureau, Kevin Knipe, manager of the PHMP, testified.
Knipe confirmed that Kenney had fully participated in the monitoring required by
his probation, which was to end on December 15, 2018, under the Consent Order.
Knipe testified that the PHMP did not support early termination of probation, for
Kenney or for any pharmacist.
On December 5, 2017, the Pharmacy Board denied Kenney’s petition.
The Pharmacy Board explained that Kenney had not obtained the written
concurrence of the Prosecution Division; had not submitted his petition on the
PHMP form; and had not been on probation for at least three years as required by
the Consent Order.
Appeal
On appeal,5 Kenney raises three issues.6 First, he argues that the
Pharmacy Board erred and abused its discretion in denying his petition to terminate
his probation because the Consent Order did not make the three-year probation an
absolute requirement. Second, he argues that the Pharmacy Board erred and abused
its discretion in denying his petition for the stated reasons that Kenney failed to
5
This Court’s review determines whether the Pharmacy Board abused its discretion, committed
an error of law, or violated constitutional rights. DePanfilis v. State Board of Pharmacy, 551 A.2d
344, 345 (Pa. Cmwlth. 1988).
6
In his brief, Kenney raises four issues on appeal. However, for purposes of this opinion, we have
combined and rearranged the order of Kenney’s issues.
6
submit his petition on the correct form and obtain the approval of the Bureau’s
Prosecution Division. Third, Kenney argues that the Pharmacy Board capriciously
disregarded his unrebutted and overwhelming evidence of rehabilitation and
sobriety.7
Licensing of Pharmacists
We begin with a review of the applicable law. The practice of
pharmacy is a regulated profession in the Commonwealth of Pennsylvania, and the
terms of this regulatory regime are set forth in the Pharmacy Act.8 The Pharmacy
Act requires all persons practicing in the pharmacy profession to be licensed, and it
establishes the standards that a pharmacist must meet in order to be licensed. See
Section 3 of the Pharmacy Act, 63 P.S. §390-3. The standards require, inter alia,
that the licensee hold a degree in pharmacy, complete an internship, pass an
examination administered by the Pharmacy Board, be of good moral and
professional character and be fit to practice pharmacy.9 Section 3(a) of the Pharmacy
Act, 63 P.S. §390-3(a).
To enforce the terms of the Pharmacy Act, the General Assembly has
created the Pharmacy Board to review applications for licensure, investigate alleged
7
The expiration of Kenney’s three-year term of probation on December 15, 2018, does not render
his appeal moot because the probation does not terminate automatically. Under the Consent Order,
he must petition the Board to have his license restored without restriction even after his probation
ends.
8
Act of September 27, 1961, P.L. 1700, as amended, 63 P.S. §§390-1 – 390-13.
9
The Board may issue a license to practice pharmacy to a person already licensed as a pharmacist
in another state without examination, so long as that person produces satisfactory evidence of
having
had the required secondary and professional education and training, including
internship, and is possessed of good character and morals as required of applicants
for licensure under the provisions of [the Pharmacy Act.]
Section 3(g) of the Pharmacy Act, 63 P.S. §390-3(g).
7
violations of the Pharmacy Act and initiate enforcement actions. Section 6(k) of the
Pharmacy Act, 63 P.S. §390-6(k). In this way, the Pharmacy Board maintains
discipline in the profession.
Under Section 5(a) of the Pharmacy Act, 63 P.S. §390-5(a), the
Pharmacy Board is authorized to revoke or suspend a license if the pharmacist
violates the licensing standards. For example, the Pharmacy Board can suspend or
revoke a pharmacist’s license if he becomes unfit to practice pharmacy; procured his
license through fraud or misrepresentation; violated any provision of the Pharmacy
Act; or had a license to practice pharmacy suspended or revoked in another state.
Section 5(a) of the Pharmacy Act, 63 P.S. §390-5(a). A license suspension or
revocation entitles the pharmacist to a full evidentiary hearing conducted in
accordance with the Administrative Agency Law, 2 Pa. C.S. §§501-508, 701-704.
In place of a hearing, a charge of misconduct can be resolved in a consent order.
A consent order has the same effect as an adjudication issued in
accordance with the Administrative Agency Law. Professor of Law Charles H.
Koch, Jr. explains that
[a] consent order is an agreement reached in an administrative
proceeding between the parties one of which is usually the
agency’s litigation staff. The agreement is then presented to the
agency head…. [If the agency head accepts the agreement,] it
issues an order much as a court issues a consent decree…. A
[consent] order will have the same effect as an order issued after
an administrative adjudication.
Charles H. Koch, Jr., ADMINISTRATIVE LAW AND PRACTICE, Settlement, §5:43, at
160 (3d ed. 2010). A consent order “is in essence a contract binding the parties
thereto.” Cecil Township v. Klements, 821 A.2d 670, 674 (Pa. Cmwlth. 2003)
(quoting Commonwealth v. United States Steel Corporation, 325 A.2d 324, 328 (Pa.
8
Cmwlth. 1974)). This Court will construe or interpret a consent order as it would a
contract. See generally Cecil Township, 821 A.2d at 674. This Court will read the
consent order as a whole and interpret each of the provisions together with the other
provisions. Westinghouse Air Brake Division v. United Electrical, Radio and
Machine Workers of America Local 610, 440 A.2d 529, 533 (Pa. Super. 1982).
With these principles in mind, we consider Kenney’s arguments that
the Pharmacy Board erred and abused its discretion in denying his petition to end
his probation.
Modification of Probation Period
In his first issue, Kenney argues that the Pharmacy Board abused its
discretion by treating the three-year probation as an absolute requirement when, in
fact, it has the discretion to modify his term of probation and has ample reasons to
do so in Kenney’s case. Kenney’s probation period was extended under the Consent
Order solely because of the Florida disciplinary matter that, in turn, was related to
his delay in contacting the Florida impaired practitioner program upon his return to
the United States. Florida’s action had nothing to do with alcohol abuse. Ironically,
the Florida matter has been resolved, and his Florida probation has ended. Since
May 2014, when Kenney voluntarily agreed to participate in the SARPH program,
he has fully complied with all monitoring requirements.
The Bureau argues that the Consent Order required Kenney to secure
the consent of the Prosecution Division and the PHMP to seek an early termination
of his probation. Because he did not secure these approvals, the Pharmacy Board’s
decision appropriately declined to end his probation before December 15, 2018.
The Consent Order, which took effect on December 15, 2015, provided
for a three-year probation. Paragraph 5.c states, in relevant part, as follows:
9
[Kenney’s] license … shall be indefinitely SUSPENDED for no
less than three (3) years, such suspension to be immediately
STAYED in favor of no less than three (3) years of
PROBATION, unless that period of probation is extended or
modified for cause by mutual agreement of [Kenney] and the
[PHMP], Disciplinary Monitoring Unit (“DMU”) case
manager….
Consent Order at 5, ¶5.c; R.R. 35 (emphasis added). Notably, Paragraph 5.c states
that the three-year period of probation may be “extended or modified.” Id. The
word “modified” can only mean a reduction in the period of probation or else it is
redundant of “extended.” In rejecting Kenney’s request, the Pharmacy Board failed
to consider the language of Paragraph 5.c that expressly authorizes a modification
of his probation.
Paragraph 5.c also states that the modification can be done by “mutual
agreement” with the PHMP. The record established, however, that the PHMP has
adopted a rigid policy to oppose all requests for early termination of probation in
order to reduce its workload.10 This policy suggests a lack of good faith and fair
10
Knipe testified, in relevant part, as follows:
[Attorney:] And what is [the] PHMP’s position with regard to the present
Reinstatement Petition submitted by Mr. Kenney to the [Pharmacy]
Board?
[Knipe:] The PHMP does not support early termination.
[Attorney:] … why is that [the] PHMP’s position?
[Knipe:] The concern regarding the liability [the] PHMP may face if we
support early termination of someone’s monitoring requirements,
and the possibility of having many more requests of this nature if
such a policy, [the] PHMP were ever to adopt early termination.
N.T. 33; R.R. 122 (emphasis added). Knipe’s stated concern for “liability” rings hollow given
sovereign immunity. Although sovereign immunity has been waived in certain circumstances, it
has not been waived for a mistake in judgment by PHMP. See 42 Pa. C.S. §8522 (exceptions to
sovereign immunity). PHMP’s real concern is having to review requests on their merits. If Knipe
believes that early termination of monitoring requirements will not be well received in the court
10
dealing on the part of the Pharmacy Board in executing the Consent Order. At a
minimum, the PHMP’s position makes the promise of a modification set forth in
Paragraph 5.c an illusory promise.
Further, the Pharmacy Act authorizes only the Pharmacy Board to place
a licensee on probation and require a licensee to submit to treatment. See Section
5(c) of the Pharmacy Act, 63 P.S. §390-5(c).11 Although the Pharmacy Board may
employ consultants “to assist it for any purposes,” it “may not delegate any of its
final decision making responsibilities to any consultant.” Section 6(k)(4) of the
Pharmacy Act, 63 P.S. §390-6(k)(4). Contrary to this statutory directive, the
Pharmacy Board delegated its authority to modify the term of Kenney’s probation
to the PHMP.
of public opinion, he should advise PHMP not to participate in consent agreements that authorize
early termination of probation.
11
It states:
When the board finds that the license of any pharmacist may be refused, revoked
or suspended under the terms of subsection (a), the board may:
(1) Deny the application for a license.
(2) Administer a public reprimand.
(3) Revoke, suspend, limit or otherwise restrict a license as
determined by the board.
(4) Require a licensee to submit to the care, counseling or
treatment of a physician or a psychologist designated by the
board.
(5) Suspend enforcement of its finding thereof and place a
licensee on probation with the right to vacate the
probationary order for noncompliance.
(6) Restore or reissue, in its discretion, a suspended license to
practice pharmacy and impose any disciplinary or corrective
measure which it might originally have imposed.
Section 5(c) of the Pharmacy Act, 63 P.S. §390-5(c).
11
In sum, the Consent Order permitted Kenney to petition for an early
end to his probation, and he did not need the consent of the PHMP to file his petition.
For these reasons, the Pharmacy Board erred and abused its discretion in denying
Kenney’s petition for early termination of his probation for the stated reason that he
needed to have completed a minimum of at least three years of probation or obtained
the approval of the PHMP.
Use of the PHMP Form and Concurrence of Prosecution Division
In his second issue, Kenney argues that the Pharmacy Board erred in
denying his petition for the stated reason it was not presented on the form provided
by the PHMP and was not agreed to by the Bureau’s Prosecution Division. Kenney
contends that neither condition was required by the Consent Order.
The Consent Order states, in pertinent part, as follows:
[a]fter successful completion of the minimum period of
probation, [Kenney] may petition the Board, upon a form
provided by the PHMP, to reinstate [his] authorizations to
practice the profession to unrestricted, non-probationary status
upon an affirmative showing that [he] has complied with all
terms and conditions of this Agreement and that [his] resumption
of unsupervised practice does not present a threat to the public
health and safety.
Consent Order at 22-23, ¶5.g; R.R. 52-53 (emphasis added). At the hearing, Knipe
testified that the PHMP refused to provide a reinstatement form to Kenney because
Kenney had not completed his minimum term of probation. It was this refusal that
prevented Kenney from using the requisite form. This is circular reasoning.
Even so, the requirement of the PHMP form applies where the
respondent has completed the period of probation stated in the Consent Order. It has
no application here where Kenney seeks a modification to his probation period.
12
Further, the Consent Order does not prescribe the use of any particular form when
seeking to modify the period of probation.
The Pharmacy Board interpreted Paragraph 9 of the Consent Order to
require the consent of the Bureau before Kenney could seek to modify his term of
probation. Paragraph 9 states, in pertinent part, as follows:
[Kenney] agrees, as a condition of entering into this Agreement,
not to seek modification of it at a later date without first obtaining
the express written concurrence of the Prosecution Division of
the Department of State.
Consent Order at 25, ¶9; R.R. 55. Paragraph 5.c of the Consent Order expressly
permitted Kenney to seek a modification of his probation period. Paragraph 9 is
irrelevant because Kenney seeks to modify his probation, not the Consent Order.
Rather, he seeks to implement Paragraph 5.c of the Consent Order.
We conclude that Kenney did not need written concurrence from the
Prosecution Division in order for the Board to consider his petition for early
termination of probation. Further, Kenney did not need to submit his petition on a
form provided by the PHMP. Accordingly, the Pharmacy Board erred and abused
its discretion in denying Kenney’s petition on these stated grounds.
Capricious Disregard of Evidence
In his third issue, Kenney contends that the Pharmacy Board
capriciously disregarded his evidence of sobriety, program compliance, and
rehabilitation, none of which was rebutted in any fashion by the Bureau. The Bureau
responds that the Pharmacy Board considered Kenney’s evidence, but it has the
discretion to deny a request for early release from probation and so exercised it.
A capricious disregard of evidence occurs “when there is a willful and
deliberate disregard of competent testimony and relevant evidence which one of
13
ordinary intelligence could not possibly have avoided in reaching a result.” Bentley
v. Bureau of Professional and Occupational Affairs, State Board of Cosmetology,
179 A.3d 1196, 1200 (Pa. Cmwlth. 2018) (quoting Station Square Gaming L.P. v.
Pennsylvania Gaming Control Board, 927 A.2d 232, 237 (Pa. 2007) (internal
quotations omitted)). “Where there is strong critical evidence that contradicts
contrary evidence, the adjudicator must provide an explanation as to how it made its
determination.” Id. In other words, “[t]he ultimate question is whether an
adjudicator has failed to give a proper explanation of overwhelming critical
evidence.” Balshy v. Pennsylvania State Police, 988 A.2d 813, 836 (Pa. Cmwlth.
2010) (quoting Grenell v. State Civil Service Commission, 923 A.2d 533, 538 (Pa.
Cmwlth. 2007)).
In the adjudication, the Pharmacy Board recited that it “considered the
testimony of the witnesses and the documentary evidence[.]” Board Adjudication at
3; R.R. 3. It summarized Kenney’s evidence as follows:
[Kenney’s] testimony indicated his full compliance with the
recovery program in Pennsylvania. He testified regarding his
disciplinary history in Florida, and that his license remains on
probationary status in Florida. (However, after the hearing,
[Kenney], through his newly-hired attorney, requested the
[Pharmacy] Board to reopen the record to allow for submission
of new documents from the Florida Board. This request was
granted, and [Kenney] submitted documents including a Florida
Board order terminating [his] Florida probation effective
October 5, 2017[].)
Board Adjudication at 2; R.R. 2. The Pharmacy Board stated that Simpson provided
Kenney’s “recovery history and indicated that he was in full compliance with the
SARPH program[,]” but Knipe “recommended denial” of Kenney’s petition. Id. On
14
these bases, the Pharmacy Board concluded that “the record [did] not support
granting the [p]etition for early release….” Id. at 3; R.R. 3.
Absent from the Pharmacy Board’s adjudication, however, is any
discussion of the length of Kenney’s time in various treatment programs, the number
of therapy sessions he attended, the number of drug screenings he passed, or the
significant, out-of-pocket costs he has incurred for participation in the programs.
Additionally, the Pharmacy Board made no comment on his employment history as
a pharmacist or his exemplary performance evaluations from his current employer.
It is uncontradicted that Kenney complied with the requirements of the
SARPH program and has been in a treatment program for more than three years.
Kenney offered considerable evidence about his treatment and employment. The
Bureau did not offer an iota of evidence that Kenney needed to remain in the SARPH
program a minute longer. The Pharmacy Board did not discredit Kenney’s
testimony in any way. Simply, the Pharmacy Board ignored this critical evidence
without comment in refusing to modify Kenney’s period of probation. We agree
that the Pharmacy Board has capriciously disregarded competent and relevant
evidence.
Moreover, in its adjudication, the Pharmacy Board mischaracterized
Simpson’s testimony as not making a recommendation. See Board Adjudication at
2; R.R. 2. At the hearing, Simpson opined that Kenney had “demonstrated
rehabilitation.” N.T. 14; R.R. 103. Further, in her letter to the Pharmacy Board’s
counsel, Simpson stated:
Thank you for considering [Kenney] for early completion of his
DMU Consent Agreement and Order. [Kenney] will have 36
months of documented, verified abstinence with the [SARPH]
program on July 25, 2014 (the date of his first screen). We
believe he has demonstrated rehabilitation to the extent that
15
the likelihood of him violating the Practice Act or Law in the
future is minimal. We believe he has demonstrated that he is
an asset to the Pharmacy profession.
R.R. 88 (emphasis in original). Simpson’s testimony and the content of her letter
cannot be reconciled with the Pharmacy Board’s statement that Simpson did not
make a recommendation.
At the hearing, Simpson explained that, in her initial correspondence to
the Pharmacy Board’s counsel in May 2017, she recommended that Kenney’s
license be restored to unrestricted status as of September 16, 2017. On the eve of
the hearing, Simpson updated her letter to reflect additional drug screening tests that
Kenney passed as well as the most recent report received from his employer. Then,
at the hearing, Simpson stated that she was not “providing any recommendation”
and requested deletion of the penultimate sentence in her letter. N.T. 14; R.R. 103.
Simpson explained that she did so in order to be consistent with the PHMP. Stated
otherwise, Simpson’s decision related to her working relationship with the PHMP
and not to the merits of her belief that Kenney is rehabilitated and able to practice
pharmacy. We reject the Pharmacy Board’s characterization of Simpson’s
testimony.
The Board erred in relying on Knipe’s testimony because it was based
upon the PHMP’s inflexible policy, not Kenney’s record, and a mischaracterization
of the import of Simpson’s testimony. At the same time, the Board made no
comment on the extensive evidence to support Kenney’s full license restoration,
which constituted capricious disregard of evidence.
Conclusion
The Pharmacy Board erred and abused its discretion in denying
Kenney’s petition to end his probation for the stated reasons that Kenney had not
16
been on probation for at least three years; lacked written concurrence from the
Prosecution Division; and failed to use the PHMP form. The Board capriciously
disregarded Kenney’s evidence of rehabilitation, program compliance, and
exemplary employment record. Accordingly, we vacate the Pharmacy Board’s
adjudication and remand the matter for an expeditious review on the current record
of Kenney’s petition to end probation. In doing so, the Pharmacy Board shall
consider Kenney’s uncontroverted evidence of rehabilitation, program compliance
and exemplary employment, and issue a determination on his authorization to
practice the profession in an unrestricted, non-probationary status.
_____________________________________
MARY HANNAH LEAVITT, President Judge
17
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Michael Kenney, Pharm.D., :
Petitioner :
:
v. : No. 10 C.D. 2018
:
Bureau of Professional and Occupational :
Affairs, State Board of Pharmacy, :
Respondent :
ORDER
AND NOW this 8th day of February, 2019, the order of the Bureau of
Professional and Occupational Affairs, State Board of Pharmacy (Pharmacy Board),
dated December 5, 2017, is VACATED, and the matter is REMANDED to the
Pharmacy Board for further proceedings consistent with the attached opinion. The
Pharmacy Board shall issue the determination within 30 days of the next meeting of
the Pharmacy Board.
Jurisdiction relinquished.
______________________________________
MARY HANNAH LEAVITT, President Judge
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ALD-173 NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 12-2100
___________
In re: REGINALD YOUNG,
Petitioner
____________________________________
On a Petition for Writ of Mandamus from the
United States District Court for the Eastern District of Pennsylvania
(Related to D.C. Crim. No. 2:05-cr-00307-003)
____________________________________
Submitted Pursuant to Rule 21, Fed. R. App. P.
May 3, 2012
Before: SLOVITER, FISHER AND WEIS, Circuit Judges
(Opinion filed: May 17,2012)
_________
OPINION
_________
PER CURIAM.
In this petition for mandamus, Reginald Young asks us to direct the “respondent”
to rule on his application for a certificate of appealability. In form, the petition reads less
like a request for mandamus and more like a motion to expedite proceedings. In any
case, it is moot; we denied Young’s request for a certificate of appealability. See United
States v. Young, C.A. No. 12-1577. Therefore, this “mandamus petition” will be denied,
as Young has obtained the ruling he seeks to compel. See Carr v. Am. Red Cross, 17
F.3d 671, 684 (3d Cir. 1994).
2
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STATE OF WEST VIRGINIA
SUPREME COURT OF APPEALS
Gregory Scolapio,
Plaintiff Below, Petitioner FILED
vs.) No. 19-0543 (Monongalia County 17-C-413)
May 26, 2020
EDYTHE NASH GAISER, CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
Harrison County Commission,
Albert Marano, individually, and in his
capacity as Sheriff of Harrison County;
Steve Johnson, individually, and in his
capacity as Chief Deputy Sheriff
of Harrison County; Pat McCarty, individually,
and in his capacity as Deputy Sheriff
of Harrison County; and Justin Scott Peck,
individually,
Defendants Below, Respondents
MEMORANDUM DECISION
Petitioner Gregory Scolapio, by counsel Sam H. Harrold, III, appeals the May 9, 2019,
order of the Circuit Court of Monongalia County1 that denied his motion for a new trial following
entry of an order granting judgment as a matter of law on petitioner’s claims of defamation and
civil conspiracy in favor of Respondents Harrison County Commission2; Albert Marano,
individually, and in his capacity as Sheriff of Harrison County; Steve Johnson and Pat McCarty,
individually, and in their capacities as Chief Deputy Sheriffs of Harrison County (hereinafter “the
county respondents”); and Respondent Justin Scott Peck. The county respondents, by counsel
Tiffany R. Durst and Nathaniel D. Griffith, and Respondent Peck, by counsel Gregory H.
Schillace, filed responses in support of the circuit court’s order.
This Court has considered the parties’ briefs and the record on appeal. The facts and legal
arguments are adequately presented, and the decisional process would not be significantly aided
by oral argument. Upon consideration of the standard of review, the briefs, and the record
1
This case was originally commenced in the Circuit Court of Harrison County. By agreed
order entered on October 23, 2017, venue was transferred to the Circuit Court of Monongalia
County.
2
The Harrison County Sheriff’s Department was originally named as a defendant in this
case. However, by agreed order entered on October 19, 2017, the Harrison County Commission
was substituted in its stead.
1
presented, the Court finds no substantial question of law and no prejudicial error. For these reasons,
a memorandum decision affirming the order of the circuit court is appropriate under Rule 21 of
the Rules of Appellate Procedure.
On November 28, 2016, following the termination from his employment as a law
enforcement officer with the Harrison County Sheriff’s Department, petitioner3 filed a complaint
against respondents4 alleging claims of tortious interference with employment, defamation of
character, and civil conspiracy.5 Petitioner’s complaint was based upon the filing of a felony
criminal complaint against him by Respondent Peck on June 3, 2015. During the course of a June
3, 2015, interview with Sgt. J.P. Branham of the West Virginia State Police, Respondent Peck
claimed that petitioner had extorted more than $30,0000 from him in his capacity as a deputy
sheriff and in connection with his role as the administrator of the estate of Respondent Peck’s
mother, Respondent Peck’s attorney-in-fact, and adviser to a special needs trust that had been
created for the benefit of Respondent Peck.6 Sgt. Branham advised petitioner of Respondent Peck’s
allegations on June 8, 2015. Petitioner met with Sgt. Branham on June 23, 2015, to discuss the
allegations and denied any wrongdoing. According to petitioner, Respondent Peck later admitted
in an August 24, 2015, pre-polygraph interview that Respondent Marano and others had put him
up to making the criminal complaint against petitioner, and that, as a result, Sgt. Branham
ultimately deemed the allegations to be unfounded. A final report concluding the investigation was
issued on March 8, 2016.
Thereafter, on August 31, 2016, Respondent Peck approached petitioner’s co-plaintiff and
former co-worker, Robert T. Ankrom, at a local gym, and identified Respondents Marano,
Johnson, and McCarty as the individuals who put Respondent Peck up to filing the criminal
complaint against petitioner. Mr. Ankrom recorded this conversation and testified about it at trial.
Petitioner and Mr. Ankrom then filed their civil action on November 28, 2016.7
3
Petitioner’s co-plaintiff was his former co-worker, Robert T. Ankrom, who had been
demoted. He is not a party to this appeal.
4
The other defendants included Joseph Carbacio, individually, and in his capacity as
Administrative Assistant to the Sheriff of Harrison County; and John Does, individually. These
defendants are not parties to this appeal.
5
The circuit court stayed discovery on petitioner’s employment-related claim.
6
In his capacity as the administrator of the estate of Respondent Peck’s mother, petitioner
filed a medical malpractice lawsuit in connection with her death. The lawsuit was settled and the
net settlement proceeds were placed in a special needs trust established for the benefit of
Respondent Peck, who, at the time, was incarcerated.
7
Petitioner filed an amended complaint on December 20, 2016, which appears to have
amended petitioner’s prayer for relief. Respondent Peck filed a counterclaim against petitioner in
which he alleged that petitioner breached his fiduciary duty to Respondent Peck, abused his
position, and converted money owned by Respondent Peck, all in connection with petitioner’s role
2
Prior to trial, on October 31, 2018, the county respondents filed a motion for partial
summary judgment on the ground that petitioner’s defamation claim had not been filed within the
applicable one-year statute of limitations and was, therefore, time-barred. See Garrison v. Herbert
J. Thomas Mem’l Hosp. Ass’n, 190 W. Va. 214, 221, 438 S.E.2d 6, 13 (1993) (“An action for
defamation is subject to a one-year statute of limitation[.]”). Further, because the civil conspiracy
claim was derivative of the defamation claim, it was also governed by the same one-year statute
of limitations and, thus, also time-barred. See Syl. Pt. 10, Dunn v. Rockwell, 225 W. Va. 43, 689
S.E.2d 255 (2009) (“The statute of limitation for a civil conspiracy claim is determined by the
nature of the underlying conduct on which the claim for conspiracy is based.”). The circuit court
denied the county respondents’ motion for partial summary judgment.
Trial on petitioners’ defamation and civil conspiracy claims commenced on December 13,
2018. Upon the close of petitioner’s case-in-chief, the county respondents moved for judgment as
a matter of law on the ground that petitioner’s defamation and civil conspiracy claims were time-
barred based upon petitioner’s own testimony at trial. Specifically, petitioner testified that he first
learned of the West Virginia State Police investigation into the allegations Respondent Peck made
against him on June 8, 2015, or, at the very latest, on June 23, 2015, when Sgt. Branham
interviewed petitioner about them. Given these facts, the county respondents argued, the one-year
statute of limitations applicable to petitioner’s defamation claim and his derivative civil conspiracy
claim expired, at the very latest, on June 23, 2016. Because petitioner did not file his complaint
until November 28, 2016, his claims were time-barred. Respondent Peck joined in the county
respondents’ motion. The circuit court granted respondents’ motion for judgment as a matter of
law.
Petitioner thereafter filed a motion for a new trial pursuant to Rule 59 of the West Virginia
Rules of Civil Procedure. Following a hearing, the circuit court denied petitioner’s motion by order
entered on May 9, 2019. It is from this order that petitioner now appeals.
“[T]he ruling of a trial court in granting or denying a motion for
a new trial is entitled to great respect and weight, [and] the trial court’s ruling will
be reversed on appeal [only] when it is clear that the trial court has acted under
some misapprehension of the law or the evidence.” Syl. pt. 4, in part, Sanders v.
Georgia–Pacific Corp., 159 W.Va. 621, 225 S.E.2d 218 (1976).
Syl. Pt. 2, Estep v. Mike Ferrell Ford Lincoln-Mercury, Inc., 223 W. Va. 209, 672 S.E.2d 345
(2008). As we have previously held in connection with our review of an order denying a motion
for a new trial, “‘[t]his Court reviews the circuit court’s final order and ultimate disposition under
an abuse of discretion standard. We review challenges to findings of fact under a clearly erroneous
standard; conclusions of law are reviewed de novo.’ Syl. Pt. 4, Burgess v. Porterfield, 196 W.Va.
as the administrator of the estate of Respondent Peck’s mother, Respondent Peck’s attorney-in-
fact, and advisor to the special needs trust. The circuit court ultimately entered an order granting
judgment on the pleadings in favor of petitioner on the ground that Respondent Peck’s
counterclaims were time barred. Respondent Peck has appealed that order to this Court in Peck v.
Scolapio, No. 19-0165.
3
178, 469 S.E.2d 114 (1996).” Gum v. Dudley, 202 W. Va. 477, 482, 505 S.E.2d 391, 396 (1997).
Petitioner raises two assignments of error. Because they are related, they will be addressed
together. Petitioner’s over-arching argument is that the circuit court erred in concluding that his
defamation claim was barred by the one-year statute of limitations. In syllabus point 5 of Dunn,
this Court instructed as follows:
A five-step analysis should be applied to determine whether a cause of
action is time-barred. First, the court should identify the applicable statute of
limitation for each cause of action. Second, the court (or, if questions of material
fact exist, the jury) should identify when the requisite elements of the cause of
action occurred. Third, the discovery rule should be applied to determine when the
statute of limitation began to run by determining when the plaintiff knew, or by the
exercise of reasonable diligence should have known, of the elements of a possible
cause of action, as set forth in Syllabus Point 4 of Gaither v. City Hosp., Inc., 199
W.Va. 706, 487 S.E.2d 901 (1997). Fourth, if the plaintiff is not entitled to the
benefit of the discovery rule, then determine whether the defendant fraudulently
concealed facts that prevented the plaintiff from discovering or pursuing the cause
of action. Whenever a plaintiff is able to show that the defendant fraudulently
concealed facts which prevented the plaintiff from discovering or pursuing the
potential cause of action, the statute of limitation is tolled. And fifth, the court or
the jury should determine if the statute of limitation period was arrested by some
other tolling doctrine. Only the first step is purely a question of law; the resolution
of steps two through five will generally involve questions of material fact that will
need to be resolved by the trier of fact.
225 W. Va. at 46, 689 S.E.2d at 258.
First, petitioner argues that the circuit court erred in its application of the second step of
the Dunn analysis—that is, in identifying when the requisite elements of his defamation claim
occurred. This Court has held that
[t]he essential elements for a successful defamation action by a private individual
are (1) defamatory statements; (2) a nonprivileged communication to a third party;8
(3) falsity; (4) reference to the plaintiff; (5) at least negligence on the part of the
publisher; and (6) resulting injury.
Syl. Pt. 1, Crump v. Beckley Newspapers, Inc., 173 W. Va. 699, 320 S.E.2d 70 (1983). (Footnote
added).
On appeal, petitioner argues that the circuit court erred in concluding that, when
Respondent Peck met with Sgt. Branham on June 3, 2015, and communicated “the allegations
claimed by [petitioner] to be defamatory statements[,]” Peck’s statements satisfied the requirement
8
“[A] nonprivileged communication to a third party” is sometimes referred to as
“publication.” See Crain v. Lightner, 178 W. Va. 765, 772, 364 S.E.2d 778, 785 (1987).
4
that they be “a nonprivileged communication to a third party.” The circuit court committed further
error, petitioner argues, in concluding that “[a]t the outer most limit, . . . the elements for the
defamation claim occurred on June 23, 2015[,] when Sgt. Branham conducted an interview of
[petitioner].” Petitioner argues that, rather, Respondent Peck’s defamatory statements to Sgt.
Branham fell within “a qualified privilege” at the time they were made and, therefore, did not
satisfy the elements of a defamation claim. See Syl. Pt. 9, in part, Belcher v. Wal-Mart Stores, Inc.,
211 W. Va. 712, 568 S.E.2d 19 (2002) (“‘A qualified privilege exists when a person publishes a
statement in good faith about a subject in which he has an interest or duty and limits the publication
of the statement to those persons who have a legitimate interest in the subject matter; however, a
bad motive will defeat a qualified privilege defense.’ Syl. Pt. 4, Dzinglski v. Weirton Steel Corp.,
191 W.Va. 278, 445 S.E.2d 219 (1994).”) Petitioner contends that he was not aware that
Respondent Peck’s defamatory statements to law enforcement were “nonprivileged” until he
received a copy of the final investigation report on March 8, 2016, which revealed that the county
respondents had put Respondent Peck up to filing the criminal complaint against him and that
Respondent Peck had thus made the statements with a “bad motive,” defeating the “qualified
privilege.” As a result, petitioner argues, because he was not aware that the elements of a
defamation claim against respondents were satisfied until March 8, 2016, the statute of limitations
did not begin to run until that time. Thus, according to petitioner, his complaint, which was filed
on November 28, 2016, was, therefore, timely filed.
As previously noted, upon the close of petitioner’s case-in-chief, respondents moved for a
judgment as a matter of law on the ground that petitioner’s defamation and civil conspiracy claims
were time-barred based upon petitioner’s own testimony at trial. In ruling upon the motion at a
subsequent hearing, the circuit court observed:
So June the 3rd was the first date that Mr. Peck met with Sergeant Branham and
communicated to him the allegations that are claimed by the plaintiff to be
defamatory statements. Publication, which even if we accept defamation per se, I
think is still a required element of defamation, but I suppose making those
statements to Sergeant Branham would constitute publication. Sergeant Branham
was a third party. . . . So all of the elements of the claim of defamation occurred . .
. I suppose at the latest June 23rd when Sergeant Branham met with the plaintiff.
The record reveals that petitioner failed to then dispute this finding or argue that
Respondent Peck’s allegedly defamatory statements about him to Sgt. Branham were subject to “a
qualified privilege” and, therefore, insufficient to satisfy the elements of a defamation claim such
that the statute of limitations did not begin to run when petitioner became aware of them. This
Court has repeatedly explained that
“in general, the law ministers to the vigilant, not to those who sleep on their rights.
. . . When a litigant deems himself or herself aggrieved by what he or she considers
to be an important occurrence in the course of a trial or an erroneous ruling by a
trial court, he or she ordinarily must object then and there or forfeit any right to
complain at a later time. The pedigree for this rule is of ancient vintage, and it is
premised on the notion that calling an error to the trial court’s attention affords
an opportunity to correct the problem before irreparable harm occurs. . . . In the
5
end, the contemporaneous objection requirement serves an important purpose in
promoting the balanced and orderly functioning of our adversarial system of
justice.
State v. Lively, 226 W.Va. 81, 92-93, 697 S.E.2d 117, 128-29 (2010) (quoting State v. LaRock,
196 W. Va. 294, 316, 470 S.E.2d 613, 635 (1996). See Hanlon v. Logan Cty Bd. of Educ., 201 W.
Va. 305, 315, 496 S.E.2d 447, 457 (1997) (“Long standing case law and procedural requirements
in this State mandate that a party must alert a tribunal as to perceived defects at the time such
defects occur in order to preserve the alleged error for appeal.”).
Although petitioner eventually raised in his Rule 59 motion for a new trial the argument
that the “nonprivileged communication” element of his defamation claim was not satisfied for
purposes of the running of the statute of limitations, it is clear that he could have raised it at the
earlier proceeding during which the issue was being considered thereby giving the circuit court the
opportunity to consider it. See Mey v. Pep Boys-Manny, Moe & Jack, 228 W. Va. 48, 56, 717
S.E.2d 235, 243 (2011) (stating that “[a] motion under Rule 59(e) is not appropriate for presenting
new legal arguments, factual contentions, or claims that could have previously been argued”).
Thus, we find that petitioner waived this argument.
Petitioner also argues that the circuit court erred in its application of the third step of the
Dunn analysis—that is, in “determin[ing] when the statute of limitation began to run by
determining when [petitioner] knew, or by the exercise of reasonable diligence should have known,
of the elements of a possible cause of action, as set forth in Gaither.” In syllabus point 4 of Gaither,
we held:
In tort actions, unless there is a clear statutory prohibition to its application,
under the discovery rule the statute of limitations begins to run when the plaintiff
knows, or by the exercise of reasonable diligence, should know (1) that the plaintiff
has been injured, (2) the identity of the entity who owed the plaintiff a duty to act
with due care, and who may have engaged in conduct that breached that duty, and
(3) that the conduct of that entity has a causal relation to the injury.
199 W. Va. at 708, 487 S.E.2d at 903. Petitioner argues that the circuit court erred in finding that
June 23, 2015, the date that Sgt. Branham advised petitioner of the substance of Respondent Peck’s
defamatory allegations about him, was “the last possible date on which [petitioner] knew or by the
exercise of reasonable diligence should have known of the elements of the defamation claim.”
Petitioner argues that he could not have known that he had a claim for defamation until he received
Sgt. Branham’s final investigation report on March 8, 2016, which was less than one year before
petitioner’s November 28, 2016, complaint was filed and, therefore, within the limitations period.
According to petitioner, the determination of when he knew, or by the exercise of reasonable
diligence, should have known that he had a defamation claim against respondents is a factual
question that should have been considered by the jury. We find no error.
At trial, petitioner testified as follows:
Q. And [Sgt. Branham] contacted you on June the 8th to set up an interview; right?
6
A. Correct.
Q. So even though you hadn’t given a full-blown interview, you knew as of June
the 8th, 2015, that Justin Peck had made a criminal complaint against you that you
believed to be false; is that correct?
A. Correct.
Q. And then again on June 23rd of 2015, when you met with Sergeant Branham,
that information was simply confirmed that Justin was making this complaint. It
was a felony criminal complaint, and then you told your side of the story?
A. Correct.
Q. So would you agree with me, Mr. Scolapio, that you did not need a copy of the
[S]tate [P]olice report to know that Justin Peck had made a defamatory—what you
thought was a false and defamatory statement against you would [sic] when he filed
the criminal complaint? You didn’t need the police report to tell you that. Sergeant
Branham had already told you that on June the 8th; right?
A. Correct
....
Q. You still knew on June 8th of 2015 that Justin Peck, whether he used the word
extorted or not, you still knew that Justin Peck was telling the [S]tate [P]olice that
you had threatened him, to take him out in the yard and kick his ass if he didn’t sign
that check. You knew that; didn’t you?
A. I knew of the complaint against me, yes, ma’am.
Q. Okay. And you knew, based on what you told this jury, that that was false, as of
June 8th; right?
A. Yes. Because I didn’t do that.
Q. You didn’t need the [S]tate [P]olice—a copy of the report for you to know that
Justin Peck had made a statement against you that you thought was false and
defamatory; did you? You knew it because Sergeant Branham told you on June 8th,
and then again on June 23rd; right?
A. True. He told me on those two dates, and then when I got a copy of the report,
it listed that Justin indicated that he had been put up to making the complaint, and
everything else fell in line.
7
Q. But you still knew what the substance of the complaint was?
A. Yes, ma’am.
Q. And you knew that as of June 8, 2015?
A. Yes, ma’am.
Clearly, petitioner’s own trial testimony supports the circuit court’s finding that, no later
than June 23, 2015, petitioner knew, or by the exercise of reasonable diligence, should have known
that Respondent Peck had made statements about him to Sgt. Branham that petitioner believed to
be defamatory. Thus, the circuit court did not err in concluding that, on that date, at the very latest,
petitioner knew, or by the exercise of reasonable diligence, should have known “of the elements
of the defamation claim.” Therefore, we find that the circuit court did not err in denying petitioner’s
motion for a new trial.
For the foregoing reasons, we affirm.
Affirmed.
ISSUED: May 26, 2020
CONCURRED IN BY:
Chief Justice Tim Armstead
Justice Elizabeth D. Walker
Justice Evan H. Jenkins
Justice John A. Hutchison
NOT PARTICIPATING:
Justice Margaret L. Workman
8
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444 F.Supp.2d 250 (2006)
PHILLIPS-VAN HEUSEN CORP., Calvin Klein, Inc., and Calvin Klein Trademark Trust, Plaintiffs,
v.
CALVIN CLOTHING COMPANY, INC., and Star Ride Kids, Inc., Defendants.
No. 05 Civ. 6802(JSR).
United States District Court, S.D. New York.
August 11, 2006.
*251 *252 Edward Elmo Vassallo, James Martin Gibson, Tila Marie Duhaime, Timothy J. Kelly, Fitzpatrick, Cella, Harper & Scinto, New York, NY, for Plaintiffs.
Anthony F. Lo Cicero, Marc Jonathan Jason, Amster, Rothstein & Ebenstein LLC, New York, NY, for Defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
RAKOFF, District Judge.
Before anyone had even heard of the name "Calvin Klein," a small clothing manufacturer named Calvin Clothing Company registered the trademark "Calvin" to identify its tailored boys' apparel. Decades later, Calvin Clothing Company, now under new ownership, sought in various ways to widen its use of the name "Calvin" to other lines of clothing, thus precipitating this lawsuit brought under the Lanham Act, 15 U.S.C. § 1114 et seq., and New York statutory and common law. Specifically, plaintiffs Phillips-Van Heusen Corp. and its subsidiaries Calvin Klein, Inc. and Calvin Klein Trademark Trust (collectively, "Calvin Klein") contend that defendants Calvin Clothing Company, Inc. and Star Ride Kids, Inc. (collectively, "Calvin Clothing") abandoned whatever rights Calvin Clothing may have once had in a broader use of its "Calvin" mark, that Calvin Klein has acquired common law rights in the "Calvin" mark for all goods other than boys' tailored apparel, that Calvin Clothing's registration and attempted registration of "Calvin" and Calvin-related marks for other lines of clothing is unlawful, and that Calvin Clothing's use of the "Calvin" mark beyond boys' tailored apparel infringes Calvin Klein's marks. Calvin Clothing, in turn, seeks a declaration that Calvin Klein has no rights in the "Calvin" mark and further claims that Calvin Klein's use of that mark violates Calvin Clothing's rights under the Lanham Act and New York common law.
Following discovery and motion practice, the Court conducted a one-week bench trial, on the basis of which it hereby makes the following findings of fact and conclusions of law:
Findings of fact. Defendants' predecessors registered and first used their "Calvin" mark on boys' tailored clothing in the 1930s and expanded their use of the mark to mens' tailored clothing in or around the late 1960s. Stipulation dated May 4, 2006 ("Stip.") ¶¶ 49, 54.[1] Plaintiffs' predecessors *253 first registered and then used the "Calvin Klein" mark on women's apparel in the late 1960s, and subsequently expanded their use of the mark to encompass all lines of apparel, as well as numerous other products. Id. ¶¶ 19-32.
For several decades thereafter, the two companies co-existed in relative peace. Although each side occasionally protested the other's use of the name "Calvin" in connection with one or another advertising campaign, and sometimes even threatened litigation, no litigation actually ensued. See Plaintiffs' trial exhibit ("Pl.Ex.") 71. Indeed, on a few occasions, defendants' predecessors expressly agreed to allow Calvin Klein to use the "Calvin" mark on certain specified products, provided certain conditions were met. Id.
From the late 1960s onward, Calvin Klein expended ever greater sums to publicize its "Calvin Klein" mark. Stip. ¶¶ 36-38; Trial Transcript ("tr.") at 85-88; Pl. Ex. 11, at R; Pl. Exs. 6, 24. In recent years, plaintiffs have incurred yearly expenditures of approximately $200 million to advertise and promote the "Calvin Klein" brand around the world. Tr. at 87. Concomitantly, retail sales of Calvin Klein goods have grown greatly and now total billions of dollars yearly. Tr. at 41, 43. As defendants concede, "Calvin Klein" is today one of the most recognized brand names in the apparel industry. Stip. ¶¶ 39-41.
Beginning in the 1980s, Calvin Klein began to occasionally refer to its women's jeans as "Calvins." The most well-known of these advertisements was the controversial 1980s commercial in which an underage Brooke Shields, wearing tight-fitting jeans, suggested that nothing came between her and her "Calvins." Pl.Ex. 23. Never one to forego an opportunity to leer, the media began to use the name "Calvin" to refer to various Calvin Klein apparel, a usage that has continued to the present. Pl.Ex. 14. In addition, Calvin Klein thereafter made further occasional use of the "Calvin" name to identify its products, such as in a 1990s campaign featuring Marky Mark. See deposition of Kimberly Vernon dated August 5, 2003, at 30;[2] Tr. at 75; Pl.Ex. 21.
By contrast, Calvin Clothing's predecessors largely limited their use of their registered "Calvin" mark to boys' tailored clothing, although, as noted, they occasionally used it on men's tailored clothing as well. Stip. ¶ 54. In the late 1990s, however, Calvin Clothing, now under new ownership, obtained four new registrations from the U.S. Patent and Trademark Office ("PTO"), and attempted to obtain six others, that would have permitted defendants to use the "Calvin" name on a much broader array of apparel.[3] Stip. ¶¶ 105-10.[4]
*254 Conclusions of Law. Calvin Klein has acquired common law rights in the Calvin mark for all apparel except boys' tailored clothing. "[T]he general principles qualifying a mark for registration under § 2 of the Lanham Act are for the most part applicable in determining whether an unregistered mark is entitled to protection under § 43(a)." Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992). To qualify as a trademark, a name or mark must be "used by a person . . . to identify and distinguish his or her goods." 15 U.S.C. § 1127. A personal name may be registered only if, "through usage, [it has] acquired distinctiveness and secondary meaning." See Pirone v. MacMillan, Inc., 894 F.2d 579, 583 (2d Cir.1990) (internal quotation marks omitted). To determine whether a mark has acquired secondary meaning, the Court may consider a number of factors, including "advertising expenditures; consumer studies linking the name to a source; sales success; unsolicited media coverage of the product; attempts to plagiarize the mark; and length and exclusivity of the mark's use." Thompson Med. Co. v. Pfizer, Inc., 753 F.2d 208, 217 (2d Cir.1985) (internal citations omitted).
As a preliminary matter, defendants contend that Calvin Klein is precluded from obtaining common law rights in the "Calvin" mark because of defendants' predecessors' prior uses of the "Calvin" mark on boys' and men's apparel. It is undisputed that, prior to the mid-1990s, defendants never made use of the mark on any other lines of apparel, but defendants argue that they nonetheless maintained a right to expand their use of the mark into its "natural zone of expansion." However, even assuming, arguendo, that defendants once had such rights, "[w]hen a senior user delays in enforcing its rights, a junior user may acquire a valid trademark in a related field enforceable against even the senior user." Patsy's Brand, Inc. v. I.O.B. Realty, Inc., 317 F.3d 209, 217 (2d Cir.2003). After years of relatively passive quiescence in the face of the explosive growth of Calvin Klein in the overall apparel industry and the corresponding notoriety of the associated name of "Calvins," the defendants may not now claim a right to expand their use of the mark into other lines of apparel. Indeed, it is noteworthy that even though defendants' predecessors sent a few letters to Calvin Klein at various times between 1975 and 1983 objecting to plaintiffs' use of the name "Calvin" on specific goods and in specific advertisements,[5] they raised no objections to some of Calvin Klein's most prominent uses of the "Calvin" mark, as on the Brooke Shields advertisement, never commenced litigation, and largely ceased making objections after 1983. Pl.Ex. 71.[6] Thus, plaintiffs can claim rights in the "Calvin" mark if they can show use of the mark, and the existence of secondary meaning, prior to defendants' more recent uses of the "Calvin" mark in the late 1990s.
It is undisputed that Calvin Klein is one of the most famous names in fashion today, *255 that the brand's annual sales are substantial, and that there is considerable secondary meaning associated with the name "Calvin Klein." While Calvin Klein has not generally marketed products under the "Calvin" name alone, it has used that name to identify itself to the public in various advertising campaigns, including not only the Brooke Shields advertisement of the early 1980s but also a 1990s advertising campaign featuring Marky Mark.
Following Calvin Klein's first use of the "Calvin" mark in the 1980s, the media also began using the nickname to refer to the brand, and this use has persisted through the years. See Pl.Ex. 14. As noted in National Cable Television Association v. American Cinema Editors, Inc., 937 F.2d 1572 (Fed.Cir.1991), "abbreviations and nicknames of trademarks or names used only by the public give rise to protectible rights in the owners of the trade name or mark which the public modified. Such public use by others inures to the claimant's benefit and, where this occurs, public use can reasonably be deemed use `by' that party in the sense of a use on its behalf." Id. at 1577-78 (internal footnote omitted). Here, the Court finds that the public strongly associates the name "Calvin" with the Calvin Klein brand and has done so from the 1980s to the present. See, e.g., Pl.Ex. 74 (when prompted with the line, "I say Calvin, you say . . .," 48 of 48 participants responded with the name "Klein"); Pl.Ex. 79 (finding 23-59% of respondents believed that products bearing the name "Calvin" were produced by Calvin Klein); Pl.Ex. 11, at M (New York Times crossword with the clue "Calvins, e.g." and the answer "blue jeans").
Accordingly, plaintiffs have acquired common law rights in the name "Calvin" as to all lines of apparel in which defendants do not have prior rights. The Court concludes that such prior rights extend only to boys' tailored apparel (including "students' tailored clothing" as previously defined as a subset of boys' tailored clothing).
Specifically, the Court finds that, even though defendants' predecessors did register the "Calvin" mark for use on "men's suits and men's sportcoats" in 1976, Stip. 1158, defendants subsequently abandoned that registration. A trademark is deemed abandoned if "its use has been discontinued with intent not to resume such use," and non-use for three consecutive years is prima facie evidence of abandonment. 15 U.S.C. § 1127. Here, James Murray, the national sales manager and one of the executive officers of Calvin Clothing's menswear division from approximately 1983 to approximately 1993, testified that Calvin Clothing did not make any sales of men's clothing under the "Calvin" label during his tenure with the company.[7] Tr. at 255-58. Rather, defendants during this period were largely engaged in making clothing for other brands, such as Austin Hill and Evan Picone. Id. at 259. While some items of their men's clothing may have borne the mark "CFM Calvin for Men," use of that mark, for which defendants owned a separate trademark, cannot prevent abandonment of the "Calvin" mark.[8]Cf. Ilco Corp. v. Ideal Sec. *256 Hardware Corp., 527 F.2d 1221, 1224 (C.C.P.A.1976) (holding that use of one mark can inure to the benefit of a related mark only if they provide a "single and continuing commercial impression").
Accordingly, defendants have abandoned their rights in the mark "Calvin" for men's apparel,[9] and plaintiffs have acquired rights in that mark with respect to all apparel except boys' tailored clothing.
As to plaintiffs' claims of trademark infringement under federal and state law, false designation of origin under federal law, and unfair competition under New York General Business Law § 349, the touchstone of these claims is a likelihood of consumer confusion as to product authenticity or origin. In determining whether there is a likelihood of confusion, the Court turns to the familiar "Polaroid" factors: "the strength of [the] mark, the degree of similarity between the two marks, the proximity of the products, the likelihood that the prior owner will bridge the gap, actual confusion, and the reciprocal of defendant's good faith in adopting its own mark, the quality of defendant's product, and the sophistication of the buyers." Polaroid Corp. v. Polarad Elecs. Corp., 287. F.2d 492, 495 (2d Cir.1961).[10]
Here, after over twenty years of substantial advertising and media attention, plaintiffs'"Calvin Klein" and "Calvin" marks are indisputably strong (the first factor). Further, they are substantially similar to the marks employed by defendants (the second factor). Although there are additional words and symbols appended to the name Calvin in defendants' new marks (e.g., "Calvin Collection," "Calvin America"), the "Calvin" name is the dominant feature shared by the marks, and it is that aspect of the marks that makes them distinctive, as defendants themselves acknowledge. See, e.g., Defendants' Proposed Findings of Fact 1160 (noting that "both [of plaintiffs' consumer confusion surveys] concluded that the ingredient causing confusion was the word `Calvin'"). Although plaintiffs may market their goods in somewhat higher-end establishments than defendants, both parties produce goods in the same field, that is, apparel, and defendants apparently intend to expand their use of the mark into many, if not all, of the lines of apparel in which plaintiffs currently market their products (the third and fourth factors). Further, while plaintiffs presented no direct evidence of actual confusion, they did present consumer surveys that provide strong circumstantial evidence of such confusion (the fifth factor). See, e.g., PPX Enters. v. Audiofidelity Enters., 818 F.2d 266, 271 (2d Cir.1987). For example, the "Ford" survey, which used actual specimens of apparel marketed by defendants or their *257 licensees, showed net confusion levels ranging from 23% to 59%.[11]See, e.g., RJR Foods, Inc. v. White Rock Corp., 603 F.2d 1058, 1061 (2d Cir.1979) (affirming a likelihood of confusion where the evidence included, inter alia, a consumer survey showing levels of confusion between 15 to 20 percent).
As to the junior user's bad faith, although the Court does not find that the defendants acted in bad faith (sixth factor), there is some evidence that defendants supported plaintiffs' use of the Calvin mark because it might ultimately benefit their own use of the mark. See Deposition of James Alperin dated October 20, 2005, at 42 ("My understanding is that for no monetary consideration we provided Calvin Klein Incorporated the right to use the Calvin name for its fragrance business, and I assume the consideration that we expected to receive was publicity that would help our brand."). Finally, the Court finds that defendants' products are of a somewhat lower quality than plaintiffs (the seventh factor), see Pl.Ex. 79 (consumer comments to that effect), and that (notwithstanding plaintiffs' own hype) the average clothing customer is not particularly sophisticated (the eighth factor). Thus, considering all of these factors, the Court determines that there is a likelihood of confusion between plaintiffs' marks and defendants' new Calvin marks, and that defendants are therefore liable for federal and state trademark infringement, false designation of origin, and unfair competition under state law. Because, however, the Court determined as part of the prior motion practice in this case that plaintiffs had failed to show actual damages, and because the Court finds no evidence of willful infringement, this finding of liability is only relevant to injunctive and declaratory relief.
As to plaintiffs' claims of trademark dilution under federal law, plaintiffs must show that defendants used the "Calvin" mark after it had become famous, and that their use "causes dilution of the distinctive quality of the mark." 15 U.S.C. § 1125(c)(1). In contrast to the infringement context, a likelihood of dilution is insufficient, and plaintiffs can prevail only if they can show "actual dilution." Moseley v. V Secret Catalogue, Inc., 537 U.S. 418, 433, 123 S.Ct. 1115, 155 L.Ed.2d 1 (2003).[12] Here, plaintiffs offer the results of their consumer confusion studies as evidence of actual dilution, but "the mere fact that consumers mentally associate the junior user's mark with a famous mark is not sufficient to establish actionable dilution." Id. Because plaintiffs have offered no evidence to show that defendants' use of a similar mark has "reduce[d] the capacity of [plaintiffs'] mark to identify" clothing and other goods manufactured by plaintiffs, id., the plaintiffs have failed to show federal trademark dilution.
As to plaintiffs' claim for dilution under New York state law, however, "[l]ikelihood of injury to business reputation or of dilution of the distinctive quality of a mark or trade name" is sufficient to establish a ground for injunctive relief. N.Y.G.B.L. § 360-1; see also Louis Vuiton *258 Malletier v. Dooney & Bourke, Inc., 454 F.3d 108, 119 (2d Cir.2006). To determine whether there has been dilution under New York state law, courts typically consider the following six factors: "1) similarity of the marks, 2) similarity of the products covered, 3) sophistication of the consumers, 4) predatory intent, 5) renown of the senior mark, 6) renown of the junior mark." Sports Auth. v. Prime Hospitality Corp., 89 F.3d 955, 966 (2d Cir.1996) (applying New York law). The Court has considered all of these factors, and because of the substantial similarity between the marks and the products on which they are used, the Court determines that there is a likelihood of dilution, and plaintiffs have proven their claim of dilution under state law.
Having considered all of the defendants' other arguments and finding them without merit,[13] the Court hereby finds for plaintiffs on all claims except count 6, and concomitantly, dismisses defendants' counterclaims with prejudice, but the Court further finds that there has been no showing of actual damages or willful infringement, and that the only relief to which plaintiffs are entitled is as follows:
Defendants Calvin Clothing Company Inc. and Star Ride Kids, Inc. are hereby ordered to file express abandonments, with prejudice, for trademark applications Serial Nos. 76/029,753; 76/029,754; 75/447,627; 75/477,628; 76/365,813; and 76/365,814. The Commissioner for Trademarks is directed to cancel U.S. Trademark Registration Nos. 1,039,306; 2,453,672; 2,573,181; 2,573,182; and 2,573,183. Defendants are hereby enjoined, on pain of contempt, from selling, offering for sale, advertising or distributing any clothing, other than boys' tailored apparel, that bears the mark "Calvin" or any modification thereof that is likely to cause confusion with plaintiffs' registered "Calvin Klein" trademarks and common law "Calvin" marks.
Clerk to enter judgment.
SO ORDERED.
NOTES
[1] At some point, there developed a category called "students' tailored clothing." While in some contexts this might be a kind of men's tailored clothing, the Court finds that in the case of Calvin Clothing it was really a subset of boys' tailored clothing that Calvin Clothing marketed to students of high school age or younger. Such limited usage is hereinafter incorporated by reference as part of Calvin Clothing's permissible use of the mark "Calvin" on boys' tailored clothing. See Stip. ¶ 54.
[2] Although the parties offered certain objections to small portions of the deposition excerpts offered at trial, the Court finds that none of the objections relates to deposition testimony that is material to this Court's findings of fact and, accordingly, the Court has not undertaken to rule on the objections.
[3] Calvin Klein has filed actions with the PTO to cancel the four approved registrations and to force abandonment of the other six. Those proceedings have been stayed pending resolution of this action.
[4] Certain additional findings of fact beyond those made above are for convenience set forth below in connection with the Court's conclusions of law.
[5] As a result, in 1981 and 1983, respectively, Calvin Klein sought Calvin Clothing's assent to its use of the "Calvin" mark on its cosmetics line and on a line of men's activewear, and in that regard Calvin Klein made some assurances that it would market these products only in conjunction with the full "Calvin Klein" trademark and that Calvin Klein Cosmetics Corp. would not seek to register the "Calvin" mark. Even assuming, arguendo, that these context-specific assurances were then binding on Calvin Klein, they do not in any way preclude Calvin Klein from seeking more general rights in these marks over twenty years later.
[6] After the mid-1980s, the only non-trivial contacts between the parties were some abortive oral negotiations beginning around 2000. Tr. at 60-62.
[7] Although Murray testified that the label might have been available upon request, "sporadic licensing for essentially non-commercial uses of a mark is not sufficient use to forestall abandonment." Silverman v. CBS, Inc., 870 F.2d 40, 48 (2d Cir.1989). As for the contrary evidence offered by defendants, the Court finds it non-credible. Moreover, with immaterial exceptions, such testimony came from individuals whose association with defendants' predecessors ended, at the latest, in the early 1990s. Thus, even were the Court to credit this testimony, there would still be a period of over three years in which defendants did not use the mark.
[8] Moreover, it is not even clear that the company regularly sold goods under the "Calvin for Men" label. See tr. at 255-58 (James Murray's testimony that the brand would have been "available," but "wasn't marketed," and wasn't "ever sold by my sales team").
[9] Because the Court finds that defendants abandoned this trademark, it need not determine whether, as plaintiffs claim, defendants' new principal, James Alperin, committed fraud on the PTO when he signed the renewal application for this registration.
[10] Defendants correctly point out that their recent registrations of several "Calvin" marks is prima facie evidence of "the validity of the registration . . . [and] of the registrant's ownership of the mark." See Goya Foods, Inc. v. Tropicana Prods., Inc., 846 F.2d 848, 854 (2d Cir.1988). However, "[t]hese presumptions are . . . rebuttable, and by obtaining . . . a federal registration a party does not significantly affect the course of an infringement action." Id. Further, the fact that Calvin Klein has, in filing registrations for the "Calvin Klein" mark in the past, taken the position that no other entity uses the mark "in such near resemblance thereto as to be likely . . . to cause confusion" is immaterial to the Court's determination of whether there is, at present, a likelihood of confusion between the two marks.
[11] Although defendants argue that Dr. Ford should have used a separate test cell in his surveys and paid greater attention to whether the products here in issue were sold at the shopping locations where he selected his survey participants, they acknowledge that these surveys were "designed in accordance with the generally accepted standards and procedures for survey research." Stip. ¶ 119.
[12] Although there is a presumption of dilution when marks are identical, see, e.g., Savin Corp. v. Savin Group, 391 F.3d 439, 452-53 (2d Cir.2004), plaintiffs do not argue that the marks here in issue are identical for dilution purposes.
[13] For example, their claim of laches borders on the frivolous, given that although defendants first filed their intent-to-use registrations with the PTO in 1998, Stip. ¶ 106, much of their actual use did not begin until much more recently, id. ¶ 117. Accordingly, the Court determines that defendants' prejudice from the delay is minimal. Further, "the public good is of paramount importance when considering the equitable defense of laches," Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 193 (2d Cir.1996), and here the Court concludes that it would not be in the public interest to permit defendants' continued use of the "Calvin" marks when such usage is likely to cause confusion.
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907 F.Supp. 806 (1995)
Ann K. STEHNEY, Plaintiff,
v.
William J. PERRY et al., Defendants.
Civ. No. 94-6306 (GEB).
United States District Court, D. New Jersey.
November 6, 1995.
*807 *808 *809 *810 *811 Frank Askin, Constitutional Litigation Clinic, Rutgers Law School, Newark, NJ, for Ann K. Stehney.
Peter Robbins, U.S. Department of Justice, Washington, DC, for William J. Perry, J. Michael McConnell, Lee Hanna, and Jeanne Zimmer.
Gerard H. Hanson, Hill Wallack, Princeton, NJ, for The Institute for Defense Analyses, Center for Communications Research, David M. Goldschmidt.
MEMORANDUM OPINION
BROWN, District Judge.
This matter comes before the Court on the motion of federal defendants, William J. Perry, Secretary of Defense, J. Michael McConnell, Director, National Security Agency/Central Security Service ("NSA"), Lee Hanna, Chief of Management Services for NSA, Jeanne Zimmer, current Chief of Management Services for NSA, to dismiss plaintiff's complaint pursuant to FED.R.CIV.P. 12(b)(1) & (6), and on the motion of nonfederal defendants, The Institute for Defense Analysis, Center for Communications Research ("IDA/CCR"), and David M. Goldschmidt, Director of IDA/CCR, for summary judgment pursuant to FED.R.CIV.P. 56. For the reasons set forth in this Memorandum Opinion, this Court will grant federal defendants' motion to dismiss Counts I through V of the Complaint. Further, this Court will deny nonfederal defendants' motion for summary judgment pursuant to FED.R.CIV.P. 56 and, instead, will dismiss Count VI of the Complaint pursuant to 28 U.S.C. § 1367.
I. BACKGROUND
A. The Polygraph Policy
NSA is an agency within the Department of Defense ("D.O.D.") charged with protecting and gathering sensitive information relating to national security. See 50 U.S.C.A. *812 § 402. IDA/CCR, a nonprofit "think tank" located in Princeton, New Jersey, assists NSA by performing extremely sensitive research in cryptologythe making and breaking of codes and other secure communications. Compl. ¶ 4. To conduct this research, IDA/CCR employees must have access to top-secret classified information, "the unauthorized disclosure of which reasonably could be expected to cause exceptionally grave damage to the national security." Executive Order ("E.O.") 12356, § 1.1(a)(1); 3 C.F.R. 174 (1983). Because this material is "particularly sensitive information" pertaining to intelligence activities and "intelligence sources or methods," it is restricted to a "special access program," E.O. 12356, § 4.2, known as "Sensitive Compartmented Information" ("SCI").
Access to SCI may be granted only after "a determination of trustworthiness has been made by agency heads or designated officials." Id. § 4.1(a). This judgment is intended to be "an overall common sense determination," see Director of Central Intelligence Directive No. 1/14 ("DCID No. 1/14") Annex A at 9 (Jan. 22, 1992), annexed to Declaration of Paul W. Naper ("Naper Dec.") as Exh. A1, made after a "thorough" background investigation "designed to develop information as to whether the individual clearly meets the SCI personnel standards." Id. ¶ 7.a. at 3. The background investigation includes "records checks and personal interviews of various sources by trained investigative personnel," id. ¶ 7.b. at 3, in the aid of which the subject is required to furnish fingerprints, and a personal-history statement delving into the subject's personal life. Id. ¶ 7.c. at 3. The subject is also required to sign releases, "as necessary," of "police, credit, financial, education, and medical records," and may be required to provide photographs of herself. Id. In all cases, at least one interview of the subject is required, and "[a]n additional personal interview will be conducted when necessary to resolve any significant adverse information and/or inconsistencies developed during the investigation." Id. ¶ 8.d. at 4.
Reinvestigations to determine continued eligibility for access to classified information must be conducted at least once every 5 years. Id. ¶ 10.a. at 5. To facilitate the reinvestigation, the subject must furnish an updated personal history statement and sign appropriate releases. Id. ¶ 10.b. at 5-6. "In all cases," the reinvestigation requires a "personal interview" addressing such matters as foreign assignments, connections and associations; approaches by foreign intelligence agencies; unreported breaches of security procedures; drug use; and criminal activities. Id.
Since 1953, NSA has conducted all security-clearance interviews of agency employees with the aid of a polygraph. Department of Defense, The Accuracy and Utility of Polygraph Testing 11, annexed to Naper Dec. at Exh. A12. When IDA/CCR was created in 1959, however, D.O.D. allowed an exception for professional employees. See Memorandum of Louis J. Bonanni, Deputy Director for Administration at 1 (Dec. 11, 1980), annexed to Naper Dec. as Exh. A6. Non-professional employees, including administrators, clerical workers and security personnel, were required to undergo polygraphs. Id.
D.O.D. reversed this policy in 1982, however, and authorized the use of polygraph interviews on an aperiodic basis, and in connection with security-clearance reinvestigations, for all personnel with access to SCI, including all contract employees. Periodic Reinvestigation Procedures for Individuals Cleared for Access to Sensitive Compartmented Information (SCI), Att. 1 at 1-2 to Memorandum of Frank Carlucci (Aug. 6, 1982), annexed to Naper Dec. as Exh. A7. One month later, NSA issued a directive that all "[c]ivilian, military and contractor personnel cleared for access to NSA SCI shall be requested to take polygraph examinations on an aperiodic basis at any time after their initial clearance," Memorandum of Lincoln D. Faurer at 1 (Sept. 27, 1982), annexed to Naper Dec. as Exh. A8, and IDA/CCR was instructed to inform its employees that the policy would go into effect on March 7, 1983. Letter of Philip T. Pease at 1 (Feb. 4, 1983), annexed to Naper Dec. as Exh. A9. The first use of the polygraph interview for professional *813 personnel began on August 5, 1983. Memorandum of Louis J. Bonanni at 1 (Aug. 5, 1983), annexed to Naper Dec. as Exh. A10.
B. The Polygraph
The polygraph measures changes in blood pressure, pulse, respiration, muscular activity and electrodermal activity (perspiration on fingertips) in reaction to the questions asked during the interview. See JOHN E. REID & FRED E. INBAU, TRUTH AND DECEPTION 4 (1966). These patterns are simultaneously recorded on pen registers while the subject wears a pressure cuff on her arm, a light tube across her chest and abdomen, and painless electrodes on two fingertips. Id. at 4-5. The changes provide subtle indications of "stress or anxiety," Anderson v. Philadelphia, 845 F.2d 1216, 1218 (3d Cir.1988), that might not otherwise be apparent to the interviewer. The theory of lie detection can be summarized as follows: the act of lying leads to conscious conflict; conflict induces fear or anxiety, which in turn results in clearly measurable physiological change. M.J. SAKS & R. HASTIE, SOCIAL PSYCHOLOGY IN COURT 192 (1978).
Polygraph examinations are intended to be "supplementary to, not ... a substitute for, other forms of investigation." D.O.D. Directive No. 5210.48, ¶ 6 at 2, annexed to Naper Dec. as Exh. A4; D.O.D. Reg. No. 5210.48-R, Ch. 1, ¶ A.5 at 1-1, annexed to Naper Dec. as Exh. A5. The results of the polygraph chart are "used during the security interview as an investigative tool with which to gather leads, encourage relevant disclosures, and identify areas of questioning that may need further development." See D.O.D. Reg. 5210, ¶ 9 at 3. Therefore, whether favorable or unfavorable, "[a]ny final administrative determinations rendered in cases in which a polygraph examination is taken shall not be based on the results of an analysis of the polygraph charts," NSA/CSS Reg. No. 122-3 § III, ¶ 6.a at 4, annexed to Naper Dec. as Exh. A3, but on information gathered independently.
Two types of polygraph interviews are used by the NSA in the background screening process. For an initial clearance, a "full-scope" interview is conducted with respect to the following areas:
(1) verification of the person being interviewed;
(2) counterintelligence questions; and
(3) clarifications or elaborations of information provided on completed security forms or other information pertaining to the person's eligibility for a clearance.
Id. § IV, ¶ 7.a(1)(a)-(c). For aperiodic and reinvestigation examinations, a shorter "counterintelligence ("CI")scope" interview is used. Id. § III, ¶ 7.b(1). This interview focuses narrowly on
(1) espionage or sabotage activities against the United States;
(2) deliberate damage to any government information system;
(3) deliberate disclosure of classified information to unauthorized persons; and
(4) undisclosed contacts with foreign nationals or representatives.
Memorandum of David H. Schachnovsky at 1 (May 26, 1992), annexed to Naper Dec. as Exh. A11.
Access to SCI "must be clearly consistent with the national security." NSA/CSS Reg. No. 122-06, ¶ 4 at 2, annexed to Naper Dec. as Exh. A2, and "[a]ny doubt concerning a person's continued eligibility will be resolved in favor of the national security." Id. ¶ 5 at 3. Because non-cooperation by the subject is an intolerable impediment to completion of the background investigation, "[f]ailure to provide required security forms, releases, and other data," or "refusing to undergo the required security processing or medical or psychological testing will normally result in a denial, suspension, or revocation of access [to SCI]." DCID No. 1/14 Annex A at 14. Specifically, "[p]ersons who refuse to take a polygraph examination in connection with determining their continued eligibility for access to specifically designated information in special access programs ... may be denied access," D.O.D. Reg. No. 5210.48-R, Ch. 1, ¶ A.5 at 1-1, regardless of any other information *814 developed during the background investigation process.
C. The Plaintiff
In 1982, plaintiff Dr. Ann K. Stehney was a tenured mathematics professor at Wellesley College. Compl. ¶ 11. Stehney accepted a part-time consulting position with IDA/CCR in the summer of 1982. Before beginning her work for IDA/CCR, however, NSA conducted a security investigation into Stehney's background. At the time of plaintiff's background check, the polygraph requirement for IDA professional personnel was not in effect. Stehney received access to SCI on June 8, 1982, and soon accepted a permanent, full-time position with IDA/CCR.
In or around 1989, Stehney was advised that she was the subject of a routine background reinvestigation for continued access to SCI. Compl. ¶ 19. Stehney was asked to submit to a polygraph and was informed that the polygraph examination was in connection with her 1989 reinvestigation. Compl. ¶ 20. In August 1992, and at all subsequent times, Stehney conscientiously refused to submit to a polygraph examination in connection with her continued access to SCI. Id. Instead, Stehney asked that she be treated as if she had taken the polygraph examination and failed. Id.
In or around May 1993, Stehney was informed that NSA had decided to deny her continued access to SCI because she refused to submit to a polygraph examination. Compl. ¶ 21. In June 1993, plaintiff appealed the proposed revocation of her SCI access to the Director of NSA's Office of Security. Compl. ¶ 23. Stehney filed a second appeal to defendant Hanna, Chief of Management Services in September 1993, and made her final appeal to defendant Vice Admiral McConnell in January 1994, thereby exhausting all available administrative remedies. Compl. ¶¶ 22-23. Stehney's SCI clearance was terminated on January 15, 1994, and her employment by IDA/CCR was terminated shortly thereafter. Compl. ¶¶ 1, 14.
Eleven months after her clearance was terminated, plaintiff filed suit in this court. Plaintiff's complaint sets forth six counts for relief. First, plaintiff argues that she is entitled to mandamus relief to force NSA officials to carry out certain duties alleged to be owed to her by regulation. Compl. ¶ 52. In the second count of the Complaint, plaintiff maintains that "the procedures used to deprive [her] of her access to SCI and to deny her appeals thereof ... deprived [her] of a property interest without due process of law." Compl. ¶¶ 58-65. The third count of the Complaint alleges that defendants' requirement that plaintiff submit to a polygraph examination was in contravention of the Fourth Amendment of the United States Constitution. Compl. ¶¶ 66-73. In Count IV, plaintiff avers that defendants' limited exemption from the polygraph examination lacked any rational basis and was granted solely to male employees in violation of the United States Constitution's guarantee of equal protection under the law. Compl. ¶ 74. Plaintiff alleges in Count V that defendants' polygraph requirement violates New Jersey law and public policy. Compl. ¶¶ 85-86. Finally, in Count VI, plaintiff maintains that defendants violated New Jersey employment discrimination law by failing to assist plaintiff in her attempt to secure an exemption in the same manner defendants assisted male employees. Compl. ¶¶ 89-91.
II. DISCUSSION
A. STANDARD FOR A MOTION TO DISMISS
A district court may grant a motion to dismiss for lack of subject matter jurisdiction pursuant to FED.R.CIV.P. 12(b)(1) based on the legal insufficiency of a claim. Dismissal pursuant to FED.R.CIV.P. 12(b)(1) is only proper, however, when the claim "`clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or ... is wholly insubstantial and frivolous.'" Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1408-09 (3d Cir.), cert. denied, 501 U.S. 1222, 111 S.Ct. 2839, 115 L.Ed.2d 1007 (1991) (quoting Bell v. Hood, 327 U.S. 678, 683, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946)). On a FED.R.CIV.P. 12(b)(1) motion, plaintiff bears the burden of persuading *815 the Court that subject matter jurisdiction exists. Id. at 1409. The factual allegations of plaintiff's complaint must be accepted as true. Mortensen v. First Federal S & L Ass'n, 549 F.2d 884, 891 (3d Cir.1977).
Federal defendants also move to dismiss certain claims in plaintiff's Complaint pursuant to FED.R.CIV.P. 12(b)(6). Such a motion may be granted only if, accepting all well pleaded allegations in the complaint as true, and viewing them in the light most favorable to plaintiff, plaintiff is not entitled to relief. Bartholomew v. Fischl, 782 F.2d 1148, 1152 (3d Cir.1986); Angelastro v. Prudential-Bache Securities, Inc., 764 F.2d 939, 944 (3d Cir.), cert. denied, 474 U.S. 935, 106 S.Ct. 267, 88 L.Ed.2d 274 (1985). The Court may not dismiss a complaint unless plaintiff can prove no set of facts which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Angelastro, 764 F.2d at 944. "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). In setting forth a valid claim, a party is required only to plead "a short plain statement of the claim showing that the pleader is entitled to relief." FED.R.CIV.P. 8(a).
B. COUNT I: MANDAMUS
In Count I of her complaint, plaintiff alleges that defendants failed to process and decide the proposed revocation of her SCI access or appeal thereof in accordance with applicable D.O.D. regulations. Compl. ¶ 56. Plaintiff argues that "[t]his failure included, but is not limited to, the failure to treat Ms. Stehney as if she had taken the polygraph examination and failed, and the failure to make a finding as to whether Ms. Stehney met the qualifications for SCI access stated in DCID 1/14, sec. 5." Id. Plaintiff maintains that as a result of this failure, she lost her job with IDA/CCR. In her prayer for relief, plaintiff asks this Court to issue a writ of mandamus ordering (1) defendants Hanna and/or Zimmer to evaluate her appeal in accordance with applicable regulations, including but not limited to Annex B of DCID 1/14; and (2) defendants Hanna, Zimmer, Perry, and McConnell to ensure that the proposed revocation of plaintiff's access to SCI and any appeals are decided in accordance with applicable regulations, including but not limited to Annex B of DCID 1/14 and DCID 1/14, sec. 5.[1] Compl. ¶¶ 20-21.
In response to plaintiff's request for relief, defendants argue: (1) plaintiff lacks standing to bring her claim because she is no longer employed by IDA/CCR and, thus, she no longer has a need for classified information that may only be released on a "need to know basis"; (2) plaintiff is asking this Court to become embroiled in a nonjusticiable political question; and (3) the type of relief plaintiff seeks, i.e., a writ of mandamus, cannot be granted by this Court because the federal government has not unequivocally waived its sovereign immunity. Each of these three arguments will be addressed seriatim.
1. Standing
To establish standing to sue, plaintiff must demonstrate that (1) she has suffered some actual or threatened injury, (2) her injury is "fairly traceable" to the defendants' allegedly unlawful conduct, and (3) her injury is likely to be redressed by the requested relief. Allen v. Wright, 468 U.S. 737, 752, 104 S.Ct. 3315, 3325, 82 L.Ed.2d 556 (1984). In the present case, plaintiff does not allege that the injunctive relief she seeks, i.e., an order that restores her security clearance, or at least instructs NSA to conduct new administrative proceedings, can be lawfully granted without an ongoing "need to know" classified information. E.O. 12356, § 4.1(a), 3 C.F.R. 174 (1983). Moreover, *816 plaintiff does not deny that her need for access to SCI ceased when she lost her job at IDA/CCR, nor does she contend that her former employer would be under any legal obligation to rehire her if her clearance were restored. In the absence of such an obligation, plaintiff's claim to standing is premised on nothing more than legally insufficient "someday" speculations about what a third-party might do in hypothetical future circumstances. Lujan v. Defenders of Wildlife, 504 U.S. 555, 564, 112 S.Ct. 2130, 2138, 119 L.Ed.2d 351 (1992); see also Greene v. United States, 376 U.S. 149, 150, 84 S.Ct. 615, 617, 11 L.Ed.2d 576 (1964) (finding that an injunctive claim for access to classified information was moot after the employment-related need for access ceased). Therefore, until plaintiff establishes, presumably in state court, her right to reinstatement by IDA/CCR, she lacks standing to seek restoration of her security clearance in federal court. Accordingly, defendants' motion to dismiss Count I pursuant to FED.R.CIV.P. 12(b)(1) will be granted.
2. Political Question
Even if plaintiff has standing to bring this action, her claim is nonjusticiable because it requires the Court to become embroiled in a political question. The Supreme Court has held that certain types of issues, regardless of their merits, are reserved by the Constitution exclusively to the political process. Among other things, such questions exist where there is "a textually demonstrable constitutional commitment of the issue to the coordinate political department." Baker v. Carr, 369 U.S. 186, 217, 82 S.Ct. 691, 710, 7 L.Ed.2d 663 (1962). Under this test, it has long been the "generally accepted view ... that foreign policy [is] the province of and responsibility of the Executive," and outside the purview of the courts. Haig v. Agee, 453 U.S. 280, 293-94, 101 S.Ct. 2766, 2775, 69 L.Ed.2d 640 (1981); see also Cafeteria & Restaurant Workers Union v. McElroy, 367 U.S. 886, 890, 81 S.Ct. 1743, 1746, 6 L.Ed.2d 1230 (1961) (recognizing that the executive branch "has traditionally exercised unfettered control" of access to military bases); Chicago & Southern Air Lines v. Waterman S.S. Corp., 333 U.S. 103, 111, 68 S.Ct. 431, 436, 92 L.Ed. 568 (1948) ("[T]he very nature of executive decisions as to foreign policy is political, not judicial" because "[t]hey are decisions of a kind for which the Judiciary has neither aptitude, facilities nor responsibility and which has long been held to belong in the domain of political power not subject to judicial intrusion or inquiry").
The same principle logically applies to the protection of national-security secrets used in aid of foreign and military policy. Dorfmont v. Brown, 913 F.2d 1399, 1404-05 (9th Cir.1990) (Kozinski, J., concurring), cert. denied, 499 U.S. 905, 111 S.Ct. 1104, 113 L.Ed.2d 214 (1991); see also New York Times v. United States, 403 U.S. 713, 728-29, 91 S.Ct. 2140, 2148-49, 29 L.Ed.2d 822 (1971) (Stewart, J., concurring) ("The responsibility [for protecting classified information] must be where the power is. If the Constitution gives the Executive a large degree of unshared power in the conduct of foreign affairs and the maintenance of our national defense, then under the Constitution the Executive must have the largely unshared duty to determine and preserve the degree of internal security necessary to exercise that power successfully."). This conclusion is based on the fact that the text of the Constitution expressly confers on the President exclusive authority to take action as "Commander in Chief of the Army and Navy of the United States." U.S. CONST., ART. II, ¶ 2. The authority to
classify and control access to information bearing on national security and to determine whether an individual is sufficiently trustworthy to occupy a position ... that will give that person access to such information flows primarily from this constitutional investment of power and exists quite apart from any explicit congressional grant.
* * * * * *
For reasons `too obvious to call for enlarged discussion,' the protection of classified information must be committed to the *817 broad discretion of the agency responsible, and this must include broad discretion to determine who may have access to it. Certainly, it is not reasonably possible for an outside nonexpert body to review the substance of such a judgment.... Nor can such a body determine what constitutes an acceptable margin of error in assessing the potential risk....
* * * * * *
Thus, unless Congress specifically has provided otherwise, courts have traditionally been reluctant to intrude upon the authority of the Executive in military and national security affairs.
Dep't of the Navy v. Egan, 484 U.S. 518, 526-30, 108 S.Ct. 818, 824-25, 98 L.Ed.2d 918 (1988) (quoting CIA v. Sims, 471 U.S. 159, 105 S.Ct. 1881, 85 L.Ed.2d 173 (1985)). Because of this "textually demonstrable constitutional commitment" of power to the Executive, Baker, 369 U.S. at 217, 82 S.Ct. at 710,
there is a reasonable basis for the view that an agency head who must bear the responsibility for the protection of classified information committed to his custody should have the final say in deciding whether to repose his trust in an employee who has access to such information.
Egan, 484 U.S. at 529, 108 S.Ct. at 825 (quoting Cole v. Young, 351 U.S. 536, 546, 76 S.Ct. 861, 868, 100 L.Ed. 1396 (1956)). For the judiciary to attempt to review the President's final say in matters of access to national security secrets would therefore violate "fundamental principles of separation of powers." Dorfmont, 913 F.2d at 1404 (Kozinski, J., concurring); see also Marbury v. Madison, 5 U.S. (1 Cranch) 137, 170-71, 2 L.Ed. 60 (1803) ("Where the head of a department acts in a case, in which executive discretion is to be exercised; in which he is the mere organ of executive will; it is again repeated, that any application to a court to control, in any respect, his conduct would be rejected without hesitation.").
A federal court would violate these fundamental principles of separation of powers if it were to review the merits of security clearance decisions. In Egan, the Supreme Court held that the Merit System Appeals Board did not have the statutory authority to review the substantive decisions of the Navy to revoke the plaintiffs security clearance. 484 U.S. at 526-29, 108 S.Ct. at 823-25. In its subsequent decision in Webster v. Doe, 486 U.S. 592, 108 S.Ct. 2047, 100 L.Ed.2d 632 (1988), the Supreme Court confirmed that federal courts lack jurisdiction to review the merits of security clearance. See also Dorfmont, 913 F.2d at 1401 (reasoning that the Supreme Court's reasoning on the reviewability of security clearance decisions "applie[d] no less to the federal courts than to [administrative review boards].").
In the present matter, plaintiff argues that the political question doctrine is inapplicable because she is not asking this Court to review the merits of NSA's decision to revoke her access to SCI. Instead, plaintiff asserts that she is asking this Court to review whether or not NSA followed its own internal guidelines when deciding to revoke plaintiff's security clearance. Stehney charges that NSA never reached the merits of her security review because it refused to find that plaintiff's refusal to submit to a polygraph examination was equivalent to taking and failing a polygraph examination. This refusal, according to plaintiff, led the NSA to revoke her access to SCI before making any merit findings pursuant to paragraphs 5, 12 and Annex B of DCID 1/14.
Paragraphs 5, 12 and Annex B of DCID 1/14 provide, in pertinent part:
5. Personnel Security Standards
Criteria for security approval of an individual on a need-to-know basis for access to SCI follow:
a. The individual must be stable; trustworthy; reliable; of excellent character, judgment, and discretion; and of unquestioned loyalty to the United States.
b. The individual requiring access to SCI must be a U.S. citizen.
c. The individual's immediate family must also be U.S. citizens....
d. Members of the individual's immediate family and any other persons to whom he or she is bound by affection or obligation should neither be subject to physical, mental, or other forms of duress by a foreign *818 power or by persons who may be or have been engaged in criminal activity, nor advocate the use of force or violence to overthrow the Government of the United States or the alteration of the form of Government of the United States by unconstitutional means.
12. Determination of Access Eligibility
The evaluation of the information developed by investigation of an individual's loyalty and suitability will be accomplished under the cognizance of the SOIC concerned by analysts of broad knowledge, good judgment, and wide experience in personnel security and/or counterintelligence. When all other information developed on an individual is favorable, a minor investigation requirement that has not been met should not preclude favorable adjudication. In all evaluations, the protection of the national interest is paramount. Any doubt concerning personnel having access to SCI should be resolved in favor of the national security, and the access should be denied or revoked. The ultimate determination of whether the granting of access is clearly consistent with the interest of national security will be an overall common sense determination based on all available information.
Annex B: Appeals
Any individual who has been considered for initial or continued access to SCI pursuant to the provisions of DCID 1/14 shall, to the extent provided below, be afforded an opportunity to appeal the denial or revocation of such access.
DCID 1/14 ¶¶ 5, 12, and Annex B.
In essence, plaintiff argues that because NSA's guidelines provide that access to SCI should not be revoked solely for failing a polygraph examination, it necessarily follows that NSA cannot revoke plaintiff's access to SCI based on her refusal to submit to a polygraph examination. See Compl. ¶ 20. Plaintiff's premise that she is similarly situated to a person who took the polygraph examination and failed, however, is nothing more than a thinly disguised effort to review the merits of the NSA's revocation action. Plaintiff asks this Court to substitute NSA's criteria for granting top-secret security clearances with her own self-serving criteria. This is precisely the type of second-guessing that is prohibited by the political question doctrine.
Moreover, this Court finds that NSA did, in fact, render a decision on the merits in this case. The relevant regulations and policy memoranda not only authorize revocation of a security clearance based solely on a failure to cooperate with the polygraph interview, D.O.D. Reg. No. 5210.48-R, Ch. 1, ¶ A.5 at 1-1; NSA/CSS Reg. No. 122-06, ¶ 6 at 3, they expressly envision that revocation "normally" will be the appropriate result of such a refusal. DCID No. 1/14 Annex at 14. Therefore, there was no need for the NSA to consider paragraphs 5, 12 and Annex B of DCID 1/14 once plaintiff refused to submit to a polygraph examination. Accordingly, plaintiff's claim involves a nonjusticiable political question and federal defendants' motion to dismiss this count pursuant to FED.R.CIV.P. 12(b)(1) is granted.
Finally, there is no merit to plaintiff's contention that, because she had an alleged "constitutionally protected interest in the procedures to evaluate her eligibility for continued access to SCI, and in the appeal procedures," Plaintiff's Brief at 6, this Court must look beyond the political question doctrine and compel NSA to evaluate plaintiff according to paragraphs 5, 12 and Annex B of DCID 1/14. If the Constitution gives the President the "final say" over who may be allowed access to classified information, Egan, 484 U.S. at 529, 108 S.Ct. at 825, then such plenary authority cannot, by definition, be exercised unconstitutionally. See also Hill v. Dep't of Air Force, 844 F.2d 1407, 1409 (10th Cir.) (authority of Egan may not be bypassed by invoking alleged constitutional rights), cert. denied, 488 U.S. 825, 109 S.Ct. 73, 102 L.Ed.2d 49 (1988); Williams v. Reilly, 743 F.Supp. 168, 171 (S.D.N.Y.1990) ("This threshold jurisdictional determination is not affected by the fact that the challenge is made on the grounds of a constitutional deprivation.").
Furthermore, plaintiff's reliance on Greene v. McElroy, 360 U.S. 474, 79 S.Ct. 1400, 3 L.Ed.2d 1377 (1959); Vitarelli v. Seaton, 359 *819 U.S. 535, 79 S.Ct. 968, 3 L.Ed.2d 1012 (1959); and Service v. Dulles, 354 U.S. 363, 77 S.Ct. 1152, 1 L.Ed.2d 1403 (1957) is misplaced and does not persuade this Court that judicial intrusion into security-clearance decisions is warranted because she raised alleged constitutional concerns. These decisions did not address any jurisdictional or constitutional issue, let alone the political question doctrine as it applies to the revocation of a security clearance. In Vitarelli and Service, career government employees challenged their terminations under the old Civil Service Act. Vitarelli, 359 U.S. at 536-46, 79 S.Ct. at 971-76; Service, 354 U.S. at 373, 77 S.Ct. at 1157-58. The plaintiffs in those cases did not challenge the denial of security clearances, nor could they have done so. See Egan, 484 U.S. at 531, 108 S.Ct. at 826. Moreover, although in Greene the Supreme Court reviewed whether an agency had been delegated the authority to deny a contractor employee's security clearance without providing an opportunity to respond, no justiciability issue was raised or addressed. 360 U.S. at 493, 79 S.Ct. at 1411-12. Finally, the Supreme Court's decision in Webster, 486 U.S. at 601-02, 108 S.Ct. at 2052-53, to allow a "colorable" constitutional challenge to the termination of CIA employment to proceed on the merits is not to the contrary. In Webster, the Court merely concluded that review of constitutional challenges to employee termination decisions of the Director of Central Intelligence was not precluded under 5 U.S.C. § 701(a)(2), because such matters were not committed by Congress to agency discretion by law by the language of 50 U.S.C. § 403(c). The holding was strictly "a matter of statutory construction, not constitutional interpretation." Dorfmont, 913 F.2d at 1405 (Kozinski, J., concurring).
Even if the political question doctrine did not preclude review of constitutional concerns, plaintiff has no such constitutional right to protect in this case. It is well settled that there is no constitutional interest in a security clearance. Egan, 484 U.S. at 529, 108 S.Ct. at 824-25. Nor is there such an interest in the procedural rules under which clearance determinations are made and appealed administratively. Hill, 844 F.2d at 1411-12. Therefore, plaintiff cannot demonstrate that NSA's actions contravened her alleged due process rights because she has no such rights. Accordingly, federal defendants' motion to dismiss Count I of the Complaint is granted.
3. Sovereign Immunity
Assuming that this Court had constitutional authority to entertain any of plaintiff's claims, her request for a "writ of mandamus"[2] to force the NSA to correct certain purported errors in its handling of her security-clearance revocation is barred by the doctrine of sovereign immunity. The doctrine of sovereign immunity provides that the United States cannot be sued unless it gives its consent, and this consent defines a court's jurisdiction to hear a particular case. United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 769, 85 L.Ed. 1058 (1941). In United States v. Testan, 424 U.S. 392, 96 S.Ct. 948, 47 L.Ed.2d 114 (1976), the Supreme Court confirmed this principle when it declared that "except as Congress has consented to a cause of action against the United States, `there is no jurisdiction ... to entertain suits against the United States.'" Id. at 399, 96 S.Ct. at 954 (quoting Sherwood, 312 U.S. at 587-88, 61 S.Ct. at 770-71). "Absent consent to sue, dismissal of the action is required." Hutchinson v. United States, 677 F.2d 1322, 1327 (9th Cir.1982) (citations omitted). Moreover, the Constitution itself does not contain a waiver of sovereign immunity. Arnsberg v. United States, 757 F.2d 971, 980 (9th Cir.1984), cert. denied, 475 U.S. 1010, 106 S.Ct. 1183, 89 L.Ed.2d 300 (1986). "Such [a] waiver [of sovereign immunity] cannot be implied, but must be unequivocally expressed." FDIC v. Meyer, ___ U.S. ___, ___, 114 S.Ct. 996, 1000, 127 L.Ed.2d 308 (1994). Finally, a suit for injunctive relief to force NSA officials to carry out certain duties alleged to be owed to plaintiff by regulation is "[a] suit against federal officers in their official capacity" and therefore "a suit *820 against the United States." Biase v. Kaplan, 852 F.Supp. 268, 284 n. 14 (D.N.J.1994) (citing Kentucky v. Graham, 473 U.S. 159, 166, 105 S.Ct. 3099, 3105, 87 L.Ed.2d 114 (1985)).
Plaintiff fails to identify any statute in which the United States is purported to have unequivocally consented to be sued for failure to follow Defense Department or NSA security-clearance regulations. The only statute on which plaintiff relies, the Mandamus Act, 28 U.S.C. § 1361, is a jurisdictional provision, which, standing alone, creates no "cause of action," Mattern v. Weinberger, 519 F.2d 150, 156 (3d Cir.1975), vacated on other grounds, 425 U.S. 987, 96 S.Ct. 2196, 48 L.Ed.2d 812 (1976), let alone a cause of action expressly waiving sovereign immunity. Pit River Home & Agricultural Co-op Ass'n v. United States, 30 F.3d 1088, 1098 (9th Cir.1994). Furthermore, plaintiff cannot rely on the waiver of sovereign immunity in the Administrative Procedure Act, 5 U.S.C. §§ 701-706, because judicial review of NSA security-clearance decisions is expressly precluded under 50 U.S.C. § 685, see 5 U.S.C. § 701(a)(1), and committed to agency discretion by law. Egan, 484 U.S. at 530, 108 S.Ct. at 825-26.
Even if a putative cause of action and waiver of sovereign immunity were present, however, the Mandamus Act provides only that "[t]he district courts shall have original jurisdiction of any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to the plaintiff." 28 U.S.C. § 1361. This language creates potential subject-matter jurisdiction in only two circumstances. The first is where a government official is required to perform "a clear, ministerial and nondiscretionary duty," Mattern, 519 F.2d at 156, that is "preemptory and unmistakable." ICC v. New York, New Havan & Hartford Railroad, 287 U.S. 178, 191, 53 S.Ct. 106, 109, 77 L.Ed. 248 (1932), "certain," id. at 194, 53 S.Ct. at 110, "inflexible," id. at 199, 53 S.Ct. at 111-12, "clear beyond debate," id. at 204, 53 S.Ct. at 113-14, "positively commanded and so plainly prescribed as to be free from doubt." Mattern, 519 F.2d at 156 (quotation omitted). The second is where the plaintiff seeks to compel an official to undertake a neglected action that requires the exercise of discretion to carry out. In this second context, mandamus relief is available only to "compel [the] action" itself, "but not to direct the exercise of discretion in a particular way nor to direct the retraction or reversal of action already taken." ICC v. Humbolt S.S. Co., 224 U.S. 474, 484, 32 S.Ct. 556, 559, 56 L.Ed. 849 (1912).
The Supreme Court has held that "it should be obvious that no one has a `right' to a security clearance," Egan, 484 U.S. at 528, 108 S.Ct. at 824, and that revocation of a clearance is a "discretionary" action. Id. at 630, 108 S.Ct. at 825-26. What plaintiff seeks here is merely an order reversing NSA's decision to revoke her clearance and directing NSA to exercise its discretion in a different way to reach a different outcome. Because plaintiff is not seeking the performance of a non-discretionary, ministerial duty withheld, her claim does not fall within the scope of the Mandamus Act. Therefore, Count I of plaintiff's Complaint is dismissed.
C. COUNT II: DUE PROCESS CLAIM
In Count II of her complaint, plaintiff alleges defendants denied her due process by failing to (1) allow her to confront witnesses against her; (2) provide her with the information collected during her 1989 re-investigation; and (3) give her the opportunity to present live testimony at a hearing. Compl. ¶ 60. Plaintiff further alleges that she had a property interest in her continued access to SCI; her job at IDA/CCR; the procedures involved in reinvestigating her background, proposing the revocation of her access to SCI, and evaluating any appeals regarding her access to SCI; and the remedies available to her after the decision was made to revoke her access to SCI. Compl. ¶¶ 61-62. Moreover, plaintiff contends that she has a liberty interest in being able to practice her chosen profession. Compl. ¶ 63.
"The requirements of procedural due process apply only to the deprivation of interests" in life, "liberty and property." Board of Regents v. Roth, 408 U.S. 564, 571, *821 92 S.Ct. 2701, 2706, 33 L.Ed.2d 548 (1972). According to the Supreme Court, "it should be obvious that no one has a `right' to a security clearance." Egan, 484 U.S. at 528, 108 S.Ct. at 824. Thus, there is no property interest in a security clearance, Hodge v. Jones, 31 F.3d 157, 165 (4th Cir.), cert. denied, ___ U.S. ___, 115 S.Ct. 581, 130 L.Ed.2d 496 (1994); Greenwood v. FAA, 28 F.3d 971, 976 (9th Cir.1994), or in a job that requires a security clearance, Mangino v. Dep't of Army, 1994 WL 55606, *2 (10th Cir.), cert. denied, ___ U.S. ___, 115 S.Ct. 275, 130 L.Ed.2d 193 (1994); Dorfmont, 913 F.2d at 1403, or in the procedural rules under which clearance determinations are made and appealed administratively, Hill, 844 F.2d at 1411-12, that is protected by due process.
Nor does plaintiff have a liberty interest in a security clearance. To have a liberty interest, plaintiff must show that (1) the government changed her employment status; (2) the change occurred as a result of derogatory allegations that created a stigma on the plaintiff; (3) the derogatory allegations were publicized by the government; and (4) this stigmatizing publication significantly reduced her ability to pursue her chosen profession. Siegert v. Gilley, 500 U.S. 226, 233-34, 111 S.Ct. 1789, 1793-94, 114 L.Ed.2d 277 (1991). The denial of a security clearance "does not equate with passing judgment upon an individual's character" and "in no way implies disloyalty or any other repugnant characteristic." Egan, 484 U.S. at 528-29, 108 S.Ct. at 824-25 (citation omitted). Therefore, courts have universally held that denial of a clearance does not stigmatize the person in any way that implicates a liberty interest. See, e.g., Hodge, 31 F.3d at 165; Mangino, 1994 WL 55606 at *2; NFFE v. Greenberg, 983 F.2d 286, 289 (D.C.Cir.1993).
Moreover, even if a property or liberty interest protected by due process were present here, plaintiff does not identify any additional procedures that would have improved the fairness of the decision-making process. "[D]ue process is flexible and calls for such procedural protections as the particular situation demands," Morrissey v. Brewer, 408 U.S. 471, 481, 92 S.Ct. 2593, 2600, 33 L.Ed.2d 484 (1972), to afford a meaningful opportunity to be heard at a meaningful time. Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18 (1976). Contrary to plaintiff's assertions to the contrary, see Compl. ¶ 60, "[t]he Fifth Amendment does not require a trial-type hearing in every conceivable case of government impairment of a private interest." Cafeteria Workers, 367 U.S. at 894, 81 S.Ct. at 1748. Where the interest involved is "a mere privilege subject to the Executive's plenary power, it has traditionally been held that notice and hearing are not constitutionally required." Id. at 895, 81 S.Ct. at 1748; see also Hill, 844 F.2d at 1410 ("[An Agency's internal] procedures [relating to revocation of an existing security clearance] are not the type of rules or understandings that secure certain benefits and that support claims of entitlement to those benefits. The procedures are administrative devices which are intended to promote fairness and safeguard the rights of individual employees, but are not intended thereby to diminish Executive authority rooted in Executive responsibility.").
In this case, prior to the revocation of her clearance, plaintiff was afforded both notice and an opportunity to present detailed arguments and supporting documents. This procedure is more than sufficient to satisfy due process. Doe v. Cheney, 885 F.2d 898, 910 (D.C.Cir.1989). Furthermore, inasmuch as the only relevant fact plaintiff's refusal to cooperate with the polygraph interviewwas uncontested, it is impossible to see what point would have been served by allowing her "to confront witnesses against her" or be "provided with the information collected during her 1989 reinvestigation." Compl. ¶ 60. The purpose of allowing cross-examination and discovery in an administrative hearing is to provide "an opportunity to show that [relevant information] is untrue" in situations where "the evidence consists of the testimony of individuals whose memory might be faulty or who, in fact, might be perjurers or persons motivated by malice, vindictiveness, intolerance, prejudice, or jealousy." Greene, 360 U.S. at 496, 79 S.Ct. at 1413. Where the facts are not in dispute, due process no more requires an evidentiary hearing in the administrative *822 context than it does in the judicial context. Accordingly, this Court finds that Count II of plaintiff's complaint has no merit, and defendants' motion to dismiss this claim pursuant to FED.R.CIV.P. 12(b)(6) is granted.
D. COUNT III: FOURTH AMENDMENT CLAIM
Plaintiff next claims that the polygraph interview is a search that violates the Fourth Amendment when it is not based on probable cause. Compl. ¶¶ 72-73. Specifically, plaintiff argues that the polygraph examination closely resembles the search of a person's private papers and diaries. Plaintiff's Brief at 37. Plaintiff suggests that "[i]t is difficult for such an examination to be limited because it concerns the most private and cherished of our possessionspersonal thoughts and ideas." Id. at 38-39. Plaintiff adds that "[b]ecause polygraph examinations constitute searches within the meaning of the Fourth Amendment, they should presumably take place only after the issuance of a warrant based upon probable cause." Id. at 40. Finally, plaintiff contends that "the government interest is no longer as compelling as it once was.... With altered security needs engendered by the close of the Cold War, there is no longer any credible justification for abridging Fourth Amendment safeguards of Americans. The national security needs envisioned by the courts during the Cold War are no longer relevant to the current state of world affairs." Id. at 43.
The Fourth Amendment of the United States Constitution provides for the "right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures." U.S. CONST., Amend. 4. The essential purpose of the proscriptions in the Fourth Amendment is to "impose a standard of `reasonableness' upon the exercise of discretion by government officials...." Delaware v. Prouse, 440 U.S. 648, 99 S.Ct. 1391, 59 L.Ed.2d 660 (1979). Thus, the Fourth Amendment protects individuals from "unreasonable government intrusions into their legitimate expectations of privacy." United States v. Chadwick, 433 U.S. 1, 7, 97 S.Ct. 2476, 2481, 53 L.Ed.2d 538 (1977). As the Supreme Court has noted:
[Reasonableness] is not capable of precise definition or mechanical application. In each case it requires a balancing of the need for the particular search against the invasion of personal rights that the search entails. Courts must consider the scope of the particular intrusion, the manner in which it is conducted, the justification for initiating it, and the place in which it is conducted.
Bell v. Wolfish, 441 U.S. 520, 559, 99 S.Ct. 1861, 1884, 60 L.Ed.2d 447 (1979).
No person with access to classified information, however, can have a reasonable expectation that she may refuse to give "an accounting of [her] use or abuse of the public trust," Uniformed Sanitation Men Ass'n v. Commissioner of Sanitation of City of New York, 392 U.S. 280, 284, 88 S.Ct. 1917, 1919, 20 L.Ed.2d 1089 (1968), or fail "to answer relevant questions about [her] official duties." Gardner v. Broderick, 392 U.S. 273, 278, 88 S.Ct. 1913, 1916, 20 L.Ed.2d 1082 (1968). Nor can plaintiff have a reasonable expectation that this inquiry will be conducted "on her own informational terms," Wyman v. James, 400 U.S. 309, 321-22, 91 S.Ct. 381, 388, 27 L.Ed.2d 408 (1971), so as to minimize the ability of the questioner to gather possibly adverse information from the surroundings.
Moreover, a polygraph does not constitute a search within the meaning of the Fourth Amendment. While "penetrat[ion] beneath the skin," Skinner, 489 U.S. at 616, 109 S.Ct. at 1412-13, to extract inorganic material, Winston v. Lee, 470 U.S. 753, 760, 105 S.Ct. 1611, 1616, 84 L.Ed.2d 662 (1985) (bullet), bodily fluid, Skinner, 489 U.S. at 616-17, 109 S.Ct. at 1412-13 (urine); Schmerber v. California, 384 U.S. 757, 769, 86 S.Ct. 1826, 1835, 16 L.Ed.2d 908 (1966) (blood), or "deep lung" breath, Skinner, 489 U.S. at 616, 109 S.Ct. at 1412-13, has been held to be a search within the meaning of the Fourth Amendment, the Supreme Court also has held that involuntary production of recorded voice samples is not a search because there is no reasonable expectation of privacy in the "physical characteristics of a person's voice, its tone and manner" or in "his facial *823 characteristics" during speech. United States v. Dionisio, 410 U.S. 1, 14, 93 S.Ct. 764, 771-72, 35 L.Ed.2d 67 (1973). The same is true of handwriting samples. United States v. Mara, 410 U.S. 19, 20-22, 93 S.Ct. 774, 775-76, 35 L.Ed.2d 99 (1973). Similarly, the taking of a fingerprint is not a search, Dionisio, 410 U.S. at 15, 93 S.Ct. at 772, even though it involves touching and pressing, and reveals physiological traits too minute to be considered exposed to public view in any meaningful sense. Id. Further, a dental examination to see if a tooth is missing is not a search, even though it involved an intrusion into a body cavity to identify a disfiguring physical feature that most people would tend to conceal. United States v. Holland, 378 F.Supp. 144, 154 (E.D.Pa.), aff'd, 506 F.2d 1053 (3d Cir.1974), cert. denied, 420 U.S. 994, 95 S.Ct. 1433, 43 L.Ed.2d 676 (1975). The incidental contact involved in attaching polygraph equipment and the rather innocuous readings of heart rate, respiration and perspiration changes are hardly more intrusive than a dental examination. See United States v. Haynes, 24 C.M.R. 881 (AFBR 1957) ("If there is anything hidden in the mind of the person subjected to such an examination, the machine does not produce it, though it appears to be evident that the examination and the results thereof are not infrequently cogent factors which lead the subject to reveal his secrets.").
Furthermore, with respect to physical and psychological stress, "[q]uestions, however unfriendly," simply "do not constitute an unreasonable search" as a matter of law. Goerlich v. Davis, 1991 WL 195772, at *4 (N.D.Ill.1991). A polygraph, like a voice exemplar, cannot plausibly be viewed as "an annoying, frightening, and perhaps humiliating experience," Dionisio, 410 U.S. at 14, 93 S.Ct. at 771-772 (citation omitted), and certainly cannot be compared to a pat-down search while spread-eagled against a wall by a police officer in public. Terry v. Ohio, 392 U.S. 1, 24-25, 88 S.Ct. 1868, 1881-82, 20 L.Ed.2d 889 (1968). Refusal to take a polygraph, therefore, does not give rise to a cause of action under the Fourth Amendment. Chesna v. Dep't of Defense, 850 F.Supp. 110, 116-17 (D.Conn.1994).
Even assuming that a polygraph is deemed to be a search within the meaning of the Fourth Amendment, a polygraph used for the purpose of a national security background reinvestigation is hardly unreasonable. It is a "longstanding principle that neither a warrant or probable cause, nor, indeed, any measure of individualized suspicion, is an indispensable component of reasonableness in every circumstance." NTEU v. Von Raab, 489 U.S. 656, 665, 109 S.Ct. 1384, 1390-91, 103 L.Ed.2d 685 (1989). "[W]here a Fourth Amendment intrusion serves special needs, beyond the normal need for law enforcement, it is necessary to balance the individual's privacy expectations against the Government's interests to determine whether it is impractical to require a warrant or some level of individualized suspicion in the particular context." Id. at 665-66, 109 S.Ct. at 1390-91. In this case, the compelling interest in protecting national security outweighs whatever minor intrusion may be occasioned by a polygraph interview. It is "obvious and unarguable" that there is no government interest as great as the security of the country. Haig, 453 U.S. at 293-94, 101 S.Ct. at 2774-75. Moreover, there can be no question that polygraphing is rationally related to the "compelling interest in national security." Chesna, 850 F.Supp. at 118. Accordingly, defendant's motion to dismiss Count III of plaintiff's complaint pursuant to FED.R.CIV.P. 12(b)(6) is granted.
E. COUNT IV: EQUAL PROTECTION CLAIM
In Count IV of her complaint, plaintiff argues that a limited exception from the polygraph requirement for "world class mathematicians" violates the equal protection component found to exist in the Fifth Amendment. See Bolling v. Sharpe, 347 U.S. 497, 499-500, 74 S.Ct. 693, 694-95, 98 L.Ed. 884 (1954). Under the relevant regulations, "[i]n extremely rare instances," agency heads "may approve one-time, limited access to SCI" for a period not to exceed 90 days, when such access "is deemed necessary to accomplish unique mission requirements." DCID No. 1/14, ¶ 9.b. at 5. Pursuant to this authority, NSA permits "[a] very limited number of consultants to IDA who are certified *824 by senior Agency officials as being World Class Mathematicians ... [to] be exempted from the polygraph requirement." NSA Memorandum Serial M5-151-91E ("NSA Mem.") at 1 (Aug. 2, 1991), annexed as Exh. A35 to Naper Dec. Plaintiff claims that this policy irrationally discriminates against less capable mathematicians, and has an indirect, discriminatory effect on women. Compl. ¶¶ 76-77.
Since there is no fundamental right to a security clearance, Chesna, 850 F.Supp. at 118, a classification distinguishing world-class mathematicians from their less distinguished peers "must be upheld against equal protection challenge if there is any reasonably conceivable state of facts that could provide a rational basis" for it. FCC v. Beach Communications, 508 U.S. 307, ___, 113 S.Ct. 2096, 2101, 124 L.Ed.2d 211 (1993). Under this standard, "a statute or regulation should not be overturned on equal protection grounds `unless the varying treatment of different groups or persons is so unrelated to the achievement of any combination of legitimate purposes that we can only conclude that the [government's] actions were irrational.'" Anderson, 845 F.2d at 1223 (quoting Vance v. Bradley, 440 U.S. 93, 97, 99 S.Ct. 939, 942-43, 59 L.Ed.2d 171 (1979)).
The purpose of the "world-class mathematician" exemption is to allow "a very limited number of individuals," who are recognized "as being among the highest echelon of internationally renowned mathematicians" and whose unique abilities are needed on a short-term consulting basis, to be "exempted from the NSA polygraph requirement to facilitate their recruitment." NSA Mem.Att. 2 at 1. In light of the recognized potential for "lost talent when suitable individuals refuse to participate in a polygraph examination," see Redefining Security, A Report to the Secretary of Defense and the Director of Central Intelligence, Joint Security Commission at 65 (Feb. 28, 1994), annexed as Exh. A13 to Naper Dec., it is hardly irrational to think that there may be rare and singular circumstances where the unique talents of an especially gifted cryptologist expert may be so important to the protection of national security and needed so desperately and immediately that the interest in procuring his or her services outweighs the increase in security risks occasioned by foregoing a polygraph on a one-time basis. Clearly, such an exemption "can arguably be said to result in a better-qualified group" of applicants for particularly important positions, Anderson, 845 F.2d at 1223, and therefore is consistent with equal protection.
Finally, plaintiff's claim that the "world-class mathematician" policy has an indirect discriminatory effect on women is also unpersuasive. It is well settled that a facially-neutral classification does not violate equal protection merely because "it may affect a greater proportion of one [group] than of another." Washington v. Davis, 426 U.S. 229, 242, 96 S.Ct. 2040, 2049, 48 L.Ed.2d 597 (1976). To state an equal protection claim, plaintiff must allege that the classification was selected "`because of,' not merely `in spite of,' its adverse effects upon an identifiable group." Personnel Admin. of Mass. v. Feeney, 442 U.S. 256, 279, 99 S.Ct. 2282, 2296, 60 L.Ed.2d 870 (1979); see Chesna, 850 F.Supp. at 117-18 (dismissing equal-protection challenge to security-clearance polygraph testing based on alleged disparate impact on blacks). In the present case, no such allegation appears in plaintiff's complaint. Accordingly, this count of the Complaint will also be dismissed.
F. STATE POLYGRAPH CLAIM
In Count V of her Complaint, plaintiff brings a pendant state law claim against defendants, alleging that the polygraph requirement she was asked to submit to violated N.J.S.A. 2C:40A-1. Compl. ¶¶ 84-86. State regulation in the area of national security is expressly preempted by Article I, § 8 and Article II, § 2 of the Constitution. Pennsylvania v. Nelson, 350 U.S. 497, 504-05, 76 S.Ct. 477, 481-82, 100 L.Ed. 640 (1956). Likewise, there can be no state regulation of a President's constitutionally granted powers to "classify and control access to information bearing on national security and to determine whether an individual is sufficiently trustworthy to occupy a position ... that will give that person access *825 to such information." Egan, 484 U.S. at 527, 108 S.Ct. at 824.
Moreover, state interference with national-security polygraphing is also preempted by federal statute. Although the Employee Polygraph Protection Act of 1988, 29 U.S.C. §§ 2001-2009, generally prohibits employers engaged in interstate commerce from requiring lie-detector tests, 29 U.S.C. § 2002(1), it expressly exempts "the administration, by the Federal government, in the performance of any intelligence or counterintelligence function, of any lie detector test to ... any employee of [an NSA] contractor," 29 U.S.C. § 2006(b)(2)(A)(iii), or "any individual assigned to a space where sensitive cryptographic information produced, processed, or stored for" NSA. 29 U.S.C. § 2006(b)(2)(A)(v). The Act further provides that it "shall not preempt any provision of any State or local law or of any negotiated collective bargaining agreement that prohibits lie detector tests or is more restrictive with respect to lie detector tests," "[e]xcept as provided in" 29 U.S.C. § 2006(a)-(c). 29 U.S.C. § 2009. Thus, both the Constitution and federal law expressly preempt states from prohibiting the use of polygraphs as part of a security-clearance background investigation. Therefore, this Court will grant federal defendants' motion to dismiss this count pursuant to FED.R.CIV.P. 12(b)(6).
G. STATE LAW DISCRIMINATION CLAIM
Finally, in Count VI of her complaint, plaintiff alleges that nonfederal defendants Goldschmidt and IDA/CCR did not assist her in securing an exemption or waiver of the polygraph examination, and that this failure to assist was because plaintiff is a female. Since this Court has granted defendants' motion to dismiss on the federal counts (Counts I through V), only the state law claim remains. Under the 1990 enactment of the supplemental jurisdiction statute, 28 U.S.C. § 1367, a federal district court may decline to exercise its supplemental jurisdiction over state law claims if all federal claims are dismissed. 28 U.S.C. § 1367(c)(3); Growth Horizons, Inc. v. Delaware County, Pa., 983 F.2d 1277, 1285 n. 14 (3d Cir.1993). In exercising its discretion, the district court should take into account principles of judicial economy, convenience, and fairness to the litigants. Id. at 1984 (citing United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966)). As one legal scholar has observed:
Whether a dismissal of the touchstone claim should bring about a dismissal ... of the dependent claim for want of supplemental jurisdiction should hinge on the moment within the litigation when the dismissal of the touchstone claim takes place and on the other surrounding circumstances.... [I]f the dismissal of the main claim occurs late in the action, after there has indeed been substantial expenditure in time, effort and money in preparing the dependent claims, knocking them down with a belated rejection of supplemental jurisdiction may not be fair. Nor is it by any means necessary.
David D. Siegel, Practice Commentary, appended to 28 U.S.C.A. § 1367 (cited in Growth Horizons, 983 F.2d at 1284).
In this case, the Court has dismissed every claim over which it had original subject matter jurisdiction, and sees no reason to exercise supplemental jurisdiction over a claim arising under state law. This case is at an early stage of litigation, and there is no concern that dismissal at this juncture would be unfair. Moreover, plaintiff's state law claim for discrimination has little, if anything, in common with her federal claims. Accordingly, Count VI of the Complaint shall be dismissed pursuant to 28 U.S.C. § 1367.
III. CONCLUSION
For the reasons set forth in this Memorandum Opinion, this Court will grant federal defendants' motion to dismiss Counts I through V. Further, this Court will deny nonfederal defendants' motion for summary judgment and, instead, will dismiss Count VI of the Complaint pursuant to 28 U.S.C. § 1367.
NOTES
[1] In her opposition to Defendants' Motions to Dismiss for Failure to State a Claim ("Plaintiff's Brief") plaintiff abandons her Bivens-style claims, id. at 45, and recasts her pendent, state-law claim as one alleging wrongful termination of some new kind of federal employment. Id. at 14-20. She therefore no longer asserts any conceivable claim against federal defendants in their individual capacities.
[2] The writ of mandamus has been abolished. FED.R.CIV.P. 81(b). This Court will assume that, instead, plaintiff is seeking an injunction in the nature of mandamus. See CHARLES ALAN WRIGHT & ARTHUR R. MILLER, 12 FEDERAL PRACTICE AND PROCEDURE § 3134, at 202-03 (1973).
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530 F.2d 625
10 ERC 1741
BANKERS LIFE & CASUALTY CO., Plaintiff-Appellant,v.Howard H. CALLAWAY, Secretary of the Army, et al.,Defendants-Appellees.
No. 74--3571.
United States Court of Appeals,Fifth Circuit.
April 21, 1976.Rehearing and Rehearing En BancDenied Aug. 4, 1976.
Ronald S. Sales, Palm Beach, Fla., William T. Kirby, Chicago, Ill., Martin J. Gaynes, Washington, D.C., for plaintiff-appellant.
Robert W. Rust, U.S. Atty., Miami, Fla., Patrick A. Mulloy, Dept. of Justice, Wallace H. Johnson, Asst. Atty. Gen., George R. Hyde, Edward J. Shawaker, Attys., Washington, D.C., for defendants-appellees.
Appeal from the United States District Court for the Southern District of Florida.
Before GOLDBERG and AINSWORTH, Circuit Judges, and NICHOLS,* Associate Judge.
GOLDBERG, Circuit Judge:
1
Nineteen years ago, Bankers Life and Casualty Company (Bankers) first acquired a dredge and fill permit from the Army Corps of Engineers, issued pursuant to the Rivers and Harbors Act, 33 U.S.C. § 403. Today Bankers stands before this Court for the second time in five years, struggling to extricate itself from the morass of bureaucratic inaction. Relying on section 9(b) of the Administrative Procedure Act (APA), 5 U.S.C. § 558(c), it asks for a declaration that its permit rights under its 1960 permit have never expired and for an injunction ordering the Corps to hold a hearing on its renewal application. The district court, in an order bare of reasons, dismissed the complaint in response to the Government's invocation of the sovereign immunity and want of ripeness defenses. Although we find that neither of these grounds warranted dismissal, we think the trial court's disposition was correct, for under our reading of section 9(b) of the APA, Bankers cannot prevail on the merits.
I. FACTS
2
At the risk of miring the reader in a bog of detail, we have chosen to discuss the facts, which are undisputed for the most part, fairly extensively, in order to place the complex administrative law questions in context. We begin by reproducing the account of the background of this litigation that appeared in our first opinion:1
3
The history of this effort by Bankers to turn part of the waters of Lake Worth into land may be summarized as follows. On April 17, 1957, Bankers paid the Florida State Board of Trustees of the Internal Improvement Trust Fund of Florida (the state agency which at that time could appropriately deal with the matter) the sum of $26,000 for the use of 2,500,000 cubic yards of fill. Much of the fill, approximately 1,116,170 cubic yards, was consumed in the filling of other lands by Bankers and is not part of the subject matter of this action.
4
On February 15, 1957, Bankers applied to the Corps of Emgineers for a permit to fill the property, and this was granted on or about April 29, 1957. There was nothing in the Federal Statutes at the time that required the Corps of Engineers to consider conservation, and there is nothing in the record to indicate that any study of possible ecological effects was made at that time. The permit which was issued carried the following statement on its face.
5
'That this instrument does not give any property rights either in real estate or material, or any exclusive privileges.'
It also stated that:
6
'If the structure or work herein authorized is not completed on or before the 31st day of December, 1960, this permit if not previously revoked or specifically extended, shall cease and be null and void.'
7
At the request of Bankers, the Corps, in December, 1960, extended the permit to December 31, 1963. The extension also contained the statement that if work authorized by the permit was not completed during the period of extension the permit would become null and void if not previously revoked or specifically extended. On December 16, 1963, the Trustees wrote the Corps a letter requesting that final consideration of Bankers' application for another permit extension be deferred pending Bankers' receipt of a local fill permit in accordance with Florida Statute Section 253.--124, F.S.A. The Corps agreed to defer Bankers' permit extension and on December 27, 1963, informed Bankers that it would not be possible to grant an immediate extension at that time because of Corps policy when there was local objection.
8
For several years no further action was taken as between Bankers and the Corps of Engineers. During this time various attempted settlements of disputes were negotiated between Bankers, the State of Florida and the Village of North Palm Beach concerning the title of the submerged lands sought to be filled. On December 6, 1968 and March 17, 1969, Bankers corresponded with the Village in an effort to obtain a local fill permit. In June, 1969, the Village informed Bankers that a permit would be granted; however, shortly thereafter on July 10, 1969, the Village undertook to rescind this action.
9
By letter dated July 10, 1969, the same date as the meeting of the Village Council rescinding the action of June, Bankers addressed a letter to the Corps of Engineers stating that a permit had been received by letter from the Village of North Palm Beach and stating that 'in as much as there were no other objections to the extension of the permit, as stated in your letter of December 27, 1963, to us, I trust this removes the final obstacle and you will grant the extension requested promptly.'
10
The Corps of Engineers, obviously not desiring to resolve any underlying disputes as to whether the requirements referred to in the original request to the Corps from the Trustees had all been met, responded by letter of July 18, stating 'it will still be necessary, however, that the written approval of the Trustees of the Internal Improvement Fund be furnished before further action can be taken on your application.'
11
The status of the matter thus was that the state agency had requested that the application be held up in December, 1963. The Corps of Engineers had held it up, indicating that once the matters referred to in the state's letter were cleared it would be the purpose of the Corps of Engineers to proceed with an issuance of the extension. However, it was not until more than five years later that Bankers undertook to inform the Corps that it considered the conditions previously existing to have now been satisfied. The Corps of Engineers, quite appropriately, we think, deferred its action until it obtained a 'go ahead' from the Trustees, the state body which had originally requested the deferment of the issuing of the permit.
12
Bankers Life & Casualty Co. v. Village of North Palm Beach, 5 Cir. 1972, 469 F.2d 994, cert. denied, 1973, 411 U.S. 916, 93 S.Ct. 1543, 36 L.Ed.2d 307 (hereinafter referred to as Bankers I).
13
Thus, to recapitulate, as of December 31, 1963, Bankers was told that it needed two permits in order to conduct its fill operations legally: the Rivers and Harbors Act permit, which it had already held for over six years, had to be renewed, and a local permit from the Village of North Palm Beach had to be secured. Since the Corps refused to grant an extension of the Rivers and Harbors Act permit until the Trustees officially withdrew their objection, and since Bankers took the position that all legal obstacles had been removed, the parties had reached an impasse which led to Bankers' first lawsuit.
II. Bankers I
14
Bankers' theory in its first effort to assure that it held a valid federal permit proceeded as follows: (1) But for the trustees' intervention, the Corps would have extended the permit in December 1963; (2) the Trustees, as a matter of Florida law, had no power to require a local permit under Florida Statutes § 253.124; and therefore, (3) the original intervention was without effect, and the Corps should be compelled to renew the 1960 permit or issue a new permit.
15
The district court agreed with this reasoning, and entered two significant orders: it directed the Corps to grant the Rivers and Harbors Act permit without reference to local permits or ecology; and it decreed that Bankers had the right to fill without a section 253.124 permit, and that upon completion of the filling project, title in the land should be quieted in Bankers.
16
This Court reversed on both points. First, it held that even if the Trustees had been wrong as a matter of state law, it was still error to require the Corps to issue its permit. Primarily, this was because the grant or denial of a permit is not a purely ministerial act. Over the time period since the Trustees first voiced their objection, the Corps had acquired new obligations to consider various environmental factors, all of which applied to Bankers. Rather than filing a formal application with the Corps, Bankers chose to file a lawsuit. Rejecting this approach, the Court held that '(t)he matter was not ripe for court action because the official of the government, who was empowered to act, had not been given an opportunity to perform the duties imposed on him by the federal statutes.' 469 F.2d at 999.
17
With regard to the state law rulings the district court had agreed with the two premises offered by Bankers: that the Trustees' request was the sole impediment to renewal, and that the Trustees had no power to block Bankers' permit. It based the latter holding on its determination that Florida Statute section 253.124, which was added by Laws of Florida, Act of 1957, Ch. 57--362, § 4, did not apply to Bankers by virtue of the grandfather clause contained in section 11 of the Act of 1957.
18
At this juncture, it becomes important to understand some of the intricacies of Florida law relating to riparian owners' rights in submerged lands. As described in Bankers I, at 469 F.2d 997 n. 3, the applicable law prior to the Act of 1957 was the Butler Act of 1921. Under the Butler Act, riparian owners could by the act of filling submerged lands up to a certain line acquire actual title to the new land. The Act of 1957 abolished this procedure and declared that title to the submerged lands was in the Board of Trustees of the Internal Improvement Trust Fund. See Florida Statutes § 253.12 (1975). Before the Trustees can convey any interest in the submerged land, the applicant must secure a fill permit. See id. § 253.124. It was this permit to which the Trustees referred in their letter of December 16, 1963.
19
Bankers' assertion that the Trustees were not authorized to require a section 253.124 permit relied on the exemption contained in Laws of Florida, Act of 1957, ch. 57--362, § 11, which provided that the provisions of Chapter 57--362 would not 'affect or apply to the construction of islands or the extension or addition to existing lands . . . which was commenced or application for permit to fill which was filed with the United States corps of engineers prior to (June 11, 1957) . . ..' Bankers' original application for a Federal permit had been filed on February 15, 1957, and the permit had been granted on April 29, 1957--both dates well before that mentioned in the statute. Two critical points, however, were in dispute--one factual and one legal. The factual dispute concerned whether Bankers had actually started filling the land prior to June 11, 1957;2 the legal dispute was whether the exemption ceased to be available when the 1957 permit expired in 1960, as a matter of Florida law. The district court's decree quieting title in Bankers resolved the exemption question in Bankers' favor. This Court found it unnecessary to reach the issue because of the factual dispute. Thus, on remand the district court was directed to dismiss the federal defendants and to conduct further proceedings on the title question--possibly to certify that issue to the Florida courts.
III. Bankers II
20
Taking this Court's advice, Bankers turned to the state courts for adjudication of the question whether it was entitled to the benefits of the grandfather clause in the Act of 1957.3 On March 8, 1973, Bankers filed its complaint in the instant case.4 Invoking jurisdiction under the Administrative Procedure Act, 5 U.S.C. § 701 et seq., Bankers made the following allegations: (1) it was arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law for the Corps to defer action on the renewal permit until a local permit was secured (5 U.S.C. § 706(2)(A)); (2) the Corps, in contravention to 5 U.S.C. § 555(b), has not proceeded to conclude the matter presented to it; (3) the Secretary of the Army, the Chief of Engineers, and the District Engineer have unlawfully withheld or unreasonably delayed agency action (5 U.S.C. § 706(1)); (4) Bankers' rights under the original permit have never expired (5 U.S.C. § 558(c)); and (5) because a refusal to renew is the equivalent of 'withdrawal, suspension, revocation, or annulment,' Bankers is entitled to a hearing pursuant to 5 U.S.C. § 558(c). By way of relief, Bankers asked for declarations that there has been unreasonable delay and that the permit rights never expired, and for an order requiring the Corps to hold a hearing on its application for renewal.
21
Before discussing the district court's dismissal of this complaint, we think it appropriate to stress that this is not the same lawsuit as Bankers I, though some of the allegations overlap. Points (1) through (3), all attacking the Corps' delay in processing the renewal application, do seem to be so close to the first stage as to be governed by it. To the extent that these paragraphs ask only that the Corps rule now on the application for renewal one way or another, our discussion of Bankers' present right to a hearing will be dispositive.
22
Points (4) and (5) raise issues of statutory interpretation that were not considered in Bankers I. Both rely on section 9(b) of the APA, 5 U.S.C. § 558(c), which provides as follows in pertinent part:
23
Except in cases of willfulness or those in which public health, interest, or safety requires otherwise, the withdrawal, suspension, revocation, or annulment of a license is lawful only if, before the institution of agency proceedings therefor, the licensee has been given--
24
(1) notice by the agency in writing of the facts or conduct which may warrant the action; and
25
(2) opportunity to demonstrate or achieve compliance with all lawful requirements.
26
Wneh the licensee has made timely and sufficient application for a renewal or a new license in accordance with agency rules, a license with reference to an activity of a continuing nature does not expire until the application has been finally determined by the agency.
27
Point (4), which asserts that Bankers' rights under its 1960 permit are still in effect, relies on the last sentence of the quoted portion. Far from being a request to order the Corps to act on the application, point (4) merely raises the question whether this portion of the APA conferred interim rights on Bankers pending the Corps' decision. Point (5), which asserts a right to a hearing, relies on section 558(c)(2). Again, Bankers is not asking the Court to order the Corps to rule one way or another; it is simply maintaining that the APA gives it a right to a hearing at this time since its permit was not renewed. Both of these issues, therefore, and narrow questions of statutory interpretation. They are not disguised reruns of the first case.
28
The Corps moved to dismiss under Rule 12(b) of the Federal Rules of Civil Procedure on grounds of lack of jurisdiction due to the sovereign immunity bar and failure to state a controversy that is ripe for judicial decision. After a flurry of memoranda had exchanged hands, the court granted the motion, in an order hardly to be faulted for prolixity.5 We assume that the court's granting of defendants' motion indicated its agreement with one or both of the points raised in the motion to dismiss and structure our discussion accordingly.
A. Sovereign Immunity
29
We need not pause long over the sovereign immunity defense--indeed, the Corps has not even bothered to pursue this argument on appeal. Since Estrada v. Ahrens, 5 Cir. 1961, 296 F.2d 690, the law of this Circuit has been that 'the (APA) . . . makes a clear waiver of sovereign immunity in actions to which it applies.' 296 F.2d at 698. See United States v. Joseph G. Moretti, Inc., 5 Cir. 1973, 478 F.2d 418, 432. Cf. Warner v. Cox, 5 Cir. 1974, 487 F.2d 1301, 1305 (APA does not constitute waiver of sovereign immunity in suit seeking money damages against United States.) Thus, the real question is whether the review provisions of the APA apply to the type of agency action involved here, which brings us to the second ground of the motion to dismiss.
B. Ripeness
30
Our discussion of the ripeness vel non of the two questions we have indicated were before the trial court must begin with Abbott Laboratories v. Gardner, 1967, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681. Abbott Labs established a method for analyzing cases in which the timeliness of judicial review poses a problem. First, the court must determine whether Congress in the governing statute intended to preclude pre-enforcement review of the agency action at issue. In this connection, it is essential to give weight to the general presumption favoring reviewability. See Dunlop v. Bachowski, 1975, 421 U.S. 560, 566, 568, 95 S.Ct. 1851, 1857--58, 44 L.Ed.2d 377, 386, 387; Chicago v. United States, 1969, 396 U.S. 162, 90 S.Ct. 309, 24 L.Ed.2d 340; Citizens Comm. for the Hudson Valley v. Volpe, 2 Cir., 425 F.2d 97, cert. denied, 1970, 400 U.S. 949, 91 S.Ct. 237, 27 L.Ed.2d 256; Textile and Apparel Group v. FTC, 133 U.S.App.D.C. 353, 410 F.2d 1052, 1054, cert. denied, 1969, 396 U.S. 910, 90 S.Ct. 223, 24 L.Ed.2d 185. If the statute does not preclude review, the court must consider whether the controversy is 'ripe' for judicial resolution. This determination contains two aspects: the fitness of the issues for judicial decision, and the hardship to the parties of withholding court consideration. Fitness of the issues for judicial decision also depends on two factors: whether the issue is a purely legal one and whether the agency action challenged is 'final,' taking a flexible view of that term of art. Hardship to the parties contemplates an immediate and direct impact; a certain expectancy of compliance with the agency's action must be present. The dilemma of complying with extremely onerous regulations or risking criminal penalties for noncompliance will often be a strong factor in favor of immediate review. E.g., Abbott Laboratories v. Gardner, supra, 387 U.S. at 152--53, 87 S.Ct. at 1517, 18 L.Ed.2d at 693, 694; Frozen Food Express v. United States, 1956, 351 U.S. 40, 76 S.Ct. 569, 100 L.Ed. 730.
31
1. Status of the 1960 Rivers and Harbors Act permit. Applying these principles to the question of the present vitality of the 1960 permit, we find that the issue is ripe for decision. Since the dredge and fill permit underlying this controversy was issued pursuant to the Rivers and Harbors Act of 1899, 33 U.S.C. § 401 et seq., our first question is whether Congress intended to preclude judicial review under that statute. The Second Circuit, noting that the statute itself was silent both as to availability of judicial review and as to manner of appeal, concluded that review was available under the APA. Citizens Comm. for the Hudson Valley v. Volpe, supra, 425 F.2d 97. Finding no reason to disagree with that conclusion, we hold that agency action under that Act is reviewable.
32
Whether the controversy is ripe for resolution depends, in part, on what 'agency action' is at issue. Section 551(13) of the APA defines 'agency action' to be 'the whole or a part of an agency rule, order, license, sanction, relief, or the equivalent or denial thereof, or failure to act.' Section 551(9) defines 'licensing' to include 'agency process respecting the grant, renewal, denial, revocation, suspension, annulment, withdrawal, limitation, amendment, modification, or conditioning of a license.' These definitions are made applicable to the judicial review chapter of the statute through section 701(b) (2), 5 U.S.C. § 701(b)(2). Finally, section 704 provides that '(a)gency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review.'
33
We think it fair to say that the Corps of Engineers has taken the firm position that Bankers' rights under its 1960 permit were not extended by virtue of 5 U.S.C. § 558(c).6 This position--that the permit rights expired at the end of 1963--can be characterized as 'agency process respecting the . . . renewal . . . of a license,' since 'agency action' can encompass the denial of the requested action as well as the grant thereof.7
34
Review of this 'agency action' presents a question that is purely legal, i.e. does section 558(c) prevent the expiration of rights under a Rivers and Harbors Act permit in a situation where local authorities have indicated that a local permit is necessary. Furthermore, the requirement of 'final' agency action is satisfied here. The action is 'final in the sense that it is an at least firm (and perhaps binding) adoption of a position by the agency with regard to a course of conduct on the part of a member of the regulated industry which does not require further administrative action other than the possible imposition of sanctions.' Northeast Airlines, Inc. v. CAB, 1 Cir. 1965, 345 F.2d 662, 664. Were Bankers to test the correctness of its position, it would expose itself to possible criminal penalties under section 12 of the Rivers and Harbors Act, 33 U.S.C. § 406. Judicial review at this time would not 'disrupt the orderly process of (agency) adjudication,' and it cannot be gainsaid that 'rights or obligations have been determined' by the Corps' position. Port of Boston Marine Terminal Ass'n v. Rederiaktiebolaget Trans-Atlantic, 1970, 400 U.S. 62, 71, 91 S.Ct. 203, 209, 27 L.Ed.2d 203, 210.
35
The hardship to the parties of withholding consideration would also be great. If Bankers is right, then it would be able to commence filling operations immediately. Because of the criminal sanctions in the Act, it is highly unlikely that Bankers will choose to test its position by action. If Bankers is wrong, then at least it will learn what the true status of its permit is and what steps it must take to secure a valid permit. Viewing all these factors realistically, we find that the hardship factor of the Abbott Labs test is satisfied.
36
Thus, having found hardship, final agency action, a purely legal question, and no statutory bar to judicial review, we hold that the question whether the 1960 permit rights were extended by force of 5 U.S.C. § 558(c) was and is ripe for judicial resolution.
37
2. Entitlement to an administrative hearing on the application for renewal. Like the permit status issue, this point relates to the Rivers and Harbors Act. It also involves the regulations pertaining to permit applications before the Army Corps of Engineers, 33 CFR § 209.120 (1975). Since nothing precludes judicial review of these regulations generally, we move directly to the question of ripeness.
38
The Corps' position on this point is that Bankers' application for renewal is incomplete, and therefore that no hearing is required now. However the legal basis for this conclusion is characterized--want of ripeness, or statutory construction of 5 U.S.C. § 558(c)(2)--it is clear that the Corps is refusing to hold a hearing now. Thus, again we find in the Corps' unequivocal position the sort of 'agency action' that could be reviewed by a court.
39
The questions raised by Bankers are again purely legal ones: what does section 558(c)(2) mean, and does it apply to refusals to renew? If this is the kind of situation in which a party is entitled to a hearing before the agency, this Court could order such a hearing to be held.8 For the same reasons as we found the requisite finality for the status issue, we find here that the agency's firm position on Bankers' lack of a right to a hearing presents final agency action.9 Finally, the hardship to the parties of withholding consideration would be great. Bankers has no other forum to which it can turn to vindicate its asserted right. We therefore find that this claim is also ripe for judicial resolution.
40
Although normally a conclusion that the lower court erred in dismissing a case on ripeness grounds would require us to reverse and remand for further proceedings on the merits, in the unique circumstances of this case we think it best to decide the issues at this time. See Independent Broker-Dealers' Trade Ass'n v. SEC, 142 U.S.App.D.C. 384, 442 F.2d 132, 135, cert. denied, 1971, 404 U.S. 828, 92 S.Ct. 63, 30 L.Ed.2d 57; Textile and Apparel Group v. FTC, supra, 410 F.2d at 1053. With the important facts undisputed, and the issue purely one of statutory interpretation, little could be gained by further development of the record in the district court. Conversely, resolution of the federal issues might be of some aid in the adjudication of the state title questions.10 Thus, we reject the parties' invitation to abstain from deciding the merits of the controversy and turn to the questions presented.
C. The Merits
41
1. Status of the 1960 Rivers and Harbors Act permit. Bankers relies heavily on the language of section 558(c) providing that when the licensee has made a timely and sufficient application for renewal, a license with reference to an activity of a continuing nature does not expire until the agency has finally ruled on the application. Bankers also points to a letter which it received from the District Engineer, in which the Corps said '(t)he lapse in the permit will have no effect insofar as the Corps of Engineers is concerned,' and to the fact that under the Corps regulations then in effect the District Engineer had no authority to refuse or disapprove an application. See 33 CFR § 209.120(c) (1968). On the other hand, the permit itself clearly stated that 'this permit if not previously revoked or specifically extended, shall cease and be null and void.' (Emphasis added). In addition to relying on this language, the Corps also argues that section 558(c) does not apply unless the application is sufficient. At the time the renewal application was filed, it was insufficient because it lacked the required local consents. As time passed, it became more incomplete with the addition of new laws requiring the Corps to take ecological considerations into account for dredge and fill permits.11
42
It might be possible to dispose of this point by relying solely on the language of the permit. Clearly, the permit was never specifically extended; thus, by its own terms, it became null and void upon the date of expiration. However, we need stand or fall on this ground, for we believe that section 558(c) was not designed to cover this kind of situation.
43
First, we note that the Corps could properly take local opposition to a fill project into account. We need not decide whether local objections could always operate as a veto over Corps projects, no matter how insubstantial or frivolous, because that case is not before us.12 Rather, we have the body in Florida with ultimate responsibility over the use of public lands, the Trustees of the Internal Improvement Trust Fund, informing the Corps that the law of Florida requires a local permit for fill work. In almost all the recent environmental legislation, Congress has indicated its desire for federal agencies to cooperate closely with state authorities. See, e.g., Federal Water Pollution Control Act Amendments of 1972, 33 U.S.C. § 1251(b), (e); National Environmental Policy Act, 42 U.S.C. §§ 4331(a), 4332(2)(C); Clean Air Act Amendments of 1970, 42 U.S.C. § 1857a(a). Under all the circumstances, we believe that the Corps' policy of deference to local objections was justified in the case now before us. Thus, Bankers' application for permit renewal contained one deficiency at the time the Corps had to decide whether to extend the permit.
44
Judge Friendly described the purpose and effect of the section of the APA at issue in the following manner:
45
The final sentence (of § 558(c)) provide(s) that if the licensee has timely sought renewal, the valuable rights conferred by a license for a limited term shall not be lost simply because the agency has not managed to decide the application before expiration of the existing license. As Mr. Justice Burton said, dissenting in Pan-Atlantic Steamship Corp. v. Atlantic Coast Line R.R., 353 U.S. 436, 444--445, 77 S.Ct. 999, 1005, 1 L.Ed.2d 963 (, 969) (1957), in a passage with which the majority did not express disagreement:
46
The policy behind the third sentence of § 9(b) is that of protecting those persons who already have regularly issued licenses from the serious hardships occasioned both to them and to the public by expiration of a license before the agency finds time to pass upon its renewal.
47
See also Attorney General's Manual on the Administrative Procedure Act 91--92 (1947).
48
County of Sullivan v. Civil Aeronautics Board, 2 Cir. 1971, 436 F.2d 1096, 1099. This reasoning suggests that the kind of case that the statute was meant to cover was that in which time exigencies within the agency prevent it from passing on a ranewal application, where an activity of a continuing nature such as radio broadcasting or shipping services is involved.
49
By contrast, in the case before us time exigencies played no part in the Corps' refusal to renew. Instead, a substantive problem arose with the application, which had to be resolved before the Corps could grant a new permit.13 The Corps' conscious decision not to renew activated the expiration provisions of the permit. Thus, after the period specified in the 1960 permit expired, all rights under the permit expired with it.
50
2. Entitlement to an administrative hearing on the application for renewal.--Bankers' second assertion is that section 558(c)(2) of the APA entitles it to a hearing before the Corps at which it is given an opportunity to demonstrate or achieve compliance with the requirements for a dredge and fill permit application. The statute provides that 'the withdrawal, suspension, revocation, or annulment' of a license is lawful only after notice and a hearing. It appears to contemplate use of the notice and hearing procedure only when some sanction is to be imposed on the licensee. Cf. Blackwell College of Business v. Attorney General, 1971, 147 U.S.App.D.C. 85, 454 F.2d 928, 933--34; H. P. Lambert Co. v. Secretary of Treasury, 1 Cir. 1965, 354 F.2d 819, 821 n.2. The alternative construction of the statute, urged by Bankers, would provide that the 'withdrawal' of a permit or license includes a failure to renew an existing license.
51
For several reasons, we believe that the former reading of the statute is truer to its language and more desirable as a policy matter. A paraphrase of the provision taken as a whole might read 'before an agency can institute proceedings to withdraw, revoke, etc., an existing license, it must provide the licensee with notice in writing of the offending conduct and a hearing at which the licensee can refute the charges.' Read this way, it is clear that Bankers is not entitled to a hearing under this section of the Act. As a policy matter, this is a desirable result. Assuming that an applicant wanted to challenge some of the requirements for an application contained in the agency's regulations, the question arises, at what point would the application be complete enough to deserve a hearing? If the party wanted to try to enjoin the agency from enforcing a specific regulation that it asserted was beyond the agency's power to promulgate, then it would be free to bring a suit for pre-enforcement review or injunction in the district court.
52
Challenges to application requirements raise a unique problem in administrative law, since the agency could refuse to consider the challenge until the regulations were complied with and the case moot. However, this dilemma does not convert section 558(c) into a statute giving the right to a hearing on application regulations. Despite Bankers' lamentations that it does not know what the Corps wants, we think that the application requirements set out in 33 CFR § 209.120(h) (1975) are reasonably clear. Similarly, the state authorities would probably be happy to tell Bankers what local permits are required. As long as the possibility of a pre-enforcement challenge to specific objectionable portions of the regulations exists, we cannot say that Bankers will forever be denied its day in court.14 As the case now stands, Bankers has a choice between transiting its way through the terrain of the Corps' application regulations or attempting to challenge them.
IV. Conclusion
53
This is a case of much suspension, and little animation. Without throwing any mud on any litigant's face, we note that this case has had more backing than filling. Many of Bankers' problems are swamped by history, but Job-like sufferings and patience cannot change the law as we find it in the Administrative Procedure Act, the federal environmental legislation, and the Florida laws pertaining to submerged lands. We cannot carve exceptions from the APA for Bankers because the history of its litigation is tortuous and tortured.
54
In the interest of efficient judicial administration (if, indeed, one can speak of efficiency with a straight face with reference to a case now nineteen years old), we have deemed it best to rule on the merits of Bankers' claims under the Administrative Procedure Act. If Bankers' earnest protestations at oral argument that it desired only to be enlightened as to what it must do in order to have the right to fill its land are given credence, then our disposition should satisfy all concerned. Though the district court was mistaken in its conclusion that the case was unripe, our consideration of the fully matured issues has led us to reject Bankers' claims. Since our affirmance of the district court's order is based on our opinion of the merits we note that the dismissal should be one with prejudice. Now that the administrative path has been cleared of underbrush, both parties should proceed to discharge their respective responsibilities for achieving a solution without sloth and delay. Let not any further glacial inertia mark this case as a relic of the Pleistocene epoch.
55
AFFIRMED.
*
Of the U.S. Court of Claims, sitting by designation
1
Bankers Life & Casualty Co. v. Village of North Palm Beach, 5 Cir. 1972, 469 F.2d 994, cert. denied, 1973, 411 U.S. 916, 93 S.Ct. 1543, 36 L.Ed.2d 307
2
In this Court's first opinion, a discrepancy between the parties' stipulation and the district court's findings of fact was noted on this point. This Court therefore found the district court's finding clearly erroneous
3
Bankers instituted a suit for a declaratory judgment in the Florida Circuit Court of the Second Judicial Circuit, in and for Leon County, Florida. On January 8, 1975, that court issued its judgment declaring that Bankers was entitled to fill the bottom lands without first securing a permit from the Trustees in accordance with section 123.124. The Trustees filed their notice of appeal from that decision to the District Court of Appeal of Florida on February 24, 1975. To date, that court has not rendered a decision, although at oral argument counsel informed us that the case was argued on October 8, 1975, before the appellate court. Whichever way that court decides, however, the unsuccessful party of course has the option of appealing to the Florida Supreme Court
4
The complaint was originally filed with the United States District Court for the District of Columbia. On defendant's motion for a change of venue pursuant to 28 U.S.C. § 1404(a), the case was transferred to the Southern District of Florida
5
The order read:
'THIS CAUSE having come before the Court in motion to dismiss by defendant Robert F. Foehlke (sic), Secretary of the Army, et al., and the Court having considered the record in this cause, and being otherwise duly advised, it is ORDERED AND ADJUDGED that said motion is granted.' (Italics denote typed words; remainder appeared on a printed form.) We note that the district court was technically justified in adopting this method of disposition, since Rule 52 provides that '(f)indings of fact and conclusions of law are unnecessary on decisions of motions under Rule(s) 12 . . ..'
6
For example, in the letter written by the Corps to Bankers on December 27, 1963, the Chief of Operations referred unequivocally to the 'lapse in the permit.' Similarly, in the present lawsuit the Corps attached to its Memorandum in Support of Defendant's Motion to Dismiss a letter from the District Engineer to Bankers which clearly demonstrated the Corps' belief that Bankers has no permit rights currently. The letter also questioned the present sufficiency of the application for renewal. See part III. C.I., infra
7
Cf. City of Chicago v. United States, 1969, 396 U.S. 162, 90 S.Ct. 309, 24 L.Ed.2d 340 (no distinction between 'negative' and 'affirmative' orders); Environmental Defense Fund, Inc. v. Hardin, 1970, 138 U.S.App.D.C. 381, 428 F.2d 1093 (failure to act is equivalent of denial of request)
8
Ordering a hearing is, of course, quite different from ordering a permit to be issued, since ordering a hearing does not tell the agency personnel how to exercise their discretion
9
Bankers seems to be arguing that it should have a hearing at which the Corps tells it what to include in the application for renewal. This position assumes that the Corps might change the requirements from those printed at 33 CFR § 209.120 (1975), in response to Bankers' legal arguments. In our opinion, the record clearly shows that this is a futile hope
10
The pendency of the state litigation on the land title question (see note 3, supra) does not render these claims unripe. The claim about the non-expiration of federal permit rights is a pure question of federal law. It is our view that the status of the permit had to be determined as of the time the Trustees entered their objection to renewal. We note that this objection was based on an honest view of the applicable Florida law, which this Court has already held the Trustees could reasonably have adopted. Bankers I, 469 F.2d at 1001. Whether or not the Trustees' position is ultimately upheld thus will not affect the resolution of the question before us. See note 12, infra, and accompanying text
Likewise, Bankers' right to a hearing does not depend on the outcome of the state litigation. As we understand the argument, Bankers asserts that it is entitled to a hearing before the Corps at which it can demonstrate that it has complied with all lawful requirements for an application and can attack those requirements that it considers unlawful. Its argument about the Trustees' power to block the federal permit is only one of a number of challenges to the application regulations. Thus, if Bankers wins in the state courts, it would still want to present to the Corps questions such as which sections of the Federal Water Pollution Control Act apply to it (33 U.S.C. § 1251 et seq.). If the Trustees win in the state courts, Bankers would simply add its challenge to the list of questions for the Corps to adjudicate.
11
Our first opinion in this case held that the more stringent requirements of the present apply to Bankers. See 469 F.2d at 998. The strong national commitment to improvement of the environment also argues strongly for application of new laws such as the National Environmental Policy Act, 42 U.S.C. § 4321 et seq., and the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., wherever possible
12
In order to avoid the defect of unlawful delegation to the state authorities, it might be necessary to require the Corps independently to evaluate the merits of the local objection. However, since the objection of the Trustees here was clearly a substantial one, we need not decide the extent of any such duty in this case
13
A possible alternative ground for our holding is that filling land is not an activity of a continuing nature, but is instead a project that will end as soon as all the land is filled in. Radio broadcasting, in contrast, could conceivably go on indefinitely. Since section 558(c) applies only to activities of a continuing nature, it would not extend Bankers' rights under the fill permit
14
We certainly cannot say that all of Bankers' points are frivolous in this regard. For example, the Corps requires certifications under section 401 of the Federal Water Pollution Control Act, 33 U.S.C. § 1341, for a dredge or fill permit. 33 CFR § 209.120(h)(2)(ii) (1975). Bankers contends that this regulation goes beyond the statutory authorization, since section 404 of the Act deals with dredge and fill permits, and it contains no certification requirements. See 33 U.S.C. § 1344. This raises a serious question about the scope of the regulation which might well be justiciable in a proper court proceeding. We see no need, though, to require the Corps to pass on this matter again, under some sort of primary jurisdiction theory. The choice is up to Bankers to comply with the regulations or to try to challenge them
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IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
FILED
June 18, 1999
Cecil W. Crowson
THOMAS OWENS, )
Appellate Court Clerk
)
Plaintiff/Counter-Defendant ) Lawrence Chancery No. 7603-95
)
v. )
) Appeal No. 01A01-9709-CH-00471
ANGELIA OWENS, )
)
Defendant/Counter-Plaintiff/ )
Appellee, )
)
v. )
)
JAMES R. OWENS and FERN OWENS, )
)
Defendants/Appellants. )
APPEAL FROM THE CHANCERY COURT OF LAWRENCE COUNTY
AT LAWRENCEBURG, TENNESSEE
THE HONORABLE WILLIAM B. CAIN, CHANCELLOR
For the Defendant/Counter-Plaintiff/Appellee For the Defendants/Appellants:
David L. Allen J. Daniel Freemon
Lawrenceburg, Tennessee Lawrenceburg, Tennessee
AFFIRMED
HOLLY KIRBY LILLARD, J.
CONCUR:
W. FRANK CRAWFORD, P.J., W.S.
ALAN E. HIGHERS, J.
OPINION
This is a divorce case involving the division of marital property. During their marriage, the
husband and wife built a house on property owned by the husband’s parents. The trial court granted
a lien against the property in favor of the wife for half the value of the marital home. The husband’s
parents appeal. We affirm.
Thomas Owens (“Husband”) and Angelia Owens (“Wife”) were married in May, 1986.
There were two children born to the marriage. In 1988, Husband and Wife constructed a house
located on property owned by Husband’s parents, James and Fern Owens (“Mr. and Mrs. Owens”).
On September 21, 1995, Husband filed a complaint for divorce alleging inappropriate marital
conduct or, in the alternative, irreconcilable differences. Wife answered the complaint and filed a
counter-complaint for divorce alleging identical grounds. Subsequently, Wife filed an amended
counter-complaint impleading Mr. and Mrs. Owens alleging that they were unjustly enriched by the
construction of the house on their property. Wife also alleged alternative theories of recovery
including quasi-contract and quantum meruit.
During the trial, both Husband and Wife accused each other of inappropriate marital conduct.
Wife testified that Husband had abused her physically in the past. She said that she left suddenly
with the parties’ two children in September 1995 because Husband struck her in front of the children
and that one child was injured during the altercation.
The trial court also heard evidence concerning the construction of the marital home on the
property of Mr. and Mrs. Owens. Wife testified that she selected and bought most of the building
materials, and that she assisted in the construction of the house. Wife introduced into evidence
receipts for building materials that she bought, in the amount of $4,785.98. Wife stated that she
saved all of her cancelled checks but could not provide them to the trial court because the checks
were left at the house when she had to leave quickly because of Husband’s abuse. Wife testified she
could obtain cancelled checks from the bank only dating back six years to April 1990. Wife asserted
that the house was nearly completed in April 1990. Wife also testified that she borrowed $5,000
from her mother to assist with construction costs.
Wife testified that her work on the house, her payment for building materials, and the
monetary assistance from her mother were because of her “understanding” that the property would
be deeded to Husband and her upon completion of the house. She asserted that Husband represented
to her that the house would be deeded to them when it was completed. She also noted Mr. Owens’
references to the house as “you all’s” and interpreted these references to mean that the house
belonged to Husband and her.
Husband denied at trial that Mr. Owens, his father, ever promised to convey the property at
any time. Husband was employed by Mr. Owens and worked on the house at times when he was
working for his father. Husband was paid by his father in cash and acknowledged failing to report
this income on the joint tax returns.
Mr. Owens asserted that he never had any intention of deeding the property to his son and
daughter-in-law and never made representations to that effect. It is undisputed that the house was
constructed from timber cut from his land, and that some of the equipment used in constructing the
house was owned by Mr. Owens. Mr. Owens claimed that he bought part of the materials for the
house for cash and paid bills concerning the construction of the house in cash. Mr. Owens produced
no receipts for the purchase of building materials. Mr. Owens also testified that Husband and Wife
paid him no rent for five years, the period of time in which they resided in the house.
After listening to the testimony, the trial court found the testimony of Husband and Mr.
Owens to be not credible. The trial judge noted the income tax returns in which Husband’s cash
income was not reported, Husband’s evasiveness and claimed ignorance about numerous basic
issues, and Mr. Owens’ propensity to deal in cash transactions:
Mr. Thomas Owens [Husband] appears to be either trying to act ignorant or is
ignorant; and I don’t believe he is ignorant. He knows nothing. He answers no
question dealing even with the date of his marriage with a straightforward answer.
It’s generally “I don’t know.” These people deal with cash. Mr. Jim Owens [Mr.
Owens] is a cash dealer; cash, cash, cash. He likewise knows nothing.
The trial court held that Mr. and Mrs. Owens would be unjustly enriched by retaining the
entire value of the house on their property. The trial court valued the property, including the value
of the land and the house, at $45,000. The trial court awarded Wife half of the value of the
residence, $22,500, less $5,000, the value of one acre of land owned by Mr. and Mrs. Owens.
Consequently, the trial court granted a lien in favor of Wife in the sum of $17,500 against the
property of Mr. and Mrs. Owens. From this order, Mr. and Mrs. Owens now appeal.
On appeal, Mr. and Mrs. Owens assert that the trial court erred by granting Wife a lien
against the property. Mr. and Mrs. Owens argue they were not unjustly enriched at the expense of
2
Wife, that the record shows that they contributed to the construction of the house and that they
should be credited for having permitted Husband and Wife to reside in the house rent free.
Our review of this case is governed by Tennessee Rule of Appellate Procedure 13(d), which
provides that review of findings of fact by the trial court shall be de novo upon the record of the trial
court, accompanied by a presumption of correctness of the factual findings, unless the evidence
preponderates otherwise. Tenn. R. App. P. 13(d); see also Union Carbide Corp. v. Huddleston, 854
S.W.2d 87, 91 (Tenn. 1993).
In support of their argument, Mr. and Mrs. Owens cite O’Brien v. O’Brien, 734 S.W.2d 639
(Tenn. App. 1987). The husband and wife in O’Brien built a house on the property of the wife’s
parents, Mr. and Mrs. Hicklen. O’Brien, 734 S.W.2d at 641. In O’Brien, there was an agreement
among the parties that the property and additional land would be owned by the wife upon the death
of Mr. and Mrs. Hicklen. Id. at 642. The husband and wife later divorced. Id. at 641.
The Court found that the husband had a reasonable expectation of residing in the house with
his wife until her parents died, but that this expectation was waived when he left his wife and the
marital home. Id. at 642. The Court noted that the termination of the marriage was solely due to
the husband’s misconduct. Id. at 643. It also observed that the husband did not expect to obtain an
ownership interest in the house; rather his expectation was “the privilege of occupancy and the
ultimate ownership by his wife.” Id. at 644. The Court refused to grant the husband equitable relief
under the doctrine of unclean hands, reasoning that the husband abandoned his wife and the house
they shared, and was therefore precluded from obtaining equitable relief regarding the house. Id.
at 643.
Wife, on the other hand, cites Housley v. Housley, in which this Court addressed the issue
of the granting a lien on the property of a third party when dividing marital property between a
divorcing husband and wife. Housley v. Housley, No. 03A01-9509-CV-00302, 1996 WL 36135
(Tenn. App. Jan. 31, 1996). In Housley, the husband and wife owned a modular home placed on
property owned by the husband’s parents, Mr. and Mrs. Housley. Housley, 1996 WL 36135, at *1.
The Court ordered the parties divorced, apparently without attribution of fault, and awarded the wife
half of the value of the modular home and imposed a lien against the property of Mr. and Mrs.
Housley in the same amount to protect the wife’s judgment. Id. *2. In sustaining the lien against
the property, the Housley Court observed that the trial court had broad discretion in the adjudication
3
of parties’ rights and interests in the marital estate. Id. (citing Batson v. Batson, 769 S.W.2d 849
(Tenn. App. 1988)).
The facts in this case are more analogous to those in Housley than O’Brien. Unlike O’Brien,
the divorce in this case is not solely the fault of Wife. See O’Brien, 734 S.W.2d 642-43. Wife
asserted in her testimony that she left the marital home suddenly because of Husband’s physical
abuse of her and the injury to the parties’ child in the course of the confrontation between Husband
and Wife. As in Housley, the trial court in this case simply declared the parties divorced without
attributing fault. In O’Brien, there was a clear agreement among the parties that the wife would
obtain ownership of the property upon the death of her parents. Id. at 642. In this case, Wife
asserted that she had a reasonable expectation that the property would be deeded to both Husband
and Wife upon completion of the house, and the trial court found that Wife’s testimony was credible
and discredited the testimony of both Husband and his father. The facts in the case at bar are similar
to those in Housley; indeed, they are more compelling than the facts in Housley, in that the home
in this case is not a modular home that can be moved, but a home built on Mr. and Mrs. Owens’
property. See Housley, 1996 WL 36135, at *1. Under all of these circumstances, the relief granted
by the trial court in this case is both reasonable and appropriate.
The decision of the trial court is affirmed. Costs are assessed against Appellants James R.
Owens and Fern Owens, for which execution may issue if necessary.
HOLLY KIRBY LILLARD, J.
CONCUR:
W. FRANK CRAWFORD, P. J., W.S.
ALAN E. HIGHERS, J.
4
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157 P.3d 796 (2007)
212 Or. App. 219
STATE
v.
PLUMB.
Court of Appeals of Oregon.
April 18, 2007.
Affirmed without opinion.
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954 So.2d 3 (2005)
GEORGE D. McCARLEY
v.
MORTGAGE ELEC. REGISTRATION SYS., INC.
No. 2031142.
Court of Civil Appeals of Alabama.
July 22, 2005.
Decision without published opinions. Affirmed.
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12/05/2018
IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
Assigned on Briefs September 4, 2018
JON VAZEEN v. MARTIN SIR
Appeal from the Circuit Court for Davidson County
No. 16C2388 Don R. Ash, Senior Judge1
No. M2018-00333-COA-R3-CV
Jon Vazeen (plaintiff) filed this action for legal malpractice and fraud against his former
attorney, Martin Sir (defendant). Plaintiff alleged that defendant was guilty of “repeated
unprofessional behavior” and the “inept and total mishandling” of his divorce case. He
also alleged defendant defrauded him by “infusing several thousand dollars of fake items
in his invoice” for attorney’s fees. (Underlining in original). The trial court granted
defendant summary judgment on the malpractice claim because the complaint was not
filed within one year of the accrual of the claim, as required by Tenn. Code Ann. § 28-3-
104(c)(1)(2017). The court granted summary judgment on the fraud claim on the ground
of res judicata. The court held that the fraud claim was barred by the earlier dismissal of
plaintiff’s ethics complaint based upon the alleged fraud of the defendant with the Board
of Professional Responsibility (the Board). We affirm the summary judgment of the trial
court on the legal malpractice claim. We hold that the Board’s decision to dismiss an
ethical complaint does not bar plaintiff from bringing a malpractice or fraud claim against
an attorney on the ground of res judicata. Summary judgment on the fraud claim is
vacated and the case is remanded for further proceedings.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Affirmed in Part and Vacated in Part; Case Remanded for Further Proceedings
CHARLES D. SUSANO, JR., J., delivered the opinion of the court, in which and RICHARD H.
DINKINS and KENNY ARMSTRONG, JJ., joined.
Jon Vazeen, Knoxville, Tennessee, appellant, pro se.
Tom Corts and Rachel C. Hogan, Nashville, Tennessee, for the appellee, Martin Sir.
1
Sitting by designation.
-1-
OPINION
I.
In February of 2015, plaintiff hired defendant to represent him in his divorce
action. On June 25, 2015, dissatisfied with defendant’s representation of him, plaintiff
sent an email saying, “I am rather very upset, concerned and, truly surprised at your
office’s lack of professionalism in handling this divorce case so far.” Plaintiff itemized
several complaints regarding discovery and lack of attention to other issues in the case.
On July 24, 2015, defendant sent plaintiff an invoice and bill reflecting total charges of
$11,660 and showing an amount due of $6,660. Plaintiff fired defendant on September
15, 2015. Apparently he also complained about the bill, because the record contains a
copy of an email sent from defendant to plaintiff on September 22, 2015, saying:
I will be reviewing my statement to you to see if we made
mistakes in our billing since you have now brought this to my
attention. It is always our policy to make adjustments if
mistakes are made. [Please] know that if billing errors were
made, they were not intentional.
On October 21, 2015, plaintiff responded with a letter stating, in pertinent part, as
follows:
Now that I am preparing to file a complaint against you with
[the] Tennessee Bar Association, other governmental
agencies, file a lawsuit to seek damages and, before I take the
story of your fraudulent charges to the public domain, I am
obligated to give you an opportunity to respond.
On September 15, 2015 documented obvious fraudulent
charges were faxed/mailed to your office. You chose not to
respond. However, the invoice that you submitted along with
your October 7, 2015 motion to the 3rd Circuit Court of
Davidson County (Nashville) is not the same as the invoice
that you had sent me. In the invoice that you submitted to the
court, you have attempted to deceit [sic] the court by
removing some of the obvious fraudulent items, combining
some of the items and, rewording some of the items. On one
hand, you have claimed that a specific service was performed
on a specific date and for specific hours. On the other hand,
you have removed the same item from your invoice.
-2-
Therefore, you have admitted that the service never happened
and the charge was fraudulent. As a supposedly professional
person operating within the legal community, I am sure that
you know that you are legally responsible to explain why you
have removed, combined and, reworded your services.
The fact that you have removed, combined and modified
your services gives me the right to claim that ALL your
invoice items related to [the divorce case] are fraudulent.
Because you have admitted to defrauding me, you have the
responsibility of proving that the remaining charges are not
fraudulent. I claim that ALL invoice items are fraudulent.
To show yet another fraudulent charge; you have charged
me $368.57 for Alpha Reporting while my cancelled check
shows that I paid for the court reporter.
(Italics, bold font, underlining, and capitalization in original).
Defendant replied two days later with a letter stating in pertinent part:
The invoice items that you reference were removed from the
bill because they were mistakenly placed on the bill. Your
copy represents a corrected version that was also sent to the
court. If you had called my office prior to making the false
allegations of fraud towards my office, I would have told you,
as I have done with other prior clients who have noticed
mistakes in bills that it was a mistake and that it would be
corrected. This is what I have done with the new bill that was
submitted to the court and to you. However, as you will note
from the contract you executed, retainers are non-refundable
and the “billing error” did not change the fact.
. . . My bills are itemized so that my clients can review them
and ascertain whether there were any mistakes made because
we are human. . . .
In addition, since you have brought to my attention the
mistake regarding Alpha Reporting. Once Alpha Reporting
verifies that payment, it will also be removed from your bill.
-3-
On January 8, 2016, plaintiff filed an ethics complaint against defendant with the
Board. On September 8, 2016, he filed his complaint in the trial court. On December 5,
2017, defendant mailed plaintiff a check in the amount of $3,948.75, the amount he
determined he had been overpaid by plaintiff, plus prejudgment statutory interest. After
discovery, defendant moved for summary judgment. The trial court granted the motion.
Regarding the timeliness of the legal malpractice claim, the court found and held in
pertinent part as follows:
On June 24, 2015 Plaintiff discovered Defendant had failed to
send interrogatories and requests for production of documents
to Plaintiff’s wife. As Plaintiff stated in his deposition, the
failure “caused an enormous amount of harm” because
Plaintiff was unable to prepare himself for his deposition.
Plaintiff admittedly would have fired Defendant “right then”
for negligence, lack of organization, unprofessionalism, and
his unethical handling of the divorce if he had not already
paid a $5,000.00 non-refundable retainer fee.
As of June 25, 2015, Plaintiff had formed the opinion
Defendant was negligent, unprofessional and unethical and
memorialized his complaint and awareness of Defendant’s
lack of professionalism in an e-mail to Defendant.
Plaintiff alleges Defendant was negligent in failing to
properly prepare for mediation, which occurred in July or
August 2015. Specifically, Plaintiff alleges Defendant “just
s[a]t in there and he didn’t have any input. He didn’t have
any offers prepared. He didn’t work with [Plaintiff]. He
didn’t ask [Plaintiff] what [he] want[ed]. He didn’t look at
the laws to say that this is what the law says, this is what you
can expect. He just showed up and sat in there.” Plaintiff
alleged damages due to Defendant’s lack of preparation for
mediation, his failure to help Plaintiff, and his failure to
negotiate a better settlement.
* * *
[B]y June 24, 2015, Plaintiff was aware of Defendant’s
failure to submit interrogatories to Plaintiff’s wife. He
-4-
memorialized his “upset, concern[] and, tru[e] surprise[]” in
an email to Defendant and he indicated to the Board, he
“would have fired him right then for negligence, lack of
organization, unprofessionalism and, his unethical handling
of [the] divorce,” but for the non-refundable retainer.
Similarly, by July 2015, Plaintiff was aware of Defendant’s
alleged malpractice regarding mediation as Plaintiff was
present at mediation and witnessed the complained-of
conduct. The Court finds, by June 24, 2015 and July 2015,
respectively, Plaintiff was aware of sufficient facts to put him
on notice injuries had been sustained regarding interrogatories
and mediation. Accordingly, Plaintiff’s September 8, 2016
Complaint is untimely as to these theories of legal
malpractice.
(Brackets in original; citation omitted).
Prior to the trial court’s grant of summary judgment, the Board dismissed
plaintiff’s ethics complaint against defendant on January 25, 2017. In defendant’s reply
to plaintiff’s response to his motion for summary judgment, defendant argued that the
Board’s decision was res judicata upon plaintiff’s fraud claim. The trial court agreed and
granted summary judgment on plaintiff’s fraud claim on the ground of res judicata.
Plaintiff timely filed a notice of appeal.
II.
Plaintiff frames the issue presented in his brief as follows:
In a motion for summary judgment where, as the main points,
I. The moving party’s Statement of Undisputed Material Facts
is flawed to the extent that it does not even include the most
essential claim of the lawsuit and
II. The court admits to not being clear on the most essential
claim,
III. The most essential claim is under dispute,
-5-
is granting the summary judgment and dismissing the most
essential claim of a lawsuit by default (Res Judicata)
justified?
(Italics, bold font, and underlining in original). In his brief, plaintiff wields the phrase
“most essential claim” like a talisman, using it on nearly every page, and in two
instances, seven times on a single page. Throughout, he defines his “most essential
claim” as defendant’s “scheme to defraud” him.
However, in the body of his brief, plaintiff also obliquely argues that the trial court
erred in dismissing his malpractice claims as untimely under the one-year statute of
limitations. Defendant argues that plaintiff has waived this argument by not including it
in his statement of issues as required by Tenn. R. App. P. 27(a)(4). The Supreme Court
has held that “an issue may be deemed waived when it is argued in the brief but is not
designated as an issue in accordance with Tenn. R. App. P. 27(a)(4).” Hodge v. Craig,
382 S.W.3d 325, 335 (Tenn. 2012); see also, e.g., Childress v. Union Realty Co., 97
S.W.3d 573, 578 (Tenn. Ct. App. 2002) (“We consider an issue waived where it is argued
in the brief but not designated as an issue”). There is no reasonable interpretation of
plaintiff’s statement of the issue presented to stretch it into a challenge to the trial court’s
ruling that plaintiff’s malpractice claims were filed within one year of their accrual.
Consequently, that issue is waived. Nevertheless, we have thoroughly reviewed the
record as it pertains to this issue, and we observe that it fully supports the trial court’s
determination that, as evidenced by plaintiff’s own testimony and filings with the Board,
the undisputed facts establish that his legal malpractice action was not timely brought.
Thus, had it not been waived, this argument would not have been successful.
We proceed to consider the issue presented, which we restate as: whether the trial
court erred in granting summary judgment on plaintiff’s fraud claim as barred by the
doctrine of res judicata.
III.
Our standard of review of a grant of summary judgment is as stated by the
Supreme Court:
Summary judgment is appropriate when “the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.” Tenn. R.
Civ. P. 56.04. We review a trial court’s ruling on a motion
-6-
for summary judgment de novo, without a presumption of
correctness.
* * *
[I]n Tennessee, as in the federal system, when the moving
party does not bear the burden of proof at trial, the moving
party may satisfy its burden of production either (1) by
affirmatively negating an essential element of the nonmoving
party’s claim or (2) by demonstrating that the nonmoving
party’s evidence at the summary judgment stage is
insufficient to establish the nonmoving party’s claim or
defense. . . . The nonmoving party must demonstrate the
existence of specific facts in the record which could lead a
rational trier of fact to find in favor of the nonmoving party.
Rye v. Women’s Care Ctr. of Memphis, MPLLC, 477 S.W.3d 235, 250, 264-65 (Tenn.
2015) (italics in original). “A trial court’s decision that a claim is barred by the doctrine
of res judicata involves a question of law which will be reviewed de novo on appeal
without a presumption of correctness.” Long v. Bd. of Prof. Resp., 435 S.W.3d 174, 183
(Tenn. 2014).
IV.
A.
Defendant argues that plaintiff’s claim for fraudulent billing sounds in legal
malpractice and should also be time-barred under the one-year statute of limitations. We
disagree. This Court, in PNC Multifamily Capital Instit. Fund XXVI Ltd. P’ship v.
Bluff City Comm. Dev. Corp., 387 S.W.3d 525, 546 (Tenn. Ct. App. 2012), stated:
[N]ot every claim which calls into question the conduct of
one who happens to be a lawyer . . . is a professional
malpractice claim. . . . It is only where the claim is based
upon the failure of the professional to meet the requisite
standards of the subject profession that [a claim for
malpractice lies]. . . . Thus, we have repeatedly held that
complaints asserting claims for intentional misconduct
against a professional, including fraud and misrepresentation,
-7-
do not require the inclusion of an expert affidavit [because
they do not sound in legal malpractice].
(Quoting Crosby v. Pittman, 305 Ga. App. 639, 640, 700 S.E.2d 629 (2010) (brackets
and ellipses in original)); see also Nobes v. Earhart, 769 S.W.2d 868, 872 (Tenn. Ct.
App. 1988) (addressing separately claims for legal malpractice and fraud against
attorney). In the present case, plaintiff has alleged intentional misconduct, so his claim is
not barred by the one-year statute of limitations for legal malpractice.
B.
Alternatively, defendant argues that plaintiff’s fraud claim should have been
dismissed because plaintiff failed to state it with particularity, as required by Tenn. R.
Civ. P. 9.02. Defendant first raised this issue in the trial court in his reply to plaintiff’s
response to his motion for summary judgment. Significantly, the trial court did not
dismiss the fraud claim for lack of particularity under Rule 9.02. Thus, on appeal,
defendant is not simply arguing that that the trial court was correct on this issue, but that
the court erred by not dismissing the fraud claim on this ground. This is a distinct issue
not raised by plaintiff as the appellant. In Hodge, the Supreme Court provided the
following guidance for appellees who want to raise their own separate issues for review:
Appellees who have not filed a notice of appeal . . . have
three options with regard to framing the issues on appeal.
First, they may simply accept the issues as framed by the
appellant. Second, they may reframe the issues presented by
the appellant if they find the appellant’s formulation of the
issues unsatisfactory. Third, they may present additional
issues of their own seeking relief on grounds different than
the grounds relied on by the appellant[.]
Parties who have not filed their own application for
permission to appeal may present issues other than those
presented by the appellant. . . . To do so, however, Tenn. R.
App. P. 27(b) requires a party to include in its brief “the
issues and arguments involved in [its] request for relief as
well as the answer to the brief of the appellant . . .” [A]n
issue may be deemed waived when it is argued in the brief
but is not designated as an issue in accordance with Tenn. R.
App. P. 27(a)(4).
-8-
382 S.W.3d at 335 (footnotes omitted). Defendant’s statement of the issues presented
states, “[t]he Appellee adopts the Statement of the Issues as recited by the Appellant.”
Under the principle stated above in Hodge, the issue of pleading fraud with particularity
is waived.
C.
The Board dismissed plaintiff’s ethics complaint against defendant on January 25,
2017. The record contains a copy of the letter to defendant from the Board that simply
states “the complaint has been dismissed.” The Board made no findings, as far as the
record reveals. The trial court ruled that “Plaintiff’s fraudulent billing claim is barred by
res judicata.” The Supreme Court has recently reiterated the following regarding the res
judicata doctrine:
“The doctrine of res judicata, also referred to as claim
preclusion, bars a second suit between the same parties or
their privies on the same cause of action with respect to all
issues which were or could have been litigated in the former
suit.” Creech v. Addington, 281 S.W.3d 363, 376 (Tenn.
2009) (citing Massengill v. Scott, 738 S.W.2d 629, 631
(Tenn. 1987)). “The primary purposes of the doctrine are to
promote finality in litigation, prevent inconsistent or
contradictory judgments, conserve legal resources, and
protect litigants from the cost and vexation of multiple
lawsuits.” Id. (citing Sweatt v. Tenn. Dep’t of Corr., 88
S.W.3d 567, 570 (Tenn. Ct. App. 2002)).
“The party asserting a defense predicated on res judicata must
demonstrate (1) that the underlying judgment was rendered
by a court of competent jurisdiction, (2) that the same parties
or their privies were involved in both suits, (3) that the same
claim or cause of action was asserted in both suits, and (4)
that the underlying judgment was final and on the merits.”
Long, 435 S.W.3d at 183 (citing Lien v. Couch, 993 S.W.2d
53, 56 (Tenn. Ct. App. 1998); Lee v. Hall, 790 S.W.2d 293,
294 (Tenn. Ct. App. 1990)).
Napolitano v. Bd. of Prof. Resp., 535 S.W.3d 481, 496 (Tenn. 2017). In the present
case, neither the first nor the third element of res judicata has been established.
-9-
The Board is not “a court of competent jurisdiction” to adjudicate a claim of fraud
against an attorney for a monetary judgment of alleged damages. The Supreme Court,
which directly oversees the Board, has provided the following guidance regarding its
nature and responsibilities:
The Board is an administrative entity, not a judicial system.
As such, the Board performs various functions. For example,
the Board is authorized to investigate any allegation of
attorney misconduct or attorney incapacity. Tenn. Sup. Ct. R.
9, §§ 5.5(a), 8.1. The Board is empowered to adopt and
submit to this Court for approval “written guidelines to ensure
the efficient and timely resolution of complaints,
investigations, and formal proceedings.” Id. § 5.5(b). The
Board assigns district committee members “to conduct
disciplinary hearings and to review and approve or modify
recommendations by Disciplinary Counsel for dismissals or
informal admonitions.” Id. § 5.5(c). The Board reviews, at
Disciplinary Counsel’s request, the determination of a
reviewing district committee member “that a matter should be
concluded by dismissal or by private informal admonition
without the institution of formal charges.” Id. § 5.5(d). The
Board may also privately reprimand attorneys for misconduct.
Id. § 5.5(e).
The Board receives regular reports from, and conducts regular
performance evaluations of, Chief Disciplinary Counsel. Id.
§ 7.1. Petitions initiating formal disciplinary proceedings are
filed with the Board. Id. § 8.2. Once a petition and answer
are filed, the Chair of the Board assigns a hearing panel to
adjudicate the matter. Id. The Board reviews Disciplinary
Counsel’s recommendation to appeal from a hearing panel’s
judgment. Id. § 5.3. The Board, or a panel of the Board,
hears petitions for dissolution of temporary orders of
suspension, id. § 4.3, and petitions for relief from costs, id. §
24.3.
Unlike a judicial system, in which investigative,
prosecutorial, and adjudicative functions are separate, some
overlapping of these functions is inherent in administrative
agencies, like the Board. See Withrow v. Larkin, 421 U.S.
35, 54–55, 95 S.Ct. 1456, 43 L.Ed.2d 712 (1975) (discussing
-10-
the overlapping investigatory and adjudicatory functions
administrative agencies may perform); Heyne, 380 S.W.3d at
735 (discussing the overlapping functions performed by
school boards in Tennessee). The Board simply is not a
judicial system; thus, a Board member is not an officer of a
judicial system.
Moncier v. Bd. of Prof. Resp., 406 S.W.3d 139, 159 (Tenn. 2013) (emphasis added;
footnote omitted).
Secondly, shortly after plaintiff filed his complaint with the Board, it responded
with a letter stating, in pertinent part, the following:
We have opened an investigative file regarding your
complaint of alleged ethical violations against the above
attorney. An investigation will be conducted into your
allegations and you will be notified of the results. . .
You should understand that we do not represent your legal
interests and cannot give you legal advice. The filing of this
complaint does not preserve your legal rights or remedies in
your underlying legal matter, such as legal malpractice or the
statute of limitations, and is not an action to pursue a civil or
monetary recovery. You should consult independent legal
advice regarding such issues. . .
Our function is limited to consideration of whether there has
been a violation of the Rules of Professional Conduct
pursuant to the requirements imposed by Rule 9 of the Rules
of the Tennessee Supreme Court.
(Emphasis added; footnote omitted). This letter makes it clear to all involved that the
issue of whether plaintiff should be awarded damages on his fraudulent billing claim
against his former attorney is not an issue before the Board. Consequently, the third
element of res judicata is not established, and defendant is not entitled to judgment as a
matter of law on the fraud claim.2
2
We do note that it is entirely possible that a Board’s judgment on an ethics complaint might be
given res judicata effect to bar a subsequent second ethics complaint. In this vein, the Supreme Court
stated in Napolitano,
For the purposes of this decision, we assume, without deciding, that the
-11-
V.
The trial court’s summary judgment on the legal malpractice claims is affirmed.
The summary judgment on the fraudulent billing claim is vacated, and the case remanded
for further proceedings. Costs on appeal are assessed one-half to appellant, Jon Vazeen,
and one-half to appellee, Martin Sir.
_______________________________
CHARLES D. SUSANO, JR., JUDGE
Board’s action of dismissing an ethics complaint after an investigation
can be considered a judgment sufficient to support a claim of res judicata
if a subsequent ethics complaint otherwise satisfies the criteria for the
application of res judicata.
535 S.W.3d at 496. However, this case obviously does not involve a second ethical complaint against
defendant.
-12-
| {
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} |
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
TIFFANI JONES,
Plaintiff
v. Civil Action No. 20-453 (CKK)
NVR INCORPORATION,
Defendant
MEMORANDUM OPINION
(April 29, 2020)
Plaintiff, Tiffani Jones, entered into a contract with Defendant, NVR Incorporation, for
the construction of a new home. Less than a year after construction of the home was completed,
Plaintiff alleges that she discovered leaks in her home’s plumbing. Plaintiff claims that these
leaks led to toxic mold and resulted in damages to her family’s health and to the value of her
home. As a result, Plaintiff brings claims against Defendant for breach of contract, fraud,
negligence, negligent misrepresentation, breach of express warranty, breach of implied warranty
of merchantability, violation of the D.C. Consumer Protection Procedures Act (“DCCPPA”), and
strict liability. Defendant has moved to dismiss each of Plaintiff’s claims for various reasons.
Upon consideration of the pleadings,1 the relevant legal authorities, and the record as a
whole, the Court will GRANT IN PART and DENY WITHOUT PREJUDICE IN PART
Defendant’s Motion to Dismiss. The Court DISMISSES WITHOUT PREJUDICE Plaintiff’s
1
The Court’s consideration has focused on the following documents:
• Def.’s Mem. of Points and Authorities in Support of Mot. to Dismiss Compl. (“Def.’s
Mot.”), ECF No. 9;
• Pl.’s Mem. of Points and Authorities in Support of Pl.’s Opp’n to Def.’s Mot. to Dismiss
(“Pl.’s Opp’n”), ECF No. 11; and
• Def.’s Reply Mem. in Support of. Mot. to Dismiss Compl. (“Def.’s Reply”), ECF No. 19.
In an exercise of its discretion, the Court finds that holding oral argument in this action would
not be of assistance in rendering a decision. See LCvR 7(f).
1
Count 2 claim for fraud, Count 3 claim for negligence, and Count 4 claim for negligent
misrepresentation because the allegations underlying these claims are founded on the alleged
breach of contract and do not state a claim in tort. The Court further DISMISSES WITH
PREJUDICE Plaintiff’s Count 6 claim for a breach of the implied warranty of merchantability
because that provision does not apply to immovable property and because Plaintiff’s contract
excludes all express and implied warranties not specified. Finally, the Court DISMISSES
WITHOUT PREJUDICE Plaintiff’s Count 7 claim for a violation of the DCCPPA because
Plaintiff has failed to allege that she was damaged by the violation and has otherwise failed to
state a claim for which relief may be granted. Based on the current record, the Court otherwise
DENIES WITHOUT PREJDUICE Defendant’s Motion.2
I. BACKGROUND
For the purposes of the Motion before the Court, the Court accepts as true the well-pled
allegations in Plaintiff’s Complaint. The Court does “not accept as true, however, the plaintiff’s
legal conclusions or inferences that are unsupported by the facts alleged.” Ralls Corp. v. Comm.
on Foreign Inv. in the United States, 758 F.3d 296, 315 (D.C. Cir. 2014).
Plaintiff alleges that on February 28, 2016, she entered into a contract with Defendant for
the construction of a new home. Compl., ECF No. 1-1, ¶ 5. The Purchase Agreement was
executed on February 29, 2016. Id. The Purchase Agreement included the purchase of a lot in a
2
The Court notes that there is a dispute between the parties as to whether or not the Court can
consider, on a motion to dismiss, certain exhibits attached to Plaintiff’s Opposition. However,
throughout this Memorandum Opinion, the Court considers only the parties’ contract and the
limited warranty provisions, which both parties agree are incorporated into the Complaint.
Because the Court does not consider any disputed documents in resolving Defendant’s Motion,
the Court need not rule on this dispute at this time.
2
subdivision as well as a particular model of home to be built on the lot. Id. According to
Plaintiff, home construction began July 6, 2016 and completed September 12, 2016. Id.
Plaintiff, her husband, and two children moved into the home on November 3, 2016. Id.
at ¶ 6. Plaintiff contends that she discovered leaks in the plumbing of her home in February
2017. Id. Plaintiff states that she reported the leaks to Defendant on February 17, 2017 and that
she allowed Defendant access to her home more than twelve times in an attempt to make repairs.
Id. However, the leaks continued. Id.
Plaintiff claims that on October 29, 2019, she had a mold inspection performed and
discovered toxic mold in her home. Id. at ¶ 7. She further claims on that November 6, 2019, she
hired a contractor to assess the safety of her home and structural defects were discovered. Id.
Plaintiff claims that the toxic mold led to medical bills for the entire family as well as a reduction
in the value of her home. Id.
On January 23, 2020, Plaintiff filed this lawsuit in the Superior Court for the District of
Columbia. See generally Compl., ECF No. 1-1. On February 18, 2020, Defendant removed the
case to this Court. And, on February 26, 2020, Defendant filed a Motion to Dismiss. ECF No. 9.
That Motion is currently pending before the Court.
Plaintiff makes eight claims for relief in her Complaint.
• Count One- Breach of contract;
• Count Two- Fraud;
• Count Three- Negligence;
• Count Four- Negligent misrepresentation;
• Count Five- Breach of express warranty;
• Count Six- Breach of implied warranty of merchantability;
3
• Count Seven- Violation of DCCPPA; and
• Count Eight- Strict Liability.
Compl., ECF No. 1-1, ¶¶ 8-15. Defendant moves to dismiss each claim.
II. LEGAL STANDARD
Defendant moves to dismiss Plaintiff’s Complaint under Rule 12(b)(6) for “failure to
state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). The Federal Rules
require that a complaint include “‘a short and plain statement of the claim showing that the
pleader is entitled to relief,’ in order to ‘give the defendant fair notice of what the ... claim is and
the grounds upon which it rests.’” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting
Fed. R. Civ. P. 8(a)(2); Conley v. Gibson, 355 U.S. 41, 47 (1957)).
Although “detailed factual allegations” are not necessary to withstand a Rule 12(b)(6)
motion, to provide the “grounds” of “entitle[ment] to relief,” a plaintiff must furnish “more than
labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Id.
Instead, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to
relief that is plausible on its face.” Id. at 556, 570. “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The
complaint must establish “more than a sheer possibility that a defendant has acted unlawfully.”
Id. “[W]here the well-pleaded facts do not permit the court to infer more than the mere
possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader
is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
4
III. DISCUSSION
Defendant moves to dismiss each of the claims in Plaintiff’s Complaint. The Court will
address each claim in turn.
A. Count 1- Breach of Contract
In Count 1, Plaintiff brings a claim for breach of contract. Plaintiff alleges that she and
Defendant entered into a written agreement for the sale and purchase of a newly-constructed
home. Compl., ECF No. 1-1, ¶ 8. Plaintiff alleges that she performed under the contract, but
Defendant “breached its contractual obligation by failing to build a structurally safe and sound
residence.” Id. Specifically, Plaintiff contends that the plumbing began to leak less than a year
after the house was constructed, causing toxic mold which damaged her family’s health and
reduced the marketability of the property. Id. Defendant moves to dismiss this claim, arguing
that the contract did not require a structurally safe and sound residence and that Plaintiff has not
alleged a specific term of the agreement which was breached.
In order to state a claim for breach of contract, a plaintiff must allege “(1) a valid contract
between the parties; (2) an obligation or duty arising out of the contract; (3) a breach of that duty;
and (4) damages caused by the breach.” Tsintolas Realty Co. v. Mendez, 984 A.2d 181, 187
(D.C. 2009). Plaintiff’s Complaint is sparse on details and not a model of clarity. However, the
Court finds that Plaintiff has pled the required elements for a breach of contract claim. Plaintiff
has pled that she and Defendant entered into a contract for a newly constructed home. She has
further pled that Defendant “had a contractual duty to build a structurally sound, safe property,
suitable for use by Ms. Jones and her family.” Compl., ECF No. 1-1, ¶ 8. Plaintiff claims that
this duty was breached when Defendant constructed a “defective” property which had leaks in
the plumbing. Id. Plaintiff states that this breach in duty caused damage to her family’s health
5
and to the marketability of her property. Id. While Defendant is correct that Plaintiff has not cited
a particular provision of the contract which was breached, Plaintiff has satisfied the standards for
notice pleading. See Truesdale v. Mountain Productions, Inc., 292 F. Supp. 3d 195, 202 (D.D.C.
2017) (requiring that the plaintiff state the terms of the contract and how the defendant breached
those terms); Ponder v. Chase Home Fin., LLC, 865 F. Supp. 2d 13, 19 (D.D.C. 2012) (denying
a motion to dismiss breach of contract claim where the complaint identified the parties and
material terms of the contract and alleged facts relating to the breach); compare with Edmond v.
Am. Educ. Servs., No. 10-578, 2010 WL 4269129, at *2 (D.D.C. Oct. 28, 2010) (dismissing
claim where the plaintiff alleged that the defendant breached its contractual duty but did not
allege the existence of a contract). In making this determination, the Court is guided by the
United States Supreme Court's admonition that “a complaint attacked by a Rule 12(b)(6) motion
to dismiss does not need detailed factual allegations.” Twombly, 550 U.S. at 555.
Defendant further contends that Plaintiff’s allegation that Defendant breached its duty to
build a structurally sound, safe residence through the existence of leaks in the plumbing is not
supported by the express terms of the Agreement and Limited Warranty. Because the Complaint
cites and relies on the Agreement and Limited Warranty, the Court may consider the documents
on a motion to dismiss. Ward v. D.C. Dep’t of Youth Rehab. Servs., 768 F. Supp. 2d 117, 119
(D.D.C. 2011).
Specifically, Defendant cites Paragraph 1 of the agreement which states “[t]he Home will
be constructed as shown on the construction drawings (or blueprints), the grading plan, floor
plans and other plans related to the construction of the Home.” Ex. A, ECF No. 9-2, ¶ 1.
According to Defendant, the only contractual duty was to build a house in accordance with the
plans and specifications. However, at the motion to dismiss stage, the Court will not decide if the
6
plans and specifications required that the plumbing not leak. On a motion to dismiss, the Court
accepts Plaintiff’s well-pled allegations as true. Plaintiff has alleged that the contract required
that the house be constructed in a non-defective manner, and, at this stage in the litigation, the
Court accepts this allegation as true.
Accordingly, the Court DENIES WITHOUT PREJUDICE Defendant’s motion to dismiss
Plaintiff’s Count 1 claim for breach of contract.
B. Count 2- Fraud
In Count 2, Plaintiff brings a claim of fraud. Plaintiff alleges that the plumbing which
was installed throughout her house, especially in the master bathroom, was dangerously
defective. Compl., ECF No. 1-1, ¶ 9. Plaintiff alleges that Defendant was aware of the defects
and “created the perfect means to conceal them.” Id. Plaintiff contends that Defendant performed
the inspection of the property, “thereby allowing it to conceal the defects and ‘pass’ inspection.”
Id. Plaintiff further alleges that Defendant performed the appraisal and acted as the mortgage
company. Id. Defendant argues that this claim should be dismissed because Plaintiff fails to meet
the heightened pleading standard for fraud and because the claim is completely predicated on her
breach of contract claim. The Court agrees.
“Under D.C. law, ‘[t]he essential elements of common law fraud are: (1) a false
representation (2) in reference to material fact, (3) made with knowledge of its falsity, (4) with
the intent to deceive, and (5) action is taken in reliance upon the representation.’” Busby v.
Capital One, N.A., 772 F. Supp. 2d 268, 275 (D.D.C. 2011) (quoting Fort Lincoln Civic Ass'n,
Inc. v. Fort Lincoln New Town Corp., 944 A.2d 1055, 1074 n.22 (D.C. 2008)). Allegations of
fraud must be pled with particularity. See Fed. R. Civ. P. 9(b) (“a party must state with
particularity the circumstances constituting fraud”). The circumstances that a plaintiff must plead
7
with particularity “include matters such as the time, place and content of the false
misrepresentations; the misrepresented fact; and what the opponent retained or the claimant lost
as a consequence of the alleged fraud.” McQueen v. Woodstream Corp., 248 F.R.D. 73, 77
(D.D.C.2008) (citations omitted). “In other words, Rule 9(b) requires that the pleader provide the
‘who, what, when, where, and how’ with respect to the circumstances of the fraud.” Id. (citations
omitted).
Here, Plaintiff alleges that fraud occurred when Defendant constructed a house with
defects and concealed those defects by conducting a property inspection in which the house
passed inspection. Compl., ECF No. 1-1, ¶ 9. This general allegation fails to establish the “who,
what, when, where, and how” of the fraud. Plaintiff does not make any allegations about the
specific content of the false misrepresentations as required by the heightened pleading standard
for fraud. See Tefera v. OneWest Bank, FSB, 19 F. Supp. 3d 215, 223 (D.D.C. 2014) (concluding
that plaintiff’s “single conclusory reference to fraud misses the mark for notice pleading under
Rule 8, let alone the heightened pleading standard required for fraud claims under Rule 9(b)”).
Additionally, the Court notes that Plaintiff does not even make the conclusory allegation that she
took any particular action in reliance upon this alleged fraud.
The Court further finds that Plaintiff’s fraud claim should be dismissed because it is
predicated upon her breach of contract claim. The Court notes that Defendant raised this ground
for dismissal in its Motion. Def.’s Mot., ECF No. 9, 10. However, Plaintiff failed to respond, in
any manner, to the argument. See generally, Pl.’s Opp’n, ECF No. 11.
“District of Columbia law requires that the factual basis for a fraud claim be separate
from any breach of contract claim that may be asserted.” Plesha v. Ferguson, 725 F. Supp. 2d
106, 113 (D.D.C. 2010); see Choharis v. State Farm Fire and Cas. Co., 961 A.2d 1080, 1089
8
(D.C. 2008) (“[T]he tort must exist in its own right independent of the contract, and any duty
upon which the tort is based must flow from considerations other than the contractual
relationship.”). In order to establish a separate claim of fraud, “[t]he tort must stand as a tort even
if the contractual relationship did not exist” and the fraud claim must be such that “an action for
breach of contract would reach none of the damages suffered by the tort.” See Choharis, 961
A.2d at 1089.
Here, Plaintiff’s allegations of fraud mirror her allegations of breach of contract. Plaintiff
alleges that her contract with Defendant required Defendant “to build a structurally sound, safe
property, suitable for use by Mrs. Jones and her family.” Compl., ECF No. 1-1, ¶ 8. She further
alleges that the contract required that there be no structural defects, such as leaks. Id. The
fraudulent statements which are alleged relate to statements that the house did not have structural
defects. Id. at ¶ 9. These alleged fraudulent statements regarding the house’s structural integrity
directly involve the alleged requirements of the parties’ contract. See Morir Servs., Inc. v.
Ekwuno, 191 F. Supp. 3d 98, 111-13 (D.D.C. 2016) (“The plaintiff's allegations of fraud in this
case are inseparable from the breach of contract allegations and directly involve duties expressly
contemplated by the contract.”); see also Choharis, 961 A.2d at 1090 (“a duty of State Farm to
be accurate in its assessment of the mold condition would flow basically from the contractual
relationship”). Plaintiff states no legal duty, aside from a contractual duty, for Defendant to
construct a defect-free home.
Accordingly, because Plaintiff has failed to meet the heightened pleading standard for
fraud and because Plaintiff’s allegations are fraud are predicated upon Defendant’s contractual
duties, the Court GRANTS Defendant’s motion and DISMISSES WIHTOUT PREJUDICE
Plaintiff’s Count 2 claim for fraud.
9
C. Count 3- Negligence
In Count 3, Plaintiff brings a claim for negligence. Plaintiff alleges that Defendant had a
duty “to design, build and construct the property in a structurally sound and workmanly manner.”
Compl., ECF No. 1-1-, ¶ 10. Plaintiff claims that Defendant breached this duty by designing and
building a defective house. Plaintiff further alleges that the structural defects in the property
caused Plaintiff and her family injuries due to the growth of toxic mold which harmed her
family’s health and damaged the value of the property. Id. Defendant argues that this claim
should be dismissed because Plaintiff failed to allege specific facts supporting the elements of
negligence and because her negligence claim is predicated on a contractual duty. The Court will
address each argument in turn.
First, Defendant requests dismissal of Plaintiff’s negligence claim due to Plaintiff’s
failure to plead the elements of negligence with specificity. In order to state a claim for
negligence, the plaintiff must allege that “(1) the defendant owed a duty to the plaintiff, (2) the
defendant breached its duty, (3) and that breach was the proximate cause of (4) damages
sustained by the plaintiff.” Busby, 772 F. Supp. 2d at 283 (citing Powell v. D.C., 634 A.2d 403,
406 (D.C. 1993)). Again, while Plaintiff’s Complaint is sparse on details, the Court concludes
that Plaintiff has pled the basic elements of a negligence claim. Plaintiff states that Defendant
had a duty to construct a structurally sound property, that the duty was breached when Defendant
designed a defective house with leaks, and that the breach led to toxic mold which caused
damages to Plaintiff’s family and to the value of her property. Compl., ECF No. 1-1, ¶ 10.
Accordingly, the Court finds that dismissal is not proper on this ground. See Twombly, 550 U.S.
at 555 (explaining that “a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need
detailed factual allegations”).
10
Second, Defendant argues that dismissal is proper because Plaintiff has failed to allege a
duty separate and distinct from Defendant’s contractual duty. Defendant raised this argument for
dismissal in its Motion. Def.’s Mot., ECF No. 9, 11. However, Plaintiff failed to respond to this
argument. See generally Pl.’s Opp’n, ECF No. 11.
“[T]he mere negligent breach of a contract ... is not enough to sustain an action sounding
in tort.” Hunter ex rel. A.H. v. D.C., 64 F.Supp.3d 158, 186 n.18 (D.D.C. 2014) (quoting Curry v.
Bank of Am. Home Loans Servicing, 802 F. Supp. 2d 105, 109 (D.D.C. 2011)). In order to state a
negligence claim, Plaintiff must establish a “duty or obligation imposed by law independent of
that arising out of the contract itself.” Towers Tenant Ass'n, Inc. v. Towers Ltd. Partnership, 563
F. Supp. 566, 570 (D.D.C. 1983). As such, the question is whether or not Plaintiff has alleged a
legal duty, independent of the contractual duty, to build a structurally safe and sound home. And,
due in part to the sparse nature of Plaintiff’s Complaint, the Court finds that she has not. See Pl.’s
Opp’n, ECF No. 11, 11 (“Defendant breached its duty to Plaintiff by failing to provide the
product (i.e. a structural safe and sound house) which Plaintiff paid for.”). Plaintiff has not
alleged a special relationship between herself and Defendant nor has she alleged an independent
legal duty. Towers Tenant Ass'n,, 563 F. Supp. at 570 (finding an independent legal duty where
the plaintiff alleged specific assurances by defendant and specific statutory rights relinquished by
the plaintiff which went beyond the contractual terms); see also Curry, 802 F. Supp. 2d at 109
(finding no independent duty for a negligence claim where defendant “negligently” rejected a
notarization of a contract).
Given Plaintiff’s failure to allege facts to support an independent legal duty, the Court
finds that Plaintiff has failed to allege a negligence claim separate from her breach of contract
11
claim. Accordingly, the Court GRANTS Defendant’s motion and DISMISSES WIHTOUT
PREJUDICE Plaintiff’s Count 3 claim for negligence.
D. Count 4- Negligent Misrepresentation
In Count 4, Plaintiff makes a claim for negligent misrepresentation. Plaintiff alleges that
Defendant made false representations of material fact when it “knowingly misrepresented the
quality and character of the property’s structural foundation.” Compl., ECF No. 1-1, ¶ 11.
Plaintiff further contends that Defendant knew or should have known that she would rely “upon
its promise to perform under the contract.” Id. Despite this knowledge, Defendant
“intentional[ly] fail[ed] to perform under the contract” causing Plaintiff injury. Id. The Court
finds that dismissal of this claim is appropriate on at least two grounds.
First, Plaintiff brings a claim for negligent misrepresentation, but states that Defendant’s
actions were intentional. To state a claim for negligent misrepresentation, Plaintiff must allege
that “(1) the defendant negligently communicated false information, (2) the defendant intended
or should have recognized that the plaintiff would likely be imperiled by action taken in reliance
upon his misrepresentation, and that (3) the plaintiff reasonably relied upon the false information
to his detriment.” Ponder, 865 F. Supp. 2d at 20 (citing Hall v. Ford Enter., Ltd., 445 A.2d 610,
612 (D.C. 1982)). In her Complaint, Plaintiff does not allege that Defendant engaged in any
negligent conduct. Instead, Plaintiff alleges that Defendant misrepresented the quality and
character of the property’s structural foundation and then “intentional[ly] fail[ed] to perform
under the contract.” Compl., ECF No. 1-1, ¶ 11. Intentional conduct cannot form the basis of a
negligence claim. Comer v. Well Fargo Bank, N.A., 108 A.3d 364, 374 n.14 (D.C. 2015)
(explaining that “appellant would be alleging negligent misrepresentation based on intentional
conduct, and the claim would fail to state a claim for relief”).
12
Second, in its Motion, Defendant argued that Plaintiff’s negligent misrepresentation
claim should be dismissed because it is founded on her breach of contract claim. Def.’s Mot.,
ECF No. 9, 11-12. Again, Plaintiff failed to respond to this argument in her Opposition. See
generally Pl.’s Opp’n, ECF No. 11.
“[C]onduct occurring during the course of a contract dispute may be the subject of a …
negligent misrepresentation claim when there are facts separable from the terms of the contract
upon which the tort may independently rest and when there is a duty independent of that arising
out of the contract itself, so that an action for breach of contract would reach none of the
damages suffered by the tort.” Choharis, 961 A.2d at 1089. As the Court has previously
explained, Plaintiff’s sparse Complaint alleges no duty owed by Defendant to Plaintiff outside of
an alleged contractual duty to build a safe and structurally sound home. See Supra Sec. III.C.
And, here, Defendant’s alleged negligent statement relates directly to its contractual duties—
Plaintiff states that Defendant “knew or should have known that Mrs. Jones would rely, to her
detriment, upon its promise to perform under the contract.” Compl., ECF No. 1-1, ¶ 11; see
Choharis, 961 A.2d at 1089 (finding no negligent misrepresentation claim where “statements and
any duty with respect thereto related directly to the question of interim living expenses provided
for in the contract”). As such, Plaintiff’s negligent misrepresentation claim is derivative of her
breach of contract claim.
Accordingly, because Plaintiff’s negligent misrepresentation claim is predicated on
intentional conduct and is based upon Defendant’s contractual duties, the Court GRANTS
Defendant’s motion and DISMISSES WIHTOUT PREJUDICE Plaintiff’s Count 4 claim for
negligent misrepresentation.
13
E. Count 5- Breach of Express Warranty
In Count 5, Plaintiff brings a claim for the breach of express warranty. Plaintiff contends
that Defendant is in breach of multiple express limited warranties in the “Sales Contract and
Public Offering Statement.” Compl., ECF No. 1-1, ¶ 12. For example, Plaintiff alleges that
Defendant is in breach of the express limited warranty in the purchase agreement by failing to
accept responsibility for necessary repairs of structural defects. Id. Plaintiff further alleges that
Defendant violated the one-year limited warranty because leaks appeared within the one-year
period meaning that her home was not free from defects in materials and workmanship for the
first year. Id. Plaintiff also claims that Defendant violated its two-year limited warranty for
mechanical systems and its ten-year limited warranty for major structural defects. Id. Defendant
argues that this claim should be dismissed because Plaintiff’s Complaint contains no other
reference to a “Sales Contract and Public Offering Statement” and because “[t]he Complaint
simply fails to inform NVR and the Court what warranty, and what terms of the warranty, NVR
allegedly breached, and how it breached any term.” Def.’s Mot., ECF No. 9, 12.
The Court finds that Plaintiff has pled a claim for breach of warranty. Again, the Court
notes that Plaintiff’s Complaint is sparse on details and somewhat difficult to understand.
However, it appears that Plaintiff bases this claim on alleged breaches of the Homeowner
Limited Warranty. Because the Complaint cites and relies on the Agreement and Limited
Warranty, the Court may consider the documents on a motion to dismiss. Ward, 768 F. Supp. 2d
at 119 (D.D.C. 2011).
Pursuant to the one-year limited warranty, Defendant agreed that the home “will be free
from defects in materials and workmanship of the original construction for a period of one (1)
year from the Warranty Date.” Homeowner Limited Warranty, 9-3, ¶ 3. Pursuant to the two-year
14
limited warranty, Defendant agreed that “the installation of the plumbing, electrical, and HVAC
systems will be free from defects in workmanship of the original installation which appear at any
time within two (2) years after the Warranty Date.” Id. at ¶ 4. Under the ten-year limited
warranty, Defendant agreed that “the Home will be free from major structural defects in the
materials or workmanship of the original construction which appear any time within ten (10)
years after the Warranty Date, and which significantly affect the load-bearing functions of the
Home or otherwise render it unsuitable for residential purposes.” Id. at ¶ 5. Finally, Defendant
warranted that if the builder is responsible for a violation of these limited warranties, “the
Builder will repair, replace, or pay the reasonable cost of repairing or replacing the defective
component.” Id. at ¶ 8.
In her Complaint, Plaintiff alleges that each of these express warranties were breached
when the home developed un-repaired leaks in the plumbing within one year, ultimately leading
to toxic mold causing Plaintiff to move and the marketability of the home to decrease. Compl.,
ECF No. 1-1, ¶ 12. The Court finds that Plaintiff has pled the existence of express warranties,
obligations arising out of those express warranties, breaches of those express warranties, and
damages resulting from those breaches. While it is certain that Plaintiff’s Complaint would have
benefited from increased detail, the Court finds that these allegations are sufficient at the motion
to dismiss stage.
Accordingly, the Court DENIES WITHOUT PREJUDICE Defendant’s motion to dismiss
Plaintiff’s Count 5 claim for breach of express warranty.
F. Count 6- Breach of Implied Warranty of Merchantability
In Count 6, Plaintiff brings a claim for the breach of the implied warranty of
merchantability. Plaintiff alleges that Defendant is a merchant with respect to newly-constructed
15
homes and is liable under the implied warranty of merchantability for the properties it builds and
sells. Compl., ECF No. 1-1, ¶ 13. Defendant argues for dismissal on two grounds. First,
Defendant contends that the implied warranty of merchantability does not apply to real property.
Second, Defendant argues that the parties’ agreement excluded all warranties except the express
limited warranties. The Court agrees on both grounds.
In its Motion, Defendant argued that Plaintiff’s Count 6 claim should be dismissed
because the implied warranty of merchantability does not apply to real property. Def.’s Mot.,
ECF No. 9, 14. Plaintiff failed to respond to this argument. See generally Pl.’s Opp’n, ECF No.
11.
Pursuant to D.C. Code, “[u]nless excluded or modified …, a warranty that the goods shall
be merchantable is implied in a contract for their sale if the seller is a merchant with respect to
goods of that kind.” D.C. Code § 28:2-314. This provision requires a sale of “goods.” The
relevant provision of the D.C. Code defines “goods” as “all things (including specially
manufactured goods) which are moveable at the time of identification to the contract for sale.”
D.C. Code § 28:2-105(1); see also D.C. Code 28:2-107 (distinguishing sale of removable
structures and goods from the sale of realty). Plaintiff’s home was not movable, so it does not
qualify as goods subject to the implied warranty of merchantability.
As an additional ground for dismissal, the D.C. Code expressly states that the warranty of
merchantability can be “excluded or modified.” D.C. Code § 28:2-314. The implied warranty of
merchantability can be excluded if the “language … mention[s] merchantability and in case of a
writing [is] conspicuous.” D.C. Code § 28:2-316(2). Alternatively, “all implied warranties are
excluded by expressions like ‘as is,’ ‘with all faults’ or other language which in common
understanding calls the buyer’s attention to the exclusion of warranties and makes plain that
16
there is no implied warranty.” D.C. Code § 28:2-316(3)(a). Here, the purchase agreement states
in all capital letters that “purchaser is purchasing the property ‘as is’ and ‘where is.’” Purchase
Agreement, ECF No. 9-2, ¶ 6. Additionally, the express warranty provision states “[t]here is no
express warranty of any kind, or implied warranty obligation (including, but not limited to, any
implied warranty of merchantability, habitability, or fitness for a particular purpose) given or
undertaken by the Builder in connection with the construction or sale of the Home, and relating
to the quality or condition of any part of the Home, except for this Warranty.” Limited Warranty,
ECF No. 9-3, ¶ 10b. As such, even if the implied warranty of merchantability applied to
Plaintiff’s home, the parties’ contract expressly excluded the warranty.
Accordingly, Plaintiff’s Count 6 implied warranty of merchantability claim is
DISMISSED WITH PREJUDICE because the implied warranty of merchantability does not
apply to Plaintiff’s home, and, even if it did, the parties’ contract excluded the warranty.
G. Count 7- DCCPPA Claim
In Count 7, Plaintiff brings a claim under the DCCPPA. Plaintiff claims that Defendant
violated D.C. Code § 28-3904(a) by making a representation “that goods or services have …
characteristics … or qualities that they do not have,” § 28-3904(d) by making a representation
“that goods or services are of a particular standard, quality, grade, style, or model, [when] in fact
they are of another,” § 28-3904(e) by making a “misrepresentation as to a material fact which
has a tendency to mislead,” § 28-3904(f) by failing “to state a material fact if such failure tends
to mislead,” and § 28-3904(r)(5) by engaging in an unconscionable contract. In support of these
claims, Plaintiff alleges that Defendant “sold a new house and warranted that it was structurally
sound and had been built with good workmanship. In fact, that was not the case.” Compl., ECF
No. 1-1, ¶ 14. Additionally, Plaintiff alleges that the contract was an unconscionable adhesion
17
contract which took advantage of Plaintiff’s ignorance and required her to waive rights of
redress. Id.
Defendant argues that Plaintiff’s claim under the DCCPPA should be dismissed on
multiple grounds. In her Opposition, Plaintiff does not address any of these arguments and
merely restates the statutory language and the allegations in the Complaint. Pl.’s Opp’n, ECF No.
11, 14.
The Court finds that Plaintiff’s DCCPPA claim is insufficiently pled. Plaintiff’ makes
only two factual allegations in asserting this claim. First, Plaintiff states that Defendant “sold a
new house and warranted that it was structurally sound and had been built with good
workmanship. In fact, that was not the case.” Compl., ECF No. 1-1, ¶ 14. Second, Plaintiff states
that the contract was unconscionable because it “took advantage of [her] ignorance” and
“required [her] to waive every conceivable right she has to seek redress of the wrongs she
suffered.” Id. Notably, Plaintiff does not even make the conclusory allegation that she was
damaged by these purported violations of the DCCPPA. Plaintiff does not state that she would
have acted differently absent Defendant’s warranty that the house was structurally sound. In fact,
based on Plaintiff’s language choice, it appears that this warranty came after the house had
already been purchased and built. Compl., ECF No. 1-1, ¶ 14 (explaining that Defendant
“warranted that it was structurally sound and had been built with good workmanship” (emphasis
added)). If these statements about the soundness and the workmanship of the house came after
the house was already purchased and built, it is unclear how the statements could have caused
Plaintiff damage.
The Court acknowledges that the DCCPPA can be violated “whether or not any
consumer is in fact misled, deceived or damaged thereby.” D.C. Code § 28-3904. However, a
18
Plaintiff must still establish damages as a result of the unlawful trade practice in order to assert a
DCCPPA claim. See Jackson v. ASA Holdings, 751 F. Supp. 2d 91, 99 (D.D.C. 2010); see also
Williams v. Purdue Pharma Co., 297 F. Supp. 2d 171, 177 (D.D.C. 2003) (finding the plaintiff
had no standing to bring a DCCPPA claim where plaintiff had not been injured by the trade
practice); Robinson v. Deutsche Bank Nat. Trust Co., 932 F. Supp. 2d 95, 108 (D.D.C. 2013)
(dismissing DCCPPA claim where there plaintiff “has failed to explain what actions he would
have taken if he had been aware of defendants’ alleged misrepresentations … [and] he has failed
to allege any facts that plausibly demonstrate that he has been damaged by defendants’ alleged
misrepresentations”); Muldrow v. EMC Mortgage Corp., 766 F. Supp. 2d 230, 235 (D.D.C.
2011) (granting summary judgment on plaintiff’s DCCPPA claim where the plaintiff did not “set
forth any facts demonstrating any correlation between her claimed damages and [the
defendant’s] alleged DCCPPA violations”).
The Court further notes that the dearth of Plaintiff’s factual allegations in support of her
claim is further cause for dismissal. Plaintiff claims only that Defendant “sold a new house and
warranted that it was structurally sounds and had been built with good workmanship. In fact, that
was not the case.” Compl., ECF No. 1-1, ¶ 14. This conclusory and unsupported allegation is not
sufficient to state a claim for a violation of the DCCPPA under even notice pleading standards.
And, at least some courts have held that violations of the DCCPPA are held to a heightened
pleading standard as they relate to fraudulent averments. See Witherspoon v. Philip Morris, Inc.,
964 F. Supp. 455, 464 (D.D.C. 1997) (holding that plaintiff failed to plead DCCPPA claim with
particularity); Alvarez v. Ins. Co. of N. Am., No, 06-4326, 2006 WL 3702641, at *4 (E.D. Pa.
Dec. 12, 2006) (explaining that same pleading standard for fraud applies to DCCPPA claims);
Jefferson v. Collins, 905 F. Supp. 2d 269, 289 (D.D.C. 2012) (applying Rule 9(b)'s heightened
19
pleading standard to dismiss DCCPPA claims). Plaintiff’s claim under the DCCPPA is simply too
devoid of factual allegations to establish a violation and damages from that violation.
As Plaintiff’s claim for unconscionability is slightly different than her claims for
misrepresentation and omission of facts, the Court will further address the alleged violation of §
28-3904(r)(5). Under that section a party cannot “make or enforce unconscionable terms or
provisions of sales” when “the person has knowingly taken advantage of the inability of the
consumer reasonably to protect his interests by reasons of age, physical or mental infirmities,
ignorance, illiteracy, or inability to understand the language of the agreement.” D.C. Code § 28-
3904(r)(5). Plaintiff makes the conclusory allegation that Defendant took advantage of her
ignorance. However, Plaintiff makes no allegation that Defendant knew or had any reason to
know that Plaintiff was ignorant. And, Plaintiff fails to explain in what way she was ignorant and
unable “reasonably to protect [her] interests.” Id.; see Hughes v. Abell, 634 F. Supp. 2d 110, 114
(D.D.C. 2009 ) (dismissing DCCPPA claim where the “misunderstanding does not suggest an
inability to understand [the contract’s] terms, which is critical to this factor”); Grayson v. AT&T
Corp., 15 A.3d 219, 252 (D.C. 2011) (finding “conclusory allegations pertaining to vulnerable
members of the District’s population” insufficient to state a DCCPPA claim).
For these reasons, the Court finds that Plaintiff has failed to state a claim under the
DCCPPA and DISMISSES WITHOUT PREJUDICE Plaintiff’s Count 7 claim.
H. Count 8- Strict Liability
In Count 8, Plaintiff brings a claim for strict liability. Plaintiff states that Defendant “is a
merchant engaged in the practice of building and selling residential property. The property which
it built and sold to Mrs. Jones was defective and caused her injuries.” Compl., ECF No. 1-1, ¶
15. Defendant moves for dismissal of this claim on two grounds. First, Defendant argues that
20
Plaintiff’s claim is devoid of factual allegations. Second, Defendant contends that “plaintiff’s
potential strict liability claim is duplicative of, and subsumed within, a claim for breach of
warranty.” Def.’s Mot., ECF No. 9, 18. The Court will address each argument.
First, Defendant faults Plaintiff for not making clear whether she asserts a manufacturing
defect, design defect, or an insufficient warning. To state a claim for strict liability, a plaintiff
must plead that “(1) the seller was engaged in the business of selling the product that caused the
harm; (2) the product was sold in a defective condition unreasonably dangerous to the consumer
or use; (3) the product was one which the seller expected to and did reach the plaintiff consumer
or user without any substantial change from the condition in which it was sold; and (4) the defect
was a direct and proximate cause of the plaintiff's injuries.” Warner Fruehauf Trailer Co., Inc. v.
Boston, 654 A.2d 1272, 1274 (D.C. 1995).
Here, Plaintiff has alleged that Defendant is a merchant engaged in the practice of
building and selling homes. Compl., ECF No. 1-1, ¶ 15. Plaintiff has further alleged that the
property was defective when it was sold, due to leaks in the plumbing, and that the defects
caused her injuries. Again, while Plaintiff’s Complaint is sparse on details, the Court finds that
Plaintiff has alleged facts sufficient to state a claim for strict liability. Twombly, 550 U.S. at 555
(“a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual
allegations”).
Second, Defendant alleges that Plaintiff’s strict liability claim is subsumed by her breach
of warranty claim. This argument fails for two reasons. First, the Court has already dismissed
Plaintiff’s implied warranty claim. See Supra Sec. III.F. And, Plaintiff’s breach of limited
warranty claim is based on contractual provisions which are not implicated by a strict liability
claim. Second, it appears that the torts of strict liability and implied warranty merge only when
21
“privity of contract is absent.” In re Fort Totten Metrorail Cases Arising out of the Events of
June 22, 2019, 793 F. Supp. 2d 133, 152 (D.D.C. 2011); see also Liberty Mut. Ins. Co. v. Equip.
Corp. of Am., 646 F. Supp. 2d 51, 56 (D.D.C.2009) (construing implied warranty and strict
products liability claims as a single tort where the plaintiff and manufacturer were not in privity
of contract). Here, Plaintiff and Defendant are in privity of contract, so it would appear that the
two torts do not merge. Potomac Plaza Terraces, Inc. v. QSC Prods., Inc., 868 F. Supp. 346,
350-52, 354 (D.D.C. 1994) (permitting strict liability and implied warranty claims where the
parties had a contractual relationship).
Accordingly, the Court DENIES WITHOUT PREJUDICE Defendant’s motion to dismiss
Plaintiff’s Count 8 claim for strict liability.
I. Damages
The Court notes that in its Motion, Defendant disputes Plaintiff’s ability to collect certain
damages for certain claims. However, Plaintiff’s request for damages is not divided or specified
by claim. And, the Court has dismissed many of Plaintiff’s claims. As such, the Court finds that
it is inappropriate at this time to dismiss portions of Plaintiff’s damages claims. The Court will
leave decisions as to damages for a later stage in litigation.
IV. CONCLUSION
For the foregoing reasons, the Court will GRANT IN PART and DENY WITHOUT
PREJUDICE IN PART Defendant’s Motion to Dismiss. The Court DISMISSES WITHOUT
PREJUDICE Plaintiff’s Count 2 claim for fraud, Count 3 claim for negligence, and Count 4
claim for negligent misrepresentation because the allegations underlying these claims are
founded on the alleged breach of contract and do not state a claim in tort. The Court further
DISMISSES WITH PREJUDICE Plaintiff’s Count 6 claim for a breach of the implied warranty
22
of merchantability because that code provision does not apply to immovable property and
because Plaintiff’s contract excludes all express and implied warranties not specified. Finally,
the Court DISMISSES WITHOUT PREJUDICE Plaintiff’s Count 7 claim for a violation of the
DCCPPA because Plaintiff has failed to allege that she was damaged by the violation and has
otherwise failed to state a claim for which relief may be granted. Based on the current record, the
Court otherwise DENIES WITHOUT PREJDUICE Defendant’s Motion.
Accordingly, Plaintiff may proceed with her Count 1 claim for breach of contract, Count
5 claim for breach of express warranty, and Count 8 claim for strict liability.
An appropriate Order accompanies this Memorandum Opinion.
/s/
COLLEEN KOLLAR-KOTELLY
United States District Judge
23
| {
"pile_set_name": "FreeLaw"
} |
846 F.Supp. 1382 (1994)
Elaine THOMAS et al., Plaintiffs,
v.
FAG BEARINGS CORPORATION, Defendant and Third-Party Plaintiff,
v.
CONTRACT FREIGHTERS, INC., et al., Third-Party Defendants.
No. 92-5070-CV-SW-8.
United States District Court, W.D. Missouri, W.D.
February 10, 1994.
*1383 *1384 John M. Parisi, Bobbie R. Bailey, Lynn R. Johnson, Shamberg, Johnson, Bergman & Morris, Chartered, Overland Park, KS, Michael A. Gould, Raaji Deen Kanan, Gould & Duchardt, North Kansas City, MO, for plaintiffs.
David Field Oliver, Smith, Gill, Fisher & Butts, Kansas City, MO, Eric S. Aronson, John M. Scagnelli, Whitman & Ransom, Newark, NJ, for defendant and third-party plaintiff.
William T. Session, The Session Law Firm, John M. Edgar, Bryan Cave, Kansas City, MO, David R. Erickson, Douglas P. McLeod, Blackwell, Sanders, Matheny, Weary & Lombardi, Overland Park, KS, James T. Price, Elaine Drodge Koch, Spencer, Fane, Britt & Browne, Randall E. Hendricks, Rouse, Hendricks, German, May & Shank, P.C., Kansas City, MO, Carol M. Wood, King & Spalding, Atlanta, GA, James W. Erwin, Gordon L. Ankney, Thompson & Mitchell, St. Louis, MO, James H. Arneson, Gary R. Cunningham, Daniel, Clampett, Lilley, Dalton, Powell & Cunningham, Springfield, MO, for third-party defendants.
MEMORANDUM OPINION AND ORDER
STEVENS, Chief Judge.
This matter is before the Court on third-party defendants' motions for summary judgment. This suit began as a class-action complaint by the residents of Silver Creek and Saginaw Village against FAG Bearings Corporation for the contamination of their well water by the chemical TCE, which they allege was released into the groundwater by FAG Bearings. FAG Bearings, in turn, brought a third-party complaint against numerous other corporations which maintain facilities near Silver Creek and Saginaw Village.
Those third-party defendants now move for summary judgment on the grounds that FAG Bearings cannot prove that any one of them caused the contamination at Saginaw Village or Silver Creek.
SUMMARY JUDGMENT
Summary judgment is appropriate 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 judgment as a matter of law." Fed.R.Civ.P. 56(c).
If a party is unable to make a sufficient showing to establish the existence of some essential element of its case upon which it will bear the ultimate burden of proof at trial, all other facts are necessarily immaterial. Celotex Corp. v. Catrett, 477 U.S. 317, *1385 321, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).
A party seeking summary judgment bears the initial burden of demonstrating to the court that an essential element of the nonmoving party's case is lacking. Id. The burden then shifts to the nonmoving party to come forward with sufficient evidence to demonstrate that there is a factual controversy as to that element, or to explain why such evidence is not currently available. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Fed.R.Civ.P. 56(e). If the nonmoving party fails so to respond, summary judgment, if appropriate, shall be entered against that party. Fed.R.Civ.P. 56(e).
The standard for determining whether a factual dispute is genuine is the same as the standard applied to motions for a directed verdict. Anderson v. Liberty Lobby, Inc., 477 U.S. at 249, 106 S.Ct. at 2511.
The "genuine issue" summary judgment standard is "very close" to the "reasonable jury" directed verdict standard: "The primary difference between the two motions is procedural; summary judgment motions are usually made before trial and decided on documentary evidence, while directed verdict motions are made at trial and decided on the evidence that has been admitted." Bill Johnson's Restaurants, Inc. v. N.L.R.B., [461 U.S. 731] 103 S.Ct. 2161 [76 L.Ed.2d 277] (1983).
Id., 477 U.S. at 251, 106 S.Ct. at 2512. The standard under both is whether the evidence is sufficiently at odds as to require a jury to decide, or whether the case is so one-sided that one party must prevail as a matter of law. Id.
If [a party] in a run-of-the-mill civil case moves for summary judgment or for a directed verdict based on the lack of proof of a material fact, the judge must ask himself not whether he thinks the evidence unmistakably favors one side or the other but whether a fair-minded jury could return a verdict for the [non-moving party] on the evidence presented. The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff. The judge's inquiry, therefore, unavoidably asks whether reasonable jurors could find by a preponderance of the evidence that the [non-moving party] is entitled to a verdict.
Id. at 252, 106 S.Ct. at 2512. Therefore, the standard on this motion is whether the defendant has come forward with evidence which would allow a reasonable jury to find in its favor.
The facts must be viewed in the light most favorable to the nonmoving party, who must be given the benefit of all reasonable inferences which may be made from the facts disclosed in the record. Adickes v. S.H. Kress & Co., 398 U.S. 144, 156, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Raschick v. Prudent Supply, Inc., 830 F.2d 1497, 1499 (8th Cir.1987), cert. denied, 485 U.S. 935, 108 S.Ct. 1111, 99 L.Ed.2d 272 (1988).
In applying the Supreme Court's standard for summary judgment, this Court is guided by the following language from Celotex Corp. v. Catrett:
One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses, and we think it should be interpreted in a way that allows it to accomplish this purpose....
The Federal Rules of Civil Procedure have for almost 50 years authorized motions for summary judgment upon proper showings of the lack of a genuine, triable issue of material fact. Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to "secure the just, speedy and inexpensive determination of every action." Fed.R.Civ.P. 1.... Rule 56 must be construed with due regard not only for the rights of persons asserting claims or defenses that are adequately based in fact to have those claims and defenses tried to a jury, but also for the rights of persons opposing those claims and defenses to demonstrate in the manner provided by the Rule, prior to trial, *1386 that the claims and defenses have no factual basis.
477 U.S. at 323-27, 106 S.Ct. at 2553-55.
DISCUSSION
FAG Bearings brought this third-party complaint against the third-party defendants under CERCLA, 42 U.S.C. § 9613 for indemnity or contribution towards satisfaction, if any, of liability assessed to FAG Bearings for contamination at the Silver Creek and Saginaw Village sites.[1] FAG Bearings also sued the third-party defendants for the contamination of its own site under 42 U.S.C. § 9607. The elements to prove either claim are essentially the same. Proof of a CERCLA claim requires that:
1. There was a release or threatened release of a hazardous substance;
2. The site of the release or threatened release is a "facility" as that term is defined in the statute;
3. The release or threatened release has caused a party to incur response costs; and
4. The person from whom costs are sought falls into a statutorily-defined group of persons.
See 42 U.S.C. § 9607.
Under Rule 56, the defendant must not disprove every element and every possible factual scenario. The defendant need only make a showing that plaintiff cannot prove an element of its case. Once that is done, the burden is on the plaintiff to present some evidence that there is a material issue of fact about the element in question. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). In this case, the third-party defendants argue that FAG Bearings cannot prove numbers one or three of the stated essential elements of a CERCLA claim. The third-party defendants claim that FAG Bearings can present no evidence that there has been a "release" of TCE or any TCE-related substance at any of the third-party sites. They further argue that FAG Bearings has no evidence to support a contention that any release at their site "caused" the contamination at Silver Creek or Saginaw Village.
Both issues raised by third-party defendants relate directly to the concept of "causation" in CERCLA actions. Before addressing either argument, the Court must discern the role of causation under 42 U.S.C. § 9607.
The element of "causation" in CERCLA suits has rarely been addressed because the "release" of the hazardous waste is almost always at the same site that has been contaminated. Congress adopted strict liability in these situations.[2] It is not necessary to connect the actual waste disposed of at a site to the waste actually released. Instead, Courts have determined that the statute
appears to impose liability on a generator who has (1) disposed of its hazardous substances (2) at a facility which now contains hazardous substances of the sort disposed of by the generator (3) if there is a release of that or some other type of hazardous substance (4) which causes the incurrence of response costs.
United States v. Wade, 577 F.Supp. 1326, 1333 (E.D.Pa.1983); see also William W. Rodgers, Jr., 4 Environmental Law Hazardous Wastes and Substances § 8.11, at 661. There is no need to trace the wastes released to the wastes deposited, or to show that defendant's delivery of wastes to the site was the "but for" cause of the release, or that defendant's wastes were a substantial factor in the resulting contamination. See Rodgers, § 8.11, at 611-612. The connection is presumed. One whose waste is disposed of at a site is presumed to be jointly and severally liable for the entire contamination at a site. This is so in the overwhelming majority of cases.
*1387 The present case, however, is in a different posture. This is a "two-site" case the alleged release took place at a different site than where the contamination was found. Use of the strict liability presumption of Wade without modification would hold liable anyone who released the same type of substance that has contaminated another site. A party who discovers TCE groundwater contamination in Missouri could successfully sue every party who released TCE in the entire country. Although CERCLA's liability provisions are far-reaching, there is no indication that Congress intended this absurd result. Accordingly, the Court must determine what type of link CERCLA requires between an offsite release and the resulting contamination.
The Eighth Circuit recently touched upon the causation issue in Farmland Indus. Inc. v. Morrison-Quirk Grain Corp., 987 F.2d 1335 (8th Cir.1993). In that case, the defendant was sued under CERCLA for contributing to contamination at a site. The defendant admitted that a release had occurred many years previous, but that the release had been cleaned up. Defendant argued that a causal link between the contamination and the harm was necessary under the existing facts. The Eighth Circuit agreed and held that there must be a causal link between the contamination and the response costs incurred in cleaning it up. To hold otherwise would mean that the scope of liability for any contamination that migrated to a site would be unlimited.
Although Morrison-Quirk Grain did recognize the principle of causation, it did not address the application of causation principles and the standard of proof in a multiple site situation.
Third-party defendants in the present case argue that causation should be strictly defined and that it should be interpreted to require FAG Bearings to be able to trace the contamination at Silver Creek and Saginaw Village directly to a third-party defendant. FAG Bearings argues that the statute's adoption of strict liability relieves it of the need to "fingerprint" the contaminants, and that a looser showing of causation should be allowed.
While cases dealing with multiple-site causation are rare, there are two published ones that deal with substantially similar issues.[3] An in-depth look at those cases would be helpful in framing the causation issues before the Court in this case.
Dedham Water Co. v. Cumberland Farms
This case involves Dedham Water Co. (Dedham) wells that were contaminated by volatile organic compounds (VOCs). Dedham cleaned up the contaminated wells and later sued nearby Cumberland Farms, alleging that VOCs discharged from Cumberland's property contaminated the groundwater at Dedham's wells. The case resulted in several published opinions from both the district and circuit courts.
The district court was confronted on a summary judgment motion with the issue of whether plaintiff must prove that defendant in fact caused the contamination at plaintiff's site, where defendant's alleged release did not occur on plaintiff's property. Dedham I, 689 F.Supp. 1223 (D.Mass.1988). The court, in discussing plaintiff's burden of proving causation, stated, "when a plaintiff alleges that chemicals have migrated underground from another site, the plaintiff must establish that the second site was in fact the source of the pollutants in question." Dedham I, 689 F.Supp. at 1225.
The court reasoned that causation is one of the essential elements of a prima facie case under CERCLA. Id. The plaintiff had argued that defendant should be strictly liable for any release, but the court stated that plaintiff's argument "confuses the principle of strict liability for the effects of a release, with the antecedent question of whether the release has any effects at all." Id. at 1225. The court determined that in cases where different persons deposited waste at one site, Courts have held that plaintiffs do not have to link specific wastes which were released to *1388 specific generators the causal link is presumed. However, in a two-site case where waste is disposed of at one site and allegedly travels to a second site, the causal question becomes whether defendant's releases have any effect on plaintiff's site. Id. at 1227.
The district court, after a hearing on the motion, determined that any VOCs discharged on defendant's property did not enter the groundwater and travel to Dedham's wells. The court found that Cumberland itself was contaminated by one or more sources located upgradient. Based on all these factors, the court found that any discharge by Cumberland Farms did not cause any contamination at Dedham's wells. Id. at 1235.
Plaintiff appealed, arguing that the district court incorrectly held that Dedham must show that the VOCs actually migrated to their property in order to support a claim under CERCLA. Rather, Dedham argued that the proper causal inquiry is whether a release or threatened release caused a party to incur response costs. Dedham II, 889 F.2d 1146 (1st Cir.1989).
The circuit court held that it was error for the district court to require proof that defendant's hazardous waste actually migrated to plaintiff's property because it is possible for a defendant's release to cause plaintiff to incur costs in response to a release without the substances actually migrating there. Dedham II, 889 F.2d at 1154.
[T]he district court did not consider whether defendant's releases (or threatened releases) might nonetheless have caused the plaintiff to incur "response costs" even though those releases did not in fact contaminate the wells. (A plaintiff, for example, under certain circumstances might reasonably think that a particular release would prove likely to contaminate his wells and spend money to avoid the contamination even though no actual contamination occurs.)
Dedham II, 889 F.2d at 1157. The trial judge's finding of no actual contamination was not challenged on appeal.
The case was remanded and reassigned to another judge to determine, despite the prior finding that no VOCs actually migrated, whether response costs were incurred because of threatened releases from defendant's property. Dedham III, 770 F.Supp. 41 (D.Mass.1991). On remand, the court found that plaintiff discovered contaminants in the groundwater and took action to prevent further pollution before identifying defendant as a potential source. Therefore, the court found that plaintiff's response costs could not have been caused by the discovery of defendant as a potential source of past or future contamination. For this reason, the court denied liability on the CERCLA claim. Id. at 42-42.
The unsuccessful plaintiff again appealed. Dedham IV, 972 F.2d 453 (1st Cir.1992). The First Circuit affirmed the ruling below, but clarified the way in which a "threatened release" could cause response costs:
[T]o the extent that [plaintiff's] activities e.g., retaining consultants, performing scientific studies, building the treatment plant were in response to actual contamination, Cumberland was home free. But, polluting substances that stopped short of the well's boundary could conceivably have caused the [plaintiff] to incur expenses compensable under CERCLA. (citation omitted). If, and to the extent that, Cumberland posed a threat, and Dedham acted in response thereto, Cumberland might be held liable.
Dedham IV, 972 F.2d at 457. To recover for a threatened release, "a plaintiff would first have to prove that it possessed a good-faith belief that some action was desirable in order to address a particular environmental threat. The plaintiff would then have to demonstrate that its response to the perceived threat was objectively reasonable." Dedham IV, 972 F.2d at 458 n. 2. In addition, the costs must be incurred as "an environmental rejoinder to threatened releases," and not "to define the magnitude of a known problem (actual contamination), to rectify that problem and, relatedly, to fix responsibility for it with an eye toward litigation." Dedham IV, 972 F.2d at 459. The court specifically held that the mere presence of actual contamination does constitute a threat of contamination for which the defendant could be liable. Id., at 460.
*1389 Artesian Water Co. v. New Castle
The second two-site groundwater "causation" case is Artesian Water Co. v. New Castle, 659 F.Supp. 1269 (D.Del.1987), aff'd, 851 F.2d 643 (3rd Cir.1988), in which a water company brought suit to recover for response costs after a release or threatened release from a nearby landfill. The defendant conceded that there were contaminants in the its landfill and even in the groundwater around the landfill, but argued that the contamination of plaintiff's wells was the result of concurrent releases from a nearby site owned by a non-party. Plaintiff produced evidence that contaminants were released on defendant's site, while defendant produced nothing more than an expert's opinion critiquing the reliability of plaintiff's evidence.
The court held that plaintiff was entitled to summary judgment on the issue of release because defendant did not "take advantage of the opportunity to create a triable issue by offering independent evidence that no hazardous substances are present within the boundaries of the site." Id. at 1282.
Next, the court considered defendant's arguments on the issue of release. Both parties admitted that contaminants were present in the groundwater immediately surrounding defendant's dump. However, defendant argued that plaintiff had not proved that the contaminants had come from defendant's dump and that the contaminants were actually the result of a release at the site of a non-party. The court rejected defendant's argument that plaintiff must prove conclusively that the contaminants which were found in the water near the landfill actually came from the landfill. "From a technological standpoint, Artesian's ability to `fingerprint' the leachate in the groundwater as emanating from either the Site or the DS & G Landfill is exceedingly doubtful. To impose such a requirement might permit the owners and operators of both facilities to avoid financial responsibility for the clean-up, and would thus eviscerate section 1007."[4]Id. at 1282. The court found that there was a release from defendant's site.
The court, did, however, recognize the necessity for a causal connection between the release or threatened release and the incurrence of clean-up costs. Id. at 1282 (citing New York v. Shore Realty Corp., 759 F.2d 1032, 1044 & n. 17 (2d Cir.1985); Idaho v. Bunker Hill Co., 635 F.Supp. 665, 674 (D.Idaho 1986)). The court then applied a concurrent cause approach in holding that "if the release or threatened release of contaminants from the Site was a substantial factor in causing Artesian to incur costs, the County may not escape liability merely because the other causes ... have contributed to the result." Id. at 1283. The court rejected defendant's proposed "but for" causation because it was inadequate where "two or more causes have concurred to bring about an event, and any one of them, operating alone, would have been sufficient to cause the identical result." Id. A defendant has caused an event if "it was a material element and a substantial factor in bringing it about." Id., citing W. Keeton et al., Prosser and Keeton on Torts § 41, at 267 (5th ed.1984).[5]
The court, applying this test, found that the releases from defendant's landfill were a substantial factor in causing Artesian wells to incur clean up costs. Unlike Dedham, there was no requirement that plaintiff prove defendant's release actually contaminated its property since plaintiff incurred response costs as a result of the release, not the discovery of contamination.
Although the Artesian and Dedham cases seem at odds on the issue of "fingerprinting" contamination, they are easily reconciled. The Artesian court refused to require "fingerprinting" in order to prove that a release had occurred. Contamination was found immediately *1390 surrounding defendant's dump. The defendant produced no affirmative evidence to prove that the contamination did not result from a release at the dump, instead, it only questioned plaintiff's ability to prove the contamination's source. The court, following United States v. Wade, supra, presumed that wastes immediately outside a dump containing wastes identical to those in the dump have been released from that dump.
Once the discovered wastes are no longer in the immediate vicinity of the dump, however, the question becomes one of causation, and "fingerprinting" becomes necessary to prove that the release was a "substantial factor." This view comports with the notions of fairness that have always been present with questions of causation in our legal system. A defendant may have committed a wrong on his own property, and a plaintiff may have been injured on his own property, but unless the defendant's wrong is causally-related to plaintiff's injury, the defendant should not be held liable. Relaxing that standard of proof as urged by FAG Bearings here would undermine this basic principle.
These two cases provide a rational framework for analyzing the causal link in a CERCLA claim. "Fingerprinting" to prove actual contamination caused by the defendant is not necessary where the plaintiff can show that the release or threatened release by the defendant, and not the actual contamination, caused the plaintiff to incur response costs. However, where the response costs are incurred solely as a result of and in response to the actual contamination, the plaintiff must prove that the release by the defendant actually caused the contamination at plaintiff's site, as contemplated by the Dedham court.
In this case, the first scenario is not at issue. All of the response costs alleged by Silver Creek and Saginaw Village in the principal complaint are related to the discovery of actual contamination, and not in response solely to a discovered release or the threat of future contamination by FAG Bearings or the third-party defendants. Therefore, FAG Bearings, as well as the class-action plaintiffs, must prove the source of the contamination in order to satisfy the elements of a CERCLA claim.
Therefore, the inquiry before this Court on this motion for summary judgment is whether FAG Bearings has come forward with sufficient facts that would be admissible at trial that would allow a reasonable jury to find that a third-party defendant caused the TCE contamination in the groundwater at Silver Creek and Saginaw Village. Anderson v. Liberty Lobby, 477 U.S. 242, 249, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).
While there may be clear and direct evidence of causation in certain groundwater contamination cases, the analysis is usually somewhat more based on indirect evidence and weighing of multiple factors. See William W. Rodgers, 2 Environmental Law Air and Water, § 4.7, at 99-102 (West 1986 & Supp.1992). Factors to consider include: the location of the wells; the proximity of the contamination to the wells; the geology; the nature of the contamination; and the quantity of contamination.
The third-party defendants argue that FAG Bearings has not presented sufficient evidence of these factors to allow a reasonable jury to find any one of them caused the contamination at Silver Creek and Saginaw Village.
FAG Bearings presents several types of evidence to oppose the summary judgment motions: test data that indicates the presence of TCE-related substances on the third-party defendants' properties in varying concentrations; reports indicating the use of TCE-related substances at some of the sites; and most importantly, a hydrogeologist who interprets the available data and opines that releases may have occurred at each of the third-party defendant properties, and that the contaminants released reached a Saginaw Village and Silver Creek by way of a hypothesized underground water pathway.
In this motion for summary judgment, the third-party defendants contest both the first and third elements of the CERCLA claim as defined by the Court. The issue before the Court is, then, whether FAG Bearings' evidence is sufficient to withstand summary judgment on these issues?
*1391 FAG BEARINGS' EVIDENCE OF CAUSATION
The primary issue is whether FAG Bearings has presented sufficient evidence for a jury find that, if TCE was released from a third-party defendant's property, did it actually cause the contamination in the drinking water wells that has caused plaintiffs to incur response costs. FAG Bearings' evidence on this issue is common to all third parties. FAG Bearings first alleges it has evidence to prove that releases of hazardous substances at the third-party defendants' sites leached into the groundwater beneath those sites. Next, FAG Bearings alleges that there is a genuine issue of fact whether those leachates entered a groundwater pathway running generally northeast to southwest that carried hazardous substances from the third-party defendants to Silver Creek and Saginaw Village.
This theory is presented by Randall J. Overton, a hydrogeologist with Tetra Tech, a consulting firm hired by FAG Bearings. Overton prepared a report on his findings, testified about his opinions at length at a deposition, and submitted an affidavit with FAG Bearings' suggestions in opposition to this motion.
Overton holds the opinion that the pathway runs under or near each third-party defendant, with the exception of Vickers, and towards Silver Creek and Saginaw Village. Overton readily admits that although he knows the general contours of the pathway, he cannot say definitely that the pathway actually runs from any particular third-party defendant to Silver Creek or Saginaw Village. Nor can he state that any contaminant has, in fact, migrated from any third-party's site to the drinking water wells. Overton stated that extensive additional testing must be conducted to establish such a link for certain. His testimony is the only evidence FAG Bearings presents on the issue of causation.
With this explanation in mind, the question before the Court becomes: Could a jury find, from Overton's opinion that the groundwater pathway exists and that it generally runs from the third parties to the drinking wells, that any release at a third-party defendants' site caused or contributed to cause the contamination at in Silver Creek, Saginaw Village, or at FAG Bearings' facility? To answer this question, the Court looks to the Overton's own words. The following are numerous examples of the Overton's testimony on the subject of establishing definitely the boundaries of the pathway and determining who is responsible for the contamination at Silver Creek and Saginaw Village. They demonstrate his lack of scientific "certainty" on central issues:
He does not have sufficient information to identify the source of the contamination:
Q. In the third paragraph of Page 42 [of the consultant's report], Mr. Overton, you suggest that additional investigative work also needed to be conducted to identify source areas for soil and groundwater contamination.
A. Yes.
Q. I take it by this statement that insufficient data is available to you now to determine whether or not any of the facilities of the third-party defendants are sources of groundwater contamination at Silver Creek or Saginaw Village. Is that true?
A. Don't have specific information that would allow me to draw a conclusion that they are.
Q. You do not have that?
A. No, do not. We have, of course, general information, some data that suggests that contamination contaminants are present in the soils.
Q. But insufficient data to determine whether or not it's contributing to contamination
A. Insufficient to determine if there's a sufficient source on those sites to be contributing to groundwater contamination.
Q. At Silver Creek and Saginaw Village?
A. At Silver Creek and Saginaw Village.
Overton deposition, at 42-44.
He has formed an opinion that an underground pathway exists generally, but cannot link it to any particular third-party site:
Q. Did I misunderstand your testimony just now that you have, in fact, been able to form opinions and conclusions and *1392 therefore defined the groundwater contaminant pathways near Silver Creek or Saginaw Village?
A. Yes, I formed opinions about the general groundwater contaminant pathway in that vicinity of Joplin and including Silver Creek and Saginaw Villages, but do not make the mistake that that's all that is needed to determine specific or very specific pathways from, you know, specific facilities to the wells. The general pathway exists. The specific pathway of the contaminants and the fate of the contaminants within that pathway, that is in question.
Overton deposition, p. 34.
Overton can only speculate that Gulf States is a potential contributor:
Q. So, other than what is in the report and the groundwater pathway that you discussed earlier, there are no other facts that you're relying on to say that Gulf States is a potential source of contamination at Silver Creek and Saginaw?
A. That's correct. See, the it might be helpful for me to just describe it. You know, really the basic approach taken in this whole thing was I spent quite a bit of time looking at information and developing the conceptual groundwater pathway, and later adding on to that the sources that had the potential to contribute to groundwater contamination.
. . . . .
A. ... My goal in doing it that way is, mind you, we have a pathway, and now it's in my mind did the potential exist for that facility based on the compounds present, for it to be a contributor?
Overton deposition, at 267-68.
He does not have the information to form any opinion as to whether any facility was the actual source of the contamination:
A. All right, I formed an opinion that there has been a release of compounds, using the "compounds," because they vary, in the soils on facilities, based on the presence in the soils. And whether or not I have not formed an opinion that they are specifically the source of contaminants found in the Silver Creek and Saginaw Village wells because that data just doesn't apply at this point to arrive at such an opinion.
Q. ... [H]ow is it, then, that you are certain that a contaminant transport pathway exists between those facilities and Silver Creek and Saginaw?
A. The pathway exists independent of whether or not contaminants were actually transported. Okay? That information, the existence of that pathway, I'm very comfortable that that's there, that the general pathway exists. Refining it is something that needs to be done to arrive at a specific determination as to specific facilities and their contributions, those types of things. There's sufficient information available, I believe, to find that the pathway does exist. There's insufficient data available to say that specific compounds from various facilities are the result of contamination found in Silver Creek wells, because the data hasn't been collected yet. The same compounds occur and they are in the soils on the facilities over the pathway.
Overton deposition, at 32-33.
All he can say is that there is a "likelihood" that someone "could" have contributed to the contamination:
Q. And that is your belief; correct? That to date there has not been sufficient investigation to determine whether contaminants have migrated from the identified facilities and how far the contaminants may have moved?
A. That's correct. What we have at this time is information about the nature and probable behavior of a groundwater pathway and potential sources over the pathway. That's what we have.
Q. All right. And you don't have enough data to tell Judge Stevens that contaminants move from Vickers to Saginaw Village or Silver Creek?
A. I have enough information to tell Judge Stevens that there's a high likelihood that the facilities identified here could be contributing to the contamination of Silver Creek.
Q. My question to you is, sir, do you have enough data to tell Judge Stevens contaminants *1393 did move from Vickers to Silver Creek?
A. In an absolute sense, no.
Q. The same question with regard to Saginaw Village. Do you have enough data to tell Judge Stevens contaminants did move from Vickers' facility to Saginaw Village?
A. In an absolute sense, no.
Q. All right. And as a matter of fact, there is not enough data to say positively yes or positively no?
A. That's correct.
Q. And if
A. In absolute
Q. we want to take the word "positively" out, the most you can say is there is a potential
A. Yes, I have been using the word "potential."
Overton deposition, at 121-22.
Finally, Overton again emphasizes that the essence of his opinion that there is "reason to believe" that someone could be a "potential contributor:"
Okay, well, there simply isn't enough available information from any party just to draw a conclusion that there's a definite contribution from any one party at all that I have seen or has been made available to me. However, we generally find occasions of various contaminants in a number of places out there over what I've been referring to as the general ground water pathway. All right? And consequently while we don't have sufficient specific information or data to say this facility is an absolute contributor to some percentage, given the presence of compounds in soil and groundwater, there's, you know, reason to believe that they are a potential contributor or that's a potential source.
Overton deposition, at 25-26.
The task confronting the Court is to determine whether the hydrologist's opinions are such that they would be admissible at trial and whether they would allow a reasonable jury to find causation.
All testimony from a qualified expert is not automatically admissible. Rather, the district court is given the role of gatekeeper: "[U]nder the Rules, the trial judge must ensure that any and all scientific testimony is not only relevant, but reliable." Daubert v. Merrell Dow Pharmaceuticals, Inc., ___ U.S. ___, ___, 113 S.Ct. 2786, 2795, 125 L.Ed.2d 469 (1993).
The Eighth Circuit has held that in the case of expert opinion testimony, "[w]hen basic foundational conditions themselves are conjecturally premised, it then behooves a court to remove the answer from one of admissible opinion to one of excludable speculation." Twin City Plaza, Inc. v. Central Surety & Insurance Corp., 409 F.2d 1195, 1200 (8th Cir.1969). Opinions of an expert need not be accepted when they are based on nothing more than personal opinion or belief, instead of an understandable scientific basis. Turpin v. Merrell Dow Pharmaceuticals, Inc., 959 F.2d 1349, 1360 (6th Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 84, 121 L.Ed.2d 47 (1992); see also Viterbo v. Dow Chemical Co., 826 F.2d 420, 423-24 (5th Cir. 1987); Calhoun v. Honda Motor Co., 738 F.2d 126, 131-32 (6th Cir.1984). "Of course, it would be unreasonable to conclude that the subject of scientific testimony must be `known' to a certainty; arguably, there are no certainties in science." Daubert, ___ U.S. at ___, 113 S.Ct. at 2795. "But, in order to qualify as `scientific knowledge,' an inference or assertion must be supported by appropriate validation i.e., `good grounds,' based on what is known. In short, the requirement that an expert's testimony pertain to `scientific knowledge' establishes a standard of evidentiary reliability." Id. That testimony about "scientific knowledge," in turn, must be based on "verifiable propositions of fact." In re Agent Orange Product Liability Litigation, 611 F.Supp. 1223, 1249-50 (D.C.N.Y. 1985), aff'd, 818 F.2d 187 (2d Cir.1987), cert. denied, 487 U.S. 1234, 108 S.Ct. 2898, 101 L.Ed.2d 932 (1988). Such evidentiary reliability is not present when the "scientific" opinion is premised on fundamentally unsound bases or a fatally deficient amount of data. E.g. Renaud v. Martin Marietta Corp., 749 F.Supp. 1545, 1552-53 (D.Colo. 1990) (in toxic tort exposure case, use of single data point to describe continuous releases of contaminants over extended period *1394 was inadmissible conjecture), aff'd, 972 F.2d 304 (10th Cir.1992). A factual basis may be so lacking for an opinion so as to render it scientifically unreliable. In such a case, "[m]ere possibilities or conjecture cannot establish a probability." Renaud, 749 F.Supp. at 1553. It is central to the concept of expert testimony that such testimony is only admissible if it speaks in terms of probabilities instead of possibilities. Lanza v. Poretti, 537 F.Supp. 777, 786 n. 14 (E.D.Pa.1982). Accordingly, a scientific opinion that cannot establish a probability cannot be the basis on which a reasonable juror can find in favor of a proposition. Renaud, 749 F.Supp. at 1553; see also Turpin, 959 F.2d at 1359 (expert testimony on possibilities insufficient to withstand summary judgment on issue of causation). Finally, "[c]ourts are particularly wary of unfounded expert opinion when causation is the issue." In re Agent Orange Product Liability Litigation, 611 F.Supp. 1223, 1249 (D.C.N.Y.1985).
In this case, Overton's opinions are concocted of impermissible bootstrapping of speculation upon conjecture. He first speculates that any contamination in the soil at third-party defendant sites entered the groundwater. This first conjecture is made without the benefit of any factual data about the nature or depth of the alleged contamination, the composition of the earth below the site, its proximity to the "conceptual" underwater pathway or the amount of contaminants allegedly released. Overton's second speculative assumption is that the contaminants that may have entered the groundwater, may have travelled this generalized, unchartered subterranean river and contaminated Silver Creek and Saginaw Village.[6] He admits that, although he is confident of the existence of the pathway and its general flow, there is no information available to say to any degree of certainty that contaminants went from point "A" to point "B."
While Overton may be permitted to testify that such groundwater pathways are generally recognized in his scientific community, opinions about causation on a particular site must be supported by some factual basis to remove them from the realm of impermissible speculation. The entire deposition demonstrates the limitations of his knowledge and his inability to pinpoint the source of the contamination.[7] Overton's testimony about every third-party defendant being a "potential" contributor is not admissible because it does not establish any one party as even "probably" being causally linked to the contamination. He cannot say, with any reasonable degree of scientific certainty that any cause is more than just a possibility. His opinions have nothing to do with probabilities and, therefore, are not properly the subject of expert testimony.
In the words of the Turpin Court, "[Overton's] conclusion so overstates its predicate that we hold that it cannot legitimately form the basis for a jury verdict. Beyond that [Mr. Overton's] opinion testimony, to the extent that it is personal opinion ... is inadmissible.... The analytical gap between the evidence presented and the inferences to be drawn on the ultimate issue ... is too wide. Under such circumstances, a jury should not be asked to speculate on the issue of causation." Turpin, 959 F.2d at 1360-61. This Court agrees. Overton would not be allowed to express his unfounded opinions during trial and, accordingly, they will not be considered in this summary judgment motion. Accordingly, FAG Bearings cannot withstand summary judgment on the element of causation. While the lack of this element should be dispositive, the Court will continue and analyze the issue of "release" because those findings underline the speculative nature of FAG Bearings' case.
FAG BEARINGS' EVIDENCE OF RELEASE
The already conjectural nature of Overton's opinions as to causation are further *1395 undermined by what is, in most instances, seriously deficient evidence of any release, for without a release, there certainly is not question of causation. As is discussed in detail below, the evidence on release as to several third parties may be sufficient to withstand the very generous standard under Rule 56(e). However, the evidence against other parties is no more than "a mere scintilla" and cannot withstand summary judgment.
A release is defined in 42 U.S.C. § 9601(22) as "any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment" of hazardous substances.
As to this element, FAG Bearings has little direct proof that releases have occurred at the sites of the third-party defendants. In several cases, there are Environmental Protection Agency (EPA), Missouri Department of Natural Resources (MDNR), or company documents that detail releases of TCE-related substances. In all other cases, however, FAG Bearings and its expert rely on preliminary soil gas sample tests that reveal the existence of quantities of TCE, 1,1 DCE or related compounds. Only Midcon's property tested positive for TCE. The others only contained DCE or related compounds, and very few of these findings were ever confirmed. The quantity of these compounds ranges from traces to more significant numbers.
The Court will address each site in turn to determine whether the evidence of release is sufficient to withstand summary judgment.
Pillsbury
Ecology and Environment, Inc. (E & E), an independent contractor doing testing for the Missouri Department of Natural Resources, took four soil gas samples. Of those, only point 1 had traces of 1,1 DCE. The point was tested twice, revealing levels of 1,1 DCE between 116.5 and 124.8 ppb. To confirm these preliminary indications, E & E took a summa canister (BC1HK102) and a soil sample (BC1HK001) for later testing. A split of the soil sample was given to Pillsbury. The summa canister later registered only pentane and benzene. The soil sample gave no notable results. See E & E Report, attached to Overton's deposition as Exhibit E.
Overton testified that he is not aware of anything other than the soil gas sample to indicate that TCE, DCE or any breakdown substance is or was present in the soils at the Pillsbury site. Overton deposition, at 145-46.
For Pillsbury to be a "responsible party" under CERCLA, there must have been a release of hazardous substances from Pillsbury's property. The only evidence presented by FAG Bearings to suggest that a release occurred is that one field soil gas sample test suggested the presence of 1,1 DCE, which is an alleged breakdown component of TCE, the substance found in the plaintiffs' wells. Overton contends that TCEs are commonly found in fumigants used on grain such as that used by Pillsbury. However, this is nothing more than an uneducated guess. FAG Bearings has supplied no evidence whatsoever that TCEs or any related substance was ever on the Pillsbury site, through fumigants or otherwise. The Court has thoroughly reviewed the deposition of Mr. Overton and finds that he admits not being able to trace any TCEs or similar compounds to the Pillsbury site. Overton deposition, at 146-147.
The scant evidence of the soil gas test is insufficient to rebut Pillsbury's showing that an essential element, a release, is missing from FAG Bearings' case. FAG Bearings' only evidence which they contend would create a genuine issue of material fact, then, is the soil gas testing that revealed trace amounts of DCE. While the Court finds that FAG Bearings is completely unable to establish any inference of a "release" of TCE or DCE by Pillsbury, the Court also finds that the soil gas test is merely a "scintilla of evidence" and would not be sufficient to establish that hazardous substances were ever used at the Pillsbury facility in the first place.
In addition, Pillsbury later retained its own testing company. The results of those soil sample tests failed to confirm the existence of TCE or 1,1 DCE.
*1396 One unconfirmed sample result indicating traces of a breakdown product of TCE is wholly insufficient to withstand a motion for summary judgement, especially in light of FAG Bearings' complete inability to prove that TCE has ever been present at the site. There is simply no evidence that Pillsbury ever used, handled, stored or disposed of TCE or DCE, as it alleges in its complaint. Therefore, Pillsbury's motion for summary judgment shall be granted.
Contract Freighters, Inc.
FAG Bearings alleges two grounds for finding that this party contributed to the contamination. First, FAG claims that the substance naphthalene was released at this defendant's site and was also found with TCE at the Silver Creek and Saginaw Village, proving the connection between the two sites. Needless to say, this alone is not sufficient to link the contamination to CFI.
Second, Fag points to the E & E test results. E & E tested the soil in seven spots on CFI property. The field tests registered 1,1 DCE, a relative of TCE, at points 3 and 4 near an old oil-waste storage tank. Those readings registered between .85 and 2.25 ppmV. A soil sample was taken from point 3 (BC1HK003) for lab testing. Later testing revealed no significant levels of contaminants. While the E & E report shows no detects of TCE, the field analytical results attached to the report do indicate small amounts of TCE. While these results are still inconclusive, they may raise a material issue of fact about a "release" of TCE at CFI's property. However, they do nothing to overcome the causation problem discussed above. Overton expressly stated that he is unable to state, with any degree of certainty that any molecules of contamination travelled from CFI's property to the affected wells. Overton deposition, at 38. Overton's lack of certainty is due to an absence of data. Overton deposition, at 39. The Court has no choice but to enter summary judgment against FAG Bearings based on lack of evidence to establish causation.
Service Packing Co.
E & E field test results showed high levels of 1,1 DCE. Both soil samples revealed levels of 1,1 DCE. The sample from point 1 was taken "near a drainage downstream of a waste treatment lagoon," where the soil was "similar to FAG subsurface soil." E & E report, at 8. Sample 2 showed the highest levels of DCE 2.34 ppm and was the subject of a soil sample taken for laboratory testing (BC1HK008). The soil sample did not reveal TCE or related substances. Like the test results from CFI, these results are unreliable and inconclusive, but may raise a question of material fact about the "release" issue. However, like all the other claims, FAG Bearings has no evidence of causation to link this defendant to the contamination. Therefore, this third-party defendant is entitled to summary judgment as well.
International Paper Co. (IPCO)
This property was classified as a hazardous waste site in 1984 because of presence of creosote, naphthalene flouranthene, pentachlorophenol, arsenic and chromium, in the soil, surface water and groundwater at the site. Exhibit H, attached to Overton's affidavit, at 44. However, MDNR has stated that IPCO does not appear to be related to TCE contamination at Silver Creek. Exhibit H, at 45.
In 1984, MDNR found trace levels (5 ppb) of PCE, a TCE-related substance in Joplin Creek at or near edge of IPCO facility. In a mineshaft spring on the property, the MDNR found 8 ppb of 1,1 DCA, 9 ppb 1,1 DCE, and 4.8 ppb TCE. In 1987, the MDNR found 2100 ppb of PCE, but no other TCE-related substances, in pretreated industrial waste that was discharged from the facility. Exhibit J.
MDNR conducted tests at International Paper in 1992 for the presence of TCE. Those test results from January 15-24, 1992, and June 17-July 16, 1992, show no detectable amounts of TCE-related substances. These results were left out of Overton's report. Overton deposition, at 366-68. He says those results should have been included in his report, and that they underline the complexity of the situation and the need for further research. Overton deposition, at 369.
The MDNR reports were made concurrently in January 1992 with the E & E tests which took place at other sites in area. The *1397 testing consisted of the sampling of groundwater from four monitoring wells on and adjacent to IPCO property. (Samples 92-0601, 92-0602, 92-0603, and 92-0605). The samples uniformly registered non-detects for TCE-related substances. In July 1992, MDNR conducted another test. This time, one sample was taken from monitoring well on IPCO property (# J23-164). The report was non-detect for all TCE-related substances. Reply Exhibit E.
IPCO presents the affidavit of James L. Grant, an engineer who has overseen IPCO's groundwater monitoring for the past 10 years. Reply Exhibit C. Grant claims that he knows of no TCE or related compounds ever used at the site, or that have appeared in groundwater samples. Grant Affidavit at 2. He claims that the detects in the E & E tests are inherently unreliable because they occurred at or very near the limits of the testing method utilized. Grant Affidavit, at 2. Overton agrees that these tests are less reliable as they near the detection limits. Overton deposition, at 364.
Finally, IPCO has tested groundwater taken from monitoring wells in accordance with 40 C.F.R. § 264 Appendix VIII. The tests have tested negative for the presence of TCE-related substances. Grant Affidavit at 2-3.
While there are inconsistencies about the presence of TCE-related substances, the Court cannot conclude that there is no issue of fact about a "release." However, as with all other third-party defendants, FAG Bearings cannot connect any alleged releases with Silver Creek or Saginaw Village, and summary judgment must be granted.
Midcon Cables Co.
Midcon Cables is documented to have used TCE on its property since 1980. Exhibit S, attached to the Overton's Affidavit. There are no documented spills, but its response to the United States Environmental Protection Agency's request for information states, "All solvent wastes during the years 1980 and 1981 were spread on the ground at the back of the facility property and allowed to evaporate. Subsequently the topsoil in the area was excavated for the purpose of parking lot construction. No adverse environmental impact has been observed." Exhibit S (Response to Question Number 9).
E & E soil testing at seven sites revealed TCE and/or DCE at several locations. A soil sample at point number 5 revealed .12 ppm of 1,1 DCE and 1.86 ppm of TCE. A soil gas sample of the same site revealed 1.56 ppm of 1,1 DCE. A soil sample of point 6 showed .51 ppm TCE. Points 5 and 6 were located downgradient of a fenced drum storage area. A summa canister (BC1HK101) and a soil sample (BC1HK002) were taken from point 5 for laboratory analysis. A split of the soil sample was provided to Midcon. While the soil sample did not yield any notable results, the summa canister revealed trace amounts of TCE and other VOCs. E & E, at 10-11. The Midcon site was one of two sites (FAG Bearings being the other) where laboratory results confirmed the presence of TCE.
FAG Bearings has provided sufficient evidence of "release" to withstand summary judgment, but cannot causally link Midcon Cables to the contaminated sites. Once again, summary judgment is proper.
Motorola, Inc./Gulf States Paper Co.
Gulf States uses several tons of TCE every year. By Gulf States' own account, past use at this site has resulted in 103 tons of fugitive emissions. In addition, Motorola has used TCA, a substance related to 1,1 DCE, and that was found at Silver Creek and Saginaw Village. Preliminary soil tests reveal high levels of those hazardous chemicals.
An E & E soil gas sample collected at point 2 registered 12.62 ppm of 1,1 DCE. MDNR reported that Gulf States had once reported a 1,1 DCE spill and clean-up near point 2. A summa canister was collected from this point for lab analysis (BC1HK103). Later tests on the canister reported high levels of 1,1 DCE, 1,1 DCA, and 1,1,1 TCA. E & E report, at 11.
Gulf States records reflect that it has used TCE at the site since 1989. Exhibit N, attached to Overton's Affidavit. Gulf States estimates that 103.54 tons of TCE are released into the atmosphere as fugitive emissions each year. Exhibit N, at 13. MDNR *1398 took soil samples in 1988. Two different locations revealed 150 ppb of 1,1 DCE.
Gulf States is another site for which FAG Bearings has presented evidence of release, but no evidence of causation at all. Summary judgment for Gulf States is proper as well.
Vickers Co.
It is clear that serious "releases" of numerous hazardous substances, including TCE, have occurred at the Vickers facility. While a "release" is fairly certain to have occurred, FAG Bearing's causation case against Vickers is the weakest of any third-party defendant.
The Vickers site is five miles away from Silver Creek and Saginaw village. According to FAG Bearings' own expert, this is well outside of the groundwater pathway. Overton deposition, at 420. FAG Bearings cannot establish beyond pure conjecture that contaminated water from Vickers could have entered the alleged pathway. Overton Deposition, at 121-23, and 419 1. 20. At best, FAG Bearings' expert can only confirm the "potential" of contaminants from Vickers reaching the polluted wells. Overton Deposition, at 121. Overton's conjecturing about the possibility of water taking precipitous turns and leaps through distressed formations as a result of groundwater pumping the 1960s is supported by no facts. His speculation is especially dubious considering that he stated the pathway flows in a southeast direction, but Vickers is five miles away in a southwestern direction. Overton deposition, pp. 129-130. The evidence from the EPA and others who have investigated the site is that no one knows where the water underneath the site goes. Overton himself testified that the brecciated zones that surround Joplin and include the hypothetical underground pathway do not extend to Vickers' facility. Overton deposition, at 431. Overton admits that he has no piece of test data to support his hypothesis. In his own words, it is his "best guess." Overton deposition, page 435.
FAG Bearings' claim cannot survive summary judgment based on the absence of information that is absolutely critical to the causal link. Unlike the situations with known releases occurring on top of Overton's alleged pathway, in which the opinion on the flow of the contaminants is based on logical deductions, the opinion as to Vickers is based on conjecture in the absence of facts where the best Overton can conclude is that the flow is conceivable.
CONCLUSION
In most instances, the "evidence" pointing to a release of TCE or related substances is gossamer thin and relies on unverified detections of trace elements in untrustworthy preliminary field tests. No further tests have been done to prove or disprove the field test results. This lack of evidence of a release is, by itself, almost sufficient to entitle some third-party defendants to summary judgment.
While the highly questionable evidence of release is nearly fatal to FAG Bearings' case, the absence of admissible evidence on the issue of causation leaves no doubt. These deficiencies are likewise fatal to all state law claims raised by FAG Bearings. They will not be discussed separately.
The Court, with the able assistance of Magistrate John T. Maughmer, formulated an accelerated discovery schedule by which the third-party defendants could learn whether they should be a part of this lawsuit. The discovery schedule was designed to allow FAG Bearings and the third-party defendants to discover whether they contributed to the contamination at Silver Creek and Saginaw Village. Now, through the mechanism of the summary judgment motion it is time for FAG Bearings to show why those parties should have to continue to defend this lawsuit. Given the expensive and time-consuming burden an environmental lawsuit places on the parties, the Court must not allow a party to continue as a defendant based on nothing more than mere speculation. FAG Bearings has had a considerable amount of time to discover who might be liable for the contamination at Silver Creek or Saginaw Village. The Court's analysis of the evidence they are able to present makes it clear that the third-party complaint is based on nothing more than inadmissible *1399 speculation. Neither before the suit was filed nor during discovery did FAG Bearings develop facts to support its claims. For whatever reason, FAG Bearings did not conduct independent testing that would conclusively determine the parameters of the groundwater pathway and the source of the contamination. Instead, FAG Bearings relied on questionable data from the Missouri Department of Natural Resources and the conjectural personal opinions of a hydrologist. Consequently, the case against the third-party defendants now must end.
FAG Bearings' Motion for Additional Discovery
While opposing these motions for summary judgment, FAG Bearings also requests additional time to discover evidence to bolster their opposition. Overton, in his deposition, estimated that testing adequate to defining the pathway and fingerprint the source of contamination would take at least one year. FAG Bearings has already been given considerable time in which to begin this crucial testing. It apparently did not wish to do so until failure in this Court seemed imminent. The Court will not delay this case for one year so FAG Bearings can make up for squandered time. Time has run out and any significant delay would prejudice all parties and inconvenience the Court. Ironically, FAG Bearings itself has opposed attempts at delay by the plaintiffs and has requested an early trial setting. That early setting has now been granted.
With these factors in mind, the Court cannot, in good conscience, order another fishing expedition on this complaint. Those third-party defendants against whom FAG Bearings has no evidence must be cut free.
Although the Court will grant summary judgment and will not acquiesce to FAG Bearings' plea for more time to make its case, the Court does not intend to preclude all means of resolving fully the issues raised in FAG Bearings third-party complaint. The summary judgment motion is granted on the grounds that FAG Bearings cannot produce more than a scintilla of evidence at this time. The Court does not imply that FAG Bearings' case, at this point, is legally flawed or factually impossible. For these reasons, the dismissal of the third-party complaint is to be without prejudice.
FAG Bearings may use whatever means available to uncover the evidence that is so sorely lacking at this point. When that evidence plausibly connects another party to the contamination at Silver Creek and Saginaw Village, FAG Bearings may file a complaint against any parties so connected.
FAG Bearings' Rule 45 Subpoenas
Subsequent to the Court's oral notice that summary judgment would be granted as to all third-party defendants, FAG Bearings served Rule 45 subpoenas on all third-party defendants requesting permission to access their property to conduct geophysical surveys and soil-gas, soil and groundwater testing. The third parties all objected to the requests. Several filed motions for a protective order, while others filed written objections to the subpoenas.
Fed.R.Civ.P. 34(a) provides that "[a]ny party may serve on any other party a request ... to permit entry upon designated land or other property in the possession or control of the party upon whom the request is served for the purpose of inspection and measuring, surveying, photographing, testing, or sampling the property ... within the scope of Rule 26(b)." Although Rule 34(a) applies only to parties, Rule 34(c) states "[a] person not a party to the action may be compelled to produce documents and things or to submit to an inspection as provided in Rule 45."
Under Rule 45(b), a subpoena for an inspection may be issued to any person not a party. Under Rule 45(c), the non-party may file written objections or may file a motion to quash or modify the subpoena. When written objections are filed, the requesting party must file a motion to compel. FAG Bearings has done so.
The third-parties make three main objections to the subpoenas. First, they argue that the subpoenas are procedurally flawed. FAG Bearings has filed amended subpoenas and the Court believes that they comply with Rule 45.
*1400 Second, the third-parties argue that the Rules do not provide for inspections of non-parties. As outlined above, the Rules clearly provide for this type of exercise.
The third argument is that the inspections constitute undue burdens, they are prejudicial, and are merely an attempt to circumvent the Court's summary judgment ruling. The inspections are to be conducted by and at the expense of defendants and they do not appear to involve any burdensome requests. While the inspections may be prejudicial in that they provide evidence that exonerates FAG Bearings and implicates a third-party defendant, this is not a legitimate reason to prevent discovery. Finally, the underlying premise of this Court's opinion on the summary judgment motion is that FAG Bearings has not done the work necessary to show that a third-party defendant may be causally-linked to plaintiff's complaint. The purpose of granting this motion without prejudice is to allow FAG Bearings to bring suit against another party only when and if it has procured admissible evidence to show that another party is liable. It is this Court's express intention that FAG Bearings be afforded an opportunity to make such a showing by using any means available.
The Silver Creek and Saginaw Village plaintiffs also object to the requests for access on the grounds that FAG Bearings should not be allowed to shift the focus of the trial from its alleged wrongdoings to the alleged wrongdoings of others. While Missouri law does not allow the jury to apportion fault to non-parties, FAG Bearings may prove its innocence of wrongdoing by proving that someone else is responsible. In Dedham Water Co. v. Cumberland Farms (Dedham I), 689 F.Supp. 1223, 1235 (D.Mass. 1988), discussed above, the court relieved the defendant of liability because the defendant proved that its own property was contaminated by sources located upgradient. This is the same theory proposed by FAG Bearings and it is relevant to the defense against plaintiffs' case.
It would be unfair for this Court to rule against FAG Bearings on the summary judgment motion because of lack of evidence, and then use the power of the Court to prevent them from discovering the evidence the Court requires. Therefore, the Court shall allow FAG Bearings to inspect the property of the third-party defendants pursuant to Rules 34 and 45.
Accordingly, it is
ORDERED that all third-party defendants' motions for summary judgment are GRANTED. The third-party complaint of FAG Bearings is dismissed without prejudice. It is further
ORDERED that FAG Bearings motion to conduct further discovery is DENIED. It is further
ORDERED that the third-party defendants' motions to quash or for a protective order are DENIED. It is further
ORDERED that the objections to the subpoena filed by third-party defendants are OVERRULED. FAG Bearings motion to compel compliance with the request for inspection is GRANTED.
NOTES
[1] FAG Bearings also asserts various common law claims. Since those claims carry the common element of causation, which is central to the Court's consideration of the CERCLA claim, they will not be addressed separately.
[2] Congress intentionally removed statutory language on causation from the final bill that would have required a causal nexus between defendant's acts and actual contamination. Dedham II, 889 F.2d 1146, 1153 (1st Cir.1989); H.R.Rep. No. 1016, 96th Cong.2d Sess. 33 (1980), reprinted in 1980 U.S.C.C.A.N. 6119, 6136-6137.
[3] Another prominent multiple-site case, Kelley v. Thomas Solvent Co., 727 F.Supp. 1532 (W.D.Mich.1989), and 790 F.Supp. 710 (1990), is not included here because causation was not discussed at length.
[4] This language, on its face, seems at odds with the holding of Dedham I. However, as discussed infra, p. 1389, the two courts' holdings deal with different elements of the CERCLA claim and are easily reconcilable. Dedham I requires "fingerprinting" for proof of causation, while Artesian refused to require it for proof of release. The standards of proof are different as Congress and the courts impose strict liability in the area of releases, while the statute, and even the Artesian court, require a finding of "causation."
[5] The court applied the substantial factor test because it felt that CERCLA granted the Courts the right to create federal common law to apply to the statute. Id. at 1283 n. 25.
[6] Overton's conjecture about the path from the Vickers facility, which is located far away from the pathway's projected flow is fanciful at best. See infra, pp. 1396-97.
[7] The Court does not mean to imply that Overton is not an able hydrologist. Rather, the Court's comments are directed to Overton's investigation into and knowledge of this particular site. It is abundantly clear that, for whatever reason, Overton was not given the opportunity to make the type of personal investigation that would have allowed him to reach actual conclusions, rather than speculations.
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352 N.W.2d 904 (1984)
218 Neb. 280
SCOULAR-BISHOP GRAIN CO., a Nebraska corporation, Appellant,
v.
BASSETT GRAIN, INC., a Nebraska corporation, Appellee.
No. 83-481.
Supreme Court of Nebraska.
August 10, 1984.
*905 John C. Schraufnagel of Cronin, Hannon & Symonds, O'Neill, for appellant.
John P. Heitz, Bassett, for appellee.
KRIVOSHA, C.J., and BOSLAUGH, WHITE, HASTINGS, CAPORALE, SHANAHAN, and GRANT, JJ.
GRANT, Justice.
Plaintiff, Scoular-Bishop Grain Co., filed an action against defendant, Bassett Grain, Inc., seeking damages for amounts due under a lease agreement and a modification thereof. Bassett Grain, in its answer, admitted the execution of the agreements but denied it was indebted to Scoular-Bishop. Jury trial was waived and trial was had to the court. At the conclusion of all the evidence, the court found for Bassett Grain and dismissed the petition. Scoular-Bishop appeals, assigning as error the insufficiency of the evidence to support the court's decision in favor of Bassett Grain and alleging that the evidence required the court to find that Scoular-Bishop should recover on its amended petition. Appellant thus bases its appeal purely on an evidentiary basis. We believe the court disposes of the matter by its conclusions of law with regard to the construction of the contracts between the parties, and we affirm.
The terms of the lease and the modification thereof are not in dispute. On June 1, 1978, Bassett Grain, as lessor, leased a grain elevator located at Long Pine, Nebraska, to Scoular-Bishop. Scoular-Bishop was to pay a basic, fixed amount of rent plus, as additional rent, an amount equal to 50 percent of the net operating income resulting from the operation of the leased elevator during each of Scoular-Bishop's fiscal years. The lease also provided that in the event there was a net operating loss for the fiscal year, that loss would be applied against any subsequent net income under the lease and that, at the termination of the lease, an adjustment would be made to reflect the total income and total losses; and if the losses exceeded the income, Bassett Grain would pay 50 percent of those losses to Scoular-Bishop.
When the June 1, 1978, lease was executed, Scoular-Bishop's fiscal year ended on April 30. During the first 2 fiscal years involving the lease (June 1, 1978, to April 30, 1979, and May 1, 1979, to April 30, 1980), there was operating income of approximately $28,000 and $190,000 yearly. Scoular-Bishop paid 50 percent of that income to Bassett Grain.
After the fiscal year ending April 30, 1980, Scoular-Bishop changed its fiscal year so that it would end on May 31. For the 13 months ending May 31, 1981, there was a net operating loss of over $164,000. The agreement between the parties ended on June 30, 1981.
On July 11, 1980, the parties executed another agreement. Bassett Grain was having financial difficulties and requested Scoular-Bishop to make certain payments to Bassett Grain's creditors rather than to Bassett Grain itself. Scoular-Bishop agreed to do so. Specifically, Scoular-Bishop agreed to pay three named creditors of Bassett Grain a total of over $171,000 in lieu of all rent due up to April 30, 1981, including both the basic monthly rent and *906 the percentage rental based on net operating profits or losses. The July 11, 1980, agreement further provided, in paragraph 2 thereof,
2. Each of the foregoing payments [to the described creditors] by the Lessee [Scoular-Bishop] shall be deemed to be made by the Lessee on account of rent due and becoming due under the lease up to April 30, 1981 and shall be charged to and deducted from such rent. If the total amount of all of such payments shall be in excess of the aggregate amount of rent due and becoming due under the Lease up to April 30, 1981, the Lessor [Bassett Grain] shall not be liable for such excess or any part thereof.
(Emphasis supplied.)
This July 11, 1980, agreement also contained two other paragraphs which must be considered. Paragraph 5 states, "Except as modified by the provisions of this agreement, all of the terms and conditions of the Lease shall remain in full force and effect." Paragraph 8 provides, "This instrument constitutes the entire agreement and understanding of the parties with respect to the transactions contemplated hereby and supersedes any and all prior agreements and understandings relating to the subject matter hereof."
The two agreements described above were placed in evidence. Scoular-Bishop called two witnesses, the manager of the elevator and the secretary-treasurer of the company. Neither witness testified as to any matters concerning the relationship between the two agreements or the conflicting paragraphs 5 and 8 in the July 11, 1980, agreement. The secretary-treasurer did testify and gave proper foundation for two exhibits comprising the monthly computer runs showing, from Scoular-Bishop's books and records, the profit and loss for each month and year of the agreement between the parties. Bassett Grain did not present any evidence, and the matter was submitted to the trial court.
The trial court decided the matter by construing the July 11, 1980, agreement. At the conclusion of the trial, the court stated:
THE COURT: This agreement that was signed the 11th day of July, 1980, seems to indicate that everything is square between the parties on that date, and at paragraph 8 it says that this agreement constitutes the entire agreement and understanding of the parties with respect to the transactions contemplated herein and supersedes any and all prior agreements and understandings related to the subject matter hereof, so it would seem to me by that agreement you are at point zero in your accountings. It does provide that these specific payments that were to be made to thethat are outlined in paragraph 1, and specifically to whom at (a), (b) and (c), and those payments are to be made through the month of April, and if the total amount of all such payments shall be in excess of the aggregate amount of rent due and becoming due under the lease up to April 30th, 1981, the lessor shall not be liable for such excess or any part thereof.
These observations were reflected in the court's journal entry, which stated that the court finds
That, by reason of the agreement of the parties received into evidence as Exhibit No. 2 [the July 11, 1980, agreement], the obligation, if any, of the Defendant for any deficit operations under the percentage rental provisions of the lease as of April 30th, 1981 was zero (0) as between the parties.
The trial court properly construed the July 11, 1980, agreement as a matter of law. As stated in Don J. McMurray Co. v. Wiesman, 199 Neb. 494, 498, 260 N.W.2d 196, 199 (1977), "When the terms of a contract and the facts and circumstances that aid in ascertaining the intent of the parties are insufficient to raise an issue of fact, the interpretation of the contract is a matter of law." In this case no evidence as to any facts and circumstances that would aid in ascertaining the intent of the parties was adduced before the trial court, and the interpretation of the contract was purely a matter of law. The court determined that paragraph 8 of the July 11, 1980, agreement controlled and that the second agreement *907 completely supplanted the earlier agreement, referring to it only to incorporate certain language.
There is no assignment of error challenging this dispositive contract construction by the trial court. Neb.Ct.R. 9D(1)d (Rev. 1983) provides in part, "Each assignment of error shall be separately numbered and paragraphed, bearing in mind that consideration of the case will be limited to errors assigned and discussed." Here, the assignments of error are directed to the nature and sufficiency of the evidence. There is no assignment or discussion of the crucial conclusion of law made by the trial court.
We recognize we may note plain error not assigned, but there is no such error in this case. Plaintiff's petition, insofar as it seeks damages up to April 30, 1981, was properly dismissed as a matter of construction of the July 11, 1980, agreement.
With regard to the period from May 1 to June 30, 1981, a different question is presented. In connection with these 2 months the trial court found that Scoular-Bishop presented no evidence to enable the court to "determine the amount of loss occasioned by the operation of the facility during those months." Again we agree with the trial court, recognizing that, in this area, the findings of the trial court where a jury is waived have the effect of a jury verdict and will not be disturbed on appeal unless clearly wrong. White v. Medico Life Ins. Co., 212 Neb. 901, 327 N.W.2d 606 (1982). Noting just one fact on the computer run exhibit (exhibit 4) adduced by Scoular-Bishop points out the problem facing the court. As of June 30, 1981, the date of termination of the relationship between the parties, the exhibit shows an ending inventory of corn of $1,740,716.89, and of wheat, beans, milo, and others of much less amounts. There is no testimony as to whose grain constitutes this inventory, the nature of the inventory, or any other explanation. As the trial court found, there was simply not enough evidence before it to make any factual determination of the profit or loss with regard to the time from May 1 to June 30, 1981. In a civil case the burden of proof is on the plaintiff to prove, by a preponderance of the evidence, all facts essential to recovery. Empire State Building Co. v. Bryde, 211 Neb. 184, 318 N.W.2d 65 (1982). Scoular-Bishop has not met its burden on this point. The determination of the trial court is correct.
Scoular-Bishop also claims that it made certain advances to Bassett Grain and that damages should be awarded for Bassett Grain's failure to repay those advances, totaling about $20,000. First of all, we note that the amended petition on which this case was tried seeks damages arising only under the lease agreements between the parties. The only reference to "advances" is in a copy of an accounting summary letter exhibit attached to the amended petition, which states, "Advances from prior years $20,234.46." There is no evidence as to where, when, or if any repayment was agreed to by any authorized person employed by Bassett Grain. There is not enough evidence for the court to find liability for Bassett Grain in this connection. The amount of the alleged advances can be gleaned from the record, but nothing else.
The action of the trial court in dismissing Scoular-Bishop's amended petition is correct and is affirmed.
AFFIRMED.
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629 F.2d 1347
Ellenderv.Texaco, Inc.
80-3069
UNITED STATES COURT OF APPEALS Fifth Circuit
10/17/80
1
E.D.La.
2
AFFIRMED***
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740 F.2d 952
Metropolitan Theatres, Inc.--Metro Investors, Inc.v.Ocasio
83-1816
United States Court of Appeals,First Circuit.
5/11/84
1
D.P.R.
AFFIRMED
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649 F.2d 827
Tracey CARTER, as Personal Representative of the Estate ofCharles M. Carter, Deceased, Plaintiff,v.The CITY OF CHEYENNE, The Cheyenne Municipal Airport andNorthrup Corporation, Defendants,v.The CITY OF CHEYENNE, Third-Party Plaintiff and Appellant,v.The UNITED STATES of America, Third-Party Defendant and Appellee.
No. 79-2211.
United States Court of Appeals,Tenth Circuit.
Argued May 11, 1981.Decided May 29, 1981.
John B. Rogers, Cheyenne, Wyo., for third-party plaintiff and appellant.
Paul M. Honigberg, Dept. of Justice, Washington, D. C. (Alice Daniel, Asst. Atty. Gen., Washington, D. C., Charles E. Graves, U. S. Atty., J. Charles Theisen, Atty., Civil Division, Torts Branch, Dept. of Justice, Washington, D. C., on the brief), for third-party defendant and appellee.
Before BARRETT, DOYLE and McKAY, Circuit Judges.
WILLIAM E. DOYLE, Circuit Judge.
1
This action arose out of the crash of an aircraft, a United States Air Force T-38, which crash occurred on July 25, 1977, while a landing was being attempted on the airfield runway of the municipal airport at Cheyenne, Wyoming. Captain Charles M. Carter, the deceased in this case, was the pilot of the aircraft. He was part of the Air Force Thunderbird Demonstration Team. Unfortunately, Captain Carter was killed in the crash.
2
The action of the plaintiff Tracey Carter, personal representative of the Estate of Charles M. Carter, named the City of Cheyenne and other defendants, and alleged that there was negligent design, construction, maintenance, control and supervision of the airfield and runway. The City of Cheyenne, in turn, has fashioned a third party claim against the United States of America. Relief here is sought under the Federal Tort Claims Act. The City alleges negligence on the part of representatives of the Federal Aviation Administration in providing Captain Carter incorrect data pertaining to landing field conditions just prior to his landing.
3
The airfield at Cheyenne is a non-military one which is used occasionally by the United States Air Force in connection with functions at F. E. Warren Air Force Base, and is used by the Wyoming National Guard pursuant to a joint use agreement with the City of Cheyenne.
4
The main issue is whether the federal court lacked subject matter jurisdiction over the third party complaint in this case under the principles contained in the decision of the Supreme Court in Stencel Aero Engineering Corporation v. United States, 431 U.S. 666, 97 S.Ct. 2054, 52 L.Ed.2d 665 (1977), rehearing denied 434 U.S. 882, 98 S.Ct. 250, 54 L.Ed.2d 168. The trial court relied on Stencel in its holding that the United States could not properly be impleaded as a third party defendant in the case because the Federal Tort Claims Act does not authorize recovery, directly or indirectly, for injuries or death to a serviceman or servicewoman incident to Armed Forces activity.
5
The City of Cheyenne concedes that the plaintiff would be unable to sue the United States government in view of the fact that this was a duty connected injury leading to the death, but it maintains that the City of Cheyenne, a defendant in the case, as a third party plaintiff, may, pursuant to Rule 14 of the Federal Rules of Civil Procedure, implead a party, here the United States, even though the plaintiff could not have sued the United States directly. The City of Cheyenne seeks to distinguish the decisions of the United States Supreme Court in Feres v. United States, 340 U.S. 135, 71 S.Ct. 153, 95 L.Ed. 152 (1950), and in Stencel v. United States, 431 U.S. 666, 97 S.Ct. 2054, 52 L.Ed.2d 665 (1977).
6
The United States District Court, after conducting a hearing, entered its order granting the motion of the third party defendant United States of America to dismiss for lack of subject matter jurisdiction. This order was entered August 13th. In it was the statement required by 28 U.S.C. § 1292 authorizing an immediate request for an appeal of an interlocutory order. The City of Cheyenne thereupon filed its petition for interlocutory appeal to this court. The petition seeking interlocutory appeal was granted.
7
The issue boils down to whether, considering the fact that the plaintiff would be unable to sue the United States under the circumstances, given the fact that the accident occurred while Carter was in the line of duty, the defendant, Cheyenne, may interpose a third party complaint against the United States seeking indemnity for any damages which flow from the principal action. The claim is that the United States in a third party indemnity does not have the same defenses and immunities which are applicable in an action by a serviceman injured or killed in the line of duty.
8
The City of Cheyenne relies on the decision of the Supreme Court in United States v. Yellow Cab Co., 340 U.S. 543, 71 S.Ct. 399, 95 L.Ed. 523 (1951). There it was held that the Federal Tort Claims Act was to be read broadly to permit an original defendant in the case to implead the United States as a third party defendant in an indemnity or contribution action, where the defendant-third party plaintiff claims that the United States was wholly or partly responsible for the plaintiff's injury.
9
But Yellow Cab Co. does not stand alone. A fully reasoned decision of the Supreme Court, in Feres v. United States, supra, which was decided contemporaneously with Yellow Cab Co., supra, held that the United States was not liable in such circumstances under the Federal Tort Claims Act for injuries to a serviceman arising out of or in the course of activity incident to service in the military. The Feres case laid down the single test that the injury to the serviceman be a service connected injury. The Court reviewed all possible aspects and held that these facts did not give rise to an action under the Federal Tort Claims Act.
10
Stencel Aero Engineering Corporation v. United States, supra, addressed itself to the question of whether, after a member of the Armed Forces had brought a tort action against a private defendant, that defendant could seek indemnity from the United States as a third party defendant under the Federal Tort Claims Act, on the ground that government officials were responsible for the plaintiff's injuries. The Supreme Court took the position that the right of a third party to recover in an indemnity action against the United States, which right was recognized in Yellow Cab, had to be limited by the rationale of Feres wherein the injured party was a serviceman. 431 U.S. at 674, 97 S.Ct. at 2059.
11
It will be helpful to set forth here the facts of the Stencel case. A National Guard captain was, in that case, injured when the ejection system of his aircraft, which had been manufactured by Stencel, malfunctioned during a mid-air emergency. The captain filed suit against the United States and Stencel. Stencel, in turn, cross-claimed against the United States, seeking indemnity grounded on the fact that the ejection system malfunctioned because of faulty specifications, requirements and components provided by the United States. But under those facts the Court refused to allow the proposed third party action. In reaching that conclusion a three-fold test was laid down: First, the Court noted the relationship between the government and the suppliers of ordinance being distinctly federal in character. Second, the Court stated that the Veterans Benefit Act establishes a statutory compensation scheme for injured servicemen without regard to fault, as a substitute to tort liability. Third, the court addressed the effect of maintaining such suits on military discipline. One gets the impression that these tests are fully applicable to a case of this kind. However, subsequent cases point to a contrary approach.
12
Indeed, in Hatzlachh Supply Co., Inc. v. United States, 444 U.S. 460, 100 S.Ct. 647, 650, 62 L.Ed.2d 614 (1980), the Court mentioned that Stencel had recognized:
13
* * * that the Veterans' Benefit Act provided compensation to injured servicemen, which we understood Congress intended to be the sole remedy for service connected injuries (and, therefore) we decline to construe the Tort Claims Act to permit third-party indemnity suits that in effect would expose the Government to greater liability than that contemplated under the statutory compensation scheme. In Stencel, Congress had provided a remedy which we thought to be exclusive * * * Stencel (holds that) the existence of an exclusive statutory compensation remedy negates tort liability * * *.
14
From consideration of Hatzlachh it is to be concluded that where the Veterans Benefit Act is present, as it is in our case, it is the sole or exclusive remedy for claims which involve service related injuries, irrespective of who sues the United States. Thus, then, in a Veterans Benefit Act case growing out of a service connected injury, there cannot be a recovery of indemnity for payments to the serviceman who suffered the injury. Hatzlachh applied the single test whether the injury to the serviceman was service connected.
15
From a consideration of these cases, it must be held that in a case like the present one, wherein the injury was in the line of duty, the sole recovery is that derived from the Veterans Benefit Act. If such relief has been made available to the serviceman, it is not possible for the joint tort feasor to sue the government in a third party action for the purpose of obtaining indemnity. To allow the indemnity action while disallowing a direct action would be grossly inconsistent.
16
A very recent case which considered this problem and reached the same result is In the Matter of Ionian Glow Marine Inc., 510 F.Supp. 196 (E.D.Va.1981). This case arose out of a collision between a United States ship and a ship owned by Ionian Glow. The United States and Ionian Glow agreed that the former would pay 35% of Ionian Glow's provable damages. The issue subsequently before the court was whether Ionian Glow could include in its provable damages those amounts paid by Ionian Glow to three members of the armed forces who were injured during the collision. The court applied the Stencel reasoning in refusing to allow Ionian Glow to include those amounts as part of its damages. The opinion noted that there was no contractual relationship between Ionian Glow and the United States as there had been between Stencel and the United States. The court held further that the Feres doctrine applied; a serviceman can recover, if at all, against the United States under the Veterans Benefit Act. The court concluded that to allow Ionian Glow to include payments made to servicemen in its provable damages of which the government had agreed to pay 35% would circumvent the purpose of the Veterans Benefit Act to provide an upper limit of disability that the government would be required to pay for service related injuries. The court in Ionian Glow also noted, as we have in the present case, that there is the problem of doing by indirection that which is not available directly. The court said that to approve third party recovery would be to circumvent the Supreme Court's ruling.
17
See also Uptegrove v. United States, 600 F.2d 1248, 1250 (9th Cir. 1979), cert. denied 444 U.S. 1044, 100 S.Ct. 732, 62 L.Ed.2d 730 (1980). In that case the Ninth Circuit said:
18
The fact that all of * * * (the Stencel ) considerations are not present in a particular case does not mean that the Feres doctrine should not be applied. (Citation omitted). The Supreme Court has never indicated that Feres should be limited only to situations in which interferences with military discipline is threatened.
19
We agree with the Uptegrove reasoning that the status of the deceased or injured person is that which controls in determining whether the claimant may recover under the Tort Claims Act. That is, if the injury or death was service related, the claimant may not recover under the Federal Tort Claims Act. It necessarily follows that a third person, here the City of Cheyenne, which has made no allegations that the death of Carter was not service related, should not be allowed to recover and thus enter through an indirect door.
20
In summary, then, Cheyenne is precluded from impleading and recovering from the United States. Stencel Aero Engineering Corp. v. United States, 431 U.S. at 673, 97 S.Ct. at 2058. See also Monarch Insurance Co. v. United States, 511 F.Supp. 201 (E.D.Va., 1981). The Veterans Benefit Act provides the sole and exclusive remedy for service related injuries, and the United States is not to be held liable for amounts in excess of the upper limits which are prescribed by that Act.
21
While we recognize that it is Mrs. Carter and not the City of Cheyenne who will be compensated by the Veterans Benefit Act, the fact that Cheyenne is not allowed to implead the United States in this action and render the United States liable for damages which exceed those provided in the Veterans Benefit Act does not, of course, preclude Cheyenne from arguing at the trial of the present action that the negligence of the United States rather than the negligence of the City of Cheyenne was the cause of Carter's death. It is the issue of damages which is precluded, not the issue of negligence. The City of Cheyenne will only be liable for its own negligence, if any, and not for any negligence on the part of the United States.
22
Our holding is, therefore, that the district court was correct in dismissing the third party action herein for lack of subject matter jurisdiction. When, as here, a case under the Federal Tort Claims Act falls within the Feres doctrine, under which the Supreme Court has held that this Act did not waive immunity for service related claims, the federal court lacks jurisdiction to hear the matter. Following the principles cited in Stencel, supra, the third party claim in this case is barred by Feres, by Stencel and by Hatzlachh.
23
The judgment of the district court is affirmed.
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United States Court of Appeals
FOR THE EIGHTH CIRCUIT
________________
No. 04-2951
________________
United States of America, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* Western District of Missouri.
Stephen E. Plummer, *
*
Appellant. *
________________
Submitted: March 14, 2005
Filed: June 2, 2005
________________
Before MORRIS SHEPPARD ARNOLD, BOWMAN, and GRUENDER, Circuit
Judges.
________________
GRUENDER, Circuit Judge.
Stephen Plummer entered a conditional plea of guilty to one count of
possessing a firearm during and in relation to a drug trafficking crime, in violation of
18 U.S.C. § 924(c). He entered the conditional guilty plea after the district court
denied his motion to suppress evidence and statements obtained as a result of a
warrantless search of his car.1 On appeal, Plummer argues that the district court erred
in denying his motion to suppress. We affirm.
I. BACKGROUND
On March 25, 2003, Corporal John A. Sampietro, Jr. of the Missouri State
Highway Patrol received a dispatch report that an ambulance crew was following a
small car with a single occupant–a white male–traveling westbound on U.S. Highway
60. It was reported that the driver of the car, later identified as Plummer, was driving
erratically from lane to lane and appeared to be smoking a marijuana cigarette. As
he was driving east on Highway 60, Trooper Sampietro located a car fitting the
description in the report heading west on Highway 60 with an ambulance following
behind. Trooper Sampietro crossed the highway and began heading west. Plummer
then turned into the parking lot of a convenience store on Highway 60 and parked
behind the store. Trooper Sampietro pulled in behind Plummer’s car in the parking
lot. The ambulance crew indicated to Trooper Sampietro that he had correctly
identified the car.
As Plummer walked toward the store entrance, Trooper Sampietro got out of
his patrol car, identified himself as a highway patrol officer, and asked Plummer for
his license. Without saying anything, Plummer got back into his car and leaned
toward the passenger’s seat. At that point, Trooper Sampietro saw a rifle lying across
the passenger’s seat and told Plummer to get out of the car. Plummer complied, and
Trooper Sampietro told Plummer that he needed to see his driver’s license. Again,
without saying anything, Plummer reached into the car toward the passenger’s seat
1
The Honorable Scott O. Wright, United States District Judge for the Western
District of Missouri, adopting the report and recommendation of the Honorable James
C. England, United States Magistrate Judge for the Western District of Missouri. The
Honorable Richard E. Dorr, United States District Judge for the Western District of
Missouri, accepted Plummer’s conditional guilty plea and sentenced him.
-2-
where the rifle was lying. Trooper Sampietro drew his service weapon, pointed it at
Plummer, and told him to get out of the car and not to get back in. Plummer replied
that he was trying to get his driver’s license. Trooper Sampietro told Plummer not to
get back in the car because there was a weapon in the car. Plummer responded that
the rifle was not loaded.
After Plummer got out of the car, Trooper Sampietro reholstered his weapon
and called for back-up officers. He took the rifle from the passenger’s seat and
discovered it was loaded. After the back-up officers arrived, Trooper Sampietro made
a protective search of the car, checking for additional weapons.2 He found a utility
knife in a storage compartment on the driver’s-side door and a machete and a set of
digital scales on the back seat. Trooper Sampietro noticed white residue and “green
material” consistent with marijuana residue on the scales and utility knife. Trooper
Sampietro arrested Plummer, handcuffed him, read him his Miranda rights, and
conducted a thorough search of his car.
Underneath the front passenger’s seat, Trooper Sampietro found a Colgate
shaving cream can with a false bottom. He unscrewed the can and found several bags
containing methamphetamine and marijuana. He also found scorched aluminum foil
and $1,700 in cash in Plummer’s pocket. Plummer told Trooper Sampietro that he
had the cash because he was in financial difficulty. On the way to jail, Plummer
admitted that he had been smoking marijuana while driving. Plummer also told
Trooper Sampietro that he had a history of drug use and that he was back on drugs
because of a disagreement with his girlfriend.
2
The record is unclear as to Plummer’s exact location while Trooper Sampietro
waited for back-up and while he conducted a protective search of Plummer’s car.
However, we do know that Plummer was not handcuffed during that time. As noted
below, he was not handcuffed until after he was arrested.
-3-
II. DISCUSSION
On appeal, Plummer only challenges Trooper Sampietro’s initial search of his
car for additional weapons. Plummer does not challenge either Trooper Sampietro’s
initial investigative stop based on the report of the ambulance crew or Trooper
Sampietro’s more thorough search of the car and search of his person after finding the
machete, utility knife and scales. Plummer’s only argument is that the district court
erred in denying his suppression motion because Trooper Sampietro’s initial search
of the car was not based on officer safety, and therefore, all of the evidence
subsequently obtained was “fruit of the poisonous tree” seized in violation of his
Fourth Amendment rights. “When reviewing a denial of a motion to suppress, we
examine the factual findings underlying the district court’s conclusion for clear error
and review de novo the ultimate question of whether the fourth amendment has been
violated.” United States v. Terry, 400 F.3d 575, 579 (8th Cir. 2005).
In Terry v. Ohio, 392 U.S. 1, 24 (1968), the Supreme Court held that a police
officer may conduct a protective search for weapons if the officer has an articulable
suspicion that an individual is armed and dangerous. See United States v. Shranklen,
315 F.3d 959, 961 (8th Cir. 2003). Terry involved the pat-down search of an
individual and not the search of a vehicle, but “its principle (officer safety searches)
was eventually extended to include vehicle searches.” United States v. Rowland, 341
F.3d 774, 783 (8th Cir. 2003) (citing Michigan v. Long, 463 U.S. 1032, 1049 (1983)).
In Long, the Supreme Court noted that “roadside encounters between police and
suspects are especially hazardous,” and held that a limited search of the passenger
compartment of a vehicle “is permissible if the police officer possesses a reasonable
belief . . . that the suspect is dangerous and the suspect may gain immediate control
of weapons.” Long, 463 U.S. at 1049. “The sole justification of the search . . . is the
protection of police officers and others nearby . . . .” Id. n.14 (quoting Terry, 392
U.S. at 29).
-4-
The test for reasonableness is an objective one. United States v. Cummins, 920
F.2d 498, 502 (8th Cir. 1990). In the Eighth Circuit, the validity of a protective
search “does not depend upon the searching officer actually fearing the suspect is
dangerous; rather, such a search is valid if a hypothetical officer in the same
circumstances could reasonably believe the suspect is dangerous.” Rowland, 341
F.3d at 783 (citing United States v. Wald, 216 F.3d 1222, 1227 (10th Cir. 2000),
which notes that the circuits are split on the issue of whether a particular officer’s
actual motivation is relevant to the reasonableness analysis); see Cummins, 920 F.2d
at 502 (applying this Circuit’s objective reasonableness standard in a protective
search case, the Court noted that “our conclusion is not changed by [the officer’s]
testimony that he had no subjective fear that [the defendants] were armed.”).
As noted above, Plummer’s only argument on appeal is that Trooper
Sampietro’s initial search of the car for additional weapons was not a permissible
protective search because it was not based on officer safety. More specifically, he
contends that Trooper Sampietro could not have been concerned for his safety
because by the time he conducted the search, he had reholstered his gun and back-up
officers had arrived at the scene. Plummer’s argument improperly focuses on whether
Trooper Sampietro was actually motivated by concern for his own personal safety
when he searched Plummer’s car for additional weapons. Plummer’s argument has
no merit because, as we discussed above, a police officer’s subjective motivation is
irrelevant to our Circuit’s objective reasonableness analysis.
Based on the “specific and articulable facts” surrounding Trooper Sampietro’s
search of Plummer’s car for additional weapons and the “rational inferences from
those facts,” we conclude that the search was reasonably warranted. See Long, 463
U.S. at 1049 (quoting Terry, 392 U.S. at 21). Plummer twice reached toward the rifle
on the passenger’s seat of his car without explaining to Trooper Sampietro what he
was doing. He also lied to Trooper Sampietro about the rifle not being loaded. In
addition, based on the report of the ambulance crew, Trooper Sampietro was dealing
-5-
with an individual who may have been on drugs. A hypothetical officer in the same
situation as Trooper Sampietro could reasonably believe that Plummer was dangerous
and that there may have been additional weapons in the car over which Plummer
could have gained immediate control if he were to break away from police control or
if he were permitted to re-enter his car. See id. at 1051-52.
The legal discovery of the machete and the utility knife and digital scales with
white and green residue supported Trooper Sampietro’s warrantless search of the
remainder of Plummer’s car under the “automobile exception” to the Fourth
Amendment’s warrant requirement. See Rowland, 341 F.3d at 784 (noting that the
“automobile exception” applies where police officers have probable cause to believe
a vehicle contains contraband or other evidence of a crime before they search).
Trooper Sampietro’s more thorough search of Plummer’s car and his search of
Plummer’s person also constituted a valid search incident to arrest. See United States
v. Poggemiller, 375 F.3d 686 (8th Cir. 2004); United States v. Pratt, 355 F.3d 1119,
1124 (8th Cir. 2004) (“The search of an arrestee’s person has long been upheld as
reasonable under the Fourth Amendment . . . .”).
III. CONCLUSION
For the reasons discussed above, we affirm the district court’s denial of
Plummer’s suppression motion and affirm Plummer’s conviction.
___________________________
-6-
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71 B.R. 142 (1987)
In re BDM CORPORATION, Debtor.
Bankruptcy No. 86 B 9094.
United States Bankruptcy Court, N.D. Illinois, E.D.
March 9, 1987.
*143 Anthony M. Vaccarello, Wischhover & Vaccarello, Palos Hills, Ill., for debtor.
Richard J. Berry, Myers, Daugherity, Berry & O'Connor, Ltd., Ottowa, Ill., for Brown Oil.
MEMORANDUM AND ORDER
ROBERT L. EISEN, Chief Judge.
This matter comes to be heard on the motion of Brown Oil Company ("Brown"), lessor under a lease of non-residential real property, for immediate surrender of possession thereof by the debtor, BDM Corporation ("BDM"), pursuant to 11 U.S.C. § 365(d)(4). At issue is whether BDM effectively assumed the lease within sixty days after the filing of its Chapter 11 petition. For the reasons set forth below, the court, having carefully considered the pleadings and memoranda filed and the arguments of counsel, concludes that the lease herein has been deemed rejected under the provisions of section 365(d)(4).
BACKGROUND
On June 11, 1986, BDM filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code, and has continued to operate its business and manage its affairs as a debtor in possession. The lease in question was executed on May 1, 1983 between Brown, as lessor, and BDM, as lessee, for rental of the premises in Ottawa, Illinois from which BDM conducts its operations. At no time within 60 days of the commencement of this case did BDM file a motion under section 365(a)[1] to assume the unexpired lease nor did BDM file a motion within such 60-day period to extend the time within which to assume or reject the subject lease.
BDM contends, however, that on July 23, 1986 at the first meeting of creditors held pursuant to section 341(a), its president, Mr. William Croft, stated under oath that BDM intended to honor all existing leases and service contracts at the Ottawa plant, which would include the Brown lease. BDM further contends that this oral assumption was communicated to Brown's president, Mr. Thomas Hill, who was present at the meeting. Consequently, BDM argues that, by virtue of the foregoing statement of its president at the first meeting of creditors as well as by its continuing to make all current monthly rental payments since the Chapter 11 petition was *144 filed,[2] it has effectively assumed the Brown lease.
Brown, on the other hand, denies that Mr. Croft made the foregoing statement with respect to existing leases and argues that even if he did, such a statement falls short of affirmatively assuming the unexpired lease. On September 24, 1986, Brown moved for an order requiring BDM to immediately surrender possession of the leased premises and for entry of an order lifting the automatic stay in connection therewith since Brown contends that BDM did not assume the lease within 60 days after the Chapter 11 petition was filed as required by section 365(d)(4).
DISCUSSION
Section 365(d)(4) of the Bankruptcy Code provides in relevant part:
... [I]n a case under any chapter of this title if the trustee does not assume or reject an unexpired lease of nonresidential real property under which the debtor is the lessee within 60 days after the date of the order for relief, or within such additional time as the court, for cause, within such 60-day period, fixes, then such lease is deemed rejected, and the trustee shall immediately surrender such nonresidential real property to the lessor.
11 U.S.C. § 365(d)(4)(West 1986). As this court noted in In re Bon Ton Restaurant and Pastry Shop, Inc., 52 B.R. 850, 852 (Bankr.N.D.Ill.1985), section 365(d)(4) must be considered in conjunction with sections 365(a) and 365(b)(1) with regard to the act of assumption. Section 365(a) provides the trustee with authority to assume an unexpired lease pursuant to court approval whereas section 365(b)(1) conditions the trustee's power of assumption on first curing any defaults, compensating the other party to the lease for damages resulting therefrom, and providing adequate assurance of future performance under the lease. Id.
The test for assumption or rejection under section 365 is whether the trustee has indicated his decision by an unequivocal act. In re Re-Trac Corporation, 59 B.R. 251, 255 (Bankr.D.Minn.1986). In Bon Ton, supra, this court held that the subsequent court approval, while essential, need not occur within sixty days after the order for relief so long as the trustee "decides" within that time. Accord In re By-Rite Distributing, Inc., 55 B.R. 740 (D.Utah 1985); Matter of Condominium Administrative Services, Inc., 55 B.R. 792 (Bankr.M.D.Fla.1985). However, since the trustee in Bon Ton expressed its unambiguous and unconditional intention to assume its unexpired lease by filing a motion within 60 days, the court did not have to determine whether any action short of filing a motion to assume would suffice to unequivocally declare a trustee's intention to assume.
Although section 365(a) does not set forth the manner in which the trustee is required to seek court approval, Bankruptcy Rule 6006 states that a proceeding to assume or reject is governed by Bankruptcy Rule 9014. Bankruptcy Rule 9014, in turn, sets forth that the relief shall be requested by motion with reasonable notice and an opportunity for hearing afforded to the opposing party. Based on a reading of section 365 in its entirety, together with the language of Bankruptcy Rules 6006 and 9014, and the analysis of recent authority, this court concludes that the only method of declaring an intention to assume is by filing a formal motion to assume within 60 days of the order for relief and that failure to do so will result in the lease being deemed rejected by operation of law. As the 9th Circuit Bankruptcy Appellate Panel recently stated in In re Treat Fitness Center, 60 B.R. 878, 14 BCD 632 (9th Cir.BAP 1986):
To not follow these rather explicit rules would be to lead us back into the morass of attempting to judge the meaning and import of the conduct and conversations of the parties.
*145 Id. at 879, 14 BCD at 633. That is precisely the type of situation this court is presently faced with as to what was said and meant by the debtor at the first meeting of creditors. Assumption by implication or action, rather than by filing a formal motion, "inevitably leads to the confusion and uncertainty exemplified by this case." In re Kelly Lyn Franchise Co., Inc., 26 B.R. 441, 444 (Bankr.M.D.Tenn.1983).
With respect to the lessor's acceptance of rent payments, such actions cannot constitute a waiver of the lessor's rights under section 365(d)(4) and section 365(d)(3) expressly so provides.[3]See In re Las Margaritas, Inc., 54 B.R. 98, 100 (Bankr.D.Nev.1985); In re Chandel Enterprises, 64 B.R. 607, 15 BCD 147, 149 (Bankr.C.D.Cal.1986); In re Re-Trac Corporation, 59 B.R. 251, 255 (Bankr.D.Minn. 1986). Moreover, the lessor herein did nothing to cause the debtor to forego seeking court approval of its assumption through the filing of a motion to assume so as to be estopped from claiming the rejection and termination of the lease by operation of section 365(d)(4). In re Las Margaritas, Inc., supra, at 99-100.
The court reiterates that, so long as a motion to assume is filed within 60 days, court approval can fall outside the 60-day period, particularly since formal ruling on the motion and entry of the court's order, as well as any scheduling of a hearing with respect to section 365(b)(1), is outside the debtor's control and therefore "should not operate to work a forfeiture of an otherwise assumable lease." See Matter of Condominium Administrative Services, Inc., supra, 55 B.R. at 798. However, since the debtor in this case failed to file such a motion within the requisite time period, the court concludes that the unexpired lease was not effectively assumed. Therefore, section 365(d)(4) mandates that the lease be deemed rejected and the debtor in possession immediately surrender possession thereof.
SO ORDERED.
NOTES
[1] 11 U.S.C. § 365(a) provides in relevant part:
... [T]he trustee, subject to the court's approval, may assume or reject any executory contract or unexpired lease of the debtor. Section 1107(a) of the Code basically gives the debtor in possession all the rights and powers of a Chapter 11 trustee. Therefore, references in § 365 as to what the trustee may do apply equally to a debtor in possession.
[2] Brown does not dispute that post-petition rent payments have continued to be remitted but states that such payments have not been made in a timely manner.
[3] Section 365(d)(3) provides in relevant part:
The trustee shall timely perform all the obligations of the debtor ... arising from and after the order for relief under any unexpired lease of nonresidential real property, until such lease is assumed or rejected, notwithstanding section 503(b)(1) of this title.... Acceptance of any such performance does not constitute waiver or relinquishment of the lessor's rights under such lease or under this title.
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319 S.E.2d 745 (1984)
Ruby VanCOLLOM
v.
Dorothy C. JOHNSON.
Record No. 812059.
Supreme Court of Virginia.
September 7, 1984.
Palmer S. Rutherford, Jr., Norfolk (Willcox, Savage, Dickson, Hollis & Eley, Norfolk, on brief), for appellant.
J. Darrell Foster, Portsmouth (Bangel, Bangel & Bangel, Portsmouth, on brief), for appellee.
Present All the Justices.
COMPTON, Justice.
In this negligence case, the plaintiff was burned severely as she removed a flaming frying pan from a dwelling. The central issue is whether the doctrine of assumption of the risk is applicable under the circumstances.
The facts are undisputed. On Sunday, September 30, 1979, appellee Dorothy C. Johnson, age 62 and the plaintiff below, *746 was the weekend visitor at the Portsmouth home of her sister. The plaintiff's mother, appellant Ruby VanCollom, resided there. About 11:00 a.m. on that day, the mother, age 82 and the defendant below, was preparing a meal for the family. Intending to cook potatoes in a "pot" on one of the surface heating elements of an electric stove in the kitchen, the mother mistakenly turned on a different element; it held a heavy frying pan filled with grease.
Shortly thereafter, the plaintiff and her mother were alone in the house, sitting in a room adjacent to the kitchen. The plaintiff noticed that the grease in the frying pan was afire and that flames extended to the kitchen ceiling. The plaintiff ran into the kitchen. The mother followed and stopped at the kitchen door, "petrified." The plaintiff picked up a towel, wrapped the towel around the handle of the pan, grasped the flaming pan, rushed through an open door from the kitchen to an attached garage, travelled out the back door of the garage, and threw the pan and contents into the yard. Apparently, the plaintiff received her burns when a wind gust blew the flames toward her as she was passing through the open garage.
Responding to interrogation about her reasons for her course of conduct, the plaintiff testified: "[W]hat went through my mind, I had to take care of my mother so she wouldn't get hurt, see my sister's home didn't catch on fire, and I definitely was very concerned about my mother." She also stated: "Well, as I said, this same thought kept running through my mind, I had to get the frying pan out of the house, knowing if I did it would mean I would have saved her life and this home." The plaintiff also testified she noticed her "mother was like she was frozen, couldn't move" at the kitchen door and that she did not want her "to get hurt or burned or anything...."
In this suit filed in March of 1980, a jury returned a verdict of $30,000 in favor of the plaintiff against the defendant in a March 1981 trial. The court below instructed the jury on primary and contributory negligence as well as on the principle of sudden emergency. The court refused, however, the defendant's request that the jury be instructed on the doctrine of assumption of the risk. After overruling a motion to set aside the verdict, the trial court confirmed the verdict in a September 1981 judgment order, from which we awarded the defendant this appeal.
The defendant contends the plaintiff assumed the risk of injury "by undertaking to lift a flaming skillet from a kitchen stove and carry it by hand to the out-of-doors." Noting the settled Virginia rule that one who voluntarily assumes the risk of injury from a known danger is barred from recovery in a negligence case, see Arrington v. Graham, 203 Va. 310, 314, 124 S.E.2d 199, 202 (1962), the defendant argues that the evidence shows the plaintiff knew and appreciated the risk involved in her conduct and that the trial court should have ruled in her favor as a matter of law. Alternatively, the defendant says the jury, under proper instructions, should have been permitted to decide the question. We disagree.
Assumption of the risk (venturousness), a defense associated with contributory negligence (carelessness), has two requirements: "the nature and extent of the risk must be fully appreciated and the risk must be voluntarily incurred." Amusement Slides Corp. v. Lehmann, 217 Va. 815, 819, 232 S.E.2d 803, 805 (1977). In the present case we focus on the latter requirement. Speaking to the necessity of voluntary assumption, the Restatement provides:
"(1) A plaintiff does not assume a risk of harm unless he voluntarily accepts the risk.
"(2) The plaintiff's acceptance of a risk is not voluntary if the defendant's tortious conduct has left him no reasonable alternative course of conduct in order to
(a) avert harm to himself or another, or
(b) exercise or protect a right or privilege of which the defendant has no right to deprive him." Restatement (Second) of Torts § 496E, at 576 (1965).
*747 Elaborating upon the rule, Comment c of the Restatement provides that a "plaintiff's acceptance of the risk is not to be regarded as voluntary where the defendant's tortious conduct has forced upon him a choice of courses of conduct, which leaves him no reasonable alternative to taking his chances." Id. at 577. The Comment further states that when a defendant, by his own negligence, has compelled a plaintiff to choose between two evils, the defendant will not be heard to say that the plaintiff cannot recover because he has made the choice. Thus, the Comment continues, when the defendant is under a duty to the plaintiff and the breach of that duty compels the plaintiff to encounter a particular risk in order to avert harm to himself or a third party, the plaintiff's acceptance of the risk is not voluntary. "The existence of an alternative course of conduct which would avert the harm ... does not make the plaintiff's choice voluntary, if the alternative is one which he cannot reasonably be required to accept." Id.
Illustration 2 that follows Comment c is pertinent here.
"A Railroad negligently sets a fire on its right of way, which burns toward B's house. In order to save the house B attempts to extinguish the fire, although he knows that there is a risk that he may be burned in doing so. B does not assume the risk." Id.
This requirement of a threshold determination on voluntary assumption articulated in the Restatement is not new in Virginia. In Landes v. Arehart, 212 Va. 200, 203, 183 S.E.2d 127, 129 (1971), we quoted from Hunn v. Windsor Hotel Co., 119 W.Va. 215, 218, 193 S.E. 57, 58 (1937), for the proposition that a plaintiff's allegedly negligent act will not be deemed voluntary if he has been compelled by a "special exigency."
In the present case, the defendant's careless, negligent act forced upon the plaintiff only one reasonable course of conduct. The plaintiff was forced to react, in a split second, to dispose of the source of the fire, thereby preventing injury to her mother and preventing damage to the dwelling as well as its contents. Certainly, there was an alternative course of conduct available to the plaintiff. She could have disregarded the blaze and ushered her mother to safety outdoors to await arrival of firemen. Nevertheless, that was not a viable alternative that afforded full protection to person and property because, while avoiding injury to the home's occupants, that choice could have resulted in substantial damage to property or complete destruction of the residence. Thus, paraphrasing the Restatement, the plaintiff's choice was not voluntary, as a matter of law, because the alternative course of conduct was one which she could not reasonably be required to accept. Stated differently, the plaintiff was compelled by a special exigency, making her choice not voluntary. We hold, therefore, that the trial court correctly refused to instruct on assumption of the risk.[*]
The jury's examination of the plaintiff's actions should have been made, and properly was made, on the basis of her reasonableness, and not on the basis of assumption of the risk. For example, Instruction 7 provided:
"The Court instructs the jury that it was the duty of the plaintiff in undertaking to deal with the fire in the skillet to use reasonable means in her efforts to avert damage to property.
"And if the jury believe from the evidence that the actions taken by the plaintiff were not reasonable under the circumstances in light of the seriousness of the harm threatened, the degree of likelihood that it would occur, and the probable harm that would result to plaintiff from her actions, then the plaintiff cannot recover and your verdict must be for the defendant."
*748 For these reasons, the judgment below will be
Affirmed.
NOTES
[*] Implicit in what we already have said is rejection of the defendant's additional contention that the trial court erred in failing to rule that the plaintiff was contributorily negligent as a matter of law.
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601 F.2d 580
Edwardsv.Johnson
No. 78-6386
United States Court of Appeals, Fourth Circuit
7/12/79
1
E.D.Va.
AFFIRMED
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Case: 12-20739 Document: 00512322337 Page: 1 Date Filed: 07/26/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
July 26, 2013
No. 12-20739
Summary Calendar Lyle W. Cayce
Clerk
COLLINS O. NYABWA,
Plaintiff–Appellant,
v.
DEPARTMENT OF HOMELAND SECURITY IMMIGRATION AND CUSTOMS
ENFORCEMENT FIELD OFFICE DIRECTOR,
Defendant–Appellee.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:12-CV-2518
Before WEINER, OWEN, and HAYNES, Circuit Judges.
PER CURIAM:*
Collins O. Nyabwa, immigration detainee # A087 029 259, filed a 28 U.S.C.
§ 2241 habeas corpus application challenging the legality of his immigration
detention on the ground that his state convictions were based on violations of an
unconstitutional state statute. The district court dismissed the petition as
premature.
*
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: 12-20739 Document: 00512322337 Page: 2 Date Filed: 07/26/2013
No. 12-20739
This court reviews a district court’s dismissal of a § 2241 petition de novo.
Kinder v. Purdy, 222 F.3d 209, 212 (5th Cir. 2000). Nyabwa is not required to
obtain a certificate of appealability before proceeding on appeal. See Ojo v. INS,
106 F.3d 680, 681 (5th Cir. 1997).
When Nyabwa filed his § 2241 application, he was being detained
pursuant to 8 U.S.C. § 1226(c), which mandates that the Attorney General take
into custody aliens who are deportable for having committed certain crimes.
Thus, Nyabwa’s § 2241 application challenged his preadjudication detention
pending a removal hearing. Nyabwa has since been ordered removed and is now
being held pending removal pursuant to 8 U.S.C. § 1231(a)(1)(A). Because
Nyabwa is no longer subject to the detention he challenged in his application, his
appeal of the district court’s dismissal is moot. See Oyelude v. Chertoff, 170 F.
App’x 366, 367 & n.4 (5th Cir. 2006).
DISMISSED AS MOOT; MOTION FOR APPOINTMENT OF
APPELLATE COUNSEL DENIED.
2
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959 S.W.2d 765 (1998)
60 Ark.App. 206
David RAMSEY, III, Appellant,
v.
STATE of Arkansas, Appellee.
No. CA CR 96-1227.
Court of Appeals of Arkansas, Divisions III and IV.
February 4, 1998.
*766 Jo Ellen Carson, Fort Smith, for Appellant.
Winston Bryant, Atty. Gen., Kelly Terry, Asst. Atty. Gen., Little Rock, for Appellee.
BIRD, Judge.
On June 5, 1995, David Ramsey, the appellant, entered a plea of nolo contendere to the charge of robbery and was given a suspended imposition of sentence for five years, conditioned upon appellant's making a good-faith effort to complete his high-school education or earn a GED and not possessing any controlled substances. Due to his incarceration on unrelated charges, appellant did not enroll in school until the spring semester of 1996. On January 25, 1996, after being involved in what appeared to be a gang-related incident at school, appellant was suspended from school. Two days later, the car in which appellant was riding with two minors was pulled over at 2 a.m. for violation of curfew. The officers conducted a search of the car, finding marijuana. On January 31, 1996, the State filed a petition to revoke appellant's suspended sentence, alleging that he was suspended from school as a result of improper activity. The petition was later amended to include charges that appellant had committed the offenses of possession of marijuana and contributing to the delinquency of a minor.
A revocation hearing was held, and the judge revoked appellant's suspended sentence. Afterward, the State declined to prosecute the charges of contributing to the delinquency of a minor and possession of marijuana for lack of evidence. Appellant then filed a motion requesting the court to reconsider its revocation because the State had failed to prosecute the marijuana and contributing charges. Following another hearing, the court denied the motion and affirmed the earlier ruling revoking appellant's suspended sentence. Appellant brings this appeal contending that his improper activity, which resulted in his suspension from school, was not sufficient evidence to prove that he failed to make a good-faith effort to obtain his high-school diploma or GED.
When appealing a revocation, the appellant has the burden of showing that the trial court's findings are against the preponderance of the evidence. Ark.Code Ann. § 5-4-309(d)(Repl.1993); Tipton v. State, 47 Ark.App. 187, 887 S.W.2d 540 (1994). On appellate review, the trial court's findings are upheld unless they are clearly against a preponderance of the evidence. Tipton v. State, supra; Russell v. State, 25 Ark.App. 181, 753 S.W.2d 298 (1988). Evidence that is insufficient to support a criminal conviction may be sufficient to support a revocation. Lemons v. State, 310 Ark. 381, 836 S.W.2d 861 (1992).
*767 From a reading of the briefs, it appears that the conditions of the suspended sentence that the State alleges were violated are that the appellant did not make a good-faith effort to obtain his high-school diploma or GED, that he possessed controlled substances, and that he contributed to the delinquency of a minor.
First, the appellant argues that he did not violate the conditions of his suspended sentence by failing to make a good-faith effort to obtain his high-school diploma or his GED. He argues that he was suspended from school for only ten days for a gang-related incident and that he was eligible to return to school after the suspension. He argues further that he did not return to the school after the ten-day suspension because he had enrolled in the Adult Education Center in an effort to get his GED. A good-faith effort is defined in Ark.Code Ann. § 5-4-323 (Supp. 1995) as meaning "the person has been enrolled in a program of instruction and is attending school or adult education." The State argues that the suspension, coupled with evidence that the appellant had been truant once and tardy twice during only a one-month period of enrollment, is enough to show that the appellant was not making a good-faith effort to obtain his high-school education.
Second, the appellant contends that his sentence should not be revoked because the State failed to prove that he was in possession of marijuana and the State did not prosecute the marijuana and contributing charges due to lack of evidence. The appellant argues that the State did not prove, nor is there any evidence to establish, that he knew the marijuana was in the car. The State argues that evidence that specifically links defendant to the controlled substance is not needed in a revocation hearing.
However, even without the consideration of the charges of contributing to the delinquency of a minor and possession of marijuana, the court did not err in revoking the appellant's suspended sentence. In order for appellant's suspended sentence to be revoked, the State need only prove that the appellant committed one violation of the conditions. Ross v. State, 22 Ark.App. 232, 738 S.W.2d 112 (1987). The fact that the appellant had been truant once, tardy twice and suspended for ten days from school, all within a period of less than a month, are sufficient proof of his lack of a good-faith effort to obtain his high-school diploma or GED.
The dissenting opinion implies that appellant is merely a school child who is being imprisoned for being tardy, cutting classes, and being suspended from school, just like "thousands, if not tens of thousands," of other citizens. The dissent has apparently overlooked the fact that appellant is an eighteen-year-old convicted felon serving a suspended sentence for robbery, subject to revocation if, among other conditions, he fails to make a good-faith effort to obtain his high-school diploma or GED. Notwithstanding the tenuous position this condition of his suspended sentence put him in at school, within a period of less than one month appellant was tardy to school twice, absent without excuse once, and suspended from school for ten days. As a result of the accumulation of these offenses, the trial court made a factual determination that appellant had violated the "good-faith effort" condition of his suspension, and sentenced appellant to serve the five-year term of imprisonment that had been earlier suspended following his conviction for robbery. Nothing in the record suggests that appellant was sentenced to serve a term in prison for being tardy, truant, and suspended from school. Plainly put, this is not a case about a school child who is being too harshly punished for violating a school rule. This case is about a convicted robber serving a five-year suspended sentence who lacked the discipline to obey the simple condition of his suspension that he attend and behave at school.
The dissenting opinion also suggests that before the trial court may revoke the appellant's suspended sentence, the State must present proof that appellant was tardy or absent a sufficient number of times to subject himself to expulsion from school, the failure to be promoted, or failure to graduate. Of course, no authority is cited in support of this suggestion because none exists.
The dissent suggests that the purpose of Ark.Code Ann. § 5-4-323(c) may be *768 thwarted if people are sent to prison when they violate the "good-faith effort" condition of their suspended sentences, because in prison they cannot be compelled to go to school. And it is suggested that, by enforcing strict compliance with this condition of appellant's suspended sentence, the court is increasing the prison population at the expense of encouraging education. This distorted reasoning is contrary to the language of section 5-4-323(b), which requires that the court "shall revoke a suspension of sentence or probation if the person fails to make a good-faith effort to achieve the degree or certificate." (Emphasis added.) Whether a good-faith effort has been made is a question of fact to be determined by the trial judge that we will not reverse unless clearly against the preponderance of the evidence. We do not find that the trial court's decision is clearly against the preponderance of the evidence.
Affirmed.
AREY and STROUD, JJ., agree.
CRABTREE, J., concurs.
GRIFFEN and ROAF, JJ., dissent.
CRABTREE, Judge, concurring.
I wholeheartedly agree with the conclusion stated in the majority opinion. I write separately to emphasize our very limited standard of review of revocation hearings, and to clarify the inappropriate characterization of appellant's circumstances by the dissent.
The State has the burden of proof to establish that the appellant violated the terms of his suspended sentence or probation by a preponderance of the evidence. Deere v. State, 59 Ark.App. 174, 954 S.W.2d 943 (1997). A preponderance of the evidence is the greater evidence when compared to that opposed to it. Missouri Pac. R.R. Co. v. Hancock, 195 Ark. 414, 113 S.W.2d 489 (1938). On appeal, we reverse the trial court only if we determine that the evidence is clearly against the preponderance of the evidence, Pearson v. State, 262 Ark. 513, 558 S.W.2d 149 (1977), and we need not review the evidence in the light most favorable to the State to make that determination. See contra Billings v. State, 53 Ark. App. 219, 921 S.W.2d 607 (1996). When considering the preponderance of the evidence, it does not matter to what degree the evidence in favor of the trial court's judgment outweighs that opposed to it, only that the evidence is sufficient to support the trial court's finding, even if that evidence only minutely outweighs that opposed to it. Because we review a cold record, we must give considerable deference to the trial court's findings on credibility issues. Hyde v. State, 59 Ark. App. 131, 953 S.W.2d 911 (1997). In a revocation proceeding, it is equally important for this Court to give deference to the trial court in its superior position to consider the demeanor of the parties ___ things that a record cannot reflect, such as facial expression, speech intonation, and the sincerity of the defendant. Although we may question the ultimate disposition of the case, we must affirm if the revocation was not clearly against the preponderance of the evidence and within the range of punishment allowed by law.
In this case, two weeks after the court suspended the appellant's sentence for robbery, the appellant served four months in the Department of Correction for committing another felony offense. Shortly after his release from the Department of Correction, the appellant enrolled in public school. Within a month, he was suspended for ten days for disrupting school by allegedly engaging in gang activity. Not long after his suspension from school, the appellant was arrested at 2 a.m. for contributing to the delinquency of a minor and possession of marijuana.[1] Since the rules of evidence do not apply in revocation matters, it is appropriate for the trial court to consider appellant's criminal history. See Palmer v. State, 60 Ark.App. 97, 105, 959 S.W.2d 420, 424 (1998). Under the facts of this case, I cannot say that the trial court's revocation of appellant's suspended sentence is clearly against the preponderance of the *769 evidence. To the contrary, the findings of the trial court indicate that the trial judge was sympathetic to the age and circumstances of the appellant.
The dissenting opinion strongly argues that the appellant did not violate the "good faith" requirement that he obtain a high school diploma or G.E.D. certificate because he enrolled in the G.E.D. program but never attended because he was arrested for the violations. I would point out that the appellant's mother was the one who convinced the appellant to enroll in the G.E.D. program. There is nothing in the record to indicate that appellant himself initiated that particular conduct.
The dissenting opinion also suggests that the appellant should not have his suspended sentence revoked because of a few tardies, missing school once, and being suspended. I disagree with this characterization of the appellant's incarceration. Lest we forget, the appellant committed a felony offense punishable by up to twenty years in the state penitentiary. He was not sentenced to the DOC for being suspended from school or because he was tardy from school. Only after the trial court bent over backwards to keep him out of prison was he finally sentenced for the underlying felony offense to which he pled guilty. While we would all prefer that our nation's youth choose the path of education over that of criminal conduct, that decision is the offender's and not ours.
For the reasons stated herein, I concur in the majority opinion.
GRIFFEN, Judge, dissenting.
I would reverse the trial court's decision to revoke appellant's suspended sentence because it is clearly erroneous. Although the State and the majority maintain that appellant was suspended from high school for ten days because of involvement in what they term "a gang-related incident at school," the State filed a petition to revoke the suspended sentence based on appellant's ten-day suspension from high school for merely saying, "What's up?" during a confrontation involving several youths in a school hallway.
Before the suspension ended, appellant attempted to enroll in adult education classes because his parents and a cooperative education teacher had counseled him not to return to Fort Smith Northside High School. It is self-evident that appellant could not make a good-faith effort to obtain a general education development certificate without enrolling in such a program; hence, it is preposterous to conclude that he failed to put forth a good-faith effort to obtain a high school diploma or a general education development certificate when all of the proof shows that he was attempting to enroll in a GED program when the revocation proceeding was commenced.
It is also perverse reasoning to hold that appellant's suspension, two incidents of tardiness, and one incident of truancy during the month that he attended Northside High School proved a failure to make a good-faith effort toward completion of a high school diploma or GED certificate. No doubt Arkansas has thousands, if not tens of thousands, of residents who completed high school or obtained their GED certificates but who were tardy or cut classes. There is no proof in the record about how many absences or tardy episodes were necessary in order to put a student in the Fort Smith School District at risk for expulsion or failing a grade. The very idea that a school district could expel or flunk a student for being tardy twice and having a single unexcused absence is absurd. If the school district legally charged with educating appellant and presumably knowledgeable about its own attendance and conduct criteria for good-faith effort did not expel appellant or flunk him because of his truancy, tardiness, and the suspension, it is astounding that courts would find that appellant had failed to make a good-faith effort to obtain an education, especially when the only other evidence before us is that appellant was trying to enroll in a GED program.
Finally, the result affirmed today should be understood in light of its practical consequences for appellant and our criminal justice system. The underlying premise of Ark. Code Ann. § 5-4-323(c)(Supp.1995) is that there is a positive relationship between having a high school education and reducing or *770 preventing crime. The basis for that premise is obvious given the mountain of data showing that the overwhelming majority of persons in our prison system lack a high school diploma or general education development certificate. Thus, it is possible for prison inmates to enroll in GED programs and obtain the equivalent of a high school education while in prison, but no one has introduced any proof about what degree of absenteeism or tardiness will disqualify the inmates from participating in adult education. So it is ironic, to put it mildly, that the people of Arkansas are now forced to house, feed, clothe, and possibly educate appellant at government expense for five yearsbecause he was tardy twice, had a single incident of truancy, and had been suspended from high school for ten days while serving a suspended sentence. Of course, no one can force appellant to obtain an education in prison, so the very incentive that the General Assembly hoped to offer when it enacted § 5-4-323 may be lost to appellant and to society.
Subsection (c) exists to promote education, not increase the prison population. That we have overlooked this aim upon no proof shows what happens when the legal process strains at gnats and swallows camels. Therefore, I respectfully dissent.
ROAF, J., joins in this dissent.
NOTES
[1] This activity, if proven, would constitute two more good causes to revoke appellant's suspended sentence.
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24 F.3d 237
Cortev.Schaffer**
NO. 93-01745
United States Court of Appeals,Fifth Circuit.
May 18, 1994
1
Appeal From: N.D.Tex.
2
AFFIRMED.
**
Conference Calendar
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945 F.2d 55
138 L.R.R.M. (BNA) 2678, 120 Lab.Cas. P 10,946
LABORERS' INTERNATIONAL UNION OF NORTH AMERICA, AFL-CIO,LOCAL 104, Petitioner-Cross-Respondent,v.NATIONAL LABOR RELATIONS BOARD, Respondent-Cross-Petitioner.
Nos. 1537, 1648, Dockets 91-4009, 91-4021.
United States Court of Appeals,Second Circuit.
Argued May 31, 1991.Decided Sept. 24, 1991.
Theodore T. Green, Washington, D.C. (Laborers' Intern. Union of North America, AFL-CIO), for petitioner-cross-respondent.
Stephen Davis, New York City (Davis & Davis, of counsel) for petitioner-cross-respondent.
Howard E. Perlstein, Washington, D.C. (Supervising Atty., N.L.R.B., Scott D. MacDonald, of counsel), for respondent-cross-petitioner.
Before OAKES, Chief Judge, and KAUFMAN and WALKER, Circuit Judges.
WALKER, Circuit Judge:
1
The National Labor Relations Board ("NLRB or Board") seeks to enforce its decision and order finding Laborers International Local 104 ("Local 104") in violation of § 8(b)(4)(ii)(D) of the National Labor Relations Act ("NLRA"). The Board concluded that Local 104 threatened an employer in order to force the latter to assign work to Local 104, work that had previously been given to members of Sheet Metal Workers Local 28. In turn, the Board ordered Local 104 to cease and desist from all such threatening activities. Local 104 claims that the NLRB's order should not be enforced because during the mandatory NLRA § 10(k) hearing to determine which union should receive the work, the Board failed to take into account evidence that the Sheet Metal Workers' pension fund has a significant financial investment in the employer. We reject Local 104's claim of error, and enforce the decision and order of the NLRB.
BACKGROUND
2
ACMAT Corporation is an asbestos removal contractor based in Hartford. Until 1987, ACMAT employed workers from different unions on a composite-crew basis, and had separate collective bargaining agreements with each union, including one with Local 104. ACMAT found that this division of labor between workers from several unions resulted in disputes over which union was entitled to perform specific tasks, friction among employees and production delays. In order to resolve these problems, ACMAT terminated these separate union agreements in late 1986 and 1987. In December 1987, after the Sheet Metal Workers' International Association ("Sheet Metal Workers") instituted a program to train its members in all aspects of the asbestos abatement process, ACMAT executed a nationwide agreement with the Sheet Metal Workers to cover all phases of ACMAT's asbestos removal work.
3
In August 1988, ACMAT was hired by Cross & Brown Co. to remove asbestos from the Prudential Insurance Company's offices on the sixth and eighth floors of the Pan Am building in New York City. As required by its contract with Sheet Metal Workers, ACMAT employed only workers represented by Sheet Metal Workers Local 28 to complete this job. On September 6, shortly after the project commenced, a representative from Local 104 came to the work site and demanded to be put on the payroll as a union steward. The Local 104 representative insisted that the job should be performed by Laborers rather than Sheet Metal Workers. ACMAT refused to accede to these demands. The next day two Local 104 representatives appeared and stated that they might have to take other Laborers off their jobs in other portions of the Pan Am building unless the work was reassigned to Local 104. Cross & Brown told ACMAT to stop the asbestos removal work until its labor dispute was settled.
4
On October 19, ACMAT attempted to resume work, but that afternoon another representative of Local 104 came to the site and demanded to be put on the payroll. ACMAT again refused. Cross & Brown then ordered ACMAT's employees off the site, stating that it did not want any more trouble. ACMAT has not performed any further work under the contract.
PROCEEDINGS
5
On September 13, 1988 ACMAT filed an unfair labor practice charge with the NLRB alleging that Local 104 had violated § 8(b)(4)(ii)(D) of the NLRA, codified at 29 U.S.C. § 158(b)(4)(ii)(D). The charge alleged that Local 104 had threatened both ACMAT and Cross & Brown in order to force ACMAT to displace employees affiliated with Sheet Metal Workers Local 28 and reassign their work to members of Local 104.
6
Before the Board could issue a complaint under § 8(b)(4)(ii)(D), § 10(k) of the NLRA, codified at 29 U.S.C. § 160(k), required that it conduct a hearing to determine which group of employees should be awarded the disputed work (a "10(k) hearing").1 After seven days of hearings in the fall of 1988, the Board determined that employees represented by Sheet Metal Workers were properly entitled to jurisdiction over the work. In reaching this conclusion, the Board balanced factors derived from Machinists Lodge 1743 (J.A. Jones Construction), 135 NLRB 1402 (1962) (the "Jones factors") including 1) employer preference and past practice; 2) economy and efficiency of operations; 3) area practice; 4) relative skill and training; 5) certifications by the Board; 6) awards of joint boards.
7
On August 1, 1989 Local 104 notified the Board that it would not comply with the Board's 10(k) award. The Board then issued a decision and order dated December 26, 1990, holding that Local 104 was in violation of § 8(b)(4)(ii)(D), and ordering Local 104 to cease its coercive activities against ACMAT with respect to the assignment of asbestos removal positions at the Pan Am building job-site.
8
Local 104 asks this court not to enforce the Board's December 26 decision on the basis that the 10(k) determination underlying it was fatally flawed by the Board's incomplete analysis of the "employer preference" factor of the Jones test. Specifically, Local 104 argues that the 10(k) Board refused to consider Local 104's offer of proof that: 1) the Sheet Metal Worker's pension fund has a thirty to thirty-five percent ownership interest in ACMAT, and 2) the pension fund has purchased thirty percent of an insurance company that provides liability insurance to asbestos removal contractors, including ACMAT, and is owned in substantial part by ACMAT.2 These investments, Local 104 argues, create a conflict of interest within the union and thus the union has engaged in an unfair labor practice by representing its members in their dealings with ACMAT. Local 104 contends that this conflict undermines the legitimacy of ACMAT's preference for Sheet Metal Workers. Therefore, Local 104 maintains, by giving weight to ACMAT's preference for Sheet Metal Workers, the Board arbitrarily and capriciously allowed its 10(k) determination to rest on an invalid employer preference.
9
We reject these contentions, and enforce the Board's decision and order.DISCUSSION
A. Standard of Review
10
Since Local 104 does not dispute the Board's finding that its threats to pull workers from other jobs in the Pan Am Building amounted to a § 8(b)(4)(ii)(D) violation if the 10(k) work award was properly made against them, our review involves the propriety of that 10(k) determination. In reviewing the Board's 10(k) decision, we are bound to uphold the Board's factual findings if they are supported by "substantial evidence," and its legal determinations if they are not "arbitrary or capricious." See NLRB v. Local 584, International Brotherhood of Teamsters, 535 F.2d 205 (2d Cir.1976); International Longshoremen's Union Local 62-B v. NLRB, 781 F.2d 919, 923 (D.C.Cir.1986). Judicial review of NLRB decisions, however, does not function as a mere "rubber stamp." Local 584, IBT, 535 F.2d at 208. Indeed, a court will look to see whether the Board's analysis of the work jurisdiction dispute is complete. A finding that it is not complete may lead to a holding that the Board's 10(k) determination is "arbitrary or capricious." See Int'l Longshoremen's Local 62-B, 781 F.2d at 923, 925-26. Thus, if we find that the NLRB failed to consider a Jones factor crucial to its 10(k) award, we may conclude that the award is fatally flawed and vacate it. We therefore turn to the question of whether the NLRB's analysis of the "employer preference" factor was substantially incomplete.
11
B. Relevance of a Union's Substantial Investment in an Employer in Examining "Employer Preference" in 10(k) Determinations
12
The Board's usual analysis of the "employer preference" factor of the Jones test is quite straightforward. The Board simply notes the employer's preference to use employees represented by one union or another, or no union at all, and further states that this factor weighs in favor of an award to the preferred employees. See Local 1332, Longshoremen's Association (Trailer Marine Transport Corp.), 264 NLRB 319, 321 (1982); UAW Local 292 ( Delco Electronics), 228 NLRB 635, 637-38 (1977); see also NLRB v. International Longshoremen's Local 50, 504 F.2d 1209, 1220 (9th Cir.1974) ("[w]henever the Board determines that a collective bargaining contract clearly and unambiguously binds an employer to one (and only one) union, then that union is almost invariably awarded the work.")
13
The Board has, however, explored the employer's preference in greater depth when that preference "may not be representative of a free and unencumbered choice," Teamsters Local 158 (Holt Cargo Systems), 293 NLRB No. 112, slip op. at 13 (April 28, 1989), but may in fact have been forced upon the employer by a union's coercive activity, i.e., threats or picketing. Where allegations of such coercion prove to be true, the Board will discount the employer's choice as a product of duress. See International Longshoremen's Local 50 (Brady Hamilton Stevedore Company), 223 NLRB 1034, 1037 (1976) (employer's preference discounted because its reassignment of work to longshoremen was brought about by that union's work stoppage on other jobs).
14
In an attempt to apply the NLRB's recognition that an employer's coerced choice of an employee is in fact no choice at all, Local 104 argues that ACMAT's choice should be disregarded because it was, in effect, "bought" by the Sheet Metal Workers pension fund's ownership interest in ACMAT. Thus, ACMAT's choice of the Sheet Metal Workers cannot be considered a "free and unencumbered" preference. Holt Cargo, slip. op. at 16. In citing Holt Cargo and Brady Hamilton Stevedore Company for this proposition, however, Local 104 has construed their holdings too broadly and taken their language condemning coerced choice out of context. These cases address the situation where a union threatens an employer in order to extort employment. The preference which Local 104 asks the NLRB to condemn here, however, is not a result of threats directed by the union at the employer, but rather it is the product of a voluntary business relationship. The only entity to whom this choice may appear coercive, or unfair, is a union that is not a party to the ACMAT-Sheet Metal Workers' collective bargaining agreement and covets the work assigned to Local 28. The fact that the Sheet Metal Workers have an ownership interest in ACMAT would appear to be more of a benefit to ACMAT than a club in the hands of the union. Arguably, a union which has invested in an employer's business has a personal stake in the success of the enterprise, and is less likely to want to disrupt it. While this might create industrial harmony, this harmony could occur at the expense of full and vigorous representation by the union of its members' interests. Whatever the merits of this issue are, however, the employer's decision to award work to a union that has a stake in its business, is not a "coerced preference" as the NLRB has thus far conceived of the term. Therefore, we are not required to disregard the employer's wishes that its work be done by a union that has invested in its business.
15
Even if the situation here does not amount to a coerced preference for the Sheet Metal Workers, however, Local 104 contends that we should further restrict the NLRB's practice of affording great deference to an employer's selection of employees to perform its work. Local 104 argues that a employer's preference should also be disregarded when the chosen union is so connected with the employer that the union's representation of its members in their interactions with the employer is necessarily conflicted. Local 104 maintains that this conflict of interest on the union's part becomes relevant to the validity of an employer's preference, because it is an unfair labor practice on the employer's part to extend recognition to such a conflicted union. Local 104 argues that an employer preference in such circumstances is irremediably tainted, and cannot be validated by a 10(k) board.
16
We have no quarrel with Local 104's assertion that an employer's unlawful behavior in assigning work to a particular union might be relevant in a 10(k) proceeding. Although the purpose of a 10(k) hearing is to "ensure that work disputes between two or more groups of employees are permanently and expeditiously settled," Local 393, United Ass'n of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry, (Hall-Way Contracting Company, Inc.), 232 NLRB 644, 645 (1977) if the Board ignored an illegal employer action which was relevant to the actual process of its work assignments, the Board's analysis of a work dispute would be incomplete, and thus arbitrary or capricious. See Int'l Longshoremen's Local 62-B, 781 F.2d at 923, 925-26.
17
We believe, however, that even if Local 104 is correct in its contention that ACMAT's recognition of the "conflicted" Sheet Metal Workers constitutes an unfair labor practice3, this violation would not taint the work assignment process, and thus is not relevant to a 10(k) proceeding. The cases cited by Local 104 that hold that an employer's recognition of a conflicted union constitutes an unlawful practice do not arise in the work assignment setting and do not deal with a 10(k) hearing and thus are inapposite. For example in Centerville Clinics, 181 NLRB 135 (1970), employees of a clinic which was funded in large part by the United Mineworkers of America's ("UMWA") welfare and retirement fund changed their union affiliation from a non-UMWA union to the UMWA after two fellow employees solicited a change of representation from the employees. The clinic's board of directors consisted mainly of UMWA representatives, and the two employees who did the soliciting were both UMWA leaders as well as clinic board members. In holding that the clinic violated § 8(a)(1) and (2) of the NLRA, codified at 28 U.S.C. § 158(a)(1) and (2),4 the Board stated that the employees might well have believed that because the UMWA and the clinic were so closely linked the clinic wished them to sign with the UMWA, and that "in these circumstances the employees did not have that complete and unhampered freedom of choice to sign or not to sign ... that the Act contemplates." Id. at 139. Similarly, in Medical Foundation of Bellaire, 193 NLRB 62 (1971), the Board held that where, as in Centerville Clinics, employees of a medical foundation left their old union to join one which was closely linked, both financially and organizationally with the foundation, the link between the employer and union created "a proximate danger of infection of the bargaining process." Id. at 64 (quoting N.L.R.B. v. David Buttrick Co., 399 F.2d 505, 508 (1st Cir.1968)).
18
Both Centerville Clinics and Medical Foundation of Bellaire deal with an employer's actions at the time its employees choose which union shall represent them. They note that an employer's nod of approval for a conflicted union at this point in time creates an impression that the employer wishes its employees to opt for the union so approved. Section 8(a)(1) and (2) forbid such action on the employer's part as an interference with a worker's right to "form labor unions" and "bargain collectively through representatives of their own choosing," or as an attempt to "dominate or interfere in the formation or administration of any labor organization." These cases do not implicate the situation in which the employer has hired a group of employees that presently belong to a union with which the employer is in some way connected. By assigning work in this manner, an employer does not insert its wishes into the employee's union selection process. The award of work to employees whose union is conflicted does not of itself offend these employees right to conflict free leadership. The employer's assignment of work to the conflicted union may send a signal to employees that it is better for them to join a union which has such connections, but it does not interfere with their ability to choose a conflict-free union in the first place. Similarly, the fact that an employer may assign work to a group of non-union employees, see Plumbers Local 195 (Texas Oil and Chemical Terminals), 231 NLRB 525, 527-28 (1977), may indicate to workers that they may have a better chance to get work if they do not join a union at all. Nevertheless, these kinds of signals at the work assignment stage do not amount to an illegal effort to interfere with the union formation process in the first instance.
19
Accordingly, we find Local 104's attempt to transfer the concerns of Centerville Clinics and Medical Foundation of Bellaire to the 10(k) context unpersuasive. We note, however, that while its actions may not be relevant in a 10(k) context, an employer may not interfere with its employees' right to choose a conflict-free union with impunity. Such employer interference is properly the subject of an unfair labor practice charge directly under § 8(a)(1) and (2) of the NLRA.
CONCLUSION
20
As Local 104 offers no reason why the decision of the Board is arbitrary or capricious or unsupported by substantial evidence, we enforce the order of the NLRB.
21
Enforcement granted.
1
The Board may issue a complaint for a violation of § 8(b)(4)(ii)(D) only if the 10(k) ruling is adverse to the union which threatened to restrain the employer, or any other person engaged in commerce, and if the union refuses to abide by the ruling. See NLRB v. Radio and Television Broadcast Engineers Union, Local 1212, 364 U.S. 573, 576-77, 81 S.Ct. 330, 332-33, 5 L.Ed.2d 302 (1961); NLRB v. Plasterers' Local Union No. 79, 404 U.S. 116, 123-124, 92 S.Ct. 360, 365-366, 30 L.Ed.2d 312 (1971)
2
These contentions by Local 104 have not yet been the subject of an evidentiary hearing, and no findings have been made with regard to them. As part of the NLRB's investigation into a separate charge by Local 104 that, in light of these investments, ACMAT and the Sheet Metal Workers' signing of a collective bargaining agreement constituted an unfair labor practice in violation of § 8(a)(1), (2), (3) and (5), and § 8(b)(1)(A), (2) and (3) of the NLRA, the Regional Director found that the Sheet Metal Workers' pension fund had a 17.9% voting interest in ACMAT, and had one member on ACMAT's eight person board of directors. The Regional Director did not discuss the pension fund's overall ownership interest, or any investment the fund may have in an insurance company substantially owned by ACMAT
3
The NLRB regional director investigating Local 104's § 8(a)(1), (2), (3) and (5) unfair labor charges based on these assertions refused to issue a complaint on the charges, and his decision was upheld by the NLRB's General Counsel
4
These sections state:
(a) It shall be an unfair labor practice for an employer--
(1) to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 157 of this title;
(2) to dominate or interfere with the formation or administration of any labor organization or contribute financial or other support to it.
Section 157 states:
Employees shall have the right to self-organization, to form, join or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection ...
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TOWN LAKE V LIC
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-563-CV
TOWN LAKE JOINT VENTURE, RON MULLEN AND JOSEPH E. THOMPSON,
APPELLANTS
vs.
LUMBERMEN'S INVESTMENT CORPORATION,
APPELLEE
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 331ST JUDICIAL DISTRICT
NO. 405,692, HONORABLE PAUL R. DAVIS, JR., JUDGE PRESIDING
Appellant Town Lake Joint Venture ("Town Lake") filed suit against appellee
Lumbermen's Investment Corporation ("LIC"), alleging breach of contract and numerous other
claims. LIC then filed a claim against appellants Ron Mullen, Joseph E. Thompson, and Town
Lake to recover the deficiency on two promissory notes. The trial court directed a verdict in
favor of LIC on its claims against appellants and offset the resulting damages with the damages
the jury awarded Town Lake on its claims of negligent misrepresentation and promissory estoppel.
Town Lake, Mullen, and Thompson appeal this judgment, asserting six points of error. We will
affirm.
FACTS
Town Lake, a joint venture involving Robert Keener, Neal Block, Mullen, and
Thompson, borrowed $4 million from Anchor Savings in March 1984 in order to purchase a plot
of land in downtown Austin. Keener, Block, and Thompson signed the promissory note
acknowledging this debt to Anchor. The land and a $1 million certificate of deposit were
collateral for the loan. Town Lake and LIC began discussing the possibility of forming a joint
venture to construct and lease an office building on the land. In July 1984, LIC loaned Town
Lake $4.6 million to refinance the Anchor loan. The new loan contained similar terms as the
Anchor loan; the land and certificate of deposit were designated as collateral. In September 1984,
LIC loaned Town Lake an additional $100,000 to cover architectural fees. The parties produced
a draft of a contract detailing the planned joint venture in early October. However, on December
11, 1984, LIC informed Town Lake that it no longer wished to enter into the venture.
Town Lake defaulted on both notes it owed LIC. On November 4, 1985, the
parties signed an agreement. Town Lake stipulated that the amount due on the two original notes
was $4,586,811.21. (1) In return, LIC agreed not to foreclose upon the land until January 5, 1986.
It had foreclosed upon the certificate of deposit on August 5, 1985, but loaned Town Lake
$78,000 from these funds; this loan was due January 5th. LIC also agreed to release Keener and
Block from any liability upon two conditions: that they convey their interest in Town Lake to
Thompson or Mullen, and that they release all claims against LIC by signing a form satisfactory
to LIC. LIC never released Keener or Block and foreclosed upon the land owned by Town Lake
on December 2, 1986.
Town Lake filed suit, claiming LIC had (1) negligently misrepresented its intentions
about forming a joint venture with Town Lake; (2) broken its promise to form a joint venture, and
Town Lake had relied on this promise to its detriment; (3) breached an enforceable contract to
form a joint venture and to construct the office building; (4) committed deceptive trade practices;
and (5) broken its promise in the November 4, 1985, agreement to release Keener and Block.
LIC's claims in this case involve the deficiency for the amount due on the three notes for $4.6
million, $100,000, and $78,000 after foreclosure upon the certificate of deposit and the land. The
trial court submitted questions to the jury on Town Lake's negligent misrepresentation and
promissory estoppel claims, refused to submit questions to the jury on Town Lake's claims
regarding deceptive trade practices and breach of the November 4th agreement, and directed a
verdict against Town Lake's claim that LIC had breached an agreement to form a joint venture.
The court also directed a verdict in favor of LIC on its claims for the deficiency on the notes and
refused to submit Town Lake's proffered jury questions on its affirmative defense that LIC had
fraudulently induced Town Lake to sign the notes. The jury found in favor of Town Lake on the
submitted questions and awarded $235,000 in damages. The court offset this amount against the
damages it found LIC should recover for its claims and rendered judgment accordingly.
THE NOVEMBER 4, 1985, AGREEMENT
Appellants' first point of error asserts that the trial court erred when it failed to ask
the jury whether LIC had breached the November 4th agreement by not releasing Keener and
Block from liability. The court's action was proper if no evidence supported the requested jury
question. Kindred v. Con/Chem., Inc., 650 S.W.2d 61, 63 (Tex. 1983).
LIC contends that it did not breach the agreement as a matter of law because Town
Lake presented no evidence that the conditions precedent for LIC's promise to release Keener and
Block from liability ever occurred. Appellants first raise a procedural argument that this Court
cannot consider such a contention in support of the trial court's judgment because LIC failed to
plead specifically which conditions precedent did not occur.
Town Lake's petition generally alleged that all conditions precedent had been
performed. This pleading was procedurally sufficient. Tex. R. Civ. P. 54. LIC's answer denied
that all such conditions precedent had been performed without specifically identifying any single
condition. This lack of specificity would prevent LIC from complaining on appeal about Town
Lake's failure to prove the performance of conditions precedent if Town Lake had recovered on
its claim at trial. Id.; Sunbelt Constr. Corp. v. S & D Mechanical Contractors, Inc., 668 S.W.2d
415, 417-18 (Tex. App.--Corpus Christi 1983, writ ref'd n.r.e.); Dealers Nat'l Ins. Co. v.
Simmons, 421 S.W.2d 669, 674 (Tex. Civ. App.--Houston [14th Dist.] 1967, writ ref'd n.r.e.).
A plaintiff's compliance with Rule 54, however, merely shifts the burden of pleading to the
defendant, not the burden of proof at trial. Trevino v. Allstate Ins. Co., 651 S.W.2d 8, 11 (Tex.
App.--Dallas 1983, writ ref'd n.r.e.). Because appellants did not prevail at trial, the relevant issue
is their complaint about the trial court's failure to submit Town Lake's requested jury question.
We conclude that LIC's general denial that all conditions precedent had been performed was
procedurally sufficient to support the trial court's action. We therefore review the merits of LIC's
assertion that Town Lake presented no evidence of the occurrence of conditions precedent to
LIC's promise to release Keener and Block from liability.
Appellants presented evidence that Keener and Block had signed documents
transferring their interests in Town Lake to the other venturers and releasing LIC from liability.
Thompson admitted in his testimony, however, that the releases were not "full and complete" or
"all in form satisfactory" to LIC, as required by the November 4th agreement. Appellants agree
that such a contractual provision must meet an objective standard; the relevant test is whether a
reasonable person would have been satisfied by the release. Black Lake Pipe Line Co. v. Union
Constr. Co., 538 S.W.2d 80, 89 (Tex. 1976). Appellants presented no evidence of the
reasonableness of the releases; indeed, they did not even introduce the releases or any testimony
about their terms into evidence. Without such proof, there was no evidence that the conditions
precedent to LIC's promise to release Keener and Block had been satisfied. The trial court
correctly refused to submit Town Lake's questions on LIC's alleged breach of the November 4th
agreement to the jury. We overrule appellants' first point of error.
DAMAGES
Appellants' second point of error challenges the trial court's refusal to submit one
of Town Lake's requested jury questions on damages resulting from its negligent
misrepresentation and promissory estoppel claims. This question asked the jury to determine the
amount Town Lake should recover for out-of-pocket expenses, the lost value of the land, and the
loss of the certificate of deposit. The court submitted a damages question referring only to out-of-pocket expenses Town Lake incurred in reliance upon LIC's negligent misrepresentation about
its intentions and its promise to enter into the joint venture agreement.
Town Lake's point of error refers to a damages question unconnected to any
specific theory of liability contained in Town Lake's proposed set of jury questions. The damages
question followed immediately after questions on fraudulent inducement, an issue only relevant
to LIC's claims on the promissory notes. Town Lake's set of proposed questions contained only
general damages questions relating to the claims of negligent misrepresentation and promissory
estoppel. Appellants therefore have not properly preserved error. See Wilgus v. Bond, 730
S.W.2d 670, 672 (Tex. 1987); see also Tex. R. Civ. P. 278. (2)
Additionally, Town Lake's requested jury question included damages not
recoverable under the theories of liability submitted to the jury. Appellants concede that Town
Lake may recover reliance damages, but not lost profits or any "benefits of the bargain," under
a negligent misrepresentation claim. Federal Land Bank v. Sloane, 825 S.W.2d 439, 443 (Tex.
1991); see also Restatement (Second) of Torts § 552B(2) (1977). This rule also applies to a claim
of promissory estoppel. Fretz Constr. Co. v. Southern Nat'l Bank, 626 S.W.2d 478, 483 (Tex.
1981).
Appellants do not dispute that the property and the certificate of deposit were
already designated as collateral under the Anchor Savings loan, which was formalized before LIC
began discussions with Town Lake. The LIC loan merely refinanced the Anchor loan and
contained similar terms. Appellants correctly note that reliance damages are intended to place a
party in the position from which it started. However, Town Lake did not incur the damages it
wishes to recover, the entire unencumbered value of the land and certificate of deposit, because
of its reliance upon any representation or promise by LIC. Appellants contend that Town Lake came into the LIC negotiations owning the land and the certificate of deposit and that
they merely want the value of these properties returned. However, Town Lake actually entered
the negotiations with Anchor's already-existing liens on its properties. Town Lake cannot ignore
these liens under a reliance theory of damages.
Town Lake notes that during the negotiations, LIC discussed the possibility that
it would finance a construction loan to Town Lake to "take out" its previous loan made in July
1984, after the joint venture contract was signed. The end result of such a loan, the elimination
of the liens on Town Lake's property, clearly would be a benefit of the anticipated joint venture.
Appellants also argue that Town Lake broke off negotiations with third parties
interested in forming similar joint ventures in reliance upon LIC's promises. Besides the problem
that Town Lake's properties were already debt-encumbered, the undisputed fact that such
negotiations only took place after LIC refused to sign a joint venture agreement makes this
argument irrelevant.
Town Lake's jury question on damages asked for the value of the land and the
certificate of deposit, without regard to the existing liens on them. Town Lake would never have
owned these items outright except as a result of a hoped-for bargain with LIC. Town Lake did
not burden the land or the certificate of deposit with liens in the first place in reliance upon any
representations or promises from LIC. The trial court did not err in failing to submit Town
Lake's jury question on damages. The second point is overruled.
LIC'S COUNTERCLAIM
The trial court directed a verdict for LIC on its deficiency claim based on the notes
owed by appellants. The third point of error asserts the court erred in granting this directed
verdict, based upon appellants' contention that the court should have submitted its proposed jury
question on fraudulent inducement. (3)
Town Lake was required to plead fraudulent inducement as an affirmative defense.
Gage v. Lansford, 615 S.W.2d 934, 940 (Tex. Civ. App.--Eastland 1981, writ ref'd n.r.e.); see
also Tex. R. Civ. P. 94. A party is not entitled to a jury question on an affirmative defense if it
failed to plead the defense. Tex. R. Civ. P. 278; Allstate Ins. Co. v. Perez, 783 S.W.2d 779, 782
(Tex. App.--Corpus Christi 1990, no writ). Town Lake failed to plead fraudulent inducement as
an affirmative defense; therefore, the trial court did not err when it failed to submit Town Lake's
proffered jury question on this issue and directed a verdict in favor of LIC on its claims.
Appellants contend the issue of fraudulent inducement was tried by consent. A
party may not claim an affirmative defense was tried by consent if it does not plead the defense.
Matthews v. General Accident Fire & Life Corp., 343 S.W.2d 251, 254 (Tex. 1961); Hirsch v.
Hirsch, 770 S.W.2d 924, 926 (Tex. App.--El Paso 1989, no writ). A party that failed to plead an
affirmative defense before trial may only assert an issue was tried by consent if it amended its
pleadings at trial before the charge was submitted. Bachynski v. Fox & Co., 662 S.W.2d 771,
774 (Tex. App.--Houston [14th Dist.] 1983, no writ); see also Tex. R. Civ. P. 67. Appellants did
not request a trial amendment; therefore, they may not assert that the issue of fraudulent
inducement was tried by consent. We also note that appellants do not refer to any evidence in the
record that supports their contention that the issue was tried by consent, except for a pre-trial
motion in limine LIC requested to prevent appellants from introducing any evidence on fraudulent
inducement. As this motion was not repeated at trial, it sheds no light on the subject of trial by
consent. We overrule the third point of error.
DTPA CLAIM
Appellants' fourth point asserts error in the trial court's refusal to submit Town
Lake's jury questions on its claim that LIC had committed violations of the Deceptive Trade
Practices-Consumer Protection Act ("DTPA"), Tex. Bus. & Com. Code Ann. §§ 17.41-.63 (West
1987 & Supp. 1993). The parties dispute whether Town Lake qualifies as a "consumer" under
the DTPA. This question is one of law for the court to decide. How Ins. Co. v. Patriot Fin.
Servs., Inc., 786 S.W.2d 533, 539 (Tex. App.--Austin 1990, writ denied). A consumer is one
who seeks or acquires goods or services by purchase or lease, when the goods or services form
the basis of the complaint. Melody Home Mfg. Co. v. Barnes, 741 S.W.2d 349, 351-52 (Tex.
1987).
Town Lake sought to borrow money to refinance its loan with Anchor Savings.
Such a transaction does not involve the acquisition of goods or services. Riverside Nat'l Bank v.
Lewis, 603 S.W.2d 169, 173-74 (Tex. 1980). (4) Although the proposed joint venture might have
been a "consumer" if it had eventually acquired the office building, Town Lake cannot use a
future entity's status to qualify as a consumer. Moreover, the proposed building and the services
which might have related to its construction are not the basis of appellants' complaint. LIC's
alleged misrepresentations involve the formation of a joint venture, not the construction of the
building.
Because Town Lake is not a consumer, it cannot bring an action under the DTPA.
See Melody Home, 741 S.W.2d at 351. We overrule the fourth point.
THE JOINT VENTURE AGREEMENT
Appellants' fifth point of error complains of the court's directed verdict against
Town Lake's claim that LIC breached its "contract" with Town Lake to form a joint venture. The
parties do not dispute that, ordinarily, a valid agreement relating to real estate must meet the
statute of frauds' requirement that it be in writing. Tex. Bus. & Com. Code Ann. § 26.01 (West
1987). LIC asserts that the parties' failure to sign a written joint venture agreement defeats Town
Lake's claim as a matter of law.
Appellants first suggest that a draft of the proposed contract, dated October 1,
1984, serves as a "memorandum" that meets the statute of frauds' requirement of a written
agreement. LIC did not sign the draft; therefore, it cannot serve as a memorandum. Id.
§ 26.01(a)(2).
Appellants next assert that LIC's promise to participate in a joint venture agreement
estops it from raising a statute of frauds defense. The supreme court addressed this issue in
"Moore" Burger, Inc. v. Phillips Petroleum Co., 492 S.W.2d 934, 940 (Tex. 1972):
"Respondents read the Court's opinion to make any promise [to enter into a contract] enforceable
. . . . The promise which is determinative here is the promise to sign a written agreement which
itself complies with the statute of frauds."
The record contains evidence that in 1984 LIC represented that a deal might be
consummated soon. No evidence exists, however, that LIC promised to sign a specific writing,
such as the October 1 draft. Even if LIC had unequivocally promised that it would soon sign a
contract, Town Lake was required to prove the promise related to a written agreement already in
existence. Consolidated Petroleum Indus. v. Jacobs, 648 S.W.2d 363, 367 (Tex. App.--Eastland
1983, writ ref'd n.r.e.).
Furthermore, in order for promissory estoppel to apply, there must be complete
agreement between the parties that they will sign a contract with terms that are finalized. H.
Molsen & Co., Inc. v. Hicks, 550 S.W.2d 354, 356 (Tex. Civ. App.--El Paso 1977, writ ref'd
n.r.e.). Town Lake presented no evidence that the parties had definitively reached a "meeting of
the minds." Keener and Block had not agreed to sign the contract. LIC had informed Town Lake
that five conditions, involving various permits or ordinances necessary to begin construction of
the office building, had to be met before LIC would enter into a joint venture agreement. The
record evidence shows these conditions were not fulfilled before LIC communicated its refusal
to form a joint venture.
Finally, even if appellants could rely upon promissory estoppel to avoid the statute
of frauds, the trial court's error was harmless, as Town Lake has already recovered reliance
damages at trial under a separate promissory estoppel claim. Appellants sought the recovery of
almost $9 million in lost profits at trial for LIC's alleged breach of its agreement to construct the
office building as a joint venture with Town Lake. Appellants may not recover lost profits under
any theory of promissory estoppel. Adams v. Petrade Int'l, Inc., 754 S.W.2d 696, 709 (Tex.
App.--Houston [1st Dist.] 1988, writ denied). (5) For these reasons, we overrule the fifth point of
error.
Appellants' sixth point of error complains about the trial court's exclusion of
evidence of the potential value of the completed office building. Appellants concede that this
evidence would be relevant only if Town Lake could recover its lost profits under its claim that
LIC breached its agreement to construct the building. In light of our holding above, we conclude
the trial court did not err in excluding the evidence in question. We overrule appellants' sixth
point.
Having overruled all of appellants' points of error, we affirm the judgment of the
trial court.
Marilyn Aboussie, Justice
[Before Justices Powers, Aboussie and B. A. Smith]
Affirmed
Filed: June 30, 1993
[Do Not Publish]
1. The agreement states, "[T]he parties do hereby stipulate and agree . . . [t]he principal
balances upon the Notes aggregate at this time the amount of $4,586,811.21 all of which is
due and payable by Town Lake to Lumbermen's" (emphasis added).
2. Appellants assert that their objection to the damages question actually submitted to the
jury suffices to preserve error. However, they do not argue on appeal that this question was
erroneously submitted as a matter of law; instead, their point of error complains that the
court failed to submit additional measures of damages contained in their requested damages
question. Appellants' point of error does not mention the actual question submitted by the
court. At any rate, under Rule 278 appellants must show on appeal that they properly
submitted a question relating to a claim on which they had the burden of proof.
3. The parties apparently agreed at trial and do not dispute on appeal that, besides the
fraudulent inducement issue, the evidence conclusively established appellants' liability for the
deficiency as a matter of law and thus supports the directed verdict. See Collora v. Navarro,
574 S.W.2d 65, 68 (Tex. 1978). Appellants stipulated the amount they owed under the three
notes in the November 4th agreement. The court calculated the damages it awarded for the
deficiency on the notes by starting with this stipulated amount and subtracting LIC's recovery
from its foreclosure on the land.
4. This situation is different from that involving the borrowing of money to acquire a good
or service. See Flenniken v. Longview Bank & Trust Co., 661 S.W.2d 705, 707-08 (Tex. 1983).
Town Lake did not use the amount borrowed under the first LIC note to buy the land or construct
a building, but merely to repay its existing debt to Anchor.
5. Appellants propose that although a party may recover only reliance damages under an
affirmative claim of promissory estoppel, it may recover lost profits when it uses this theory
to avoid the statute of frauds. They cite no authority for such a proposition, and caselaw
clearly makes no such distinction. See Macgobar N. Am. v. Grasso Oilfield Servs., Inc., 736
S.W.2d 787 (Tex. App.--Corpus Christi 1987), writ dism'd by agr., 754 S.W.2d 646 (Tex. 1988).
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568 F.3d 1374 (2009)
VALUE VINYLS, INC., Plaintiff-Appellee,
v.
UNITED STATES, Defendant-Appellant.
No. 2007-1562.
United States Court of Appeals, Federal Circuit.
June 16, 2009.
*1375 Robert T. Givens, Givens & Johnston, PLLC, of Houston, TX, argued for plaintiff-appellee.
Marcella Powell, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of New York, NY, argued for defendant-appellant. With her on the brief were Barbara S. Williams, Attorney in Charge, International Trade Field Office, and Jeanne E. Davidson, Director, of Washington, DC. Of counsel was Beth C. Brotman, Attorney, Office of Assistant Chief Counsel, International Trade Litigation, United States Customs and Border Protection, of New York, NY.
Before NEWMAN and MOORE, Circuit Judges, and GETTLEMAN, District Judge.[*]
Opinion for the court filed by Circuit Judge NEWMAN. Dissenting opinion filed by District Judge GETTLEMAN.
NEWMAN, Circuit Judge.
This appeal concerns the proper classification of a plastic-coated textile product imported by Value Vinyls, Inc. The question is whether the Court of International Trade correctly concluded that the imported product, whose textile component is made entirely of man-made fibers, is a "product with textile components in which man-made fibers predominate by weight over any other single textile fiber" and hence is classified under subheading 3921.90.11 of the Harmonized Tariff Schedule of the United States (HTSUS), or whether, as the government argues, this category does not include product made entirely of man-made fibers. We conclude that the Court of International Trade correctly classified the subject goods.
*1376 BACKGROUND
Value Vinyls' product is a plastic-coated fabric material that is imported in sheets, and is used in making products such as truck covers, barrier coverings, dividers, upholstery, signs, and barriers. The product is comprised of a textile layer made from a polyester fiber, coated on both sides with a layer of compact polyvinyl chloride. Value Vinyls imported the goods during 1998, 1999, and 2000, through the ports of Los Angeles, San Francisco, and Dallas. Upon import, United States Bureau of Customs and Border Protection ("Customs") (formerly known as the United States Customs Service, see 6 U.S.C. § 542 & notes) classified the goods under HTSUS subheading 3921.90.19, at a duty rate of 5.3% ad valorem. Value Vinyls protested, arguing that subheading 3921.90.11 was the proper classification, at a duty rate of 4.2% ad valorem. Customs denied the protests, and Value Vinyls challenged the classification in the Court of International Trade.
The Court of International Trade held that subheading 3921.90.11, which includes "textile components in which man-made fibers predominate by weight over any other single textile fiber," encompasses product whose textile component contains only man-made fibers. Value Vinyls, Inc. v. United States, No. 01-00896, 2007 WL 273839 (Ct. Int'l Trade Jan. 30, 2007). The court granted rehearing, and then adhered to its decision. Value Vinyls, Inc. v. United States, No. 01-00896, 2007 WL 2071535 (Ct. Int'l Trade July 20, 2007). The government appeals.
DISCUSSION
Interpretation of the tariff schedules, as a question of statutory interpretation, is reviewed as a matter of law. Degussa v. United States, 508 F.3d 1044, 1047 (Fed.Cir.2007). Whether a particular imported product fits within a correctly interpreted tariff provision is a question of fact, which we review for clear error. Id. In this case, the only question is interpretation of the tariff schedule. See General Elec. Co.-Med. Systems Group v. United States, 247 F.3d 1231, 1235 (Fed.Cir.2001) ("When there is no genuine dispute over the nature of the merchandise, the classification of the merchandise is a question of law.").
The HTSUS is organized by chapters, which encompass broad subject matter categories; headings, which set forth particular classes of merchandise; and subheadings, which further separate goods within each class. See Orlando Food Corp. v. United States, 140 F.3d 1437, 1439 (Fed.Cir.1998). Following the General Rules of Interpretation (GRI) of the HTSUS, the classification of merchandise is determined according to the terms of the headings and subheadings and any relevant section or chapter notes. See id. at 1440.
The parties agree that the goods here at issue are within chapter 39 and under heading 3921 for "Other plates, sheets, film, foil and strip, of plastics." The dispute is between subheadings 3921.90.11 and 3921.90.19. The relevant provisions follow:
3921 Other plates, sheets, film, foil and strip, of
plastics:
* * *
3921.90 Other:
Combined with textile materials and
weighing not more than 1.492 kg/m2:
Products with textile components
in which man-made fibers predominate
by weight over any other
single textile fiber:
3921.90.11 Over 70 percent by
weight of plastics .... 4.2%
3921.90.15 Other (229) ........... 6.5%
3921.90.19 Other ........................ 5.3%
All agree that Value Vinyls' product satisfies the overall weight criterion of heading 3921.90, and the seventy percent plastics threshold of 3921.90.11. The question is whether the textile definition "man-made fibers predominate by weight over *1377 any other single textile fiber" includes textiles made entirely of man-made fibers.
The government argues that the word "predominate" requires two or more components, and thus cannot apply to a situation where only one fiber is present. Thus the government argues that Value Vinyls' goods cannot be included in 3921.90.11, and must instead be placed in the catch-all "Other" of subheading 3921.90.19. The government cites several dictionary definitions of the word "predominate" in support of this argument, but its chief support comes from an earlier decision of the Court of International Trade, which interpreted the word "predominate" in the way the government proposes, albeit for different goods in a different subheading of a different chapter of the HTSUS. In Semperit Industrial Products, Inc. v. United States, 855 F.Supp. 1292, 1298 (Ct. Int'l Trade 1994), the court held that the plaintiff's industrial conveyor belt products made with vulcanized rubber combined with textiles made entirely of man-made fibers are properly classified under HTSUS subheading 4010.91.19. The government argues that the court adopted the plain meaning of "predominate" in Semperit, and that this settled meaning must apply throughout the HTSUS, rendering it not only unnecessary but improper for the court to redefine the term for the HTSUS subheading that applies to Value Vinyls' goods.
The Court of International Trade explained that it had found the language of 3921.90.11 ambiguous, and resorted to the legislative history including the conversion history to resolve that ambiguity, and to ensure that it reached the correct result. The court also recognized that the Semperit definition did not control the different HTSUS categories here at issue, and in all events is not binding precedent. See D & L Supply Co. v. United States, 22 Ct. Int'l Trade 539, 540 (1998) ("[T]he Court notes that it is not bound by a decision of another judge of the same court, although such a decision may be persuasive precedent."). The court recognized that its ultimate obligation was "to find the correct result, by whatever procedure is best suited to the case at hand." Jarvis Clark Co. v. United States, 733 F.2d 873, 878 (Fed. Cir.1984). The court then independently analyzed the tariff provisions relevant to the Value Vinyls goods.
The Court of International Trade found the history of conversion from the corresponding class in the prior Tariff Schedule of the United States (TSUS) to be particularly enlightening as to whether Congress intended to exclude textiles made wholly of man-made fibers from the scope of HTSUS subheading 3921.90.11. The court observed that goods with textiles made wholly of man-made fibers had previously been included in the predecessor to 3921.90.11. After assessing the relevant history and other indicia of statutory intent, the court concluded that the imported goods, with textile components made wholly of man-made fibers, are within subheading 3921.90.11, and that the catch-all "Other" of subheading 3921.90.19 includes textiles with a less than predominant amount of man-made fibers.
We conclude that the Court of International Trade correctly determined the meaning of "predominate" in the context of subheading 3921.90. See generally Helvering v. Stockholms Enskilda Bank, 293 U.S. 84, 93-94, 55 S.Ct. 50, 79 L.Ed. 211 (1934) ("The intention of the lawmaker ... is to be ascertained, not by taking the word or clause in question from its setting and viewing it apart, but by considering it in connection with the context, the general purposes of the statute in which it is found, the occasion and circumstances of its use, and other appropriate tests for the ascertainment of the legislative will."). The *1378 history of conversion from the TSUS to the HTSUS makes especially clear that there was no substantive change intended in the scope of the TSUS subheading when converted to the HTSUS subheading now at issue. Whatever generality of meaning is borne by the word "predominate," the history of the relevant provisions shows that the "man-made fibers predominate by weight" provision includes textiles made wholly of man-made fibers.
The Conversion Report issued by the International Trade Commission, the cognizant agency, states that HTSUS subheading 3921.90.11 corresponds to the former TSUS subheading 355.81, which covered plastic-coated fabrics whose textile component was made "of man-made fibers." The government agrees that TSUS subheading 355.81 encompassed Value Vinyls' goods. In contrast, the Conversion Report states that HTSUS subheading 3921.90.19 corresponds to TSUS subheading 355.85 (and some other provisions not relevant here). The structure of these corresponding TSUS subheadings was as follows, with emphasis added:
Woven or knit fabrics (except pile or tufted fabrics), of textile materials, coated or filled with rubber or plastics material, or laminated with sheet rubber or plastics:
* * *
Of man-made fibers:
355.81 Over 70 percent by weight
of rubber or plastics .... Sq. yd. 4.2%
355.82 Other .............................. 8.5%
* * *
355.85 Other ........................... Sq. yd. 5.3%
The similarity to the HTSUS is apparent. In addition, TSUS General Headnote and Rule of Interpretation 9(f)(i) defined the word "of," when used between the description of an article and a material, as meaning that the "article is wholly or in chief value of the named material." This is the usage in the emphasized phrase above. Thus subheading 355.81 encompassed plastic-coated textile materials made wholly or in chief value of man-made fibers. When the TSUS was superseded by the HTSUS, the phrase "of man-made fibers," meaning "wholly or in chief value," was replaced by "man-made fibers predominate by weight over any other single textile fiber."
As the Court of International Trade observed, citing this history, this shift from value to weight was not a substantive change in the fiber content of goods under this section but a convenience for measurement, for weight is an objective metric, whereas value is not. HTSUS subheading 3921.90.11 therefore continued to cover, as had TSUS subheading 355.81, fabrics made wholly of man-made fibers, as well as fabrics containing "mostly" man-made fibers, with the only difference that "mostly" is now to be determined by relative weight, rather than value. There is no suggestion of any other legislative intent, either in the conversion history or in any other source we are aware of.
The government has pointed to no error in the court's view of the ITC's Conversion Report; instead, the government argues that the Conversion Report should be accorded no weight because it is not proper "legislative history," in that it states the intention of the executive agency, not Congress. The Conversion Report was designed to explain the legislative actions being taken and to assist in applying them, and was properly considered by the Court of International Trade. We agree that this Report guides and supports the court's correlation of the TSUS and HTSUS provisions that encompass the subject goods.
The "harmonization" of the tariff schedule was designed generally to adopt internationally accepted product nomenclature while leaving United States tariff provisions substantially intact, without change in the applicable duties. See H.R.Rep. No. *1379 100-576, at 548 (1988) (Conf.Rep.), reprinted in 1988 U.S.C.C.A.N. 1547, 1581 ("The conferees believe that the HTS fairly reflects existing tariff and quota treatment and that the conversion is essentially revenue-neutral."); see also Marubeni Am. Corp. v. United States, 35 F.3d 530, 532-33 (Fed.Cir.1994) (describing conversion to the Harmonized Tariff System). In guidelines provided with the President's request to the International Trade Commission to draft the harmonized schedule, President Reagan stated:
In converting the tariff schedules the Commission should avoid, to the extent practicable and consonant with sound nomenclature principles, changes in rates of duty on individual products.
Anhydrides & Chems., Inc. v. United States, 130 F.3d 1481, 1484 (Fed.Cir.1997) (quoting Institution of Investigation for the Conversion of the Tariff Schedules of the United States into the Nomenclature Structure of the Harmonized System, 46 Fed.Reg. 47,897, 47,897 (Sept. 30, 1981)). This court reasoned in Anhydrides that "[i]t is highly relevant that Congress and the executive stated their intention to maintain generally revenue-neutral tariff treatment in converting to the nomenclature of the HTSUS." Id. This principle further supports the conclusion that HTSUS subheading 3921.90.11 continues to encompass textiles consisting wholly of man-made fibers, for the only change in the move from the TSUS to the HTSUS was from value to weight, with no change in definition of the fiber itself, and no change in the duty rates for the relevant subheadings.
This history negates the interpretation that the change to the HTSUS removed wholly man-made fibers from the category that previously included such fibers, while providing no replacement category. Such interpretation would violate the principle of continuity of tariff embodied in the general charge to maintain revenue neutrality in the conversion from the TSUS to the HTSUS. The classification now proposed was explicitly precluded by the TSUS. Such a change, without any explanation by Congress or the cognizant agency, would be an "absurd construction," for it would move the Value Vinyls goods into the classification category for goods wherein the textile component does not have a predominant amount of man-made fiber, while excluding the Value Vinyl goods from the category previously designated for goods with mostly or wholly man-made fibers. See Witco Chem. Corp. v. United States, 742 F.2d 615, 619 (Fed.Cir.1984) ("[A]n absurd construction of a statutory provision should be avoided.") (citing Oates v. Nat'l Bank, 100 U.S. (10 Otto) 239, 244, 25 L.Ed. 580 (1879)); see also 2A Sutherland Statutory Construction § 46.07 (4th ed.1973 & supp.1983) ("it is clear that if the literal import of the text of an act ... leads to absurd results, the words of the statute will be modified by the intention of the legislature"). The Court of International Trade correctly concluded that the change from "value" to "weight" did not change the prior interpretation.
The Court of International Trade recognized that its interpretation diverged from that in Semperit, where the word "predominate" was construed for different goods under a different heading. The government stresses the canon of statutory construction that the meaning of the same term used in different parts of the same statute is presumed to be the same. That is a sound canon. Nonetheless, a disputed term is not thereby insulated from analysis in light of the nature and structure of the statute, the provisions in which the term is used, the possibility of error in the prior construction, and any other relevant considerations in the particular case. When the earlier definition arose for a different HTSUS provision and different products, *1380 it is not immune from review and reapplication for different HTSUS provisions and products. See Degussa, 508 F.3d at 1047 ("The meaning of a tariff term is a question of law, reviewable de novo by this court ...."); see also General Dynamics Land Systems, Inc. v. Cline, 540 U.S. 581, 595-96, 124 S.Ct. 1236, 157 L.Ed.2d 1094 (2004) ("The presumption of uniform usage [throughout a statute] thus relents when a word used has several commonly understood meanings among which a speaker can alternate in the course of an ordinary conversation, without being confused or getting confusing." (footnote omitted)); Sherman v. Hamilton, 295 F.2d 516, 520 (1st Cir.1961) ("[I]t is not unusual for the same word to have different connotations in the same act and surely no canon of statutory construction forecloses courts from attributing to the word the meaning which the legislature intended that it should have in each instance."); see also 2A Sutherland Statutory Construction §§ 46:05, 51.02.
We have not reviewed the correctness of the Semperit decision as applied to the goods and classification there at issue. As to the Value Vinyls goods and Chapter 39, the circumstances of this case are particularly weighty in light of the history of the conversion from TSUS subheading 355.81 to HTSUS subheading 3921.90.11. The Court of International Trade did not err in holding that the definition and application of "predominate" in Semperit does not apply to these different goods and different HTSUS section. The complexity of the tariff schedule, the great variety of products in trade, and the constant barrage of new products, all support the obligation of the Court of International Trade to reach the "correct result" in the case at hand. Jarvis Clark Co., 733 F.2d at 878. We conclude that the court correctly ruled that subheading 3921.90.11 embraces products whose textile component is made wholly of man-made fibers, and therefore applies to Value Vinyls' goods. The decision of the Court of International Trade is
AFFIRMED.
GETTLEMAN, District Judge, dissenting.
I respectfully dissent from the majority opinion.
This international tariff case concerns the proper classification of a synthetic woven textile fabric (the "Fabric") imported by respondent Value Vinyls, Inc. ("Value Vinyls"). The sole issue on appeal is the proper interpretation of the operative language of HTSUS subheading 3921.90.11, which provides: "products with textile components in which man-made fibers predominate by weight over any other single textile fiber." Specifically, at issue is the meaning and function of the word "predominate," and whether a 100% man-made woven textile fiber product qualifies as a "product with textile components in which man-made fibers predominate by weight over any other single textile fiber" under HTSUS subheading 3921.90.11. My colleagues hold that the Court of International Trade correctly ruled that HTSUS subheading 3921.90.11 applies to products with textile components made of entirely man-made fibers and properly classified the Fabric. I conclude that the Court of International Trade erred by holding that the term "predominate" was ambiguous within the meaning of HTSUS subheading 3921.90.11, and improperly relied on an agency report to reach its holding.
The terms used in the schedule are afforded their common or dictionary meaning unless the HTSUS or the legislative history provide a contrary definition. Medline Indus., Inc. v. United States, 62 F.3d 1407, 1409 (Fed.Cir.1995); see also Mita Copystar Am. v. United States, 21 F.3d 1079, 1082 (Fed.Cir.1994) ("A court may rely upon its own understanding of *1381 terms used, and may consult standard lexiographic and scientific authorities to determine the common meaning of a tariff term."). In addition, the court may "look to the Explanatory Notes accompanying a tariff subheading as a persuasive, but not binding, interpretative guide." Bauer Nike Hockey USA, Inc. v. United States, 393 F.3d 1246, 1250 (Fed.Cir.2004) (citing Mita Copystar, 21 F.3d at 1082).
At the core of my disagreement with the majority is its willingness to disregard the plain meaning of the language of the HTSUS. The plain meaning of "predominate" is unambiguous. It necessarily "contemplates a hierarchy between two or more elements" and "incorporates a comparison between two or more entities and a determination that one of the entities outweighs the other." Semperit Indus. Prods., Inc. v. United States, 855 F.Supp. 1292, 1298 (Ct. Int'l Trade 1994). In Semperit, the Court of International Trade adopted this definition and engaged in a lengthy analysis of the common and popular meaning of the term "predominate." Id. While it is true that Semperit is not binding on this court, I find the detailed analysis of the meaning of "predominate" wholly persuasive.
At issue in Semperit was the meaning of "predominate" as it appears in the subsection of the HTSUS that applies to conveyor or transmission belting made of vulcanized rubber. Although the relevant subheadings in Semperit and the instant case are distinct in regard to the merchandise they encompass, the relevant language at issue is identical in both subheadings: "[w]ith textile components in which man-made fibers predominate by weight over any other single textile fiber." In the absence of a statutory definition or guiding legislative history, the Semperit court looked to the plain meaning of the statute and compared the common definition of "predominate" with various dictionary entries for the term. The Semperit court concluded that nothing in the HTSUS or common and popular meaning of predominate "suggests that one material can `predominate' when no other material exists." Id., 855 F.Supp. at 1298-99. Thus, applying this logic to the instant case, because the Fabric is made of only one type of material, a subheading utilizing the word "predominate" is inapplicable.
The majority takes issue with the Semperit definition and finds it unpersuasive because the legislative history of the subheading in Semperit differs from the legislative history of HTSUS subheading 3921.90.11. Although it is true that Semperit and the instant case are distinguishable in some respects, it would be incorrect to rely on an administrative agency report (the "Conversion Report") as legislative history. The Conversion Report was issued by the International Trade Commission when the Tariff Schedule of the United States ("TSUS") was converted to the HTSUS. While the Conversion Report may shed light on congressional intent, it is merely an interpretive text by the agency, and should not be relied on as conclusive legislative history in the face of the unambiguous plain language of the subheading.
Further, a review of the actual congressional legislative history of HTSUS subheading 3921.90.11 reveals nothing to compel a contrary result. See Bausch & Lomb, Inc. v. United States, 148 F.3d 1363, 1367 (Fed.Cir.1998). The TSUS General Headnote and Rule of Interpretation 9(f)(i)(1988) defined the word "of" when used between the description of a material and the material to mean the "article is wholly or in chief value of the named material." Therefore, TSUS subheading 355.81 encompassed textile materials coated, filled or laminated with rubber or plastics made only of man-made *1382 fibers. There is no language in TSUS subheading 355.81 limiting its scope to material comprised of two or more textile fibers.
In contrast, the new language of HTSUS subheading 3921.90.11 does create such a limitation. The change in language from "wholly or in chief value" in the TSUS, to "predominate by weight" in the HTSUS evidences intent by Congress to change the meaning of the subheadings, not just the method of measuring the goods as the majority suggests. See Bausch & Lomb, 148 F.3d at 1367 ("`A change in the language of a statute is generally construed to import a change in meaning ....'" (quoting Ruth F. Sturm, Customs Laws and Administration § 51.7 at 57 (1995))). Consequently, any inference that the classification of fabrics having 100% man-made fibers under TSUS subheading 355.81 necessitates the classification of such fabrics under HTSUS subheading 3921.90.11 is, in my view, incorrect.
Based on its interpretation of the Conversion Report, the majority concludes that "predominate" can have multiple meanings within the HTSUS. While I recognize my colleague's faithfulness to the principle of continuity of tariffs in the conversion from TSUS to HTSUS, I am unconvinced that this mandates a departure from one of the primary rules of statutory construction: words should be defined consistently throughout a statute "[a]bsent clear legislative intent to the contrary." Lynteq, Inc. v. United States, 976 F.2d 693, 699 (Fed.Cir.1992). I find that it would be incongruous and confusing to ignore this rule. The meaning of "predominate" has already been litigated, defined by the Court of International Trade, and applied as law by U.S. Customs and Boarder Protection. I find no reason to assign multiple definitions to the term within the same statute.
The undisputed facts in this case establish that the subject Fabric has the following characteristics: (1) it is a sheet of plastic; (2) combined with textile material; and (3) the textile component is made exclusively of a single man-made fiber. Consequently, in my view, the man-made components of the subject Fabric cannot "predominate over any other single textile fiber" because there is no "other" fiber over which to predominate. Therefore, the Fabric does not fall within HTSUS subheading 3921.90.11, and the goods must be classified under HTSUS subheading 3921.90.19 at a duty rate of 5.3% ad valorem.
Because I would reverse the Court of International Trade's decision, I respectfully dissent.
NOTES
[*] The Honorable Robert W. Gettleman, United States District Court for the Northern District of Illinois, sitting by designation.
| {
"pile_set_name": "FreeLaw"
} |
FILED
AUG. 20, 2015
In the Office of the Clerk of Court
W A State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
IN THE MATTER OF THE MARRIAGE )
OF: ) No. 32022-7-III
)
DIANEL. WOOD )
)
Respondent, )
) UNPUBLISHED OPINION
and )
)
ZALE K. WOOD, )
)
Appellant. )
FEARING, J. -. Zale Wood assigns error to most rulings of the trial court in his
divorce action with Diane Wood, Zale's wife for forty-nine years. Since the trial court
applied the correct legal standards and properly exercised its discretion, we affirm the
judgment and decree of marital dissolution entered below.
FACTS
Diane and Zale Wood married on July 5, 1960 in Yakima. In 1980, the Woods
purchased a Yakima County home on seventeen acres, and they resided together in the
home until their separation. The couple begat and nurtured two now adult children.
No. 32022-7-111
In re the Marriage of Wood
Throughout most of the marriage, Zale worked in construction as a member of the
Teamsters Union. He retired and began drawing a Teamsters pension in 2002, but still
continued to work on occasion. The Teamsters pension was a principal retirement asset.
Diane worked as a homemaker throughout the marriage. In 2009, Diane and Zale Wood
separated.
PROCEDURE
On April 7, 2009, Diane Wood filed a petition for legal separation. Diane later
converted the separation petition to a divorce petition. In her petition, Diane stated that
her monthly income was $577.40 in Socifll Security benefits and her monthly expenses
were $4,516.00. Diane listed Zale's monthly income as $8,932.10.
On May 18,2009, the trial court issued temporary orders requiring Zale Wood to
pay Diane $2,221 per month in spousal maintenance and the two home mortgage
payments in the aggregate of $1,779 per month. The maintenance and mortgage
payments amounted to $4,000 per month. Diane continued to reside in the family home.
On January 4, 2010, the trial court lowered Zale's spousal maintenance obligation to
$1,190 per month, in light of his temporary unemployment. The trial court continued to
order Zale to pay the two mortgage payments, and the court ordered Zale to notifY Diane
once he started work again or garnered unemployment benefits.
In April or May 2010, Zale Wood returned to work, but did not notifY Diane or the
court. On September 16,2010, Zale suffered serious injuries in a workplace accident.
2
No. 32022-7-III
In re the Marriage of Wood
The injuries prevented Zale from working, and he began receiving worker compensation
benefits.
On May 6,2011, Zale Wood moved the court for an order allowing him to retrieve
his personal property from the Woods' residence and holding Diane in contempt for
selling the martial community's animals, without accounting for the sales. In response,
Diane agreed that Zale could retrieve his personal property at any time. During oral
argument before this appeals court, Zale's counsel could not answer whether Zale has
garnered all of his personal property. Wash. Court of Appeals oral argument, In re the
Marriage of Wood, 32022-7-III (June 10,2015) at 7:40. At oral argument, Diane's
counsel stated that Zale collected all of his personal property. Wash. Court of Appeals
oral argument, In re the Marriage of Wood, 32022-7-III (June 10,2015) at 15:50).
On May 12,2011, Diane Wood requested an increase in maintenance. On June 1,
2011, the trial court increased Zale Wood's spousal maintenance obligation to $1,750 per
month and continued the direction for Zale to pay the two mortgage payments. The court
ordered Diane to provide an accounting of the proceeds from any animal sales. The trial
court also ordered the parties to arrange a time for Zale to visit the Yakima property and
retrieve his possessions.
On August 29, 2011, the trial court found Zale Wood in contempt for willful
violation of the June 1 maintenance order. The court awarded Diane Wood $1,650 in
3
No. 32022-7-III
In re the Marriage of Wood
maintenance owed between June 1 and August 31; $1,300 in attorney fees due by
November 30, 2011; and $500 in attorney fees due by December 31, 2011.
The marriage dissolution proceeded to trial on April 9, 2013. At trial, Diane
proposed raising Zale Wood's maintenance obligation to $2,996, but relieving him of the
mortgage payments. Diane filed a current benefits statement she received from the Social
Security Administration, stating that her monthly benefit, after Medicare deductions, was
$651, for a yearly total of$7,812.
During the quarrelsome trial, the trial court declined to consider Zale or Diane
Wood's conduct regarding preservation of the financial wealth of the marital estate. The
court commented:
A lot of times in these situations people want to talk about who spent
the money during the divorce, where the money went during the divorce
and the truth is it doesn't matter. We are where we are and the debt is what
it is as of-at least as of the date of separation. Debt incurred after
separation may be the responsibility of the person incurring that debt but
for money that was badly invested, poorly spent, whatever, before the
separation, that's part of marriage and so we're not going to spend a lot of
time talking about who spent what during the marriage because it ends up
not making any difference. Like I said, you are where you are.
Report of Proceedings (RP) (Apr. 9, 2013) at 10-11. In addition to Zale claiming Diane
squandered property, Diane argued that Zale lost money on gambling.
On April 10,2013, the trial court issued an oral ruling awarding the Yakima home
and acreage to Zale Wood and ordering Diane Wood to cooperate in its sale; requiring
Zale to continue paying both mortgages; awarding Diane the personal property in the
4
No. 32022-7-III
In re the Marriage of Wood
house, except for Zale's clothes, tools, stock truck, and tractor; and granting the divorce.
The trial court further ruled:
I'm going to equalize the income. Yes, the L&I is Mr. Wood's
separate property. But when I'm considering how to divide things, I'm
considering ... what's the ... relative financial condition of the parties and
so on and this L&I ... is designed as a replacement for income that he
would have been getting and so ... Ijust factor that in. So, basically it's
going to be-she gets her Social Security. He gets his L&I and then the
various pension payments and so on would be divided so that net they come
out equal in terms of what their monthly income is. Then if ... there's a
change in the L&I, either up or down, that would by agreement of the
parties, would be considered grounds for modification and so I'm ordering
that when there's a determination made on the future of that L&I, if there's
any change to it, then that can be brought back to Court if you can't agree
on how it should be changed. You can bring it back to Court for
modification of the maintenance.
RP (Apr. 102013) at 169. The division of the parties' combined income would begin on
April 15, 2013. Zale Wood would pay $1,750 in maintenance payments per month until
the couple's property sold.
On May 22,2013, Diane Wood moved the court to hold Zale in contempt for
failing to comply with the June 1,2011 maintenance order; the August 29,2011 contempt
order; and the April 10,2013 trial oral ruling. On May 31, 2013, the court held Zale in
contempt for making untimely and incomplete maintenance payments. The court ordered
him to pay $300 in back maintenance and $250 in attorney fees. Nevertheless, the trial
court denied Diane's request to hold Zale in contempt for unpaid maintenance payments
equivalent to her share of his pensions, noting that Diane needed to determine whether
5
No. 32022-7-111
In re the Marriage of Wood
she was entitled to more social security benefits before the court could finalize Zale's
maintenance obligation.
On July 30, 2013, Diane Wood noted a hearing for August 9 to present proposed
findings of fact and conclusions of law, and a decree of dissolution. Diane proposed a
judgment against Zale for $7,986 in unpaid maintenance between February 1,2013 and
July 31, 2013. She sought future maintenance in the sum of $4,50 1 monthly and an
award of reasonable attorney fees and costs. The findings and conclusions listed Zale's
worker compensation payments as the couple's community property. On August 8, 2013,
the day before the hearing, Zale Wood filed an objection to the amount of maintenance in
the proposed findings, Diane Wood's request for attorney fees, and to Diane's inclusion
of her separate credit cards as community liabilities.
On August 9, 2013, the court conducted a hearing to enter findings of fact,
conclusions of law, and a decree of dissolution. Zale Wood informed the trial court that
the Yakima property sold with a net profit of approximately $8,000. Diane stated that
she contacted the social security administration, and it informed her that she was entitled
to no additional benefits. The parties agreed to reduce Zale's maintenance obligation if
Diane incurred more social security benefits in the future. Zale continued to object to the
amount of maintenance proposed by Diane, and he argued that the maintenance
calculation did not reflect a reduction in his worker compensation benefits. The trial
court expressed frustration with the parties' failure to perform arithmetic calculations,
6
No.3 2022-7-III
In re the Marriage of Wood
and he ordered them to cooperate to revise the final orders to accurately reflect Zale's
current monthly income from pensions and benefits.
Two weeks later, Diane Wood rescheduled entry of the final decree of dissolution,
and findings and conclusions for September 18,2013. Diane mailed a copy of her
proposed order to Zale Wood's attorney on August 21,2013, before she rescheduled a
hearing. The second version of the proposed findings still listed Zale's worker
compensation benefits as community property. The second proposed decree divided the
net proceeds from the sale of the house between the parties, awarded Diane $5,630 for
back maintenance, and granted Diane $4,094 in future monthly maintenance. The
proposed decree directed that future maintenance be reduced proportionate to the amount
of payment Diane monthly receives from qualified domestic relations orders on Zale's
pensions.
On September 3,2013, Zale Wood's attorney withdrew. On September 18,2013,
the day of the second hearing for entry of the final decree, Zale moved to continue the
hearing because he had yet to replace his lawyer. The trial court denied the motion to
continue. Zale argued, without counsel, the merits of the entry of the findings and
conclusions and contended that the facts did not support the trial court's oral ruling. Zale
objected to the amount of maintenance that the trial court ordered him to pay. At the
close of the September 18 hearing, the trial court entered the findings of fact, conclusions
of law, and divorce decree as proposed by Diane.
7
No. 32022-7-II1
In re the Marriage of Wood
Zale Wood obtained new counsel on September 23, 2013. On September 30,
2013, Zale moved for reconsideration, which motion the trial court denied.
LAW AND ANALYSIS
On appeal, Zale Wood contends: (1) the trial court abused its discretion in denying
Zale's motion to continue the September 18,2013 presentment hearing, (2) the trial court
violated article IV, section 20 of the Washington Constitution and RCW 2.08.240 by
failing to provide Zale a final decision within ninety days of the trial, (3) the trial court
abused its discretion in denying Zale a court order to retrieve personal property from the
Woods' former residence, (4) the trial court abused its discretion by excluding testimony
at trial regarding the parties' contributions and misconduct during their forty-nine year
marriage, (5) the trial court erred in taking into consideration Zale's monthly social
security and worker compensation disability benefits when calculating Diane's spousal
maintenance award, (6) the trial court abused its discretion under RCW 26.09.090 in
awarding spousal maintenance, and (7) the trial court abused its discretion under RCW
26.09.080 in its division of the parties' assets and liabilities. We address the contentions
in such order.
Issue 1: Whether the trial court abused its discretion in denying Zale Wood's
motion to continue the September 18,2013 presentment hearing?
Answer 1: No.
We first address two purported procedural errors assigned by Zale Wood. Zale
8
No. 32022-7-III
In re the Marriage of Wood
. argues that the trial court erred in denying his motion to continue the September 18, 2013
hearing, after his attorney withdrew on September 3,2013. Zale argues that, even though
Diane Wood complied with CR 52(b)'s requirement of giving lO-days' notice of entry of
final orders to the opposing party, he lacked time to review the findings of fact and
conclusions of law due to his residence in Puyallup and his attorney's withdrawal. Zale
asserts prejudice as a result of the trial court's denial of his motion to continue the
presentment hearing until he could hire another attorney. Diane responds that Zale's
motion for a continuance was untimely and meritiess, and she observes that the trial court
gave Zale the opportunity to file a motion for reconsideration to correct any error in the
findings of fact, conclusions of law, or dissolution decree.
This court reviews a trial court's denial of a motion for a continuance for manifest
abuse of discretion. Molsness v. City of Walla Walla, 84 Wn. App. 393,400,928 P.2d
1108 (1996). A trial court manifestly abuses its discretion if no reasonable person would
take the view adopted by the court. Eagle Pac. Ins. Co. v. Christensen Motor Yacht
Corp., 85 Wn. App. 695, 709, 934 P.2d 715 (1997), aff'd, 135 Wn.2d 894, 959 P.2d 1052
(1998).
We hold that the trial court below did not abuse its discretion in denying Zale
Wood's motion for a continuance. Although his attorney's withdrawal created
inconvenience, Diane Wood provided Zale ample notice of presenting the final orders to
the trial court. During the presentment hearing, Zale did not argue that orders prepared
9
No. 32022-7-III
In re the Marriage of Wood
by Diane failed to reflect the trial court's oral rulings or that Zale needed an attorney to
draft a correct version of the orders to mirror the trial court's rulings. Zale instead
continued his ongoing objection to the amount of maintenance the trial court ordered and
the trial court's division of property. Thus, Zale was not prejudiced by the trial court's
denial of his motion for a continuance, and we find no abuse of discretion in denying the
motion to continue.
Issue 2: Whether the trial court violated article IV, section 20 ofthe Washington
Constitution and RCW 2.08.240 by failing to issue afinal decision within 90 days?
Answer 2: No.
Zale Wood next contends that the trial court violated article IV, section 20 of
Washington's Constitution, and RCW 2.08.240 by deferring, during its April lO, 2013
oral ruling, his duty to value assets and liabilities until a later date. Zale argues that the
intervening five months between the trial court's oral ruling and the entry of written
findings of fact, conclusions of law, and the decree of dissolution resulted in Diane
Wood, not the court, deciding the material facts and issues in the case favorable to her.
He complains that the trial court failed to assign value to the family residence, household
goods, personal property, or liabilities of the parties, which failure misled him to
conclude his divorce was not final.
Diane Wood responds that the parties understood the trial court's oral ruling as
shown by Zale's listing and selling the Yakima property prior to entry of the final decree
lO
No. 32022-7-III
In re the Marriage 0/ Wood
of dissolution and in compliance with the oral ruling. She maintains that the only dispute
unresolved after trial was whether she might be eligible for an increase in social security
benefits. Diane observes that Zale never objected to the trial court's direction that the
parties sell their home and gather more information about Diane's social security benefits
before presenting final orders.
Article IV, section 20 of Washington's Constitution provides, in relevant part:
"Every cause submitted to a judge of a superior court for his decision shall be decided by
him within ninety days from the submission thereof." RCW 2.08.240 repeats this
command.
Zale Wood may argue that the trial court's failure to enter a final order within
ninety days of its oral ruling in April 2013 automatically voids the decree of dissolution.
The law is to the contrary. The superior court is a court of general jurisdiction, and
nothing in the constitutional provision lessens that jurisdiction or otherwise forbids a
judgment after the expiration ofthe ninety-day period. State v. Regan, 76 Wn.2d 331,
341,457 P.2d 1016 (1969); State v. Dooly, 14 Wn.2d 459,467, 128 P.2d 486 (1942).
The mere fact that the judgment was not rendered within ninety days does not of itself
constitute error on which the judgment may be reversed. Moylan v. Moylan, 49 Wash.
341, 344, 95 P. 271 (1908). Reviewing courts are even less inclined to reverse a tardy
judgment if the trial court makes an oral ruling at the close of trial. See W. Philadelphia
Title & Trust Co. v. City o/Olympia, 19 Wash. 150, 155,52 P. 1015 (1898).
11
No. 32022-7-111
In re the Marriage o/Wood
Even assuming violation of the constitutional deadline for decision voids a ruling,
the trial court does not violate the rule if the parties fail to timely present orders or if the
trial court seeks additional information from the parties. An old, but controlling decision,
is West Philadelphia Title & Trust, 19 Wash. at 151-52, a commercial paper case. W.J.
Casebeer sought to enforce warrants against the City of Olympia and paid to him by a
company contracted by the city to grade and improve its streets. The trial court made an
oral ruling in favor of the city on July 3,1891, but did not enter findings of fact and
conclusions of law until January 23, 1892. Casebeer sought to have the judgment vacated
on appeal on the basis that the trial court failed to file the findings and conclusions within
ninety days as provided in the Washington Constitution. Our Supreme Court disagreed,
while noting that the trial court made an oral ruling at the close of trial that could have
been reduced to judgment at any time. W. Philadelphia Title & Trust, 19 Wash. at 155.
The language of the constitutional provision has not changed since the state constitution's
adoption in 1889.
lale Wood's trial court issued an oral ruling at the close of the Woods' marital
dissolution trial, and the court entered final findings and conclusions approximately five
months later. The trial court was willing to sign findings of fact, conclusions of law, and
a final order within weeks, if not days, of its April oral ruling. The parties dallied in
obtaining important information needed to finalize the dissolution. In the meantime, lale
violated court orders necessitating contempt motions. lale Wood caused much of the
12
No. 32022-7-III
In re the Marriage of Wood
delay. Zale objected to Diane's first attempt to present final orders in August 20l3. He
then tried to delay again by moving for a continuance on the day of the second
presentment hearing. Zale cannot now, on appeal, claim an error to which he himself
contributed, and in fact seemed to endorse. See State v. Momah, 167 Wn.2d 140, 153,
217 P.3d 321 (2009). The trial court's delay in entering findings of fact and conclusions
of law do not warrant reversal of the written orders.
Issue 3: Whether the trial court abused its discretion in denying Zale Wood a
court order to retrieve personal property from the Woods' former residence?
Answer 3: We refuse to address this assignment oferror since Zale Wood
provided no argument in his appeal brief
Zale Wood assigns error to the trial court's denial of his request for a court order
to retrieve personal property from the Woods' former residence. Nevertheless, Zale
presents no argument in support of this assignment of error. RAP 10.3(a)(6) provides
that an appellate brief should contain "argument in support of the issues presented for
review, together with citations to legal authority and references to relevant parts of the
record." Assignments of error not argued or further referred to in a brief or orally are
treated as abandoned by an appellant. Talps v. Arreola, 83 Wn.2d 655,657,521 P.2d
206 (1974).
We note that the trial court granted Zale Wood possession of his personal
property. If he has not garnered the possessions due to the fault of Diane, he remains free
l3
I
No. 32022-7-III
In re the Marriage of Wood
to enforce the order.
Issue 4: Whether the trial court abused its discretion by excluding testimony
regarding the parties' contributions and misconduct during their forty-nine year
marriage?
Answer 4: No.
Zale Wood contends the trial court abused its discretion by excluding evidence of
the Woods' respective contributions to the marital estate and each party's conduct in
preserving or wasting community assets. A trial court may consider gross fiscal
improvidence, the squandering of marital assets, or the deliberate and unnecessary
incurring of tax liabilities in dividing the assets and liabilities of a marital estate. In re
Marriage ofSteadman, 63 Wn. App. 523, 528, 821 P.2d 59 (1991). Stated differently,
the trial court has discretion to consider whose negatively productive conduct depleted
the couple's assets and to apportion a higher debt load or fewer assets to the wasteful
marital partner. In re Marriage of Williams, 84 Wn. App. 263, 270-71, 927 P.2d 679
(1996). Because the trial court has discretion, the trial court may ignore any waste of
assets. In Marriage of Williams, the trial court ignored, when distributing marital
property, the wife's squandering of$12,000 through gambling debts.
The Wood trial court did not consider the parties' financial behavior in dividing
the marital estate. The trial court encountered enough difficulty preventing the parties
from arguing with each other in open court about whether one slept with someone else or
14
No. 32022-7-III
In re the Marriage of Wood
lied. In a contentious trial, the court did not abuse its discretion by preventing the
proceeding from degenerating into bickering about waste of the couple's assets.
If the trial court wished to consider the parties' financial conduct, the trial court
could have awarded Diane more because ofZale's purported gambling. Also, if the
couple's history was such that Zale Wood contributed to the financial success of the two
and Diane squandered financial assets, this history could harm Zale in the end. Diane's
inability to handle money could lead the judge to award her a higher sum so that her
needs are met despite her waste. Thus, Zale should be happy that the trial court excluded
evidence of waste.
A principal factor for the trial court to consider when dividing marital assets is the
economic circumstances of each spouse at the time the division of the property is to
become effective. RCW 26.09.080(4). The trial court's paramount concern when
distributing property in a dissolution action is the economic condition in which the decree
leaves the parties. In re Marriage ofGillespie, 89 Wn. App. 390, 399, 948 P.2d 1338
(1997). The court may consider the parties' prospects for future earnings, their education
and employment histories, their necessities and financial abilities, their foreseeable future
acquisitions and obligations. Friedlander v. Friedlander, 80 Wn.2d 293,305,494 P.2d
208 (1972); Gillespie, 89 Wn. App. at 399. Thus, Washington law parrots the slogan
made famous by Karl Marx: from each according to his or her ability, to each according
to his or her needs.
15
No. 32022-7-111
In re the Marriage of Wood
Issue 5: Whether the trial court erred in taking into consideration Zale Wood's
social security and L&I disability benefits when calculating spousal maintenance?
Answer 5: No.
Zale Wood contends the trial court improperly considered his social security and
worker compensation benefits in its calculation of Diane's award of lifetime spousal
maintenance. He argues that social security benefits are the separate and indivisible
property of the spouse who earned them and are not marital property subject to division
or weight when awarding maintenance. He also argues that his worker compensation
benefits are his separate property, and the trial court abused its discretion in awarding
Diane fifty percent of those benefits. Diane contends that the trial court merely
considered Zale's social security and worker compensation benefits when evaluating the
relative incomes of the two parties in calculating the amount of maintenance needed in
order to "equalize" the parties' incomes. She argues that the court did not abuse its
discretion, because it did not actually attach or assign Zale's social security or worker
compensation benefits to Diane. We agree with Diane.
RCW 26.09.090 governs awards of spousal maintenance. The statute provides, in
relevant part:
(l) In a proceeding for dissolution of marriage ... the court may
grant a maintenance order for either spouse. ... The maintenance order
shall be in such amounts and for such periods of time as the court deems
just, without regard to misconduct, after considering all relevant factors
including but not limited to:
16
No. 32022-7-III
In re the Marriage o/Wood
(a) The financial resources of the party seeking maintenance,
including separate or community property apportioned to him or her, and
his or her ability to meet his or her needs independently. . ..
(b) The time necessary to acquire sufficient education or training to
enable the party seeking maintenance to find employment appropriate to his
or her skill, interests, style of life, and other attendant circumstances;
(c) The standard of living established during the marriage ...
(d) The duration of the marriage ...
(e) The age, physical and emotional condition, and financial
obligations of the spouse or domestic partner seeking maintenance; and
(f) The ability of the spouse or domestic partner from whom
maintenance is sought to meet his or her needs and financial obligations
while meeting those of the spouse or domestic partner seeking
maintenance.
RCW 26.09.090.
This court reviews the trial court's award of maintenance for abuse of discretion.
In re Marriage o/Zahm, 138 Wn.2d 213,226-27,978 P.2d 498 (1999). An award of
maintenance that is not based on a fair consideration of the statutory factors constitutes an
abuse of discretion. In re Marriage o/Crosetto, 82 Wn. App. 545, 558,918 P.2d 954
(1996). Ultimately, the court's main concern must be the parties' economic situations
post-dissolution. In re Marriage o/Williams, 84 Wn. App. at 268 (1996). The only
limitation on amount and duration of maintenance under RCW 26.09.090 is that, in light
of relevant factors, the award must be just. In re Marriage 0/ Bulicek, 59 Wn. App. 630,
633, 800 P.2d 394 (1990).
Zale Wood correctly notes that a spouse's right to receive social security benefits
is nontransferable and nonassignable. 42 U.S.C. § 407(a); In re Marriage o/Zahm, 138
17
No. 32022-7-III
In re the Marriage of Wood
Wn.2d at 220-21. Nevertheless, our Supreme Court has held that a trial court may
consider divorcing spouses' social security benefits when fashioning ajust and equitable
maintenance award. Zahm, 138 Wn.2d at 227. Consideration of such benefits aids the
trial court in determining the relative needs of the parties and their respective ability to
pay maintenance. Zahm, 138 Wn.2d at 223.
In Zahm, 138 Wn.2d at 227, our state high court upheld a trial court's decision to
consider, when establishing an award of maintenance, the social security benefits to
which a divorcing spouse was entitled. The Zahm court first held that a trial court does
not abuse its discretion by mischaracterizing social security benefits as community
property, so long as the court does not actually attempt to assign one spouse's future
social security benefits as part of an equitable division of property in a divorce
proceeding. Zahm, 138 Wn.2d at 220-21. The court applied this same reasoning when
upholding the trial court's maintenance award.
The trial court below did not assign a portion of Zale or Diane Wood's social
security benefits in its division of the parties' community property and liabilities.
Although Diane included both Zale's and her social security incomes in her initial
estimate of the parties' total combined income, the trial court stated that it used such
information to help evaluate the relative positions of the parties in fashioning an award of
maintenance to Diane. The Zahm court held such an analysis permissible. Therefore, the
trial court qid not abuse its discretion in considering the parties' social security benefits
18
No. 32022-7-III
In re the Marriage of Wood
when fashioning its maintenance award for Diane Wood.
lale Wood repeats the same argument regarding his worker compensation benefits
and his union pension, but again the argument fails. Washington's Industrial Insurance
Act Title 51 RCW does not allow garnishment of disability benefits for the purpose of
satistying a spousal maintenance obligation. RCW 51.32.040{l). Nor does it allow
assignment of those benefits for the purpose of dividing marital property. In re Marriage
ofDugan-Gaunt, 82 Wn. App. 16, 19-20, 915 P.2d 541 (1996). A disability pension
resulting from a disability occurring after permanent separation should be characterized
as separate property of the disabled spouse but may be considered as affecting his ability
to pay alimony. In re Marriage ofHuteson, 27 Wn. App. 539, 542,619 P.2d 991 (l980).
The written findings' characterization of lale Wood's worker compensation
benefits as being community property may be a clerical error. Diane Wood agreed the
benefits were separate property. In its oral ruing, the trial court recognized the benefits as
separate property. Even if the error was not clerical in nature, reversal is not needed.
As taught in In re Marriage ofZahm, 138 Wn.2d 213 (1999) and In re Marriage
ofHuteson, 27 Wn. App. 539, mischaracterization of separate property as community
property does not, on its own, render a subsequent division of property, or order of
maintenance, unjust and inequitable. Although the trial court mischaracterized lale's
worker compensation benefits, the final divorce decree does not award the payments to
Diane, nor does the decree garnish the benefits for the purpose of paying maintenance. In
19
No. 32022-7-II1
In re the Marriage o/Wood
the trial court's equitable award, an increase or decrease in worker compensation benefits
accordingly increases or decreases the spousal maintenance.
RCW 26.09.090 directs the trial court to fashion ajust award of maintenance.
Diane remained at home, during the parties' lengthy marriage, to care for the children and
tend the household. Diane's work at home allowed Zale to work injobs where he
accumulated pensions and a higher amount for social security. Diane expected to live in
retirement based in part on Zale's pension and social security benefits. The trial court did
not abuse its discretion by considering the worker compensation benefits when
establishing Zale's maintenance obligation to Diane.
Issue 6: Whether the trial court abused its discretion under RCW 26. 09. 090 in
awarding spousal maintenance?
Answer 6: No.
Zale Wood next assigns error to the trial court awarding spousal maintenance.
This assignment of error differs from the preceding assignment in that Zale now argues
the trial court should not have awarded any maintenance. He argues, in part, that the trial
court failed to consider his poor health and need for surgery. Diane Wood responds that
the trial court considered all relevant statutory factors before awarding maintenance. We
agree with Diane.
Our previous discussion quoted the spousal maintenance statute, RCW 26.09.090,
and the factors on which the trial court should grant maintenance. We review the trial
20
No. 32022-7-III
In re the Marriage of Wood
court's decision on an award of maintenance for abuse of discretion. In re Marriage of
Zahm, 138 Wn.2d at 226-27 (1999). Ultimately, the court's main concern must be the
parties' economic situations postdissolution. In re Marriage of Williams, 84 Wn. App. at
268 (1996). The only limitation on amount and duration of maintenance under RCW
26.09.090 is that, in light of relevant factors, the award must be just. In re Marriage of
Bulicek, 59 Wn. App. at 633 (1990).
The trial court concluded in its final marital dissolution decree that "[a]ll statutory
factors exist for an award of maintenance to wife." CP at 193. The trial court did not
abuse its discretion in so ordering. During a disorganized and volatile trial and several
contempt hearings, the trial court heard testimony regarding both parties' health and
financial situations, and the couple's community and separate debts. The trial court
sought to place each in the same financial situation by ordering lale Wood to pay
maintenance to Diane. The final decree orders maintenance for life, but directs that
maintenance be modified depending on lale's worker compensation benefits. In
addition, the maintenance of $4,094 per month is reduced by the amount Diane receives
from laIe's pensions. Given the length of the parties' marriage, the disparity of income
between the two, and the provision reducing maintenance relative to the property
division, the trial court did not abuse its discretion.
Issue 7: Whether the trial court abused its discretion under RCW 26. 09. 090 when
dividing the marital estate?
21
No. 32022-7-III
In re the Marriage of Wood
Answer 7: No.
Zale Wood next assigns error to the trial court's division of property. He argues
that the trial court failed to assign values to all assets before dividing them. Diane Wood
contends that the trial court considered all relevant statutory factors before dividing
property. She also observes that Zale Wood contributed to any potential error in the trial
court's calculations because he failed to provide valuations of properties. Once again, we
agree with Diane.
RCW 26.09.080 governs disposition of marital property. The statute provides, in
relevant part:
In a proceeding for dissolution of the marriage ... the court shall,
without regard to misconduct, make such disposition of the property and
the liabilities of the parties, either community or separate, as shall appear
just and equitable after considering all relevant factors including, but not
limited to:
(1) The nature and extent of the community property;
(2) The nature and extent of the separate property;
(3) The duration of the marriage or domestic partnership; and
(4) The economic circumstances of each spouse or domestic partner
at the time the division of property is to become effective.
RCW 26.09.080.
As with an award of maintenance, this court reviews the division of property for
an abuse of discretion. In re Marriage ofMuhammad, 153 Wn.2d 795,803, 108 P.3d
779 (2005). The trial court has broad. discretion, which will only be reversed if exercised
on untenable grounds or for untenable reasons. In re Marriage ofRockwell, 141 Wn.
22
No. 32022-7-III
In re the Marriage of Wood
App. 235, 242-43, 170 P.3d 572 (2007). We recognize that the trial court sits in the best
position to assess the assets and liabilities of the parties and to determine what constitutes
an equitable outcome. In re Marriage ofBrewer, 137 Wn.2d 756,769,976 P.2d 102
(1999).
A just and equitable division does not require mathematical precision, but rather
fairness, based on a consideration of all the circumstances of the marriage, both past and
present, and an evaluation of the future needs of parties. In re Marriage ofLarson &
Calhoun, 178 Wn. App. 133, 138,313 P.3d 1228 (2013), review denied sub nom., In re
Marriage ofLarson, 180 Wn.2d 1011,325 P.3d 913 (2014); In re Marriage ofCrosetto,
82 Wn. App. at 556 (1996). In a long-term marriage of twenty five years or more, the
trial court's objective is to place the parties in roughly equal financial positions for the
rest of their lives. Rockwell, 141 Wn. App. at 243.
Diane Wood received approximately $600 per month in social security benefits,
while Zale Wood received roughly three times that amount, plus pension and worker
compensation benefits. The major asset accumulated for retirement was Zale's pension
benefits. The trial court divided Zale's pensions between the parties. The court ordered
the Woods' Yakima property sold to pay off its outstanding mortgages, and for the
parties to divide the net proceeds from the sale. It awarded some household items and
personal property to Zale, including the stock truck, tractor, farm implements he
requested, and his personal papers.
23
No. 32022-7-111
In re the Marriage of Wood
Although the trial court based its property division on calculations provided by
Diane, Zale had multiple opportunities to present different calculations or propose a
different division, but he did neither. Any failure of the trial court to exercise
mathematical precision in its division of the Woods' property resulted from Zale Wood's
intransigence in producing documentation requested by Diane and the court. Under these
circumstances, the trial court did not abuse its discretion in its division of the marital
estate.
Issue 8: Whether Zale or Diane Wood is entitled to attorney fees on appeal?
Answer 8: No.
Zale and Diane Wood each request an award of reasonable attorney fees on appeal
underRCW 26.09.140. Diane also seeks an award of fees under CR 11. We deny each
party's request for fees.
RAP 18.1(a) permits a party to recover attorney fees on appeal if an applicable law
grants the party that right, and the party includes a request for fees in its brief. RCW
26.09.140 provides, in relevant part:
The court from time to time after considering the financial resources
of both parties may order a party to pay a reasonable amount for the cost to
the other party of maintaining or defending any proceeding under this
chapter and for reasonable attorneys' fees or other professional fees in
connection therewith, including sums for legal services rendered and costs
incurred prior to the commencement of the proceeding or enforcement or
modification proceedings after entry ofjudgment.
24
No. 32022-7-III
In re the Marriage of Wood
Upon any appeal, the appellate court may, in its discretion, order a
party to pay for the cost to the other party of maintaining the appeal and
attorneys' fees in addition to statutory costs.
In determining w4ether to award fees under RCW 26.09.140, this court examines
the arguable merit of the issues on appeal and the financial resources of the respective
parties. In re Marriage ofKing, 66 Wn. App. 134, 139,831 P.2d 1094 (1992). Because
of the equal division of assets and spousal maintenance awarded Diane Wood, we find
that each party has the wherewithal to pay his or her attorney fees.
Diane Wood also contends that this court could award her attorney fees and costs
under CR 11 for a frivolous appeal. This court abides by the following considerations
when determining whether an appeal is frivolous:
(1) A civil appellant has a right to appeal under RAP 2.2; (2) all
doubts as to whether the appeal is frivolous should be resolved in favor of
the appellant; (3) the record should be considered as a whole; (4) an appeal
that is affirmed simply because the arguments are rejected is not frivolous;
(5) an appeal is frivolous ifthere are no debatable issues upon which
reasonable minds might differ, and it is so totally devoid of merit that there
was no reasonable possibility of reversal.
Streater v. White, 26 Wn. App. 430, 435, 613 P.2d 187 (1980); see also Griffin v. Draper,
32 Wn. App. 611, 616, 649 P.2d 123 (1982).
Most of Zale Wood's arguments are frivolous, but we find at least one assignment
of error that contains a debatable issue. Some law supports Zale's contention that the
trial court could consider Diane's waste of assets when distributing the parties' property.
25
No. 32022-7-III
In re the Marriage of Wood
CONCLUSION
We affirm all rulings of the trial court. We deny each party an award of
reasonable attorney fees.
A majority of the panel has determined this opinion will not be printed in the
Washington Appellate Reports, but it will be filed for public record pursuant to RCW
2.06.040.
Fearing, J~
1
WE CONCUR:
~)ALJr.
Brown, A.C.J.
26
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258 P.3d 387 (2011)
LEFFEL
v.
CITY OF MISSION HILLS.
No. 103880.
Court of Appeals of Kansas.
August 26, 2011.
Decision Without Published Opinion
Affirmed.
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} |
904 F.2d 519
Everth Aroldo CEBALLOS-CASTILLO, and Santos Pineda-Medrano,Petitioners,v.IMMIGRATION AND NATURALIZATION SERVICE, Respondent.
No. 88-7529.
United States Court of Appeals,Ninth Circuit.
Argued and Submitted March 14, 1990.Decided June 1, 1990.
Kevin R. Johnson, Heller, Ehrman, White & McAuliffe, San Francisco, Cal., for petitioners.
Mark C. Walters, Assistant Director, Office of Immigration Litigation, Dept. of Justice, Washington, D.C., for respondent.
Petition to Review a Decision of the Immigration and Naturalization Service.
Before SNEED, FARRIS and FERNANDEZ, Circuit Judges.
FARRIS, Circuit Judge:
1
Everth Ceballos-Castillo and his wife Santos Pineda-Medrano, natives and citizens of Guatemala, appeal the decision of the Board of Immigration Appeals denying their application for asylum and withholding of deportation. The BIA upheld the decision of the Immigration Judge, who found that the aliens' claims were not credible because of inconsistencies in their testimony and material misstatements of fact on their asylum applications. The aliens claim that these inconsistencies are minor and cannot support the BIA's determination.
2
The Immigration Judge and the Board identified four reasons for finding that the aliens' testimony was incredible: (1) the gross inconsistencies between the asylum application and the testimony and declaration of May 4, 1984, especially concerning the "180 degree" change from a claim of guerrilla persecution to one of government persecution; (2) the inconsistencies regarding the aliens' passports; (3) Mr. Castillo's position in the civil patrol at the time he claimed to have been persecuted by the government; (4) the fact that the aliens left their two year old child behind while they fled persecution. A review of the entire administrative record shows that the Immigration Judge's and the Board's findings of incredibility are supported by the evidence.
3
A. The Change From Guerrilla to Government Persecution
4
The aliens attempt to justify their total refutation of their earlier claim of guerrilla persecution, and the change to a claim of government persecution in their 1984 hearing, by claiming that they lied because of their fear of the government. They assert that this reversal is itself consistent with their claim of asylum. They argue that "[u]ntrue statements by themselves are not reason for refusal of refugee status and it is the examiner's responsibility to evaluate such statements in the light of all the circumstances of the case." Turcios v. INS, 821 F.2d 1396, 1400 (9th Cir.1987) (Salvadoran alien claimed he was Mexican in order to avoid deportation to El Salvador).
5
We understand but reject the argument. Unlike Turcios, the mistatements here were not incidental. They involved the heart of the asylum claim. Their sworn testimony was inconsistent with their sworn asylum application on many points, ranging from the general claim of persecution to the details of that claim.
B. Inconsistencies Relating to the Passport
6
The IJ and the BIA also relied on the inconsistencies between the aliens testimony regarding their passports and the normal appearance of the documents. The aliens claimed that a friend in the army obtained the passports illegally, and gave the documents to them just before they left Guatemala. Yet, the passports were not issued on the same day, they have a gap of more than 300 numbers between them, and they were not issued by the same official. The dates of issuance, May 9 and 10, 1983, are during the time that Mr. Castillo was allegedly in detention. The passports also bear fingerprints that refute a claim that someone else obtained the documents for them.
7
C. Mr. Castillo's Service in the Civil Patrol
8
The BIA and the IJ also considered the fact that Mr. Castillo served in the civil patrol, a volunteer para-military organization under the supervision of the army, at the time he claims to have been subject to a capture order.1 Mr. Castillo testified that he had been under a capture order since 1980. Yet, he volunteered for the civil patrol in January 1981 and served for over two years, bringing himself to the attention of those parties he claims to have been hiding from.
9
D. The Aliens' Leaving Their Child in Guatemala
10
We recognize that "[t]he fact that [the alien's] family is safe does not refute [his] claims [of persecution]." McMullen v. INS, 658 F.2d 1312, 1319 (9th Cir.1981). It may well have been safer to leave the child at home than bring it along on the long and potentially dangerous trip to the United States. This factor was not supported by substantial evidence.
11
Even though our review satisfies us that one of four reasons cited by the BIA is not supported by the record, the finding of the BIA that the aliens' testimony was incredible finds substantial support in the record.
12
AFFIRMED.
1
The BIA did not, as the aliens claim, make any per se rule that membership in the civil patrol bars a claim of persecution by the government. The BIA decided only that based on these facts Mr. Castillo's service in the civil patrol was inconsistent with his claim of persecution
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137 B.R. 139 (1992)
In re WHITE PLAINS DEVELOPMENT CORPORATION, et al., Debtors.
Bankruptcy No. 91 B 21481.
United States Bankruptcy Court, S.D. New York.
February 25, 1992.
*140 Rogers & Wells, New York City, for debtors.
Hebb & Gitlin, Hartford, Conn., for Connecticut General Life Ins. Co.
DECISION ON MOTION FOR AN ORDER AMENDING ORDER DETERMINING POSTPETITION RENTS TO BE CASH COLLATERAL OF CONNECTICUT GENERAL LIFE INSURANCE COMPANY AND ORDER CONDITIONING DEBTORS' USE OF RENTS AND PROVIDING ADEQUATE PROTECTION OF CONNECTICUT GENERAL LIFE INSURANCE COMPANY'S INTEREST IN RENTS
HOWARD SCHWARTZBERG, Bankruptcy Judge.
White Plains Development Corporation, the Chapter 11 debtor in this case, for itself and on behalf of P & P Realty Company, Boston Harbor Industrial Development Corporation, Pappas Industrial Parks and E Street Associates, has moved for a new trial or reargument pursuant to Bankruptcy Rule 9023 and Federal Rule of Civil Procedure 59. The motion is directed to this court's order dated February 14, 1992, which awarded to the first priority mortgagee, Connecticut General Life Insurance Company ("Connecticut General"), the right to receive assigned rents under certain mortgages and notes with respect to commercial real estate owned by the debtor in Boston, Massachusetts.
In a decision dated January 29, 1992, this court held that Connecticut General's right to use the assigned rents as cash collateral accrued as of September 25, 1991, the date the debtor filed its Chapter 11 petition, although its right to collect the rents did not accrue until it took affirmative action by seeking turnover of the assigned rents. In re White Plains Development Corporation, 136 B.R. 93 (Bankr.S.D.N.Y.1992). The rents that the debtor collected from the commencement of the Chapter 11 case constituted cash collateral under Connecticut General's inchoate lien, had to be segregated and could not be used by the debtor without a court order. 11 U.S.C. § 363(c)(2)(B). Accordingly, this court concluded that absent such court order, Connecticut General was entitled to have the assigned rents treated as cash collateral as of the commencement of the debtor's Chapter 11 case. The parties had previously stipulated as to the amount of cash collateral the debtor could use in connection with the operation of the mortgaged real estate. Therefore, the excess of the cash collateral beyond the funds applied towards the maintenance of the real estate had to be turned over by the debtor to Connecticut General as of the commencement of the Chapter 11 case.
The debtor now seeks an amendment of this court's previous order of February 14, 1992 to reflect that the excess collected by the debtor from the commencement of the Chapter 11 case until February 14, 1992, when Connecticut General affirmatively established its right to collect such rents, should not be turned over to Connecticut General. The debtor predicates its right to keep the assigned rents from the commencement of the Chapter 11 case until February 14, 1992 on the basis of language in the recent district court decision by Judge Leonard B. Sand in In re Vienna Park Properties, a Limited Partnership, 136 B.R. 43 (S.D.N.Y.1992).
DISCUSSION
In the Vienna case the debtor was a limited partnership with real estate in Virginia. A mortgage creditor filed a motion for sequestration of rents as cash collateral under an assignment of rents clause in the mortgage. In its first decision, the bankruptcy court held that under Virginia law the assignment of rent clause was absolute in accordance with the validly recorded mortgage, without the need for any additional steps on the part of the mortgagee *141 to enforce its interest. In re Vienna Park Properties, 112 B.R. 597 (Bankr. S.D.N.Y.1990). The bankruptcy court held that the mortgagee was entitled to the assigned rents as of the prepetition date of the debtor's default under the mortgage. Six months later, the bankruptcy court vacated its previous decision and held that the assignment of rent was not absolute and that additional enforcement steps were necessary on the part of the mortgagee as a precondition to entitlement, such as acceleration of the debt and taking possession of the premises. Because these steps had not been taken prepetition, the bankruptcy court concluded that the mortgagee had not "perfected" its inchoate lien for rents. In re Vienna Park Properties, 120 B.R. 332 (Bankr.S.D.N.Y.1990).
On appeal, the district court applied state law, as required by Butner v. United States, 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979), and held that perfection of an interest in assigned rents under Virginia law is accomplished by recording the agreement that contained the assignment of rents provision. Vienna, 136 B.R. at 1992 WL 51 (citations omitted). Therefore, the district court reversed the bankruptcy court's holding that the mortgagee had not perfected its interest in the rents. The district court concluded that under Virginia law possession of the property was not a necessary affirmative step required to be taken by the mortgagee before it could enforce its right to collect the assigned rent. The district court reasoned that because the automatic stay precluded the mortgagee from taking possession of the property, the mortgagee's motion for sequestration of the rents was the equivalent to seeking relief from the stay and was a sufficient affirmative step to trigger the mortgagee's right to enforce its interest in the cash collateral, or in other words, its right to collect the rents.
The Vienna court noted that the mortgagee sought a turnover of all rent from the date of the prepetition mortgage default, while the debtor argued that the mortgagee's right to collect the assigned rent began only after the mortgagee took possession of the premises. The district court concluded that both parties were wrong. The district court observed that the debtor may not use cash collateral without the mortgagee's consent, absent a finding by the court that the mortgagee was adequately protected. The district court then concluded that the mortgagee was entitled to collect the assigned rent from the date it filed its motion for sequestration. This holding was based on the reasoning in Butner that "the mortgagee is afforded in federal bankruptcy court the same protection he would have under state law if no bankruptcy had ensued." Butner, 440 U.S. at 56, 99 S.Ct. at 918. Having determined that the mortgagee was entitled to collect the assigned rents from the date it filed the motion for sequestration, the district court did not then rule, as the debtor in the instant case would have this court hold, that the Vienna debtor was entitled to unfettered use of the cash collateral rent it collected from the commencement of the Chapter 11 case until the mortgagee was entitled to collect the assigned rent. As pointed out by the district court in Vienna, the debtor could not use the cash collateral rent unless it first obtained an order from the court that the mortgagee was adequately protected. Hence, absent such a finding and order, the cash collateral assigned rent continued subject to the mortgagee's security interest, even though the debtor collected the rent after the commencement of the Chapter 11 case. The Vienna case merely determined from which date the mortgagee was entitled to collect the assigned rent, and did not remove the cash collateral restrictions imposed upon the debtor from the commencement of the Chapter 11 case pursuant to 11 U.S.C. § 363(c).
In the instant case, the issue is not from which date the mortgagee is entitled to collect the assigned rents, but rather, who is entitled to the use of the assigned rents collected by the debtor prior to February 14, 1992, when the mortgagee was authorized to collect the assigned rents. The limited holding in the Vienna case does not support the debtor's position that it is entitled to keep and use the assigned rents *142 which it collected from the commencement of this case up to February 14, 1992. The debtor argues that Butner stands for the proposition that the mortgagee's rights should not be greater than permitted under state law and that the mortgagee should not receive "`a windfall merely by reason of the happenstance of bankruptcy.'" Butner, 440 U.S. at 55, 99 S.Ct. at 918 (quoting Lewis v. Manufacturer's National Bank of Detroit, 364 U.S. 603, 609, 81 S.Ct. 347, 350, 5 L.Ed.2d 323, (1961)). This point elides the fact that the Bankruptcy Code, which was not applied at the time Butner was decided, did enlarge the rights of secured creditors with respect to cash collateral following the commencement of a bankruptcy case. The concept of cash collateral "embraces the idea of something less than unqualified ownership." In re Northport Marina Associates, 136 B.R. 911, 919 (Bankr.E.D.N.Y. 1992).
Under the Bankruptcy Code, as applied after the Butner case, a debtor must "segregate and account for any cash collateral that it does not have the consent of the creditor or authority from the court to use, sell or lease. 11 U.S.C. § 363(c)(4)." Id. The Vienna court recognized the restrictions imposed on a debtor under 11 U.S.C. § 363(c) and did not award the debtor an unrestricted use of the assigned rents from the time it filed its Chapter 11 case. The court simply held that the mortgagee had the right to collect the assigned rents from the time it moved for sequestration. The issue as to adequate protection with respect to the accrued cash collateral collected by the debtor from the commencement of the case, for which the debtor had to account to the mortgagee, was not addressed by the Vienna court because this question was left to the bankruptcy court to determine upon an appropriate motion made pursuant to 11 U.S.C. § 363(c)(2)(B).
It is clear that the district court in Vienna did not intend to authorize the debtor, over the secured creditor's objection, to use the cash collateral assigned rent from the date the Chapter 11 case was commenced. The Vienna court cited with approval the decision in In re Tucson Indus. Partners, 129 B.R. 614, 623-24 (B.A.P. 9th Cir.1991), which observed that 11 U.S.C. § 363(c) barred untrammeled use of the rents by the debtor during the period when the funds are in the possession of the debtor. The Tucson court concluded:
From the date bankruptcy is filed, a defaulted bankruptcy estate may not use the rent without moving for such use and demonstrating that the secured creditor is adequately protected. Failing such a showing, the cash collateral is property of the secured creditor.
Tucson Indus. Partners, 129 B.R. at 625 (emphasis added). Similarly, in In re Sam A. Tisci, Inc., 133 B.R. 857 (N.D.Ohio 1991), a mortgagee with an assignment of rent moved for relief from the stay seven months after the commencement of the debtor's Chapter 11 case. The Chapter 11 case was converted for liquidation under Chapter 7 of the Bankruptcy Code and a trustee in bankruptcy was appointed. The bankruptcy court lifted the stay and allowed the appointment of a receiver to collect rent. Thereafter, the bankruptcy court allowed the debtor's trustee to retain the rent collected prior to the time that the receiver had been appointed. The district court reversed the lower court and held that pursuant to 11 U.S.C. § 363(a) and § 552(b) the mortgagee was entitled to all of the rent collected by the debtor's trustee before the receiver was appointed.
In In re Miller, 133 B.R. 882, 886 (Bankr. N.D.Ohio 1991), the court noted that a perfected assignment of rents clause in favor of a mortgagee precludes the debtor from using the assigned rent in the post-petition period without the mortgagee's consent or a court order, notwithstanding that the mortgagee's right to collect the rent first accrued after it moved to sequester the rent.
In Northport Marina, Judge Goetz noted that an appropriate motion had not been presented to the court with respect to the issue as to whether or not a debtor is restricted in its use of rents from the time it files or only from the time the secured creditor moves to assert its rights. Northport Marina, 136 B.R. at 921. The sole *143 issue before the court was whether or not the mortgagee had any rights whatsoever in the debtor's post-petition rentals. Judge Goetz concluded that the mortgagee had cash collateral rights in post-petition rents under 11 U.S.C. §§ 363 and 552. Id.
Connecticut General had stipulated that the debtor might apply specific amounts from the assigned rents for the maintenance of the real estate from the time the Chapter 11 case was filed. It did not consent to the debtor's use of any excess rents beyond what was stipulated for maintaining the real estate. Accordingly, the debtor may not use such excess cash collateral over Connecticut General's objection unless this court finds that the debtor has established that Connecticut General was adequately protected in accordance with 11 U.S.C. § 363(c)(2)(B) and § 363(c)(3).
To grant the debtor's motion for reargument so as to permit it unrestricted use of the excess cash collateral rents which it collected from the commencement of the Chapter 11 case would fly in the face of 11 U.S.C. § 363(c) and would read this mandate out of the Bankruptcy Code. Manifestly, the district court decision in the Vienna case does not support the debtor's position that a debtor is entitled to unrestricted use of assigned rents which are cash collateral up to the time that the secured creditor moves to assert its rights. In holding that the mortgagee was entitled to collect the assigned rent from the time it moved for rent sequestration, the Vienna court simply assumed that the debtor had complied with its obligations under 11 U.S.C. § 363(c) until that point. There was no objection by the mortgagee that the debtor failed to segregate and account for any cash collateral in the debtor's possession, as required by 11 U.S.C. § 363(c)(4). Nor was there any argument that the debtor used any of the cash collateral in the post-petition period in any manner inconsistent with the obligations imposed under 11 U.S.C. § 363(c). Therefore, the accumulated post-petition assigned rents in the Vienna case continued to be subject to the mortgagee's perfected lien and could not be used by the debtor without the mortgagee's consent unless the court, after notice and a hearing, authorized such use in accordance with 11 U.S.C. § 363(c)(2)(B).
The summary judgment motion which was before the district court in the Vienna case addressed the chronological point at which the mortgagee was entitled to enforce its right to collect the assigned rent. Having determined that the mortgagee's motion for rent sequestration triggered the mortgagee's rent collection right, the Vienna court then remanded the matter to the bankruptcy court where the parties could litigate the debtor's right to use any portion of the cash collateral in the context of the mortgagee's right to receive adequate protection for such use, as authorized under 11 U.S.C. § 363(c).
The Vienna case is not inconsistent with this court's previous ruling in the instant case that the debtor may use the assigned rents, which are Connecticut General's cash collateral, only in accordance with the stipulation between the parties and the adequate protection provisions contained therein for such use. The excess rents over and above the amount necessary to operate the real estate were not covered by a cash collateral order, nor was adequate protection of Connecticut General's interests determined as a condition for the debtor's use of such excess rents. Therefore, Connecticut General is entitled to receive the excess funds as collateral for its secured claim. The Vienna case is not in conflict with this point. Accordingly, the debtors' motion for the entry of an order pursuant to Bankruptcy Rule 9023 and Federal Rule of Civil Procedure 59 is denied.
CONCLUSIONS OF LAW
1. This court has jurisdiction of the subject matter and the parties pursuant to 28 U.S.C. §§ 1334 and 28 U.S.C. § 157(b)(2)(E).
2. The debtor has not cited any additional authority for amending this court's previous order dated February 14, 1992, which required the debtor to turnover to Connecticut General all the assigned rents which it collected from the commencement of this Chapter 11 case, in excess of the amounts to be used by the debtor to maintain the debtor's real estate, in accordance with the cash collateral stipulation entered into between the parties and approved by this court.
*144 3. The debtor's motion for the entry of an order pursuant to Bankruptcy Rule 9023 and Federal Rule of Civil Procedure 59 is denied.
IT IS SO ORDERED.
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949 P.2d 262 (1997)
Christie Ann RICE, Appellant,
v.
The STATE of Nevada, Respondent.
No. 26111.
Supreme Court of Nevada.
November 20, 1997.
*263 Laura Wightman FitzSimmons, Las Vegas, for Appellant.
Frankie Sue Del Papa, Attorney General, Carson City, Richard A. Gammick, District Attorney, Terrence P. McCarthy, Deputy District Attorney, Reno, for Respondent.
OPINION
ROSE, Justice:
Christie Ann Rice (Christie) and her husband, Cody Alan Rice (Cody) first met in April of 1990. After learning that she was carrying his child, she moved in with him, and they were subsequently married. However, the marriage was strained because Cody was violent and abusive toward Christie. Matthew, Christie and Cody's son, was born on July 1, 1992. Sometime around the middle of September 1992, Cody told Christie *264 that Matthew had been accidentally burned in hot water. Christie tried to treat Matthew's injuries at home. On September 22, 1992, Matthew was rushed to the hospital because he had stopped breathing. He died in the hospital two days later.
Cody was charged with and pleaded guilty to the first degree murder of Matthew. He was sentenced to life imprisonment without the possibility of parole. Christie was charged with child neglect causing substantial bodily harm to Matthew. Following a jury trial, Christie was convicted and sentenced to serve the maximum term in prison allowed by law, twenty years. Christie now appeals. We affirm the conviction but remand for resentencing.
FACTS
In April of 1990, Christie met Cody, and they were engaged in August of 1991. Christie moved in with Cody in January of 1992 when she found out she was pregnant with Matthew, and the two were married in April of 1992. Christie testified that until she moved in with Cody, the two never had any problems.
Christie stated that shortly after they moved in together, Cody became physically abusive toward her. However, she did not leave because she loved Cody and believed he would not continue to hurt her because he loved her. Christie's family and friends also testified to Cody's violent, threatening, and explosive behavior toward Christie.
Matthew was born on July 1, 1992. Despite Cody's abusive and controlling behavior toward her, Christie testified that she believed he would not hurt Matthew because he was so proud to be a father. Christie testified she could never imagine Cody intentionally hurting Matthew.
On August 21, 1992, Dr. Berkley Powell, a physician in Reno, saw Matthew. Dr. Powell testified that Matthew had a fever, a yellowish, bloody discharge coming from his nose, and was breathing very rapidly. Matthew had also thrown up blood the night before. Matthew was admitted to the hospital and was diagnosed with pneumonia, and he remained in the hospital for approximately a week. During his stay in the hospital, Matthew recovered from the infection but lost almost half a pound.
Dr. Powell also noticed a bruise above Matthew's nose and his eye. When he asked Christie about it, she said Cody had dropped Matthew, and Matthew's face had struck a coffee table. Dr. Powell's concern prompted him to order a CAT scan and X-rays and call child protective services. The X-rays did not reveal any indications of fractures. Dr. Powell testified that Christie seemed uncomfortable with the questions he asked about Matthew's injuries, and he believed she was covering up for Cody.
Child abuse was suspected, and a social worker from Washoe County Child Protective Services was assigned to Matthew's case. The social worker testified that Cody related several inconsistent accounts about Matthew's injuries. Based on twenty-two different factors, the social worker rated the risk of injury to Matthew as low, despite information he received from a family member that Cody had a quick temper.
After Matthew was released from the hospital, Christie got a job because Cody was not working regularly. When Christie was at work, Matthew was in the care of either Cody or Christie's grandparents. Christie testified that Cody became "very explosive," volatile, and short-tempered during this time. He quit his job and did not tell Christie. Christie related an incident in which Cody threatened her with a knife, telling her he was going to kill them both so that they would die as a family and nobody could control them any longer. Christie stated that when Cody realized she was holding Matthew, he backed off. She stated she was terrified of Cody by this point.
On September 17, 1992, Cody went to see Christie while she was at work. He told her Matthew had been burned when Cody had been giving Matthew a bath and failed to check the water temperature. Christie could not remember the exact date this incident had happened. Cody told Christie the burns were not bad, just pinkish. Christie told Cody to go home and stay with Matthew. When Christie got home, she looked at Matthew's burns. She testified they were "pink *265 like a sunburn" and reddish in some areas. She bathed Matthew, put ointment on his burns, and dressed them in gauze.
Christie told Cody she thought a doctor should see Matthew, but Cody told her no. Cody told her they could treat Matthew's wounds themselves, and if he got worse, then they would take him to a doctor. Christie acquiesced to Cody's demands because she was afraid of what Cody would do to her if she did not, especially because Cody had previously threatened to kill them all. Christie was also worried that social services would take Matthew from her.
On September 18, 1992, a friend of Christie's and Cody's, Lori Smith, visited Cody and Matthew while Christie was at work. Lori saw Matthew lying on his stomach with gauze covering his back and upper arms. She saw no blisters or oozing around the gauze covered area, but noted that when Cody turned Matthew over to change his diaper, he started crying. She asked Cody what happened, and he told her Matthew had been in the bath when the water suddenly got hot and burned him. Lori thought the burns looked bad, so she asked Cody if Matthew had been to the hospital, and Cody replied that he had.
In the early evening of September 22, 1992, Matthew was having trouble breathing. Christie stated that she told Cody she was going to take Matthew to the doctor the next day, and Cody became enraged. The next day at work, Cody called Christie and told her that there was an emergency with Matthew. When Christie got home, Cody was performing CPR on Matthew. They drove Matthew to the hospital.
Christie and Cody arrived with Matthew at the emergency room of Saint Mary's Hospital shortly before 5:00 p.m. on September 22, 1992. Shari Quinn, a nurse at the emergency room of Saint Mary's, testified that when Matthew arrived at the hospital, he had no heart or respiratory rate and was subsequently put on life support. Quinn questioned Christie and Cody about the events leading to Matthew's injuries. Quinn testified that Christie told her Matthew had been burned four or five days earlier when the water heater had exploded. Quinn re-entered the emergency room and while moving Matthew, felt fluid from the burn on his back. She stated that when she pulled her hand away from Matthew, her hand had sanguinous fluid and dead skin from the burn on it. She rolled Matthew over and saw a huge burn over most of his back.
Another nurse who treated Matthew assumed when she saw him that he was only four to five weeks old because his weight was so low. Matthew's injuries included a black eye and a small cut under it, noticeable abrasions on his ear and head, burn marks on his hand, a blister on one of his feet, and a large burn on his back covering the majority of the area between his shoulders and buttocks. The burn on Matthew's back was open and cracked, moist and oozing, with the skin flaking away. No ointment or other kind of medical treatment was evident on Matthew at the time he was admitted. Additionally, evidence was presented that Matthew had suffered "tissue wasting" and "muscle wasting," as evidenced by his buttocks and legs having no plumpness and being almost "to bone."
Matthew was transferred from Saint Mary's to Washoe Medical Center for further treatment, but died on September 24, 1992. The autopsy revealed that in addition to the burns, Matthew had suffered injuries not superficially apparent. These included broken ribs and a severe cranial trauma. Additionally, Matthew's thymus gland had withered. The stated cause of death was blunt injuries to the skull and brain, in combination with the burn wound.
Detective Jenkins, a Reno Police detective, was called in by the medical team, and he interviewed Christie. Christie never told him she was afraid of or abused by Cody; however, she did tell Jenkins she had seen Cody very angry on occasions. She also told Jenkins she felt the need to protect her husband and her child and said she had never seen Cody hurt Matthew. Jenkins concluded that Christie, three years older than Cody, was clearly the more mature one and did not seem intimidated by him. In fact, Christie stated that she would leave *266 Cody immediately if he was physically abusive to Matthew or her.
Christie also told Jenkins that Matthew had been burned in the shower with Cody. However, detectives found that the various faucets in Cody's and Christie's apartment maintained a consistent temperature, not over 135 degrees. Additionally, testimony was presented which indicated Matthew would have had to have been immersed in water that temperature for nearly one minute to suffer the burns found on him.
Christie initially characterized Matthew's burns as pinkish in color with no blistering or other indication of a severe burn. Later in the interview, she told Jenkins that Matthew's blanket was sticking to his burns and that when she removed the blanket, portions of his skin would "literally peel off with the blanket." She also indicated that the blistering had occurred shortly after the burn trauma.
Following the investigation of Matthew's death, Cody was charged with first degree murder. Prior to trial, Cody pleaded guilty to this charge and was sentenced to life without the possibility of parole. On October 28, 1992, an indictment was filed alleging that Christie had committed the offense of child neglect causing substantial bodily harm. The State alleged that Christie had caused Matthew to suffer unjustifiable physical pain when she "neglected, delayed or refused to seek appropriate medical treatment for [Matthew's] malnourishment and failure to thrive and for second degree burns [Matthew] received while under the care of [Christie] and/or CODY A. RICE." The State's theory was that Christie did not seek treatment for Matthew's burns because she was afraid social services would take Matthew away from her. Christie was only charged with neglecting Matthew for the period between September 14 and September 22, 1992.
Prior to trial, Christie was evaluated by Dr. Lon Kepit, a clinical psychologist specializing in cases involving battered women. Kepit concluded that Christie's behavior fit the model of a battered woman. Dr. Kepit testified that as a battered woman, Christie would lose sight of her personal boundaries. She would also, therefore, lose sight of boundaries for Matthew and be unable to assess danger accurately.
Following a jury trial, Christie was convicted of child neglect causing substantial bodily harm. The district court sentenced Christie to twenty years in prison.
DISCUSSION
The district court properly instructed the jury concerning the definition of "willfully" as used in NRS 200.508
In Childers v. State, 100 Nev. 280, 680 P.2d 598 (1984), we considered the propriety of giving an instruction defining the word "willfully" as was given in this case.[1] We concluded that the definition was proper to describe the intent needed for the general intent crime of child abuse/neglect.
The instruction was proper. The child abuse statute is a general intent crime. The word "willfully" must be defined in that context. The California courts have long approved the use of this definition of "willfully," which is taken from the California Penal Code Section 7(1). See, e.g., People v. Atkins [53 Cal.App.3d 348] 125 Cal.Rptr. 855, 861 (Cal.App.1975) (approves use under child abuse statute, California Penal Code Section 273d).
(Footnote omitted.) In Smith v. State, 112 Nev. 1269, 927 P.2d 14 (1996), we recently upheld a child abuse and neglect conviction based on NRS 200.508 and held that this statute was not unconstitutionally vague. Child neglect is a general intent crime, and the definition of "willfully" has been approved several times in Nevada and elsewhere. We find no error in its use in this case.
*267 The evidence adduced at trial was sufficient to sustain the conviction
For this court to affirm a conviction, sufficient evidence must be presented to establish the essential elements of each offense beyond a reasonable doubt as determined by a rational trier of fact. Sanders v. State, 110 Nev. 434, 436, 874 P.2d 1239, 1240 (1994). The Ninth Circuit Court of Appeals has stated what evidence is needed to prove child abuse based on delay in seeking medical treatment, and the analysis would be the same for child neglect. Martineau v. Angelone, 25 F.3d 734 (9th Cir.1994). Martineau states:
Appellants contend, and the state concedes, that under the Nevada Supreme Court's ruling, the child abuse conviction can be upheld only if the state proved beyond a reasonable doubt that appellants committed an "omission"i.e. that they "willfully caused or permitted" [the child] to suffer unjustifiable physical pain by delaying in seeking medical care. NRS 200.508 (1977). Appellants argue that even "reviewing the evidence in the light most favorable to the prosecution, [no] rational trier of fact could have found proof of [delay] beyond a reasonable doubt." Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979). We agree.
In order to prove child abuse based on delay, the state had to prove both (A) that some time passed between [the child's] injuries and appellants' 911 call and attempted CPR and (B) that, during this time, appellants knew (or should have known) that [the child's] injuries were serious enough to require immediate medical attention, yet did nothing.
Id. at 739 (citing Fabritz v. Traurig, 583 F.2d 697 (4th Cir.1978)).
Christie's defense was that when she noticed the burns, she was going to take the infant to the hospital until Cody objected and said that social services would be called and would take the child from them. Concerned about losing her child and Cody's propensity for violence, she decided that medical assistance was not essential and that she could care for the baby at home. The dissent claims, that at the worst, Christie is guilty of "bad judgment." However, there is ample evidence from which a jury could conclude that there were observable injuries during the week prior to Matthew's hospitalization that needed medical attention and that the child suffered substantial pain and injury because of the delay in obtaining such care.
Dr. Ellen Clark, the pathologist who observed the child at the hospital for one and one-half days prior to his death and who conducted the autopsy, stated: "It's my opinion that Matthew Rice was a victim of child abuse which extended over several episodes, certainly from August through his death." Dr. Clark testified that the child lost a substantial amount of weight from his first hospitalization on August 22 until his second hospitalization on September 22, and that it was readily observable that he was malnourished and extremely underweight. She explained that his weight at the August hospitalization was in the ten to twenty-five percentile of children two months old, but that when he was admitted on September 22, his weight was below the fifth percentile of children three months old. She did acknowledge that some weight loss could have been attributable to the continuing pneumonia Matthew had that caused the August hospitalization.
Dr. Clark testified that the child had second degree burns from his neck down to the upper part of his buttocks and stated that: "A second degree burn goes deeper into the skin and is characterized by damage to the skin. It's in the form of blistering, and very often skin sloughage or peeling of the skin." The burns involved approximately twenty-five to thirty percent of the total body surface area, and Dr. Clark stated that burns over this extent of an infant's body are extremely serious and cause a great risk of dehydration and infection without proper medical treatment. Another complication of the burn was that it would be a painful injury, and "it would have disturbed the baby's normal daily functions, including sleeping and eating."
Christie testified that the burn wound was just pinkish for the four or five days Matthew *268 was at home. While she wanted to take the infant to the hospital, she discerned no emergency medical situation. However, this was refuted by several health professionals and Lori Smith, the couple's teenage friend. Nurse Quinn testified that upon admission, Matthew's burn wounds were open and secreting sanguinous fluid. Drs. Clark and Bonaldi testified that the blistering would have been observable shortly after the injury and that immediate medical assistance should have been sought. Describing how the second degree burn wound would look during the four days after the injury, Dr. Bonaldi stated:
[T]he first day would be very red, lots of blisters. Blisters would begin to rupture the first couple, three days. Then depending on how the burn is treated, those blisters will stick to the skin and further weep. If the blisters are removed this would begin some type of granulation or healing phase by three to four days.
Christie admitted that the blistering occurred shortly after the burn and that the blanket was sticking to Matthew's open wounds. Lori Smith stated that the burns looked bad shortly after they had been sustained. When she inquired about seeking medical treatment, Cody lied about having taken the baby to the hospital.
The jury easily could have concluded that from the time the baby was burned four or five days prior to the hospital admission, he was in desperate need of medical assistance for the serious burns and what Dr. Clark described upon admission as his severe malnutrition and "wasted appearance." Not only could the jurors conclude, from the expert testimony and their own life experiences, that these physical injuries necessitated immediate medical care, but that the pain and disruption in the infant's eating and sleeping habits could not have been overlooked by any reasonable person. As to Christie's assertion that she was afraid of Cody and the possible loss of her child if medical assistance was sought, the jury could have discounted this testimony or believed that Christie has an overriding responsibility to the infant in spite of these possible consequences.
There was more than ample evidence to establish that Christie knew or should have known that the infant was in need of medical care, that she unreasonably delayed in providing it to him, and that the delay caused the infant to suffer unjustifiable physical pain or mental suffering. Therefore, the evidentiary concerns of the Martineau decision were met.
The district court did not err in failing to instruct the jury on the lesser degree of child neglect
NRS 200.508 provides that anyone who willfully causes a child to suffer unjustifiable physical pain or mental suffering as a result of abuse or neglect is guilty of a gross misdemeanor. But if substantial bodily or mental harm results, the perpetrator is guilty of a felony. The statutory definition of substantial bodily harm set forth in NRS 0.060 states that it is bodily injury which creates a substantial risk of death or which causes serious, permanent disfigurement or prolonged physical pain.
The indictment charged Christie with causing Matthew to suffer unjustifiable physical and/or mental suffering resulting in substantial bodily harm to the child, a felony. At the trial's conclusion, the jury was instructed on the felony charge, but the lesser included offense of gross misdemeanor child neglect was not included in the instructions nor was it requested by the defense. Christie now claims that the district judge had an obligation to instruct the jury on the lesser included offense notwithstanding her failure to request such an instruction.
In Davis v. State, 110 Nev. 1107, 1114, 881 P.2d 657 (1994), we held that a district court need not instruct the jury on a lesser included offense if evidence clearly showed guilt above the lesser offense. In this case, we believe the State introduced sufficient evidence to establish that Christie's four or five day delay in seeking medical treatment resulted in Matthew sustaining prolonged physical pain, thereby falling within the definition of substantial bodily harm. Expert testimony established that the massive burn was extremely painful and a jury *269 could conclude that delaying treatment for four or five days unjustifiably prolonged that pain. Therefore, it was not error to omit giving an instruction on the lesser included offense of gross misdemeanor child neglect.
The district court did not err in permitting evidence of the cause of Matthew's death and then instructing the jury on the limited use of this evidence
Christie argues the State improperly introduced evidence of the cause of Matthew's death. Prior to trial, the defense filed a motion in limine seeking exclusion of evidence concerning Matthew's cause of death and injuries that became evident to medical personnel following his admission to the hospital. The defense requested this motion in limine because it was concerned about the prejudice to Christie if evidence was admitted regarding the non-visible injuries as contributing factors to Matthew's death. The defense claimed Christie would essentially be forced to defend herself against allegations of murder, when she was only charged with neglect, based on her knowledge of the bruising on Matthew's face upon his admission to the hospital for pneumonia and his burns days prior to his death.
In a pre-trial ruling, the district judge decided to limit testimony regarding the extent of Matthew's injuries, beyond those specifically referred to in the indictment, the failure to thrive and the second degree burns. The district judge then decided to admit evidence of the cause of Matthew's death only after the State's expert witness, Dr. Clark, testified at length on the subject outside the jury's presence. Judge Adams noted that the court would give strong cautionary instructions to the jury to the effect that Christie was not on trial for the acts Cody committed on Matthew.
A pretrial order granting a motion in limine may be modified or reversed at trial. To preserve the issue for appeal, however, the objection must be renewed at trial when the evidence previously ruled inadmissible by the order in limine is offered in evidence. Staude v. State, 112 Nev. 1, 5, 908 P.2d 1373, 1376 (1996). During its opening argument, the State made comments regarding Matthew's injuries discovered by medical personnel upon Matthew's admission to the hospital. However, the defense did not object to these statements. Therefore, the defense waived its right to complain about these comments on appeal.
On the second day of trial, the district court held a hearing outside the presence of the jury to determine what parts of Dr. Clark's testimony would be admitted. The district court allowed Dr. Clark to testify to the full extent of the injuries she observed on Matthew during the two days she treated him prior to his being removed from life support. This included the blistered second degree burns and cranial injuries. Prior to Dr. Clark's testimony, the district judge admonished the jury that Christie was not "charged with causing the death of Matthew..., nor ... with administering any of the injuries which Dr. Clark will discuss in her testimony." At this point, the defense neither objected to this instruction nor proposed an alternative instruction.
Generally, the failure of a party to propose a limiting instruction bars raising this issue on appeal. Richardson v. State, 91 Nev. 266, 534 P.2d 913 (1975). In Levi v. State, 95 Nev. 746, 749, 602 P.2d 189, 190-91 (1979), this court stated:
Only in exceptional circumstances need the trial court, sua sponte, give such a limiting instruction. For example, in Champion v. State, 87 Nev. 542, 490 P.2d 1056 (1971), the state conceded that a cautionary instruction concerning an addict-informer's testimony was central to the cause, and we found prejudice where no such instruction was given.
In this case, the district court provided the jury with a cautionary instruction with no objection by the defense. Therefore, we conclude the district court did not commit error in instructing the jury as it did.
The prosecutor did not engage in misconduct
District courts have a duty to ensure an accused receives a fair trial and must therefore control obvious prosecutorial misconduct sua sponte. Collier v. State, 101 Nev. 473, 477, 705 P.2d 1126, 1128 (1985). *270 "A prosecutor may not argue facts or inferences not supported by the evidence." Williams v. State, 103 Nev. 106, 110, 734 P.2d 700, 703 (1987).
Christie alleges the prosecutor committed several instances of misconduct in his opening and closing argument to the jury. In his opening argument, the prosecutor stated:
Ms. Quinn went to pick up the infant, who was clad in only a diaper, she placed one hand under his head and the other hand under his lower back. Ladies and gentleman, at that time, even with all her years of experience as a nurse, she felt something so unusual that she had never felt before. She immediately withdrew her hand, and on her hand was skin from infant Matthew Rice because of burns on his back that were so severe, the skin was literally just coming off.
She actually became traumatized herself from this. She went and she washed her hands. She just kept rubbing and rubbing and washing and washing, because it disgusted her so much.
Christie asserts this statement constituted misconduct because Ms. Quinn never testified that she reacted in such a manner to Matthew's burns. At trial, Quinn testified she was "extremely shocked" and "stunned." After showing the doctor Matthew's burned back, she "stepped back out of the picture... and just basically got [her] thoughts together."
Generally, the prosecution has a duty to refrain from making statements in opening arguments that cannot be proved at trial. Riley v. State, 107 Nev. 205, 212, 808 P.2d 551, 555 (1991). "It is proper for the prosecutor to outline his theory of the case and to propose those facts he intends to prove." Garner v. State, 78 Nev. 366, 371, 374 P.2d 525, 528 (1962). Even if the prosecutor overstates in his opening statement what he is later able to prove at trial, misconduct does not lie unless the prosecutor makes these statements in bad faith. Id. Although Quinn's testimony at trial was not exactly what the State promised, nothing in the record indicates the State's statements were made in bad faith.
In his closing argument to the jury, the prosecutor stated: "Christie Rice, at the age of 22, chose to bring a life, to bring a child into this world. A healthy, beautiful little boy named Matthew was born on July 1st, 1992. `Matthew' means a gift from the Lord." The defense objection to the relevancy of this statement was overruled.
The prosecutor also stated in closing that:
Anybody who has even scorched themselves with the tip of an iron on your finger or your hand knows the extent of the pain of a burn over several days.
When the life, not just the pain from the burn but the life of an innocent, defenseless child is at stake, is it even conceivable that the mother of that child would neglect that child's life-threatening injuries because of anything the husband could possibly be threatening her with?
....
Are we willing to accept this as a defense for the failure to protect such a child? ....
....
And, ladies and gentleman, of course it goes almost without saying that if your baby is suffering from life-threatening dehydration or the possibility of infection, that you must take all steps to prevent not only that from occurring, but that from getting worse. To knowingly permit any of these risks is unconscionable....
Christie also objects to a later statement in the prosecution's argument: "No one of us or anyone we can think of would have acted the same and expected their conduct to be excused, to allow this child to suffer." At that point, the defense objected because the prosecution was misstating the law. The court reminded the jury that the statements of the prosecutor were not statements of law but merely argument.
In Williams v. State, 103 Nev. 106, 109, 734 P.2d 700, 702 (1987), this court concluded that it is improper for the prosecutor to place the jury in the position of the victim. However, in this case, the prosecutor was asking the jurors what they would do if placed in the defendant's positionnot the *271 victim's. Since the defendant's state of mind and action were the primary issue and the statements had substantial support in the evidence presented, this argument was not improper and did not prejudice the overall fairness of the trial.
Finally, Christie objects to the prosecution's statement to the jury that: "Concededly, the State has not opted to attempt to prove that [Christie] committed any of the abuse by direct physical action, but she is guilty of neglect of this child." Christie complains that this argument "clearly implied that the state could have charged Christie with actually directly abusing Matthew, but chose not to." We conclude the defense's interpretation of this statement is extreme. Christie suffered no prejudice as a result of the statement, and any possible error that resulted was harmless. Ross v. State, 106 Nev. 924, 928, 803 P.2d 1104, 1106 (1990). The argument was relevant to explain what the State had charged and was obligated to prove.
The district court erroneously sentenced appellant by relying on impermissible evidence
The defense called Nancy Clark, a professional who provided an alternate sentencing report based on interviews with people involved in the case. The district judge asked Clark approximately 100 questions, many of which concerned information the judge obtained from presiding over the criminal proceedings involving Cody Rice or from reading Cody's presentence report. Christie asserts this conduct indicates that in sentencing Christie, the district court judge improperly relied upon information never provided to the defense. In particular, Christie complains about the district judge's professed disbelief that Christie was unaware of Cody's drug and alcohol abuse.
NRS 176.156(1) governs the disclosure of presentence reports and states: "The court shall disclose to the district attorney, the counsel for the defendant and the defendant the factual content of the report of the presentence investigation and the recommendations of the division and afford an opportunity to each party to object to factual errors and comment on the recommendations." In Shields v. State, 97 Nev. 472, 634 P.2d 468 (1981), this court concluded that the trial court's failure to provide the defense counsel with police reports which were contained in the presentence report violated NRS 176.156 and deprived the defendant of due process. This due process violation was highlighted by the fact that "the district judge's sentencing decision manifestly was affected by information contained in the reports." Id. at 473, 634 P.2d at 469.
In this case, the district judge spent quite a bit of time questioning Clark about the credibility of Christie's professed unawareness of Cody's drug and alcohol use. In his questioning of Ms. Clark, it was apparent that the judge was relying on the information furnished by Cody in his presentencing report and sentencing hearing. Repeatedly, the district judge asked how Christie could not have known of Cody's alcohol and drug abuse when Cody's habit and conduct as described by him would have been obvious to anyone. In effect, the judge was accepting Cody's statements of continual and excessive drug use as true and asking Clark to square Christie's professed lack of knowledge of Cody's drug problem with such statements. This was part of the larger inquiry the district judge was making about whether Christie had lied when she testified.
A judge should always disclose information he has received from third parties concerning the sentencing of a defendant. Todd v. State, 113 Nev. 18, 931 P.2d 721 (1997). And if it appears from the record that the judge used such material or relied on it, the use of the information is deemed prejudicial if not divulged to the defendant. Id. at 26, 931 P.2d at 726; see also U.S. v. Copeland, 902 F.2d 1046 (2d Cir.1990) (defendant entitled to opportunity to respond to information considered by sentencing court); U.S. v. DeVore, 839 F.2d 1330 (8th Cir.1988) (court permitted defendant to review co-defendant's presentence investigation containing codefendant's version of the robbery). There is no evidence in the record that the defense was provided with a copy of Cody's presentence report or that Christie's attorney stipulated to its use at Christie's sentencing.
*272 The district judge's perception of Christie's veracity was critical. Christie called numerous witnesses at the sentencing hearing who portrayed her as a responsible young adult who had no prior criminal record of any type and would almost certainly do well on probation. The district judge admitted as much.
I don't doubt a word of what all your friends and relatives and employers have said about you. By every single account from every source, you are a positive, productive, intelligent, able person. You're a person with good judgment. You're extremely industrious.
In striking contrast to most of the defendants who come before the Court, you don't have any history of drug abuse, alcohol abuse, unemployment. You have a record every parent would hope for their child: an A student, a good employee, a participant in a program for gifted and talented students, a manager of other employees at a young age. In short, a model life.
In viewing Christie's positive life before the birth of her child and the criminal neglect of which she was convicted, the district judge posed the following two extremes: "Either she shouldn't be in prison or [on] probation, just congratulate her for being a nice person and go home, or she should be punished very severely." The judge later speculated that perhaps Christie knowingly let her child be severely abused by Cody to "take [the child] out of the picture" and remove the "obstacle to the flourishing of her life with her husband." The judge's opinion of Christie's credibility did in large measure determine whether she received the lightest or the most severe sentence.
In accepting Cody's statements in the presentence report and using them in a critical analysis of whether Christie had fabricated her testimony, the judge apparently came to the conclusion that Christie had lied and that she was partly responsible for the child's death. Cody's presentence report was just as important to Christie as was the police report in the Shields case, and perhaps more so. The prosecutor even referred to Cody's presentence report in his closing argument. Therefore, we believe that since the district court's use and reliance upon Cody's presentence report without providing the defense with a copy constituted prejudicial error, we are compelled to reverse the sentence in this case and remand for resentencing. To eliminate any problem with what the sentencing judge may remember from the sentencing of Cody, the resentencing shall be conducted by another district court judge. Since we conclude that the use of Cody's presentence report requires us to reverse this sentence, it is not necessary to consider Christie's remaining claims of error committed at sentencing.
CONCLUSION
First, we conclude that sufficient evidence existed to sustain Christie's conviction for felony child neglect. Second, we conclude that because Christie failed to request an instruction on the lesser offense of gross misdemeanor child neglect, the district court did not err in failing sua sponte to instruct the jury on this lesser offense. Third, we conclude that the use of evidence of the cause of Matthew's death was properly restricted by the instruction given to the jury. Fourth, the prosecutor did not engage in misconduct in the opening and closing arguments. However, we also conclude that the district court relied on impermissible evidence in sentencing Christie. Accordingly, we affirm the conviction of child neglect, but reverse the sentence imposed and remand to the district court for sentencing by another district judge.[2]
SHEARING, C.J., and YOUNG, J., concur.
SPRINGER, J., concurring in part and dissenting in part:
I concur with remanding this matter for resentencing, but I dissent to the remaining judgment of this court because there are two errors in this case that require reversal.
The most obvious error is the trial court's failure to instruct the jury on the lesser *273 degree of the crime of child neglect. Child neglect is a gross misdemeanor unless there is proof of "substantial bodily or mental harm." Proof of the added element of substantial bodily or mental harm raises the crime of child neglect from a gross misdemeanor to a felony calling for a maximum of twenty years in prison.
NRS 175.201[1] requires not only that a jury must be instructed on the degrees of an offense, it also requires that the jury be instructed that if there is a reasonable doubt as to which degree is proven, the defendant is to be convicted of the lowest degree. Ms. Rice was denied the benefit of this statute. See Lisby v. State, 82 Nev. 183, 414 P.2d 592 (1966).
Although I believe that it was error per se for the trial court not to instruct on the lesser offense, I would point out that the omission was particularly disastrous to this defendant because this case looks much more like a gross misdemeanor case than a felony case, and the jury should have had the chance to bring in a verdict of the lesser offense.
The jury was not given a chance to decide that injuries suffered by reason of delay in seeking medical attention were less than "substantial," which is to say, injuries which created a substantial risk of death, loss or impairment of the function of a bodily organ or member, or prolonged physical pain. NRS 200.060. As I will demonstrate, proof relating to "substantial" injury in this case must be related to the scald injury and the scald injury alone. It is very difficult to conclude that Ms. Rice's deciding not to call in professional medical care until the scalding reached the blister stage resulted in "substantial" injury, as defined by NRS 200.060. I find no evidence in the record that this delay was the cause of any increased or unnecessary suffering on the part of the child. The intentional scalding inflicted by the child's father was what caused the child's injuries, not Ms. Rice's delay in calling the doctor. The evidence in this case certainly would support a jury finding that Ms. Rice's delay in getting medical treatment for the scalding did not result in any appreciable detriment to the child and that it could not possibly have resulted in injury of a "substantial magnituderisk of death, loss of a bodily organ or prolonged physical pain." It is safe to say, given the circumstances of this case, that if Ms. Rice were guilty of child neglect at all, she would be guilty of gross misdemeanor child neglect and not felony child neglect. That the jury did not have the opportunity to convict Ms. Rice of the lesser degree of child neglect is so prejudicial as to call clearly for the reversal of her felony child neglect conviction.
Apart from the obvious error present in the trial court's failing to instruct on the lesser degree of child neglect, a momentous error has been committed in this case. This error, which has been ignored by this court, threatens to put in jeopardy future child neglect convictions, convictions which, like the conviction in this case, will be judged by federal judicial authority to be in violation of the federal constitution and in direct contravention of federal cases in point. The error to which I refer is the failure of the trial court to define and instruct properly on the mental element of the crime of child neglect, the mens rea.
Mens rea, sometimes referred to in terms of "guilty mind," "consciousness of criminality" or "wrongful purpose" is a necessary element of any crime. Ms. Rice cannot be guilty of a crime simply because she exercised bad judgment in not calling in medical attention for her child's scald injury; yet that is what this case is all about.
As I will maintain throughout this opinion, Ms. Rice cannot be guilty of a crime unless she knew or should have known that a delay in calling a doctor was going to cause unjustifiable *274 injury to her son.[2] As matters stand, Ms. Rice was incorrectly convicted of a crime when, at most, she was guilty of negligence. The indictment charged that Ms. Rice "neglected... to seek appropriate [reasonable and proper] medical treatment." The court instructed the jury (Instruction No. 15) that "`neglect' includes negligent treatment" and the "negligent ... care, control and supervision or lacks the subsistence, medical care or other care necessary for the well-being of the child." This is a negligence case. We must bear in mind that the difference between mere negligence and criminal misconduct is that in a negligence case the actor is held civilly liable for failure to perceive danger; whereas, in criminal cases the actor is held criminally liable for being aware of an impermissible risk and acting in spite of the danger. There is no charge, nor is there evidence to support a charge, that Ms. Rice knew of a danger and that she knowingly disregarded a known danger.
When Ms. Rice tried to take the case out of the negligence realm and into the criminal by asking for an instruction defining the word "willfully" in terms of a deliberate and knowing omission as distinguished from mere inadvertence or negligence, the trial court refused the request and, instead, defined "willfully" in terms of a mere "willingness to commit the act." Under the court's instruction, Ms. Rice could be held criminally liable just for failing to perceive a danger in not calling for immediate medical attention, without regard to her knowledge of the danger that might be inherent in the delay. This, then, is a negligence case, not a criminal case. Ms. Rice has gone to prison for twenty years for negligence. This is a violation of Ms. Rice's due process rights under the Fourteenth Amendment of the Constitution of the United States.
Not long ago the Ninth Circuit Court of Appeals invalidated a Nevada criminal conviction for child neglect because "[n]either the Nevada Supreme Court opinion nor Nevada case law clearly states the precise mental state required [for a conviction of child neglect]." Martineau v. Angelone, 25 F.3d 734, 739 n. 10 (9th Cir.1994). The federal appeals court made it very clear to us that in order to convict for child neglect the state must define the mental state required for conviction. It has told us that there must be something more than mere parental negligence and told us that there had to be proof of guilty knowledge or scienter on the part of a parent before a parent could be held "criminally responsible."
In Martineau, a case very much like the one now before us, the Ninth Circuit held that in cases of delayed medical treatment, parents " `cannot be held criminally responsible for knowledge of medical risks which are neither readily apparent nor known to [them].' " Id. at 741 (quoting United States v. Robertson, 37 M.J. 432, 440 (C.M.A.1993) *275 (Glerke, J., concurring)). As was the case at the time of Martineau, presently, in this state, neither state statute nor case law defines the mental state required for a conviction of child neglect; and until such definition is provided, we will continue to face federal intervention under the constitutional principles which are announced in Martineau. The superficial opinion which accompanies the affirmance of this conviction invites another federal habeas corpus writ by reason of the clear violation of Ms. Rice's federal right to due process of law that results from punishing her criminally for mere negligence and in the absence of the universal requirement for criminal liability, mens rea, criminal intent.
Ms. Rice was charged with a violation of NRS 200.508. This statute, in addition to dividing child neglect into two separate crimes, one a gross misdemeanor, the other a felony, defines the offense in terms of two different kinds of conduct. One crime is committed (under NRS 200.508(1)(a)) by a person who actively "causes a child" to suffer unjustifiable pain; the other crime is committed (under NRS 200.508(1)(b)) by a person who passively "permits or allows" a child to suffer unjustifiable pain or to be placed in a situation where the child "may suffer" pain. Such an omission must, however, as I have said, be made with " `knowledge of [the] medical risks.' " Martineau, 25 F.3d at 741 (quoting Robertson, 37 M.J. at 440 (Glerke, J. concurring)).
Although the indictment charges that during a one-week period (September 14-22, 1992) Ms. Rice "caused or permitted the victim to suffer unjustifiable" pain, there is no allegation or proof that would indicate any culpable conduct on the part of Ms. Rice during this period other than that she negligently "permitted" her son to suffer injury because she "neglected, delayed or refused to seek appropriate medical care."
It should be noted early on that Ms. Rice is not charged with having "permitted" the child's father to kill the child by inflicting upon the child fatal blunt injuries to the skull and brain. The State does not blame Ms. Rice for negligently permitting the child's father to beat the child to death; the State charged and attempted to prove only that Ms. Rice neglected "to seek appropriate medical treatment" for three kinds of injuries, namely, (1) malnourishment, (2) failure to thrive and (3) "second degree burns the child received while under the care of the defendant and/or CODY A. RICE."
It is important to note that it is readily apparent from a reading of this record there was no attempt to prove that Ms. Rice neglected to seek appropriate medical care to treat the child's malnourishment. It is clear from the record that the child suffered malnourishment, but only as a result of a bout with pneumonia and the child's hospitalization for this disease. The child lost weight while in the hospital, and after recovering from his pneumonia had trouble digesting his food because of mucus that remained in his stomach as a sequela to the pneumonia. The record shows that the child had difficulty in gaining weight after his illness and that a district health nurse, Jeanette O'Brien, made a home visit during this time and talked to Ms. Rice about the child's nutritional problems. The nurse observed that Ms. Rice "was very good with the baby" and "very loving and attentive to infant's needs." There is certainly no evidence during the one-week period charged in the indictment that Ms. Rice neglected to get appropriate medical attention for the malnutrition.
With regard to the charged "failure to thrive," there is no evidence in the record as to what this term might mean. One of the testifying physicians, Dr. Clark, testified that he was not qualified to give an opinion as to whether the child had "failed to thrive." The other testifying physician, Dr. Powell, did not testify that the child failed to thrive. Failure to thrive is a problematical diagnosis, and it is very difficult to trace its etiology. There is no evidence that any neglect on Ms. Rice's *276 part in seeking "appropriate medical treatment," brought about the "failure to thrive" syndrome, much less evidence that such neglect caused "substantial bodily or mental harm" to the child. The only possible "unjustifiable" pain that Ms. Rice may have "permitted" her child to suffer was that connected with the "second degree[[3]] burns" the child received.
The scalding in question was intentionally inflicted upon the child by the murderer, Cody Rice. Cody Rice told Ms. Rice that the child had been accidentally scalded while he was giving the child a bath. When Ms. Rice got home from work that evening, she expressed her concern about her son and suggested to Cody that they should take him to the hospital for treatment. Cody would not permit this and ordered Ms. Rice to treat the child for the scald at home. Ms. Rice testified that at this time she was "terrified" of Cody and that he had threatened to kill her on a number of occasions. The scalding looked pink and much like a sunburn. Ms. Rice bathed her baby son and dressed the scalded tissue. An independent witness saw the scalded area on September 18, 1992, and said that it looked like a sunburn. When the scalding started to blister, Ms. Rice again suggested that they get medical attention for the child, but Cody "exploded," screaming and throwing things. Ms. Rice spent the rest of the night in fear, holding her baby to her chest all night long. She told Cody that she was going to take the child to the doctor on the next day no matter what. On that day Cody beat the child to death.
Now it seems to me that if the child had been suffering from some serious disease that placed the child in danger of death or permanent physical impairment, it could be argued that the mother was obliged, at least morally, to risk her own life and to call in medical care in order to save her child's life; but this was not the case here.[4] It can of course be argued that the mother exercised poor judgment in not having the scald attended to sooner, but it is very hard to argue that her treating the boy at home caused the child to "suffer unjustifiable physical pain," *277 much less "substantial bodily or mental harm" in the form of a life-threatening situation or the other defining conditions of substantial bodily harm. It was Cody Rice that caused the child to suffer unjustifiable physical pain and not Ms. Rice; and there is absolutely no evidence that any failure on the part of Ms. Rice to bring in professional care for the scald injury inflicted by the child's father caused the child to suffer any more or any less pain than that which was intentionally inflicted by the father. Ms. Rice treated the child at home with unguents and coverings and baby pain-relievers. There is no evidence that a doctor could have or would have done things differently.
This whole case and Ms. Rice's having to spend twenty years in prison are based, at the very most, on an error in judgment on her part, an error committed when she decided not to risk her life in order to have the pre-blister scald injury attended to by a doctor instead of treating it at home. There is nothing at all to indicate that the child was any the worse off because of this decision, and certainly nothing to indicate that treating the child at home caused the child to suffer any harm as a result of Ms. Rice's arguably bad decision, much less proof that the child suffered "substantial bodily or mental harm."[5]
Having an understanding of the nature of the charges and the factual background of this case enables us better to understand the injustice of this conviction. This leads me to discuss further the major error in this case, the constitutional violation of due process that was committed by the trial court in allowing this woman to be convicted of a crime for, at most, being neglectful and in having negligently "permitted" her child to suffer by reason of her decision to delay medical treatment for a scald injury suffered at the hands of her murdering husband.
As I have mentioned above (citing Martineau v. Angelone, 25 F.3d 734 (9th Cir.1994)), neither the statute nor our case law has, as of yet, has defined "the precise mental state required" in child neglect cases. 25 F.3d at 739 n. 10. Obviously, the mental state required for a criminal child neglect conviction has to go beyond mere negligent child supervision, or all parents would be in jeopardy. It is a rare parent indeed who does not, at some time or another, fall below the standard of "due care" expected of a *278 "reasonable" parent. What this court should be doing now, and what this court has completely failed to do, is to define the "mental state," the mens rea that is an essential element of the subject crime. Without such definition the present conviction suffers from the same constitutional infirmities that resulted in the release of the convicted defendant in Martineau.
As mentioned, Ms. Rice tried, unsuccessfully, to get the trial court to define the requisite mental element of the charges against her. Ms. Rice requested the trial court to give an instruction to the jury which reflected the necessity for the State to prove something more than negligence, more than mere breach of duty. She wanted the court to instruct the jury that her decision to delay medical attention had to have been made with some kind of guilty "knowledge" that delay in seeking professional medical attention for her son would result in "unjustifiable pain." Otherwise put, Ms. Rice sought to have the jury instructed that if her decision was merely an error in judgment, she could not be convicted of a crime. The trial court refused the instruction. The trial court should have been guided by Martineau, in which a Nevada child neglect conviction was invalidated in a case in which it was also charged (under the same statute as here) that a parent had permitted a child to suffer as a result of a failure to call in timely medical attention. The Martineau opinion makes it very clear that it is necessary for the state to prove that defendants charged with child neglect "knew (or should have known) that the [child's] injuries were serious enough to require immediate medical attention, yet did nothing." Id. at 739. The Martineau court ordered the defendants released on habeas corpus, observing that the state simply did not prove these facts, namely, that the defendants "knew (or should have known) that [the] injuries were serious enough to require immediate medical attention." Id.
Although the majority thinks that the Martineau habeas corpus writ was "[b]ased solely on a lack of sufficient evidence," the lack of evidence in Martineau related to lack of proof of the mental element of the crime, the requirement that defendants in child neglect cases must have known or should have known of the need for immediate medical attention and that they failed or refused to act on this knowledge. I see the thrust of the Martineau case as being disapproval by the federal court of Nevada's failure to provide and apply a properly defined "mental state" as an element of the crime of child neglect.
If I have read Martineau incorrectly, there are other federal cases that deal even more directly with the point. For example, in a case that is very suggestive of the present one, Fabritz v. Traurig, 583 F.2d 697 (4th Cir.1978), cert. denied sub nom. Hopkins v. Fabritz, 443 U.S. 915, 99 S.Ct. 3106, 61 L.Ed.2d 879 (1979), a mother of a three-year-old daughter came home from a trip to find her daughter ill and covered with bruises. The mother hesitated to get medical care because she was embarrassed about taking the child to the hospital in that condition; so she treated the child at home as best she could. After about eight hours the child stopped breathing. She called an ambulance, but the child died on the way to the hospital. On federal habeas corpus, the Fourth Circuit held that the conviction violated the due process clause of the Fourteenth Amendment because:
[T]he evidence is utterly bare of proof of a consciousness of criminality during her bedside vigil. This may have been an error of judgment, however dreadfully dear, but there was no awareness of wrongdoing on her part.... Without expert medical knowledge to place her on notice of the fatal nature of the child's illness, she treated her as best as she knew. The misjudgment was only to the significance of the symptoms and of the immediacy of the demand for professional care.
583 F.2d at 700.
*279 The majority neglects to discuss the court's failure to instruct the jury that it had to find not only that there was danger in Ms. Rice's delay in bringing in professional help to treat the scalding, but also that Ms. Rice was aware of the danger. Absent an instruction on the necessity to prove knowledge or awareness of the risk, the jury was free to bring in a guilty verdict (as it did) based on negligence alone and on the basis of a mere "misjudgment," as mentioned in the Fabritz case.[6]
I may be overstressing the point, but I must emphasize that a parent's mere failure to call the doctor in case of a child's illness or injury, of itself, cannot amount to criminal conduct. It happens every hour, every day. For criminal liability to be imposed, there must be some "consciousness of criminality," as put in the Fabritz case. All the court required the jury to find here was that Ms. Rice did not seek medical attention for her scalded son. This is not enough to support a criminal conviction. Ms. Rice attempted to interject the mental element, the scienter element, but her instruction was refused by the court.
Ms. Rice tried to persuade the court to define the "willfully" element of violation of NRS 200.508 in terms of scienter or knowledge that her actions were wrong. The instruction offered by Ms. Rice was taken verbatim from Robey v. State, 96 Nev. 459, 611 P.2d 209 (1980). Robey taught that the word "`willful'" when used in criminal statutes with respect to proscribed conduct relates to "an ... omission which is done intentionally, deliberately or designedly, as distinguished from an ... omission done accidentally, inadvertently or innocently." Robey employed such terms as "culpable mind" and "conscious commission of a wrong" to distinguish culpable, criminal misconduct from mere misjudgments and negligence.[7] It was clear error for the trial court to refuse to instruct on the mental element of this crime. The trial court had the opportunity to instruct the jury, in accordance with Robey and thus, at last, to define "the precise mental state required" for conviction in these kinds of cases. Martineau, 25 F.3d at 739. The trial court, contrary to Robey, defined "willfully" as meaning "simply a purpose or willingness to commit the act or to make the omission in question." In other words, to be guilty under this instruction, all Ms. Rice had to do was to be "willing"[8] to "make the omission" to call the doctor to attend to her son's scalding, that is to say, to have made the conscious decision not to seek professional *280 assistance in treatment of the scald, with or without knowledge of the danger involved.[9]
In sum, then, the majority opinion is at odds with Martineau; and it was constitutional error for the trial court not to have instructed the jury that Ms. Rice could not be convicted of a crime unless it found that she "knew or should have known" that a delay in treating her son's scalding would result in the child's suffering "unjustifiable physical pain or mental suffering." Ms. Rice cannot stand convicted for a crime just because she did not call the doctor. She may have exercised poor judgment in not calling in professional medical help when she discovered that her husband had "accidentally" caused her son to be scalded in the bathtub, but this is not the same as knowing that her son would suffer "unjustifiable" pain because she decided to treat him at home.
Although there are a number of errors in this case, I have stressed two errors in contending that this conviction must be reversed. The most obvious error is the court's failure to tell the jury that there were two possible crimes here, the gross misdemeanor and the felony.[10] Ms. Rice was greatly prejudiced by reason of the jury's not knowing that it could have brought in a conviction for a lesser offense, based on the facts in evidence.
Still, the main reason why this conviction must be reversed, and the reason of most concern to me, is that this court has still not defined "the precise mental state required" in child neglect cases and has ignored the ruling in the Martineau case relative to the scienter requirement that a defendant charged with this crime must have known or "should have known" that any failure or delay in calling in medical attention was going to result in "unjustifiable" pain being suffered by the child. 25 F.3d at 739 n. 10. I hate to see this court ignoring the clear constitutional mandate imposed upon us by the Martineau case; but, even worse, I hate to see its dereliction in refusing to deal with *281 the problem of what mental state must be shown in order to establish criminal liability in child neglect cases. This is a matter that clearly must be addressed by the court; and this is the principal reason for my dissenting to the majority opinion.[11]
NOTES
[1] The following is the instruction given to the jury:
The word "willfully," when applied to the intent with which an act is done or omitted, as used in my instructions, implies simply a purpose or willingness to commit the act or to make the omission in question. The word does not require in its meaning any intent to violate the law, or injure another.
[2] The Honorable A. William Maupin, Justice, did not participate in the decision of this matter.
[1] NRS 175.201 provides as follows:
175.201 Presumption of innocence: Conviction of lowest degree of offense. Every person charged with the commission of a crime shall be presumed innocent until the contrary is proved by competent evidence beyond a reasonable doubt; and when an offense has been proved against him, and there exists a reasonable doubt as to which of two or more degrees he is guilty, he shall be convicted only of the lowest.
[2] Since the judgment was entered in this case, the court has given its attention to the mental element in child neglect cases. In Smith v. State, 112 Nev. 1269, 927 P.2d 14 (1996), this court pointed out the difference in the child abuse/neglect statute between the willful abuse crime described in NRS 200.508(1)(a) and the child neglect crime described in NRS 200.508(1)(b). The court conceded that the "statutory definitions of `allow' and `permit' ... are not drafted as clearly as would be preferred" and went on to declare the mental state required for conviction of child neglect under NRS 200.508(1)(b). Smith, 112 Nev. at ___, 927 P.2d at 18. The court decided to read the two statutory definitions of allow and permit "in conjunction and conclude that both definitions establish the same requirement: a person acts unreasonably and is therefore criminally liable if she knows or has reason to know of abuse or neglect yet permits or allows the child to be subject[ed] to it." Id.
The foregoing, necessary elaboration of the mental element of child neglect is all that Ms. Rice wanted presented to the jurynamely, that, as it was put in the Smith case, the court "define[] the state of mind required for a finding of guilt and effectively preclude[] punishment for inadvertent or ignorant acts.
If the jury had been told in this case that Ms. Rice could be held "criminally liable" only if she knew her child was being abused and that she consciously permitted this abuse to continue and that she could not be prosecuted for "ignorant acts," she would have received a fair trial and probably would have been found not guilty.
[3] A first-degree burn is one that involves only the outer layer of skin (the epidermis), ordinarily without blistering. A second-degree burn involves "the epidermis and dermis[, ] usually forming blisters." A third-degree burn involves tissue beyond the skin itself. Stedman's Medical Dictionary 201-02 (5th Unabridged Lawyers' Ed.1982). As described in the text, the scalding was similar to a severe sunburn.
[4] The majority opinion correctly points out that Ms. Rice's decision to postpone professional treatment of the scald was "because she was afraid of what Cody would do to her if she did not [obey him], especially because Cody had threatened to kill them all many times."
Dr. Lon Kepit, a clinical psychologist who specializes in these kinds of cases diagnosed Ms. Rice as suffering from "battered woman syndrome." Dr. Kepit had this to say about Ms. Rice:
Here's the important thing. Because she loses sight of the personal boundaries for herself, she also loses them with Matthew. And really relevant is the fact that she's unable to assess danger accurately.
What is not unusual in these cases where women are abused, is that they truly believe that the child will not be hurt. * * *
And the other point I think that needs to be made here is, that, many cases leaving a relationship that's abusive can be life threatening. She was already in a situation, in my professional opinion, that was life-threatening. There were incidents with Cody with guns and knives and enough violence that she could have essentially been killed, hurt, maimed.
It is also my professional opinion, not only was she a battered woman, but she was under duress and imminent danger....
Almost twenty years ago, Dr. Lenore Walker described and defined the battered woman syndrome in her book The Battered Woman. Dr. Walker has written ten books on the subject of domestic violence, and her term, "battered woman syndrome," is a generally accepted explanation of the psychological impact of the kind of abuse suffered by Ms. Rice at the hands of Cody Rice. The gist of the syndrome as manifested in this case is Ms. Rice's inability to assess the danger to her child and her true belief that her child was not going to be harmed. (See reference to Dr. Kepit's evaluation in the text of this dissent:)
I realize that the battered woman syndrome is just one of a number of theories employed in the social sciences to explain such apparent paradoxes as battered women's not leaving their batterers and putting their children under risk of abuse from a violent domestic partner. The syndrome as delineated and later elaborated by Dr. Walker is based on clinical studies and experimental animal studies of abuse. See, e.g., Martin Seligman, Helplessness: On Depression, Development and Death 75-106 (1975). The battered woman syndrome is often accepted by the courts to explain and justify the actions of women who are accused of crimes. The theory amply explains why Ms. Rice may have delayed her decision to call in professional care until the baby's back started to blister.
[5] Actually, the gross misdemeanor crime is the only crime which the evidence in this case could possibly support. To be guilty of felony child neglect, Ms. Rice's negligence had to result in "substantial bodily harm," which is defined as injury "which creates a substantial risk of death or which causes serious, permanent disfigurement or protracted loss or impairment of the function of any bodily member or organ or prolonged physical pain." NRS 200.060. We must remember that, at most, we are dealing with Ms. Rice's neglect in calling in professional medical care for the child's scalding. As stated, the child's father beat the child to death, fracturing his skull, causing brain injury and death. Any substantial risk of death, permanent disfigurement or impairment of bodily function was entirely attributable to Cody Rice, and no one has suggested that Ms. Rice had anything at all to do with the brutal killing of her son. The only supportable charge against her is that she did not treat the scalding in an "appropriate" manner. The evidence shows that she did what she thought best, that she treated the child at home with home remedies, "dermoblast," vaseline, A & D ointment and pain medication. Any suffering sustained by reason of Ms. Rice's not calling in professional medical care, if present at all, is minimal and certainly not of the kind that was life-threatening or threatening to cause serious and permanent impairment of bodily function. Although one witness believed that the scalding and the low body weight might have contributed to the child's death, it is very clear that the child died as a result of skull fracture and brain injury inflicted by his father and completely unknown to the mother. If there be any crime committed here it is violation of NRS 200.508 without substantial bodily harm. At the very least, this conviction should be reduced to gross misdemeanor child neglect; but I must admit that this would be difficult to do in this case given the State's failure to charge the only crime that could possibly have been committed in this case.
[6] An even closer case than Fabritz is found in the reports of the Military Court of Appeals. In United States v. Robertson, 37 M.J. 432 (C.M.A.1993), a general court martial conviction was reversed on the ground that a father who failed to obtain treatment for his son's eating disorder, failed in proof because of lack of evidence that the father knew and appreciated the magnitude of the child's symptoms. These cases merely confirm the obvious; we should not be sending people to prison for misjudgments and for merely failing to seek medical attention when they do not appreciate the magnitude of the risk in not doing so.
[7] It may be instructive to draw a parallel here to civil liability for punitive damages in cases of negligence or neglect. Ms. Rice's conduct in this case would not warrant a punitive damage award, much less criminal conviction. Punitive damages were denied to the plaintiff in Village Development Co. v. Filice, 90 Nev. 305, 526 P.2d 83 (1974), a case in which there was evidence "to show negligence and unconscionable irresponsibility." Id. at 315, 526 P.2d at 89. Even unconscionable irresponsibility does not constitute the "oppression, fraud or malice, express or implied," necessary to establish the right to punitive damages. Id. at 315, 526 P.2d at 89 (quoting NRS 42.010). The concurring/dissenting opinion in Filice drew a parallel to Nevada Cement Co. v. Lemler, 89 Nev. 447, 514 P.2d 1180 (1973), in which the punitive damages were justified because "the defendant knew that if it continued to spew dust from its cement kiln that damage would ensue" and that it "did so not withstanding such knowledge." Filice, 90 Nev. at 321, 526 P.2d at 93 (Thompson, C.J., dissenting in part). I would argue that the same kind of principle is involved here and that before punitive damages or criminal liability could result from Ms. Rice's conduct, there had to be a charge and proof that "the defendant knew ... that damage would ensue" and that she decided not to call a doctor "notwithstanding such knowledge." Moral and criminal culpability presupposes a conscious disregard of a known risk. The jury should have been instructed along these lines.
[8] It is very difficult for me to understand how the jury could have possibly concluded that Ms. Rice acted voluntarily under these circumstances. She was faced with a sunburn-like scald on her baby's back and a husband who threatened to kill her if she called the doctor. It is my opinion that, as a matter of law, the trial court's definition of "willfully," even if it were correct, would not apply to this case.
[9] In refusing to instruct the jury that "willfully" refers to some kind of guilty knowledge of the consequences of delay in treatment, the trial court apparently relied on Childers v. State, 100 Nev. 280, 680 P.2d 598 (1984), a pre-Martineau case that distinguished child neglect cases from all other criminal cases when it held that in such cases the mere act or omission created criminal liability and that "willfulness" as used in the statute referred to a "general intent," thereby relieving the state from having to prove that the defendant "knew (or at least should have known)" of the consequences of delay. Martineau, 25 F.3d at 741. The Childers case, wrong on its face, can be safely ignored in the light of Martineau, which held that under these circumstances a parent "cannot be held criminally responsible for knowledge of medical risks which are neither readily apparent nor known to [them]." It can be argued, of course, that the pink, "sunburned" appearance of the baby's back put Ms. Rice on notice that immediate medical attention was called for; but, the jury had no opportunity to discuss this issue, for all the jury had to do, under the instructions given by the court, to find Ms. Rice guilty was to conclude that the child was scalded and that Ms. Rice did not call the doctor. This is wrong on its face.
[10] By going for a felony in what at most is a gross misdemeanor case, the prosecution has presented a case with a missing element. The indictment charged that Ms. Rice's negligence or neglect in failing "to seek appropriate medical treatment" "result[ed] in substantial bodily harm." The court defined "substantial bodily harm" as injury which creates a substantial risk of death or which causes serious permanent disfigurement or prolonged physical pain. It is obvious that all injuries to the boy which resulted in a substantial risk of death or caused serious permanent disfigurement were inflicted by Cody Rice. Ms. Rice was not charged with inflicting injuries upon her son. There is nothing to support a conclusion that she permitted her child to suffer substantial risk of death or permanent disfigurement. The only possible charge would be that Ms. Rice's failure to call the doctor to attend to the child's burns was the cause of prolonged suffering. Any prolonged suffering by this little boy was caused by his father who placed him in scalding water and then beat him to death. There is no evidence that any misjudgment on the part of Ms. Rice was the cause of any additional, much less prolonged, suffering by the child. There is no evidence that Ms. Rice caused "substantial bodily harm" to her son. In the absence of this evidence, the conviction should be set aside.
[11] Although, as said, my principal concern in this case is the court's refusal to deal with Martineau and to define the required mental element of the crime of child neglect, it is quite apparent that the sentence was excessive in this case and should be reversed.
The following is the trial judge's evaluation of Ms. Rice:
I don't doubt a word of what all your friends and relatives and employers have said about you. By every single account from every source, you are a positive, productive, intelligent, able person. You're a person with good judgment. You're extremely industrious.
In striking contrast to most of the defendants who come before the Court, you don't have any history of drug abuse, alcohol abuse, unemployment. You have a record every parent would hope for their child: an A student, a good employee, a participant in a program for gifted and talented students, a manager of other employees at a young age. In short, a model life.
I cannot even speculate as to why, if the judge believed what he said about Ms. Rice, he would have, contrary to the recommendation of the presentence report, given Ms. Rice the maximum sentence of twenty years. She may have to serve as much time as her husband, the man who brutally beat her son to death in her absence.
Defense counsel contends that the judge based his decision to give Ms. Rice twenty years on inadmissible matters contained in the Cody Rice's pre-sentence report. During argument, the prosecutor made reference to "Cody Rice's PSI." The sentencing judge made a number of statements during sentencing that support defense counsel's belief that the judge improperly based his sentencing decision on matters contained in Cody Rice's presentence report. The prosecutor made reference to "Cody Rice's PSI" (presentence report); and the judge challenged Ms. Rice's credibility based on material in Cody Rice's presentence reporta report that was not available to defense counsel. Of most concern to me, however, is the judge's "theory" that Ms. Rice was a murderer and that she may actually have collaborated in the killing of her son because she saw her son as "an obstacle to the flourishing of her life with her husband" and an "obstacle to the happiness in her life." This theory, expressed by the sentencing judge, is absolutely incompatible with the evidence in this case. The judge himself saw his "theory" as being "as miserable a picture as one could imagine," but went ahead to suggest that it may have been Ms. Rice's mindset to say: "But suppose you take the son out of the picture...." This idea that Ms. Rice murdered her son, to take him "out of the picture" because he was an obstacle to her happiness is so grotesque that it is difficult to understand why the sentencing judge would put such an outlandish thought on the record, or as he said, "put it out on the table."
That the judge considered Ms. Rice to be a murderer is the only explanation of why he would sentence to twenty years in prison a woman who was charged with delaying the calling of a doctor to treat her son's scalded back. What is most difficult to explain is how the judge could have believed that this mother was so cruel and unfeeling toward her own son as to kill him just because he was an "obstacle to [her] happiness."
I am pleased to see that the majority agrees that the district judge relied on impermissible evidence during sentencing and concur in that judgment.
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543 So.2d 1194 (1989)
Michelle VARNADORE
v.
STATE DEPARTMENT OF HUMAN RESOURCES.
Civ. 6741.
Court of Civil Appeals of Alabama.
April 5, 1989.
*1195 James W. May, Gulf Shores, for appellant.
William Prendergast and Coleman Campbell, Asst. Attys. Gen., and Lynn S. Merrill, Sp. Asst. Atty. Gen., for appellee.
L. CHARLES WRIGHT, Retired Appellate Judge.
This is a termination of parental rights case.
In April 1986 the Juvenile Court of Baldwin County placed Trisha Eileen Varnadore, a four-day-old infant, in temporary custody with the Department of Pensions and Security (DPS). That decision was appealed and affirmed by this court in Varnadore v. Department of Pensions & Security, 495 So.2d 1141 (Ala.Civ.App.1986).
In September 1987 DPS filed a petition requesting the termination of all parental rights of Michelle Varnadore (the mother) to Trisha. Termination proceedings were delayed pending the result of the mother's criminal prosecution relating to the 1984 death of her three-month-old son. In February 1988 the mother was found guilty of child abuse and was sentenced to eight years' imprisonment. Her conviction is presently on appeal in the Court of Criminal Appeals. The father's parental rights were terminated in June 1988. In September 1988, following an ore tenus proceeding, the trial court ordered the termination of all the mother's parental rights to Trisha. She appeals from that order.
The mother argues that there was a lack of clear and convincing evidence to support the trial court's decision in terminating her parental rights. She contends that, due to the pending appeal of her criminal conviction, "her situation is in such a state of uncertainty that the decision to terminate her parental rights at this time is ill-advised" and "is at least premature, if not clearly erroneous." She further asserts that the trial court erred in failing to exhaust all viable alternatives to termination of her rights in that the maternal grandmother, Linda Varnadore, was a viable alternative for custody.
*1196 In order to terminate parental rights, the court must make several findings. First, the court must determine that the child is dependent based on clear and convincing evidence. Second, the court must find that there exists no viable alternative to termination of the mother's custodial rights. Wallace v. Jefferson County Department of Pensions & Security, 501 So.2d 473 (Ala.Civ.App.1986). The trial court is presented the evidence ore tenus; therefore, its decision is presumed to be correct and will be set aside only if the record reveals the decision to be plainly and palpably wrong. Wix v. Department of Pensions & Security, 464 So.2d 118 (Ala.Civ.App.1985).
It is well settled that a natural parent has the prima facie right to custody. That right, however, can be overcome by clear and convincing evidence that the removal from the parent's custody is in the child's best interest. Haag v. Cherokee County Department of Pensions & Security, 489 So.2d 586 (Ala.Civ.App.1986). In determining the child's best interest, the court must consider whether a party to a custody proceeding is physically, financially, and mentally able to care for the child. Perry v. Department of Human Resources, 516 So.2d 659 (Ala.Civ.App.1987). The court may determine a child to be dependent based on the totality of the circumstances. Carter v. Jefferson County Department of Pensions & Security, 496 So.2d 66 (Ala.Civ.App.1986).
The mother's first contention, that the termination is premature, is based on the supposition that her criminal conviction will be overturned. She insists that if that occurs, then satisfactory counseling arrangements could be made to assist her in her parenting skills. We find this argument to be based on mere speculation, to be perfunctory at best and unpersuasive.
The trial court found Trisha to be dependent based on its observation that the mother was "not in a position to properly care for or rear" Trisha. The court further found that the commitment of permanent custody to the State was in the child's best interest.
At the time of the hearing the court was cognizant of the fact that the mother had been convicted of child abuse and sentenced to eight years imprisonment. By stipulation, the parties entered into evidence testimony from the criminal proceeding. That evidence proved that the mother's three-and-one-half-month-old son died from Battered Child Syndrome. The diagnosis was based on fifteen human bite marks found on the child's body and seventeen old rib fractures. There was testimony that the mother admitted biting the child and did so because he would not stop crying.
The only evidence available concerning the mother's mental condition was a psychological evaluation procured pursuant to the criminal proceeding. In that evaluation it was determined that the mother was incapable of parenting due to her inability to react normally to stress. The mother has refused to seek any form of counseling since the 1984 death of her child because of the detrimental effect it might have had on her criminal proceedings. The mother refused counseling even after the trial court told her it would be in her best interest.
Trisha is at present three years old and has been in foster care since birth. The record reveals that she is well adjusted and because of her age is an excellent candidate for adoption proceedings. The mother's "uncertainty" about her future tends to support the court's decision that her instability makes her unable to adequately care for Trisha. We find the court's determination of dependency to be based on clear and convincing evidence and to be in the child's best interest.
The mother next contends that the court failed to exhaust all viable alternatives to termination of her rights. She asserts that the maternal grandmother, Linda Varnadore, was a viable alternative. This argument is unpersuasive.
In the appeal of the 1986 temporary custody decision, the mother argued that the maternal grandparents were an appropriate resource for custody of Trisha. Varnadore, supra. We found otherwise *1197 based on the fact that the maternal grandmother had kept her grandson three or four days prior to his death. During that time she changed his diapers and fed him. The evidence showed that the child's injuries had been inflicted over a period of several weeks and days prior to his death. In denying the maternal grandparents custody, we found that "the maternal grandmother knew or should have known of the abuse to Christopher and that she failed to take any action to report the abuse or protect the child." The court was warranted in considering the past history of this case. Haag v. Cherokee County Department of Pensions & Security, 489 So.2d 586 (Ala.Civ.App.1986). The court could correctly conclude that placing Trisha with her grandmother, who had taken no action to protect another grandchild, was not a viable alternative.
The child's retention in the same environment is also a factor for the trial court's consideration in determining if there is a viable alternative to termination. Matter of Moore, 470 So.2d 1269 (Ala.Civ.App. 1985). In the 1986 appeal we noted that the mother was living with the maternal grandparents. We found at that time that "placing the child with the maternal grandparents would, in effect, be the same as leaving the child with her mother." Varnadore, supra. The circumstances have not changed. The mother still resides with the maternal grandmother. This factor, coupled with the grandmother's prior neglect of another grandchild, supports the trial court's determination that the maternal grandmother was not a viable alternative to termination.
In addition, the record is clear that DHR made persistent attempts to locate a relative resource other than the maternal grandmother, but was unsuccessful in its pursuit.
There is clear and convincing evidence to support the trial court's decision to terminate the mother's parental rights and its conclusion that no less drastic alternative was available. Accordingly, the decision of the trial court is affirmed.
The foregoing opinion was prepared by Retired Appellate Judge L. CHARLES WRIGHT while serving on active duty status as a judge of this court under the provisions of § 12-18-10(e), Code 1975, and is hereby adopted as that of the court.
AFFIRMED.
All the Judges concur.
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128 Ariz. 150 (1981)
624 P.2d 828
STATE of Arizona, Appellee,
v.
Randy GREENAWALT, Appellant.
No. 4616.
Supreme Court of Arizona, In Banc.
January 23, 1981.
Rehearing Denied March 3, 1981.
*154 Robert K. Corbin, Atty. Gen., Phoenix by Bruce M. Ferg, Asst. Atty. Gen., Tucson, for appellee.
Robert C. Brown, Casa Grande, for appellant.
STRUCKMEYER, Chief Justice.
This is an appeal by Randy Greenawalt from judgments of guilty to four counts of murder in the first degree, two counts of armed robbery, three counts of kidnapping, and one count of theft of a motor vehicle and from the sentences of death on the murder convictions. Affirmed.
A brief statement of the facts supporting the convictions for murder will be given at this point. Other facts necessary for an understanding of the many claimed errors will be set forth as the occasion demands.
On Sunday, July 30, 1978, appellant and Gary Tison were imprisoned in the Arizona State Prison at Florence, Arizona, serving lengthy sentences for murder. On that day, they escaped from the Arizona State Prison Trusty Annex. They were aided in their escape by Tison's three sons who were visiting the prison. Appellant actively participated in the escape, having access to the trusty annex control center and receiving and using weapons provided by Tison's sons to compel the cooperation of guards and prison visitors. Appellant and the four Tisons left the prison driving a green Ford sedan. A short time later, they transferred to a Lincoln Continental. This vehicle was later found disabled in Yuma County, Arizona, near Quartzsite.
On August 6, 1978, the bodies of John Lyons, his wife, Donnelda Lyons, and his twenty-two-month-old son, Christopher, were found in or near the Lincoln Continental automobile. Five days later, on August 11, 1978, the body of Theresa Tyson, a niece of the Lyonses, was found in a wash approximately one-fifth of a mile west of the Lincoln Continental. The remains of the Lyonses' small dog were found close to Theresa's body.
John Lyons was the the owner of a late model Mazda automobile. It was subsequently found in a forested area in Coconino County near Flagstaff, Arizona, where it was partially buried and covered with pine branches, abandoned when the Tisons and Greenawalt obtained a four-wheel drive truck in Flagstaff.
In the early morning of August 11, 1978, appellant, together with Gary Tison and his three sons, ran through a roadblock in Pinal *155 County, Arizona. At that time they were traveling in a stolen Ford van with a Texas license. At a second roadblock, the van was forced off the road and stopped. Donald Tison, a son of Gary Tison, was found shot and unconscious in the driver's seat. Ricky and Raymond Tison, two other sons of Gary Tison, together with appellant, fled into the desert but were captured. Gary Tison escaped. His body was found several days later where he had died from exposure on the desert.
Appellant assigns twenty-three errors on appeal. It is first urged that the trial court erred in refusing to appoint an expert to conduct a public opinion survey. The purpose of the requested survey was to determine the extent to which pretrial publicity had permeated the community, thereby supplying the basis of a motion for change of venue by showing that prejudicial pretrial publicity would have the probable effect of denying appellant a fair trial.
A.R.S. § 13-1673(B) (now § 13-4013(B)) specifically provides for court-appointed experts in capital cases in this language:
"When a person is charged with a capital offense the court * * * shall upon application of the defendant and a showing that the defendant is financially unable to pay for such services, appoint such investigators and expert witnesses as are reasonably necessary adequately to present his defense at trial * * *."
The question whether an expert can properly be appointed, pursuant to A.R.S. § 13-1673(B), to conduct a public opinion poll for the purpose of substantiating a claim that prejudicial pretrial publicity necessitates a change of venue was answered by this Court in State v. Smith, 123 Ariz. 231, 599 P.2d 187 (1979). We held:
"Jury selection and proceedings for change of venue are not matters having a bearing on the ultimate question of defendant's guilt or innocence and therefore, are not contemplated by the statute's requirement of necessity `to present his defense at trial * * *'."
The trial court correctly denied appellant's request to have an expert appointed to conduct a public opinion survey.
Appellant urges that the court erred by imposing a limitation on his use of a court-appointed investigator to areas previously presented to and approved by the court. The court ordered that an investigator be appointed from time to time, based upon counsel's in camera representations as to the necessity of investigations, and further ordered:
"* * * if the defendants wish to have any particular area investigated, then the Court will require that in each instance, counsel advise the Court what they wish to have investigated and why it appears to them to be material." (Omnibus Hearing, September 12, 1978)
It is argued that the trial judge did not need to exercise such personal control over the investigatory activities of counsel and that such control had a "definitely chilling effect upon the conduct of the case."
In State v. Knapp, 114 Ariz. 531, 562 P.2d 704 (1977), this Court found that the trial court did not err in refusing to allow the court-appointed expert to conduct a questionable experiment. There we set forth the guidelines to be used by the trial court in effecting A.R.S. § 13-1673(B) as well as the scope of review of such actions on appeal:
"A.R.S. § 13-1673(B) is not to be construed as mandating, in every case, an appointment of investigators or experts, nor the expenditure of public money for their use, merely upon application. There must be a finding, by the trial court, (1) that the defendant is unable to pay for such services himself and (2) that the appointment and expenditure is reasonably necessary to present an adequate defense. This determination * * * rests in the sound discretion of the trial court. In the absence of a showing that the determination was an abuse of that discretion, it will not be disturbed on appeal." 114 Ariz. at 540-541, 562 P.2d 704.
The determination of what expenditures are reasonably necessary to enable the defendant to present an adequate defense is *156 within the sound discretion of the trial court. The requirement that counsel indicate what was to be investigated and why it was believed to be material was not only reasonable but required in order for the court to determine that the expenditure sought was reasonably necessary to enable defendant to present an adequate defense. Appellant made no showing, and our review of the record does not reveal any instance in which the court either denied such a request for an investigator or refused a requested area of investigation presented to the court pursuant to the order.
Appellant's assertion that the disparity between the State's resources and the refusal of the court to appoint an investigator without the prior approval of the court "would seem to be a clear denial of Due Process under the Fifth and Fourteenth Amendments" was also addressed and answered in State v. Knapp, supra, wherein we quoted, approved, and adopted the language of the Indiana Supreme Court:
"* * * when the court is allocating state funds for the defense of a defendant, it is rational for the court to use discretion in granting or denying the defendant's requests * * * Within the primary goal of the judicial process, which is due process of law for each defendant the court may determine which expenses are probably needless, wasteful or extravagant. Magley v. State, [263 Ind. 618], 335 N.E.2d 811, 816 (1975)."
We conclude the court imposed reasonable limits in order to prevent needless, wasteful or extravagant expenses. Appellant was not denied due process of law and no error was committed.
Appellant urges that the trial court erred in refusing to suppress his statements allegedly obtained by law enforcement officers in violation of Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), and Sixth Amendment right to counsel. The determination of this question requires an enlargement on the facts of the case.
In the very early morning hours (approximately 3:00 a.m.) of August 11, 1978, appellant and the Tisons, traveling in a late model van, ran a roadblock, fired on the officers manning the roadblock, fired on officers pursuing the van in a high-speed chase, ran through a second roadblock, ran off the highway, and, upon the vehicle becoming disabled, with the exception of Donald Tison, fled on foot into the surrounding desert. Donald Tison was found lying across the front seat of the van, unconscious from a head wound. Subsequently, aided by aerial flares and helicopter search lights, police officers found appellant and Raymond and Ricky Tison lying in the desert at varying distances from the vehicle. The three were taken into custody, disarmed, stripped, handcuffed, shackled, and placed in the bed of a pickup truck while the search continued for Gary Tison.
At daybreak, the pickup truck was moved to a more secured location and the suspects were placed in separate vehicles. Harold Cardwell, a prison official, guarded appellant in the truck. Cardwell gave appellant Miranda warnings and asked if he had any statements to make. Appellant at that time asked for an attorney. Appellant was later moved to the back seat of Cardwell's state-owned car. While in Cardwell's car, interviews were attempted by representatives from three different law enforcement agencies: Pinal County Sheriff's Office (Deputies Solis, Harwell and Martinez), Arizona State Prison officials (MacDougall, Cary and Burd), and Department of Public Safety officers (Sanchez and Greig). Two of the agencies, the Pinal County Sheriff's Office and the State Department of Public Safety, conducted interviews using a team approach. Both interviews were brief and were terminated by appellant exercising his Miranda rights. There is some indication that Deputy Solis of Pinal County continued to talk with Greenawalt after he had asserted his rights; however, the conversation concerned whether Greenawalt had an attorney or needed to have one appointed. The interviews conducted by the prison officials, MacDougall and Burd, are somewhat confusing as to the sequence of occurrence and who was present. Both sides agree *157 that appellant made a statement to both MacDougall (either alone or with Cary) and Burd in separate interviews. All interviewing at the scene of arrest ceased at approximately 9:25 a.m., according to Officer Sanchez' testimony.
The State, although assertedly having obtained three statements from appellant (two at the scene of arrest and one later at the Pinal County Jail), introduced and used at appellant's trial only the statement made in the Pinal County Jail. Since the two statements obtained at the scene of the arrest were not used to incriminate appellant, we need not inquire as to the use of procedural safeguards in obtaining those statements.
"the prosecution may not use statements, whether exculpatory or inculpatory, stemming from custodial interrogation of the defendant unless it demonstrates the use of procedural safeguards effective to secure the privilege against self-incrimination." Rhode Island v. Innis, 446 U.S. 291, 100 S.Ct. 1682 at 1688, 64 L.Ed.2d 297 (1980). (Emphasis added.)
Appellant was taken to the Pinal County Jail at about 11:15 a.m., where he was examined by a doctor and talked with an attorney for approximately fifteen minutes through a window in a cell. At no time after appellant talked with his attorney did he again request an attorney or in any way indicate a desire to have an attorney present during questioning.
Lt. Tom Brawley, of the Coconino County Sheriff's Office, acting as Supervisor of the Arizona Coordinator Investigative Team (created for the specific purpose of investigating the Greenawalt-Tison matter), interviewed appellant in his cell shortly before 2:00 p.m. It was during this interview, more than four hours after the last interview at the scene, and after appellant had seen a doctor, a lawyer, and had rested, that he had made the third incriminating statement.
The third statement was supported by the testimony on direct examination of Lt. Brawley at the trial, who testified:
"Q. After he told you that he had some things he wanted to clear up what was the next thing that occurred?
A. I then asked him what he wanted to clear up.
Q. What did he tell you at that time?
A. He told me that he wanted to clear up the news media stories of Theresa Tyson.
Q. What happened next?
A. I asked him what he meant and he replied that, `We didn't kidnap the girl, nor was she sexually molested.'
Q. What was the next statement made?
A. I then asked him if she hadn't been kidnapped where was she.
Q. Did he respond to that question?
A. Yes, he did.
Q. What was his response?
A. His response was that she should be there with the rest of the bodies.
Q. And what was next said?
A. I told him that her body had not been found or she hadn't been found and he said, `Well, we left her there.'
Q. Were any further statements made?
A. Yes.
Q. What was made at that time?
A. He made a statement that she has or I made a statement that the Yuma authorities have been unable to locate her and he replied, `Well just look around because she has to be there.' I then asked him why did she have to be there, was she shot. And he replied, `You goddamn right she was shot.'
Q. Was there any further conversation after that, Tom?
A. Yes.
Q. Did that concern other matters?
A. Yes, it did.
Q. How long did the conversation continue after that?
A. The total conversation was probably 20, 25 minutes.
Q. During this 20 or 25 minutes that you were there did you threaten Mr. Greenawalt in any way?
*158 A. No.
Q. Did you make any promises to him at all?
A. No, I didn't.
Q. And did you abuse him in any way?
A. No.
Q. How would you describe your manner and your demeanor throughout this period?
A. It was as friendly as possible.
Q. During this period of time did Mr. Greenawalt have any complaints?
A. His only complaint was his eyesight and not having his glasses.
MR. IRWIN: No further questions."
There can be no question but that (1) appellant was advised of his constitutional rights pursuant to Miranda v. Arizona, supra, (2) that appellant requested counsel, and (3) that questioning by various officers from various agencies did not cease upon appellant's initial request for counsel. The issue therefore is whether appellant, after first asserting his right to counsel, subsequently waived the right.
It is well settled that a constitutional right once asserted can subsequently be waived; however, the state has a heavy burden to show such waiver once the right has been asserted. The United States Supreme Court in North Carolina v. Butler, 441 U.S. 369, 99 S.Ct. 1755, 60 L.Ed.2d 286 (1979), held that a waiver of Miranda rights need not be explicit but may be inferred from the actions and words of a person interrogated.
"[Quoting from Miranda v. Arizona] `If the interrogation continues without the presence of an attorney and a statement is taken, a heavy burden rests on the government to demonstrate that the defendant knowingly and intelligently waived his privilege against self-incrimination and his right to retained or appointed counsel.' 384 U.S. at 475, 86 S.Ct. at 1628."
And see Tague v. Louisiana, 444 U.S. 469, 100 S.Ct. 652, 62 L.Ed.2d 622 (1980).
This Court has held:
"Where a suspect has asserted his right to counsel, that right may later be waived, but establishing such a waiver requires proof of an intentional abandonment or relinquishment of a known right or privilege. Brewer v. Williams, 430 U.S. 387, 97 S.Ct. 1232, 51 L.Ed.2d 424 (1977). An express refusal of counsel is not a prerequisite to a valid waiver. State v. Gholson, 112 Ariz. 545, 544 P.2d 654 (1976); State v. Jenkins, 111 Ariz. 13, 522 P.2d 1090 (1974). Thus, the answering of questions after the giving of a proper `Miranda' warning constitutes a waiver by conduct. State ex rel. Berger v. Superior Court, 109 Ariz. 506, 513 P.2d 935 (1973), cert. denied sub nom. Pate v. Arizona, 414 U.S. 1145, 94 S.Ct. 899, 39 L.Ed.2d 101 (1974); State v. Knapp, 114 Ariz. 531, 562 P.2d 704 (1977), cert. denied sub nom. Knapp v. Arizona, [435] U.S. 908, 98 S.Ct. 1458, 55 L.Ed.2d 500 (1978); State v. Pineda, 110 Ariz. 342, 519 P.2d 41 (1974)." State v. McGinty, 120 Ariz. 162, 164, 584 P.2d 1153 (1978); see also State v. Grange, 25 Ariz. App. 290, 543 P.2d 128 (1975).
The trial court's denial of the motion to suppress was correct. That appellant knew and understood his constitutional rights to remain silent and to have an attorney present during questioning is evidenced by his exercise of those rights. Further, appellant through intelligent exercise of his rights controlled all questioning by selectively choosing which officers with whom he would speak. (Burd, MacDougall and Brawley were all prior acquaintances.) He controlled the questioning by responding only to the specific questions he wanted to answer and refusing to respond to others. Lt. Brawley also testified in his deposition of October 31, 1978:
"Q. After this initial discussion about the subject of the body of Theresa Tyson, did you get into other or attempt to get into other areas with him?
A. Yes. I attempted to and I would ask him a question about some phase of the investigation and he said that he didn't want to reply to that and I said *159 fine. He said, `I told you I will talk about some things, not others.' I said, `Fine. If I ask you something you don't want to talk about tell me.' I asked him several things he didn't want to talk about so I didn't pursue them."
In response to defense counsel's questioning, Lt. Brawley continued:
"Q. Specifically, Mr. Greenawalt would only talk to you about Theresa Tyson, is that correct?
A. He wanted to talk to me about Theresa Tyson, which he did, and then he made one comment pertaining to the Judges [other believed victims] and that was it.
Q. And you, yourself, were never told by anyone that Mr. Greenawalt had previously requested an attorney?
A. He told me, he, himself, told me that he had an attorney, but he still wanted to talk to me about certain things."
Further, Warden Burd's account also reflects that appellant exercised the same degree of control over questioning which occurred at the scene of the arrest. He testified at the suppression hearing:
"Q. And from what you said, the first question you asked him, that you remember, is where was the Tyson girl?
A. Yes, Sir.
* * * * * *
Q. Did he have any reluctance about answering that question?
A. No, to the best of my memory, he answered right off. Like we should have known, or he implied this, you know.
Q. Then, you asked what was the next question you asked him?
A. I asked him where Gary if Gary was actually in the van, you know.
Q. Did he answer that question?
A. Yes, he said he definitely was in the van and he took off with the rest of them * * *
Q. And, what was the next question you asked him?
A. And, then, I asked him about the owners of the van, where they were at.
Q. What did he say at that point?
A. He said he didn't want to answer that until he had an opportunity to talk to an attorney.
Q. What did you do at that point?
A. I left him."
Appellant argues that his waiver of his rights was not voluntary. As to this, the record is replete with testimony that appellant was never threatened and there were no promises of leniency. Appellant, himself, testified that Warden Burd "was very polite." He also testified that his reasons for choosing to speak to Warden Burd were (1) he had known him quite awhile, (2) to get rid of him, and (3) to clear up misunderstandings. At a hearing on appellant's motion to suppress, he took the stand and testified:
"Q. Mr. MacDougall and Mr. Burd. Did you answer some of their questions?
A. I believe so, yes.
Q. What was your reason for doing this, Randy?
A. Mr. Burd, I have known him for quite awhile, and, you know, he just kept asking me the questions, you know, little side line questions. I finally answered one of Mr. Burd's questions.
Q. What was your reason for doing this?
A. Oh, probably a combination of reasons.
Q. Can you express those reasons?
A. Not accurately, no.
Q. Do you know what they are?
A. Yes, one of them, one of the reasons was to try and, you know, and get rid of him, get him off my back.
Q. When you were speaking with Warden Burd, did he threaten you in any way?
A. No, he was very polite.
Q. Did he make you any promises of any sort?
A. No.
* * * * * *
Q. Without going into the actual statements you gave him, can you express *160 the reasons that made a difference in your choosing to speak with Warden Burd?
A. To clear up misunderstandings.
Q. You felt there was some misunderstanding, then?
A. Yes.
Q. And you wished to clear up that misunderstanding?
A. In a way, yes.
Q. Did you feel at that time there had been some inaccurate reports in the newspapers?
A. Yes, sir.
Q. You felt that some of the public comments in the press and the newspapers were inaccurate and misleading?
A. Quite a bit.
Q. And, this was one of the other reasons that you thought you should explain this to Warden Burd?
A. Yes, that plus the fact that I knew him, plus he told me it wouldn't go any farther.
* * * * * *
Q. Mr. Greenawalt, I think you indicated a minute ago in my questioning that you wanted to clear something up with the Warden and this was the reason that you spoke with him, or one of the reasons that you spoke with him.
Does this have to do with accounts that had been published in newspapers or on the radio which you felt had done you some injustice?
A. I don't know about doing yes, that is correct. Because they were incorrect.
Q. And you wanted to clear the record, so to speak?
A. I don't know about clearing the record.
Q. Set the record straight?
A. Something to that effect."
Once the accused has properly challenged the State's evidence, the State has the burden to show, by a preponderance of the evidence, the legality of the acquisition of any challenged evidence. The court's findings, pursuant to a Rule 16.2, Rules of Criminal Procedure, 17 A.R.S., motion to suppress, as to the lawfulness of the State's acquisition of evidence will be upheld on appeal if supported by adequate evidence absent clear and manifest error.
By stipulation of counsel, appellant's motion to suppress was heard and decided by a Pinal County Superior Court Judge rather than the Yuma County judge assigned to the case.
The evidence presented, viewed most favorably to affirming the trial court, indicates: (1) appellant received, understood and asserted his constitutional rights; (2) that when appellant chose to speak, he did so only to those officers with whom he was previously acquainted; (3) and even then, was very selective as to what questions he would answer, thereby maintaining complete control of the interview; and (4) that the purpose or reason for discussing any area with any officer was appellant's desire to correct the inaccurate and misleading news reports relative to the Yuma County incident and specifically the whereabouts of one of the victims, Theresa Tyson; (5) that no promises, threats or coercion were used to obtain the statements; (6) that although appellant was successively interviewed, the interviews were conducted by investigators from different agencies, each conducting its own investigation, and were of very brief duration; and (7) when appellant indicated to the interviewer that he did not want to discuss the matter further, or that he wanted an attorney present, questioning by that interviewer ceased and his assertion of rights was respected and honored by that interviewer.
The trial court, following the hearing at which appellant testified as stated supra, found:
"* * * the statements made by Randy Greenawalt on August 11, 1978 to law enforcement personnel, both at the scene of the arrest and at the Pinal County Jail, were made freely and voluntarily, therefore the Motion to Suppress is denied."
We hold the trial court did not err in this respect.
*161 For his fourth assignment of error, appellant urges that the trial court erred in refusing to grant his pretrial publicity motions. Specifically, he points to (1) his motion to continue, (2) his request to individually voir dire jurors, (3) his motion to have the jury sequestered, and (4) his motion to change either the venue or the venire.
We note that the determination of these, like most pretrial motions, rests within the sound discretion of the trial court, and as such will not be disturbed on appeal absent a clear showing of abuse of discretion and resulting prejudice to defendant.
"A motion for continuance is not granted as a matter of right. The matter is solely within the sound discretion of the trial judge whose decision will not be disturbed unless there is a clear abuse of discretion, and unless denial of the motion is shown to be prejudicial to the defendant. State v. Richie, 110 Ariz. 590, 521 P.2d 1136 (1974); State v. Benge, 110 Ariz. 473, 520 P.2d 843 (1974); State v. Guthrie, 108 Ariz. 280, 496 P.2d 580 (1972)." State v. Jackson, 112 Ariz. 149, 154, 539 P.2d 906 (1975).
See also, State v. Schmid, 107 Ariz. 191, 484 P.2d 187 (1971).
Appellant's other motions are governed by the same standard; for abuse of discretion with resulting prejudice, see State v. Schmid, supra (change of venue); State v. Richmond, 112 Ariz. 228, 540 P.2d 700 (1975) (change of venue); State v. Melendez, 121 Ariz. 1, 588 P.2d 294 (1978) (scope of voir dire); State v. Rose, 121 Ariz. 131, 589 P.2d 5 (1978) (extent of voir dire); Rule 18.5, Arizona Rules of Criminal Procedure, 17 A.R.S. ("the court may permit counsel to examine an individual juror" (emphasis added)); State v. Lippard, 26 Ariz. App. 417, 549 P.2d 197 (1976); Rule 19.4, Rules of Criminal Procedure, 17 A.R.S. ("The court in its discretion may permit jurors to separate or, on motion of any party, may require them to be sequestered * * *" (emphasis added)).
With this standard in mind, we examine each specifically asserted error for abuse of discretion.
Appellant contends that "[t]he court did not permit the matter to be continued sufficiently to allow the publicity to subside, and granted continuances only long enough to permit counsel to prepare for trial." There can be no question but that during August and September of 1978 the crimes with which appellant was charged, as well as his subsequent capture by law enforcement officers, were top news items which received extensive coverage. Appellant's trial, which resulted in his conviction began February 9, 1979, almost six months after his capture. The record not only does not indicate that the extensive news coverage continued throughout the six-month period between appellant's capture and his trial, but appellant's counsel affirmatively asserted on November 14, 1978 that the publicity had died down to manageable proportions and that the case was becoming a "murder case and not a cause celebre." On this record, there is no evidence that the trial court abused its discretion.
Appellant asserts that "[t]he court did not permit individual voir dire of the jurors in order to allow counsel to probe for the effects of the publicity." Contrary to what appellant asserts, the trial judge did permit counsel to question several jurors individually, out of the hearing of other jurors, following the court's voir dire. Defense counsel questioned thirteen jurors individually and separately regarding the publicity generally and specifically on what they knew or could recall about statements allegedly made by the Tison brothers.
Rule 18.5, Arizona Rules of Criminal Procedure, 17 A.R.S., governs the procedures for selecting a jury. It provides:
"d. Voir Dire Examination. The court shall conduct the voir dire examination, putting to the jurors all appropriate questions requested by counsel. The court may in its discretion examine one or more jurors apart from the other jurors.
If good cause appears, the court may permit counsel to examine an individual juror.
*162 e. Scope of Examination. The examination of prospective jurors shall be limited to inquiries directed to bases for challenge for cause or to information to enable the parties to exercise intelligently their peremptory challenges." (Emphasis added.)
The rule clearly puts the burden of voir dire on the court; however, for good cause appearing, the court may permit, in its discretion, counsel to examine an individual juror. The trial judge examined the panel from questions prepared by counsel, permitted individual voir dire by respective counsel as appropriate due to the affirmative answers, and, further, permitted defense counsel to individually question some thirteen jurors separate and apart from all other jurors.
In reviewing the questions posed to the panel by the trial judge, we find that all areas of pretrial publicity, prior knowledge of the appellant's background, and the alleged statements of the Tison brothers were sufficiently inquired into to give counsel adequate information to enable them to intelligently exercise their challenges. We find no error in refusing to allow defense counsel to individually and separately question every member of the panel.
Appellant complains of the failure to sequester the jury. Rule 19.4, Arizona Rules of Criminal Procedure, provides:
"The court in its discretion may permit jurors to separate or, on motion of any party may require them to be sequestered * * *."
He argues it was error for the trial court to refuse to sequester the jury and to allow them to return to the community "saturated" with trial publicity every night. The trial court admonished the jurors:
"Do not expose yourselves to any news accounts of the trial and don't go to anyplace mentioned in the evidence for the purpose of making a personal inspection of it. Regarding news accounts of the trial I am sure there will be some. Tell your family you are not to be exposed to any of those accounts. Don't read any newspaper accounts and tell them not to permit you to read any news accounts. If necessary, have them cut those accounts out of the paper if you want to read the paper.
So far as television sets are concerned just don't be in the room when the news is on. Don't listen to it, don't turn on the radio for that purpose. And if you find yourself in that position you can either turn it off or get out of the room. Let your family know these are the ground rules by which you must abide during the course of the trial."
We think this is sufficient, absent a showing of juror misconduct or disobedience to the court's admonitions. We will not disturb the trial court's discretion in this matter on appeal.
Appellant complains that he was denied a change of venue based on pretrial publicity. His burden is set forth in Rule 10.3(b), Arizona Rules of Criminal Procedure, 17 A.R.S.:
"Whenever the grounds for change of place of trial are based on pretrial publicity, the moving party shall be required to prove that the dissemination of the prejudicial material will probably result in the party being deprived of a fair trial."
Appellant has filed numerous newspaper articles relative to the prison escape, the discovery of the victims' bodies, the shootout capture at the roadblock, and the ensuing judicial proceedings. Such events are clearly newsworthy and will almost always generate extensive coverage due to the very nature of the activities. However, it is the "prejudice" of the publicity, and not the "extensiveness" of the publicity, with which we are concerned. In State v. Schmid, 109 Ariz. 349, 353, 509 P.2d 619 (1973), this court clearly placed the burden of proving publicity-caused jury prejudice on the defendant:
"We hold that without a showing of such outrageous circumstances as Sheppard [384 U.S. 333, 86 S.Ct. 1507, 16 L.Ed.2d 600 (1966)] or Estes [381 U.S. 532, 85 S.Ct. 1628, 14 L.Ed.2d 543 (1965), reh. den. 382 U.S. 875, 86 S.Ct. 18, 15 L.Ed.2d 118 (1965)], where an accused is subjected to *163 widespread publicity prior to and during the trial, it is not enough to allege that there was extensive press coverage of the trial or the events preceding it, unless jury prejudice can be proved."
An examination of the jurors, through voir dire process, is an effective means by which to determine the effects or influence of pretrial publicity on the jurors. As discussed previously, voir dire in this case was extensive with a particular emphasis on inquiry into the exposure to and effects of pretrial publicity.
A defendant, pursuant to fundamental fairness, due process requirements of the federal and state constitutions, is entitled to be tried by a fair and impartial jury. U.S. Constitution, Fifth and Fourteenth Amendments; Art. II, Sec. 4, Arizona Constitution; Murphy v. Florida, 421 U.S. 794, 95 S.Ct. 2031, 44 L.Ed.2d 589 (1975). Therefore, our inquiry is whether the publicity, extensive or otherwise, was prejudicial to the point of having the probable effect of precluding a trial by fair and impartial jurors. Rule 10.3(b), Rules of Criminal Procedure, 17 A.R.S.
"The fact that all of the empanelled jurors had some degree of knowledge of the facts of this case, does not, in and of itself, demonstrate such prejudice as would necessitate a change of venue * *." State v. Schmid, 107 Ariz. 191, 193, 484 P.2d 187 (1971).
This case, like Schmid, supra, is one which the entire panel had, through pretrial publicity, acquired some degree of knowledge of the facts of the case; but, as the record shows, only 41 potential jurors had to be called to obtain a panel of 34 (20 challenges, 2 alternates, and jury of 12), of which only four were excused by the court for the reason that they could not set aside a previously formed opinion. Additional indicia of lack of juror prejudice is indicated by the fact that in the jury selection process for the initial trial (which terminated in a mistrial) only 39 had to be called to qualify a panel of 34.
Finally, we note what the trial judge said in denying the defense motion to have public opinion poll taken:
"I think the best way to determine the existence of whether your case can be fairly tried here would be through a voir dire process and failing that, then, of course, the question that you seek can be raised once again.
The newspaper accounts to this point, the factual reporting, that is, has not struck me, and those accounts which I read in both the local newspaper and the Arizona Republic as being anything but a factual rendition; albeit, inaccurate. We may find that out later, but I don't think the articles that I have read have been designed to inflame the passions of the public * * *."
Appellant has failed to carry his burden of showing that the extensive pretrial publicity was prejudicial or would probably result in the denial of a fair trial. The trial court denied the motion for change of venue and we will not disturb his ruling on the present record.
Appellant asserts he did not receive the type of fair trial mandated by the due process clause of the Fifth and Fourteenth Amendments of the United States Constitution due to the publicity in this matter. He points to what he calls the "unchecked and irresponsible journalism" which created the type of carnival-like atmosphere which the court found present and condemned in Sheppard v. Maxwell, 384 U.S. 333, 86 S.Ct. 1507, 16 L.Ed.2d 600 (1966). In addition, counsel relies on pretrial publicity matters which this Court has previously held should not occur, and which may result in reversal. Specifically, this Court in State v. Schmid, supra, suggested that in order to preserve the rights of the accused, the news media restrict its coverage in several particulars, including:
"(1) the character, reputation, or prior criminal record (including arrests, indictment, or other criminal charges) of the accused;
* * * * * *
(3) the existence or contents of any confession, admission, or statement given by the accused, * * *
* * * * * *
*164 (5) the identity, testimony or credibility of prospective witnesses; * * *." 109 Ariz. at 353-354, 509 P.2d 619.
The clear concern of the court in Schmid was the effects of such publicity upon the accused's right to be tried by a fair and impartial jury. Although publicity of the nature specified in Schmid may create such prejudice as would preclude a fair trial, this will not be presumed unless the circumstances are extreme.
Prejudice, sufficient to preclude a fair trial, has been presumed from the outrageous circumstances in which the trials were conducted in Rideau v. Louisiana, 373 U.S. 723, 83 S.Ct. 1417, 10 L.Ed.2d 663 (1963); Estes v. Texas, 381 U.S. 532, 85 S.Ct. 1628, 14 L.Ed.2d 543 (1965); Sheppard v. Maxwell, supra. In Murphy v. Florida, supra, the Court explained that in these cases, Rideau, Estes, Sheppard, the presumption of prejudice was based on the fact that:
"The proceedings in these cases were entirely lacking in the solemnity and sobriety to which a defendant is entitled in a system that subscribes to any notion of fairness and rejects the verdict of a mob. [These cases] cannot be made to stand for the proposition that juror exposure to information about a state defendant's prior convictions or to news accounts of the crime with which he is charged alone presumptively deprives the defendant of due process." 421 U.S. at 799, 95 S.Ct. at 2036, 44 L.Ed.2d at 594.
The proceedings involved in the three cases wherein prejudice was presumed lacked the solemnity and sobriety appropriate to a judicial proceeding, and, instead there developed a carnival-like atmosphere. Such was not present in the case before us. The trial was covered by the press, including the use of television cameras on the lawn of the courthouse. They were prohibited inside. Persons attending the trial, including jurors, were searched and the jury was not sequestered. But we do not think this even remotely approaches the outrageous circumstances present in those cases in which prejudice has been presumed. Since we do not find a presumption of prejudice, appellant must show the actual presence of such prejudice that a fair trial was precluded.
Appellant relies heavily on the extensive pretrial publicity to establish such prejudice. It is pointed out that the media printed the prior criminal record of appellant "ad nauseum," and published the alleged confessions of codefendants accusing appellant of the murders, thereby completely ignoring the Schmid criteria. While the Schmid criteria are clearly an indication of the factors this Court may look to to determine whether the publicity has prejudiced the accused's right to a fair trial, they are not ironclad grounds for automatic error.
The court on voir dire placed particular emphasis on the two noted areas of publicity.
"THE COURT: Very well. Do you know anything of or have you read or heard anything about the life and history of Randy Greenawalt, the defendant, as it existed before July 1978? * * *"
There were no affirmative responses to this inquiry. As to the alleged statements made by the codefendants, the court, early in voir dire asked:
"All of you have heard or read about the case. More specifically have any of you, do any of you recall having heard or read anything about statements attributed to the defendant or co-defendants, Ricky Tison or Raymond Tison? Do any of you recall having heard anything about the statements they may have made?"
To which fifteen members of the panel responded affirmatively. Subsequently, close to the end of the voir dire, the court again asked:
"Finally, let me ask again, I think I asked this question previously, but I may have overlooked doing so, have any of you read or heard about any statement attributed to either the defendant or to co-defendants Ricky and Raymond Tison concerning this case?"
At this time, ten members of the panel responded affirmatively.
*165 It should be noted that between the first inquiry and the second, four jurors had been excused by the court and four new panelists called. Of the 19 individuals acknowledging having heard or read about the statements, four were excused by the court for having a strong opinion, and 13 were individually and separately questioned on voir dire by defense counsel. Of 13 individually examined, defense counsel allowed three to remain on the panel without being peremptorily challenged. Although defense counsel did challenge one for cause, upon denial of the challenge counsel did not peremptorily challenge the particular juror. The jury which convicted appellant contained five members who acknowledged prior knowledge, three of whom had been individually examined on voir dire, and all of whom the court decided could set aside what information they remembered and decide the case fairly and impartially.
We do not think that on this record there was a sufficient showing that the prior publicity, both as to the statements allegedly made by the codefendant and the prior criminal record of the defendant, tainted the jury's verdict. The language of the United States Supreme Court in Dobbert v. Florida, 432 U.S. 282, 97 S.Ct. 2290, 53 L.Ed.2d 344 (1977), is appropriate here:
"Petitioner's argument that the extensive coverage by the media denied him a fair trial rests almost entirely upon the quantum of publicity which the events received. He has directed us to no specific portions of the record, in particular the voir dire examination of the jurors, which would require a finding of constitutional unfairness as to the method of jury selection or as to the character of the jurors actually selected. But under Murphy, extensive knowledge in the community of either the crimes or the putative criminal is not sufficient by itself to render a trial constitutionally unfair. Petitioner in this case has simply shown that the community was made well aware of the charges against him and asks us on that basis to presume unfairness of constitutional magnitude at his trial. This we will not do in the absence of a `trial atmosphere . .. utterly corrupted by press coverage.' Murphy v. Florida, supra, * * *." 432 U.S. at 303, 97 S.Ct. at 2303, 53 L.Ed.2d at 362. (Emphasis added.)
In reviewing the entire record, we are satisfied that the trial judge, with the cooperation of the parties and members of the press, conducted this trial in a fair and impartial manner. The proceedings were conducted in appropriately solemn and serious judicial fashion, accompanied by a full and sober realization of all that was involved. We find no violation of the Arizona Constitution, nor of the federal constitutional requirements of due process.
For his sixth error on appeal, appellant argues the trial court erred in refusing to grant his motion in limine and the overruling of his objections at trial regarding the exclusion of evidence of events occurring before and after the killing of the Lyons family and Theresa Tyson. Specifically, appellant objects to the testimony relative to the prison escape and to his capture near Casa Grande as being irrelevant and highly prejudicial. He urges that the applicable rule regarding admissibility of separate and distinct crimes is stated in Dorsey v. State, 25 Ariz. 139, 143, 213 P. 1011, 1012 (1923):
"The general rule is that, in the prosecution of one accused of a particular offense, evidence showing or tending to show the commission by accused of another crime entirely distinct and independent of that for which he is on trial, * * * is neither relevant nor admissible."
While we agree with the statement of the rule, see also State v. Myers, 117 Ariz. 79, 570 P.2d 1252 (1977), cert. denied 435 U.S. 928, 98 S.Ct. 1498, 55 L.Ed.2d 524 (1978), we fail to find it applicable to the present case for the following reasons. Appellant was charged with murder in the first degree pursuant to A.R.S. § 13-452 (now § 13-1105), which at the time of the offense read:
"A murder which is perpetrated by means of poison or lying in wait, torture or by any other kind of wilful, deliberate or premeditated killing, or which is committed *166 in avoiding or preventing lawful arrest or effecting an escape from legal custody * * * is murder in the first degree." (Emphasis added.)
In the present situation we are not dealing with "another crime entirely distinct and independent of that for which [the accused] is on trial" as contemplated in Dorsey, or Rule 404(b), Rules of Evidence, 17A A.R.S. To convict under the statute A.R.S. § 13-454 (now § 13-703), the State must present evidence sufficient to show that the murders were committed in "avoiding or preventing lawful arrest or effecting an escape from legal custody," or any of the other proscribed acts. Where the accused is charged with first degree murder, based upon the felony-murder statute, which itself requires a showing of another underlying crime or specified conduct as an element of the offense charged, evidence of the proscribed conduct cannot be precluded as being irrelevant or prejudicial. Clearly, in such situations the underlying criminal activity is not distinct and independent; rather, it is an integral part of the crime with which appellant was charged. Testimony regarding appellant's escape and flight from the Arizona State Prison, as well as testimony regarding the capture is relevant and admissible to show either that the murders occurred in "effecting an escape", "to avoid or prevent lawful arrest", or both.
Appellant and his companions fled the prison in a green Ford sedan and within a very short time changed to a Lincoln Continental. This vehicle, after being driven some distance, became disabled. It was discarded and abandoned in the desert in Yuma County. Appellant and his companions continued their journey in the late model Mazda registered in the name of the victims, the Lyons family, and it was driven until yet a fourth vehicle was obtained in northern Arizona. Several days later, while in still another vehicle, the group ran the roadblock in Pinal County. In all, they traveled in at least five different vehicles.
The Continental and the Mazda were abandoned in such a manner as to suggest there was an attempt to keep their locations secret, so that the occupants' route and whereabouts would be unknown to the authorities seeking their capture. The Continental was driven some distance off the highway onto a gasline maintenance road and then backed well off the gravel maintenance road into the desert. The vehicle and the remains of the murdered victims were not discovered until August 6, 1978, almost six full days after the murders occurred. The Mazda was driven until a Chevrolet truck was obtained, and it was then abandoned in a forest area south of Flagstaff. The Mazda was discovered by authorities on August 11, 1978, some eight days after appellant and his companions were last seen in the area. It had been painted gray with spray paint, buried to the center of the wheels, and covered with pine boughs.
Testimony of the capture indicated that the vehicle in which appellant was riding ran two roadblocks and the occupants of the van fired on the law enforcement officers manning the roadblocks. Officers on the scene testified that when appellant was taken into custody, he was armed with a rifle and a .357 magnum pistol.
Evidence of the prison escape, repeated changes of vehicles, the means of disposing of the vehicles used, and the circumstances of the apprehension near Casa Grande, including the weapons seized, is relevant and admissible to establish a substantive element of the crime with which appellant is charged that appellant was effecting an escape from lawful custody and/or was attempting to avoid or prevent lawful arrest. The trial court did not err in admitting evidence of the very acts or circumstances which the applicable statute, A.R.S. § 13-452, specifically itemized as elements of the charge itself. We think the evidence objected to was obviously relevant.
For his seventh issue on appeal, appellant argues that the trial court erred in denying his challenge to the jury panel on the grounds that (1) the size of the panel from which the jury was drawn was somewhat reduced in that four juries had been drawn from the panel within four days, and (2) *167 that the average age of prospective jurors was "raised" to 45.5 years.
We do not understand that this could possibly be error. An accused has a constitutional right to be tried by a fair and impartial jury, United States Constitution, Amend. VI; Arizona Constitution, Art. 2, § 24, but he is not entitled to be tried by any one particular jury. See State v. Thompson, 68 Ariz. 386, 206 P.2d 1037 (1949). Unless the record affirmatively shows that a fair and impartial jury was not secured, the trial court must be affirmed. State v. Zimmer, 106 Ariz. 166, 472 P.2d 35 (1970).
In challenging the jury panel, pursuant to Rule 18.4, Rules of Criminal Procedure, 17 A.R.S., the challenger has the burden of showing that the panel's selection constituted or was the result of a "material departure from the requirements of law." Appellant has not shown that the jury was unlawfully empanelled (as required by Rule 18.4) or that the jurors were other than fair and impartial (as required by the Arizona and United States Constitutions).
Appellant alleges that the average age of prospective jurors was "raised" to 45.5 years, but he makes no showing of the average age of all potential jurors or, if a substantial deviation was present, how such a deviation prejudiced him. Unless it can be shown that the average age of the jurors was prejudicial to him, appellant's challenge based on the age of the jurors is without merit. Nor does the fact that the master panel from which appellant's jury was selected had been reduced in number in itself give rise to reversible error without a showing of prejudice. Rule 18.4, Rules of Criminal Procedure, 17 A.R.S. We find this Court's statement in State v. Miller, 71 Ariz. 140, 224 P.2d 205 (1950), determinative of appellant's position on appeal:
"* * * When a jury panel has been regularly called, summoned, qualified and sworn, in accordance with [the applicable laws] * * * then such a panel is a legal jury panel. The mere fact that the whole jury panel of 175 members, as there were in this one, is not again personally summoned through the sheriff and present when a case goes to trial is not such an irregularity that would disqualify a fair representative group drawn by lot from the panel to try the case. All that a defendant or party litigant is entitled to is a fair and impartial jury to try his case. In the instant case no claim is made by defendant that he was prejudiced in any way. He is merely insisting on an assumed technical legal right to have the entire panel present. We feel the record shows that his rights to a fair and impartial jury have not been invaded and that is all that is due him." 71 Ariz. at 143, 224 P.2d 205. (Emphasis added.)
Appellant was tried by a fair and impartial jury, drawn from a legally constituted panel. We find no error.
Appellant urges as his eighth error on appeal that the trial court erred in refusing to halt the sheriff's "searching" of jurors and spectators and in denying his motion for mistrial based upon such searches. The "searching" of which appellant complains was the subjecting of spectators and, on occasion jurors, to a minimally intrusive "scanning" by an electronic metal detecting device.
The issue of whether a defendant had been denied a fair trial by reason of the security precautions employed throughout the trial has been addressed by the Federal Circuit Court in United States v. Howell, 514 F.2d 710 (5th Cir.1975), cert. denied, 429 U.S. 838, 97 S.Ct. 109, 50 L.Ed.2d 105 (1976). There, the court held that the presence of eleven marshals in the courtroom and the practice of passing all persons, including jurors, admitted to the courtroom through two magnometers for the purpose of detecting metal was not unreasonable given the facts known to the court. See also United States v. Kelly, 551 F.2d 760, cert. denied 433 U.S. 912, 97 S.Ct. 2981, 53 L.Ed.2d 1097 (8th Cir.1977); United States v. Jackson, 549 F.2d 517 (8th Cir.1977). Here, the very nature of the crimes with which the defendant was on trial and the knowledge that at the time of the crimes he *168 was an escapee from the state prison where he had been incarcerated for a prior murder, clearly justified the trial judge's concern for the safety of those present in the courtroom.
The conduct of a trial to a very large extent rests within the sound discretion of the trial judge, who is in the best position to observe what measures need to be taken to insure that there be a fair and impartial trial. Counsel's analogy to the "restraint" cases is ill-founded. The concern here was not entirely with the possibility of appellant's escape or his dangerous nature, but also with the possibility that appellant would be protected against violent reprisals by those who might attempt to administer their own concept of justice. In view of the facts and circumstances known to the trial judge, we find no abuse of discretion.
Next, appellant argues that the trial court erred in admitting into evidence the numerous weapons which were found in the van in which appellant was riding when captured. These weapons, according to appellant, bore no known connection with the Yuma County charges for which the accused was on trial.
We disagree. That at the time of his arrest appellant had in his possession and had access to many deadly weapons, clearly substantiates the State's theory that the five people in the van were attempting to avoid being arrested or captured and showed that they were prepared and capable of using the most extreme measures to prevent their future restraint. Evidence is not inadmissible simply because it paints a black picture of a defendant's character or his bent for evil. We find no error.
Appellant next urges that the trial court erred in refusing to give his requested second degree murder instruction. The Court's reason for refusing the requested instruction was stated as:
"Defendant's requested instruction number 12 is refused in that it instructs on second degree murder and the case is being submitted solely on the felony murder rule."
In State v. Valencia, 121 Ariz. 191, 589 P.2d 434 (1979), this Court considered the propriety of instructing on second degree murder when an accused was charged under the felony-murder statute. In that case, the defendant was charged with first degree murder committed in the perpetration of a robbery. After noting that the trial court should instruct the jury on every degree or grade of offense that is supported by the evidence, we said:
"We have stated that a jury may not be instructed on a lesser degree of murder than first degree where the evidence indicates it was committed in the course of a robbery. State v. Clayton, 109 Ariz. [587], 514 P.2d 720 (1973); State v. Kruchten, 101 Ariz. 186, 417 P.2d 510 (1966); State v. Folk, 78 Ariz. 205, 277 P.2d 1016 (1954)." 121 Ariz. at 198, 589 P.2d 434.
When a case is submitted to the jury solely on a felony-murder theory, the jury may not be instructed on a lesser degree of murder where the evidence indicates it was committed in the perpetration or attempted perpetration of any of the activities enumerated in the first degree murder statute, A.R.S. § 13-452.
The evidence in the present case supports only a first degree murder instruction because the murders were committed either in effecting an escape from lawful custody, in preventing or avoiding lawful arrest, or in a robbery while effecting an escape or avoiding an arrest. The trial court properly refused the requested instruction.
Appellant's eleventh assignment of error is that the court below erroneously instructed the jury at the State's request on the theory of conspiracy as a ground of vicarious criminal responsibility.
The Court instructed the jury:
"A conspiracy is an agreement between two or more persons to commit a public offense or crime.
It is not necessary in proving a conspiracy to show a meeting of the alleged conspirators or the making of an express or formal agreement. The formation and existence of a conspiracy may be inferred *169 from all the circumstances tending to show the common intent and may be proved in the same way as any other fact may be proved, either by direct testimony of the facts or by circumstantial evidence.
The acts and statements of a conspirator when said or done in furtherance of the conspiracy and during its continuance are binding on all participants in the conspiracy.
One may become a member of a conspiracy without full knowledge of all the details of the conspiracy. On the other hand a person who has knowledge of a conspiracy, but happens to act in a way which furthers the object or purpose of the conspiracy does not thereby become a conspirator.
Before you may find a defendant or any other person has become a member of a conspiracy the evidence in the case must show beyond a reasonable doubt that the conspiracy was knowingly formed and that the defendant or other person who is claimed to have been a member wilfully participated in the unlawful plan with the intent to advance or further some object or purpose of the conspiracy.
To act or participate wilfully means to act or to participate voluntarily and intentionally and with specific intent to do something that the law forbids or with specific intent to fail to do something the law requires to be done. That is to say, to act or participate with the bad purpose either to disobey or disregard the law.
So if a defendant or any other person with the understanding of the unlawful character of a plan knowingly encourages, advises, or assists for the purpose of furthering the undertaking or scheme, he thereby becomes a wilful participant conspirator.
One who wilfully joins an existing conspiracy is charged with the same responsibility as if he had been one of the original conspirators or instigators of the conspiracy."
By statute:
"All persons concerned in the commission of a crime * * * whether they directly commit the act constituting the offense, or aid and abet in its commission, or, not being present, have advised and encouraged its commission * * * are principals in any crime so committed." A.R.S. § 13-139 (now § 13-301).
Clearly under the State's evidence in the case by force of A.R.S. § 13-139 Greenawalt was concerned in the commission of the crimes and was therefore a principal in the murders of Theresa Tyson and the Lyons family. The evidence showed that Greenawalt just before the escape was in the trusty annex control center at the Arizona State Prison, where he received a shotgun and a pistol from one of Gary Tison's sons; that he gave the pistol to Gary Tison when Gary entered the control center and used the shotgun to threaten the prison guards, compelling them to lie down on the floor. Thereafter, Greenawalt locked the guards and some prison visitors in a storage room and left the prison with Gary Tison and his sons in a green Ford sedan, later found abandoned two miles from the prison. They transferred to a Lincoln Continental which had been given to Gary Tison's sons by an uncle. When the Lincoln was found, appellant's palm print along with finger prints of each of the Tisons were found on it.
A friend of Greenawalt, Kathleen Ehrmentraut, was contacted by Donald Tison on the afternoon of the day following the Lyons murders. She later met Greenawalt at her home about 9:00 p.m. and there was a discussion about their use of her son's truck. The next morning, Greenawalt returned with Donald Tison and told Ehrmentraut to go to town and buy them a vehicle, which she and Donald Tison did, buying a blue, four-wheel-drive Chevrolet pickup. She left appellant at the house to watch her grandchildren. In addition, Ehrmentraut gave Tison and Greenawalt a Winchester rifle and a .357 magnum pistol. That afternoon she bought more that $80.00 worth of ammunition which she gave to appellant later that evening. The Lyonses' Mazda was subsequently found in the same general *170 area where she gave the ammunition to Greenawalt. His fingerprints along with those of Raymond Tison were found in the Mazda. A person resembling appellant in appearance was later seen in Flagstaff putting gas in the blue Chevrolet pickup. When appellant was captured, he was armed with the pistol and the rifle which had been obtained from Ehrmentraut.
Appellant's statement made to Officer Tom Brawley, as testified to by Brawley, is alone sufficient evidence to tie Greenawalt to the homicides. Greenawalt told him: "We didn't kidnap the girl [the Lyonses' niece], nor was she sexually molested. * * we left her there * * * just look around because she has to be there * * * she was shot."
The conspiracy instruction charged the jury that:
"So if a defendant or any other person with the understanding of the unlawful character of a plan knowingly encourages, advises, or assists for the purpose of furthering the undertaking or scheme, he thereby becomes a wilful participant conspirator."
This is no more than a re-statement of the criminal responsibility found in A.R.S. § 13-139, that is, if appellant encouraged, advised, or assisted the Tisons "for the purpose of furthering the undertaking" he became a "participant conspirator." While the requested instruction involving conspiracy added nothing to the State's theory of responsibility for the murders, under the felony murder statute, A.R.S. § 13-452, neither do we think it misled or confused the jury.
For his twelfth error, appellant urges that the court below erred in refusing to conduct separate hearings for sentencing for capital and non-capital crimes, and, as a result, evidence which was inadmissible under the death penalty statute was considered by the court. We, however, disagree. No error was committed in holding either a single sentencing hearing or in admitting the evidence objected to by appellant.
The Arizona death penalty statute provides for a "separate sentencing hearing," A.R.S. § 13-454(A) (now § 13-703(B)), at which time evidence may be offered by both sides in order to support or controvert the existence of aggravating and/or mitigating circumstances. A.R.S. § 13-454(B) (now § 13-703(C)). The appellant's position is that this statutory provision requires separate hearings on sentencing to be held when there are convictions for capital and non-capital crimes. We hold, however, that the intent of the Legislature in enacting the statute requiring "separate sentencing hearing" was merely to provide for a bifurcated procedure by which sentencing was to be separated from the trial of guilt and that the words have no further purpose.
The appellant next challenges the nature of the evidence which was received in the aggravation/mitigation hearing. The prosecution introduced certified copies of the prior convictions of the appellant from both Arizona and Arkansas which established that Greenawalt had been convicted of first degree murder in both jurisdictions, and of robbery in Arkansas. Further, law enforcement officers were permitted to testify as to the specific factual circumstances of the crimes. Sheriff George Ford of Mississippi County, Arkansas, testified concerning a conversation he had with Greenawalt regarding the manner in which the robbery and killing in Arkansas were committed. According to Sheriff Ford, Greenawalt told him that he had stopped at a rest stop along the highway and, being that he was "* * * broke and needed some money," he had armed himself and decided to rob a truckdriver who had gone into the restroom. Greenawalt went into the restroom and "* * * engaged briefly in a conversation with the decedent * * *. And * * * he went to the stall where Mr. Weber was seated on the commode and demanded that he give him money. * * * And as he stood up he told me he shot him in the head."
The prosecution also had photographs of the scene of the killing in Arizona admitted in evidence. And, finally, Lt. Brawley of the Coconino County Sheriff's Office testified *171 concerning statements made by Greenawalt in regard to the actual commission of the Arizona crime. According to this officer's account, Greenawalt stated that "* * * he had learned of a good way of obtaining money from truckdrivers," and had then shot and robbed a truckdriver while the victim was asleep in his truck.
Appellant interprets our decision in State v. Lee, 114 Ariz. 101, 559 P.2d 657 (1976), as precluding the sentencing court from receiving any evidence other than certified copies of prior convictions. Appellant errs in his interpretation of our decision in State v. Lee, supra. There, we were concerned with the introduction of evidence of prior convictions as they related to the first aggravating circumstance, A.R.S. § 13-454(E)(1) (now § 13-703(F)(1)). We did not hold that other forms of evidence were not relevant and admissible to the other aggravating circumstances specified in the statute. To illustrate, in State v. Richmond, 114 Ariz. 186, 560 P.2d 41 (1976), cert. denied, 433 U.S. 915, 97 S.Ct. 2988, 53 L.Ed.2d 1101 (1977), we approved of the procedure in which the victim in a different crime was called as a witness to identify the defendant as the person who had kidnapped him. This form of evidence was offered and received by the sentencing court to establish the existence of the second aggravating circumstance under our death penalty statute, a prior felony conviction involving the use or threat of violence on another person. A.R.S. § 13-454(E)(2) (now § 13-703(F)(2)). The limitation on proof which was adopted in State v. Lee, supra, has no application to the second aggravating circumstance. The testimony of the three law enforcement officers concerning the details of the prior crimes of violence which were committed by Greenawalt was properly received in the court below.
Appellant questions whether the admission of the testimony of the nature of the prior crimes at the sentencing hearing violates the statutory limitation on the receipt of evidence found in A.R.S. § 13-454(B). That section provides:
"* * * the admissibility of information relevant to any of the aggravating circumstances * * * shall be governed by the rules governing the admission of evidence at criminal trials."
It is the appellant's view that this evidence was highly prejudicial and irrelevant and, as such, would not have been admissible at a trial.
By Rule 403, Rules of Evidence, 17A A.R.S., relevant evidence will be excluded only if its probative value is substantially outweighed by factors such as the danger of unfair prejudice. Since the testimony of the law enforcement officers about the prior crimes was highly relevant to the determination by the court of whether a crime of violence within the purview of A.R.S. § 13-454(E)(2) had occurred, we hold that the admission of this evidence was proper. The receipt of this testimony serves the basic function of an aggravation/mitigation hearing which is to determine the character and propensities of the defendant so that the punishment imposed will fit both the crime and the offender. State v. Valencia, 124 Ariz. 139, 602 P.2d 807 (1979). Moreover, it leads to the inference appellant did not have such scruples that his conduct was such he played only a minor part in the homicides.
Appellant next contends that the additional aggravating circumstances found in the sentencing hearing were not established in accordance with our decision in State v. Watson, 120 Ariz. 441, 586 P.2d 1253 (1978), cert. denied 440 U.S. 924, 99 S.Ct. 1254, 59 L.Ed.2d 478 (1979).
The court below found the existence of A.R.S. § 13-454(E)(1) and (2), providing as follows:
"1. The defendant has been convicted of another offense in the United States for which under Arizona law a sentence of life imprisonment or death was imposable.
2. The defendant was previously convicted of a felony in the United States involving the use or threat of violence on another person."
*172 The record reflects that the evidence presented supports the finding of these aggravating circumstances. The certified copies of the first degree murder convictions of Greenawalt support the finding of A.R.S. § 13-454(E)(1) because those crimes are punishable by life imprisonment or death in Arizona. A.R.S. § 13-454; see State v. Steelman, 126 Ariz. 19, 612 P.2d 475 (1980); State v. Smith, 125 Ariz. 412, 610 P.2d 46 (1980). The testimony of Sheriff Ford shows beyond question that Greenawalt had been convicted of a felony in the United States involving the use or threat of violence on another person. A.R.S. § 13-454(E)(2); see State v. Watson, 120 Ariz. 441, 586 P.2d 1253 (1978), cert. denied, 440 U.S. 924, 99 S.Ct. 1254, 59 L.Ed.2d 478 (1979).
Since the first two aggravating circumstances were properly established and since mitigating circumstances were not established, it is unnecessary to further consider other findings made by the sentencing court as aggravating circumstances enumerated in A.R.S. § 13-454(E)(3), (5) and (6) (now A.R.S. § 13-703(F)(3), (5) and (6)). See State v. Jordan, 126 Ariz. 283, 614 P.2d 825 (1980).
Appellant next asserts that the sentencing court erred in its determination as to the existence of the mitigating circumstances enumerated in A.R.S. § 13-454(F)(1) through (4) (now § 13-703(G)(1) through (5)).
The first mitigating circumstance enumerated in the statute reads:
"1. His capacity to appreciate the wrongfulness of his conduct or to conform his conduct to the requirements of law was significantly impaired, but not so impaired as to constitute a defense to prosecution."
Appellant's position is that this mitigating circumstance was established through the testimony of Dr. Richard Melendez, a psychiatrist who diagnosed Greenawalt as a borderline organized personality structure, which he characterized as an individual with an "* * * apparent ability to function at relatively high levels of productivity in a conventional sense while at the same time episodically, transiently and under particular circumstances experience breaks with reality comparable to those that are found in the full blown psychotic illness, such as schizophrenia." Dr. Melendez described this kind of person as one who lacks self-identity and when placed around an authoritative figure becomes submissive to the point of blindly following the will of that person. It was his opinion that Gary Tison could have been such a dominant personality in Greenawalt's life at the state prison and that the severe dependence and relinquishment of autonomy which takes place could have been present at the time of the prison escape and sequential events. In his professional medical opinion, it severely disabled appellant's judgment and his ability to perceive reality.
However, Dr. Michael Cleary, called by the prosecution, reached an entirely different conclusion. He criticized the theory relied upon by Dr. Melendez and felt that Greenawalt had not exhibited the extreme signs of dependence usually associated with a borderline organized personality especially because of the independent roles he played in the previous killings of which he had been convicted. Dr. Cleary could find no signs of psychotic behavior necessary for a diagnosis as a borderline organized personality; hence, in his opinion Greenawalt did not suffer from any mental disease or defect which constituted impaired capacity.
In evaluating the merits of the findings of the sentencing court with regard to the existence of the mitigating circumstances, our review of the record has revealed no basis which justifies disturbing the determination of the trial court. The burden of establishing mitigating circumstances rests with the defendant. A.R.S. § 13-454(B); State v. Smith, supra; State v. Watson, supra. In this matter the lower court was not compelled to accept Dr. Melendez' psychiatric opinion of the mental condition of Greenawalt in the light of the unproven nature of the theory relied upon by Dr. Melendez for his diagnosis and the unsatisfactory explanation of certain events *173 in Greenawalt's life which, in combination, did not adequately substantiate his claim of impaired capacity within the contemplation of A.R.S. § 13-454(F)(1). See generally State v. Richmond, supra; State v. Brookover, 124 Ariz. 38, 601 P.2d 1322 (1979); State v. Evans, 124 Ariz. 526, 606 P.2d 16 (1980); State v. Steelman, supra.
Appellant asserts that the court erred in determining that Greenawalt was not under substantial duress at the time of the events in question so as to constitute a mitigating circumstance under A.R.S. § 13-454(F)(2) (now § 13-703(G)(2)). Appellant argues that the testimony by correctional service officers to the effect that he was nervous and shaking during the prison escape and that Kathleen Ehrmentraut's, Greenawalt's companion in Flagstaff, testimony indicated that the Tisons virtually had control over Greenawalt. The prosecution in response argues that any nervous condition from which Greenawalt may have been suffering during the escape can be explained as due to the anxiety surrounding the events because of the underlying fear of either being captured or shot. The prosecution also argues that any claim that the Tisons had complete control over Greenawalt is untenable considering that he was armed throughout and his relative degree of freedom while in Flagstaff with Ehrmentraut. We concur with the interpretation of the facts by the prosecution because we think it is a more reasonable explanation of Greenawalt's behavior.
The appellant's next contention concerns the mitigating circumstances set forth in A.R.S. § 13-454(F)(3) and (4) (now § 13-703(G)(3) and (4)), which provide:
"3. He was a principal, under 13-452, Arizona Revised Statutes, in the offense, which was committed by another, but his participation was relatively minor, although not so minor as to constitute a defense to prosecution.
4. He could not reasonably have foreseen that his conduct in the course of the commission of the offense for which he was convicted would cause, or would create a grave risk of causing, death to another person."
The trial court did not find either of these circumstances because there was no evidence from which the court could determine that Greenawalt's participation in the murders was relatively minor or that Greenawalt could not have reasonably foreseen that his conduct could cause or would create a grave risk of causing death to another person. Appellant argues that error was committed because without evidence before the court to demonstrate Greenawalt's actual participation in the crimes or that he had reasonably foreseen the risk of causing death, his burden of proof to establish mitigating circumstances had been fully met. We do not find the appellant's reasoning persuasive, however.
The burden of proof to establish mitigating circumstances is not met by the lack of proof, as the appellant contends, but by the production of some form of affirmative evidence from which it could be inferred that the defendant's participation was relatively minor or that he could not have reasonably foreseen the risk of death to another person. No evidence in support of subsections (3) and (4) of § 13-454(F), supra, was offered. We hold the claim that these mitigating circumstances should have been found is without merit.
Appellant seems to contend that the prosecution should be required to prove beyond a reasonable doubt the non-existence of mitigating circumstances. We adhere to our decision in State v. Watson, supra, where we rejected that contention.
Appellant's argument with regard to the findings of the mitigating circumstances is that the sentencing judge failed to consider some of the mitigating evidence presented by him. We find nothing in the record to support this assertion. As it was stated by the trial judge:
"[a]ll information relevant to any mitigating circumstances, including but not limited to those set forth in Sec. 13-454(F), contained in the presentence report and presented at the sentencing *174 hearing and received in evidence at the trial of the defendant has been considered by the Court."
The appellant contends that the imposition of the death penalty constitutes cruel and unusual punishment in violation of the Eighth Amendment to the United States Constitution. Both the United States Supreme Court and this Court have previously rejected that contention. Gregg v. Georgia, 428 U.S. 153, 96 S.Ct. 2909, 49 L.Ed.2d 859 (1976); State v. Jordan, supra; State v. Madsen, 125 Ariz. 346, 609 P.2d 1046 (1980); State v. Watson, supra; State v. Knapp, 114 Ariz. 531, 562 P.2d 704 (1977), cert. denied 435 U.S. 908, 98 S.Ct. 1458, 55 L.Ed.2d 500 (1978); State v. Richmond, supra.
We have considered before appellant's claim that the death penalty statute was not severable and held otherwise. See State v. Watson, supra; State v. Clark, 126 Ariz. 428, 616 P.2d 888 (1980); State v. Jordan, supra; State v. Steelman, supra; State v. Mata, 125 Ariz. 233, 609 P.2d 48 (1980); State v. Arnett, 125 Ariz. 201, 608 P.2d 778 (1980); State v. Evans, supra.
The appellant claims that our decision in State v. Watson, supra, was a prohibited exercise of legislative power which is irreconcilable with the separation of powers concept embodied in Article 3 of the Constitution of the State of Arizona. Appellant bases this assertion on the effect of the Watson decision, which is to allow defendants convicted of first degree murder to present any mitigating circumstances at the sentencing hearing. The appellant asserts that the Court engaged in judicial legislation because the decision specifically contradicted the legislative intent in enacting the statute A.R.S. § 13-454(F). We have recently stated that our death penalty is carried out pursuant to a valid and enforceable statute and not by any judicially imposed penalty, State v. Mata supra. The decision in Watson did not encroach on any function of the legislative branch since it simply carried out the responsibility of the judicial branch, even though there may be in some areas a seeming overlap of responsibility.
The appellant urges that the death penalty statute, A.R.S. § 13-454, under our decision in Watson is an ex post facto law prohibited by both Article I, Section 10 of the Constitution of the United States, and Article 2, Section 25, of the Constitution of the State of Arizona. This argument was adequately explored in Watson. There, in responding to the defendant's contention that the court's action was ex post facto, we said:
"In the instant case, we are only concerned with a procedural change and one which increases the rights of the defendant in death penalty cases. We do not believe there is an ex post facto problem. We find no error." 120 Ariz. at 454, 586 P.2d at 1266.
See, e.g., State v. Jordan, supra; State v. Steelman, supra; State v. Arnett, supra.
The appellant claims that our decision in Watson constitutes the judicial enactment of a bill of attainder, in violation of Article I, Section 10 of the Constitution of the United States. A bill of attainder under the federal constitutional provision refers to legislative acts which inflict punishment without a judicial trial. Cummings v. The State of Missouri, 71 U.S. (4 Wall.) 277, 18 L.Ed. 356 (1866); Ex parte Garland, 71 U.S. (4 Wall.) 333, 18 L.Ed. 366 (1866); United States v. Lovett, 328 U.S. 303, 66 S.Ct. 1073, 90 L.Ed. 1252 (1946); United States v. Brown, 381 U.S. 437, 85 S.Ct. 1707, 14 L.Ed.2d 484 (1965). In United States v. Brown, supra, the United States Supreme Court stated: "* * * that the Bill of Attainder Clause was intended * * * as * * * a general safeguard against legislative exercise of the judicial function, or more simply trial by legislature." 381 U.S. at 442, 85 S.Ct. at 1712, 14 L.Ed.2d at 488. We fail to see any merit in appellant's position, since our decision in Watson was a judicial one and did not in any respect usurp a power reserved to the legislative branch. See State v. Mata, supra.
The appellant contends that the imposition of the death penalty pursuant to our *175 decision in State v. Watson, supra, violates the concept of fundamental fairness of the due process clause of the Fifth and Fourteenth Amendments to the Constitution of the United States because it failed to give fair warning of the penalty that could be imposed. We rejected this contention in State v. Jordan, supra, and concluded that the effect of Watson was not unfair but was to the defendant's benefit by allowing the introduction of any mitigating factors at the sentencing hearing.
Appellant urges that the death penalty as set forth in A.R.S. § 13-454 and State v. Watson, supra, will be imposed wantonly, arbitrarily and freakishly because no ascertainable standards are provided for the sentencing court to measure the relative weights to be given to the aggravating and mitigating circumstances. This precise point was raised by the defendant in State v. Mata, supra. We recognized the problem of resolving the need for flexibility in order to afford individualized decision-making in capital cases and the need for standards to prevent arbitrariness when unbridled discretion rests with the sentencer, but held that our death penalty statute was not violative of due process for this reason. We find it unnecessary to reconsider this issue at this time. See State v. Jordan, supra.
Appellant argues that the death penalty statute improperly fixes the burden of proof because it requires the defendant to prove the existence of mitigating factors, but does not require the prosecution to establish the existence of aggravating circumstances beyond a reasonable doubt. The first portion of the appellant's argument was answered in State v. Watson, supra. Appellant is not denied due process because, as we stated in State v. Smith, 125 Ariz. 412, 416, 610 P.2d 46, 50 (1980): "[f]acts which would tend to show mitigation are peculiarly within the knowledge of a defendant." And see State v. Jordan, supra.
Finally, appellant urges that the imposition of the death penalty upon a person who has been convicted solely on a felony murder theory constitutes grossly disproportionate punishment and violates the prohibition against cruel and unusual punishment contained in the Eighth Amendment to the Constitution of the United States.
Appellant points out that the instant case went to the jury upon a theory of vicarious liability as the result of the application of the felony murder rule; that by showing that Greenawalt was part of a conspiracy to escape the Arizona State Prison and thereafter to avoid arrest, the State was able to take the case to the jury although it could not establish that he participated in the robbery of the Lyonses, ever fired a shot at the Lyonses or Theresa Tyson, in any way assisted in the robbery or shooting or ever intended that the Lyonses and Theresa Tyson be robbed or killed.
We do not agree, as we have said, that it can be inferred that appellant's part in the murders and robbery was minor. His statements "We didn't kidnap the girl, * * *" and "Well, we left her there" indicate his active participation. Were it otherwise, appellant would have used language such as: "They didn't kidnap the girl, * * *" and "Well, they left her there."
Appellant points to the case of Lockett v. Ohio, 438 U.S. 586, 98 S.Ct. 2954, 57 L.Ed.2d 973 (1978). There, a plurality of four Justices, Burger, Stewart, Powell and Stevens, held the Ohio statute was unconstitutional because it limited the range of mitigating circumstances which could be considered by the sentencing court. The plurality was joined by concurring opinions from three other Justices, Blackmun, Marshall and White. Justice Blackmun recognized the nature of Arizona's mitigation statute. See footnote 3, 438 U.S. at 615-616, 98 S.Ct. 2954 at 2971, 57 L.Ed.2d at 996-997, and A.R.S. § 13-454(F)(3), quoted supra. He said:
"The more manageable alternative in my view is to follow a proceduralist tack and require * * * that the sentencing authority have discretion to consider the degree of the defendant's participation in the acts leading to the homicide and the character of the defendant's mens rea. That approach * * * merely requires that the sentencing authority be permitted to *176 weigh any available evidence adduced at trial or at the sentencing hearing, concerning the defendant's degree of participation in the homicide and the nature of his mens rea in regard to the commission of the homicidal act. A defendant would be permitted to adduce evidence, if any be available that he had little or no reason to anticipate that a gun would be fired, or that he played only a minor part in the course of events leading to the use of fatal force."
Following the decision in Lockett v. Ohio, we held in State v. Watson, supra, that a restriction on mitigating circumstances "does not pass constitutional muster", saying:
"The matter will have to be remanded for sentencing at which time the defendant will be allowed to present any mitigating circumstances tending to show why the death penalty should not be imposed." 120 Ariz. at 445, 586 P.2d 1253.
Watson stands for the proposition that any relevant evidence of mitigating circumstances can be shown from which the sentencing judge can conclude the death sentence should not be imposed.
It was therefore the law in Arizona at the time of the appellant's sentencing, and since, that a defendant could show at his sentencing hearing his participation in the homicides was relatively minor. This the appellant did not do, nor did he attempt to do so. No evidence was introduced at the sentencing hearing concerning the extent of appellant's participation in these homicides or the nature of his mens rea in regard to commission of the homicidal acts. Appellant had the opportunity to show that the death penalty was grossly disproportionate by evidence of the limited degree of his participation. The court specifically found:
"3. There is no evidence or information of any kind to permit this court to find that the defendant's participation in the murders was relatively minor."
In sustaining our obligation to review the imposition of the death penalty, see State v. Richmond, supra, we have examined in detail the record in this case and have concluded in the light of the wanton disregard for human life, the brutal nature of the killings and appellant's two former convictions of other ruthless murders that the punishment imposed is neither excessive nor disproportionate to the offenses committed.
For the foregoing reasons, the judgments are affirmed.
HOLOHAN, V.C.J., and HAYS, CAMERON and GORDON, JJ., concur.
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5 So.3d 665 (2009)
In re AMENDMENTS TO THE FLORIDA RULES OF JUVENILE PROCEDURE.
No. SC08-1612.
Supreme Court of Florida.
March 19, 2009.
David Neal Silverstein, Chair, Florida Juvenile Court Rules Committee, Tampa, FL, and John F. Harkness, Jr., Executive Director, The Florida Bar, Tallahassee, FL, for Petitioner.
Anthony C. Musto, Special Counsel, Florida Department of Children and Families, Hallandale Beach, Florida, and Jeffrey Dana Gillen, Statewide Appeals Director, Florida Department of Children and Families, West Palm Beach, FL, on behalf of Florida Department of Children and Families, Responding with comments.
PER CURIAM.
This matter is before the Court for consideration of proposed amendments to the Florida Rules of Juvenile Procedure. We have jurisdiction. See art. V, § 2(a), Fla. Const.
In September 2008, the Court adopted an amendment to Florida Rule of Juvenile Procedure 8.225 (Process, Diligent Searches, and Service of Pleadings and Papers), as well as amendments to several juvenile forms. The amendments were proposed by the Juvenile Court Rules Committee (Committee) in a "fast track" report in response to then recent legislation, chapter 2008-245, Laws of Florida and chapter 2008-122, Laws of Florida. Because the amendments were not published for comment prior to adoption, the Court allowed sixty days in which interested persons could file comments. One comment was filed by the Florida Department of Children and Family Services (DCF) with regard to rule 8.225, which was amended to require that notice of proceedings or hearings in dependency cases be given to preadoptive parents, foster parents, and relative caregivers, and specifically, *666 that seventy-two hours notice be given to foster or preadoptive parents.
In its comment, DCF first points out that the addition of "relative caregivers" to the list of those entitled to notice of hearings and proceedings in dependency cases appears to have been in response to the requirements of federal law, rather than the 2008 amendments to section 39.502(17), Florida Statutes. Chapter 2008-245, section 9, Laws of Florida, amended section 39.502(17) to require that "the foster or preadoptive parents" of a child be given reasonable notice of all proceedings and hearings, and to specifically require that "[a]ll foster or preadoptive parents must be provided with at least 72 hours' notice, verbally or in writing, of all proceedings or hearings relating to children in their care or children they are seeking to adopt to ensure the ability to provide input to the court." § 39.502(17), Fla. Stat. (2008). Thus, as DCF points out, the legislation did not address "relative caregivers." DCF states that federal law requires that in order to receive certain federal funding, states must have a "case review system" and a rule requiring notice to foster parents, preadoptive parents, and relative caregivers as a condition for such funding. See 42 U.S.C. § 629h(b)(1) (2006); 42 U.S.C. § 675(5)(G) (2006). DCF also asks that the Court clarify that the term "relative caregiver" should be defined as it is under federal law and that, as under federal law, requiring notice does not mean that a foster parent, preadoptive parent, or relative caregiver must be made a party to the proceeding. See 42 U.S.C. § 675(5)(G) (2006). Finally, DCF raises an issue with regard to the seventy-two-hour notice requirement. DCF argues that the wording of rule 8.225 should be modified to allow for flexibility where circumstances require immediate action by the court and it would be impractical or impossible to provide seventy-two hours' notice.
In its response to DCF's comments, the Committee acknowledges that the addition of "relative caregivers" to the rule was in response to federal requirements and that the term as it is used in the rule should be defined under federal law. The Committee also agrees that the rule should be clarified to explain that the notice requirement does not confer party status and proposes an additional amendment to rule 8.225(c) to accomplish this. The Committee does not agree with DCF's suggestion that the rule be modified to specifically provide for an emergency circumstances exception to the seventy-two-hour notice requirement, but does propose an amendment to the rule to address notice of "emergency hearings."
Upon consideration, we adopt the additional amendments proposed by the Committee with minor modifications.[1] Florida Rule of Juvenile Procedure 8.225(c) is amended as reflected in the appendix to this opinion. New language is underscored; deleted language is struck through. The amendment shall become effective immediately upon release of this opinion.
It is so ordered.
QUINCE, C.J., and PARIENTE, LEWIS, CANADY, and LABARGA, JJ., concur.
POLSTON, J., recused.
*667 APPENDIX
RULE 8.225. PROCESS, DILIGENT SEARCHES, AND SERVICE OF PLEADINGS AND PAPERS
(a)-(b) [No change]
(c) Notice and Service of Pleadings and Papers.
(1)-(2) [No change]
(3) Notice of Hearings to Participants and Parties Whose Identity or Address are Known. Any preadoptive parents, all participants, including foster parents and relative caregivers, and parties whose identity and address are known must be notified of all proceedings and hearings subsequent to the initial hearing, unless otherwise provided by law. Notice to parents in proceedings involving shelter hearings and hearings resulting from medical emergenciesemergency hearings must be that which is most likely to result in actual notice. It is the duty of the petitioner or moving party to notify any preadoptive parents, all participants, including foster parents and relative care takerscaregivers, and parties known to the petitioner or moving party of all hearings subsequent to the initial hearing, except hearings which must be noticed by the court. Additional notice is not required if notice was provided to the parties in writing by the court or is contained in prior court orders and those orders were provided to the participant or party. All foster or preadoptive parents must be provided at least 72 hours notice, verbally or in writing, of all proceedings or hearings relating to children in their care or children they are seeking to adopt to ensure the ability to provide input to the court. This subdivision shall not be construed to require that any foster parent, preadoptive parent, or relative caregiver be made a party to the proceedings solely on the basis of notice and a right to be heard.
(4)-(7) [No change]
NOTES
[1] For the sake of consistency, we modify the proposed amendment to use the term "relative caregiver," rather than "relative caretaker." Similarly, on our own motion, we amend the third sentence of rule 8.255(c) to replace the term "relative caretaker" with the term "relative caregiver."
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145 F.3d 1340
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.Purnima Pranjivan SHAH, Petitioner,v.Immigration and Naturalization Service, Respondent.
No. 97-70801.INS No. Avy-qci-vmb.
United States Court of Appeals, Ninth Circuit.
Submitted March 17, 1998**.Decided May 19, 1998.
On Petition for Review of an Order of the Board of Immigration Appeals.
Before CHOY, SNEED and WIGGINS, Circuit Judges.
1
MEMORANDUM*
2
Purnima Pranjivan Shah, a native and citizen of India, petitions pro se for review of a Board of Immigration Appeals ("BIA") order dismissing her appeal of an immigration judge's denial of her application for asylum and withholding of deportation. We have jurisdiction pursuant to 8 U.S.C. § 1105a(a), and we deny the petition.1
3
We review for substantial evidence the BIA's factual determinations underlying its decision that an applicant is ineligible for asylum and withholding of deportation. See Sangha v.. INS, 103 F.3d 1482, 1487 (9th Cir.1997). We must uphold the BIA's decision unless the evidence was so compelling that no reasonable fact-finder could find as the BIA did. See id.
4
Shah contends that the BIA's finding that she did not establish past persecution or a well-founded fear of future persecution on account of her religion is not supported by substantial evidence. This contention lacks merit.
5
Although Shah testified that she fears persecution if returned to India, she did not adduce sufficient evidence to support an objectively reasonable well-founded fear of persecution on account of one of the five statutorily enumerated grounds. See Rodriguez-Rivera v. INS, 848 F.2d 998, 1001 (9th Cir.1988)(per curiam). The only incident to which Shah testified as supporting her asylum claim was an attack by four Muslim extremists on her father and the arrest of her brother after her brother came to her father's assistance and beat up the Muslim assailants. Shah presented no evidence that either the attack on her father or her brother's subsequent arrest by the police had any connection, or was in any way tied, to Shah. Shah presented no evidence at her hearing that she was beaten, harassed, intimidated, tortured, detained or mistreated in any way by Muslims or by the police. She presented no evidence that she, as opposed to her brother and father, was singled out on account of her religion or political opinion, and has anything to fear from Muslims or the police upon her return to India.
6
In light of the record, we conclude that no reasonable fact-finder would be compelled to conclude that Shah possessed a well-founded fear of persecution. See Kazlauskas v. INS, 46 F.3d 902, 905 (9th Cir.1995). Finally, because the standard for withholding of deportation is higher than the standard for asylum, we affirm the denial of withholding of deportation. See Acewicz v. INS, 984 F.2d 1056, 1062 (9th Cir.1993).
7
PETITION FOR REVIEW DENIED.
**
The panel unanimously finds this case suitable for decision without oral argument. Fed. R.App. P. 34(a) and Ninth Circuit Rule 34-4
*
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir. R. 36-3
1
8 U.S.C. § 1105a was repealed by the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 ("IIRIRA"), Pub.L. No. 104-208, 110 Stat. 3009 (Sept. 30, 1996), as amended by Act of Oct. 11, 1996, Pub.L. No. 104-302, 110 Stat. 3656. However, because petitioner was in deportation proceedings before April 1, 1997, section 309(c) of the IIRIRA provides that this court continues to have jurisdiction under 8 U.S.C. § 1105a
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590 So.2d 282 (1991)
B.W.C.
v.
A.N.M. and K.C.
B.W.C.
v.
K.K.M. and K.C.
Civ. 7882, 7883.
Court of Civil Appeals of Alabama.
November 1, 1991.
*283 AFTER REMAND FROM SUPREME COURT
ROBERTSON, Presiding Judge.
The prior judgment of this court, 590 So.2d 279, has been reversed and the cause remanded by the Supreme Court of Alabama. On remand to this court, and in compliance with the supreme court's opinion of August 16, 1991, we now consider whether the trial court correctly determined that B.W.C. was barred from contesting the validity of the adoptions of A.N.M. and K.K.M. in juvenile court.
The facts pertinent to this appeal are set out in Ex parte B.W.C., 590 So.2d 279 (Ala.1991), and the dispositive issue now before this court is whether the circuit court, which granted the divorce, had subject matter jurisdiction over the adoptions such that it could either uphold them or set them aside.
An inquiry into subject matter jurisdiction may be made at any time. C.C.K. v. M.R.K., 579 So.2d 1368 (Ala.Civ.App. 1991). If a court does not have subject matter jurisdiction, then it does not have authority to act. Mobile & Gulf R.R. Co. v. Crocker, 455 So.2d 829 (Ala.1984).
In the past, this court has held that primary jurisdiction over adoption proceedings is in the probate court. C.C.K.; Ex parte Hicks, 451 So.2d 324 (Ala.Civ.App.1984). Further, this court held in Holcomb v. Bomar, 392 So.2d 1204 (Ala.Civ.App.1981), that the facts of that case made the probate court the proper place to file a motion to set aside an adoption. Moreover, unless the juvenile court acquired jurisdiction over a petition to adopt by the "transfer" mechanism found at § 12-12-35, Code 1975, the juvenile court would be without authority to grant an adoption. See Ex parte D.C.H., C.W.H., & J.L.H., 575 So.2d 100 (Ala.Civ.App.1990). We find that the same principle applies in a proceeding to set aside an adoption.
It is well settled that adoption is purely statutory, unknown to the common law, and that strict statutory adherence is required. Ex parte Sullivan, 407 So.2d 559 (Ala.1981); Wolf v. Smith, 435 So.2d 749 (Ala.Civ.App.1983). Here, the circuit court which granted the divorce had not acquired subject matter jurisdiction over the adoptions by any statutory mechanism. Therefore, we hold that the circuit court that granted the divorce in this case could not have ratified or set aside the adoptions, because it had not acquired subject matter jurisdiction pursuant to any statute.
In this matter, because B.W.C.'s petition to set aside the adoptions had been properly transferred from the probate court to the juvenile court, the juvenile court now has authority to consider whether the adoptions were fraudulent and should be set aside.
The judgment of the juvenile court is reversed and the cause is remanded for proceedings consistent with this opinion.
REVERSED AND REMANDED WITH DIRECTIONS.
THIGPEN and RUSSELL, JJ., concur.
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TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-09-00443-CR
Ben Ogbodiegwu, Appellant
v.
The State of Texas, Appellee
FROM THE COUNTY COURT AT LAW NO. 1 OF TRAVIS COUNTY
NO. C-1-CR-08-100115, HONORABLE J. DAVID PHILLIPS, JUDGE PRESIDING
MEMORANDUM OPINION
Appellant Ben Ogbodiegwu pleaded no contest in municipal court to charges that
he violated a City of Austin zoning ordinance. The municipal court accepted his plea and deferred
disposition for six months. Three months after he was placed on deferred disposition, Ogbodiegwu
filed a motion to withdraw his plea. Following a hearing, the municipal court denied the motion,
revoked the deferred disposition, and convicted Ogbodiegwu of violating the city ordinance.
Punishment was assessed at a $2,000 fine. The municipal court’s judgment was affirmed by the
county court at law. In two issues on appeal, Ogbodiegwu asserts that the trial court erred by not
allowing him to withdraw his plea and that his plea was involuntary due to ineffective assistance of
counsel. We will affirm the judgment.
BACKGROUND
Ogbodiegwu is the Executive Director of Push-Up Foundations, a nonprofit
organization in Austin. At the hearing on the motion to withdraw his plea, Ogbodiegwu testified that
the organization “provides transitional housing, sometimes abuse treatment services, and job
opportunities for the homeless persons and individuals coming out of jails and prisons.” In 1998,
the organization began operating a residential facility located at 1711 East Cesar Chavez. In 1999,
the organization also began regularly operating a car wash at this location in order to raise money.
According to Ogbodiegwu, the car wash operated five days a week, from Tuesday through Saturday.1
Ogbodiegwu testified that he first heard of any complaint of the City of Austin
(City) regarding the car wash in 2005, when he received a violation notice from the City’s
Code Enforcement Section. Nevertheless, he continued operating the car wash. In April 2006,
the City filed formal charges against Ogbodiegwu in Austin municipal court. The complaint alleged
that Ogbodiegwu knowingly conducted a use, to wit: operating a car wash without obtaining a
conditional use permit, in a zoning district which prohibited said use, contrary to provisions in the
Code of the City of Austin. The cause was set for hearing in the municipal court on May 10, 2006.
On May 9, 2006, Ogbodiegwu, represented by counsel, filed what would be the
first of several motions for continuance. Subsequent motions for continuance were filed in
August 2006, November 2006, and February 2007. In the February 2007 motion, filed pro se,
Ogbodiegwu represented that he and his counsel were in disagreement as to how to conduct the trial,
1
There was no evidence presented at the hearing elaborating on the nature of the car wash.
However, during closing argument, defense counsel referred to it as a “water and bucket” and “hand-
wash” operation, not a coin-operated or automated car wash.
2
and he needed time to hire a new attorney. Counsel moved to withdraw from the case, and the
municipal court granted the motion.
The cause was set for jury trial on March 26, 2007. On March 21, Ogbodiegwu
had retained new counsel. At that time, counsel filed a motion for continuance. In the motion,
counsel represented that he “would like a further opportunity to discuss the case with the prosecutor
about the possibility of reaching an agreement and avoiding trial.” “In addition,” counsel stated, “the
recent hiring of counsel for Defendant means there is insufficient time in which to adequately
prepare for trial.”
The municipal court entered an order granting the motion for continuance on
March 22. Nevertheless, it is undisputed that Ogbodiegwu and his counsel proceeded to court as
originally scheduled and that Ogbodiegwu pleaded no contest to the charges. The municipal court
accepted the plea and entered an order deferring disposition for six months until September 2007.
Among other terms, the order required Ogbodiegwu, within 30 days, to
[C]ease operating and/or advertising a car wash on the property and/or [] cease
allowing any and all car wash operations, advertising, development or activity to
occur or be conducted on the property without first bringing the property into full
compliance with any and all applicable provisions of Title 25 of the Austin City
Code, 2003, as amended, including a conditional use permit or fully approved and
released site plan and certificate of occupancy for such use at/of said property. No
such use may occur until all necessary permits have been submitted and approved
and released by the City in accordance with any and all applicable zoning, site plan,
building, and conditional use permit requirements of Title 25 of the Austin City
Code, 2003, as amended. . . .
3
The order provided that if Ogbodiegwu did not comply with the above conditions, a judgment
of guilt would be entered and a fine of $2,000.00 would be assessed. The order also contained the
following statement, below which appears Ogbodiegwu’s signature:
PLEA OF NO CONTEST: I hereby plead no contest to the offense charged,
waive my right to trial by judge or jury, and agree to the conditions stated above. I
understand that my failure to comply with any of the above terms will constitute
grounds for the Court to find me guilty and impose the fine assessed.
Three months later, on June 28, 2007, Ogbodiegwu filed a motion for leave to
withdraw his plea. In the motion, counsel asserted the following:
Counsel for Defendant had insufficient time to prepare for a trial, and the City of
Austin (as the prosecuting entity) . . . refused to agree to a continuance of the trial.
Counsel for Defendant was unable to obtain a hearing on a continuance until the
morning of the trial, immediately prior to trial, with no assurance that a continuance
would be granted. Defendant was not aware of any legal defenses to the charge at
issue at that time and counsel for Defendant had an inadequate time to determine
such defenses. Based on these circumstances, Defendant plead[ed] nolo contendere
and entered into the Order.
Counsel also argued that since the plea had been entered, he had learned of a defense to the City’s
charge against Ogbodiegwu, namely that the car wash was a “legal, non-conforming use” permitted
under the Code. Counsel then proceeded to argue in detail the merits of this alleged defense. He
claimed that this defense “was raised to the City in a letter dated May 31, 2005 from Defendant’s
prior counsel,” approximately eleven months before charges were filed against Ogbodiegwu.2 The
2
Ogbodiegwu offered this letter into evidence during the hearing. However, the City
objected to its admission, and the municipal court did not admit it into evidence.
4
City, according to counsel, had explained to prior counsel why it believed the defense was not
applicable in this case, and prior counsel had apparently accepted the City’s explanation. However,
in the view of counsel who was now representing Ogbodiegwu, the defense applied to Ogbodiegwu
and entitled his client to relief. Therefore, counsel argued, Ogbodiegwu “is in compliance with the
Code,” “should be allowed to withdraw [his] plea of nolo contendere and plead not guilty and this
case should be dismissed.”
A hearing on the motion was held on October 10, 2007.3 The only witness to testify
at the hearing was Ogbodiegwu. After briefly discussing the nature of his organization, Ogbodiegwu
testified about the circumstances surrounding the termination of his first counsel. He stated that
during a meeting with his attorneys on February 27, “some serious issues of trust came up.” He also
expressed frustration with the amount of money that he had allegedly spent thus far trying to bring
the car wash operation into compliance with the code—approximately $35,000 for “site plan work,”
according to Ogbodiegwu. He concluded, “I felt like I was not well represented, so I relieved them
of their duties.”
Ogbodiegwu testified that he then hired new counsel while aware that a jury trial
was only three days away. When asked how much communication he had with counsel before he
signed the order deferring disposition, Ogbodiegwu testified, “Not much.” When asked to clarify
what that meant, he stated, “About a day.” According to Ogbodiegwu, up to the point when he
3
Prior to the hearing, in August 2007, Ogbodiegwu’s counsel filed a motion to withdraw
as attorney of record and to substitute new counsel. The municipal court granted the motion.
Counsel on appeal is the same counsel who represented Ogbodiegwu at the hearing on the motion
to withdraw the plea.
5
had entered his plea, he was not advised by counsel that he had a defense. The following testimony
was elicited:
Q: Did your attorney, [counsel during the plea bargain], give you a choice, or
advise you as far as choices available, on a plea agreement?
A: Not much.
Q: Did he advise you as to any defenses that you had?
A: No, there was no defense available because my previous attorney had already
declined any defense that we had, making me believe that the defense was
through . . . . So, my attorney misled me, and he lied to me. At that
particular time, I didn’t want anything to be on my record.
Ogbodiegwu then clarified that it was his first counsel who had “misled” him, not counsel during
the plea bargain.
During cross-examination, Ogbodiegwu admitted that counsel had informed him
that he did not have to sign the deferral agreement. He also admitted that counsel had informed
him of the terms of the agreement and that he had read the agreement before signing it. However,
he claimed that there was “something stressing” him at the time he had entered into the agreement.
He explained, “One is, I have been in this country for twenty-five years, and I have never had any
criminal record, and the result is, if I don’t do that, I’m going to have a criminal record for providing
services to the community. So, I went with that.”
Ogbodiegwu further admitted that, although he had stopped operating the car wash
for approximately two months after he had entered into the plea agreement, he had resumed
operating the car wash at some point during the summer months of 2007. He did so, he claimed,
6
because his then-counsel had advised him that if he did not operate the car wash for a period of
longer than ninety days, the car wash would lose its status as a “legal, non-conforming use.”
Finally, Ogbodiegwu testified that since he had resumed operating the car wash,
the City had maintained its position that the car wash was illegal. In fact, according to Ogbodiegwu,
after he had filed his motion to withdraw his plea, a new complaint had been filed against him.
After hearing argument from counsel, the municipal court denied Ogbodiegwu’s
motion, revoked the deferred disposition, found him guilty, and assessed a $2,000 fine. A written
judgement was entered on October 14, 2008. After the municipal court denied his motion for
new trial, Ogbodiegwu appealed to the County Court at Law No. 1 of Travis County. In an opinion
and judgment signed on July 2, 2009, the county court at law affirmed the municipal court’s
judgment. This appeal followed.
ANALYSIS
Voluntariness of plea
We first address Ogbodiegwu’s second issue, in which he asserts that he entered
his plea involuntarily due to ineffective assistance of counsel. An involuntary plea must be set aside
and the trial court reversibly errs when it fails to do so. See Boykin v. Alabama, 395 U.S. 238,
244 (1969); Williams v. State, 522 S.W.2d 483, 485 (Tex. Crim. App. 1975).
When a defendant challenges the voluntariness of a plea entered upon the advice
of counsel, contending that his counsel was ineffective, the voluntariness of the plea depends
on (1) whether counsel’s advice was within the range of competence demanded of attorneys in
criminal cases and if not, (2) whether there is a reasonable probability that, but for counsel’s errors,
7
he would have pleaded not guilty and would have insisted on going to trial. Ex Parte Morrow,
952 S.W.2d 530, 536 (Tex. Crim. App. 1997) (citing Hill v. Lockhart, 474 U.S. 52 (1985);
Strickland v. Washington, 466 U.S. 668 (1984); and McMann v. Richardson, 397 U.S. 759 (1970)).
As with other types of ineffective assistance of counsel claims, appellant has the burden to show by
a preponderance of the evidence that counsel’s performance fell below an objective standard of
reasonableness and that appellant would, with a reasonable probability, have pled not guilty and
insisted on going to trial had he been properly advised. See Ex parte Moody, 991 S.W.2d 856, 858
(Tex. Crim. App. 1999). Any allegation of ineffectiveness must be firmly founded in the record,
and the record must affirmatively demonstrate the alleged ineffectiveness. Thompson v. State,
9 S.W.3d 808, 814 (Tex. Crim. App. 1999).
Ogbodiegwu claims that counsel was deficient in two ways. First, he claims that
his first counsel was deficient because the attorneys “misled” and “misinformed” him about how
to bring the car wash into compliance with the code. Second, he claims that his counsel during the
plea bargain was deficient because he did not inform him of any defenses to the charge. We cannot
determine the validity of these claims based on the record before us. The only witness to testify at
the hearing was Ogbodiegwu, and he presented no evidence other than his uncorroborated
testimony that prior counsel “misled” and “lied” to him and that his other counsel failed to
adequately advise him. The municipal court, as fact-finder, was able to evaluate Ogbodiegwu’s
credibility, and it would not have abused its discretion in disbelieving this testimony. See Fimberg
v. State, 922 S.W.2d 205, 208 (Tex. App.—Houston [1st Dist.] 1996, pet. ref’d); see also
Dusenberry v. State, 915 S.W.2d 947, 949 (Tex. App.—Houston [1st Dist.] 1996, pet. ref’d) (“The
8
court may consider the interest and bias of any witness and is not required to accept as true
the testimony of the accused or any defense witness simply because it was uncontradicted.”). “There
is a strong presumption that counsel’s conduct fell within the wide range of reasonable professional
assistance.” Thompson, 9 S.W.3d at 813. A defendant’s claim that he was misinformed by counsel,
standing alone, is not enough to overcome that presumption. See Fimberg, 922 S.W.2d at 208
(explaining that in cases in which guilty plea has been held to be involuntary, record contains
confirmation of misinformation by counsel, or documents augmenting defendant’s testimony that
reveal misinformation and show its conveyance to defendant). None of Ogbodiegwu’s attorneys
testified at the hearing or submitted affidavits, nor was any other evidence of their conduct admitted.
We cannot conclude on this record that counsel’s performance was deficient. See Labib v. State,
239 S.W.3d 322, 335 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (explaining that when record
does not show what kind of investigation into law and facts counsel conducted, record is inadequate
to determine effectiveness of counsel).
Because Ogbodiegwu has not shown, by a preponderance of the evidence, that
counsel’s performance fell below an objective standard of reasonableness, we need not reach
the second prong of the Strickland test. See Labib, 239 S.W.3d at 335. We cannot conclude on this
record that Ogbodiegwu’s plea was involuntary due to ineffective assistance of counsel.
Nor is there any indication in the record that Ogbodiegwu’s plea was involuntary
for any other reason. The standard of review when an appellant contends that his plea was not
knowingly and voluntarily given is whether the record discloses that the defendant’s plea represents
a voluntary and intelligent choice among the alternative courses of action open to the defendant. See
9
North Carolina v. Alford, 400 U.S. 25, 31 (1970); Brown v. State, 896 S.W.2d 327, 328
(Tex. App.—Houston [1st Dist.] 1995, pet. ref’d). Here, Ogbodiegwu testified that he was informed
of and understood the terms of the agreement, including that he had to cease operating the car wash;
that he had read the order before signing it; and that he knew he was not required to sign the
agreement. Additionally, he testified that he pleaded no contest because he wanted to avoid a
criminal record, which may have happened had he insisted on going to trial. Thus, the record
discloses that Ogbodiegwu’s plea represented a voluntary and intelligent choice among the
alternative courses of action open to him.
Finally, Ogbodiegwu emphasizes the fact that he was not admonished prior
to entering his plea. See Tex. Code Crim. Proc. Ann. art. 26.13(a) (West Supp. 2009) (listing
admonishments court is required to give in felony prosecutions in which defendant pleads guilty
or nolo contendere). However, it is well-settled that no admonitions are required in misdemeanor
cases. See Gutierrez v. State, 108 S.W.3d 304, 309 (Tex. Crim. App. 2003); Empy v. State,
571 S.W.2d 526, 529-30 (Tex. Crim. App. 1978); Johnson v. State, 39 Tex. Crim. 625, 48 S.W. 70
(1898); see also Tex. Code Crim. Proc. Ann. art. 27.14(b) (West Supp. 2009) (explaining that in
misdemeanor cases for which maximum possible punishment is by fine only, defendant need not
even appear in court to plead guilty or no contest and may deliver plea to court by mail).
We cannot conclude on this record that Ogbodiegwu’s plea was involuntary. We
overrule Ogbodiegwu’s second issue.
10
Motion to withdraw
In his first issue, Ogbodiegwu asserts that the municipal court erred in denying
his motion to withdraw his plea. A defendant may withdraw his plea as a matter of right, without
assigning a reason, until judgment is pronounced or the case is taken under advisement by the
trial court. Jackson v. State, 590 S.W.2d 514, 515 (Tex. Crim. App. 1979); Jagaroo v. State,
180 S.W.3d 793, 802 (Tex. App.—Houston [14th Dist.] 2005, pet. ref’d). If, on the other hand, the
defendant decides to withdraw his plea after the trial court has taken the case under advisement or
pronounced judgment, the withdrawal of such plea is within the sound discretion of the trial court.
Jackson, 590 S.W.2d at 515; Jagaroo, 180 S.W.3d at 802.
As a general rule, a deferred-adjudication case is considered to have been taken under
advisement once a plea has been entered, both sides have presented evidence, and the trial court
has accepted pleas, deferred adjudication, and placed the defendant on community supervision.
Labib, 239 S.W.3d at 331.4 Additionally, in some cases, the trial court must first pass the case
for presentence investigation. See Houston v. State, 201 S.W.3d 212, 218 (Tex. App.—Houston
[14th Dist.] 2006, no pet.); Saldana v. State, 150 S.W.3d 486, 490 (Tex. App.—Austin 2004,
no pet.). Ogbodiegwu argues that because the municipal court did not pass his case for a presentence
investigation pursuant to the community supervision statute, see Tex. Code Crim. Proc. Ann.
4
Proceedings in municipal and justice courts are governed by chapter 45 of the code of
criminal procedure. See Tex. Code Crim. Proc. Ann. art. 45.002 (West 2006). If chapter 45 does
not provide a rule of procedure governing any aspect of a case, courts are to apply the other general
provisions of the code of criminal procedure to the extent necessary to achieve the objectives
of chapter 45. See id. There is no procedure in chapter 45 governing when a case is taken “under
advisement” in municipal court. We are aware of no authority holding that the procedure is different
in municipal court than it is in other criminal courts, nor do the parties cite to any such authority.
11
art. 42.12, § 9 (West Supp. 2009), the case was not taken under advisement at the time he filed his
motion to withdraw. We disagree.
Article 42.12 requires that presentence investigations be conducted in misdemeanor
cases, “unless the defendant requests that a report not be made and the judge agrees to the request;
or (2) the judge finds that there is sufficient information in the record to permit the meaningful
exercise of sentencing discretion and the judge explains this finding on the record.” See id.
art. 42.12, § 9(b). However, article 42.12 does not govern deferred adjudication proceedings
in justice and municipal courts. Instead, these proceedings are governed by article 45.051. See id.
art. 45.051(a) (West Supp. 2009); see also id. art. 45.002 (West 2006) (“Criminal proceedings in the
justice and municipal courts shall be conducted in accordance with this chapter, including any other
rules of procedure specifically made applicable to those proceedings by this chapter.”). There is no
requirement in article 45.051 that a presentence investigation be conducted in cases brought before
the municipal court. Therefore, in this particular case, the absence of a presentence investigation has
no bearing on whether the case was taken under advisement.
Here, it is undisputed that Ogbodiegwu entered his plea, the municipal court accepted
the plea, deferred an adjudication of guilt, and placed Ogbodiegwu on deferred disposition, which
is the municipal court equivalent of community supervision. See id. art. 45.051. As no presentence
investigation was required, there was nothing more for the municipal court to do at that time.
Furthermore, the order of deferred disposition expressly states, “Disposition of this case is hereby
deferred from 03/26/2007 until 09/26/2007.” Ogbodiegwu filed his motion to withdraw his plea
in June 2007. Thus, we conclude that his case had been taken under advisement at the time
12
Ogbodiegwu filed the motion to withdraw his plea. Accordingly, we review the municipal court’s
ruling for abuse of discretion. See Jackson, 590 S.W.2d at 515; Labib, 239 S.W.3d at 331.
A trial court abuses its discretion when it acts arbitrarily or unreasonably, or
without reference to any guiding rules and principles. Montgomery v. State, 810 S.W.2d 372, 380
(Tex. Crim. App. 1990); Stone v. State, 951 S.W.2d 205, 207 (Tex. App.—Houston [14th Dist.]
1997, no pet.). To show that the trial court abused its discretion when it refused to allow appellant
to withdraw his plea, Ogbodiegwu must show that the trial court’s ruling lies outside the zone of
reasonable disagreement. Jagaroo, 180 S.W.3d at 802.
Ogbodiegwu has failed to make such a showing. First, as we have already explained,
the record does not reflect that Ogbodiegwu’s plea was the result of anything other than a voluntary
and intelligent choice. Ogbodiegwu admitted that he was informed of and understood the terms of
the deferral and that he read the order before signing it. He also admitted that he knew he was not
required to sign the agreement. Thus, the municipal court would not have abused its discretion in
finding that Ogbodiegwu was fully aware of the conditions and requirements of the agreement
before he entered into it and should not have been allowed to withdraw his plea for that reason. See
Jagaroo, 180 S.W.3d at 803 (no abuse of discretion in denying motion to withdraw plea when record
reflects that defendant freely and voluntarily entered his plea).
Moreover, we observe that this was a Class C misdemeanor case, punishable by
fine only, that had already been pending on the municipal court’s docket for what the municipal court
could have found was an inordinate amount of time. Ogbodiegwu’s plea was not entered until
March 2007, almost one year after formal charges were filed and almost two years after the City
13
had first notified him that the car wash was in violation of the code. Several motions for continuance
had already been filed and granted, and Ogbodiegwu’s motion to withdraw his plea was filed
three months into his six-month deferred disposition. The municipal court would not have abused
its discretion in finding that the motion to withdraw was another attempt by Ogbodiegwu to further
delay the final disposition of this case. See DeVary v. State, 615 S.W.2d 739, 740 (Tex. Crim. App.
1981) (no abuse of discretion in denying motion to withdraw guilty plea when motion was filed
two months after case was taken under advisement); Jackson, 590 S.W.2d at 515 (no abuse of
discretion in denying motion to withdraw guilty plea when motion was filed six weeks after case was
taken under advisement).
Furthermore, the only reason Ogbodiegwu provided for wanting to withdraw his plea
was that he did not know he had a legal defense to the charge prior to entering his plea. However,
the municipal court would not have abused its discretion in concluding otherwise. In the motion to
withdraw, counsel represented that the “legal, non-conforming use” defense had been raised to the
City in a letter from Ogbodiegwu’s prior counsel dated May 31, 2005, but that prior counsel had
accepted the City’s explanation that the defense did not apply in this case. Although this letter
was not admitted into evidence, Ogbodiegwu acknowledged in his testimony that he had read the
letter and was aware of its contents. Thus, the municipal court could have reasonably inferred that
Ogbodiegwu knew about this defense prior to entering his plea but decided not to pursue it because
he did not believe at the time he entered his plea that it would succeed. The municipal court would
not have abused its discretion in finding that it was now too late for Ogbodiegwu to change his mind
14
about the viability of the defense, especially considering that the letter in which the defense was
raised was written almost two years prior to Ogbodiegwu entering his plea.
Finally, Ogbodiegwu argues that he should have been allowed to withdraw his plea
because the City breached the plea agreement by continuing to file charges against him after he filed
his motion to withdraw. See Ex parte Williams, 637 S.W.2d 943, 947-48 (Tex. Crim. App. 1982)
(explaining contract theory of plea bargains and observing that “when a plea bargain is not kept,
the proper relief is either specific enforcement of the agreement or withdrawal of the plea, depending
upon the requirements of the circumstances in each case”). However, nowhere in the record or in the
order deferring disposition is there any indication that the City was required by the agreement
to refrain from filing further charges against Ogbodiegwu for ongoing violations.5 The order did,
however, require Ogbodiegwu to cease operating the car wash and, by his own admission,
Ogbodiegwu resumed operating the car wash in summer 2007. Thus, the record reflects that
Ogbodiegwu violated the plea agreement.
On this record, we cannot conclude that the district court abused its discretion in
denying Ogbodiegwu’s motion to withdraw his plea. We overrule Ogbodiegwu’s first issue.
5
Ogbodiegwu cites to internal city policies that apparently prohibit the City from bringing
further charges against a person who has violated a code provision if that person has been placed on
deferred adjudication for that violation. Whether or not the City violated these policies would have
no bearing on whether the City violated the plea agreement.
15
CONCLUSION
We affirm the judgment of the county court at law.
__________________________________________
Bob Pemberton, Justice
Before Justices Patterson, Puryear and Pemberton
Affirmed
Filed: February 12, 2010
Do Not Publish
16
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Case: 18-15265 Date Filed: 03/26/2020 Page: 1 of 6
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 18-15265
Non-Argument Calendar
________________________
D.C. Docket No. 8:12-cr-00228-RAL-TBM-1
UNITED STATES OF AMERICA,
Plaintiff–Appellee,
versus
CALVIN JOSEPH MOORE,
Defendant–Appellant.
________________________
Appeal from the United States District Court
for the Middle District of Florida
________________________
(March 26, 2020)
Before WILSON, LAGOA, and ANDERSON, Circuit Judges.
PER CURIAM:
Case: 18-15265 Date Filed: 03/26/2020 Page: 2 of 6
Calvin Moore, a federal prisoner serving a 120-month sentence for
attempting to possess cocaine with intent to distribute, appeals the district court’s
sua sponte denial of his post-conviction discovery motion. Moore argues that he
needed the discovery to make a prima facie showing for leave from this Court to
file a successive 28 U.S.C. § 2255 petition, so that he could file a Fourth
Amendment claim under the Supreme Court’s decision in Carpenter v. United
States, 138 S. Ct. 2206 (2018). We affirm the district court’s denial of Moore’s
motion for discovery.
Moore was convicted of conspiracy to distribute cocaine in 2012 and was
sentenced to a 120-month prison term. We affirmed Moore’s conviction on
appeal. See generally United States v. Moore, 535 F. App’x 795 (11th Cir. 2013).
Since then, Moore has repeatedly attempted to collaterally attack his conviction.
He filed a motion under 28 U.S.C. § 2255 in 2014, alleging that law enforcement
violated his Fourth Amendment rights by conducting a warrantless search of his
cell phone, relying on the Supreme Court’s then-recent decision in Riley v.
California, 573 U.S. 373 (2014). The district court denied Moore’s petition,
determining that his claim was procedurally barred because he did not raise it on
direct appeal and denying a certificate of appealability. We denied a COA for the
same reason.
2
Case: 18-15265 Date Filed: 03/26/2020 Page: 3 of 6
Following the denial of his 2014 petition, Moore has filed three pro se
discovery motions. All three motions were filed with the explicit purpose of
gathering evidence to support a Carpenter-based Fourth Amendment claim that
would enable him to file a second or successive section 2255 petition. The district
court, however, denied each of Moore’s three motions sua sponte without
providing any explanation.
In Moore’s third motion—the denial of which is before us—Moore
requested that the government provide: (1) all reports prepared by law enforcement
for the confidential informant in his case; (2) all warrants used during the
government’s investigation; (3) all discovery related to his cell phone, including
his physical location; (4) all subpoenaed or court-ordered courts for his phone; and
(5) all government trial exhibits related to subpoenaed phone tolls from his phone.
On appeal, he argues that the district court erred in denying his motion because the
evidence he requested was needed to make a prima facie showing for leave from
this Court to file a successive section 2255 motion to assert his Carpenter claim.
He claims that with the discovery material, “there is an overwhelming reasonable
probability that the jury verdict would have been not guilty.” The government, in
turn, responds that the district court did not have jurisdiction because this Court
had not granted Moore leave to file a successive section 2255 petition and,
therefore, there was no live case before the district court. It also argues that, even
3
Case: 18-15265 Date Filed: 03/26/2020 Page: 4 of 6
if the district court had jurisdiction, Moore did not establish good cause for
discovery.
We review de novo questions concerning subject matter jurisdiction of the
district court, United States v. Grimon, 923 F.3d 1302, 1305 (11th Cir.), and
review a district court’s denial of a post-conviction discovery motion for abuse of
discretion, United States v. Espinosa–Hernandez, 918 F.2d 911, 913 (11th Cir.
1990). We construe pleadings filed by pro se parties liberally. See Sanders v.
United States, 113 F.3d 184, 187 (11th Cir. 1997).
Collateral attacks on the legality of a federal sentence typically must be
brought under a section 2255 motion. Darby v. Hawk-Sawyer, 405 F.3d 942,
944 (11th Cir. 2005). A federal prisoner who fails to raise a claim on direct appeal
may be procedurally barred from raising the claim in a section 2255 motion, absent
a showing of cause that excuses the default and prejudice, or actual innocence.
Lynn v. United States, 365 F.3d 1225, 1234 (11th Cir. 2004). A federal prisoner
who wishes to file a successive section 2255 motion is required to move the court
of appeals for an order authorizing the district court to consider such a motion. See
28 U.S.C. § 2255(h), cross-referencing 28 U.S.C. § 2244. Absent prior
authorization from a court of appeals, a district court lacks jurisdiction to consider
a successive section 2255 motion. United States v. Holt, 417 F.3d 1172,
1175 (11th Cir. 2005).
4
Case: 18-15265 Date Filed: 03/26/2020 Page: 5 of 6
In Carpenter, the Supreme Court held that an individual maintains a
legitimate expectation of privacy in his physical movements captured by wireless
carriers—which collect a user’s location from a time-stamped record known as
cell-site location information—and, therefore, the government needs a warrant
supported by probable cause to access that information. See 138 S. Ct. at 2211,
2217, 2219, 2220–21, 2223.
We have not had the occasion to address the specific issue of whether a
district court has jurisdiction over a federal prisoner’s post-conviction discovery
motion in anticipation of his filing a section 2255 motion or a successive section
2255 motion. 1 But we do not need to resolve that thorny question to address the
merits of Moore’s appeal. Even assuming, arguendo, that the district court had
jurisdiction to decide Moore’s triad of discovery motions, we cannot conclude that
it abused its discretion in denying Moore’s third motion. The Supreme Court’s
opinion in Carpenter concerned a person’s expectation of privacy in his physical
movements gathered by wireless carriers. That holding does not affect Moore’s
conviction. None of the trial evidence that Moore references specifically shows
1
We note that, in United States v. Felix, an unpublished opinion from 2008, we affirmed the denial
of a petitioner’s discovery motion, which was filed after he was convicted, sentenced, and his first
section 2255 motion denied. 298 F. App’x 905, 906 (11th Cir. 2008). In support of its conclusion,
the Felix panel stated that the district court lacked jurisdiction to provide relief under Federal Rule
of Criminal Procedure 16, because nothing in that rule authorized discovery after a criminal case
concluded, and to the extent that Felix’s motion sought relief from his convictions and sentences,
it was due to be denied because this Court had not authorized a successive section 2255 motion.
Id.
5
Case: 18-15265 Date Filed: 03/26/2020 Page: 6 of 6
that law enforcement obtained, or that the government relied on or used, records of
his physical location that his wireless carrier gathered. Instead, the evidence
introduced in support of the government’s case at trial served as direct proof that
Moore had attempted to acquire cocaine with the intent to subsequently distribute
it—e.g., a recorded phone call between Moore and a confidential informant and a
videotape of the attempted exchange of drugs between Moore and the informant.
That evidence was introduced at trial as direct proof that Moore committed the
crime. No indirect proof based on cell-tower data of Moore’s physical location
was introduced. Accordingly, we conclude that the district court did not abuse its
discretion in granting Moore’s third discovery motion.
Moreover, even if the evidence was the sort implicated by the Supreme
Court’s holding in Carpenter, Moore has procedurally defaulted his Carpenter claim
because, like his Riley claim from his first section 2255 petition, he failed to raise it
on direct appeal and cannot demonstrate cause for his failure to do so, or prejudice.
See Darby, 405 F.3d at 944.
Accordingly, we affirm.
AFFIRMED.
6
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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 11-12501 ELEVENTH CIRCUIT
Non-Argument Calendar FEB 16, 2012
________________________ JOHN LEY
CLERK
D.C. Docket No. 0:89-cr-06122-UNA-3
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
versus
MARIE LOUIS,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(February 16, 2012)
Before CARNES, WILSON and KRAVITCH, Circuit Judges.
PER CURIAM:
Marie Louis, a foreign national and former federal prisoner, appeals the
district court’s denial of her petition for a writ of error coram nobis, filed pursuant
to the All Writs Act, 28 U.S.C. § 1651. Relying on the Supreme Court’s then-
recent decision in Padilla v. Kentucky, 559 U.S. , 130 S.Ct. 1473 (2010), Louis
sought to vacate her 1990 federal drug-trafficking conviction based on her trial
attorney’s alleged failure to advise her of the deportation consequences of
pleading guilty. After conducting a hearing concerning Louis’s plea and counsel’s
conduct at the time, the district court found that Louis failed to present sound
reasons for not seeking relief earlier, failed to demonstrate that her attorney did
not adequately advise her of the immigration consequences of pleading guilty, and
failed to establish that she suffered any prejudice as a result of counsel’s alleged
error.
Louis now appeals, arguing that the district court abused its discretion by
denying her coram nobis petition because Padilla applies retroactively to cases on
collateral review and her former attorney failed to advise her that a guilty plea
would automatically subject her to deportation.
We review the denial of coram nobis relief for an abuse of discretion.
United States v. Peter, 310 F.3d 709, 711 (11th Cir. 2002). A district court abuses
its discretion if it applies an incorrect legal standard, follows improper procedures,
2
or relies on findings of fact that are clearly erroneous. United States v. Jordan,
582 F.3d 1239, 1249 (11th Cir. 2009). Nonetheless, issues that are not plainly and
prominently raised on appeal are deemed abandoned and will not be considered.
United States v. Jerigan, 341 F.3d 1273, 1283 n.8 (11th Cir. 2003). This includes
issues that are simply referenced in passing without substantive argument as to
their merits. Id.
A writ of error coram nobis is “an extraordinary remedy of last resort
available only in compelling circumstances where necessary to achieve justice.”
United States v. Mills, 221 F.3d 1201, 1203 (11th Cir. 2000). The bar for coram
nobis relief is high, and the writ may issue only where (1) “there is and was no
other available avenue for relief,” and (2) “the error involves a matter of fact of the
most fundamental character which has not been put in issue or passed upon and
which renders the proceeding itself irregular and invalid.” Alikhani v. United
States, 200 F.3d 732, 734 (11th Cir. 2000). Furthermore, a district court may
consider a coram nobis petition only where “the petitioner presents sound reasons
for failing to seek relief earlier.” Mills, 221 F.3d at 1204.
A petitioner asserting a claim of ineffective assistance of counsel must show
both that (1) counsel’s performance was deficient and (2) the deficient
performance prejudiced her defense. Strickland v. Washington, 466 U.S. 668, 687
3
(1984). Before the Supreme Court issued its 2010 decision in Padilla, most
courts, including this one, held that counsel was under no constitutional obligation
to advise a client of the possible deportation consequences of pleading guilty. See,
e.g., Padilla, 559 U.S. at , 130 S.Ct. at 1481 n.9 (collecting cases); see also
United States v. Campbell, 778 F.2d 764, 768-69 (11th Cir. 1985). In Padilla, the
Supreme Court rejected this view, holding that an attorney renders deficient
performance by failing to advise a non-citizen client that a guilty plea “carries a
risk of deportation.” 559 U.S. at , 130 S.Ct. at 1486. The Supreme Court did
not, however, alter or address the prejudice requirement for obtaining relief, which
continues to demand a showing that there was a reasonable probability that, but
for counsel’s errors, the petitioner would not have pleaded guilty and would have
insisted on going to trial. See id. at , 130 S.Ct. at 1478, 1483-84; Hill v.
Lockhart, 474 U.S. 52, 59 (1985).
Circuits are split as to whether Padilla should be given retroactive effect to
convictions that became final prior to its issuance, pursuant to the principles set
forth in Teague v. Lane, 489 U.S. 288 (1984). See, e.g., Chaidez v. United States,
655 F.3d 684, 686 (7th Cir. 2011) (Padilla does not apply retroactively to cases on
collateral review); United States v. Orocio, 645 F.3d 630, 641 (3d Cir. 2011)
(Padilla does apply retroactively). And although this circuit has not addressed the
4
issue, we need not do so here.
In this case, the district court assumed that Padilla was retroactively
applicable but found that Louis failed to satisfy the prejudice prong of Strickland.
Louis fails to challenge this finding in her brief and thus has abandoned it.1
Accordingly, Louis has not shown that the district court abused its
discretion in denying her petition, and we affirm the district court’s denial of her
petition for a writ of error coram nobis.
AFFIRMED.
1
She has also abandoned any challenge to the district court’s alternate findings, each of
which standing alone would be a sufficient basis to deny relief.
5
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64 B.R. 58 (1986)
In re Donald Cletus ICSMAN, Debtor(s).
SIGNAL FINANCE OF OHIO, Plaintiff,
v.
Donald Cletus ICSMAN, Defendant.
Bankruptcy No. 85-0272.
United States Bankruptcy Court, N.D. Ohio, W.D.
May 14, 1986.
*59 James S. Nowak, Toledo, Ohio, for plaintiff.
Robert T. Kelsey, Sandusky, Ohio, for defendant.
MEMORANDUM OPINION AND ORDER
RICHARD L. SPEER, Bankruptcy Judge.
This cause comes before the Court for Trial on the Complaint To Determine Dischargeability of Debt. The Court has conducted the Trial, and has heard the evidence and arguments offerred by each of the parties. The Court has reviewed the evidence, the arguments, and the entire record in this case. Based upon that review and for the following reasons the Court finds that the debt addressed in the Complaint should be held non-dischargeable.
FACTS
The majority of facts in this case do not appear to be in serious dispute. The Defendant-Debtor was the owner-operator of a "drive-thru" business known as the Variety Village. He is also an attorney licensed to practice in the State of Ohio.
At some time during 1982, the Debtor and one Leonard J. LaRose (hereinafter LaRose) initiated negotiations regarding the possibility of entering into a partnership for the ownership and operation of the Debtor's drive-thru business. Although it does not appear that a written partnership agreement was executed, the evidence reflects that LaRose advanced Ten Thousand and no/100 Dollars ($10,000.00) to the Debtor in furtherance of their contemplated arrangement. The characterization of this advance is seriously disputed by the parties. The Debtor contends the advance was part of an oral partnership agreement that was consummated between himself and LaRose. The Plaintiff contends that the advance constituted a loan. The terms of the advance are not entirely clear. However, it appears that LaRose neither participated in business activities nor received any of the proceeds therefrom. It also appears that the Debtor has, during the course of the underlying bankruptcy case and other legal proceedings, referred *60 to the advance as a loan. It should be noted that the Debtor's schedules reflect an unsecured obligation to LaRose for a "PERSONAL [L]OAN" in the amount of Forty Thousand and no/100 Dollars ($40,000.00), and that this obligation is the subject of a law suit filed in the Erie County Court of Common Pleas. It does not appear that the obligation listed in the petition is related to the Ten Thousand and no/100 Dollar ($10,000.00) advance.
The evidence also indicates that the Debtor had some financial involvement with the Citizens Banking Co. (hereinafter Citizens). At some time during 1983, the Debtor executed a sixty (60) day promissory note to Citizens. As security for this debt, Citizens took an interest in a passbook account and a 1979 Buick automobile. At the time this obligation became due, the Debtor "rolled over" the note into another thirty (30) day obligation, and paid the interest currently due. It appears that this loan has been rolled over on several subsequent occasions. The Debtor testified that at all times between the execution of the original note and the filing of his petition, the vehicle was subject to Citizen's security interest. The purpose of these notes is unclear. However, the schedules reflect that Citizens has been listed as an unsecured creditor in the amount of Four Thousand Five Hundred and no/100 Dollars ($4,500.00). The schedules also indicate that the debt was incurred "FOR PURCHASE OF A 1979 BUICK REGAL AUTOMOBILE FOR EX-WIFE".
On or about March 7, 1984, the Debtor applied for a Ten Thousand and no/100 Dollar ($10,000.00) loan from the Plaintiff. Although the circumstances, purpose, and characterization of the loan application had been discussed several days earlier, it appears that it was actually submitted on March 7, 1984. The application process was conducted in a telephone conversation between the parties, with the Debtor calling from his place of business in Sandusky, Ohio, to the Plaintiff's office in Bowling Green, Ohio. During the course of that conversation, the Debtor was asked to disclose both his current outstanding obligations and the amount of his income. In response to the former subject, the Debtor indicated that he had outstanding obligations to Montgomery Wards and the May Co., as well as a note and mortgage to the First Federal Savings & Loan Co. on his residential real estate. He also disclosed a pre-existing obligation to the Plaintiff which is not addressed in this action and not scheduled on the petition. With regard to his vehicles, the Debtor indicated to the Plaintiff's agent that he leased one automobile and owned another. The agent inquired as to whether or not the latter vehicle was free and clear of any liens. The Debtor indicated that it was. The Debtor did not disclose the obligations to LaRose or Citizens.
With regard to the Debtor's income, the Debtor indicated that he received approximately Two Thousand and no/100 Dollars ($2,000.00) per month from his drive-thru business and approximately One Thousand Five Hundred and no/100 Dollars ($1,500.00) from his activities as an attorney. There is some dispute over whether or not the agent inquired if this income was net income or gross income. However, the Plaintiff's agent testified that she did inquire whether these figures constituted the Debtor's income "after expenses". For purposes of processing the loan, the Plaintiff used the Three Thousand Five Hundred and no/100 Dollars ($3,500.00) per month figure as representative of the Debtor's monthly income. It should be noted that the Debtor had two prior obligations with the Plaintiff, both of which were described by the Plaintiff's agents as "positive". It should also be noted that at some time prior to submitting the application in question, the Plaintiff had denied the Debtor's application for a loan based upon the Debtor's business.
Subsequent to completing the application, the Plaintiff's agent initiated a credit check of the Debtor with the agency located in the Debtor's vicinity. The results of that check revealed that in addition to the debts disclosed on the application, the Debtor had obligations to Elder Beerman *61 and the Sears & Roebuck Co. The report also disclosed that there was a lien against the 1979 Buick. The report did not contain any information relative to the LaRose obligation. In an effort to verify this additional information, the agent contacted Citizens. Citizens declined to respond to the Plaintiff's inquiries as to the Debtor's credit worthiness and the circumstances of the lien. In a further attempt to obtain additional information, the agent contacted the Debtor. This effort was made so as to afford him the opportunity to explain the discrepancies between the application and the credit report. The Debtor explained that there may have been some confusion at Citizens as to whether the obligation they reflected was actually owed by his father or by himself. He also explained that the vehicle was clear of any liens. There is some dispute over whether or not the agent expressed any interest in obligations owed by the Debtor's business. The Debtor indicated that he offered such information, but was told that it was not required. The agent indicated that she would have inquired about such obligations if she had known any existed.
After receiving the information from the Debtor, another of the Plaintiff's agents began to assess the Debtor's eligibility for the loan. After totalling his monthly obligations and the amount established by company policy for each of an applicant's dependents, the Plaintiff was able to establish the amount of monthly expenditures the Debtor should reasonably expect to incur. By comparing that figure with the Debtor's income, the Plaintiff was able to determine the amounts available to service a prospective loan. The agent's assessment of the Debtor's application indicated that his income would not be sufficient to service the proposed loan. This conclusion was based upon standards established by company policy regarding the margin of income which an applicant must have available. However, the agent also determined that because the Debtor's financial situation was close to meeting the company's standards, they would extend a loan if the Debtor would grant them a second mortgage on his residence and be willing to accept slightly less than the full amount requested. The Debtor accepted the Plaintiff's proposal and, on April 6, 1984, after reviewing the loan application, executed the application along with all other documents necessary for closing the transaction. It should be noted that the agent responsible for reviewing the application testified that if he had known about the Debtor's obligation to LaRose and the lien held by Citizens, the loan would not have been made.
The Debtor filed his voluntary Chapter 7 petition with this Court on June 26, 1985. In the schedules which accompany that petition, the Debtor lists obligations to certain creditors, all of which were either disclosed to the Plaintiff at the time the application was submitted or incurred after the loan was extended. However, a review of the Debtor's statement of affairs finds that the Debtor made payments to several creditors in the year that preceded the filing of his petition. It also appears that these creditors were paid subsequent to the Debtor's receipt of the loan. As reflected on the petition, such payments were made to the "Northwest Bank" and the "Savings Bldg. & Loan Co." These obligations were not disclosed to the Plaintiff in the Debtor's financial statement. It is unclear when these debts arose.
In response to the filing of the petition, the Plaintiff filed the above entitled adversary action. In that action, the Plaintiff asserts that the debt for the loan which originated on or about March 7, 1984, should be held to be nondischargeable. Specifically, the Plaintiff asserts that the debt in question was created through the use of a financial statement which did not reflect all the Debtor's obligations, and that the statement was relied upon by the Plaintiff in extending the credit. In support of these assertions, the Plaintiff offered certain documents that were used in processing the Debtor's application. These documents included the application form on which the information provided by the Debtor was recorded. They also included *62 the worksheet on which all credit information obtained about the Debtor was placed. These documents and the information found thereon was corroborated by the testimony of the agents involved in the disputed transaction.
The Debtor contests the allegations in the Complaint, arguing that the statement as to his financial condition was not fraudulent. Specifically, he asserts that he did not offer the statement with any intent to deceive the Plaintiff, and that he disclosed all obligations in which the Plaintiff demonstrated any interest. He also contends that because of marital problems which existed at the time he applied for the loan, his preoccupation with those problems may have contributed to the fact that he inadvertently omitted certain obligations from the application. The Debtor further contends that at the time the application was submitted, he did not believe that the obligation to LaRose was the type of debt the Plaintiff would be interested in having disclosed, inasmuch as it was an investment in his business and, therefore, a business obligation. In support of these contentions, the Debtor offered a copy of the divorce decree, an unexecuted partnership agreement between LaRose and himself, and a general release of the Ten Thousand and no/100 Dollars ($10,000.00) obligation signed by LaRose.
LAW
The provisions of 11 U.S.C. Section 523(a)(2) state in pertinent part:
(a) A discharge under section 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt
(2) for obtaining money, property, services, or an extension, renewal, or refinance of credit, by
(B) use of a statement in writing
(i) that is materially false;
(ii) respecting the debtor's or an insider's financial condition;
(iii) on which the creditor to whom the debtor is liable for obtaining such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive . . .
Under these provisions, a debt which arises through the use of a written financial statement will not be dischargeable in bankruptcy if the statement: 1) was materially false, 2) had to do with the debtor's financial condition, 3) was offered to the plaintiff with the intent to deceive, and 4) the plaintiff reasonably relied on the statement. Thorp Credit Inc. of Ohio v. Saunders (In re Saunders), 37 B.R. 766 (Bkcy. N.D.Ohio 1984), Investors Consumer Corporation, Inc. v. Goff (In re Goff), 17 B.R. 564 (Bkcy.W.D.Ky.1982). Intent may be inferred from either the circumstances of the case or the debtor's conduct. Thorp Credit Inc. of Ohio v. Saunders, supra, H.C. Prange Co. v. Schnore (Matter of Schnore), 13 B.R. 249 (Bkcy.W.D.Wis. 1981). It must also be shown that the plaintiff's reliance on the written statement was reasonable. Reasonable reliance is that degree of care which would be exercised by reasonably cautious persons in an average business transaction under similar circumstances. First Security Bank of Fox Valley v. Ardelean (In re Ardelean), 28 B.R. 299 (Bkcy.N.D.Ill.1983). This standard imposes a duty on the creditor to make a reasonable inquiry as to the information provided by the statement.
A review of the facts finds that the existence of certain elements of 11 U.S.C. Section 523(a)(2)(B) is not contested. It is readily apparent that the loan application signed by the Debtor was a written statement, and that it was published by the Debtor with regard to his application for a loan. It is also apparent that the information provided by the Debtor pertained to the Debtor's assets and liabilities. Furthermore, this document was used by the parties during the loan application process, and was relied upon to some extent in assessing the Debtor's credit worthiness. Based upon these uncontested facts, it must be concluded that the Debtor published a written statement respecting his financial condition which was relied on by the Plaintiff and was used to obtain an extension *63 of credit. It must also be concluded that the only elements which remain to be determined are whether or not the statement was materially false, whether the Plaintiff's reliance on the statement was reasonable, and if the statement was published with the intent to deceive.
With regard to the question of whether or not the statement was materially false, a review of the loan application finds that no reference to the obligations to Citizens, Elder Beerman, and Sears, Roebuck & Co. is made. The testimony and the schedules clearly indicate that those obligations were owed at the time the application was submitted. Those obligations represent a significant percentage of the Debtor's obligations which existed at the time the application was completed. Also significant is the ommission of the debt to LaRose. This debt, though relating to the Debtor's business, was an obligation for which he was personally liable. While it is unclear whether or not the Debtor was apprised of the standards used by the Plaintiff in assessing an applicant's eligibility, the material nature of these obligations is made apparent from the testimony of the agent who reviewed the application. That testimony indicated that the loan in question would not have been made had the debts been disclosed. Therefore, in view of the degree to which these omissions negatively effected the portrail of the Debtor's financial condition, it must be concluded that the statement was materially false.
The next question which must be resolved is whether or not the Plaintiff's reliance on the statement was reasonable. As previously indicated, a creditor proceeding under 11 U.S.C. Section 523(a)(2)(B) must make reasonable inquiry into the information provided by a debtor in order to have its reliance on the statement found to be reasonable. Thorp Credit Inc. of Ohio v. Saunders, supra. A review of the present case finds that the Plaintiff did inquire as to the veracity of the information provided by the Debtor. Specifically, the agent who recorded the information from the Debtor testified that she inquired whether the Buick automobile was subject to any liens, and whether the Debtor had any debts other than the ones she specifically mentioned. After obtaining this information, the agent contacted the credit bureau in an effort to verify the information's completeness and accuracy. This inquiry revealed additional obligations that were not reflected on the application. While she testified that it is not uncommon for an applicant to inadvertently omit a debt to a retail creditor, she also indicated that the credit report's indication of a lien against the vehicle caused her to make further inquiries. Upon undertaking such inquiries, she was unable to obtain any additional information from the lienholder. At this point, her only recourse was to request additional information from the Debtor.
While the Plaintiff's inquiry about the lien is consistent with the duty to make reasonable investigation, it is apparent that an oral explanation as to the discrepancy could not be as certain to disclose a lien as would an inspection of the certificate of title. To this extent, the Plaintiff's reliance on the application was not sufficient to meet the test of reasonability. However, the failure to check the title is not, under the facts and circumstances of this case, sufficient to hold that the Plaintiff's reliance was unreasonable. While the provisions of 11 U.S.C. Section 523(a)(2)(B) impose upon a creditor the duty to make reasonable inquiry, they do not require a party to make all possible inquiries. It also does not require a creditor to investigate all possible avenues when the information on an application is not the sole source of the creditor's reliance. Where a creditor has had favorable prior dealings with a debtor and, in consideration of all circumstances, can reasonably expect that an obligation can and will be satisfied, then partial reliance on a financial statement is reasonable. Stated differently, where a creditor has knowledge of factors other than the ones set forth on a financial state ment which would lead a prudent businessman to reasonably expect that he will be *64 able to look to a debtor or the debtor's assets for satisfaction of a debt, then the standard by which reasonable reliance on a financial statement is measured will be lower. See, Martin v. Bank of Germantown (In re Martin), 761 F.2d 1163 (6th Cir.1985), Sparkman v. Janes (In re Janes), 51 B.R. 932 (Bkcy.D.Kan.1985), St. Charles Savings & Loan Ass'n. v. Besch (In re Besch), 42 B.R. 45 (Bkcy.N.D.Ill. 1984).
In the present case, a review of the testimony reflects that the focus of the Plaintiff's concerns was not towards finding sufficient equity in the Debtor's property to secure the loan. Although the Plaintiff took a second mortgage in the Debtor's residence, the testimony indicates that the Plaintiff did not actually intend to look to the real estate in the event of default. The absence of this intent is apparent from the Plaintiff's testimony which indicated that a first mortgagee already held a lien for a substantial amount of the property's value, and that the loan was not large enough to justify the expense of acquiring the property in the event of foreclosure. Rather, the focus of the Plaintiff's inquiry was on whether or not, in the absence of a security agreement, the Plaintiff could be satisfied from either the Debtor's future income or his existing assets. It was also directed at disclosing whether the Debtor had sufficient property to attach in the event of default, and whether or not there were numerous other creditors with whom the Plaintiff would have to compete in the attachment process. The financial statement provided by the Debtor and the extent of the inquiries made by the Plaintiff were reasonably calculated to elicit the information they required. In view of the Debtor's prior history with the Plaintiff, the fact that the Debtor's business was not subject to liens, and that the Debtor did not have a significant amount of disclosed unsecured debt, it cannot be said that the extent of the Plaintiff's reliance on the statement was unreasonable. This is made especially apparent in light of the fact that the debt to LaRose would not have appeared in a credit report, and that the Plaintiff queried the Debtor about other debts not specifically called for by the application. Therefore, in consideration of the inquiries made by the Plaintiff and the totality of the circumstances of this case, it must be concluded that the Plaintiff's reliance on the financial statement was reasonable.
The final element which must be shown is that the Debtor published the statement with the intent to deceive. It is well established that intent may be inferred from the facts and circumstances of a case. Sparkman v. Janes, supra, McReynolds v. Carr (In re Carr), 49 B.R. 208 (Bkcy.W.D.Ky. 1985). In the present case, the testimony indicates that the Debtor told the Plaintiff's agents that the 1979 Buick was free and clear of all liens. However, a subsequent investigation revealed that there was, in fact, a lien against the vehicle. At trial, the Debtor admitted that a lien existed against the vehicle at the time the application was submitted. The inferences which may be drawn from this discrepancy cannot be adequately or reasonably explained as an inadvertent omission. Rather, the Debtor's responses to both the initial and follow-up questions of the Plaintiff, when compared to the information reflected on the credit report and the schedules, lead this Court to conclude that the Debtor intentionally withheld information from the Plaintiff relative to the vehicle in an effort to create a more favorable financial profile.
In addition, the Court notes that the Debtor is both a business man and an attorney licensed to practice in Ohio. As an attorney, he is familiar with the rights and liabilities attendant to those involved in commercial transactions. He also has a heightened awareness of the responsibilities which must be carried out in the creation of contractual arrangements. As a businessman, he was or should have been cognizant of the specific information that one would be required to disclose in an effort to obtain credit. In light of the these factors, this Court cannot accept the Debtor's testimony that he did not feel obligated to disclose the outstanding loan *65 to Citizens. It also cannot accept his explanation that the advance by LaRose was a business debt, and that as such it was somehow divorced from debts on which he was personally liable. A review of the evidence clearly suggests that the Ten Thousand and no/100 Dollars ($10,000.00) advance by LaRose was an obligation for which the Debtor was personally obligated.
Furthermore, the Court does not find merit in the Debtor's testimony that he was not asked about other debts in a manner which suggested that the Plaintiff would be interested in having such debts disclosed. The evidence reflects that the Plaintiff's agent inquired of him as to whether or not he had obligations which did not fall into the specific categories set forth on the application. As an attorney, he knew or should have known that obligations incurred by a sole proprietor, whether for business or otherwise, are obligations for which the proprietor is personally liable. Even if the Ten Thousand and no/100 Dollars ($10,000.00) advance was part of a partnership agreement, the debt was still one on which he was liable, inasmuch as a general partner is personally liable to other partners for the pro-rata value of the other partner's contribution. Despite knowledge of this fundamental legal precept, the Debtor denied having outstanding obligations to other creditors. The significance of this omission is made particularly apparent in light of the fact that the Plaintiff had recently denied the Debtor an extension of credit that was to be characterized as a "business" loan, and that the Debtor was aware he would have to improve the perception of his financial condition in order to obtain the loan. These facts, when viewed in relation to all the other facts and circumstances adduced at trial, require this Court to conclude that the Debtor intentionally failed to disclose relevant and material information to the Plaintiff regarding his financial obligations. Therefore, it must also be concluded that the financial statement was published by the Debtor with the intent to deceive.
Based upon the foregoing analysis, the Court must conclude that the Plaintiff has demonstrated sufficient facts so as to establish all the elements of nondischargeability under 11 U.S.C. Section 523(a)(2)(B). The Plaintiff has shown that the Debtor received an extension of credit through the use of a written statement, and that the statement involved the Debtor's financial condition. The Plaintiff has also shown that the statement was materially false, that it reasonably relied on the statement in extending the credit, and that the Debtor published the financial statement with intent to deceive the Plaintiff. Although the Debtor has presented evidence in an attempt to demonstrate the absence of certain elements, the weight of such evidence does not overcome the facts established by the Plaintiff and the reasonable inferences drawn therefrom. Accordingly, it must be concluded that the Plaintiff is entitled to judgment, and that the debt in question should be held to be non-dischargeable.
In reaching these conclusions the Court has considered all the evidence and arguments of counsel, regardless of whether or not they are specifically referred to in this opinion.
It is ORDERED that Judgment be, and is hereby, entered for the Plaintiff.
It is FURTHER ORDERED that the debt to the Plaintiff be and is hereby held NONDISCHARGEABLE.
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51 F.2d 243 (1931)
TICE TOWING LINE
v.
JAMES McWILLIAMS BLUE LINE et al.
District Court, S. D. New York.
January 29, 1931.
*244 Park, Mattison & Lynch, of New York City (Anthony V. Lynch, of New York City, of counsel), for libelant.
Leo J. Curren, of New York City, for James McWilliams Blue Line.
Burlingham, Veeder, Fearey, Clark & Hupper, of New York City (Chauncey I. Clark and Norman M. Barron, both of New York City, of counsel), for Director General of Railroads.
WOOLSEY, District Judge.
I overrule the first exception to the Commissioner's report and confirm the amount of the salvage fixed by him for barges and cargo at $1,000.
I sustain the second and third exceptions to the Commissioner's report.
The result of these rulings is that the libelant may have a decree providing for an award of $1,000 recoverable primarily against the Director General and secondarily against the James McWilliams Blue Line.
I. This libel for salvage is the sequel of other litigations in which the Director General was held for negligent mooring at Newtown Creek on February 4, 1920, of the coal laden barges Blue Girl and W. H. Elliott while under contract to tow them within the port of New York. James McWilliams Blue Line v. Davis, Director General (D. C.) 273 F. 622, affirmed 285 F. 312 (C. C. A.). It now comes before me on exceptions to the report of Earle Farwell, Esq., as Commissioner. His report has been printed in full in 1930 American Maritime Cases at page 1834 and, consequently, it is unnecessary to refer to it except incidentally.
II. Judge A. N. Hand, in a short opinion,[1] dated December 30, 1924, held the Director General primarily liable to the salvor for the award and referred the case to a Commissioner to find the value of the cargo salved.
He said:
"This is a libel against the respondent for salvage services in the rescue of two barges with their cargoes in the East River. The latter brings in the Director General of Railroads upon the theory that the negligent operation of a tug by the agents of the latter occasioned the necessity for the salvage service, and that the Director General should accordingly bear any loss to the respondent occasioned thereby. The Director General pleads res adjudicata because in former action damages were recovered against him by the respondent for injury to its barges. It is argued on behalf of the Director General that any salvage for which the respondent might be made liable here should have been included as damages in the former action. The Director General also pleads the two year Statute of Limitations provided in the Salvage Act.
"In the case of British & Foreign Marine Ins. Co. v. Kilgour S. S. Co. [D. C.] 184 F. 174, Judge Hough held that the amount for which a libelant might be held liable for salvage could be added to the damages recovered by such libelant in a suit by it against a third party for negligence where the salvage services became necessary owing to such negligence.
"As a matter of fact no attempt was made in the former litigation (which is referred to *245 here under the plea of res adjudicata) to recover anticipated salvage payments as one of the items of damage. The salvors were not a party to that litigation and, therefore, cannot be bound.
"Unless the salvage has been paid, certainly unless it had been completely adjusted with the salvors, it could not be treated as an item of damage without an adjudication by which they were bound as parties. Here there has been clear prima facie proof of salvage services. An attempt is made by bringing in the Director General under the Fifty-sixth Rule to hold him liable for the payment of salvage services occasioned by his negligence which he has never paid and which he could not have been compelled to pay in the state of the pleadings in the former action. I think the plea of res adjudicata must therefore be overruled, and the Director General held liable unless the Statute of Limitations is a bar. But the Director General is not liable for salvage; he is only liable to indemnify the person whose property was salved for losses occasioned by the negligence of a tug which the government was then operating. This cause of action would not accrue until the primary liability was in some way established. The Statute of Limitations had therefore not run at the time the Director General was brought in under the Fifty-sixth Rule.
"Inasmuch as sufficient testimony as to the value of the cargo has not been introduced, I shall only direct an interlocutory decree for the libellant, under which the Director General shall be primarily, and the McWilliams Blue Line secondarily liable, referring the question of the amount of salvage to be awarded to Pierre M. Brown, Esq."
Earle Farwell, Esq., the Commissioner, who was substituted for Pierre M. Brown, Esq., originally appointed in pursuance of this opinion, found as the salved values involved, which were admitted or agreed, the following:
Blue Girl .................. $12,000.
W. H. Elliott .............. 3,500.
_______
Vessels' salved total ............... $15,500.00
Blue Girl Cargo ............ $7,363.25
W. H. Elliott Cargo ........ 6,822.38
_________
Cargoes salved total ................ $14,185.63
The Commissioner fixed $1,000 as the total award for the salvage of these values and allocated the proportion thereof to be assessed as salvage award against the barges alone as $522, to which amount he limited the libelant's total recovery.
The three exceptions filed by the salvor to the Commissioner's report and now before me may be summarized as follows:
First. That the amount awarded libelant is inadequate.
Second and Third. That the award was limited to the proportion chargeable against the barges the salved vessels only, and excluded any award for services rendered to the cargoes thereof.
Having regard to the circumstances of the weather on the night of the salvage, cf. McWilliams v. Davis (C. C. A.) 285 F. 312 at pages 314-315, and the promptness and skill of the service, I agree with the Commissioner that $1,000 is a proper award for the total salvage. I also agree that, proportionately assessed, $522 is a fair proportion of the award to be assessed against the barges alone. I do not agree, however, that this amount is all that is recoverable by the libelant herein.
III. The question of importance in this case, therefore, arises, not out of the amount at which the award was fixed, but out of the respective liabilities for cargo's proportion thereof as between the carrying barges and their negligent bailee tug.
It should be observed in this connection that, as Judge Augustus Hand held, there cannot be a direct claim for salvage against the Director General, operator of the negligent bailee tug, because the salvage suit was not brought within two years of the salvage service as required by the provisions of the Salvage Act of August 1, 1912. Title 46, U. S. C., § 730 (46 USCA § 730). That is the law of this case.
Thus the liability of the Director General is by way of indemnity only under Admiralty Rule 56 (28 USCA § 723).
Such being the practice situation, it must next be determined what decree should be rendered in the exercise of the substantive equity which is one of the characteristic attributes of admiralty courts.
IV. The situation is this:
A sues B, a barge owner, on a cause of action for salvage which has arisen against B and in favor of A owing to the fault and neglect of C, the operator of a bailee tug.
B impleads C as indemnitor for any amount which may be found due from him for the salvage service.
*246 The cargoes on B's barges are not before the court.
Under settled principles, C, as operator of the bailee tug, is liable for negligence causing damage to her tow, including salvage required to be paid by the tow as a consequence of such negligence. British & Foreign Marine Ins. Co. v. Kilgour S. S. Co. (D. C.) 184 F. 174.
The question here is whether the absence of cargo on B's barges should reduce A's recovery against B proportionately, and, consequently, reduce the amount for which C is liable over to B.
This question is of first rate interest and importance, and its proper decision requires some consideration of the authorities here and in England.
V. I hold, under the authorities hereinafter cited, that a salvor is entitled to a salvage award as against any one whom he may have benefited by successful salvage services.
The problem in this case is to determine in the absence of the cargo whether any party before the court was benefited by the salvage of the cargo, and, if so, which party was benefited and in what way.
The barges were private carriers and the relationship of the owners of the coal cargoes to the barges and the owner thereof was that of bailor and bailee.
If the coal cargoes had been lost or damaged and the owner of the barges had been sued for such loss or damage, it could not have defended by alleging and proving that the loss or damage was due to the negligence of the tug which it had engaged to help it perform its contract to carry the cargoes. Taylor Bros. Lumber Co., Inc., v. Sunset Lighterage Co. et al., 43 F.(2d) 700, 702 (C. C. A. 2); The Moran No. 10 (D. C.) 41 F. (2d) 255, 256; Schoonmaker Conners Co. v. Lambert Transp. Co., 268 F. 102, 104 (C. C. A. 2), and cases there cited. And see, also, The Harper No. 145, 42 F.(2d) 161, 164 (C. C. A. 2).
Nor could the owner of the barges have claimed freedom from liability to their cargoes under section 3 of the Harter Act, title 46 U. S. C., § 192 (46 USCA § 192), on the ground that the loss was due to negligent management or navigation by the tug.
There are two reasons for this:
First. Because the Harter Act does not apply to private carriers such as these barges. The G. R. Crowe, 294 F. 506, 508 (C. C. A. 2), affirming Judge Ward's decision in the District Court for this district, 287 F. 426.
Second. Because the Harter Act does not apply to the carriage of cargo wholly within the same port in this case the Port of New York but applies so far as domestic commerce is concerned only to carriage of cargo "to and from," i. e., between different ports in the United States. Cf. Sacramento Navigation Co. v. Salz, 273 U. S. 326, 332, 47 S. Ct. 368, 71 L. Ed. 663; The Hugh O'Donnell (D. C.) 22 F.(2d) 410; The Nettie Quill (D. C.) 124 F. 667, 669; In re Piper Aden Goodall Co. (D. C.) 86 F. 670, 671; The E. A. Shores, Jr. (D. C.) 73 F. 342, 347.
Consequently the salvage service rendered by the libelant relieved the barge owner in this case from the risk of the liability to which it could have been held if the coal cargoes had been lost or damaged.
VI. A claim for salvage may be maintained in personam against any party whose relationship to the vessel or thing salved is such that he might have been liable in respect of its damage or loss, Duncan v. The Dundee Perth and London Shipping Co., Scotch Session Cases, vol. V, 4th Series, 742; The Five Steel Barges, 15 Prob. Div. 142, 146, 6 Asp. Mar. Cas. 580, 582; The Port Victor, 9 Asp. Mar. Cas. 163, 165, 166, affirmed 9 Asp. Mar. Cas. 182, 183, or who, though not its owner, is benefited by its being salved, as was the case where the salving of cargo gave the United States an opportunity to impose customs duties on it. United States v. Cornell Steamboat Co., 202 U. S. 184, 26 S. Ct. 648, 50 L. Ed. 987; Id., 137 F. 455 (C. C. A. 2), in which the principles of the British cases just cited were discussed and approved.
And see, also, for another and earlier enforcement of this principle by Judge Benedict, Seaman v. Erie R. R. Co., 21 Fed. Cas. pages 918, 920, No. 12582 decided in 1868.
Duncan v. The Dundee Perth and London S. S. Co., Scotch Session Cases, vol. V, 4th Series, page 742, the earliest British case in which the principle under discussion seems to have been involved, was decided in 1878. In that case a British vessel, which was running coastwise as a common carrier with a general cargo, was salved. The necessity for her salvage arose from the actionable negligence of her master. The salvors sued her owner alone in personam without joining any of the cargo or any of the cargo owners.
The Lord President, Inglis, said at page 748: "The case, then, stands in this position: *247 The master of a vessel received into his possession, as a carrier, a great variety of goods, to be carried from Dundee to London, belonging to a very great number of different owners altogether unconnected with one another. If he had lost these goods he and his owners would have been answerable for the value. The salvors saved not only his ship but saved these goods, and enabled him, as turned out afterwards, and his owners, to trans-ship these goods at Dundee into another vessel belonging to the company, and in that vessel to carry them to London and deliver them at their destination. What would have been the consequence to the master and the owners, and to the owners particularly, if the pursuer, instead of allowing trans-shipment to take place, had laid an embargo on these goods, and said `No, these goods shall not leave Dundee until my claim is satisfied, or security is found to satisfy it.' I cannot conceive a more inconvenient or oppressive proceeding on the part of salvors than that would have been. And it is said that the salvors have lost really all opportunity of making good their claim because they failed to follow that very inconvenient and oppressive procedure. I cannot listen to that allegation."
Lord Shand said at page 751: "The case then comes to this, that the carrier of these goods being absolutely bound to deliver them at the end of the voyage, the salvage has directly enured to his benefit, for it has enabled him to fulfil his contract and to earn the freight which he charged for these goods. On the ground that it is established in this case as matter of fact that the benefit of this salvage, in so far as regarded the cargo, enured directly to the carrier, I am of opinion that he is liable for the salvage which is here claimed."
In The Five Steel Barges, 15 Prob. Div. 142, a case which arose in 1890, the President, Sir James Hannen, without having had the Scotch case called to his attention, said at page 146: "As to the two (barges) which have been given up to the Government, I think it is perfectly clear on the authorities that an action in personam lies against the owners of a vessel which has been saved, even though the property has been transferred to others, and the lien lost. In this case, however, the property does not appear to have been in the defendant, because it would, I think, under the contract, to which reference has been made, be in the Government. But on this point I am of opinion that the right to sue in personam is not confined to the case of the defendant being the actual legal owner of the property saved. I think it exists in cases where the defendant has an interest in the property saved, which interest has been saved by the fact that the property is brought into a position of security. The jurisdiction which the Court exercises in salvage cases is of a peculiarly equitable character. The right to salvage may arise out of an actual contract; but it does not necessarily do so. It is a legal liability arising out of the fact that property has been saved, that the owner of the property who has had the benefit of it shall make remuneration to those who have conferred the benefit upon him, notwithstanding that he has not entered into any contract on the subject. I think that proposition equally applies to the man who has had a benefit arising out of the saving of the property. In this case the defendants were under contract with the Government to supply them with barges at a certain price. Payment was to be made by certain instalments, of which only one remained unpaid at the time of the services. I think, if Mr. Barnes' argument is well founded viz., that those installments were all paid on condition that the barges should be delivered all within twelve months of the date of the contract it would follow that, if defendants had not been in a position to deliver the barges within the twelve months, then either they would have been liable in damages for not performing the contract, or liable to make restitution of the instalments which had been paid them on conditions not fulfilled by them. It appears to me, therefore, that they had substantially an interest to the full amount of the barges at the time of the services, and that the same moral obligation to which the law has given force in the case of an owner applies to those who have an interest in the property. That is certainly the business-like view of the matter; and I do not forget that the defendants insured themselves to the full value of these barges, and described themselves as being the owners. In conclusion, I award £200 as salvage, independently of the towage contract."
In The Port Victor, 9 Asp. Mar. Cas. 165, decided in 1901, government stores were being carried at the risk of the charterers of the Port Victor, and these stores were saved from a danger for which the charterers were legally responsible. It was held that the charterers were liable to pay salvage, and that there was a personal liability to do so quite apart from the liability of the res.
One of the greatest admiralty judges of the last generation, Sir Francis Jeune, then *248 president of the Probate and Admiralty Division, referred to the case of The Five Steel Barges, decided by Sir James Hannen, and also to the Scotch case of Duncan v. Dundee Shipping Co., and, after quoting from the decisions in both cases, said at page 566:
"It was argued before me that the present case can be distinguished from that of The Five Steel Barges on the ground that in that case the defendants had a lien for the price of the barges, and so, for practical purposes, were the owners, although the property in law was no doubt in the Government. It was contended that the claim for salvage is limited to claims against the owners, or at least against the persons who, like carriers, are in possession of the goods at the time of the salvage, but that in the present case the defendants were not the owners of the goods, nor were ever in possession of them. A legal foundation for this review was sought in the argument that the Admiralty action in personam is based on the supposition that the goods were allowed by the salvors to be returned to their former possessor on the terms that he should be liable to pay the salvage reward. I think that this contention is based on too narrow a view of the right of a salvor, and, in my opinion, the nature and origin of the Admiralty action for salvage do not impose any limits on that right narrower than those indicated by Lord Hannen and Lord Shand in the cases I have mentioned. * * *
"The true view is, I think, that the law of Admiralty imposes on the owners of property saved an obligation to pay the person who saves it simply because, in the view of that system of law, it is just he should, and this conception of justice naturally imposes a proportionate obligation on any person whose interest in the property is real, though falling short of that of ownership. I see no reason, therefore, why I should not follow the view of Lord Hannen and of the Scotch Court of Session, that a man who has had a benefit arising out of the saving of the property is liable to a claim for salvage no less than the actual owner of it."
The case then went to the Court of Appeal, The Port Victor, 9 Asp. Mar. Cas. (N. S.) 182. That court consisted of Lord Alverstone, Lord Chief Justice, Smith, Master of the Rolls, and Romer, L. J. a very strong Court and Sir Francis Jeune's decision was affirmed unanimously. The view of the Court of Appeal was shortly and most emphatically stated in an opinion by the Master of the Rolls, at page 184: "We are asked to overrule the President of the Admiralty Division on a point as to which he has, no doubt, special knowledge, and we are asked to reverse the authority of Sir James Hannen, who of all men was a man of peculiar knowledge on that point namely, as to whether an action in personam for salvage was properly brought in the Admiralty Court. The judgment of Sir James Hannen in The Five Steel Barges was delivered in 1890, after the judgment of the Scotch Court of Session in Duncan v. Dundee, Perth and London Shipping Company, and curiously enough the Scotch case was not brought to the attention of Sir James Hannen when he decided the case of The Five Steel Barges. Therefore, we have, independently of each other, four Scotch judges and afterwards Sir James Hannen spontaneously arriving at the same conclusion. Now we are asked in the year 1901 to say that all of those five learned judges were wrong in what they decided in those cases. I myself am prepared to rest my judgment upon the judgment of Sir James Hannen, and I will say this, that having read this judgment through twice during the argument of this case, I consider it is founded upon common sense. A clearer judgment was never delivered by any learned judge, and I refuse to say it is wrong. I think this appeal ought to be dismissed."
The principles laid down in the cases just discussed have not only been approved by the Circuit Court of Appeals for this circuit in United States v. Cornell Steamboat Company, 137 F. 455, 459, 460 (1905), but have been adopted as the law by the Supreme Court of the United States in the appeal of that case, United States v. Cornell Steamboat Company, 202 U. S. 184, 26 S. Ct. 648, 50 L. Ed. 987, which was decided in 1906.
In that case a tug owned by the Cornell Steamboat Company had saved a certain lot of sugar in bags on board the lighter Bangor in New York harbor from the imminent risk of being destroyed by fire. Duties in the sum of $6,000 were saved to the United States by this service.
The Supreme Court affirmed the decision of the Circuit Court of Appeals holding the United States liable for salvage. Mr. Justice Brown, one of the most experienced of admiralty judges, in writing the opinion of the court, dealt with the cases which I have cited thus (202 U. S. at pages 193-195, 26 S. Ct. 648, 651, 50 L. Ed. 987):
*249 "The case of Five Steel Barges, L. R. 15 Prob. Div. 142, is authority for the proposition that the remedy in personam is not confined to the legal owner of the property saved, but extends to one who has a direct pecuniary interest in such property. This was an action against five barges, two of which belonged to the government, with whom the defendants were under contract to build and deliver the barges. An action in rem was brought against the three barges, and an action in personam against the defendants, who had contracted with the government and given it possession of the two barges. The court sustained the action in personam thinking it `perfectly clear that an action in personam lies against the owners of a vessel which has been saved, even though the property has been transferred to others and the lien lost.' Continuing, the president of the court, Sir James Hannen, observed: `I think it exists in cases where the defendant has an interest in the property saved, which interest has been saved by the fact that the property is brought into a position of security. The jurisdiction which the court exercises in salvage cases is of a peculiarly equitable character. The right to salvage may arise out of an actual contract, but it does not necessarily do so. It is a legal liability arising out of the fact that property has been saved; that the owner of the property, who has had the benefit of it, shall make remuneration to those who have conferred the benefit upon him, notwithstanding that he has not entered into any contract on the subject. I think that proposition equally applies to the man who has had a benefit arising out of the saving of the property.' This last sentence is particularly applicable to this case.
"In the subsequent case of The Port Victor, 9 Asp. Mar. L. Cas. 163, the same court decided that where government stores were being carried at the risk of charterers, these charterers were liable to pay salvage in a personam action, apart from the liability of the stores in rem. The case was decided largely upon the authority of Five Steel Barges and Duncan v. Dundee, P. & L. Shipping Co., 5 Sc. Sess. Cas. 4th Series, p. 742, and was affirmed by the court of appeals in an opinion by Lord Alverstone (9 Asp. Mar. L. Cas. 182), in which great deference was shown to the decision of Sir James Hannen. See also Carver, Carriage by Sea, § 324a.
"Although courts of admiralty have no general equity jurisdiction, and cannot afford equitable relief in a direct proceeding for that purpose, they may apply equitable principles to subjects within their jurisdiction, and, in the distribution of proceeds in their possession or under their control, may give effect to equitable claims. 2 Parsons, Shipping, 344. Bearing in mind that the duties in this case had been actually collected, were in the hands of the government, and had been saved to it by the exertion of the salvors, who had been awarded salvage for saving the sugar upon which the duties had been collected, a strong case is presented for the allowance of salvage, which should not be lost sight of in determining the principles applicable to the situation."
So far as the Director General, as operator of the negligent bailee tug, is concerned, what has just been said above would apply to him if he were open now to a direct suit for salvage, but, as time has precluded such a suit, he must be remitted entirely to his position as indemnitor of the barge owner through whom alone he can now be reached.
VII. The tug and tow were in effect one vessel. Sacramento Navigation Co. v. Salz, 273 U. S. 326, 332, 47 S. Ct. 368, 71 L. Ed. 663; The Columbia, 73 F. 226 (C. C. A. 9); The Hugh O'Donnell (D. C.) 22 F.(2d) 410; The Bathgate (D. C.) 19 F.(2d) 663, affirmed 25 F.(2d) 103, 104 (C. C. A. 3).
Negligence of the tug which put the cargoes and the barges in jeopardy was similar in its legal effect to actionable negligence for which any shipowner who was a private carrier would be responsible.
The next point to consider, therefore, is the incidence of a salvage award when the necessity for the salvage arises from an actionable breach of the shipowner's duty to cargo.
VIII. Perhaps the leading work on salvage is "The Law of Civil Salvage" by the late Lord Justice Kennedy, formerly of the English Court of Appeal.
In the second edition of that book, on page 207, this proposition, which is universally recognized as sound salvage law, is laid down: "* * * The shipowner cannot look to the cargo-owner for any contribution to the salvage where the occasion for the salvage service has arisen through a breach of contract or duty on the part of the shipowner himself, or of those for whose conduct he is responsible" citing The Ettrick, 6 Prob. 127; Strang, Steel & Co. v. Scott, 14 App. Cas. 601, 608; Schloss v. Heriot, 14 C. B. N. S. 59.
The author further says, at page 208: "If the owner of cargo has been compelled to pay *250 the salvor for services which have been rendered necessary by a breach of contract or duty on the part of the shipowner or his servants, he is entitled to be indemnified by the shipowner in respect of this expenditure. In The Princess Royal, the facts alleged were that that vessel had been improperly injured, and then improperly abandoned at sea by her master; and the plaintiffs, the assignees of the bill of lading for goods on board of her, had been obliged, in order to get possession of their goods, to pay the amount of remuneration due to the persons who had salved her. They then proceeded in rem against The Princess Royal (1870 L. R. 3 A. & E. 27, 41) in the Admiralty Court (under the 24 Vict. c. 10, s. 6), to recover the amount of the payment, as well as damages for delay of delivery, and Sir Robert Phillimore held that the action was maintainable."
Again the author says, at page 210: "In salvage, the cargo is primarily, and equally with the ship, liable for payment of the award. The shipowner who pays the cargo's share of it, is clearly entitled to reimbursement, unless, the need for the salvage having arisen from his actionable wrong, the owner of cargo has a good defense, under the rule of avoiding circuity of action."
The rule thus laid down in Kennedy on Civil Salvage, is also to be found in Carver on Carriage by Sea (7th Ed.) § 354, page 502, where it is said:
"But where the salvage services became requisite in consequence of fault on the part of the ship, the shipowner cannot claim contribution from the owner of the cargo (The Ettrick (1881) 6 P. D. 127; The Cargo ex Capella (1867) L. R. 1 & A. & E. 356), notwithstanding that he may have satisfied his full liability to damages for negligence, by taking proceedings for limiting his liability, and paying £8 a ton into Court (The Princess Royal (1870) L. R. 3 A. & E. 27, 41)."
"And where the cargo owners have been compelled to pay salvage in consequence of improper acts of the master, e. g., a wrongful abandonment of the ship, they may claim repayment from the shipowner, and may proceed in rem against the ship for the amount (The Princess Royal (1870) L. R. 3 A, & E. 27, 41)."
In The Loyal (D. C.) 198 F. 591, Judge Holt said, at page 592: "The Apollinaris Company, the owner of the cargo, claims that, if any recovery for salvage is had, it should be had against the F. W. Jarvis Company, on the ground that the vessel was unseaworthy. I think that that claim is correct."
Judge Holt held that, inasmuch as the Jarvis Company could not limit its liability, it should be liable for the full salvage.
The Circuit Court of Appeals affirmed this decision, The Loyal (1913) 204 F. 930, in an opinion written by Judge Noyes, who said at page 931:
"That the lighter `Loyal' was unseaworthy seems established beyond question. She sprang a leak without having been subjected to any sea peril. The only inference in such circumstances is of unseaworthiness. Besides, the history of the vessel leads to the same conclusion.
"The owner of the lighter was under obligation to the owner of the cargo to assume any salvage award caused by unseaworthiness of its vessel. The vessel-owner had a written contract with the cargo-owner for lighterage services covering an extended period. This lighterage contract implied an obligation that the lighters to be furnished under it should be seaworthy and if this one were in fact unseaworthy (as we have found she was) and if the unseaworthiness made the salvage services necessary (as it unquestionably did) the salvage award ran properly against the vessel-owner subject to any right to limit its liability."
The case of The Lackawanna (D. C.) 220 F. 1000, is also interesting in this connection.
There suit was brought for salvage against a steamship by a wrecking company which had got her off the strand, and it was held that, while in general ship and cargo must proportionately bear salvage expenses where there is a common peril, yet, where salvage services are rendered necessary by the ship's negligence or unseaworthiness, the cargo may be relieved from contribution and the vessel bound for the entire expense.
Judge Hazel said at page 1002: "It is asserted that the salvage services in their entirety were made necessary by the fact that the steering gear of the Lackawanna was defective, as a result of which she came into collision with the barge Chieftain. The Circuit Court of Appeals has sustained this view. The Lackawanna, 210 F. 262, 127 C. C. A. 80. Although, generally speaking, the ship and cargo must proportionately bear the salvage expenses where there is a common peril, yet, where the salvage services are rendered necessary by the ship's negligence, the cargo *251 may be relieved from contribution and the vessel bound for the entire expense. International Navigation Co. v. Atlantic Mutual Ins. Co., supra [(D. C.) 100 F. 304]; The Irrawaddy, 171 U. S. 187, 18 S. Ct. 831, 43 L. Ed. 130. The employment of the tug James A. Reid by the master of the Lackawanna to assist in floating her was an employment for salvage services, and no doubt gave rise to a maritime lien on the ship. If the salvors had elected to proceed against both the vessel and cargo, and had recovered against them both, the cargo, in my opinion, because of the unseaworthiness of the vessel or her negligent navigation, could have recovered from the vessel the amount for which it was held liable to the claimant. The Wildcroft, 201 U. S. 378, 26 S. Ct. 467, 50 L. Ed. 794; Strang, Steel & Co. v. Scott, 14 App. Cas. 601."
The libelant should not, therefore, because cargo is not before the court, have his recovery cut down in favor of a negligent bailee barge owner when that bailee is before the court, and as between himself and cargo would be liable for the salvage of the cargo if cargo also were there.
As noted above, the direct liability for salvage of the Director General is precluded by the provisions of the Salvage Act of August 1, 1912 (46 USCA §§ 727-731), but direct liability for salvage is not sought here. Liability is sought against the Director General and was imposed by Judge Hand by way of indemnity only for damages incurred by the barge owner owing to the liability for a salvage service which was rendered necessary by the negligence of the Director General. For as operator of the railroad tug he was bailee, appointed by the owner of the barges, of both the barges and their cargoes, and as such liable for negligence. Doherty v. Penn. R. R. Co., 269 F. 959, 962 (C. C. A. 2); The Wyomissing (D. C.) 51 F.(2d) 242, 1929 A. M. C. 1575; The Drifter and The White City (D. C.) 35 F.(2d) 1006, 1007.
Vis-à-vis the owner of the cargoes, therefore, the Director General as operator of the railroad tug was bailee of a bailee. His negligence has already been adjudicated, McWilliams Blue Line v. Davis (C. C. A.) 285 F. 312, and he has been held liable for damages in respect thereof and is now liable for this salvage as a hitherto unrecoverable part of those damages.
IX. The recovery in an admiralty suit may be imposed as justice requires in whole or in part and primarily or secondarily on the several parties. Cf. Dailey v. City of New York (D. C.) 119 F. 1005; The Sarnia, 261 F. 900 (C. C. A. 2).
Here I think it is clearly just that the libelant's recovery should be payable primarily by the Director General because in his capacity as operator of the bailee tug in charge of the salved property he gave occasion for the salvage services.
McWilliams Blue Line, though primarily liable for the salvage as such, is entitled to indemnity from the Director General. The decree should, therefore, provide that the libelant's claim shall be first payable by the Director General, and, after remedies against him are exhausted, by the McWilliams Blue Line.
X. A final decree may be submitted in accordance herewith giving costs on the libel to the libelant, payable primarily by the Director General and secondarily by the James McWilliams Blue Line. The James McWilliams Blue Line may have the costs as petitioner under the 56th Rule (28 USCA § 723) against the Director General.
Unless its form is agreed, this decree may be settled on three days' notice.
NOTES
[1] Here quoted in full.
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12 Wn. App. 930 (1975)
533 P.2d 130
RICHARD FREEMAN, Appellant,
v.
METRO TRANSMISSION, INC., et al., Respondents.
No. 2393-1.
The Court of Appeals of Washington, Division One.
March 17, 1975.
Stock & Welch, Inc., P.S., and Eugene A. Stock, for appellant.
Terry P. Watkins, for respondents.
FARRIS, J.
Richard Freeman appeals from a trial court decision denying him recovery against Lacey Bonding & Insurance, Inc., for damage done to his automobile while it was in the possession of Metro Transmission, Inc., d/b/a Lee Myles Transmissions. Freeman acknowledges that he delivered the automobile to Metro for repairs but argues *931 that his subsequent delivery of the certificate of title to Lacey created a second bailment, which made Lacey liable for the damage to the automobile, although Lacey never took actual possession of the vehicle. We affirm.
On August 26, 1970, Freeman took his 1965 customized Ford Galaxie, valued at approximately $6,500, to Metro for minor repair work which was to take approximately 3 days. Later that same day, Freeman was arrested in Everett, Washington, and the following day, Lacey issued a bail bond for his release after receiving from Freeman the bond premium and the endorsed title to the automobile. Lacey thereafter informed Metro that Freeman was no longer the title holder of the automobile and that it should not be delivered to Freeman without the permission of Lacey. Lacey also made inquiry of Metro regarding its security and insurance coverage. In addition, arrangements were made to store the automobile at Metro at Freeman's expense until he was able to substitute cash collateral for the automobile.
Before the repair work was completed, the automobile was vandalized and stripped. Neither Freeman nor Lacey were advised of this occurrence until a week following the incident. On September 10, 1970, Freeman, accompanied by an agent of Lacey, went to Metro and demanded the return of the vehicle in its delivery condition. Metro was unable to comply. Several days later, Metro's president placed the vehicle on blocks in the street near his home where it remained until December 21, 1971, when it was retrieved by Freeman. Its value at the time was $1,500.
Freeman was granted judgment of $8,077 in his action against Metro for damages. His appeal is from the adverse decision of the court in his action against Lacey and is based on the theory that his transfer of the automobile's title to Lacey as security for the bail bond created a bailment which obligated Lacey to return the vehicle in the same condition as it was when the title was delivered. He also argues that Lacey, in any event, is liable for damage to the automobile which occurred between the time that it *932 was placed on blocks and left on the street until such time as it was retrieved.
Three questions are presented by the appeal: (1) Was the Freeman to Lacey transaction a bailment, (2) if so, what standard of care did Lacey owe as bailee, and (3) if that standard has been violated, what damages should Freeman recover from Lacey?
A bailment arises generally when personalty is delivered to another for some particular purpose with an express or implied contract to redeliver when the purpose has been fulfilled. Earhart v. Callan, 221 F.2d 160 (9th Cir.1955). Freeman argues that a bailment of his automobile was created when he delivered the vehicle's certificate of title to Lacey as security for a bail bond until alternate security could be provided. His theory is that he constructively delivered the automobile to Lacey when he tendered the title certificate and that Lacey is responsible for the automobile even though it never possessed the vehicle. We do not agree.
[1] The transaction is primarily a security transaction; Freeman's delivery of the certificate of title to Lacey creates in Lacey a pledge interest in the certificate and the underlying collateral, the automobile. Restatement of Security § 2(2) (1941). While delivery of the certificate of title to Lacey creates a bailment in that certificate, see Restatement of Security §§ 1, 5 (1941), it does not necessarily follow that there is a bailment of the automobile.
[2] Before a bailment of the automobile can be said to exist
there must be a change of possession and an assumption or acceptance of possession by the person claimed to be a bailee. Theobald v. Satterthwaite, 30 Wn.2d 92, 190 P.2d 714, 1 A.L.R.2d 799 (1948); Ramsden v. Grimshaw, supra [23 Wn.2d 864, 162 P.2d 901 (1945)]; see R. Brown, The Law of Personal Property §§ 74, 75 (2d ed. 1955); 8 Am.Jur.2d Bailments § 54 (1963); Annot., 7 A.L.R.3d 927, § 3 (1966). Whether there is a change or acceptance of possession depends on whether there is a change or acceptance of actual or potential control in fact over the subject *933 matter. Such control may be actual or physical, or it may be constructive recognized by law as the equivalent of actual control. In determining whether control exists, it is relevant to consider the subject matter's amenability to control, steps taken to effect control, the existence of power over the subject matter, the existence of power to exclude others from control, and the intention with which the acts in relation to the subject matter are performed.
Collins v. Boeing Co., 4 Wn. App. 705, 711, 483 P.2d 1282, 46 A.L.R.3d 1294 (1971). See Annot., 1 A.L.R. 394 (1919). Constructive delivery can be accomplished by a written transfer of title to the bailed property, Annot., 1 A.L.R. 394 (1919) and cases cited in n. 15, but whether such delivery effectively creates a bailment is a question of fact. Collins v. Boeing Co., supra; see also Irish & Swartz Stores v. First Nat'l Bank, 220 Ore. 362, 349 P.2d 814 (1960).
The trial court's oral opinion reflects its finding that Lacey was not intended to become bailee of the vehicle until the repairs ordered by Freeman at Metro had been completed and the automobile put into Lacey's care. (The court did not deem relevant the fact that once the vehicle was repaired, Lacey intended to store it with Metro.) There is substantial evidence in the record to support the finding which supports the trial court's holding that no bailment existed at the time the vehicle was stripped.
[3] Even if the record had established that a bailment was created by the delivery of the certificate of title, it does not necessarily follow that Lacey is responsible for the loss. Where the bailed property remains with an independent agent or employee of the bailor, there is a corresponding limitation on the bailment and the duty of the bailee. Sisung v. Tiger Pass Shipyard Co., 303 F.2d 318 (5th Cir.1962); Stegemann v. Miami Beach Boat Slips, Inc., 213 F.2d 561 (5th Cir.1954). Likewise,
The pledgee owes to the pledgor the duty of reasonable care of the pledged chattel except where the chattel is in the possession of a third person designated by the pledgor *934 or is in the possession of the pledgor himself. Comment:
a. The rule of reasonable care expressed in this Section is confined to the physical care of the chattel, whether an object such as a horse or piece of jewelry, or a negotiable instrument or document of title.
(Italics ours.) Restatement of Security § 17, at 65 (1941). The pledged property while awaiting repair at Metro was in the possession of a "third person designated by the pledgor" and thus the trial court's finding that Metro, not Lacey, violated the standard of reasonable care is supported by law even if the record supported Freeman's theory that a bailment arose from the delivery of the certificate of title.
[4] We do not agree with Freeman's argument that Lacey is responsible for such loss as may have occurred to the vehicle following his delivery of substitute security to Lacey. The automobile remained at all times in the custody of Metro, the agent to whom it was delivered by Freeman. When his certificate of title was returned, Freeman's right to exercise absolute control over the vehicle was restored. The record fails to establish that Lacey breached any obligation owed to Freeman.
Affirmed.
JAMES and CALLOW, JJ., concur.
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653 F.Supp. 1200 (1986)
The ECCLESIASTICAL ORDER OF the ISM OF AM, INC., Rev. George Nicholas Baustert and Janette C. Schwedt, Plaintiffs,
v.
Joseph CHASIN, Julia Shea Kane, Charles Gillette, Joseph Luperini, Melvin Blough and Robert Schervish, Defendants.
Civ. A. No. 82-CV-70377-DT.
United States District Court, E.D. Michigan, S.D.
November 24, 1986.
*1201 *1202 Joseph Falcone, Southfield, Mich., for plaintiffs.
David S. Grossman, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, D.C., for defendants.
ORDER
JULIAN ABELE COOK, Jr., District Judge.
On January 15, 1980, the Ecclesiastical Order of the Ism of Am (Ism of Am) filed an application for recognition of a federal income tax exempt status under Section 501(c)(3) of the Internal Revenue Code of 1954 with the Internal Revenue Service (IRS). The application was denied. Shortly thereafter, the Tax Court, acting upon a declaratory judgment request by Ism of Am, declared that the denial of a tax exempt status was not constitutionally infirm. Ecclesiastical Order of the Ism of Am v. Commr., 80 T.C. 833, 842 (1983).
On February 2, 1982, Plaintiffs filed a Complaint with this Court, seeking, among other things, a judicial determination that the Ism of Am was entitled to obtain a tax exempt status from the Internal Revenue Service. Subsequently, this Court dismissed the case on three grounds; to wit, (1) the Anti-Injunction Act, 26 U.S.C. § 7421(a), and the Declaratory Judgment Act, 28 U.S.C. § 2201, prohibited the granting of the requested relief, (2) the United States Government, acting through the IRS, is immune as a sovereign from any suit of this nature by taxpayers, and (3) the failure of Plaintiffs to identify any specific individuals as Defendants was fatal to their claims against unknown agents. On appeal, the Sixth Circuit affirmed the dismissal as to the IRS but remanded as to the unknown agents. Ecclesiastical Order of the Ism of Am, Inc. et al v. Internal Revenue Service et al, 725 F.2d 398 (6th Cir.1984).
On remand, this Court entered an Order which allowed Plaintiffs to file their Third Amended Complaint. Joseph Chasin, Julia Shea Kane, Charles Gillette, Joseph Luperini, Melvin Blough and Robert Schervish were named as Defendants. The Complaint was subsequently served on the Department of Justice who filed answers on behalf of the named Defendants. Summonses were not served upon the individually named Defendants. They now move for a dismissal, the entry of a summary judgment, and/or the imposition of sanctions. On June 6, 1986, Plaintiffs responded in opposition. That motion is presently before this Court.
*1203 I.
Defendants contend that personal jurisdiction over them is lacking for three reasons. First, they assert that the service of process was insufficient under Fed.R. Civ.P. 4(a) because the summonses were issued only to the IRS, John Doe, and Mary Roe. According to Defendants, the substitution of the six individuals for John Doe and Mary Roe amounted to a change of parties within the meaning of Fed.R.Civ.P. 15(c). Therefore, Fed.R.Civ.P. 5(b) is inapplicable since the currently named Defendants were not parties at the time that the summonses were served.
Second, Defendants argue that they have been sued in their individual capacities. It is their belief that personal service should have been made in accordance with Fed.R. Civ.P. 4(d)(1), 4(c)(2)(C), and 4(e). Thus, they insist that service of process has not been effectuated because Plaintiffs have not personally served any of them with a summons and copy of the Complaint.
Third, Chasin, Luperini, Kane and Gillette, all of whom are non-residents of Michigan, claim that there is no basis for this Court to assert in personam jurisdiction over them because Plaintiffs have not met their burden of satisfying the minimum contacts requirements of the Michigan "long arm" statute, M.C.L.A. § 600.715, and the constitutional requirements of due process.
In response, Plaintiffs admit that summonses were not issued in the names of the individual Defendants, citing an earlier determination by a Magistrate who held that the Department of Justice had entered a general appearance for all of the Defendants. On the basis of this theory, Plaintiffs believed that they had the right to proceed under Fed.R.Civ.P. 5(b) and effectuate service of process by serving the Department of Justice as the agent for all of the Defendants. Additionally, Plaintiffs argue that it was their intention to determine the identity of the responsible unknown IRS agents through discovery, and to have the summonses issued in the actual names of the agents. Bivens v. Six Unknown Agents of the Federal Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971).
Next, Plaintiffs argue that Michigan's "long arm" statute vests this Court with jurisdiction over Chasin, Luperini, Kane, and Gillette. They contend that Defendants cannot raise the alleged lack of personal jurisdiction in a motion under Fed.R. Civ.P. 12(c) on any grounds other than those which were submitted in their first Motion to Dismiss. Thus, Plaintiffs assert that Defendants are bound by the arguments within their first Motion to Dismiss and, under Fed.R.Civ.P. 12(h)(1), any defense which was not made in the first Motion to Dismiss is waived, and the filing of an Amended Complaint does not revive the right to assert the defense.
Plaintiffs contend that Defendants have engaged in a course of conduct of religious discrimination which has caused them to suffer the loss of their constitutional rights to the freedom of religion, free speech, and due process, all of which was specifically designed to cause clearly foreseeable and intentional consequential harm in Michigan.
Finally, Plaintiffs have alleged a conspiracy among all of the Defendants, thereby allowing the actions of the Michigan Defendants to be attributed to their co-conspirators in Washington, D.C. Williams v. Garcia, 569 F.Supp. 1452 (E.D.Mich.1983).
In this case, service of process was never personally served on the named individual Defendants in accordance with Fed. R.Civ.P. 4. Instead, service was made on the Department of Justice in accordance with Fed.R.Civ.P. 5(b). The six individually named Defendants were arguably included as parties in the original Complaint which merely named "John Doe and Mary Roe" as unnamed IRS agents and as representatives of the specific IRS agents actually involved. This procedure has been accepted as proper and used by many courts. Bivens v. Six Unknown Agents of the Federal Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). This Court believes that it is a proper procedure. The Rules of Civil Procedure are to be *1204 liberally construed and are not narrowly read as Defendants would choose to have them read.
This Court also believes that quashing service for insufficient process under Fed.R.Civ.P. 12(b)(4) or insufficient service of process under Fed.R.Civ.P. 12(b)(5) is not an adjudication on the merits. The quashing of service in this case appears to be unwarranted since the rights of Defendants have not been impaired and, especially, because they have had actual notice of these proceedings through the representation of their interests by the Justice Department. Additionally, Fed.R. Civ.P. 4(h) allows this Court, in its discretion, to order an amendment of any process unless it clearly appears that material prejudice would be caused to the substantial rights of the opponent.
The Michigan "long arm" statute confers jurisdiction when (1) the transaction of any business within the state has occurred, or (2) the doing or causing an act to be done, or consequences to occur, in the state resulting in an action for tort. Further, constitutional requirements of due process are met when certain "minimum contacts" with the forum state exist. International Shoe v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Traditional notions of fair play and substantial justice would not be violated by the assertion of personal jurisdiction over the four Washington, D.C. Defendants, all of whom have ostensibly maintained a relationship with the other Defendants within the State of Michigan. Thus, it would appear that these Defendants have conducted the minimal amount of business contact within the State of Michigan which is required to satisfy M.C.L.A. § 600.705(1). American Business Overseas v. Methods Research Products, Inc., 593 F.Supp. 1 (E.D.Mich. 1983). It would be unreasonable and unduly burdensome upon an aggrieved party and the federal court to require all taxpayer actions to be initiated only in Washington, D.C. Even the slightest amount of contact with the forum state, which does not offend the traditional notions of fair play and substantial justice, is sufficient to confer jurisdiction upon this Court. As a result, this Court concludes that the exercise of jurisdiction over these Defendants, under the circumstances of this case, would not be constitutionally infirm.
III.
Defendants contend that Plaintiffs are attempting to collaterally attack the determination of the Tax Court which held that the Ism of Am is not entitled to tax exempt status. They assert that Plaintiffs have not plead any specific acts of Defendants in violation of their statutory or constitutional rights.
In response, Plaintiffs claim to have identified several places in their Complaint where specific acts of misconduct by Defendants have been delineated. Plaintiffs also contend that the administrative remedy of seeking declaratory judgment action only concerned the Ism of Am's request for exempt status and did not encompass any First Amendment issues. Additionally, they claim that the administrative remedy was made ineffectual by (1) Defendants' own actions with regard to the administrative procedures which were used to mislead them, and (2) the concealment of evidence from the Tax Court that was used by Defendants in denying the Ism of Am's tax exempt status. Plaintiffs assert that Defendants' interference with the administrative process has effectively denied them their right to due process. They believe that this course of conduct mandates the maintenance of an administrative hearing in accordance with fundamental principles of fair play and applicable procedural standards established by law.
In considering a motion to dismiss under Fed.R.Civ.P. (12)(b)(6), an inquiry is limited to whether the allegations constitute a claim under the Federal Rules of Civil Procedure. A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." The function of such a pleading is to provide notice to the opposing party. Fed. R.Civ.P. 8(a)(2). A complaint should not be *1205 dismissed unless it appears to a certainty that the plaintiff is entitled to no relief under any state of facts which could be proven in support of the claim. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). In passing on a motion to dismiss, the allegations of the complaint should be construed favorably to the pleader. Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). Legal sufficiency, not probability of success, is the test to be applied. Therefore, this Court must determine whether the Complaint states a valid claim for relief in a light which is most favorable to Plaintiffs and with every doubt resolved in their behalf. Davey v. Tomlinson, 627 F.Supp. 1458.
IV.
Defendants submit that if this Court construes the Complaint to allege common-law tort violations, then they are absolutely immune from any claim for damages. On the other hand, they contend that if this Court finds that Plaintiffs have stated a claim under the Constitution, then the claims should be dismissed. Defendants claim that they have satisfied the requisite test for qualified immunity; to wit, the "objective reasonableness of an official's conduct as measured by reference to clearly established law." Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982). Defendants assert that they acted within the scope of their duties as employees of the IRS at all times, and did not undertake any actions which violated Plaintiffs' statutory or constitutional rights. Therefore, they believe that Plaintiffs' action is an "insubstantial suit." Butz v. Economou, 438 U.S. 478, 508, 98 S.Ct. 2894, 2911, 57 L.Ed.2d 895 (1978), and, as such, must be dismissed.
In reply, Plaintiffs deny that they are suing on the basis of common-law tort violations, or that IRS agents have absolute immunity. Cameron v. IRS, 773 F.2d 126 (7th Cir.1985). While agreeing that objective reasonableness is to be applied in resolving this issue, Plaintiffs argue that the defense of qualified immunity is no longer to be evaluated with reference to any subjective consideration of an officer's good faith in carrying out certain discretionary functions. They contend that "subjective inquiry with respect to religious truth" is specifically prohibited, U.S. v. Dykema, 666 F.2d 1096 (7th Cir.1981), and that Defendants went beyond the mere objective examination of Plaintiffs' activities by seeking specific information regarding their beliefs, and then based a decision directly on those beliefs.
Agents of the IRS do not have absolute immunity only qualified immunity from suit. Mitchell v. Forsyth, 472 U.S. 511, 105 S.Ct. 2806, 86 L.Ed.2d 411 (1985). Thus, the IRS agents are insulated from suit if (1) reasonable grounds existed for the belief that the challenged action was appropriate, and (2) they acted in good faith. The test is based upon the objective reasonableness of the conduct as measured by reference to clearly established law. Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 2738, 73 L.Ed.2d 396 (1982). Subjective inquiry into religious beliefs is forbidden. U.S. v. Dykema, 666 F.2d 1096 (7th Cir.1981), cert. denied, 456 U.S. 983, 102 S.Ct. 2257, 72 L.Ed.2d 861 (1982).
The declarations of the six Defendants indicate that none of them undertook any action relating to Plaintiffs which was in violation of a statutory or constitutional right. Thus, it would appear that each Defendant was acting within the scope of authority as employees of the IRS at all times. Express examination of the religious activities of the organization is permitted by 26 U.S.C. § 7605(c). Dykema, 666 F.2d at 1102. Without such an examination, it would be difficult to see how any church could qualify as a tax exempt organization "for religious purposes." Id. Thus, the inquiries by Defendants as to membership requirements (e.g., "May an individual who is a member of another religion become a member of your Church? If so, on what basis? Is renunciation of former religious beliefs a prerequisite to membership in your church?") appear to be *1206 appropriate inquiries that are relevant and necessary to the proper performance of those tasks which have been entrusted to the IRS by Congress.
Tax exemption is a privileged status and the taxpayer, who claims it has the burden of demonstrating entitlement thereto. Id. at 1099. The IRS has the statutory duty "to canvass and to inquire" into the status of all persons who may be liable to pay internal revenue tax. Donaldson v. U.S., 400 U.S. 517, 91 S.Ct. 534, 27 L.Ed.2d 580 (1971). The decision to grant or deny tax exempt status does not constitute establishment of a religion. Id. 666 F.2d at 1100.
As a result, this Court believes that (1) there existed reasonable grounds for Defendants to believe that their challenged action was appropriate, and (2) Defendants acted in good faith. Therefore, Defendants are entitled to receive the protections of qualified immunity from Plaintiffs in the instant suit.
V.
Defendants contend that this suit is really a suit against the sovereign, despite the efforts of Plaintiffs to characterize it as a claim against the named individuals. They argue that this must be considered to be an action against the sovereign if the judgment would (1) require an expenditure of funds from the public treasury, (2) interfere with the public administration, (3) restrain the Government from acting, or (4) compel the Government to act. Dugan v. Rank, 372 U.S. 609, 83 S.Ct. 999, 10 L.Ed.2d 15 (1963). Defendant points out that the Complaint does not allege that they acted outside of their official capacities as employees of the IRS. This suit, according to Defendants, is barred by sovereign immunity.
Plaintiffs say that they are suing the named Defendants in their individual capacities, pointing out that the United States of America was previously dismissed as a party by this Court a decision which was subsequently affirmed by the Sixth Circuit.
The United States is a sovereign and, therefore, is immune from suit without its prior consent. United States v. Shaw, 309 U.S. 495, 500-501, 60 S.Ct. 659, 661, 84 L.Ed. 888 (1940). The doctrine of sovereign immunity cannot be avoided by naming officers and employees of the United States as Defendants. Larson v. Domestic and Foreign Commerce Corp., 337 U.S. 682, 687, 69 S.Ct. 1457, 1460, 93 L.Ed. 1628 (1949). In the absence of a consent to sue, an action which merely names officers and employees of the United States as defendants must be dismissed. Id.; Stout v. United States, 229 F.2d 918 (2nd Cir.), cert. denied, 351 U.S. 982, 76 S.Ct. 1047, 100 L.Ed. 1496 (1956).
In contrast to Plaintiffs' assertions, the record clearly indicates they have not alleged that any of the Defendants acted outside of their official capacities as employees of the IRS. Paragraphs 10, 14, and 17 of the Complaint expressly state that Defendants are being sued because of acts done "under the color of performing their duties as agents or employees of the United States of America [because they (1)] knowingly carried out a formal or informal policy of the Internal Revenue Service [and (2)] have performed the aforementioned acts under color of law to effectuate the policy of the Internal Revenue Service." Thus, although Plaintiffs have identified the individual IRS agents as Defendants, the action must be considered to be a claim against the United States. Hutchinson v. U.S., 677 F.2d 1322 (1982); Film Truck Service v. Nixon, 216 F.Supp. 77 (E.D.Mich.1963).
A sovereign, such as the United States, can only be sued when it consents to suit by statute or where a statute explicitly waives immunity. The United States has waived its immunity under the Federal Tort Claims Act. 28 U.S.C. §§ 1346(b) and 2671-2680. Nevertheless, Plaintiffs cannot rely upon that statute because it specifically precludes claims which (1) are based upon the performance of a discretionary function by a Government officer or (2) arise with respect to the assessment and collection of any tax. 28 U.S.C. § 2680(a) and (c). On the basis of the record, the *1207 individual Defendants were engaged in discretionary functions which were related to the assessment of taxes.
Therefore, this Court concludes that Plaintiffs' claims against the individual Defendants are barred by the doctrine of sovereign immunity. The United States has not consented to this suit. Consequently, Plaintiffs' claims must be denied.
VI.
Defendants seek the imposition of sanctions for several reasons. First, the Third Amended Complaint fails to allege any specific facts to support Plaintiffs' claim of constitutional violations. Second, Plaintiffs are fully aware that the Sixth Circuit affirmed the decision by the Tax Court which determined that the denial of a tax exempt status by the IRS was not constitutionally flawed. Third, Plaintiffs, despite having received answers to interrogatories, have pursued four Defendants who have no connection with the State of Michigan.
Plaintiffs urge this Court to reject the sanctions request, contending that (1) specific facts have been sufficiently set forth in the Complaint to state a cause of action, (2) Plaintiffs are not required to plead and prove that Defendants are not immune from suit since qualified or good faith immunity is an affirmative defense, and (3) the declaratory judgment action before the Tax Court was based on a very limited record with no discovery available, whereas the present claims is premised on the alleged interference by Defendants with the administrative procedures that were used to make the flawed record upon which the Tax Court relied.
Fed.R.Civ.P. 11 reads as follows:
Every pleading, motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record in his individual name, whose address shall be stated. A party who is not represented by an attorney shall sign his pleading, motion, or other paper and state his address ... The signature of an attorney or party constitutes a certificate by him that he has read the pleading, motion, or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.
In this case, sanctions should not be imposed against Plaintiffs' counsel. The existence of some legal issues, which are open to interpretation, have been presented. It appears that counsel acted reasonably in this case.
IT IS SO ORDERED.
JUDGMENT
On this date, the Court rendered an opinion which, inter alia, indicated that Plaintiffs had failed to assert a valid claim against Defendants.
Accordingly, a judgment of dismissal, with prejudice, shall be entered in favor of Defendants, and against Plaintiffs, in this cause.
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74 Cal.App.2d 105 (1946)
FRED SCHULSTAD, Appellant,
v.
CITY AND COUNTY OF SAN FRANCISCO, Respondent.
Civ. No. 12942.
California Court of Appeals. First Dist., Div. Two.
Apr. 22, 1946.
John A. Foley, C. F. Eschwig, J. Emmett Chapman and Frederick C. Dewar for Appellant.
John J. O'Toole, City Attorney, and Lawrence S. Mana, Deputy City Attorney, for Respondent.
J. F. DuPaul, City Attorney (San Diego), and J. H. McKinney, Deputy City Attorney, as Amici Curiae on behalf of Respondent.
DOOLING, J.
This is an appeal from a judgment for defendant City and County of San Francisco entered after its demurrer to plaintiff's complaint had been sustained without *106 leave to amend. The complaint is one for personal injuries alleged to have been suffered by appellant on December 5, 1943, by being struck by a bus negligently operated by respondent's employee.
The complaint alleges the presenting of a verified claim for such injuries to the controller on May 31, 1944. The San Francisco charter in section 87 requires such claims to be presented to the controller "within sixty days after the occurrence from which it is claimed the damages have arisen."
In explanation of his failure to comply with the sixty-day time provision of this section the plaintiff alleged in his complaint:
"That plaintiff failed to file said claim against said City and County of San Francisco, with the Controller of said City and County, within sixty days as required by law, for the reason that plaintiff was wholly incapacitated mentally by reason of the above described injuries suffered by him, until the date upon which said claim was actually filed as hereinabove set forth."
[1] The question is squarely presented whether a plaintiff who is rendered mentally incapable of filing a claim within the time specified in the charter by the same injury which is the basis of his cause of action is nevertheless barred although he actually files his claim as soon as he regains the mental ability to do so.
That he is barred under such circumstances was expressly held in Johnson v. City of Glendale, 12 Cal.App.2d 389 [55 P.2d 580], and Wicklund v. Plymouth E. School Dist., 37 Cal.App.2d 252 [99 P.2d 314], but we feel justified in reexamining the question in view of the later decision of the Supreme Court in Farrell v. County of Placer, 23 Cal.2d 624 [145 P.2d 570, 153 A.L.R. 323].
Prior to the latter decision it had been established by an unbroken line of authority in this state that the time limits fixed in claim provisions of the character here in question were not subject to any exception, however harsh their operation might be in the particular case. In Farrell v. County of Placer, supra, this harsh rule was relaxed, the court holding that the counties defendant in that case could be estopped by the representations of their agent from insisting on the filing of a claim within the time limit fixed by the law. The court said in that case (23 Cal.2d at p. 630):
"Although it has been repeatedly held that compliance with the appropriate claim statute is mandatory and an essential *107 requisite to plaintiff's cause of action, nevertheless the time element with respect to the filing of the claim is essentially procedural in nature (citing cases) and is analogous to a statute of limitation. (Citing cases.) It has been intimated by some authorities that the claim statute is the measure of the power of the governmental agency in paying the tort claims involved, and hence any deviation from that procedure cannot be dispensed with by waiver, estoppel, or otherwise. That conclusion, at least with respect to the time of filing the claim, is not supported by the statute or reason." There is a divergence of authority in other jurisdictions as to whether a plaintiff is execused from compliance with the time provision of a claim statute by the fact that as a result of the very tort for which he seeks recovery he was rendered mentally or physically incapable of filing the claim within the required time. (See notes in 31 A.L.R. 619; 59 A.L.R. 411; and 109 A.L.R. 975.) Many cases have recognized the manifest injustice of denying to an injured person relief for his injury against a municipality where the gravity of the injury itself so disabled him that he was unable to present the statutory claim within the time required, and have held that where the very injury for which he seeks recovery has prevented his filing his claim in time, a filing within a reasonable time after he is able to do so is a sufficient compliance with the statute. (Webster v. City of Beaver Dam, 84 F. 280; Green v. Village of Port Jervis, 55 App.Div. 58 [66 N.Y.S. 1042]; Walden v. City of Jamestown, 178 N.Y. 213 [70 N.E. 466]; Forsyth v. City of Oswego, 191 N.Y. 441 [84 N.E. 392, 123 Am.St.Rep. 605]; Hillborg v. City of New York, 263 App.Div. 668 [34 N.Y.S.2d 153]; City of Colorado Springs v. Colburn, 102 Colo. 483 [81 P.2d 397]; Terrell v. City of Washington, 158 N.C. 281 [73 S.E. 888]; Randolph v. City of Springfield, 302 Mo. 33 [257 S.W. 449, 31 A.L.R. 612]; City of Tyler v. Ingram, (Tex.Civ.App.) 157 S.W.2d 184; Hartsell v. City of Asheville, 166 N.C. 633 [82 S.E. 946].) These courts have recognized that a city should not be allowed to escape liability by reason of its own wrongful act in rendering the plaintiff incapable of complying with the time provision of its claim statute.
Thus in Green v. Village of Port Jervis, supra, 66 N.Y.S. at page 1044, the court said that "if compliance with the condition is rendered temporarily impossible by the wrongful act of the defendant, it would be monstrous to allow the defendant *108 to assert that fact as a defense to the action. The requirement of notice necessarily presupposes the existence of an individual capable of giving it, and not one deprived of that power by the operation of the very wrong to be redressed. That the defendant should be permitted to take advantage of its own wrong is clearly not within the purview of the law."
In Terrell v. City of Washington, supra, 73 S.E. at page 895 we read:
"But the jury have found, under proper instructions, that by reason of his injuries, which affected him both mentally and physically, the plaintiff was unable, during that period, to transact ordinary business or to present his claim, and that he did so within a reasonable time after he was restored sufficiently to do so. This, we think, excused the delay. ... It may very properly be said that it would, in truth, shock the sense of justice and right if this provision was construed so as to hold the notice of the plaintiff's claim insufficient under the circumstances. It is an accepted maxim that the law does not seek to compel that to be done which is impossible. It cannot reasonably be presumed that the intention of the Legislature, in enacting this charter, would lead to any such unjust conclusion. ..."
More tersely the court said in City of Tyler v. Ingram, supra, 157 S.W.2d at page 189:
"To hold that a city may, upon adopting such a charter provision, wrongfully injure a person to the degree of rendering the victim powerless to comply with its terms, and then avoid liability by invoking such charter provision in bar of the right to sue, would constitute a complete denial and abrogation of the claimant's right of recourse to the courts."
We might also quote the dry remark of Mr. Justice Butler in his concurring opinion in City and County of Denver v. Taylor, 88 Colo. 89 [292 P. 594, 598, 72 A.L.R. 833]:
"To adopt the strict rule, which we should decline to do, would be equivalent to offering this suggestion to municipalities: If you are negligent on any occasion, see to it that your negligence is sufficiently gross to insure the complete physical and mental disability of the victim; for by doing so, you will avoid the necessity of paying damages, which you would be required to pay if the victim were left in possession of his faculties."
Respondent argues that this case is not to be governed by Farrell v. County of Placer, supra, 23 Cal.2d 624, because in our case there is no estoppel as such. That there is in our case *109 no estoppel by representation is true, but the fundamental fact exists in both cases that defendant by its wrongful conduct prevented the plaintiff from filing his claim within the time provided by law. It is a maxim of jurisprudence embodied in section 3517 of our Civil Code that: "No one can take advantage of his own wrong." To permit defendant to take advantage of the sixty-day provision of section 87 of its charter under the facts alleged in the complaint would violate this maxim as fully as a similar holding in the Farrell case would have done.
We have reached the conclusion that the reasoning of the Supreme Court in the Farrell case justifies us in refusing to follow Johnson v. City of Glendale, 12 Cal.App.2d 389 [55 P.2d 580], and Wicklund v. Plymouth E. School Dist., 37 Cal.App. 2d 252 [99 P.2d 314], cited supra. We limit our holding to a case, such as this, in which the plaintiff is rendered incapable of filing the claim in time by the tortious injury for which he seeks to recover. So limited our ruling does not conflict with Artukovich v. Astendorf, 21 Cal.2d 329 [131 P.2d 831].
The judgment is reversed with directions to the trial court to overrule the demurrer.
Nourse, P. J., and Goodell, J., concurred.
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FILED
NOT FOR PUBLICATION AUG 25 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JORGE ALFREDO BURGOS-GOMEZ, No. 08-72170
aka Medardo Villanueva-Castellanos,
B.I.A. No. A098-182-258
Petitioner,
v. MEMORANDUM*
ERIC H. HOLDER JR., Attorney General,
Respondent.
On Petition for Review of an Order of the
Board of Immigration Appeals
Argued and Submitted August 11, 2010
San Francisco, California
Before: GRABER, CALLAHAN, and BEA, Circuit Judges.
Petitioner Jorge Alfredo Burgos-Gomez, a native and citizen of Honduras,
appeals the Board of Immigration Appeals’ ("BIA") dismissal of the immigration
judge’s ("IJ") removal order. The BIA found that Petitioner was deportable as
charged, inadmissible because of his conviction for a crime involving moral
turpitude, and ineligible for any waiver that would permit him to qualify for
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
adjustment of status. The BIA also affirmed the denial of Petitioner’s application
for adjustment of status on the ground that he failed to demonstrate the requisite
degree of hardship to his United States citizen mother and son. We review final
decisions of the BIA, Sanchez-Cruz v. INS, 255 F.3d 775, 779 (9th Cir. 2001), but
we lack jurisdiction to review discretionary decisions, Murillo-Salmeron v. INS,
327 F.3d 898, 901 (9th Cir. 2003). We grant the petition in part, dismiss in part,
and remand to the BIA.
The BIA erred in its analysis regarding whether Petitioner’s conviction for
conspiracy to commit battery, in violation of sections 199.480 and 200.481 of the
Nevada Revised Statutes, constitutes a crime of moral turpitude. The BIA
improperly held that Petitioner’s conviction constituted a crime of moral turpitude
without conducting the required analysis under the most recent applicable
precedents. Specifically, the BIA’s analysis is incomplete because it failed to take
account of the categorical approach set forth by the Supreme Court in Taylor v.
United States, 495 U.S. 575 (1990). The BIA did not analyze the specific elements
of the Nevada crime. See Uppal v. Holder, 605 F.3d 712, 714 (9th Cir. 2010)
(holding that, in determining whether a conviction under a criminal statute is
categorically a crime of moral turpitude, the BIA first must identify the elements of
the criminal statute and then must compare those elements to the generic definition
2
of a crime involving moral turpitude and decide whether they meet the definition).
And, a fortiori, the BIA did not undertake to decide whether, if the Nevada statute
does not qualify categorically, the modified categorical approach applies. See
Gonzales v. Duenas-Alvarez, 549 U.S. 183, 187 (2007) (noting that some courts
refer to this step of the Taylor inquiry as the "modified categorical approach").
The BIA also failed to use the form of analysis set forth in its own opinion in In re
Short, 20 I. & N. Dec. 136, 137-38 (B.I.A. 1989).
We are not authorized to conduct any of that analysis for the BIA, INS v.
Orlando Ventura, 537 U.S. 12 (2002) (per curiam), so we must remand for it to do
so in the first instance.
We lack jurisdiction to review the BIA’s discretionary decision to deny
Petitioner a waiver of inadmissibility under section 212(h) of the Immigration and
Nationality Act. Mejia v. Gonzales, 499 F.3d 991, 999 (9th Cir. 2007).
GRANTED in part; DISMISSED in part; and REMANDED. Costs on
appeal awarded to Petitioner.
3
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646 F.Supp. 524 (1986)
William SOUTEAR, Personal Representative of the Estate of Nancy Jane Soutear, and William Soutear, Individually, Plaintiffs,
v.
UNITED STATES of America, Defendant.
Civ. No. 83-3703.
United States District Court, E.D. Michigan, S.D.
October 28, 1986.
*525 Stuart Freedman, Lopatin, Miller, Freedman, Bluestone, Erlich, Rosen & Bartnick, Detroit, Mich., for plaintiffs.
Pamela J. Thompson, U.S. Attorney's Office, Detroit, Mich., for defendant.
MEMORANDUM OPINION AND ORDER
ANNA DIGGS TAYLOR, District Judge.
On June 7, 1982, Garry Soutear, a former psychiatric patient at the Allen Park Veterans Administration (VA) Hospital, attacked his parents with a knife, causing the death of his mother, Nancy Soutear, and the injury of his father, William Soutear. This wrongful death action, brought by William Soutear, individually and as administrator of the estate of Nancy Soutear, against the United States under the Federal Tort Claims Act, 28 U.S.C. §§ 1346(b) and 2671 et seq. (1982), alleges that medical personnel at the VA hospital were negligent in releasing Garry Soutear and in failing to warn his parents that Garry posed a danger of physical violence to them. The matter was tried by the court without a jury. The following represents the court's findings of fact and conclusions of law.
Garry Soutear was first diagnosed as suffering from schizophrenia, chronic undifferentiated type, in early 1980 while he was in the Army, stationed in Germany. He was transferred from the military hospital in Germany to the Fort Hood Army Hospital at Sheppard Air Force Base in Texas on March 1, 1980. Upon admission, it was noted that Garry was alert, oriented in all spheres and cooperative. He denied any hallucinations, body image distortions or other signs of perceptual disorder. He was rather guarded in sharing his thoughts but did reveal interests in unusual dietary practices, including eating dog meat, and in spiritual and occult matters. Some loosening of associations was noted, but otherwise his thought processes were in the normal range. There was no homicidal or suicidal ideation. His memory was intact, but he manifested no insight into his problems and his judgment appeared to be impaired.
During his hospitalization at Sheppard, Garry deteriorated when his medication was discontinued. Four to six weeks after reinstitution of medication, his symptoms improved, with reintegration of his personality and a return to something approximating *526 his premorbid level of functioning. Garry was discharged from the hospital in May of 1980 with a diagnosis of schizophrenia, chronic undifferentiated type, in partial remission. He was subsequently found unfit for active duty and later retired from the Army on a medical disability.
Garry returned to his parents' home in Shelby Township, Michigan and was first seen at the outpatient Mental Health Clinic at the Allen Park VA Hospital on July 15, 1980. He was referred to staff psychiatrist Thaddeus Kosinsky who, following an interview during which Nancy Soutear was present, diagnosed Garry as suffering from schizophrenia, chronic undifferentiated type.
On August 1, 1980, Dr. Kosinsky met with Mr. and Mrs. Soutear to apprise them of Garry's condition and to explain to them what they could expect in terms of the course of the illness and its prognosis. When Garry returned for his scheduled appointment on August 6th, Dr. Kosinsky noted that he was exhibiting increasingly serious physical side effects from the prescribed medication, Haldol, and therefore recommended Garry's admission to the hospital for treatment and evaluation.
Garry was an inpatient at the Allen Park VA for approximately one month. During this period his treating physician was Dr. Reddy. On admission Garry was anxious, apprehensive, defensive and evasive but was communicative and displayed no thought disorder or manic symptoms. He denied hallucinations and suicidal or homicidal intent or plans and was not overtly delusional. However, he had little or no insight into his psychological problems, blaming them on the Haldol.
After supportive psychotherapy, he gained trust and was willing to express some of his fears and disappointments to Dr. Reddy. Garry explained his interest in parapsychology, witchcraft, the occult, religion and philosophy as an attempt to understand his disturbed state. He exhibited periodic anger and hostility toward staff members, other patients and his family. He was seen on three occasions with his family and seemed to show appreciable improvement in his thinking, mood and behavior toward them after three weeks of treatment. During his hospitalization, Dr. Reddy, as well as numerous other staff who had contact with Garry, noted that he exhibited no signs or symptoms of self-destructive thoughts or plans and was not dangerous to himself or others.
Following his discharge, Garry was seen in the Mental Health Clinic by Dr. Kosinsky on an outpatient basis in September, October, November and December. On each occasion, Dr. Kosinsky noted that Garry was not suffering from a thought disorder, hallucinations or delusions and was neither homicidal or suicidal. In January Garry's condition began to deteriorate and he was again admitted to the Allen Park VA hospital on January 20, 1981. Mr. Soutear brought his son to the hospital that evening because Garry was continually pacing and unable to sleep. Nancy Soutear later indicated in a telephone conversation with staff at the Battle Creek VA hospital that Garry had been brought to the hospital because of bizzare behavior which included constant pacing, not eating or sleeping and discussing masturbation with his sisters. She also reported that on one occasion Garry started screaming and swearing in a crowd of people at a shopping mall and had displayed similar behavior in a bar where he got into an altercation regarding ice in his glass. On that occasion, Garry put the ice in an ashtray, but on neither occasion was there any report of physically violent or assaultive conduct.
In his deposition, Mr. Soutear stated that on the evening of this admission his son was too sick to discuss hospitalization and that Garry was unaware of where he was being taken until they arrived at the hospital. While waiting to be admitted, Garry began cursing and swearing at others in the lobby. This behavior was directed particularly toward a cleaning woman working in the waiting room at whom Garry threw cigarettes. The federal police were summoned and Garry calmed down without being physically restrained. Garry was hostile, *527 uncooperative and refused to answer admitting staff's questions.
The progress notes from the Allen Park hospital for the January, 1981 admission indicate that Garry's behavior was very inappropriate. He was hyperactive and restless, with a short attention span and poor insight and judgment. On January 30, 1981, he was transferred voluntarily to the Battle Creek VA hospital, the VA facility for long-term treatment, where he remained for approximately eight months, until September 24, 1981.
Garry made little significant improvement until July of 1981. Notations from August and September indicate that he was acting in a more responsible, mature manner and assuming more responsibility for himself. He was reported to be sociable and active, alert, rational and in contact with reality. His behavior and verbalization were appropriate; he was calmer, and did not pace the ward.
Garry was discharged in late September, 1981 to a residential care home. The discharge summary indicated that he was neither homicidal nor suicidal. Within days of his placement at the residential care home, Garry argued with the home's sponsor and refused to follow the house rules. Garry called his mother, and against the advice of the social worker, was able to convince her to assist him in obtaining an apartment.
Garry was seen at the outpatient Mental Health Clinic at the Allen Park VA in October and November of 1981 and seemed to be doing relatively well. In early December, Garry called the Mental Health Clinic asking if his medication could be sent to his home. He refused Dr. Kosinsky's request that he return to the Clinic. In mid-December, Dr. Kosinsky called the Soutear home and spoke to Nancy Soutear who told him that Garry was not taking his medication and refused to seek treatment. This was Dr. Kosinsky's last contact with the Soutear family. At all times, his diagnosis of Garry's condition was schizophrenia, chronic undifferentiated type.
On January 29, 1982 Garry was brought to the Allen Park VA Hospital by his parents with an order signed by an Oakland County Probate Judge. The order had been issued upon Mrs. Soutear's petition and allowed a state hospital to hold Garry for twenty-four hours to perform an examination to determine whether he met the criteria for judicial commitment as a "person requiring treatment" under the Michigan Mental Health Code, M.C.L.A. § 330.1400 et seq.
Section 401 of the Michigan Mental Health Code defines a "person requiring treatment" as
(a) a person who is mentally ill, and who, as a result of that mental illness can reasonably be expected within the near future to intentionally or unintentionally seriously physically injure himself or another person, and who has engaged in an act or acts or made significant threats that are substantially supportive of the expectation.
(b) a person who is mentally ill, and who as a result of that mental illness is unable to attend to those of his basic physical needs such as food, clothing or shelter that must be attended to in order for him to avoid serious harm in the near future, and who has demonstrated that inability by failing to attend to those basic needs.
(c) a person who is mentally ill, whose judgment is so impaired that he is unable to understand his need for treatment and whose continued behavior as the result of this mental illness can reasonably be expected, on the basis of competent medical opinion, to result in significant physical harm to himself or others.
In the petition filed by Nancy Soutear on January 29, 1982, she circled the first and third criteria for commitment. However, in the subsequent narrative portion of the petition, requesting the petitioner to state the personal observations upon which the conclusion that the patient meets the criteria is based, Mrs. Soutear stated: *528 My son Garry is diagnosed as a chronic schizophrenic. Since his diagnosis as of February, 1980, he has spent approximately 1½ years in different hospitals. His last release was from VA Battle Creek in 10-81. He needs continuous outpatient medical care, plus medication. As of this time he refuses both. I feel as his mother he is not capable of making any competent decisions toward his condition. His judgment is impaired to the point to understand the need for treatment.
At trial, and in his deposition, Mr. Soutear testified that he and Mrs. Soutear sought hospitalization for Garry in January of 1982 because he was nervous, withdrawn, unable to relate or communicate with people, losing weight and doing strange things such as eating in restaurants without paying the bill and leaving his clothes wet after washing them.
The January 29th admission was effectuated after Mr. and Mrs. Soutear, Nancy's sister and her husband, Mr. and Mrs. Gomez, and two Rochester police officers had entered Garry's apartment. Garry was asleep, and the two officers went into the bedroom to awaken him. After some initial protestation, Garry dressed himself and agreed to go voluntarily to the Allen Park VA hospital rather than to the state hospital identified by the order. No threats were made in the apartment and the police did not accompany the family to Allen Park.
Mr. and Mrs. Gomez testified that while waiting to be admitted, Garry approached his mother and, without shouting or using aggressive gestures, stated that he was going to get even with her for trying to run his life by spreading her name all over the newspapers, and by embarrassing and humiliating her as she had done to him. No threat of physical harm was reported and this incident was not conveyed to physicians at Allen Park despite repeated questions regarding any threats Garry had made.
Garry signed an application for formal voluntary admission to the hospital. The admission note indicated that Garry was not actively suicidal, had no homicidal intent, denied hallucinations and delusions, but had been noncompliant in taking his medication.
On February 1, 1982, Garry was examined by Dr. Ruth Huggins, Chief of Psychiatry at the Allen Park VA Hospital. She found him to be fully oriented with a basic primary thought disorder, withdrawn, ambivalent, evasive, guarded and demonstrating loose associations. Although he was observed to be autistic, had a rich fantasy life, and was delusional, Dr. Huggins noted that the delusions were grandiose, not paranoid. Based upon Garry's responses to her questions with regard to his feelings about himself, his manifestations of anger, any history of attempts to hurt himself or others, what would make him angry enough to hurt someone, and whether he had either a preoccupation with or access to weapons, Dr. Huggins concluded that Garry was not homicidal or suicidal.
She further noted that although Garry was angry with his parents because of their attempt to commit him, he was more bewildered than angry and his anger was not extreme. At trial Dr. Huggins testified that anger and ambivalence in general, and in Garry's case specifically, are not manifestations of psychosis or indicators of potential homicidal or assultive behavior. She opined that Garry's anger was reality-based because his parents were trying to interfere in his life, albeit in a positive sense, by attempting to commit him. The fact that his anger had a basis in reality, as well as Garry's ability to verbally express it and the reasons for it were viewed by Dr. Huggins as a sign of health. Nor did Dr. Huggins find Garry's interest in the occult to be an indication of violence. He was not a member of a cult and his involvement was limited to reading books on the subject. His interest was not destructive, but rather, was an attempt to understand and help himself, a common response of the mentally ill to their problems.
During the course of her examination of Garry, Dr. Huggins received a telephone *529 call from Nancy Soutear. Mrs. Soutear told Dr. Huggins that she believed Garry needed hospitalization because he was not taking his medication, keeping his outpatient appointments or eating properly and because he was not doing anything with his life. She told the doctor that there were cigarette burns in Garry furniture and that he had knocked holes in the walls of his apartment, but she did not express any concerns about his potential to be dangerous to others. In response to Dr. Huggins' inquiries, Mrs. Soutear denied that Garry had a past history of assultive behavior, threats to harm others, or that he had access to or a preoccupation with weapons.
Since Garry could not continue to be held on the court order for examination, Dr. Huggins advised Mrs. Soutear to file another petition if she wanted him hospitalized. Dr. Huggins was concerned, based in large part upon her conversation with Mrs. Soutear, that Garry might not be able to meet his basic needs. Thus, he might have been subject to commitment under the second criterion of the Michigan Mental Health Code and she wanted him to remain hospitalized for further observation. Dr. Huggins testified that at the time she examined Garry, she did not believe that he met either the first or the third criterion for judicial commitment.
On February 2, 1982, Nancy Soutear filed a second petition with the Oakland County Probate Court. She again circled the first and third criteria, but provided the following basis for her conclusion that Garry met them:
Garry has been diagnosed to have chronic scizophrenia. As an outpatient he was instructed to be on continuous medication and treatment. As of the last four months he has refused to take any medication or now see any doctor. I believe his illness impairs his judgment as to the need for treatment. Garry is withdrawn, not thinking logical, cannot make proper decisions. He is not taking care of himself and has lost a lot of weight.
Upon admission Garry was placed on Ward B-7, a closed ward. His primary treating physician was Dr. Magdalena Beltran. When Dr. Beltran first examined Garry she found him withdrawn, guarded and oriented to time, place and person. His speech was coherent and he denied homicidal or suicidal ideas as well as auditory or visual hallucinations. She observed that Garry was angry toward his parents and ambivalent about almost everything. Garry denied his need for medication, his judgment was impaired and his affect flat.
Dr. Beltran's impression was "schizophrenia, paranoid, chronic, rule out schizophrenia, chronic undifferentiated." Dr. Beltran explained that by "rule out" she meant that a diagnosis of schizophrenia, chronic undifferentiated should be checked out or explored. She testified at trial that her impression was based on the fact that Garry was withdrawn, guarded and did not trust her. She did not, however, observe any paranoid delusions. Despite the fact that Garry was angry with Dr. Beltran and left the session before it was over, he did not shout, threaten, or attempt to strike her.
Dr. Beltran saw Garry again on February 3rd, 4th and 5th. It was her recommendation apparently that if Garry were to be committed, he should be transferred to Battle Creek for longer term treatment. Her notes of February 5th further indicate that Gary was not homicidal or suicidal.
On February 5, 1982, physician's certificates signed by Dr. Beltran and Dr. Lustre, another psychiatrist on Ward B-7, were filed with the Oakland County Probate Court certifying that Garry Soutear was a "person requiring treatment" under the Michigan Mental Health Code. Commitment proceedings were initiated by Dr. Beltran because of Garry's threats to leave and the staff's belief that he needed further observation. In the certificate Dr. Beltran stated that Garry met the criteria for judicial commitment because of his inability to attend to basic needs and his inability to understand the need for treatment. The factual basis for meeting both criteria was the same: that the patient refused to take medication, had no insight into his *530 mental illness and his judgment was impaired. Dr. Lustre indicated that Garry met the criteria for commitment because of his inability to understand the need for treatment. The diagnosis on both certificates was schizophrenia, paranoid.
Garry's commitment hearing was scheduled for February 16th. In the meantime, he was seen by Dr. Beltran on February 8th, 9th and 11th. During these examinations, Dr. Beltran never observed any hallucinations or paranoid delusions; Garry denied homicidal or suicidal ideas and was able to express his anger toward his parents verbally, without threats or violent gestures. Although he expressed anger at his parents for putting him in the hospital and felt that they were over-protective, he realized that they loved him. Dr. Beltran testified that Garry's desire to be left alone by his parents did not indicate that he might strike out at them. She further testified that his "preoccupation" was directed toward the upcoming commitment hearing rather than at his parents.
Based on her observations of improvement in both his ability to communicate and his behavior between February 2 and February 11, Dr. Beltran's final diagnosis of Garry's condition was schizophrenia, chronic undifferentiated. She testified that although she had believed Garry might be a danger to himself on February 5th when she filed her certificate, she no longer believed this to be the case on February 11th. She further testified that at no time during her treatment of Garry Soutear did she believe that he was dangerous to others.
As a protection to the civil liberties of the patient, the VA Hospital had a policy that the treating physician could not testify at a commitment proceeding. Since Dr. Beltran was the treating physician, and Dr. Lustre was due in another court on the date scheduled for Garry's hearing, Dr. Rajani Thangavelu, another staff psychiatrist, was asked to act as the "court physician." She first examined Garry in anticipation of her role at the commitment proceeding on February 12th. In a forty-five minute examination, she observed that he was fully oriented, coherent and pleasant, not delusional or hallucinating, and displayed no looseness of associations, although his affect was somewhat flattened. He was not homicidal or suicidal but he was somewhat restless and his judgment was impaired to the extent that he did not recognize his need for hospitalization or medication. On the basis of her examination and her review of his medical records, Dr. Thangavelu concluded that Garry did not meet the criteria for judicial commitment. Her plan was to continue Garry's hospitalization and observe him further. Garry, who dreaded commitment, agreed to this plan.
Dr. Thangavelu discussed her findings and conclusions with both Dr. Huggins and Dr. Beltran. Dr. Beltran explained that she had signed the certificate because she had wanted to observe Garry further but he had wanted to leave. Both Dr. Huggins and Dr. Beltran agreed with Dr. Thangavelu that Garry did not meet the criteria for judicial commitment at this point and concurred in her plan to observe him further.
Dr. Thangavelu phoned Nancy Soutear and explained that although she did not believe Garry met the criteria for commitment at that time, should the situation change, he could be committed in the future. She explored with Mrs. Soutear whether she was aware of any facts which might indicate that he should be committed. The only information volunteered by Mrs. Soutear was that Garry was refusing to keep his outpatient appointments and to take medication.
Dr. Thangavelu's examination of Garry on February 16th again revealed no evidence of overt psychosis. He continued to refuse medication but agreed to stay on an open ward a few days longer for observation. Following this examination, Dr. Thangavelu discussed the case with the staff on Ward B-7 and again with Dr. Huggins. All agreed that Garry did not meet the criteria and that he should be transferred to an open ward.
Dr. Thangavelu called Mrs. Soutear and told her that upon reevaluation Garry still *531 did not meet the criteria for commitment. She arranged a meeting with the Soutears for February 19th. Mrs. Soutear expressed no objection to Dr. Thangavelu's decision not to go forward with the commitment procedures, but stated that she and her husband wanted Garry to be involved in a vocational rehabilitation program.
The Probate Court and Garry's attorney were notified that the hospital did not plan to go forward with commitment proceedings. Both Dr. Thangavelu and Dr. Huggins testified that it is common practice for psychiatrists to file certificates indicating that a patient meets the criteria for commitment, and then to reverse that decision based on subsequent observation prior to the commitment hearing.
Dr. Thangavelu saw Garry individually on the morning of February 19th. During this session they discussed at length Garry's feelings toward and problems with his parents. He verbalized well and stated that he was angry with them because they were interfering with his life and treating him like a child. Although he continued to refuse medication, Garry agreed to seek outpatient therapy on a regular basis.
That afternoon, Dr. Thangavelu met with the Soutears, first separately and then with Garry present. During her discussion with the parents, Dr. Thangavelu again explored whether there was any history which might indicate that Garry met the criteria for commitment. She received negative responses to inquiries about past assaultive behavior, threats and either a preoccupation with or access to weapons. Dr. Thangavelu testified that if the Soutears had provided her with information at this point which indicated that Garry met the criteria, she would have reinstituted commitment proceedings. Mr. and Mrs. Soutear again reiterated their reasons for seeking Garry's hospitalization as his refusal to take medication or to participate in any activities. At this meeting the doctor also explained to Garry's parents that he would probably never return to his premorbid condition.
The parents agreed to be supportive but not overbearing, and Garry appeared to acknowledge his need for outpatient treatment and agreed to attend such sessions. Garry was advised to seek hospitalization if he found himself getting worse and his parents were encouraged to bring him back if his condition deteriorated. The Soutears expressed no disagreement with the hospital's decision not to pursue commitment and Garry was discharged that day, February 19, 1982. Dr. Thangavelu's discharge diagnosis, with which Dr. Huggins concurred, was residual schizophrenia.
Dr. Thangavelu had no further contact with Garry after his discharge. In late March or early April, Mrs. Soutear called Dr. Thangavelu to inquire about preparing a report so that Garry could get his drivers license back. In response to the doctor's inquiry regarding how Garry was doing, Mrs. Soutear replied, "about the same." She did not request Dr. Thangavelu's assistance in hospitalizing Garry. When Garry failed to return to the outpatient clinic, staff called his parents' home on April 14, 1982. Garry was not there, but his sister, who answered the phone, agreed to give him the message to call the hospital. On April 26, 1982, a follow-up letter was sent asking Garry to call the hospital within seven days. When he failed to respond, Garry's case was closed on May 4, 1982.
Garry had begun treating on an outpatient basis with a Dr. Senapiti and a social worker at the Pontiac General Mental Health Clinic on March 23, 1982. The records indicate that he was initially brought in by his parents because of inappropriate behavior such as failing to properly care for himself and his apartment and refusing to take medication. Following an examination on March 30, 1982, Dr. Senapiti diagnosed Garry as suffering from schizophrenia, residual type, chronic. He noted, however, that Garry showed no overt psychosis. The records from Pontiac General reveal no indication from either Garry or his family that he was then or had ever engaged in violent or assaultive behavior. Dr. Senapiti saw Garry on April 16th, May 4th and May 12th.
*532 During April of 1982, three disturbing incidents occurred, all involving Garry and his sisters. Michelle Soutear testified that on one occasion in April, while she and Garry were at the airport, he began bumping into people, knocking them on purpose and making obscene comments. She testified that Garry chuckled and seemed to think it was funny. Michelle took him back to his apartment. Elizabeth Soutear testified that, on several occasions for a long time prior to the Spring of 1982, her brother had pulled out a hunting knife and displayed it to her. Her testimony that Garry carried a knife was corroborated by no other witness and is contradicted by the consistently negative family responses to routine hospital inquiries as to Garry's possession of weapons. It should be noted here that it was later revealed that a number of hunting and fishing weapons were kept in the Soutear basement, and that Garry and his father had hunted and fished together, over the years. No one at the VA hospital had been told of the weapons.
Elizabeth further testified that in the Spring of 1982 Garry cut up a dead squirrel and teased her with it. Around this same time, while their parents were vacationing in Florida, Elizabeth testified that as she was walking from the Soutear home to her cousin's parked car, Garry came running toward her from down the street. When Elizabeth got into the car and locked the doors, Garry began pounding on the car with his fists and yelling at her to let him in. He cursed at Elizabeth and her cousin and called them babies but finally broke into his parents' house, taking the keys to the family truck and sped away, nearly hitting another car.
William Soutear testified on deposition and at trial that Garry did well for six to eight weeks following his discharge from Allen Park, but then began to withdraw. On June 5, 1982, two days before Garry's attack on his parents, Garry and Mr. Soutear went fishing with a friend. Garry was quiet and withdrawn. Mr. Soutear did not see him again until June 7th, when he walked into the Soutear home and began the fatal attack upon his mother with a hunting knife, which he had obtained from the Soutears' basement. When Mr. Soutear intervened, he too was injured.
The liability of the United States under the Federal Tort Claims Act is to be determined in the same manner and to the same extent as that of a private individual under like circumstances. 28 U.S.C. § 2674. Section 1346(b) of the Act provides that the district courts shall have exclusive jurisdiction of civil actions on claims against the United States for personal injuries in accordance with the law of the place where the act or omission occurred. Because the alleged negligence occurred at the VA hospital in Allen Park, Michigan, the law of Michigan must be applied.
Plaintiff's claim is based on two theories of negligence. First, that the doctors at the Allen Park VA hospital were negligent in releasing Garry because he posed a risk of violence to his parents, and second, that the doctors negligently failed to warn the Soutears that they were potential victims. In Michigan, the elements which a plaintiff must prove in order to prevail on a cause of action for negligence are: (1) a duty owed by the defendant to the plaintiff; (2) a breach of that duty; and (3) damages suffered by the plaintiff. In addition, the plaintiff must establish that the defendant's negligence was the proximate cause of the injury for which damages are sought. See Ghezzi v. Holly, 22 Mich.App. 157, 177 N.W.2d 247 (1970).
In Davis v. Lhim, 124 Mich.App. 291, 335 N.W.2d 481 (1983), the Michigan Court of Appeals held that a psychiatrist has a duty to exercise reasonable care in protecting potential victims who are readily identifiable as foreseeably endangered by his or her patient. In order to determine whether a psychiatrist has breached this duty, a court must examine the applicable standard of care. The Michigan legislature has codified the standard of care to be applied in malpractice cases. Although the case at bar sounds in negligence and does not allege malpractice in the treatment of Garry Soutear, this court finds the legislature's *533 statement of the standard of care applicable to doctors in the malpractice context helpful. The statute provides in pertinent part:
In an action alleging malpractice, the plaintiff shall have the burden of proving that in light of the state of the art existing at the time of the alleged malpractice:
(b) the defendant, if a specialist failed to provide the recognized standard of care within that specialty and reasonably applied in light of the facilities available under the circumstances, and as a proximate result of the defendant failing to provide that standard, the plaintiff suffered an injury.
M.C.L.A. § 600.2912a; M.S.A. § 27A.291a.
Identification of the standard of care and a determination of whether it was breached in this case require expert testimony. At trial, testimony of the expert witnesses, Drs. Emanuel Tanay and Edward Salem for plaintiff, and Drs. Herbert Modlin and Elliot Luby for defendant, focused on the ability of a psychiatrist to predict dangerousness and violence in a patient and whether, in this case, the VA doctors knew or should have known that Garry posed a threat of harm to his parents. The testimony was interwoven with application and interpretation of the Michigan Mental Health Code's criteria for judicial commitment. All of the doctors who testified had reviewed the records in the case but only Dr. Salem had ever examined Garry, and that examination occurred over a year after the murder.
One area of disagreement among the experts was the diagnosis ascribed to Garry by the VA doctors. Dr. Tanay took issue with both the diagnoses of schizophrenia, chronic undifferentiated, and residual schizophrenia. Based on his review of the records, he believed that Garry was a paranoid schizophrenic. The significance of the distinction in this case as described by Dr. Tanay is that the paranoid schizophrenic experiences delusions of persecution, seeing himself as the victim of a conspiracy and therefore, presumably presents a risk of harm to the "conspirators." Dr. Tanay stated that Garry's preoccupation with his parents, and Mrs. Soutear in particular, was evidence that he viewed his parents as persecutors. He testified that it is not unusual for a paranoid schizophrenic to have such delusions with regard to someone he loves, and added that "when a paranoid schizophrenic loves you, you'd better seek cover" because the love relationship is apt to turn to hate. Dr. Tanay also stated that he could not account for the change from the diagnosis of Drs. Beltran and Lustre of paranoid schizophrenia to that of Drs. Huggins and Thangavelu of residual schizophrenia and claimed that he had never seen such a dramatic change. Finally, Dr. Tanay testified that the term residual schizophrenia was outmoded and nondescriptive.
Neither the medical records nor the opinions of any of the other experts or treating doctors support Dr. Tanay's assessment that Garry was suffering from paranoid delusions. There is no evidence that Garry had prominent persecutory or grandiose delusions or convictions of delusional jealousy. His belief that he was not sick was not a delusion at all according to Drs. Modlin and Luby, but rather, a form of denial and a manifestation of his lack of judgment and insight. Nor was Garry's belief that his parents were trying to commit him a paranoid delusion because that in fact was their aim. Garry's view of himself as a college-bound professional, which Dr. Huggins characterized as a delusion, was described as grandiose rather than paranoid.
The primary diagnosis of Garry's treating doctors was schizophrenia, chronic undifferentiated type. Such a diagnosis is supported by manifestations of prominent loose delusions, periods of incoherent thinking, disorganized behavior and frequently auditory hallucinations. Drs. Modlin and Luby agreed with this diagnosis in Garry's case. A diagnosis of residual schizophrenia describes a patient in partial remission. Such a patient does not have a delusional system or experience such symptoms as auditory hallucinations but does present a *534 flat affect, is socially withdrawn, interacts poorly and may have loose thought associations. Dr. Modlin believed that the diagnosis of residual schizophrenia was appropriate in February of 1982 at the time of Garry's discharge. While Dr. Luby stated that he did not totally agree with the diagnosis, neither doctor believed it to be an outmoded term and both doctors agreed that patients frequently move from one form of schizophrenia to another, with exacerbations and remissions common. They explained that schizophrenia is a fluid, changing condition, with or without medication. Moreover, both Dr. Luby and Dr. Modlin most credibly testified that the fact that Garry later killed his mother does not mean that the diagnosis of the VA doctors was wrong. Considering the evidence and testimony presented at trial, the court finds no breach of the standard of care in the VA doctors' diagnoses of Garry Soutear's illness.
Despite the label ascribed to Garry's illness, the crux of plaintiff's argument is that Garry was in fact a danger to his parents and therefore should have been committed to the hospital in February of 1982. With respect to this argument, the parties elicited testimony from their experts regarding a psychiatrist's ability to predict violence, the means by which such predictions are made and the accuracy of such predictions.
Without specification, Dr. Tanay seemed to testify that Garry met the first and third criteria of the Michigan Mental Health Code's requirements for judicial commitment and that the hospital's failure to proceed with commitment was a breach of the standard of care. As explained above, the Michigan Mental Health Code allows involuntary commitment of a mentally ill person only if one of its three criteria is satisfied. The two criteria under which a prediction of dangerousness is relevant are (a) and (c):
(a) A person who ... can reasonably be expected within the near future to intentionally or unintentionally seriously physically injure himself or another person, and who has engaged in an act or acts or made significant threats that are substantially supportive of the expectation.
(c) A person ... whose judgment is so impaired that he is unable to understand his need for treatment and whose continued behavior ... can reasonably be expected ... to result in physical harm to himself or others.
Dr. Tanay's opinion that the VA doctors should have known that Garry presented a risk of harm to his parents was premised on his beliefs that Garry was a paranoid schizophrenic and that schizophrenics in general are more violent than the general population, as well as on Garry's continuous refusal to take medication. He testified that schizophrenics are people with tremendous amounts of rage and described the paranoid schizophrenic as a walking time bomb. In his opinion, long-term institutionalization is the only acceptable treatment for the overtly psychotic. Specifically, Dr. Tanay stated that living is only possible for the chronic psychotic in a mental hospital. Because the condition is chronic and life-long, he believes that such individuals need a structured environment and explained that it is not unusual for such patients to present no overt symptoms at times, nor that institutionalization results in an improvement in their symptoms. Such improvement, however, according to Dr. Tanay, does not warrant the patient's release, particularly if the patient refuses medication. He opined that the psychotic is unable to make the decision to take medication and therefore, the hospital should force the patient to do so. He found Garry's non-compliance with medication during the last hospitalization disturbing because it was clear evidence that he would refuse medication upon release and that his condition would deteriorate. He further took issue with the testimony of Drs. Huggins and Thangavelu in which they stated that Dr. Thangavelu had developed a therapeutic relationship with Garry. Dr. Tanay expressed the opinion that while psychotherapy is sometimes attempted with schizophrenic patients, it is usually ineffective and is most often used for educational purposes. *535 Permanent hospitalization and medication are the only safe and effective methods of dealing with schizophrenia in his view.
Dr. Tanay testified that he did not think past acts of physical harm are necessarily good predictors of future violence. Rather, he seemed to base his opinion that a patient poses a risk of violence solely on the fact of the patient's psychosis and stated essentially that all psychotics present a risk and require long-term, if not life-long confinement.
He further testified that psychotic homicide can be anticipated and that although a psychiatrist identifies a given state in a patient as of the time of the examination, that state may carry a potential or a risk of violence in the future. Dr. Tanay stated that once a patient is diagnosed as homicidal, the psychiatrist should be able to make a prognosis as to how long that state will last. However, when asked about the predictability of future violence in a patient found to be non-homicidal, Dr. Tanay replied that it would depend on the case. The only illumination he provided on this point was that he does not think that anyone enters or leaves the state of a potential for violence on a daily basis. In essence, it seems that Dr. Tanay's point was again that Garry Soutear was misdiagnosed and that he had actually been homicidal for some time prior to the attack on his parents.
In contrast to Dr. Tanay's testimony, defendant's experts testified that it is extremely difficult for a psychiatrist to predict dangerous behavior in a patient and that without a history of prior or current assaultive behavior, it is virtually impossible. According to Drs. Modlin and Luby, indications that a patient may be dangerous in the future include: whether the patient uses drugs or alcohol, past or current assaultive behavior, past or current threats of harm, and command hallucinations (voices telling the patient to harm himself or others). These experts cautioned, however, that even when threats have been made, clinical judgment is essential because many patients make such threats but very few carry them out. Moreover, plaintiff's own expert, Dr. Salem, upon questioning by the court concurred in the opinion of Drs. Modlin and Luby that it is extremely difficult to predict dangerousness. He likened it to trying to predict what someone will do when they are drunk, and added that the same person does not always behave in the same manner.
Further, defendant's experts testified that psychiatrists do not have the skills to predict dangerousness beyond an outside time limit which, in Dr. Modlin's opinion is two to four weeks and in Dr. Luby's opinion is approximately one week. Both agreed that a psychiatrist's ability to predict assaultive behavior does not extend to 3½ months, the interval between Garry's release and the assault upon his parents. Accordingly, even if the hospital were negligent, its negligence could not have constituted the proximate cause of this tragedy.
Nor did Drs. Modlin and Luby agree with Dr. Tanay that schizophrenics are more dangerous than the general population. They relied upon studies supporting their position and discredited the literature relied upon by Dr. Tanay as having involved a much broader category of mentally ill persons than schizophrenics.
Both Dr. Modlin and Dr. Luby agreed that Garry did not meet any of the state's criteria for judicial commitment as of February 19, 1982. They noted that the fact that Garry had been without medication during the entirety of his last hospitalization without exhibiting any assaultive or violent behavior was an indication that violence could not be predicted for the future in his case. While both doctors opined that long-term hospitalization is almost always beneficial to the chronically ill, neither accepted Dr. Tanay's position that compulsory institutionalization is the only effective treatment or was required in this case. Although Drs. Modlin and Luby agreed that without medication, Garry could be expected to deteriorate at some time in the future, they did not envision that deterioration as necessarily including violent behavior. *536 Nor did defendant's experts opine that a therapeutic relationship can take the place of medication or hospitalization. Dr. Modlin, however, stated that a therapeutic relationship is very important and helpful in treating schizophrenic patients because they have difficulty in developing relationships of trust. He distinguished a therapeutic relationship from psychotherapy and identified the benefits of a therapeutic relationship as a basis upon which the patient is able to learn that the doctor is reliable, predictable and dependable.
Similarly, both of defendant's experts disagreed with Dr. Tanay's opinion that the VA doctors should have forced Garry to take his medication and they pointed out that the Michigan Mental Health Code prohibits medicating a patient against his will without a court order or unless the patient is immediately assaultive. Nor, under the Code is a patient's refusal to take medication by itself a sufficient basis upon which to commit.
Both defense experts agreed that the anger and ambivalence Garry felt toward his parents had no predictive value as to a potential for violence. They testified that ambivalence is no longer considered one of the cardinal indicators of schizophrenia and that all individuals experience fluctuating feelings at one time or another in personal relationships. These doctors simply did not equate anger with a potential for homicide without some predictor that Garry would express his anger violently. They noted that he had expressed his anger toward his parents and others in the past verbally, rather than by physically striking out at them.
Dr. Modlin and Dr. Luby testified that the appropriate standard of care required Dr. Thangavelu to carefully interview both the patient and his family, take a history of the patient, perform a mental status and a medical exam, familiarize herself with the observations of other staff with whom the patient had contact and review past medical records including those from other hospitals. Both doctors expressed their belief that Dr. Thangavelu met the standard of care and neither thought it incumbant upon her to have interviewed Garry's siblings.
Based upon its review of the evidence and the testimony presented at trial in this case, the court finds that neither the defendant's decision not to attempt to commit Garry Soutear, nor its failure to warn his parents of his potential for violence were negligent. Although hospitalization and medication would have undeniably been the best treatment for the patient, the decision of the doctors at the VA hospital to abandon legal commitment proceedings and the absence of a warning of dangerousness did not breach their duty to his parents.
A psychiatrist owes a duty of reasonable care only to persons "foreseeably endangered" by his or her patient. Davis, 124 Mich.App. at 301, 335 N.W.2d 481.
Danger to a third person is foreseeable only where the psychiatrist "determines, or pursuant to the standards of his profession should determine, that his patient presents a serious danger of violence to another." Tarasoff [v. Regents of University of California, 17 Cal.3d 425, 431; 131 Cal.Rptr. 14, 20; 551 P.2d 334, 340 (1976)]. Psychiatry ... is not an exact science. Medical doctors cannot predict with perfect accuracy whether or not an individual will do violence to himself or to someone else. Thus, we hold a psychiatrist to only the standard of care of his profession. That standard "must take into consideration the uncertainty which accompanies psychiatric analysis.... The concept of `due care' in appraising psychiatric problems, assuming proper procedures are followed, must take account of the difficulty often inevitable in definitive diagnosis." Lipari v. Sears, Roebuck & Co., [497 F.Supp. 185, 192 (D.Neb.1980)] quoting Hicks v. United States, ... 511 F.2d 407, 417 (D.C.Cir. 1975). Thus, a psychiatrist will not be held liable for his patient's violent behavior simply because he failed to predict it accurately.
Davis, 124 Mich.App. at 301, 335 N.W.2d 481 (emphasis added).
*537 In this case, the VA doctors were clearly unaware that Garry was potentially dangerous to anyone. The question then becomes whether they should have known that he was likely to cause serious harm to another person. Based upon the record before it, the court does not so find. Despite Dr. Thangavelu's full compliance with all appropriate procedures she was simply unable to discern any persuasive evidence upon which to predict such behavior.
At the time of his discharge Garry's condition had improved despite his refusal to take medication. He was not overtly psychotic, delusional or hallucinating. He was coherent with no looseness of associations. He verbalized his feelings well, displayed no signs of homicidal or suicidal ideation and agreed to seek outpatient treatment. Dr. Thangavelu had interviewed or examined the patient on three occasions prior to the afternoon session with Garry and his parents on February 19th. She had reviewed his medical records and discussed the case with numerous other staff who had been in contact with Garry. In addition she, as well as other doctors at the VA hospital, had discussed the patient's condition with his family on several occasions and had been given no new information which would have supported commitment.
During interviews with the family inquiries were made regarding Garry's access to or preoccupation with weapons and as to whether he had ever threatened to harm anyone or had engaged in assaultive behavior. Mrs. Soutear did not report to the VA staff the only threat that Garry apparently ever made which was to get even with her by embarrassing her. Nor could Dr. Thangavelu have been aware of the jostling incident at the airport, the incident with the dead squirrel, or Garry's pounding on the car to which his sisters had testified because all three of these incidents occurred after his release. Even when Dr. Thangavelu spoke with Nancy Soutear on the phone in April of 1982 and inquired as to Garry's condition, Mrs. Soutear failed to advise her of this aggressive behavior. Moreover, the parents were advised that Garry would experience remissions and exacerbations of his illness and that he was expected to deteriorate. The Soutears were encouraged to seek his hospitalization upon the worsening of his condition. Despite the events of April, 1982, they did not do so.
Although the VA doctors were aware that the furniture in Garry's apartment had been burned by cigarettes, this behavior was interpreted as merely inattentiveness on his part and not predictive of dangerousness. Since the staff had ample opportunity to observe Garry in the hospital setting, this conclusion does not appear unwarranted. Similarly, neither Garry's treating physicians nor the experts who testified at trial viewed his interest in the occult as evidence of a potential for violence. Even Dr. Tanay noted that such interests are not uncommon in schizophrenics and therefore, presumably not significant.
In the considered opinion of Drs. Huggins, Beltran and Thangavelu, Garry did not meet the criteria for judicial commitment on February 19, 1982. Even those doctors who had earlier believed that he met the criteria had based their opinions on Garry's inability to understand the need for treatment and to attend to his basic needs. Dr. Beltran testified that although she believed that Garry might be a danger to himself on February 5th when she filed her certificate, by February 11th, she no longer believed this to be the case. At no time during her treatment of the patient did she believe that he was dangerous to others. By February 11th she had also revised her earlier impression of Garry as a paranoid schizophrenic and had formulated her final diagnosis of schizophrenia, chronic undifferentiated, a diagnosis which she obviously had suspected as a possibility since her first encounter with the patient.
In determining whether Garry met the criteria for judicial commitment under the Michigan Mental Code, the VA doctors made a specific finding as to the likelihood that he might cause serious harm to others. In their considered medical opinions he met none of the criteria. While Garry's ultimate *538 violent act demonstrates that he met the criteria at some point, the court cannot say by a preponderance of the evidence that he required commitment on February 19th. Nor does the court find that the doctors could have foreseen, based on the record, that he would have been dangerous 3½ months in the future. Mr. Soutear's testimony that Garry did well for six to eight weeks following his release is evidence of the reasonableness of the VA staff's decision to release him.
Having found that the doctors' opinion that Garry was not dangerous to anyone was formulated in accordance with the appropriate standard of care, the court also finds no breach of duty in the doctors' failing to warn the Soutears of their potential as Garry's victims. In the absence of other evidence, the fact that Garry was angry at his parents for their attempts to commit him and what he viewed as interference in his life is simply not sufficient for the court to find, contrary to every doctor who ever treated him and the most credible expert opinions, that the Soutears were foreseeably endangered by him. If the doctors had been able to determine that Garry was dangerous, perhaps the Soutears would have then become identifiable as foreseeably endangered. But again, in the absence of a basis upon which to reasonably conclude that the patient was dangerous to anyone, the question of whether the Soutears were foreseeably endangered must be answered negatively. Moreover, it appears that the Soutears were warned to the extent deemed necessary under the circumstances that the possibility of violent behavior should be anticipated in any schizophrenic patient. The warning was implicit in every doctor's repeated inquiries regarding weapons, threats and assaultive conduct and the Soutears were put on notice that Garry, by virtue of his illness, could become dangerous. This warning was sufficient in light of the dearth of evidence to suggest that Garry would become dangerous.
Were the court to adopt Dr. Tanay's point of view, it would be compelled to find that all schizophrenics require long-term commitment a finding which would nullify the Michigan Mental Health Code. The Code, with which Dr. Tanay expressed his strenuous disagreement, is the law in Michigan and it appears to the court after hearing all of the testimony that it is not inconsistent with the practice of good medicine. Although it protects the rights of the mentally ill, it also allows a psychiatrist to confine an individual who, in the doctor's considered judgment, is likely to cause serious harm to himself or others. Sometimes doctors are wrong. Whether or not the VA doctors were wrong in this case to release Garry Soutear on February 19th, considering the record and the state of the art in psychiatry, the error, if indeed it was error, was not the result of negligence. This is not to minimize the tragedy that befell the Soutear family. However, to hold the United States liable when, despite its doctors' full compliance with all accepted procedures they were unable to discover any evidence upon which to predict such behavior, would be untenable. "To require a psychiatrist to use due care to protect another whenever he encounters the slightest hint that his patient might endanger that person would be an intolerable burden." Davis, 24 Mich.App. at 302, 335 N.W.2d 481.
Therefore,
IT IS ORDERED that judgment in this case is hereby entered for defendant and plaintiff's claim is hereby dismissed.
IT IS SO ORDERED.
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