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295 F.3d 1124
John M. RICKS, Plaintiff-Appellant,v.Marvin L. NICKELS, Commandant USDB Ft. Leavenworth; Fred W. Bucher, S-3 Operations Officer, Assistant Chief of Staff; (NFN) Robinson, S-3 Operations Officer, Major; Mark P. Speere, Air Force Detachment Commander; (NFN) Stieger, NCOIC/ANCOIC of S-3 Operations, USDB Ft. Leavenworth; (NFN) Minton, NCOIC/ANCOIC of S-3 Operations, USDB Ft. Leavenworth; (NFN) Williams; (NFN) Cook; (NFN) Rudnicki; (NFN) Arthur;(NFN) Mitchell; (NFN) (NMI) Martin, all in various command/supervisory/administrative positions; John and Jane Does, 1-700 are correctional, administrative, or supervisory officials on USDB policies, Defendants-Appellees.
No. 00-3176.
United States Court of Appeals, Tenth Circuit.
July 9, 2002.
Alison Ruttenberg, Boulder, CO, for Plaintiff-Appellant.
Major James Roger Agar II, Of Counsel, U.S. Army Litigation Division, (Lieutenant Colonel Tara A. Osborn, Of Counsel, U.S. Army Litigation Division; James E. Flory, United States Attorney, Topeka, Kansas; D. Brad Bailey, Assistant United States Attorney, Topeka, KS; with him on the brief), for Defendants-Appellees.
Before HENRY, BALDOCK, and MURPHY, Circuit Judges.
MURPHY, Circuit Judge.
I. INTRODUCTION
1
Plaintiff-Appellant John M. Ricks appeals an order dismissing his claims brought under Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics against Defendants Appellees for alleged constitutional violations incurred while incarcerated at the United States Disciplinary Barracks (USDB). See Bivens, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). The issue presented is whether the Feres doctrine bars a military prisoner's Bivens claims for damages arising from alleged injuries sustained after the prisoner has received a complete punitive discharge from service. See Feres v. United States, 340 U.S. 135, 71 S.Ct. 153, 95 L.Ed. 152 (1950). We have jurisdiction under 28 U.S.C. § 1291. Because Ricks' Bivens claims arise from events incident to his military service, this court affirms.
II. BACKGROUND
2
Ricks originally enlisted in the United States Air Force. After a trial and conviction for violations of Articles 85 and 134 of the Uniform Code of Military Justice (UCMJ), a general court-martial sentenced Ricks to fifteen years' imprisonment. Ricks received a dishonorable discharge on March 28, 1996, which was executed on April 3, 1996.1
3
At the time he filed the original complaint, Ricks was serving his sentence at the USDB in Forth Leavenworth, Kansas. The USDB is the Army Corrections System maximum custody facility and provides long-term incarceration for enlisted and officer personnel of the armed forces. No civilians are confined at the USDB. The USDB is run by the Commandant, a United States Army military police officer. Military police serve as correctional officers at the USDB, which does not employ civilian guards. At the time of the complaint, all named Defendants were active duty members of the United States Army, serving in their official capacities as Commandant, noncommissioned officers, guards, and administrative support for the USDB.
4
Ricks filed a complaint pro se, later amended, in the United States District Court for the District of Kansas seeking injunctive, mandamus, and monetary relief, as well as administrative sentence credit for alleged violations of his First, Fifth, and Eighth Amendment rights. Ricks alleged, inter alia, that the Defendants' various violations of his First Amendment rights included retaliation for filing litigation against the Defendants. Ricks also claims that he was sexually assaulted by prison guards during frisk searches on November 8, 1997 and January 13, 1998 and that his administrative complaints were ignored or summarily rejected.
5
The district court initially dismissed all claims except Ricks' First Amendment retaliation claim for punitive and nominal damages2 and his sexual assault claims for compensatory and punitive damages. Ricks does not appeal the district court's dismissal of his other claims. Although the Defendants argued that all claims were barred by the Feres doctrine, the district court stated that it was unable to determine whether Feres applied because Ricks had not indicated when he had been discharged. Thereafter, the Defendants brought another motion to dismiss, renewing their Feres doctrine argument. After additional briefing and further consideration, the district court dismissed Ricks' remaining claims as barred by Feres.
6
During the pendency of the lawsuit in district court, Ricks was transferred to the custody of the United States Bureau of Prisons. Because Ricks seeks only monetary damages on appeal, his transfer does not moot his claims. The only issue before this court is whether the district court properly dismissed Ricks' Bivens claims for damages pursuant to the Feres doctrine.3
III. DISCUSSION
A. Standard of Review
7
Although not specifically stated in its order, this court assumes that the district court dismissed Ricks' claims under the Feres doctrine pursuant to Federal Rule of Civil Procedure 12(b)(1). See Dreier v. United States, 106 F.3d 844, 847 (9th Cir.1997) (explaining that motion to dismiss pursuant to Feres doctrine is properly treated as a Rule 12(b)(1) motion to dismiss). Accordingly, this court reviews the district court's dismissal for lack of subject matter jurisdiction de novo. Quintana v. United States, 997 F.2d 711, 712 (10th Cir.1993). Because the Defendants challenge the sufficiency of Ricks' complaint to satisfy subject matter jurisdiction, and not Ricks' factual allegations, this court must accept the allegations in the complaint as true. See Holt v. United States, 46 F.3d 1000, 1002-03 (10th Cir.1995). Allegations in a pro se complaint are construed liberally. See Haines v. Kerner, 404 U.S. 519, 520-21, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972) (per curiam).
B. Incident to Service Test
8
In Feres, the Supreme Court created a judicial exception to the broad waiver of sovereign immunity in the Federal Tort Claims Act (FTCA). See 340 U.S. at 146, 71 S.Ct. 153. The federal government cannot be liable under the FTCA "for injuries to servicemen where the injuries arise out of or are in the course of activity incident to service." Id. The Supreme Court subsequently applied the exception created in Feres to damage actions under Bivens. See Chappell v. Wallace, 462 U.S. 296, 305, 103 S.Ct. 2362, 76 L.Ed.2d 586 (1983).
9
Relying on language in Feres, courts have applied the "incident to service" test. Originally, this test was cast in narrow terms, barring enlisted military personnel from bringing FTCA claims against a superior officer. See id. at 305, 103 S.Ct. 2362. In subsequent cases, the federal courts have expanded the reach of the Feres doctrine. See, e.g., United States v. Stanley, 483 U.S. 669, 107 S.Ct. 3054, 97 L.Ed.2d 550 (1987) (applying Feres to bar Bivens claims for damages against military and civilian officials for injuries resulting from the military's intentional administration of LSD to unwitting volunteer); United States v. Johnson, 481 U.S. 681, 107 S.Ct. 2063, 95 L.Ed.2d 648 (1987) (applying Feres to bar an FTCA claim against the United States alleging negligence by civilian employees of the Federal Aviation Administration); United States v. Shearer, 473 U.S. 52, 105 S.Ct. 3039, 87 L.Ed.2d 38 (1985) (applying Feres to FTCA claim arising from the decedent servicemember's murder committed by a fellow servicemember which occurred off-duty and off-base); Stencel Aero Eng'g Corp. v. United States, 431 U.S. 666, 97 S.Ct. 2054, 52 L.Ed.2d 665 (1977) (applying Feres to bar defendant corporation's cross-claim against United States for indemnification of servicemember's injuries arising from military activities); Pringle v. United States, 208 F.3d 1220 (10th Cir.2000) (per curiam) (applying Feres to an FTCA claim for injuries sustained from a beating after plaintiff servicemember was ejected from a military club); Quintana, 997 F.2d 711 (applying Feres to reserve servicemember's medical malpractice FTCA claim for injuries sustained from military training).
10
Courts have broadened the scope of the incident to service test to encompass injuries that are attenuated from the servicemember's duty status. In Pringle, this court stated:
11
In recent years, the Supreme Court has broadened Feres, to the point where it now encompasses, at a minimum, all injuries suffered by military personnel that are even remotely related to the individual's status as a member of the military. Courts applying the Feres doctrine have given a broad reach to Feres' "incident to service" test and have barred recovery by members of the armed services for injuries that at first blush may not have appeared to be closely related to their military service or status. Practically any suit that implicates the military's judgments and decisions runs the risk of colliding with Feres.
12
208 F.3d at 1223-24 (quotations, citations, and alterations omitted). As a result of the broad application of the incident to service test, "the Feres doctrine has been applied consistently to bar all suits on behalf of service members against the Government based upon service-related injuries." Johnson, 481 U.S. at 687-88, 107 S.Ct. 2063 (emphasis added); see also Quintana, 997 F.2d at 712 (reasoning that Feres should bar plaintiff's FTCA injuries "precisely because of" her relationship to the military). The Supreme Court has emphasized that it has never deviated from the incident to service test. See Johnson, 481 U.S. at 686, 107 S.Ct. 2063 (citing cases).
C. "Special Factors" Analysis
13
Federal courts have employed a second test which examines whether applying Feres would further its underlying purposes in a particular case. The Supreme Court in Feres gave several justifications for the doctrine, but courts have subsequently emphasized three purposes when determining Feres' applicability: "(1) the distinctly federal nature of the relationship between the government and members of its armed forces; (2) the availability of alternative compensation systems; and (3) the fear of damaging the military disciplinary structure." Walden v. Bartlett, 840 F.2d 771, 773 (10th Cir.1988) (quotation and alteration omitted); see also Chappell, 462 U.S. at 299, 103 S.Ct. 2362; Stencel, 431 U.S. at 671, 97 S.Ct. 2054. The Supreme Court has stated that these three factors comprise the "special factors" analysis. See Chappell, 462 U.S. at 298-99, 103 S.Ct. 2362 (citing Bivens, 403 U.S. at 396, 91 S.Ct. 1999).
14
While the incident to service test has been reaffirmed and broadened in recent Feres cases, the reasoning and application of the "special factors" analysis have been criticized. See Johnson, 481 U.S. at 692-703, 107 S.Ct. 2063 (Scalia, J., dissenting) (criticizing the rationale of each factor); Stencel, 431 U.S. at 674-77, 97 S.Ct. 2054 (Marshall, J., dissenting) (disagreeing with the application of Feres' special factors analysis to a defendant corporation's indemnity claim against the government).
15
In applying the "special factors" analysis, several courts have discussed the test without adducing how the underlying purposes of Feres are actually furthered in a particular case. In Johnson, for example, the Supreme Court recited the "special factors" analysis but did not actually examine how the purposes were furthered by applying the Feres doctrine. See Johnson, 481 U.S. at 688-92, 107 S.Ct. 2063; see also Walden, 840 F.2d at 773-74 (same).
16
As for the viability of the three special factors, the Supreme Court has stated that the first two rationales, the distinctly federal nature of the government-military relationship and the availability of alternative compensation systems, are "no longer controlling." See Shearer, 473 U.S. at 58 n. 4, 105 S.Ct. 3039.4 Concomitant with the diminishing importance of the first two special factors, however, is the increasing emphasis on the third, the importance of the military disciplinary structure. This rationale has been labeled the "best expla[nation]" for Feres. See Chappell, 462 U.S. at 299, 103 S.Ct. 2362; see also Pringle, 208 F.3d at 1227 (calling the military discipline rationale the "most important"). Within this rationale, there are apparently two interrelated strains of reasoning: (1) the general policy to limit litigation that could undermine the unique hierarchical and disciplinary structure of the military; and (2) separation of powers concerns that the judiciary should not delve into the internal affairs of the military. See Stanley, 483 U.S. at 679, 107 S.Ct. 3054; Shearer, 473 U.S. at 57, 105 S.Ct. 3039; Chappell, 462 U.S. at 300-02, 103 S.Ct. 2362. With respect to the latter, courts have emphasized that governance and oversight of the military have been constitutionally committed to Congress and the executive branch. See Chappell, 462 U.S. at 301, 103 S.Ct. 2362. There is a judicial concern that any "trial would ... involve second-guessing military orders, and would often require members of the Armed Services to testify in court as to each other's decisions and actions." Stencel, 431 U.S. at 673, 97 S.Ct. 2054.5
17
Formalistic application of the "special factors" analysis and the increasing emphasis on only the military discipline factor were addressed in Stanley, the Supreme Court's most recent exposition of the reach of Feres. In Stanley, the Supreme Court considered a former servicemember's Bivens claims for damages against military and civilian officials for injuries originating from the Army's secret administration of LSD to unsuspecting active-duty volunteers. See 483 U.S. at 671-72, 107 S.Ct. 3054. After stating that Feres established an incident to service test, the Court shifted its discussion to the "special factors" analysis. See id. at 681-82, 107 S.Ct. 3054. Importantly, however, Stanley did not mention the first two factors. The Stanley Court then candidly admitted that "there are varying levels of generality at which one may apply `special factors' analysis." Id. at 681, 107 S.Ct. 3054. The appropriate level of generality "depends upon how prophylactic one thinks the prohibition should be (i.e., how much occasional, unintended impairment of military discipline one is willing to tolerate), which in turn depends upon how harmful and inappropriate judicial intrusion upon military discipline is thought to be." Id.
18
The Court explicitly rejected a "special factors" analysis which would consider how miliary discipline would actually be affected in a particular case. See id. Instead, the appropriate level of generality is to "disallow Bivens actions whenever the injury arises out of activity `incident to service.'" Id. Stanley thus effectively merged the "special factors" analysis with the incident to service test. Discussing the effect a suit could have on military discipline, the Court concluded:
19
A test for liability that depends on the extent to which particular suits would call into question military discipline and decisionmaking would itself require judicial inquiry into, and hence intrusion upon, military matters. Whether a case implicates those concerns would often be problematic, raising the prospect of compelled depositions and trial testimony by military officers concerning the details of their military commands. Even putting aside the risk of erroneous judicial conclusions (which would becloud military decisionmaking), the mere process of arriving at correct conclusions would disrupt the military regime. The "incident to service" test, by contrast, provides a line that is relatively clear and that can be discerned with less extensive inquiry into military matters.
20
Id. at 682-83, 107 S.Ct. 3054 (emphasis added). Stanley made clear that the incident to service test rests squarely on the third special factor of preserving the military's disciplinary structure and Congress' prerogative in regulating intramilitary affairs. See id. at 683, 107 S.Ct. 3054. The Court concluded that the plaintiff's claims were barred by Feres because they were incident to service. Id. at 684, 107 S.Ct. 3054.
21
In applying Stanley and rejecting the argument that inquiry should be made to determine how military discipline and command would actually be affected in a particular case, this court stated that the Supreme Court has "rejected a case-by-case review of service members' damage[s] actions because it would involve judicial inquiry into, and intrusion upon, military matters." Walden, 840 F.2d at 774 (citing Johnson and Stanley). "[I]n the last analysis, Feres seems best explained by the peculiar and special relationship of the soldier to his superiors, and the effects on the maintenance of such suits on discipline...." Chappell, 462 U.S. at 299, 103 S.Ct. 2362 (quotation omitted). In accordance with Stanley and Walden, we apply the incident to service test.6
22
D. Effect of Ricks' Fully Executed Dishonorable Discharge
23
"[N]o Bivens remedy is available for injuries that arise out of or are in the course of activity incident to service." Stanley, 483 U.S. at 684, 107 S.Ct. 3054 (quotation omitted). Ricks argues that because he was fully discharged at the time of the alleged injuries, his claims are not incident to service. A complete discharge, however, does not automatically transform a servicemember into a civilian for purposes of Feres analysis. The paramount inquiry is whether the alleged constitutional violations are incident to the plaintiff's military service. See Wake v. United States, 89 F.3d 53, 60 (2d Cir.1996) ("The dispositive inquiry ... is not whether the plaintiff was lawfully on active duty at the time his claims arose, but whether he stood in the sort of relationship to the Air Force at the time of the incidents in question that those incidents arose out of activity incident to service." (quotation and alterations omitted)).
24
In Quintana, this court applied Feres to bar a reserve servicemember's FTCA claims for injuries sustained as a result of a military surgeon's medical negligence. See 997 F.2d at 712. As a member of the New Mexico National Guard and the United States Army National Guard, the plaintiff was participating in "inactive duty training" at the time of her injuries. See id. We rejected the plaintiff's argument that Feres was inapplicable to her claims because she was on reserve status. See id. "[W]e have previously held that active duty status is not necessary for the Feres `incident to service' test to apply." Id. The relevant fact was that her injuries arose from her military relationship, not her status as a reserve member of the national guard.
25
In the habeas context, courts have held that a complete military discharge does not necessarily deprive the military of jurisdiction over the plaintiff. See Kahn v. Anderson, 255 U.S. 1, 8-9, 41 S.Ct. 224, 65 L.Ed. 469 (1920); Ragan v. Cox, 320 F.2d 815, 816-17 (10th Cir.1963). Kahn and Ragan involved military prisoners at the USDB who, upon court-martial for crimes or UCMJ violations committed during incarceration, challenged their imprisonment and argued that their prior discharges rendered them civilians and thus not subject to military law. See Kahn, 255 U.S. at 6-7, 41 S.Ct. 224; Ragan, 320 F.2d at 816. The courts held that each prisoner's discharge was immaterial, since each remained subject to military law and trial by court-martial for offenses committed during imprisonment. See Kahn, 255 U.S. at 8, 41 S.Ct. 224 (noting that petitioner "was a military prisoner though he had ceased to be a soldier"); Ragan, 320 F.2d at 817 (explaining that the plaintiff "had not returned to civilian life and was not completely separate from the military forces, but remained in military custody ... and, being so confined, [ ] was made subject to military jurisdiction"); see also Lee v. Madigan, 248 F.2d 783 (9th Cir.1957) ("The technical dishonorable discharge constituted a severance from the military for certain purposes, including the deprivation of various benefits, but it is unthinkable to regard it as a vitiation of all military authority over the petitioner."), rev'd on other grounds, 358 U.S. 228, 79 S.Ct. 276, 3 L.Ed.2d 260 (1959).
26
In Walden, the plaintiff was an inmate at the USDB who had been convicted by court-martial for military crimes committed while on active duty. See Walden, 840 F.2d at 772. He claimed that the manner in which the defendant military officials conducted disciplinary proceedings pursuant to the court-martial violated his due process rights. See id. These alleged due process violations occurred before Walden's discharge was officially executed. See id. This court concluded that the challenged disciplinary proceedings were "incident to service":
27
At the time of [the] challenged proceedings, Walden was an active-duty service member assigned to a military institution commanded and operated by military personnel according to military policies and regulations. He remained subject to the Uniform Code of Military Justice and could be tried by court-martial for offenses while incarcerated at the USDB. 10 U.S.C. § 802(a)(7). Walden's incarceration at the USDB is uniquely part of this military relationship such that it is "incident" to his military service as established by Feres.
28
Id. at 774.
29
Here, Ricks stands in a position similar to that of the plaintiff in Walden. Ricks was convicted in a military court for offenses committed during active duty. At the time he suffered the alleged constitutional violations, Ricks was confined in a military institution commanded and operated by military personnel, subject to the USDB's rules and regulations. Merely because Ricks was fully discharged at the time of the alleged violations, unlike Walden, does not alter his status as a military prisoner. As military prisoners, both Walden and Ricks were subject to the UCMJ and could be tried by court-martial for offenses committed during incarceration. See 10 U.S.C. § 802(a)(7). Ricks' incarceration at the USDB, and thus his alleged injuries, stemmed from his "military relationship such that it is `incident' to his military service." Walden, 840 F.2d at 774.
30
We recognize that this court's unpublished dispositions suggest that a service member's duty status affects this court's Feres doctrine analysis. In Paalan v. Nickels, this court stated that "a person's military duty status affects the applicability of the Feres doctrine. The Feres doctrine does not bar recovery of damages where the injured party was completely discharged from military service prior to the injury." No. 99-3283, 2000 WL 177416, at *1 (10th Cir. Feb.16, 2000) (citations omitted). Paalan, a military prisoner incarcerated at the USDB, brought a Bivens action based on the denial of prescribed heart medication during his confinement. See id. This court remanded the case for further proceedings to determine whether Paalan's injuries occurred after discharge. See id. Although this court affirmed the district court's dismissal of Paalan's Bivens claim on remand, it reiterated that "Feres is inapplicable ... to injuries sustained after the completion of an individual's military service." Paalan v. Nickels, No. 00-3367, 2001 WL 997938, at *1 (10th Cir. Aug.31, 2001).7
31
This court agrees that a person's military status may affect the applicability of the Feres doctrine. Nothing in the Supreme Court's jurisprudence, however, suggests that a person's complete discharge creates a per se rule that Feres is inapplicable. Indeed, the Supreme Court has cautioned that the Feres doctrine "cannot be reduced to a few bright-line rules." Shearer, 473 U.S. at 57, 105 S.Ct. 3039; see also Pringle, 208 F.3d at 1224. Moreover, as unpublished dispositions, the Paalan orders and judgments are nonbinding dispositions. See 10th Cir. R. 36.3(A). Thus, if a servicemember's claims are incident to service, it is immaterial whether the plaintiff has been fully discharged from the military.
32
Ricks argues that the military discipline rationale is not implicated in this case because his claims "do[ ] not involve the `demands of discipline and duty [that] becomes [sic] imperative in combat,' which necessitates protecting the special relationship between the enlisted military personnel and their superior officers." He argues that his status as a discharged military prisoner renders him more like a federal prisoner than an active duty servicemember. In United States v. Muniz, he notes, the Supreme Court permitted federal prisoners to bring FTCA suits for injuries sustained during incarceration. See 374 U.S. 150, 158-59, 83 S.Ct. 1850, 10 L.Ed.2d 805 (1963) (distinguishing Feres).
33
Feres caselaw does not support Ricks' contention. In rejecting a similar argument in Stanley, the Supreme Court explained that "Feres did not consider the officer-subordinate relationship crucial, but established instead an `incident to service' test." Stanley, 483 U.S. at 680-81, 107 S.Ct. 3054. Moreover, it is clear that Feres applies to claims that arise outside of combat and military activities. In Shearer, for example, the decedent's administrator brought an FTCA claim on behalf of her son, who was off-duty and off-base when he was kidnaped and murdered by a fellow servicemember. See Shearer, 473 U.S. at 53, 105 S.Ct. 3039. The plaintiffs asserted that the military negligently failed to exert control over the servicemember and failed to warn others about his dangerousness. See id. at 58, 105 S.Ct. 3039. As in Shearer, Ricks' claims "go[ ] directly to the `management' of the military; it calls into question basic choices about the discipline, supervision, and control of a serviceman." Id.; see also Pringle, 208 F.3d at 1227 (explaining that permitting the plaintiff's FTCA claims arising from the ejection from a military club would call into question the military's management of the club, the adequacy of security measures, Army staffing decisions, and whether club regulations were followed by club employees). The inquiry into military structure and command that adjudication of Ricks' claims would necessitate and its resulting effects are precisely the sort that Feres intended to circumscribe. See Stanley, 483 U.S. at 682-83, 107 S.Ct. 3054.
IV. CONCLUSION
34
This court concludes that Ricks' complete discharge does not place him beyond the ambit of the Feres doctrine. Because Ricks was incarcerated at a military prison and subject to the UCMJ, the alleged constitutional violations were incident to his military service. Accordingly, the district court's dismissal of Ricks' Bivens claims is AFFIRMED.
Notes:
1
The government contends in its initial answer brief that Ricks was "not served with his discharge until September 15, 1998, when he was transferred to the Bureau of Federal Prisons." Ricks attached to his initial reply brief documentation that he was served with a DD Form 214, which memorializes the punitive discharge, on April 3, 1996. The government does not challenge Ricks' assertion in its supplemental briefing. As such, this court accepts as true Ricks' assertion that his discharge from military service was executed prior to the unconstitutional acts alleged in his complaint
2
The district court dismissed Ricks' claim for compensatory damages with respect to his retaliation claim, citingPerkins v. Kansas Department of Corrections, 165 F.3d 803 (10th Cir.1999). Ricks does not appeal this decision.
3
Ricks initially filed his appealpro se. After briefing, this court appointed counsel to represent Ricks and permitted supplemental briefing. Ricks subsequently filed a notice with this court, which was construed as a motion to withdraw and substitute counsel. The order granting the motion was not entered until after both Ricks' appointed and retained counsel filed supplemental briefs. Because both briefs are properly before this court, we have considered them in the disposition of this appeal.
4
Indeed, the Supreme Court explained that whether a servicemember has adequate federal remedies for his injuries is "irrelevant."United States v. Stanley, 483 U.S. 669, 683, 107 S.Ct. 3054, 97 L.Ed.2d 550 (1987) ("The special factor that counsels hesitation is not the fact that Congress has chosen to afford some manner of relief in the particular case, but the fact that congressionally uninvited intrusion into military affairs by the judiciary is inappropriate." (alterations omitted)).
5
In the context of civilian court review of servicemembers'habeas claims, the Supreme Court has explained that Congress created the military courts to provide a separate system of justice for servicemembers which must be respected by the civilian courts. See Schlesinger v. Councilman, 420 U.S. 738, 758, 95 S.Ct. 1300, 43 L.Ed.2d 591 (1975) ("[I]t must be assumed that the military court system will vindicate servicemen's constitutional rights."); Burns v. Wilson, 346 U.S. 137, 140-42, 73 S.Ct. 1045, 97 L.Ed. 1508 (1953) (plurality opinion).
6
Ricks acknowledges that the incident to service test governs ourFeres doctrine analysis.
7
In support of this proposition, we citedUnited States v. Brown, 348 U.S. 110, 112-13, 75 S.Ct. 141, 99 L.Ed. 139 (1954). In Brown, the Supreme Court held that Feres did not bar a discharged veteran's FTCA claim arising from treatment received at a Veterans Administration Hospital. See id. The Court emphasized, however, that "[t]he injury for which suit was brought was not incurred while respondent was on active duty or subject to military discipline." Id. at 112, 75 S.Ct. 141 (emphasis added). It is undisputed that Ricks was subject to military discipline at the time of the alleged constitutional violations. We note that Brown, decided in 1954, was the last Supreme Court case in which a plaintiff's claims were not barred by the Feres doctrine. In the nearly fifty years since Brown was decided, the Supreme Court has consistently broadened the reach of the Feres doctrine. See Part III.B., supra.
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849 F.2d 604Unpublished 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.Silas CAMERON, Petitioner,v.ROBINSON PHILLIPS COAL COMPANY; Director, Office ofWorkers' Compensation Programs, United StatesDepartment of Labor, Respondents.
No. 86-1225.
United States Court of Appeals, Fourth Circuit.
Argued: Dec. 2, 1987.Decided: May 31, 1988.
Richard G. Rundle (Rundle & Rundle, on brief), for petitioner.
John Payne Scherer, Sr. (File, Payne, Scherer & Brown, on brief), for respondents.
Before DONALD RUSSELL, WIDENER and CHAPMAN, Circuit Judges.
PER CURIAM:
1
The petitioner in this case, Silas Cameron, seeks benefits under the Black Lung Benefits Act, 30 U.S.C. Secs. 901 et seq. As Mr. Cameron's claim was filed on October 7, 1979, the Secretary of Labor's interim regulations apply. 20 C.F.R. pt. 727 (1978). After a hearing the administrative law judge (ALJ) determined that Cameron was not entitled to benefits. The Benefits Review Board affirmed the ALJ's decision. This appeal followed. We think the Board's decision is supported by substantial evidence, and affirm.
2
Silas Cameron worked approximately 19 years with the defendant, Robinson Phillips Coal Company, encompassing the period 1961 to 1980. Cameron's last employment was in June of 1980 at which time he resigned from his job as a supply truck driver with the defendant. He cited shortness of breath as the primary factor for giving up his job.
3
At the administrative hearing medical evidence was introduced consisting of X-Rays, pulmonary function tests, blood gas studies and examinations by physicians. The ALJ found that the interim presumption of disability under 20 CFR Sec. 727.203(a)(1) was invoked as Cameron had been engaged in mining in excess of ten years and had produced an X-ray establishing the existence of pneumoconiosis. With this presumption established, the ALJ shifted the burden to the employer to rebutt the presumption by a preponderance of the evidence.1
4
Five pulmonary function tests administered to Cameron were admitted into evidence. The results of four of these tests including the most recent test were non-qualifying under the Department of Labor guidelines. Four blood gas studies were non-qualifying.
5
The record contained physical examinations by four separate physicians. Of these, three, including the most recent examination, indicated that Cameron was not disabled from coal mine or comparable work. In weighing the medical evidence, the ALJ noted that one of the physicians, Dr. R.H. Nestmann, based his conclusion on an incorrect standard; thus, in his ascertainment of weight of evidence, he assigned less weight to Dr. Nestmann's opinion. The ALJ went on to conclude that the opinion of Dr. John M. Daniel, the most recent examining physician, was sufficient to rebutt the presumption of disability by a preponderance of the evidence.
6
With the presumption rebutted, the ALJ then considered Cameron's claim under Part 410 of the Regulations. Again on the basis of Dr. Daniel's examination, the ALJ found that Cameron did not have a totally disabling pulmonary impairment.
7
Our standard of review in a black lung benefit case is one of substantial evidence. Beaven v. Bethlehem Mines Corp., 741 F.2d 689, 691 (4th Cir.1984). The reviewing court may not duplicate the trier of fact's job of weighing the evidence. In this case the petitioner does not argue that the law has been misapplied or that the ALJ's findings are clearly erroneous but that the record supports an award of benefits. In a case such as this where the evidence is of a conflicting nature what the petitioner seeks is equivalent to a request for the reviewing court to reweigh the evidence. That we cannot do. Weighing the evidence is the province of the trier of fact, who is not bound to accept any particular testimony. Sykes v. Director, Office of Workers' Compensation Programs, 812 F.2d 890 (4th Cir.1987).
8
Petitioner also argues that a reversal is mandated by our recent decision in Sykes. In that case this court stated that the finding of no impairment under AMA standards does not necessarily equate to a finding that the claimant is capable of continuing coal mining work. That is not this case, for, here, the physician upon whose testimony the ALJ relied found that the claimant could carry out the normal endeavors required of a coal miner.2
9
The ALJ found that the petitioner invoked the interim presumption of disability and that the presumption was rebutted by a preponderance of the evidence indicating the claimant was able to work. This was sustained by the Board. There is substantial evidence to support that finding, and the order of the Board is
10
AFFIRMED.
1
In considering the evidence and applying the regulations, the ALJ followed our decision in Stapleton v. Westmoreland Coal Co., 785 F.2d 424 (4th Cir.1986) rev'd sub nom Mullins v. Director, Office of Worker's Compensation Programs, 56 USLW 4044 (Dec. 14, 1987). That case has since been reversed. As the ALJ found the interim presumption to have been rebutted however, the more stringent requirements of Mullins necessary to invoke the interim presumption will not affect the outcome of this case. See Mullins, 56 USLW at 4045, n. 8
2
There is an additional procedural difference between Sykes and this case. In Sykes the Benefits Review Board had used the no impairment finding under AMA standards to reverse the trier of fact's finding of impairment despite the fact that the ALJ had considered the contrary evidence and rejected it
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COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
§
Security Service Federal Credit Union, § No. 08-19-00154-CV
Appellant, § Appeal from the
v. § 168thDistrict Court
Michelle Rodriguez, § of El Paso County, Texas
Appellee. § (TC# 2018DCV3979)
§
ORDER
The Court GRANTS the Appellee’s third motion for extension of time within which to file
the brief until January 23, 2020. NO FURTHER MOTIONS FOR EXTENSION OF TIME TO
FILE THE APPELLEE’S BRIEF WILL BE CONSIDERED BY THIS COURT.
It is further ORDERED that the Hon. John P. Mobbs, the Appellee’s attorney, prepare the
Appellee’s brief and forward the same to this Court on or before January 23, 2020.
IT IS SO ORDERED this 30th day of December, 2019.
PER CURIAM
Before Alley, C.J., Rodriguez and Palafox, JJ.
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881 F.2d 1074
U.S.v.Velazquez-Garcia*
NO. 89-1061
United States Court of Appeals,Fifth Circuit.
JUL 28, 1989
1
Appeal From: W.D.Tex.
2
AFFIRMED.
*
Fed.R.App.P. 34(a); 5th Cir.R. 34.2
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175 N.W.2d 598 (1970)
ESTATE of William H. THOMPSON, Deceased, Mary Lou Barnett, Ruby Nunn, Robert Baldwin, Appellants,
v.
James O'TOOL and Juletta O'Tool, Husband and Wife, Appellees.
No. 53660.
Supreme Court of Iowa.
March 10, 1970.
*599 Crary, Huff & Yates, Sioux City, for appellants.
Thomas L. McCullough, Sac City, for appellees.
LeGRAND, Justice.
This is an action for rent under a farm lease. The defendants claim an offset, asserting they performed certain work and made certain improvements under an oral agreement with their landlord for which they are entitled to compensation. The trial court found that defendants owed $16,000.00 in rent, allowed them an offset of $13,662.50 for repairs and improvements, and entered judgment for plaintiffs in the amount of $2367.50. Plaintiffs appeal.
We agree as to the amount of rent due but find defendants are not entitled to credit for any repairs or improvements allegedly made by them. Consequently we modify that portion of the decree and enter judgment in favor of plaintiffs for $16,000.00, the full amount of the rent due.
Since most of the testimony concerns W. H. Thompson, now deceased, and James O'Tool, we refer to them as though they were the sole parties. However, what we say applies equally to all plaintiffs and to both defendants.
The record shows some uncertainty as to the nature of this action, but it was agreed the matter was triable in equity. Under our rules we therefore consider this as an equity case triable de novo. McCullough Investment Company v. Spencer, 246 Iowa 433, 436, 67 N.W.2d 924, 925, and citations; Mahon v. Mahon, 257 Iowa 563, 568, 133 N.W.2d 697, 700. It follows that the trial court's findings are not binding upon us, although we give them consideration in reaching our own conclusion. Rule 344(f) (7). Rules of Civil Procedure; Connell v. Hays, 255 Iowa 261, 268, 122 N.W.2d 341, 345.
Defendant had been a tenant on the 400-acre farm in question since 1942. On October 17, 1955, a written lease was entered into for a one year period beginning March 1, 1956, at a cash rental of $7000.00. No notice of termination was given over the ensuing years by either party, and the lease stood renewed from year to year thereafter until 1967 under the terms of sections 562.6 and 562.7, Code of Iowa.
W. H. Thompson owned an interest in the farm and also acted as agent for the other owners. He was the only person with whom defendant had any negotiations or conducted any business over the period of the lease.
Mr. Thompson died in December of 1966. Shortly after his death his executor discovered from the farm records that defendant was delinquent in rent payments. On behalf of the W. H. Thompson estate, the executor, joined by the other owners of the farm, brought this action to recover the unpaid rent. In his answer defendant claimed credit in an amount equal to the unpaid rent for work done and improvements made under an oral contract entered into with W. H. Thompson. He denied any rent was due or owing. Plaintiff asserts the trial court erred in allowing defendant any offset and relies on the following propositions for reversal:
(1) There is no competent evidence of the alleged oral agreement permitting defendant credit for repairs and improvements made;
(2) The testimony concerning said alleged oral agreement is so vague, indefinite and uncertain that it could not in any event establish the alleged oral agreement;
(3) All of defendant's evidence was in violation of the parol evidence rule;
(4) The testimony offered by defendant to prove the alleged oral agreement was inadmissible under the dead man statute, section 622.4, Code of Iowa;
*600 (5) The defendant did not sustain the burden of proving the making of said repairs and improvements and the reasonable cost thereof; and
(6) The judgment of the court allowing $13,662.50 was excessive.
In view of our conclusion that defendant has failed to establish the oral lease upon which he relies, we need consider only the first of these propositions.
The written lease of October 17, 1955, heretofore referred to, contained the following provision:
"* * * The said James O'Tool, Jr. and Juletta O'Tool, parties of the second part, do hereby waive and release any claim they or either of them have for any improvements they or either of them may have placed upon the leased premises and for any money, materials, labor or other expenses incurred, paid or furnished by them or either of them for said real estate and improvements. This waiver and release applies to all past expenditures as well as such future expenditures by them made during the term of this lease." (Emphasis added.)
Despite this specific provision, which strongly suggests the parties were attempting in advance to avoid the very type of controversy which has now arisen, defendant contends that within a month or two thereafter this provision was virtually scrapped and plaintiff orally gave him unlimited authority to make repairs and improvements and agreed to credit his rent for the work done.
Plaintiff resisted all effort to establish an oral agreement modifying the written lease of October 17, 1955. He claimed all such evidence was inadmissible because it attempted to vary the terms of a written contract in violation of the parol evidence rule. We must disagree. The purpose of the testimony was to show a new agreement made subsequent to the date of the lease. While it is quite true, such an agreement may have modified, or even cancelled, the written agreement, it would have done so by separate contract, not by changing the terms of the old one.
Parties to a contract, in the absence of some legal impediment, may change their agreement by making a new one which meets the requirements of contractual relationship. 17A C.J.S. Contracts section 377(c), page 437; 17 Am.Jur.2d, Contracts, sections 465-467, pages 934-939; Baie v. Nordstrom, 238 Iowa 866, 869, 29 N.W.2d 211, 213; Gard v. Razanskas, 248 Iowa 1333, 1340, 85 N.W.2d 612, 616, 65 A.L.R. 2d 982. See also Davenport Osteopathic Hospital Association of Davenport, Iowa v. Hospital Service, Inc., Iowa, 154 N.W.2d 153, 157.
We hold it was proper to show an oral agreement subsequent to the written lease by which defendant would be compensated for work done and improvements made. The troublesome question is not whether he could prove such a modification, but whether he did.
To succeed here defendant must establish that oral contract. He is at once confronted with the serious obstacle that any conversations he or his wife may have had with W. H. Thompson concerning this matter are rendered incompetent by virtue of section 622.4, Code of Iowa, the dead man statute. The trial court, correctly we believe, excluded all such evidence in reaching its decision. We do likewise, but we reach different conclusions than those of the trial court based upon the competent evidence in the record.
Before reviewing this evidence, we point out defendant has the burden in this equitable action of proving his oral agreement by clear and satisfactory evidence. Davis v. Davis, Iowa, 156 N.W.2d 870, 874. We refer briefly to a few of our pronouncements concerning the type of evidence which defendant must unfortunately rely upon here.
*601 In Williams v. Harrison, 228 Iowa 715, 722, 293 N.W. 41, 44, we said, "It has always been the holding of this court, and of the courts generally, that claims of this kind [based on oral contracts for services rendered to a decedent] should be scrutinized with the greatest care, and established only upon the most satisfactory evidence." We there mentioned some of our previous holdings to the same effect in which we uniformly held a high degree of proof necessary to establish a claim based upon an oral agreement with a party since deceased.
In Byers v. Byers, 242 Iowa 391, 404, 405, 46 N.W.2d 800, 807, 808, we put it this way:
"* * * There can be no testimonial contradiction or denial of the testimony of these five witnesses because the lips of Nathan N. Byers, with whom they talked, are sealed in death. Such testimony has been presented to this court many, many times since the court was organized, in various kinds of cases in law, equity, probate, and criminal prosecution, and just as often the court has announced that such testimony is heard with doubt and skepticism, examined with the closest scrutiny, subjected to the most severe tests which tend to weaken its credibility, and carefully, jealousy and cautiously weighed and considered. Some of the reasons why such testimony is uniformly regarded as so dangerous and unsatisfactory are: because of the ease of its fabrication, the impossibility of its controversion, the grievous consequences which may result from the fallability of human memory, understanding or judgment, and the absence of worldly sanction, since from the nature of such evidence, no witness so testifying could ever be convicted of perjury. Such testimony is not accepted as conclusive simply because it cannot be directly denied. It must, nevertheless, pass the test of credibility in the light of surrounding circumstances and its inherent probability or improbability, as judged by common experience and the ordinary rules of human conduct in like situations."
In Bell v. Pierschbacher, 245 Iowa 436, 444, 62 N.W.2d 784, 789, we said, "We have repeatedly pointed out that evidence of claimed oral statements of a decedent should be closely scrutinized and cautiously received because it is not susceptible of denial and the witness may not have been capable or desirous of accurately relating what decedent may have said."
A similar statement is found in Nelson v. Nelson, 249 Iowa 638, 642, 87 N.W.2d 767, 770.
In Connell v. Hays, 255 Iowa 261, 268, 269, 122 N.W.2d 341, 346, we again considered the same problem and held, "Proof of the claimed oral contract must be clear, satisfactory and convincing. A mere preponderance of the evidence is not sufficient. * * *
"We have often said this type of case belongs to a class which usually challenges the scrutiny and skepticism of the court. It imposes upon the court the special duty of receiving the testimony subject to every fair test which tends to weaken its credibility." We there cite additional authority from our previous opinions supporting this view.
Our task now is to determine if defendant's evidence meets this strict test, and if it establishes his claimed oral contract by "clear, satisfactory, and convincing proof." Practically all of it is subject to the skepticism and close scrutiny required of us. Defendant depends entirely upon the testimony of three witnesses: his two sons and a neighboring farmer.
One of the sons, Dennis O'Tool, testified in substance:
"There were probably seven or eight times between 1955 and now (1968) that I was present on my father's farm when Mr. Thompson was there. I did not take part in the talking. I would just sit there and they would talk about the farm and what it *602 needed. Mr. Thompson would say you go ahead and fix it up and if it needed replacing or repairing, why, he would say repair it and it would be taken out of the rent and he would pay for it, one of the two. He said it would be cheaper that way. I remember my folks discussing with Mr. Thompson some of the [specific] matters [for which claim is made.] I helped with making quite a few of the improvements * * *. I never heard Mr. Thompson say mother and dad owed him any money for rent."
The other son, Merle O'Tool, testified substantially to the same effect. He stated he specifically remembered discussions involving the clearing of the land, the well and the waterworks, and the garage and several buildings.
The other witness was Ralph Rauch. He testified to having had a conversation with Mr. Thompson in 1956, twelve years before trial, in which they discussed Mr. O'Tool as a tenant. Mr. Rauch testified, "We talked about many things. Mr. O'Tool was a pretty good friend of mine and we got on the conversation of Mr. O'Tool. I think I mentioned that he sure was doing a nice job out there and Mr. Thompson said he was. He said, `I think very highly of Mr. O'Tool.' At that time I believe he was putting in a cement silo. We talked about that and I said, `Mr. O'Tool certainly has improved your farm for you,' and he said, `He certainly has and I really appreciate it,' and he says that he tells Mr. O'Tool to go ahead and do these things and then later he will take it off the rent. That was the part of the conversation as I remember it."
This was the full extent of the evidence concerning an oral lease. It will be noted the conversations go back 12 or 13 years. Some of the statements of the sons undertake to recall conversations they heard years before when they were youngsters. To say the very least this is unsatisfactory proof, particularly since the sons are not entirely disinterested in the outcome of this litigation.
Similarly it is difficult to consider Mr. Rauch's single casual conversation in 1956 as "clear and convincing" proof of an agreement to make unlimited improvements in the indefinite future.
One serious difficulty with all this testimony is that it is entirely inconsistent with the conduct of the parties. The repairs and improvements for which claim is made include 20 separate items, some large, some small. Many of them were completed in 1957, 1958, and 1959. Virtually all were before 1962, except as to a few concerning which defendant stated he "did not remember" the date the work was done. Yet during all this period defendant continued to pay his cash rent of $7000.00 per year.
We said in Connell v. Hays, supra, at page 269 of 255 Iowa Reports, 122 N.W.2d 341, that the acts of the parties may be considered to determine if they were consistent with the existence of the claimed oral agreement, particularly when improvements are made to property.
Admittedly the conduct of neither party here is entirely reconcilable with the positions now taken. We find it incredible that defendant would continue to expend thousands of dollars in improvements, both in labor and materials, while paying his cash rent each year without securing the credit to which he now says he was entitled. It is equally difficult to understand why plaintiff would permit almost three years rent to accumulate without protest and without some action to compel payment.
In considering the conduct of the parties we are forced to shackle defendant with the burden which is legally histo prove his agreement by clear, convincing, and satisfactory evidence. We find no reasonable explanation for his failure to demand and secure credit for his claim from year to year as his rent became due.
Neither do we find an explanation for defendant's delay in making this claim until after the death of the only person who could refute it. One answer might be that *603 the amount of unpaid rent approximately equalled the amount to which he as entitled for repairs and improvements. However, this argument loses much of its persuasion when we consider the following letter written by defendant to W. H. Thompson in 1965:
"Auburn, Iowa,
December 21, 1965
"Dear Mr. W. A. H. Thompson, * * * Hicks was here a few times & wanted me to pay for the pump that we had to replace a year ago. Our water fountain was also in need of replacing this fall. I thought I could pay you $5000.00 now & try to pay you some more later. I have just paid Mr. Hicks which was $510.00. I will send you a check for $4490.00 but will you hold it until you have signed the [lien waiver] and returned it to the Sac County ASCS office. * * *.
"Yours truly,
James O'Toole"
We believe this letter is important. First, it is to be noted Mr. O'Tool made claim for credit for repairs he had authorized; secondly, he paid $5000.00 on the rent and stated he would try to pay more later; and third, he made no mention of any credits he claimed except the one which he deducted from the cash rent payment.
This letter does not bear out the position defendant now takes. It was written in December 1965. Yet Mr. O'Tool, who asked for and received credit for $510.00 while paying part of his rent and promising to pay more, now says at that time he was entitled to credit of more than $13,000.00. We find the evidence falls far short of establishing this claim by the quantum of proof required by the cases heretofore referred to.
Since we conclude defendant has failed to establish his oral contract, it follows he is not entitled to an offset for work and improvements. The trial court found the unpaid rent to be $16,000.00. Defendant claims the correct amount is $14,000.00. However, we agree with the trial court that the evidence discloses $16,000.00 as the correct amount.
After allowing defendant credit for repairs and improvements, the trial court entered judgment for plaintiff in the amount of $2367.50, together with interest at five percent per annum from the date of the decree, and costs, including statutory attorney fees. We modify the decree to provide that plaintiff have judgment for $16,000.00.
We remand to the district court for entry of judgment in accordance herewith and for re-assessment of interest and costs, including statutory attorney fees.
Modified and remanded with instructions.
All Justices concur except UHLENHOPP, J., who takes no part.
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39 Cal.App.4th 1007 (1995)
46 Cal. Rptr.2d 295
In re ANGELICA V., a Person Coming Under the Juvenile Court Law.
SAN DIEGO COUNTY DEPARTMENT OF SOCIAL SERVICES, Petitioner and Respondent,
v.
GUSTAVO V., Objector and Appellant.
Docket No. D023478.
Court of Appeals of California, Fourth District, Division One.
October 25, 1995.
*1009 COUNSEL
Kathleen Murphy Mallinger, under appointment by the Court of Appeal, for Objector and Appellant.
Lloyd Harmon, County Counsel, Susan Strom, Chief Deputy County Counsel, Gary C. Seiser, Charles Nickell and James Wellman, Deputy County Counsel, for Petitioner and Respondent.
Carl Fabian, as Amicus Curiae, upon the request of the Court of Appeal, for Minor.
OPINION
FROEHLICH, J.[*]
This is an appeal from a judgment terminating the parental rights of appellant father, after a selection and implementation hearing pursuant to Welfare and Institutions Code section 366.26.[1] Counsel appointed for appellant filed a brief which summarized the procedural and factual background of the case, advised that no substantive issues warranting reversal on appeal could be identified,[2] and requested that this court review the record independently. We decline to undertake this review and hence, no *1010 grounds for appeal being raised by appellant's brief, we dismiss the appeal. (See 9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, §§ 508, 530, pp. 494, 514.)
Since we dismiss the appeal because no grounds for appeal were stated, a detailed recitation of the case background is unnecessary. However, to put the matter somewhat in perspective, we review the same cursorily. Appellant father and the mother of Angelica had several children, all of whom had been removed from their custody. At the time of Angelica's birth, all the children lived with their maternal grandmother. The mother was a drug addict who continued her habit during pregnancy with Angelica, resulting in removal of the child from parental custody shortly after birth. Appellant was in jail at the time of birth. He did not participate in the reunification program and appears to have been a very unreliable citizen. One of the social service reports indicated that from 1988 to the time of the hearing, he had been arrested six times for offenses including domestic violence, driving while intoxicated, possession of a deadly weapon and possession of a stolen vehicle. A report at the 12-month review indicated that appellant had had no contact with his children. He was served with notice of the section 366.26 hearing while in the Vista jail. By this time the grandmother had moved to Mexico with Angelica and her siblings and it was recommended, both by Mexican authorities and the department of social services, that she be approved for adoption of all the children. At the hearing, appellant did not explicitly oppose the permanent plan of adoption of Angelica but appeared and requested that a friend of his be considered as a potential adoptive parent. The court found Angelica to be adoptable, found that neither parent had maintained contact with her, concluded that further attempted contact with either parent would not be beneficial, terminated the parental rights of both parents, and referred Angelica for adoptive placement.
In asking this court to independently review the record in search of possible error, appellant refers to and relies upon People v. Wende (1979) 25 Cal.3d 436 [158 Cal. Rptr. 839, 600 P.2d 1071]. In that case the California Supreme Court, following what it conceived to be a mandate from the United States Supreme Court in Anders v. California (1967) 386 U.S. 738 [18 L.Ed.2d 493, 87 S.Ct. 1396], imposed upon Courts of Appeal the obligation to independently review the record whenever appointed counsel appealing a criminal conviction submits a brief which raises no specific issues. Appellant suggests that this authority, although derived from criminal process, is equally applicable to a dependency proceeding. (1a) Thus, appellant argues that whenever a parent appeals from an order terminating parental rights and the appointed appellate counsel for the case can find no *1011 specific grounds for appeal, it is incumbent upon the Court of Appeal to mount its own independent investigation of the record to verify that the report of appointed counsel is correct.
We do not accept this contention and in refusing to do so make two brief arguments. We abbreviate our presentation because this is a field twice plowed recently by other appellate courts. The first of these opinions, In re Sade C. (1995) 41 Cal. App.4th 1642 [44 Cal. Rptr.2d 509],[*] was originally published in March of this year, rehearing then granted, and the case republished with minor modifications very recently. The second was published as In re Angela G.[*] (Cal. App.), and is no longer citable as authority because hearing has been granted by the Supreme Court. Although the second of these opinions no longer constitutes authority, both opinions are obviously now before the Supreme Court, and there would be little point in repeating the logic contained therein. We will endeavor, therefore, not to restate points already well made. The purpose of our opinion will be to emphasize our agreement with these two prior decisions, and to add certain comments which will reflect our own particular approach to the matter.
Our first contention, which we acknowledge to be in reliance on the references and reasoning contained in footnote 18 to Justice Croskey's opinion in In re Sade, supra, 37 Cal. App.4th at page 112, is that the Wende procedure has outlived whatever utility it may originally have had. The mandate of appellate review of the criminal record set forth in Anders was based on the United States Supreme Court's conclusion that appellate counsel had not devoted adequate attention to the case, and indeed may have acted more as amicus curiae to the court rather than as advocate for the convicted defendant. (Anders v. California, supra, 386 U.S. at p. 743 [18 L.Ed.2d at pp. 497-498].) As Justice Croskey pointed out, California's appellate practice and procedures have been greatly modified since 1967, providing much more efficient appellate review of indigent appeals than was possible in 1967. To recast his conclusion, in consideration of our present procedures for providing review by independent appellate agencies and specially appointed counsel, it is both redundant and wasteful of scarce judicial resources to require a replication of this same study by staff of the Court of Appeal. We believe it is time for California Supreme Court review of the basic Wende principle, in light of current circumstances.
Our second argument accepts the existence of the Wende requirement in criminal law, but rejects the propriety of its use in standard juvenile dependency cases. The basis for the contention that Wende review is appropriate *1012 comes from two cases written by this court: In re Brian B. (1983) 141 Cal. App.3d 397 [190 Cal. Rptr. 153] (Brian B.) and In re Joyleaf W. (1984) 150 Cal. App.3d 865 [198 Cal. Rptr. 114] (Joyleaf W.). Brian B. was a very brief (somewhat over one page) opinion by "the court," which recognized that parental rights to custody of children are "fundamental," and that therefore there is "no valid reason to accord a parent ... a lesser degree of review than is accorded a criminal defendant." (Brian B., supra, at p. 398.) Joyleaf W. was a somewhat more extended exposition of the subject, but again determined that Wende review of dependency decisions should be afforded simply because the rights involved in separation of child from parent are of equal societal dignity to those recognized in review of criminal cases. (Joyleaf W., supra, at p. 869.) Neither case traced the constitutional underpinnings of the Anders decision or made an attempt to equate those to the authority resulting in the requirement of appointment of counsel for dependency appeals. This failure was, in our view, fatal to the value of these opinions. It is appropriate that we, writing for the same court that issued these rulings, now reject them in light of changed circumstances and closer legal scrutiny. (See 9 Witkin, Cal. Procedure, supra, § 772, pp. 740-742.)
The Anders requirement of heightened appellate review was grounded in recognition that the right of representation in criminal cases is one of federal constitutional derivation. (Anders v. California, supra, 386 U.S. at pp. 742, 744 [18 L.Ed.2d at pp. 497, 498].) That the Anders rule would not apply in situations in which indigent representation was based on other than federal constitutional grounds was confirmed in Pennsylvania v. Finley (1987) 481 U.S. 551 [95 L.Ed.2d 539, 107 S.Ct. 1990]. There the court considered whether Anders would be applicable in a postconviction proceeding in which the appointment of counsel was required not by federal constitutional but by state statutory requirements. Chief Justice Rehnquist said Anders did not apply, stating: "Of course, Anders did not set down an independent constitutional command that all lawyers, in all proceedings, must follow these particular procedures. Rather, Anders established a prophylactic framework that is relevant when, and only when, a litigant has a previously established constitutional right to counsel." (Id. at pp. 554-555 [95 L.Ed.2d at p. 545].)
(2) To determine, therefore, whether Wende review is required by federal authority in dependency cases, we must consider whether counsel's appointment in such cases is a federal "constitutional command." We find that it is not. The right to counsel in criminal cases is automatically of constitutional dimension. (In re Kathy P. (1979) 25 Cal.3d 91, 103 [157 Cal. Rptr. 874, 599 P.2d 65]; Gideon v. Wainwright (1963) 372 U.S. 335 [9 L.Ed.2d 799, 83 S.Ct. 792, 93 A.L.R.2d 733].) The right to counsel in dependency cases, however, does not automatically rise to a constitutional *1013 level. The governing federal authority is Lassiter v. Department of Social Services (1981) 452 U.S. 18 [68 L.Ed.2d 640, 101 S.Ct. 2153]. The court there was faced with an appeal from termination of parental rights because the state court had not appointed counsel to represent the parent in the termination proceedings. The Supreme Court acknowledged that while the parent-child relationship is an important one warranting protection (id. at pp. 27, 31 [68 L.Ed.2d at pp. 649-650, 652]), the singular potential of loss of custodial/parental rights is not sufficient to rebut the presumption that, absent the potential of deprivation of physical liberty, as in criminal prosecutions, there is ordinarily no constitutional right to appointment of counsel (id. at p. 31 [68 L.Ed.2d at p. 652]). Rather, the question is whether the complexity of the issues to be resolved and the capacity of the parent to obtain a fair hearing without counsel impel the appointment. (Ibid.) The Lassiter rule was summarized in In re Christina P. (1985) 175 Cal. App.3d 115, 129 [220 Cal. Rptr. 525], as follows: "In Lassiter ... the United States Supreme Court held that a federal constitutional due process right to appointment of counsel for parents at a [section] 232 hearing on termination of parental rights is a question for case-by-case resolution. The federal due process right is dependent upon the complexity of issues likely to be presented and the likelihood that assistance of counsel for the parent might sway the outcome." (Fn. omitted; see also In re Justin L. (1987) 188 Cal. App.3d 1068, 1073 [233 Cal. Rptr. 632] ["There is no federal constitutional right per se to be represented by counsel in all parental termination proceedings"].)[3]
(3) Assuming, therefore, that there may be termination proceedings the complexity of which demand appointment of counsel on due process grounds, can it be said that this case falls within the group? We think not. As we noted above, appellant at the trial hearing neither asserted a personal interest in obtaining custody of the child nor made any objection to the proposed placement. In light of appellant's ambivalent position at trial, it is *1014 difficult to see how the assistance of counsel could have altered the outcome. Also, there appears to have been nothing "complex" about the issues presented for determination. The case, as is usual in dependency proceedings, was fact driven a presentation based on preexisting documentary evidence, to be resolved by a trial court rather than jury. As evidenced by appellate counsel's inability to identify any issue for appellate attention, this was a simple case. It cannot be said to rise to the level of difficulty requiring, under the Lassiter rule, the appointment of counsel.
(1b) Concluding, therefore, that the right to counsel in this case, as in most dependency cases, does not rest on federal constitutional requirements, we further conclude that neither Anders nor Wende is authority for the proposition that independent appellate review of the record is required when appointed appellate counsel files a Wende brief.
Is there any basis for contending that this in-depth investigation by the Court of Appeal should be undertaken on grounds other than constitutional? Is there a policy reason why it should be done? There is not.
The Wende principle, generally, even as applied to criminal cases, has been effectively criticized. (See, e.g., People v. Wende, supra, 25 Cal.3d at pp. 443, 444 (conc. and dis. opn. of Clark, J.); People v. Von Staich (1980) 101 Cal. App.3d 172, 173-175 [161 Cal. Rptr. 448]; People v. Hackett (1995) 36 Cal. App.4th 1297, 1303-1305 [43 Cal. Rptr.2d 219].) However, the most reliable critique of the effectiveness of Wende review would seem derived not from theoretical analysis but from the experience of the courts which administer it, namely the Courts of Appeal. We assert that our personal experience with the potential and actual application of the Wende principle is worthy of serious consideration.
Counsel are appointed in virtually all dependency trials when requested by parties. When a trial order or judgment is appealed or writted, counsel are almost invariably appointed for the appeal. The only exception comes when we, looking at cases individually, can conclude with assurance that the party has the funds to hire private counsel. This happens very rarely.
The counsel who are appointed are competent. Particularly in terms of appellate work, counsel are experienced and diligent and produce a good work product. Our system of appointment relies upon a quasi-governmental agency, Appellate Defenders, Inc., which is staffed with most qualified and experienced attorneys, well able to handle both criminal and dependency appeals. This agency maintains a panel of private attorneys who accept referrals of indigency appeals, which service is not pro bono but compensated. This cadre of appellate counsel is professional. They rely to a considerable extent upon income from their appointed appellate work for their *1015 living. Note also, that at least in current and recent times this work has been popular. There is competition to get on the list. One does not achieve appointment without having demonstrated competency, reliability and professionalism.
Accordingly, we on the Court of Appeal become acquainted with the work of these lawyers. We see their diligence in the briefs they write seeking reversal of dependency orders. We know the lengths to which they will go in advocating the positions of their clients. These are not people presenting an amicus curiae brief.
Therefore, when we receive a Wende brief from one of these advocates, we are assured that in fact the record has been sifted, potential issues for review have been analyzed, and the conclusion reached that there are no issues for review is professionally sustainable. Beyond this, we know that before a Wende brief is submitted it, as well as the record on which it is based, have been reviewed by an experienced staff person at Appellate Defenders, Inc.[4]
What, then, is to be accomplished by requiring duplicative effort by the Court of Appeal? Our resources for digging issues out of records are no better, indeed probably inferior, to those of regular dependency appellate counsel. As a practical matter we know that in the several years in which we have accepted and given Wende reviews to dependency cases we have discovered, to the best of our present recollection, no unbriefed issues warranting further attention. Should a case be developed which actually reflected the complex issues giving rise, in accordance with the Lassiter principles, to due process concerns, it is likely that diligent appellate counsel could persuade us to give it that extra review available under Wende. However, the ordinary dependency case, as is true with this case, does not present that situation.
The possible merit of continuing Wende review of dependency cases must also be viewed in light of the administrative problems now facing our Courts of Appeal. A true Wende review in a dependency case requires the inspection of serial social service reports, minute orders of multiple hearings at the trial court, psychological reports, several reporters' transcripts going back sometimes for periods of years, letters from friends, etc. This court now has a backlog of over 700 fully briefed cases waiting resolution. Our present workload will result in civil cases waiting for a period of from 15 to 18 *1016 months after complete briefing before we and our staffs commence (let alone complete) their review. Under these circumstances can we justify the devotion of time and energy for duplicative review of this special class of civil case, when all our experience teaches that such review is unproductive?
The answer is "no." We decline to apply Wende principles to dependency cases (short of the very unusual case described in our Lassiter discussion above). This appeal is dismissed.
Benke, Acting P.J., and Nares, J., concurred.
Appellant's petition for review by the Supreme Court was denied January 18, 1996.
NOTES
[*] Retired Associate Justice of the Court of Appeal, Fourth District, sitting under assignment by the Chairperson of the Judicial Council.
[1] All statutory references are to the Welfare and Institutions Code unless otherwise specified. Rule references are to the California Rules of Court.
[2] Nowhere in her brief does appellant's counsel specifically say to us that she cannot identify any grounds for appeal. However, in omitting to reference any such grounds, coupled with the request to this court that it undertake its own search for grounds for appeal, stating specifically that the brief is filed "in accordance with the procedures outlined in People v. Wende [(1979) 25 Cal.3d 436 (158 Cal. Rptr. 839, 600 P.2d 1071)]," we construe the brief to so assert. This understanding was explicitly confirmed by counsel at oral argument.
[*] Reporter's Note: In re Sade C., review granted October 19, 1995 (S048796); In re Angela G., review granted June 15, 1995 (S046327) and on December 14, 1995, review dismissed and cause remanded to Court of Appeal, First Appellate District, Division Four.
[3] In In re Arturo A. (1992) 8 Cal. App.4th 229 [10 Cal. Rptr.2d 131] we discussed the right to counsel in dependency termination cases in the context of the assertion of reversible error by reason of ineffective assistance of appointed counsel. We noted that the right to appointed counsel in California for indigent parents defending a dependency issue is provided by statute and court rule (§ 317, subd. (b); rule 1412(h)(1)(B)), and stated that "There is also a due process constitutional right to representation by counsel on a case-by-case basis when the result of the hearing may be termination of parental rights.... Such a right will depend upon the complexity of the issues presented and the likelihood that counsel might sway the outcome." (8 Cal. App.4th at p. 238.) Later in our opinion we suggested that the constitutional right to counsel might depend more upon the potential result of the hearing (i.e., the possibility of termination of parental rights) rather than the complexity of the issues and the likelihood that the appearance of counsel might affect the outcome. (See id. at p. 239.) In light of the issues we face in this case, we more favor our initial analysis of the question, as stated in In re Arturo A., supra, at page 238, than our subsequent dictum.
[4] In the affidavit attached to the brief in this case counsel averred that before filing the Wende brief the case had been reviewed and discussed with a staff attorney at Appellate Defenders, Inc.
| {
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445 F.Supp. 65 (1977)
Thelma FANNIE and Lavina Torockio et al., Plaintiffs,
v.
CHAMBERLAIN MANUFACTURING CORP., DERRY DIVISION, and Local 624 United Electrical, Radio and Machine Workers of America, et al., Defendants.
Civ. A. No. 75-1402.
United States District Court, W. D. Pennsylvania.
December 5, 1977.
*66 *67 *68 *69 Bernard D. Marcus, Kaufman & Harris, Pittsburgh, Pa., Jane M. Picker, Cleveland, Ohio, for plaintiffs.
H. Woodruff Turner, Kirkpatrick, Lockhart, Johnson & Hutchison, Pittsburgh, Pa., Andrew S. Price, Obermayer, Rebmann, Maxwell & Hippel, Philadelphia, Pa., Sandra Reiter Kushner, Rothman, Gordon, Foreman & Groudine, Pittsburgh, Pa., for defendants.
OPINION
TEITELBAUM, District Judge.
The case sub judice is an action for alleged sex-based employment discrimination. The plaintiffs were female employees of the defendant company and members of the defendant Local 624. They allege in a 41-page, six-count complaint that the defendant company, union and named individuals have operated under a policy and practice of discrimination against female employees on the basis of sex in regard to various terms and conditions of their employment.
Specifically, eleven employees of the Chamberlain Manufacturing Corporation allege that the corporation, various of its present and/or former supervisory employees, their unions, Local 624 and the United Electrical, Radio and Machine Workers of America, and various present and/or former union representatives and officers have violated their rights protected by Title VII of the Civil Rights Act of 1964, 42 U.S.C. Sec. 2000e, et seq.; 29 U.S.C. Sec. 185; 42 U.S.C. Sec. 1981; and 42 U.S.C. Sec. 1985(3).
Counts One and Two of the complaint allege a historical and continuing pattern and practice of discrimination against female employees based upon their sex. The complaint specifically alleges discrimination in the plaintiffs' terms and conditions of employment, in job classifications and assignments, in the seniority system, in layoff *70 and recall practices, in the negotiation, administration and enforcement of collective bargaining agreements, in the harassment and intimidation of female employees, and in the retaliation against those female employees who lodged charges of discrimination with government agencies and/or who filed prior complaints of sex discrimination against the defendants in Court. It is also alleged that a 1965-1967 Collective Bargaining Agreement entered into by the Local and International Union defendants and Keystone Alloys Company, predecessor in interest to Chamberlain Manufacturing Corporation, provided separate men's and women's job classifications and that all women's jobs paid less then all men's jobs. Additional allegations are that women were laid off out of line of seniority while men junior to them were permitted to work and while new male employees were hired, and that this practice occurred both before and after January 1, 1967, when Chamberlain Manufacturing Corporation assumed control of the plant in which the plaintiffs were working in Derry, Pennsylvania. The complaint further alleges that the plaintiffs were employees in the Window and Door Division of the Corporation's plant and that they held divisional seniority in that division. This division of the corporation was closed in 1969-1970 resulting in the lay-off of each of the plaintiffs, and the 1969-1972 Collective Bargaining Agreement in effect at the time of the closing required employees to forfeit their seniority in the Window and Door Division if they elected to transfer to the Siding Division, the corporation's only other division in the Derry Plant. The employees of the Window and Door Division are alleged to have been predominantly female, while the employees of the Siding Division were predominantly male. The seniority system and other provisions of the Collective Bargaining Agreements are alleged to have perpetuated the effects of past discrimination since female employees were locked into a division that was no longer operational. Counts One and Two also allege discriminatory practices to which the plaintiffs were subjected when they worked as junior employees in the Siding Division after the closing of the Window and Door Division including harassment and intimidation, discriminatory job disqualification practices, and retaliatory practices. The plaintiffs also allege that after the closing of the Window and Door Division they were denied the opportunity of doing work to which their Window and Door Division seniority entitled them.
Count Three alleges violations by the corporation of contracts between the corporation and the unions in violation of 29 U.S.C. § 185. The plaintiffs in Count Three include the eleven plaintiffs named in Counts One and Two plus an additional employee. Count Three sets forth a clause present in all contracts from 1964 prohibiting discrimination on the basis of sex and plaintiff's allegation that the discriminatory acts earlier described in Counts One and Two are violations of the contract.
Count Four alleges that the Local and International Defendants violated their duty of fair representation in violation of 29 U.S.C. § 185. It additionally alleges that the defendant Local in 1971 and 1975 arbitrarily and discriminatorily refused to accept grievances and to process meritorious grievances of the plaintiffs. The defendant Unions are further alleged arbitrarily and discriminatorily to have failed to represent female employees fully in arbitration and to have negotiated, administered and enforced contracts with the company which discriminate against female employees on the basis of their sex.
Count Five alleges that the acts set forth in Counts One and Two and the additional individual claim of Count Three are violations of 42 U.S.C. § 1981.
Count Six alleges that the defendants and others presently unknown conspired to deprive the plaintiffs of their rights, privileges and immunities secured by 42 U.S.C. §§ 2000e, et seq., 29 U.S.C. § 185, and 42 U.S.C. § 1981, and injured them in property or person and deprived them of equal protection of the laws and rights secured by these same statutes. The alleged discriminatory acts committed by one or more of the defendants in furtherance of the conspiracy *71 include: the discriminatory practices described in other counts; negotiation of discriminatory provisions of collective bargaining agreements which were signed by all the individual defendants, except two who are alleged to have participated in the conspiracy by harassing female employees and by assigning them jobs and judging their qualifications to do such jobs in a discriminatory manner; and retaliation in violation of First Amendment rights against female employees who lodged charges of discrimination with government agencies and/or who filed prior complaints against the Company and Union defendants in court.
The relief sought in Counts One and Two includes declaratory and permanent injunctive relief; back pay; costs, including attorneys' fees; retention of jurisdiction of the case by the Court until it is assured that the activities complained of have been remedied; and such other relief as is necessary and appropriate. In Count Three the plaintiffs seek injunctive relief, compensatory damages for injuries suffered due to the execution of discriminatory provisions in the collective bargaining agreements and for the Corporation's breaches of contract. In Count Four, the plaintiffs seek injunctive relief, compensatory damages for the injuries suffered by them from the Unions' breaches of contract, and of their duty of fair representation; and costs, including attorneys' fees. In Counts Five and Six the relief sought is essentially the same as that sought in Counts One and Two, except that requests for compensatory and punitive damages are also included.
The issues presently to be decided on various motions by the parties are whether or not the instant case should be certified as a class action under Rule 23 of the Federal Rules of Civil Procedure, whether or not defendants' motion to dismiss should be granted and whether partial summary judgment with respect to Count Two of plaintiffs' amended complaint is appropriate.
CLASS CERTIFICATION
Plaintiffs have moved this Court to certify the instant case as a class action pursuant to Rule 23(b)(2) of the Federal Rules of Civil Procedure[1]. The class which plaintiffs seek to represent is defined as follows:
". . . [a]ll females who are or were employed by Chamberlain Manufacturing Corporation at its Derry Division, or by its predecessor in interest, Keystone Alloys Company, on July 2, 1965, or thereafter, and who are or during the course of their employment were, on the seniority list of the Window and Door Division."
There are initially four prerequisites which must be satisfied as a condition precedent to the maintenance of a class action under Rule 23(a).[2] For the reasons hereinafter stated, we deem the requirements of 23(a)(3) and 23(a)(4) to be unfulfilled in the case sub judice.
Plaintiffs have failed to prove that their claims are typical of the class they seek to represent, thereby failing to comply with Rule 23(a)(3). Plaintiffs' claims are not typical because former Window and Door employees can be classified into two distinct groups. The first group would be comprised of those former employees, like the nominal plaintiffs, who refused transfer over to the Siding Division after the closing of the Window and Door operations. The second group would be comprised of those former employees, unlike the nominal plaintiffs, who did in fact transfer to the Siding Division after the closing of the Window *72 and Door operations. When those employees in the first group refused to transfer from the Window and Door Division to the Siding Division, employment opportunities were offered to other Window and Door employees, members of the second group, who had less Window and Door seniority than first group plaintiffs. Thereafter, the group one employees, including the nominal plaintiffs, were laid-off and recalled in accordance with their accumulated seniority in the Siding Division. Having refused transfer to the Siding Division, the employees in group one were treated as new employees with no seniority benefits with respect to lay-off and recall. In light of the foregoing facts, it is apparent that the nominal plaintiffs' claims are only typical of those Window and Door employees who refused transfer to the Siding Division. Their claims are not typical of the entire purported class which would include all females who were on the seniority list of the Window and Door Division since 1965.
Additionally, typicality is lacking in the nature of discriminatory charges alleged in the instant suit. The complaint alleges as a basis for relief retaliation against those female employees who lodged charges of discrimination with government agencies and/or who filed prior complaints of sex discrimination against the defendants in court. These charges, while applicable to the nominal plaintiffs, are not typical of the purported class in its entirety.[3] The complaint further alleges that plaintiffs were subjected to discriminatory practices when they worked as junior employees in the Siding Division after the closing of the Window and Door Division. The nature of these charges also varies depending upon whether or not the junior employee had accepted transfer to the Siding Division. For those who refused transfer to the Siding Division, that which is perceived as discriminatory treatment could merely be a result of adherence to the new Siding Division Seniority List. Thus, the nature of the claims set forth in plaintiffs' complaint reveals diversity rather than typicality, thereby requiring an individualized, factual analysis not conducive to broad class action treatment.[4] See Ungar v. Dunkin Donuts of America, Inc., 531 F.2d 1211 (3d Cir. 1976). The aforementioned factual scenario is also sufficient to defeat the somewhat duplicative adequacy of representation requirement contained in Rule 23(a)(4). "Whether a party adequately represents a class depends on all the circumstance of the particular case." 3B, Moore, Federal Practice, ¶ 23.07[1] (2d Ed. 1974). Where the basis for relief is predicated upon differing individual situations to the extent existent in the instant suit, the nominal plaintiffs could not possibly be adequate representatives of the heterogeneous class as a whole. Thus, the requirement of Rule 23(a)(4) is also unfulfilled in the case sub judice.
Regardless of whether the class deficiency is labelled under Rule 23(a)(3) or Rule 23(a)(4), the important principle to be recognized is that a class action would be an inappropriate vehicle for litigation of the claims alleged in the instant case. Accordingly, class certification will be denied for failure to satisfy the requirements of Rule 23(a)(3) and/or Rule 23(a)(4).[5]
*73 MOTION TO DISMISS
Defendant Chamberlain Manufacturing Corporation and defendants United Electrical, Radio and Machine Workers of America, and Local 624, United Electrical, Radio and Machine Workers of America have asserted numerous reasons why plaintiffs' complaint should be dismissed. For the sake of clarity, we will undertake a seriatim review of the objections to each individual Count of the Six Count Amended Complaint.
"Count One"
The first barrier erected by the defendants in an effort to dismiss Count One is the doctrine of res judicata.[6] "[U]nder the doctrine of res judicata, a judgment `on the merits' in a prior suit involving the same parties or their privies bars a second suit based on the same cause of action." Lawlor v. National Screen Service Corp., 349 U.S. 322, 326, 75 S.Ct. 865, 867, 99 L.Ed. 1122 (1955). The prior judgments which defendants assert as a bar to the maintenance of the instant litigation will hereinafter be referred to as Torockio # 1 and Torockio # 2. Torockio, et al. v. Chamberlain Manufacturing Corporation, et al., 328 F.Supp. 578 (W.D.Pa.1971), remanded, 456 F.2d 1084 (3d Cir. 1972), on remand 56 F.R.D. 82 (W.D.Pa.1972), aff'd. 474 F.2d 1340 (3d Cir. 1973) (Torockio # 1); Torockio, et al. v. Chamberlain Manufacturing Corporation, et al., Civ. No. 72-244 (W.D. Pa.1973) (Torockio # 2).
Torockio # 1 was also an action instituted against the same defendants named herein based on alleged sex discrimination. This Court held in Torockio # 1 that the filing of a charge with the Equal Employment Opportunity Commission (hereinafter EEOC) within 90 days of the occurrence of the alleged unlawful employment practice and the filing of a civil action within 30 days of the issuance of a Right to Sue letter were both jurisdictional preconditions to the commencement of an action under Title VII. Having concluded that none of the ten (10) named plaintiffs had complied with the jurisdictional prerequisite of filing suit within 30 days of the issuance of a Right to Sue letter, it was ordered that the action be dismissed without prejudice to the plaintiffs.[7]
In Torockio # 2, the plaintiffs, all of whom were or had been employees of the defendant, Chamberlain Manufacturing Corporation alleged that (1) pursuant to the terms of a collective bargaining agreement between them, the defendants established a promotional and seniority system the intent and effect of which was to discriminate against the plaintiffs on the basis of their female sex; (2) the defendant unions breached their duty of fair representation in that they arbitrarily failed to process grievances entered by the plaintiffs; and (3) defendant Chamberlain violated the collective bargaining agreement in that it did not honor plaintiffs' seniority rights in its laying off and recall practices. This Court dismissed the first count of Torockio # 2 based upon Torockio # 1 in that no plaintiff had yet presented a timely right to sue letter.[8] Counts Two and Three in Torockio # 2 were dismissed because of the failure to aver that plaintiffs had either exhausted or attempted to exhaust any available internal union remedies.
*74 Having set forth the holdings in both Torockio # 1 and Torockio # 2, it is apparent that they do not raise res judicata implications for the case sub judice. Res judicata requires for its application a final judgment "on the merits." A dismissal without prejudice, as in Torockio # 1, does not determine the merits. American Heritage Life Insurance Co. v. Heritage Life Insurance Co., 494 F.2d 3 (5th Cir. 1974); Sack v. Low, 478 F.2d 360 (2d Cir. 1973). Additionally, it was the intention of this Court that Torockio # 1 not bar subsequent litigation. In fact, the petition for reconsideration, review and reinstatement of the complaint in Torockio # 1 was denied "because the Order of June 8, 1971 had dismissed the action `without prejudice,' and therefore, the plaintiffs were free to refile the action if it were subsequently caused to be made jurisdictionally acceptable." 56 F.R.D. at 84.
Count One of Torockio # 2 was therefore barred by res judicata only in the sense that the same jurisdictional deficiencies of Torockio # 1 continued to exist. Having alleged in the instant suit that plaintiffs have filed timely charges with the EEOC and that this action was commenced within ninety (90) days of the receipt of right to sue notices,[9] the jurisdictional deficiencies of Torockio # 1 and Torockio # 2 have been cured, thus enabling Count One sub judice to proceed unfettered by the restraint of res judicata.
Defendants next assail Count One alleging that the time period and scope of its allegations go beyond those made in the EEOC charges. Section 706(e) of Title VII provides:
"A charge under this section shall be filed within one hundred and eighty days after the alleged unlawful employment practice occurred and notice of the charge . . . shall be served upon the person against whom such charge is made within ten days thereafter, except that in a case of an unlawful employment practice with respect to which the person aggrieved has initially instituted proceedings with a State or local agency with authority to grant or seek relief from such practice or to institute criminal proceedings with respect thereto upon receiving notice thereof, such charge shall be filed by or on behalf of the person aggrieved within three hundred days after the alleged unlawful employment practice occurred, or within thirty days after receiving notice that the state or local agency has terminated the proceedings under the state or local law, whichever is earlier, and a copy of such charge shall be filed by the Commission with the state or local agency." (emphasis added)
For an EEOC charge to be timely filed in Pennsylvania, it must be filed within three hundred (300) days of the alleged unlawful employment practice.[10] The case sub judice is based upon EEOC charges filed on October 30, 1972 resulting in the alleged issuance of right to sue letters in October and November of 1975. Therefore, in Pennsylvania, only those alleged unlawful employment practices that occurred on or after January 2, 1972 (300 days before October 30, 1972) could have been the basis for the October 30, 1972 EEOC charges. Since plaintiffs' allegations cover events prior to January 2, 1972, defendants argue that plaintiffs are improperly attempting to expand the scope of this action. McDonnell-Douglass Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973); Collins v. United Airlines, 514 F.2d 594 (9th Cir. 1975); Jenkins v. Blue Cross Mutual Hospital, 522 F.2d 1235 (7th Cir. 1975); Oatis v. Crown Zellerbach Corp., 398 F.2d 496 (5th Cir. 1968). We agree with defendants that inasmuch as transactions and events occurring before January 2, 1972 could not have timely provided a basis for EEOC charges in October of 1972, such events must not be allowed to become part of a civil complaint filed in October of 1975.
Defendants' argument, however, overlooks Section 706(g) of Title VII which provides in relevant part:
*75 "Back pay liability shall not accrue for a date more than two years prior to the filing of a charge with the Commission."
Thus, plaintiffs may recover back pay for discrimination occurring more than three hundred (300) days before the filing of EEOC charges up to a two-year time limit. Whether or not such a two-year restriction is also applicable to injunctive relief need not be decided because plaintiffs' request for injunctive relief is no longer appropriate in view of defendant Chamberlain Manufacturing Corporation having ceased operations.
Accordingly, Count One shall be dismissed only as to events which transpired prior to October 30, 1970. We have considered defendants' other contentions and find them to be without merit.
"Count Two"
The first attack upon Count Two is predicated on the jurisdictional prerequisites previously discussed in conjunction with Count One. Specifically defendants contend that neither named plaintiff in Count Two, Mary Mehalic or Helen Miller, possesses a valid right to sue letter authorizing the present suit. However, plaintiffs' amended complaint alleges that Mary Mehalic received a right to sue letter on or about October 24, 1975 and that Helen Miller received a right to sue letter on or about December 11, 1975.[11] On a motion to dismiss, the allegations of the complaint must be accepted as true. 2A, Moore, Federal Practice, ¶ 12.08 (2d Ed. 1974). It is therefore inappropriate to challenge the validity of any 1975 right to sue letters in the present procedural posture where defendants' jurisdictional contentions are unsubstantiated. Plaintiffs' allegations are sufficient to survive a motion to dismiss.
Defendants additionally contend that Count Two is barred by the equitable doctrine of laches. Inexcusable delay and prejudice to the defendant are elements of laches. Both the length of delay and the existence of prejudice are questions of fact. Churma v. United States Steel Corp., 514 F.2d 589 (3d Cir. 1975). Ruling on laches at this juncture of the suit is, therefore, premature.
Count Two was also attacked on the grounds of res judicata. For the reasons stated in connection with Count One, we deem Count Two to be maintainable despite Torockio # 1 and Torockio # 2.
Accordingly, defendants' motion to dismiss Count Two must be denied.[12]
"Count Three"
Defendant initially argues for the dismissal of Count Three alleging that nowhere in the amended complaint do plaintiffs claim that defendant Chamberlain Manufacturing Corp. has violated any specific provision or term of the collective bargaining agreement. Therefore, it is contended that plaintiffs have failed to state a claim upon which relief may be granted under § 301 of the Labor Management Relations Act. However, plaintiffs have alleged breach of the following contractual provision by defendant Chamberlain Manufacturing Corp.:
"Article II. No Discrimination
Section 1. There shall be no discrimination against employees during and after their trial period of employment because of UE membership or activities, color, race, sex, marital status, age, religious or political beliefs."
Under the liberal notice pleading requirements of the Federal Rules of Civil Procedure, plaintiffs' complaint is sufficiently definite to state a claim upon which relief may be granted.
Plaintiffs' amended complaint also cures the pleading deficiency of the § 301 count *76 in Torockio # 2. It was held in Torockio # 2 that:
"Here, the complaint is devoid of averments with respect to whether or not the plaintiffs have either exhausted or attempted to exhaust any available internal union remedies. Consequently, this action, insofar as it seeks relief as against the unions, is not maintainable. And additionally, since the maintainability of the action insofar as it seeks relief against Chamberlain is dependent upon the action as against the unions, it follows that the whole action is one over which this court has no jurisdiction until any internal remedies available to the plaintiffs have been exhausted."
Plaintiffs' amended complaint in the case sub judice now alleges that they have either exhausted or attempted to exhaust their available internal union remedies.[13] Therefore, under the reasoning previously discussed in connection with Count One, Torockio # 2 does not bar litigation of Count Three in the instant suit.
Lastly, defendants contend that Count Three is barred by the doctrine of res judicata, not because of Torockio # 1 and Torockio # 2, but as a result of an arbitration decision rendered on January 17, 1973 denying the named plaintiffs' grievances that the employer had violated the collective bargaining agreement. However, in Count Four plaintiffs have also asserted a breach of the duty of fair representation against the defendant unions. An arbitration decision is not binding on employees where the union has breached its duty of fair representation. Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 96 S.Ct. 1048, 47 L.Ed.2d 231 (1976). To determine the res judicata effects of the aforementioned arbitration decision prior to a ruling on the merits of the alleged breach of the unions' duty of fair representation would be improper. A motion to dismiss is not an appropriate vehicle to dispose of Count Three in light of the allegations contained in Count Four.[14]
Accordingly, defendants' motion to dismiss Count Three must be denied.
"Count Four"
The Union defendants allege that plaintiffs have failed to state specific facts in support of their Count Four fair representation claim. Having reviewed plaintiffs' amended complaint, this Court is of the belief that the broad notice pleading requirements of the Federal Rules of Civil Procedure have been satisfied.[15] Plaintiffs are not required to plead evidence.
The Union defendants also contend that the two year tort statute of limitations bars relief under Count Four. The appropriate limitations period to be applied in an action for breach of the duty of fair representation has been the subject of considerable controversy.[16] Some Courts have found the shorter tort statute to best effectuate the underlying policies of federal labor law. Read v. Local Lodge 1284, International Association of Machinists and Aerospace Workers, AFL-CIO, 528 F.2d 823 *77 (3d Cir. 1975); De Arroyo v. Sindicato De Trabajadores Packinghouse, AFL-CIO, 425 F.2d 281 (1st Cir. 1970). Read held that Delaware's two-year statute of limitations applied where the underlying claim was for personal injuries even though the form of the action was an alleged breach of the unions' duty of fair representation. However, in the case, sub judice we choose to apply the six year contract statute of limitations. See Falsetti v. Local Union No. 2026, UMW, 355 F.2d 658 (3d Cir. 1966); Butler v. Local Union 823, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, 514 F.2d 442 (8th Cir. 1975); Tuma v. American Can Company, 367 F.Supp. 1178 (D.N.J.1973).
As in Read, supra, where the underlying claim was for personal injury, it is important to ascertain the underlying basis of plaintiffs' claims in the instant suit. Count Four, inter alia, alleges that the defendant unions negotiated, administered and enforced contracts with the defendant company which discriminated against females. These claims clearly sound in contract because they revolve around the labor agreements negotiated by the defendant company and unions. Accordingly, Count Four is not barred by the two year tort statute of limitations but rather is subject to the six year contract limitation period.[17]
"Count Five"
Count Five alleges the claims of sex discrimination previously discussed to be violations of 42 U.S.C. § 1981. However, it has been uniformly held that 42 U.S.C. § 1981 provides no remedy for sex discrimination. Jackson v. University of Pittsburgh, 405 F.Supp. 607 (W.D.Pa.1975); McIntosh v. Garofalo, 367 F.Supp. 501 (W.D.Pa.1973); Weyandt v. Mason's Stores, 279 F.Supp. 283 (W.D.Pa.1968). Having alleged only sex discrimination, Count V of plaintiffs' amended complaint must be dismissed.
"Count Six"
Count Six of plaintiffs' amended complaint alleges a conspiracy in violation of 42 U.S.C. § 1985(3). Defendants contend that the conspiracy claim should be dismissed because § 1985(3) does not create a cause of action against purely private employment conduct and in any event females are not members of the class statutorily protected by § 1985(3). However, both of defendants' propositions have been definitively rejected. Griffin v. Breckenridge, 403 U.S. 88, 91 S.Ct. 1790, 29 L.Ed.2d 338 (1971); Pendrell v. Chatham College, 386 F.Supp. 341 (W.D.Pa.1974). Conspiracies by private parties resulting in sex discrimination are actionable under § 1985(3).
Additionally, Count Six is not barred by the applicable statute of limitations. As in Count Four, the appropriate statute of limitations to be applied is that which would be applicable in a similar state court action. While there is authority for the view that application of a two year tort statute of limitations would be acceptable, Davis v. United States Steel Supply, Division of United States Steel Corporation, 405 F.Supp. 394 (W.D.Pa.1976); Wilson v. Sharon Steel Corporation, 399 F.Supp. 403 (W.D. Pa.1975), we believe that a six year limitation period is warranted by Pennsylvania law. Under state law the statutory period of limitations upon an action to recover damages for an alleged conspiracy to damage plaintiff's business and otherwise injure him is six years. 22 P.L.E., Limitation of Actions, § 31. The above-mentioned six year state conspiracy limitation period is therefore the yardstick which should be applied in a federal action under § 1985(3). See Wilson v. Sharon Steel Corporation, 549 F.2d 276, 280 (3d Cir. 1977).
CONCLUSION
To summarize, Count One is dismissed as to all allegations based upon events occurring prior to October 30, 1970. Count Five is dismissed in its entirety. Dismissal with *78 respect to Counts Two, Three, Four and Six is denied.
PARTIAL SUMMARY JUDGMENT
Having failed in its effort to dismiss Count Two through their motion to dismiss, defendants now marshal to their support certain exhibits and deposition testimony which they claim makes entry of summary judgment under Rule 56 appropriate. For the reasons hereinafter stated, Count Two of the instant action should be dismissed as to plaintiff Mehalic only.
Defendant Chamberlain Manufacturing Corporation urges that this Court lacks subject matter jurisdiction over Count Two. While we rejected defendant's identical contention in connection with its previous motion to dismiss Count Two,[18] certain additional evidence now brought to our attention via exhibits and deposition testimony in conjunction with defendant's partial summary judgment motion warrants dismissal of Count Two as to plaintiff Mehalic's claim.[19]
Plaintiff Mehalic filed two separate charges with the EEOC, one in 1967 and the other in 1968. On January 2, 1970, the EEOC issued a single notice of right to sue. Subsequently, on February 3, 1970, plaintiff and her attorney were notified by the EEOC that the two charges had been consolidated into one case.[20] A second notice of right to sue was issued in October of 1975 to plaintiff Mehalic. Due to confusion regarding whether or not there was one consolidated charge or two separate charges the second notice of right to sue was issued. The EEOC felt that in those situations in which there is any question regarding whether or not a notice of right to sue should be issued, the Commission should issue such a letter and let the Federal District Court render a decision.[21]
Accepting the EEOC's invitation to decide the validity of plaintiff Mehalic's 1975 notice of right to sue letter, this Court is of the belief that the aforementioned letter is legally inoperative because the Commission had already issued a notice of right to sue in 1970 which, after consolidation, was intended to provide a jurisdictional basis for both the 1967 and 1968 charges. Thus, the EEOC lacked authority in 1975 to reinstitute time barred charges. The issuance of duplicative notices by the EEOC cannot substitute for compliance with the Congressionally prescribed limitation period. Cleveland v. Douglas Aircraft Co., 509 F.2d 1027 (9th Cir. 1975).
Having decided that Count Two is properly dismissable against plaintiff Mehalic, the issue arises whether or not summary judgment is the proper vehicle to effectuate disposal of such claim. Summary judgment under Rule 56 initially appears appropriate due to the fact that matters outside the pleadings have been necessary to conclude that this Court lacks subject matter jurisdiction. However, it has been decided that it is error to rule on a summary judgment motion where a court determines that it lacks jurisdiction over the subject matter. O'Donnell v. Wien Air Alaska, Inc., 551 F.2d 1141 (9 Cir. 1977). The proper procedure to be utilized is outlined by the Third Circuit in Mortensen v. First Federal Savings and Loan Association, 549 F.2d 884, 891 (3d Cir. 1977);
"At the outset we must emphasize a crucial distinction, often overlooked, between 12(b)(1) motions that attack the complaint on its face and 12(b)(1) motions that attack the existence of subject matter jurisdiction in fact, quite apart from any pleadings. The facial attack does offer similar safeguards to the plaintiff: The court must consider the allegations of the complaint as true. The factual attack, however, differs greatly for here *79 the trial court may proceed as it never could under 12(b)(6) or Fed.R.Civ.P. 56. Because at issue in a factual 12(b)(1) motion is the trial court's jurisdictionits very power to hear the casethere is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case."
Mortensen is therefore authority for the proposition that matters outside the pleadings may be evaluated in reaching a decision on whether or not a motion to dismiss based on lack of subject matter jurisdiction should be granted. "[A] motion for summary judgment for lack of jurisdiction over the subject matter may be treated and disposed of as a motion to dismiss." 6, Moore, Federal Practice, ¶ 56.03 (2d Ed. 1974). Accordingly, defendant's partial summary judgment motion as to plaintiff Mehalic will be treated as a motion to dismiss and Mehalic's claim under Count Two will thereby be dismissed.
Treating defendant's subject matter jurisdiction objection to plaintiff Miller's claim in Count Two as a motion to dismiss, said motion must be denied. There has been a direct factual conflict as to whether or not a notice of right to sue letter was forwarded to plaintiff Miller in 1975 and whether or not she received a notice of right to sue in 1970.[22] Such a dispute is more properly resolvable at trial rather than by reference to conflicting depositions and exhibits.[23] Additionally, defendant has contended that Count Two be entirely dismissed under the doctrine of laches.[24] In support of its position, defendant Chamberlain has submitted an affidavit executed by Francis J. Kommelter, Vice President of Industrial Relations, delineating specific areas of prejudice arising as a result of plaintiffs' delay in instituting suit. In response, plaintiffs have requested a continuance pursuant to Rule 56(f) of the Federal Rules of Civil Procedure in order to depose Kommelter. It appears that whether or not a factual dispute exists as to those events which form the basis of the instant laches contention must await plaintiffs being afforded an equal opportunity to depose Kommelter. Accordingly, a one-month continuance will be granted for the purpose of enabling plaintiffs to depose Kommelter on the issue of laches as it relates to the remaining plaintiff in Count Two, Helen Miller.
Plaintiffs have also filed a motion to strike certain exhibits and affidavits attached to defendant's motion and memorandum of law in support of summary judgment. In turn, defendant has requested reimbursement for costs and counsel fees expended in opposing the aforementioned motion. We have considered the parties' respective contentions and find them to be without merit.
In summary, plaintiff Mehalic's claim in Count Two is dismissed. Plaintiff Miller's claim in Count Two remains viable subject to proof at trial of the requisite jurisdictional basis and subject to future survival of said claim in the face of defendant's continuing laches objection. Decision on the question of laches with respect to Count Two is reserved until completion of Kommelter's deposition by plaintiffs within one month. Lastly, plaintiffs' motion to strike certain exhibits and affidavits is denied.
NOTES
[1] The Court's position on the appropriateness of invoking Rule 23(b)(2) in a similar factual setting has been previously set forth in Rodgers v. United States Steel Corporation, 69 F.R.D. 382, 387 (W.D.Pa.1975).
[2] PREREQUISITES TO A CLASS ACTION. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
[3] Plaintiffs' Reply Memorandum at page two states that while all of the named plaintiffs in Count One filed charges with the EEOC, the purported class would include all persons employed by Chamberlain 300 days prior to October 30, 1972.
[4] "An action, of course, is not maintainable as a class suit merely because it is designated as such in the pleadings; whether it is or is not depends upon the attending facts. Both logic and justice dictate that a party or parties who seek to bring an action on behalf of a class or against a class, or an action by a class against a class, must bring themselves within the requirements of Rule 23." 3B, Moore, Federal Practice, ¶ 23.02-2 (2d Ed. 1974).
[5] Plaintiffs had filed a motion to strike defendant Chamberlain Manufacturing Corporation's surrebuttal memorandum of law on the issue of class certification and defendant Francis J. Kommelter's counter affidavit for the reason that such papers were not authorized either by the Federal Rules of Civil Procedure or this Court. In the alternative plaintiffs' requested that we consider certain documents submitted in response to the surrebuttal memorandum of law and counter affidavit. In light of the fact that plaintiffs had an opportunity to submit a response to the defendant's unsolicited papers, we have considered both defendant's materials and plaintiffs' notes in reply. The interests of justice would appear to be best served by such a resolution under these circumstances.
[6] In its brief defendant Chamberlain Manufacturing Corporation has also asserted as a bar the doctrine of direct estoppel. This doctrine is more popularly known as collateral estoppel. See 1B, Moore, Federal Practice, ¶ 0.405[1] (2d Ed. 1974). Due to the nature of the legal issues actually decided in Torockio # 1 and Torockio # 2 collateral estoppel cannot be the basis for a motion to dismiss the case sub judice.
[7] "In the context of these jurisdictional questions, we treat the defendant's motion more properly as one to dismiss and hereby dismiss the action, without prejudice to the plaintiffs." Torockio # 1, supra, at 580.
[8] The Opinion in Torockio # 2 uses the phrase "res judicata" in its generic sense. See 1B, Moore, Federal Practice, ¶ 0.405[1] (2d Ed. 1974).
[9] Plaintiffs' Amended Complaint, p. 18-19.
[10] 43 P.S. § 962.
[11] Plaintiffs' Amended Complaint, p. 23.
[12] Count Two is also subject to the limitation imposed upon Count One that only events occurring within two years of the filing of EEOC charges can be considered as a basis for the instant suit. Presumably, this restriction is less meaningful in Count Two than in Count One because the plaintiffs named in Count Two filed their charges of discrimination with the EEOC back in 1967 and 1968.
[13] Plaintiffs' Amended Complaint, p. 27.
[14] Defendant Chamberlain Manufacturing Corp.'s reply brief at page 13 states: "Plaintiffs at page 20 of their brief claim that they are not bound by an arbitration decision where the union has breached its duty of representation. However, Professor Cooley's January 17, 1973 decision indicates that the individual grievants personally appeared before him and were fully heard. Thus, since the individual grievants participated and were heard by the arbitrator they cannot now claim that the union did not represent their interests." Defendant cannot seriously contend that mere physical presence of the grievants at the hearing is an adequate substitute for the zealous professional representation which unions are supposed to afford. The fact that the grievants appeared and were heard at the hearing does not atone for the unions' breach of their duty of fair representation, if indeed there was such a breach.
[15] See Plaintiffs' Amended Complaint, pp. 30-32.
[16] Where the federal cause of action is silent as to the applicable limitations period, the appropriate state statute of limitations is to be followed. International Union, United Automobile, Aerospace and Agricultural Implement Workers v. Hoosier Cardinal Corp., 383 U.S. 696, 86 S.Ct. 1107, 16 L.Ed.2d 192 (1966).
[17] Defendants' contentions regarding res judicata vis a vis Count Four are without merit for the same reasons stated in the discussion of Count Three.
[18] See previous discussion of defendant's motion to dismiss at p. 11.
[19] Exhibits A through D attached to defendant's partial summary judgment motion and Eugene Nelson's deposition.
[20] See Exhibits B and C attached to partial summary judgment motion.
[21] See Exhibits A and D attached to partial summary judgment motion.
[22] See plaintiffs' amended complaint, p. 23; Exhibit A attached to defendant's partial summary judgment motion; Miller deposition, p. 151.
[23] "[W]here a factual issue arises in connection with a jurisdictional or related type of motion, . . . the court has a broad discretion as to the method to be used in resolving the factual dispute." 6, Moore, Federal Practice, ¶ 56.03 (2d Ed. 1974).
[24] See previous discussion on the nature of laches at p. 11.
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UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 99-11141
_____________________
MARK BRYANT; WILLIE D. SMITH; ROBERT HILL,
Plaintiffs-Appellants,
versus
TEXAS UTILITIES SERVICES, INC., ET AL.,
Defendants,
TEXAS UTILITIES SERVICES, INC.; TEXAS ENERGY
INDUSTRIES, INC.; TEXAS UTILITIES MINING
COMPANY; TEXAS UTILITIES COMPANY; ENSEARCH CORP.,
Defendants-Appellees.
_________________________________________________________________
Appeal from the United States District Court
for the Northern District of Texas
(3:99-CV-3-T)
_________________________________________________________________
September 11, 2000
Before WOOD*, DAVIS, and BARKSDALE, Circuit Judges.
PER CURIAM:**
The Rule 12(b)(6) dismissal, as to Appellees, of this action
is the subject of this FED. R. CIV. P. 54(b) appeal. We AFFIRM.
*
Senior United States Circuit Judge for the Seventh Circuit,
sitting by designation.
**
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.
I.
Appellants were arrested in January 1997 by a Texas game
warden, defendant Robinson (not one of the Appellees), while
hunting on land owned by a relative of appellant Bryant but leased
to appellee Texas Utilities Services, Inc. (TU) for lignite mining.
According to the complaint: Robinson told Appellants that TU
“asked [him] to patrol and keep you all out”, and he was going to
issue them a citation; when Appellants continued to assert their
right to be on the property, however, Robinson seized their weapons
and ordered them to follow him to jail; at the jail, when an
unknown corporate representative insisted Appellants be arrested
and prosecuted, Robinson told Bryant “he had no alternative but to”
comply, stating Appellees “did not want African-Americans on the
... property”; and, subsequently, a jury exonerated Appellants of
criminal charges. (Emphasis added.)
II.
We review a Rule 12(b)(6) dismissal de novo, in the light most
favorable to Appellants, with dismissal being appropriate “only if
... no relief could be granted under any set of facts that could be
proven consistent with the allegations” in the complaint.
Barrientos v. Reliance Standard Life Ins. Co., 911 F.2d 1115, 1116
(5th Cir. 1990), cert. denied, 498 U.S. 1072 (1991) (quotation
marks and citation omitted; emphasis added). Factual, but not
conclusory, allegations must be accepted as true. E.g., Fernandez-
2
Montes v. Allied Pilots Ass’n, 987 F.2d 278, 284 (5th Cir. 1993).
Appellants contend: the district court erred in dismissing
their federal claims, presented under 42 U.S.C. §§ 1983, 1985(3),
and 1986, and their state claims for intentional infliction of
emotional distress, false arrest, false imprisonment, assault,
malicious prosecution, negligence, gross negligence, and invasion
of privacy. Bryant v. Texas Utils. Servs., Inc., No. 3:99-CV-0003-
T (N.D. Tex. 8 July 1999) (unpublished). They maintain they
sufficiently alleged, for Rule 12(b)(6) purposes, facts
demonstrating a conspiracy, between Appellees and Robinson, to
deprive them of their civil rights: inter alia, Robinson’s
statement about Appellees “not want[ing] African-Americans on the
... property”, and Appellees’ “control” of Appellants’ prosecution.
(Emphasis added.)
As part of our review, we reject Appellants’ contention,
bordering on being frivolous, that the district court “misstated”
allegations in the complaint. In any event, that would not affect
our de novo review.
A.
Based on such review, we agree with the district court that
Appellees’ alleged activities do not rise to the level of a
conspiracy, sufficient to state a claim under §§ 1983, 1985 or
1986. See Daniel v. Ferguson, 839 F.2d 1124, 1130 (5th Cir. 1988)
(“private party does not act under color of state law when []he
3
merely elicits but does not join in an exercise of official state
authority”) (quotation marks and citation omitted; emphasis added);
see also Mississippi Women’s Med. Clinic v. McMillan, 866 F.2d 788,
795 (5th Cir. 1989) (to prevail on § 1986 claim, one must first
prevail under § 1985).
To succeed on these federal claims, Appellants would have to
show: “a sufficiently close connection between the state and the
challenged conduct for the [private] actor to be treated as an
agent of the state”, Sims v. Jefferson Downs Racing Ass’n, 778 F.2d
1068, 1076 (5th Cir. 1985); and “that the state ... acted according
to a preconceived plan [with] ... the private actor, [and] not on
the basis of [its] own investigation”. Bartholomew v. Lee, 889
F.2d 62, 63 (5th Cir. 1989) (emphasis added).
Appellants’ allegations fall far short of stating the
requisite elements. The complaint alleges Appellants were arrested
after Robinson: discovered them on the property; conducted his own
investigation, and determined, even if mistakenly, that they were
trespassing; and gave Appellants the opportunity to accept a
citation and leave. Regarding Appellees’ seeking Appellants’
arrest and prosecution, Appellants alleged the “state’s attorney”
told them Appellees were concerned that accepting Appellants’ right
to hunt on the land “would adversely impact [Appellees’] ability to
restrict other landowners and their invitees from hunting on other
[similarly leased] property”.
4
In the light of these specific allegations, Appellants’ “mere
characterization of [Appellees’] conduct as conspiratorial or
unlawful” fails to “set out allegations upon which relief can be
granted”. Russell v. Millsap, 781 F.2d 381, 383 (5th Cir. 1985)
(internal quotation marks and citation omitted; emphasis added),
cert. denied, 479 U.S. 826 (1986).
B.
Pursuant to the above discussion, and essentially for the
reasons stated by the district court, we conclude that Appellants
have likewise failed to allege sufficient facts to support their
state claims.
III.
For the foregoing reasons, the judgment is
AFFIRMED.
5
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910 N.E.2d 670 (2009)
Marie RAFFERTY-PLUNKETT, Petitioner-Appellant,
v.
Patrick K. PLUNKETT, Defendant and
State Universities Retirement System of Illinois, Respondent-Appellee.
No. 3-08-0659.
Appellate Court of Illinois, Third District.
June 11, 2009.
*671 Pamela Davis Gorcowski (argued), Richard J. Kavanagh, Kavanagh Grumley & Gorbold LLC, Steven Troy (argued), Mason, Orloff, Reich, Troy & Thanas, Joliet, for Marie Rafferty-Plunkett.
Lauren Frank Noll (argued), Ranjit Hakim, Mayer Brown LLP, Chicago, for State Universities Retirement System of Illinois.
Presiding Justice O'BRIEN delivered the opinion of the court:
The trial court granted respondent State Universities Retirement System's motion to dismiss petitioner Marie Rafferty-Plunkett's citation to discover assets and denied her motion for turnover of pension fund assets that were awarded to Marie in the dissolution of her marriage to Patrick. The trial court found that in the absence of a qualified Illinois domestic relations order (QILDRO) consent executed by Patrick, the trial court had no statutory authority to order the State Universities Retirement System to turn over pension benefits. Marie appeals the trial court's ruling. We reverse the trial court and remand.
FACTS
On September 15, 1998, the trial court entered a judgment order dissolving the marriage of Marie Rafferty-Plunkett and Patrick Plunkett. As part of the dissolution order, the trial court approved as fair, just and equitable, an oral settlement agreement, noting the parties had entered into the agreement "freely, voluntarily without force, coercion or duress," with full knowledge and full and complete disclosure. As part of the settlement agreement *672 incorporated into the dissolution judgment, Marie was awarded 50% of Patrick's pension plan benefits acquired during the marriage. The judgment provided, in part:
"As the Defendant is currently receiving his pension, it is the agreement of the parties that the Defendant shall pay Plaintiff one-half (½) of said pension amounts directly to Plaintiff commencing October 1, 1998[,] and continuing thereafter until such time as a Qualified Domestic Relations Order[1] becomes effective for the benefit of Plaintiff."
On September 15, 2006, the trial court entered a rule to show cause against Patrick, in part, for his failure to pay pension benefits to Marie. On October 23, 2006, following a hearing in which Patrick did not appear, the trial court entered an order finding, in part, that Patrick was in indirect civil contempt for his failure to pay one-half of his monthly pension benefit to Marie. The trial court found Patrick owed Marie an arrearage equal to $106,523, which the trial court reduced by $38,149, the amount Marie owed Patrick from her pension. As a result, the trial court entered a judgment in favor of Marie in the amount of $68,374. As part of the judgment order, the trial court directed Patrick to execute a consent to the issuance of a QILDRO and found that Patrick's current monthly pension benefit is $6,671, of which Marie is entitled to $3,335 per month.
Marie issued citations to discover assets to various banks and brokerage firms and secured the turnover of $14,630 toward satisfaction of the judgment order. Marie also issued a citation to discover assets to the State Universities Retirement System of Illinois (SURS) and directed to the same agency a motion for a turnover order. SURS filed a motion to dismiss the citation to discover assets. Patrick did not appear at the citation proceeding. The evidence indicates that in correspondence to SURS dated January 8, 2007, Patrick verified his address in Dublin, Ireland. He requested his annuity checks be sent to his Ireland address. Withholding certificates signed by Patrick in June 2007 and November 2007 also reflect the Ireland address.
On April 24, 2008, the trial court granted SURS's motion to dismiss the citation to discover assets and denied Marie's motion for a turnover order. The trial court specifically found that because Patrick had not executed a consent to a QILDRO, the trial court was without statutory authority to "otherwise override the exemption of pension funds from judgement as set out in the Illinois Pension Code [and] the Illinois Code of Civil Procedure." Following the trial court's denial of Marie's motion to reconsider, Marie filed this appeal.
ANALYSIS
Marie raises several issues on appeal, including whether section 1-119(m) of the Illinois Pension Code (the Pension *673 Code) (40 ILCS 5/1-119(m) (West 2006)), violates the Illinois Constitution. Because we have concluded our decision rests on an alternate ground, we do not reach Marie's constitutional challenges to section 1-119(m) of the Pension Code. See In re E.H., 224 Ill.2d 172, 178, 309 Ill.Dec. 1, 863 N.E.2d 231, 234 (2006) (stating that cases should be decided on nonconstitutional grounds whenever possible, reaching constitutional issues only as a last resort). Furthermore, because we are ruling in Marie's favor, we find it unnecessary to address her first issue on appeal, that the trial court erred in allowing SURS, as opposed to Patrick, to raise an objection to the citation to discover assets on the basis the assets were exempt from judgment. We find the issue before us is whether the trial court erred in concluding it had no authority to enforce a judgment order directing Marie's share of pension funds be delivered to her where there exists an agreed settlement order incorporated in the judgment for dissolution of marriage that addressed, in part, the distribution of the pension funds. We conclude the trial court did so err.
Section 1-119 of the Pension Code, effective July 1, 1999, entitled "Qualified Illinois Domestic Relations Orders," gave Illinois domestic relations courts the statutory authority to direct payment of governmental pension benefits to a person other than the regular payee. Smithberg v. Illinois Municipal Retirement Fund, 192 Ill.2d 291, 301, 248 Ill.Dec. 909, 735 N.E.2d 560, 566-67 (2000); 40 ILCS 5/1-119 (West 2006). Even before the statutory authority conveyed by the QILDRO legislation, however, this court considered trial courts had the authority to direct pension benefits to a payee other than the pension member. In re Marriage of Carlson, 269 Ill.App.3d 464, 471-72, 206 Ill.Dec. 954, 646 N.E.2d 321, 326-27 (1995). The court in Carlson found that notwithstanding the section of the Pension Code governing firefighters' pension funds that dictated the pension funds could not be used to satisfy judgments, claims, or debts, the trial court had the authority to enter an agreed order establishing pension benefits be disbursed directly to the nonemployee divorced spouse. Carlson, 269 Ill.App.3d at 471, 206 Ill.Dec. 954, 646 N.E.2d at 326. In Carlson, the member spouse had failed to sign any of the documents necessary to secure the nonmember divorced spouse's right to a portion of the member's pension as awarded in the marriage dissolution order. Carlson, 269 Ill.App.3d at 465-66, 206 Ill.Dec. 954, 646 N.E.2d at 322. Following the nonmember's petition to the trial court, the fund consented to the entry of an agreed order in which the fund, in return for the nonmember's agreement to defer receipt of the pension until the member's retirement, agreed to mail the nonmember's share directly to her. Carlson, 269 Ill.App.3d at 466, 206 Ill.Dec. 954, 646 N.E.2d at 323. When the Fund later petitioned the court to vacate the agreed order, we affirmed the trial court's decision and upheld the validity of the agreed order. Carlson, 269 Ill.App.3d at 471-72, 206 Ill.Dec. 954, 646 N.E.2d at 326-27.
In coming to our determination in Carlson, this court was guided by the supreme court's decision in In re Marriage of Hackett, 113 Ill.2d 286, 100 Ill.Dec. 790, 497 N.E.2d 1152 (1986). In Hackett, the supreme court determined that a firefighter's pension benefits may be divisible as marital property in dissolution actions and that the pertinent section of the Pension Code did not supercede the provisions of section 503 of the Illinois Marriage and Dissolution of Marriage Act (the Marriage Act). Hackett, 113 Ill.2d at 292-93, 100 Ill.Dec. 790, 497 N.E.2d at 1154-55; 750 ILCS 5/501 et seq. (West 2006). Important to the Hackett decision, as noted by the Carlson *674 court, was its holding that the legislative intent of the pertinent section of the Pension Code was to shield retired firefighters and their beneficiaries from creditors. Carlson, 269 Ill.App.3d at 468, 206 Ill.Dec. 954, 646 N.E.2d at 324. It therefore stands to reason that the court in Hackett agreed that upon dissolution of a marriage, a former spouse becomes a co-owner of pension benefits accumulated during the marriage. Hackett, 113 Ill.2d at 292, 100 Ill.Dec. 790, 497 N.E.2d at 1154. It is now well settled that retirement benefits are presumed to be marital property to the extent that the beneficial interest was acquired during the marriage, a concept acknowledged in the 1999 amendment to section 503(b)(2) of the Marriage Act. Smithberg, 192 Ill.2d at 303, 248 Ill.Dec. 909, 735 N.E.2d at 567; 750 ILCS 5/503(b)(2) (West 2006). Pension benefits in many cases constitute one of the most important items of property acquired in a marriage of long duration. Smithberg, 192 Ill.2d at 304, 248 Ill.Dec. 909, 735 N.E.2d at 568.
In Smithberg, a post-QILDRO case, the supreme court acknowledged the change to the law brought about by the QILDRO provisions, refusing to further comment on "the wisdom or effect" of the legislation as not dispositive of the case before it. Smithberg, 192 Ill.2d at 302, 248 Ill.Dec. 909, 735 N.E.2d at 567 (noting in passing that the QILDRO provision did not apply to the payment of death benefits). In Smithberg, the ultimate issue was whether the pension fund member's first or second wife was entitled to pension death benefits. Smithberg, 192 Ill.2d at 294-95, 248 Ill. Dec. 909, 735 N.E.2d at 563. Contrary to the marital settlement agreement, the member named his second wife as the beneficiary on the pension fund death benefit designation form. Smithberg, 192 Ill.2d at 292-93, 248 Ill.Dec. 909, 735 N.E.2d at 562. The first wife argued the marital settlement agreement entitled her to the benefit while the second wife argued the statutory provision defining the beneficiary as the person designated on the form should be strictly construed. Smithberg, 192 Ill.2d at 296-97, 248 Ill.Dec. 909, 735 N.E.2d at 564.
The Smithberg court engaged in a lengthy discussion regarding the court's power to provide equitable relief, stating that "[i]rrespective of empowering statutes, a court retains its traditional equitable powers." Smithberg, 192 Ill.2d at 298, 248 Ill.Dec. 909, 735 N.E.2d at 565. The Smithberg court also stated the court's powers cannot be taken away or abridged by the legislature. Smithberg, 192 Ill.2d at 298, 248 Ill.Dec. 909, 735 N.E.2d at 565 The Smithberg court also reinforced the Hackett court's finding that antialienation provisions do not conflict with the Marriage Act and ultimately agreed, given the facts and circumstances before it, with the Carlson court's reasoning that no statute or precedent prohibited a public pension fund from agreeing to make payment to a nonemployee divorced spouse entitled to pension benefits. Smithberg, 192 Ill.2d at 304-06, 248 Ill.Dec. 909, 735 N.E.2d at 568-69. The Smithberg court affirmed the order of the appellate court granting summary judgment to the first wife. Smithberg, 192 Ill.2d at 306, 248 Ill.Dec. 909, 735 N.E.2d at 569. Although the Smithberg court limited its decision to the ultimate issue of who was entitled to the deceased's death benefit, the court also noted that "the facts and arguments raise a broader more troubling matter, specifically a challenge to the power of a court, in this context, to enforce by equitable means, a judgment based upon the incorporated terms of a marital settlement agreement effecting an agreed distribution of marital assets." Smithberg, 192 Ill.2d at 295, 248 Ill.Dec. 909, 735 N.E.2d at 563.
*675 In the case before us, the trial court believed section 1-119(m)(1) of the Pension Code preempted the trial court's authority to order the turnover of assets from SURS to Marie. We disagree. Section 1-119(m)(1) of the Pension Code applies if the pension member began participating in the retirement system on or before the July 1, 1999, effective date of the QILDRO legislation. Section 1-119(m)(1) of the Pension Code reads:
"[A] QILDRO issued against a member of a retirement system established under an Article of this Code that exempts the payments of benefits or refunds from attachment, garnishment, judgment or other legal process shall not be effective without the written consent of the member. * * * That consent must specify the retirement system, the court case number, and the names and social security numbers of the member and the alternate payee. The consent must accompany the QILDRO when it is filed with the retirement system, and must be in substantially the following form [sample provided]." 40 ILCS 5/1-119(m)(1) (West 2006).
The consent provision of section 1-119(m)(1) of the Pension Code, which is applicable in the instant case, was apparently included in the legislation to protect a pensioner's rights under article XIII, section 5, of the Illinois Constitution, which provides that "[m]embership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired." Ill. Const.1970, art. XIII, § 5; In re Marriage of Menken, 334 Ill.App.3d 531, 534, 268 Ill.Dec. 295, 778 N.E.2d 281, 284 (2002).[2] As noted in our discussion above, such anti-alienation provisions are intended to protect the beneficiaries of pensioners as well as the pensioner.
In the instant case, we find no conflict between section 1-119(m)(1) of the Pension Code and a finding that Patrick did consent to an order directing payments to Marie when he freely and voluntarily entered into the settlement agreement that was incorporated in the judgment for dissolution of the marriage. A property settlement between spouses, which has been approved by the court and incorporated in the judgment of dissolution, becomes merged in the judgment and the rights of the parties thereafter rest on the judgment. In re Marriage of Hoffman, 264 Ill.App.3d 471, 474, 202 Ill.Dec. 89, 637 N.E.2d 628, 630 (1994); Olson v. Olson, 58 Ill.App.3d 276, 278-79, 15 Ill.Dec. 812, 374 N.E.2d 247, 249 (1978) (the purpose of a settlement agreement is to establish the rights and duties of the parties to the agreement). As stated in Guyton v. Guyton, 17 Ill.2d 439, 444-45, 161 N.E.2d 832, 835 (1959), "when such agreements are made apart of the [dissolution] decree the parties are concluded thereby." In Guyton, the court affirmed the trial court's rejection of defendant's attempt to set aside his agreement to convey real property to the plaintiff, which was made a part of the dissolution decree. Guyton, 17 *676 Ill.2d at 444-45, 161 N.E.2d at 834-35. The law in Illinois is designed to promote the amicable settlement of disputes between parties to a marriage dissolution and unless the agreement is deemed unconscionable, the agreements are binding upon the courts. In re Marriage of Kloster, 127 Ill.App.3d 583, 585-87, 82 Ill.Dec. 847, 469 N.E.2d 381, 383-85 (1984).
Furthermore, "[p]rovisions of divorce judgments and property settlements are construed by applying the same rules as those governing construction of contracts." In re Marriage of Sherrick, 214 Ill.App.3d 92, 96, 157 Ill.Dec. 917, 573 N.E.2d 335, 338 (1991). Clear and unambiguous contractual terms are to be given their ordinary and natural meaning. Sherrick, 214 Ill.App.3d at 96, 157 Ill.Dec. 917, 573 N.E.2d at 338. The contract may be composed of several writings whose terms do not conflict. Kloster, 127 Ill.App.3d at 584-85, 82 Ill.Dec. 847, 469 N.E.2d at 383. The intent of the parties is determined with reference to the contract as a whole, viewing each part in light of the others. Sherrick, 214 Ill.App.3d at 96, 157 Ill.Dec. 917, 573 N.E.2d at 338; see In re Marriage of Marr, 264 Ill.App.3d 932, 935, 202 Ill.Dec. 657, 638 N.E.2d 303, 306 (1994) (finding petitioner estopped from denying the existence of an oral marital settlement agreement in which he agreed to quitclaim his interest in property to respondent where agreement was accepted by the trial court and written into the record).
In the instant case, as part of the dissolution order, the trial court approved as fair, just and equitable, an oral settlement agreement between Patrick and Marie, noting the parties had entered into the agreement "freely, voluntarily without force, coercion or duress," with full knowledge and full and complete disclosure. Patrick signed the dissolution agreement, which was a recitation of the settlement agreement, in which he consented to an award to Marie of 50% of his pension plan benefits acquired during the marriage. The trial court further found the parties had agreed that Patrick would pay Marie one-half of said pension amounts directly, commencing October 1, 1998, and continuing thereafter until such time as a "Qualified Domestic Relations Order [sic]" became effective for the benefit of Marie. The judgment for dissolution order contained nearly all the provisions required by the Pension Code and as such, meets the requirement of the written consent called for in the Pension Code. Patrick's consent should be considered binding, as would any other provision of the contracted settlement agreement. Patrick's consent, through the agreed settlement, can be read together with the QILDRO forms provided by SURS to give effect to the intention of the parties in reaching the settlement and to fulfill the substantial compliance directive of section 1-119(m)(1) of the QILDRO legislation. In the instant case, the trial court retained the authority to enforce the settlement agreement, just as it could have directed SURS at the time of the dissolution order to direct pension payments to Marie.
For the foregoing reasons, the judgment of the circuit court of Will County is reversed and the cause remanded for proceedings in keeping with our disposition.
Reversed and remanded.
SCHMIDT and McDADE JJ., concur.
NOTES
[1] The dissolution order incorrectly called for a qualified domestic relations order (QDRO). A QDRO is a creature of the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C.A § 1001 et seq. (2006)), and although it is also a method for dividing pension benefits between the employee spouse and the nonemployee spouse pursuant to a dissolution of marriage, ERISA does not apply to an employee benefit plan if it is a government plan. In re Marriage of Carlson, 269 Ill.App.3d 464, 466-67, 206 Ill.Dec. 954, 646 N.E.2d 321, 323 (1995). Prior to July 1, 1999, there was no statutory basis following the dissolution of a marriage for the apportionment of a government pension plan, a void addressed by the QILDRO legislation. C. Fain, Qualified Illinois Domestic Relations Orders: A Retirement System View, 88 Ill. B.J. 533 (2000).
[2] In Menken, the court concluded that because section 1-119(m)(1) of the Pension Code was motivated by an intent to protect a pensioner's constitutional rights, the trial court was without authority to order respondent to execute a QILDRO consent form. Menken, 334 Ill.App.3d at 534, 268 Ill.Dec. 295, 778 N.E.2d at 284. However, the factual situation in Menken differs from the instant case; in Menken, there is no indication that the respondent entered into a voluntary settlement agreement in which he agreed the petitioner would receive a statutory portion of his pension. Menken, 334 Ill.App.3d at 532-33, 268 Ill.Dec. 295, 778 N.E.2d at 282.
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Chrysler Group, LLC and s
Fourth Court of Appeals
San Antonio, Texas
February 17, 2015
No. 04-13-00757-CV
Michael TATSCH,
Appellant
v.
CHRYSLER GROUP, LLC and Infinity County Mutual Insurance Company,
Appellee
From the 216th Judicial District Court, Gillespie County, Texas
Trial Court No. 12977
Honorable N. Keith Williams, Judge Presiding
ORDER
Sitting: Sandee Bryan Marion, Chief Justice
Marialyn Barnard, Justice
Luz Elena D. Chapa, Justice
The panel has considered the appellees’ Chrysler Group LLC’s Motion for Rehearing,
and the motion is DENIED.
_________________________________
Marialyn Barnard, Justice
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the said
court on this 17th day of February, 2015.
___________________________________
Keith E. Hottle
Clerk of Court
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Mammone v T.G. Nickel & Assoc., LLC (2016 NY Slip Op 07300)
Mammone v T.G. Nickel & Assoc., LLC
2016 NY Slip Op 07300
Decided on November 9, 2016
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on November 9, 2016
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
CHERYL E. CHAMBERS, J.P.
LEONARD B. AUSTIN
SANDRA L. SGROI
JEFFREY A. COHEN, JJ.
2014-10808
(Index No. 13087/11)
[*1]Enzo Mammone, appellant,
vT.G. Nickel & Associates, LLC, respondent, et al., defendants.
Bruce E. Cohen & Associates, P.C., Rockville Centre, NY (Robin Mary Heaney and Janet Heller Smitelli of counsel), for appellant.
Ahmuty, Demers & McManus, Albertson, NY (Nicholas M. Cardascia and Glenn A. Kaminska of counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals from so much of an order of the Supreme Court, Nassau County (Iannacci, J.), entered September 12, 2014, as granted those branches of the motion of the defendant T.G. Nickel & Associates, LLC, which were for summary judgment dismissing the causes of action alleging common-law negligence and violations of Labor Law §§ 200, 240(1), and 241(6) insofar as asserted against it.
ORDERED that the order is affirmed insofar as appealed from, with costs.
In July 2011, construction work was being done at Garden City High School. On July 27, 2011, the air conditioners on the roof of the school stopped working and the plaintiff, a maintenance worker for the school district, was assigned by his supervisor to fix them. The plaintiff obtained access to the air conditioners by climbing a ladder that was permanently affixed to the exterior of the building. After the plaintiff completed the necessary repair, he determined that the air filters on the air conditioners needed to be replaced. While climbing up the ladder in order to change the filters, the plaintiff fell off the ladder and allegedly sustained injuries.
The plaintiff commenced this action against, among others, the defendant T.G. Nickel & Associates, LLC (hereinafter Nickel), alleging that Nickel was the construction manager for the construction work at the high school and that it was liable for the accident based on a theory of common-law negligence and for violating Labor Law §§ 200, 240(1), and 241(6). Nickel subsequently moved, inter alia, for summary judgment dismissing the complaint insofar as asserted against it.
The Supreme Court properly granted that branch of Nickel's motion which was for summary judgment dismissing the causes of action alleging violations of Labor Law §§ 240(1) and 241(6) insofar as asserted against it. Nickel submitted evidence sufficient to establish, prima facie, that the plaintiff was not engaged in an enumerated activity protected under Labor Law § 240(1) at the time of his accident. Furthermore, Nickel submitted evidence sufficient to establish, prima facie, [*2]that the plaintiff's accident did not involve construction, demolition, or excavation and, accordingly, that Labor Law § 241(6) does not apply. In opposition, the plaintiff failed to raise a triable issue of fact.
We also find that the Supreme Court properly granted that branch of Nickel's motion which was for summary judgment dismissing the Labor Law § 200 and common-law negligence causes of action insofar as asserted against it, albeit for a different reason. Nickel established, prima facie, that the ladder was not defective, and the plaintiff conceded that fact. Thus, the potential liability of Nickel, contrary to the Supreme Court's finding, was not based on its actual or constructive notice of any dangerous or defective condition of the ladder (see McFadden v Lee, 62 AD3d 966, 967; Chowdhury v Rodriguez, 57 AD3d 121, 129). Instead, the plaintiff allegedly was injured as a result of the manner in which he performed his work. Accordingly, recovery against Nickel under Labor Law § 200 or under the common law may only be found if Nickel had the authority to supervise or control the performance of the work (see Lombardi v Stout, 80 NY2d 290, 295; Wejs v Heinbockel, 142 AD3d 990; Sanchez v Metro Bldrs. Corp., 136 AD3d 783, 787; Rojas v Schwartz, 74 AD3d 1046, 1046; McFadden v Lee, 62 AD3d at 967; Ortega v Puccia, 57 AD3d 54, 61). Nickel established, prima facie, that it did not have authority to exercise supervision or control over the means and methods of the plaintiff's work. In opposition, the plaintiff failed to raise a triable issue of fact (see Zuckerman v City of New York, 49 NY2d 557). Accordingly, the Supreme Court properly granted that branch of Nickel's motion which was for summary judgment dismissing the Labor Law § 200 and common-law negligence causes of action insofar as asserted against it (see Marquez v L & M Dev. Partners, Inc., 141 AD3d 694, 699; Sanchez v Metro Bldrs Corp., 136 AD3d 783, 787).
CHAMBERS, J.P., AUSTIN, SGROI and COHEN, JJ., concur.
ENTER:
Aprilanne Agostino
Clerk of the Court
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NUMBER 13-06-263-CR
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
_________________________________________________________
MICHAEL
WESLEY JOHNSON, Appellant,
v.
THE
STATE OF TEXAS, Appellee.
_________________________________________________________
On appeal from the 24th District Court
of De Witt
County, Texas.
_________________________________________________________
MEMORANDUM OPINION
Before Chief
Justice Valdez and Justices Yañez and Garza
Memorandum Opinion Per
Curiam
Appellant, MICHAEL
WESLEY JOHNSON, attempted to perfect an appeal from a judgment entered by
the 24th District Court of De Witt County,
Texas. Sentence in this cause was
imposed on June 9, 2004.
No timely motion for new trial was filed. The notice of appeal was due to be filed on July 8, 2004, but was not filed until April 27,
2006. Said notice of appeal is untimely
filed.
Tex. R. App. P. 26.3
provides that the court of appeals may grant an extension of time for filing
notice of appeal if such notice is filed within fifteen days of the last day
allowed and within the same period a motion is filed in the court of appeals
reasonably explaining the need for such extension. Appellant failed to file his notice of appeal
and a motion requesting an extension of time within such period.
The Court, having
considered the documents on file and appellant's failure to timely perfect his
appeal, is of the opinion that the appeal should be dismissed for want of
jurisdiction. The appeal is hereby DISMISSED
FOR WANT OF JURISDICTION.
PER CURIAM
Do not publish.
Tex. R. App. P. 47.2(b).
Memorandum Opinion delivered and filed this
the 22nd day of June, 2006.
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310 F.2d 809
Nello MORROCCO and Employers Mutual Liability Insurance Co., of Wisconsin, Plaintiffs-Appellants,v.NORTHWEST ENGINEERING COMPANY, a Delaware Corporation, Defendant-Appellee.
No. 14938.
United States Court of Appeals Sixth Circuit.
December 10, 1962.
Alvin L. Levine, Detroit, Mich., Levine & Zweig, Gary A. Taback, Detroit, Mich., on brief, for plaintiffs-appellants.
A. D. Ruegsegger, Detroit, Mich., Dyer, Meek, Ruegsegger & Bullard, Detroit, Mich., on brief, for defendant-appellee.
Before CECIL, Chief Judge, WEICK, Circuit Judge, and BOYD, District Judge.
PER CURIAM.
1
This appeal is from a judgment entered in the District Court on a jury verdict for defendant in a personal injury action against the manufacturer of a pullshovel.
2
Plaintiff, Morrocco, was a construction worker employed by a sewer contractor. He was engaged in laying sections of concrete sewer pipe into an excavation which was made by the pullshovel. The pullshovel, which was commonly known as a "Northwest Back Hoe" had been purchased new by the contractor only three days prior to the accident. After acquiring the pullshovel the contractor installed a hook on the back of the dipper bucket to accommodate a steel sling to which was affixed a pipe hook. This attachment, connected to the pullshovel, was used for lifting heavy articles such as sections of concrete pipe.
3
On October 24, 1956, Morrocco was in the excavation at the time when a section of pipe was being lowered therein by the pullshovel. The boom on the pullshovel came down sufficiently so that the pipe hit the edge of the excavation and dislodged the pipe hook with the result that the pipe rolled into the excavation hitting Morrocco and seriously injuring him.
4
It was the plaintiff's claim that the brake lining on the left-hand hoist brake of the pullshovel had become overheated and glazed causing the brake to slip, the boom to drop and the pipe to hit the side of the excavation.
5
The suit, which was filed nearly three years later, was the first notice the manufacturer had of the accident.
6
The principal ground relied upon for reversal was that the District Judge erred in not permitting plaintiff to amend his complaint so as to charge negligence in failing to instal a brake locking or safety device on the machine.
7
In a pre-trial order entered by the court on April 3, 1961 for the purpose of simplifying the issues in the case, which order was consented to by counsel for both parties, it was provided:
8
"1. That the issue of liability of the defendants herein is limited to the single question as to whether or not they or either of them were guilty of negligence in the selection, design, use, installation, inspection and/or testing of the type and kind of brake lining which was installed on the left hand hoist brake of the Model 6 Back Hoe involved in this case."
9
In view of the pre-trial order a locking or safety device was not an issue in the case. Rule 16, Federal Rules of Civil Procedure.
10
The case has been pending since June 19, 1959. At the first pre-trial conference which was held October 24, 1960 counsel for plaintiff then indicated that he desired to amend the complaint so as to allege negligence in failing to equip the machine with a locking or safety device. Counsel for defendant stated that he would object thereto on the ground that the amendment would constitute a new cause of action which was barred by the statute of limitations. The court, nevertheless, granted plaintiff until November 21 to file any amendment to his complaint. No such amendment was filed. The order later entered on April 3, 1961 was in response to a motion of defendant to delineate the issues of liability, and counsel for both parties participated in the choice of the language contained therein.
11
Plaintiff's motion to amend his complaint involved changing the pre-trial order of April 3, 1961. The motion was addressed to the sound discretion of the court. Taking into account all of the factors involved, we are unable to conclude that the District Judge abused his discretion in not changing the pre-trial order and relieving the plaintiff of his stipulation. There was no manifest injustice to plaintiff, particularly, since the court had previously on October 24, 1960 granted him leave to amend, but plaintiff did not avail himself of that opportunity to make the desired change in his pleading although he had given it consideration.
12
Error is charged in the failure of the District Court to charge the jury that the manufacturer owed a duty to warn the user of the pullshovel of the tendency of the brake to slip until it was broken in. The court did not charge the jury on this subject since the uncontradicted evidence showed that the user already had such knowledge. There was no duty to warn when the user has actual knowledge of the alleged danger. Comstock v. General Motors Corp., 358 Mich. 163, 181, 99 N.W.2d 627, 78 A.L.R.2d 449; Gerkin v. Brown & Sehler Co., 177 Mich. 45, 60, 143 N.W. 48, 48 L.R.A.,N.S., 224; Jamieson v. Woodward & Lothrop, 101 U.S. App.D.C. 32, 247 F.2d 23; Sawyer v. Pine Oil Sales Co., 155 F.2d 855 (C.A.5).
13
We find no prejudicial error in the admission of evidence.
14
The judgment in the District Court is affirmed.
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730 N.W.2d 152 (2007)
2007 WI 43
In the Matter of DISCIPLINARY PROCEEDINGS AGAINST Arthur L. SCHUH, Jr., Attorney at Law:
Office of Lawyer Regulation, Complainant,
v.
Arthur L. Schuh, Jr., Respondent.
No. 2006AP2235-D.
Supreme Court of Wisconsin.
Decided April 19, 2007.
¶ 1 PER CURIAM.
We review a stipulation filed by the Office of Lawyer Regulation (OLR) and Attorney Arthur L. Schuh, Jr., pursuant to SCR 22.12[1] requesting this court to revoke Attorney Schuh's license to practice law in Wisconsin due to his professional misconduct, effective July 27, 2006, the date of the summary suspension of Attorney Schuh's license. Attorney Schuh's misconduct consisted of committing criminal acts, conspiring to distribute a controlled substance and knowingly possessing a firearm in furtherance of a drug trafficking crime, that reflect adversely on his honesty, trustworthiness and fitness as a lawyer, in violation of SCR 20:8.4(b).[2]
¶ 2 Having independently reviewed the matter, we approve the SCR 22.12 stipulation and adopt its stipulated facts and conclusions of law. We agree that the serious nature of Attorney Schuh's professional misconduct requires the revocation of his *153 license to practice law in this state. We also agree to the parties' request that the revocation be made effective on the date of the summary suspension of Attorney Schuh's license.
¶ 3 Attorney Schuh was admitted to the practice of law in Wisconsin in 1982. He previously practiced in the Appleton area. Prior to the summary suspension of his license due to his criminal convictions, he had not been subject to professional discipline.
¶ 4 On April 3, 2006, pursuant to a plea agreement, Attorney Schuh pled guilty to two criminal counts in the United States District Court for the Eastern District of Wisconsin. In Count 1, Attorney Schuh pled guilty to conspiring to distribute a controlled substance, 500 grams or more of a mixture containing cocaine, in violation of Title 21, United States Code, Sections 841(a)(1) and (b)(1)(B), and 846. In Count 2, Attorney Schuh pled guilty to knowingly possessing a firearm in furtherance of the drug trafficking crime, in violation of Title 18, United States Code, Section 924(c)(1)(A)(i). According to the plea agreement, which the parties stipulate to including in the record of this proceeding, from 2000 to 2003 Attorney Schuh routinely obtained one to three ounces of cocaine from a supplier, used some of it for personal consumption, and distributed the rest to friends and associates.
¶ 5 On July 13, 2006, the federal district court sentenced Attorney Schuh to a total of 123 months of imprisonment, to be followed by four years of supervised release. The court also ordered Attorney Schuh to pay a $2000 fine and to forfeit his ownership interest in a motorcycle and a cabin in Pine River, Wisconsin.
¶ 6 On July 27, 2006, this court summarily suspended Attorney Schuh's license to practice law in this state pursuant to SCR 22.20 and based on his federal criminal convictions.
¶ 7 In the SCR 22.12 stipulation, Attorney Schuh agrees that his criminal acts of conspiring to distribute cocaine and knowingly possessing a firearm in furtherance of that drug trafficking crime reflect adversely on his honesty, trustworthiness and fitness as a lawyer, and constitute a violation of SCR 20:8.4(b). On the basis of that violation, Attorney Schuh and the OLR jointly request that the court revoke his license to practice law in Wisconsin, effective as of July 27, 2006.
¶ 8 The stipulation notes that Attorney Schuh's misconduct is aggravated by the willful nature of his violations of the law and the damage his criminal acts have done to the perception of lawyers and the legal system in this state. On the mitigating side, the stipulation notes that Attorney Schuh does not have a prior disciplinary history and the OLR has no information that Attorney Schuh failed to represent his clients diligently. Moreover, Attorney Schuh has experienced significant consequences including a prison term of ten years and three months, which is close to the mandatory minimum total of ten years required for the two federal offenses.
¶ 9 The stipulation properly states that Attorney Schuh understands the misconduct allegations against him, the ramifications of the stipulated level of discipline, his right to contest the matter, and his right to consult with counsel.[3] Further, Attorney Schuh verifies that he is entering the stipulation knowingly and voluntarily.
¶ 10 Finally, the stipulation contains several requests and statements by Attorney Schuh. He requests the court to take note of his assertions that he did not engage in selling drugs for profit and distributed *154 drugs to a limited number of acquaintances in connection with his own use of drugs. He also asserts that he responsibly transferred his client files to other attorneys prior to his conviction. The stipulation states that Attorney Schuh accepts responsibility and expresses "heartfelt remorse" for his actions.
¶ 11 After independently considering this matter, we accept the SCR 22.12 stipulation and its joint request for the revocation of Attorney Schuh's license to practice law in this state. Whether or not Attorney Schuh sold the cocaine for profit or simply distributed it to his friends and associates, his actions constitute serious criminal offenses and violations of his obligations as an attorney, and require the revocation of his license to practice law in Wisconsin. Nonetheless, as we have done in similar cases, we accept the stipulation's request that the revocation be deemed to have commenced on July 27, 2006, when this court summarily suspended Attorney Schuh's license due to his criminal convictions.
¶ 12 Because Attorney Schuh has stipulated to the revocation of his license, eliminating the need for the appointment of a referee, and because the OLR has not requested the imposition of costs, we do not assess the costs of this disciplinary proceeding against Attorney Schuh.
¶ 13 IT IS ORDERED that the license of Arthur L. Schuh, Jr., to practice law in Wisconsin is revoked, effective as of July 27, 2006.
¶ 14 IT IS FURTHER ORDERED that if he has not already done so, Attorney Schuh shall comply with the requirements of SCR 22.26 pertaining to the duties of a person whose license to practice law in Wisconsin has been revoked.
NOTES
[1] SCR 22.12 provides: Stipulation.
(1) The director may file with the complaint a stipulation of the director and the respondent to the facts, conclusions of law regarding misconduct, and discipline to be imposed. The supreme court may consider the complaint and stipulation without the appointment of a referee.
(2) If the supreme court approves a stipulation, it shall adopt the stipulated facts and conclusions of law and impose the stipulated discipline.
(3) If the supreme court rejects the stipulation, a referee shall be appointed and the matter shall proceed as a complaint filed without a stipulation.
(4) A stipulation rejected by the supreme court has no evidentiary value and is without prejudice to the respondent's defense of the proceeding or the prosecution of the complaint.
[2] SCR 20:8.4(b) provides that it is professional misconduct for a lawyer to "commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects."
[3] The stipulation is also signed by Attorney Schuh's counsel.
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FILED
NOT FOR PUBLICATION JUN 27 2013
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
JAMES KELLY, No. 11-17440
Plaintiff - Appellant, DC No. 2:08 cv-0088 KJD
v.
MEMORANDUM*
CSE SAFEGUARD INSURANCE
COMPANY,
Defendant - Appellee.
Appeal from the United States District Court
for the District of Nevada
Kent J. Dawson, District Judge, Presiding
Submitted June 11, 2013**
San Francisco, California
Before: TASHIMA and BYBEE, Circuit Judges, and STAFFORD, Senior
District Judge.***
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable William H. Stafford, Jr., Senior United States District
Judge for the Northern District of Florida, sitting by designation.
Plaintiff James Kelly appeals from the district court’s grant of summary
judgment in favor of Defendant CSE Safeguard Insurance Company (“CSE”).
Kelly asserts claims under Nevada law based on CSE’s alleged breach of the
implied covenant of good faith and fair dealing to Andres Flores, its insured, and
Jose Cruz, the individual who was driving Flores’ vehicle at the time of the
accident with Kelly. We have jurisdiction under 28 U.S.C. § 1291. We review the
district court’s grant of summary judgment de novo, and we affirm.
1. Kelly contends that CSE violated the covenant of good faith and fair
dealing by failing to settle for the policy limits when it had a reasonable
opportunity to do so. Even assuming that this principle of California law applies in
Nevada, see Murphy v. Allstate Ins. Co., 553 P.2d 584, 586 (Cal. 1976), CSE was
entitled to summary judgment on this claim. Kelly contends that his counsel, the
Christensen Law Offices (“CLO”), sent a letter to CSE on March 28, 2001 offering
to settle for the policy limits. However, there is no evidence that CSE received this
letter prior to November 2005.
CLO sent the March 28, 2001 demand letter to an entity named “Safeguard
Insurance” at an address in Charlotte, North Carolina, which was unrelated to CSE.
CSE’s receipt of a different letter sent to the same incorrect address in North
Carolina is explained by the fact that the letter was also sent to Flores, who
-2-
provided it to his insurance agent, who then forwarded it to CSE. There is also no
support for Kelly’s claim that the March 28, 2001 letter was faxed to CSE’s
attorney in June 2001, as the implicated copy of the letter bears a fax time stamp of
November 14, 2005. Indeed, CSE’s attorney attests that he did not receive the
letter in June 2001, and that he first viewed the letter when CLO produced it in
anticipation of a settlement conference in November 2005.
Finally, it is irrelevant that CLO provided CSE evidence in July 2002 that
Kelly’s claim would exceed the policy limits. CSE’s attorney explains in a
detailed account that he made an open-ended offer to settle for the policy limits on
April 4, 2002. Thus, CSE had already offered to settle for the policy limits by the
time it learned of the extent of Kelly’s injuries.
2. Kelly alternatively contends that CSE acted in bad faith by failing to
communicate his settlement offer to Flores and Cruz. Under Nevada law, “the
covenant of good faith and fair dealing includes a duty to adequately inform the
insured of settlement offers.” Allstate Ins. Co. v. Miller, 212 P.3d 318, 322 (Nev.
2009). Here, however, there was no settlement offer for CSE to communicate,
given that it never received the March 28, 2001 demand letter. Kelly attempts to
overcome this fact by pointing to a May 30, 2001 phone conversation between a
CLO attorney and a CSE representative, in which the attorney told the
-3-
representative of the demand letter. But the day after the phone conversation, the
representative sent the attorney a letter informing him that CSE had no record of
having received the demand letter and asking him to send another copy. CLO
never responded to this request. No reasonable jury could conclude that CSE acted
in bad faith by failing to communicate a settlement offer that it did not have in
writing and that opposing counsel refused to confirm when requested to do so. See
United Fire Ins. Co. v. McClelland, 780 P.2d 193, 197 (Nev. 1989) (holding that a
jury question as to an insurer’s bad faith arises “when facts permit differing
inferences as to the reasonableness of [the] insurer’s conduct”). Accordingly, the
district court correctly granted summary judgment on this claim.1
The judgment of the district court is AFFIRMED.
1
Because we affirm the district court’s dismissal on the merits, we need
not address the alternative grounds on which the district court dismissed Kelly’s
claims.
-4-
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114 Cal.Rptr.2d 881 (2001)
94 Cal.App.4th 1203
Charles BURNS, Plaintiff and Appellant,
v.
NATURE'S BEST et al., Defendants and Appellants.
No. G023339.
Court of Appeal, Fourth District, Division Three.
December 28, 2001.
Review Granted May 1, 2002.
*882 Latham & Watkins, Jon D. Anderson, Costa Mesa, Julie V. King, and Neil G. Kenduck, Santa Ana, for Plaintiff and Appellant.
Wood, Bohm & Francis, Lee A. Wood, Bohm, Francis, Kegel & Aguilera and James G. Bohm, Irvine, for Defendants and Appellants.
OPINION
SILLS, P.J.
This case requires us to consider the definition of "confidential communication" under section 632 of California Privacy Act (Pen.Code, § 630 et seq.)[1] Because we determine the trial court incorrectly followed Coulter v. Bank of America (1994) 28 Cal.App.4th 923, 33 Cal.Rptr.2d 766, we reverse the judgment in favor of Charles Burns on his cause of action against Nature's Best and Timothy Groff for secretly recording a telephone conversation and remand for a new trial.
FACTS
Amplicon, Inc. leases computer equipment and software to businesses, using salespersons to contact prospective customers by telephone to determine their needs and arrange leases. In 1992, Nature's Best leased computer software from a subsidiary of Amplicon. A dispute arose over the value of the leased software at the end of the lease term. In August 1995 Amplicon sued Nature's Best for breach of the lease (the Lease Case). Nature's Best cross-complained against Amplicon for unfair business practices.
Nazli Ozen was a new salesperson with Amplicon in September 1995. Unaware of Amplicon's relationship with Nature's Best, Ozen "cold called" Nature's Best and left a message with her standard sales pitch on the voice mail recorder of Nature's Best's controller, Jon Lira. Lira forwarded the voice mail message to Tim Groff, Nature's Best's chief financial officer, who was the person "primarily responsible for looking after Nature's Best's interests" in the lawsuit over the lease dispute with Amplicon.
Groff did not know whether Ozen's call was "an attempt on her behalf to get information about Nature's Best for the company or if they were really truly soliciting." Thinking he might be able to get information supporting Nature's Best's claim of unfair business practices, he pretended he was interested in leasing and engaged in several conversations with Ozen, two of which he tape recorded. The second recorded conversation included Charles Burns, Ozen's sales manager. Both tape recorded conversations took place in Groff's private office, on the speakerphone, with Lira also present. Groff introduced Lira in both conversations, but in neither conversation did he ask Ozen or Burns' permission to tape record. Groff assumed Ozen would have discontinued the conversation if she knew she was being recorded, and he "wanted to see what they would say if they did not know they were being tape recorded...."
After the first conversation, Ozen told Burns that she "had somebody who was interested in obtaining some leasing" and she needed some help on the follow-up call. Like Ozen, Burns was not aware of the prior relationship between Amplicon and *883 Nature's Best. He knew they were being broadcast on a speakerphone and that Lira was present during the conversation, but he saw no need "to confirm that the conversation would be private to just [them] and whoever [sic ] was on the phone." Although he did not particularly care whether anyone other than Groff and Lira overheard the conversation, and he made no effort to limit the conversation to Groff and Lira, he had no reason to expect that someone was overhearing.
Groffs deposition was taken in the Lease Case a few days after the recorded conversation with Burns and Ozen. During the deposition, Groff identified Burns and Ozen as people he thought had treated Nature's Best "unfairly." When asked if the conversation had been recorded, Groff refused to answer, claiming the Fifth Amendment privilege against self-incrimination. Burns found out that the conversation might have been recorded shortly after Groffs deposition. He was "kind of dumbfounded as to why they'd be taping me" because he had no involvement with either the lawsuit or Nature's Best. He was worried about his job and felt Nature's Best was "pitting [him] against [his] employer" and trying to "drive a wedge between [him] and [his] employer."
Nature's Best refused to disclose the taped conversations until January 1997, almost a year and a half after Groffs deposition. During that time, Nature's Best claimed "the tapes had ferreted out the truth, that they could prove using the tapes charges of fraud, misrepresentation, extortion, generally criminal behavior on the part of Chuck and Nazli." Patrick Paddon, the president and majority shareholder of Amplicon, testified, "[T]he charges were hard to believe, but they were serious. They were made by a law firm. They were put forth as if they were true. It did ... cause some concern." When Paddon finally read the transcripts of the conversations, "it relieved [his] mind enormously."
In August 1996, Amplicon and Burns filed a complaint in municipal court for unlawful recording of confidential communications based on Penal Code section 632, subdivision (a) (the Tape Case). They claimed statutory damages of $5,000 for each violation, or three times the amount of actual damages as a result of the wrongful acts. Nature's Best filed a cross-complaint for unfair business practices in the Tape Case. It then moved to consolidate the Lease Case and the Tape Case because they were factually related, claiming it would avoid duplicative discovery, overlapping trials, and inconsistent judgments. Although Amplicon opposed consolidation, the cases were consolidated in April 1997, and the trial court ordered the Tape Case to be tried first before a jury in superior court. The jury returned special verdicts finding that Burns and Ozen had a reasonable expectation of privacy in the telephone conversations, Groff recorded the conversations in violation of the Privacy Act, in doing so he was acting as Nature's Best's agent, and Burns suffered actual damages in the amount of $12,000. Judgment was entered accordingly.
Subsequently, Burns and Amplicon moved to enter a new judgment because Burn's actual damages had not been trebled as required by the Privacy Act. The court entered an award of $10,000 to Amplicon and $25,000 to Burns, limiting his award to the jurisdictional limit of the municipal court. Nature's Best and Groff timely filed their notice of appeal; they later settled with Amplicon and dismissed the appeal against it, leaving their appeal against Burns. Burns filed a cross-appeal, claiming he should have been awarded the full $36,000. Because we reverse the judgment in favor of Burns, his cross-appeal on damages is moot.
*884 DISCUSSION
Nature's Best contends the jury verdict must be reversed because the trial court incorrectly perceived the law underlying the pivotal issue in the case: the definition of "confidential communication" under the Privacy Act. At the status conference several months before trial, the trial court ruled that "confidentiality requires nothing more than the existence of a reasonable expectation by one of the parties that no one is listening in or overhearing the conversation," relying on this court's opinion in Coulter v. Bank of America, supra, 28 Cal.App.4th 923, 33 Cal.Rptr.2d 766. This preliminary determination influenced evidentiary rulings during the trial and the instructions to the jury.
Nature's Best argues the conversation with Burns that Groff surreptitiously recorded could not be a confidential communication as a matter of law because Burns had no reasonable expectation of privacy during it, as demonstrated by his testimony that he knew he was being broadcast on a speakerphone and he did not care if the conversation was overheard. It claims the correct interpretation of "confidential communication" under the Privacy Act is found in O'Laskey v. Sortino (1990) 224 Cal.App.3d 241, 273 Cal.Rptr. 674, which held confidentiality requires one of the parties to reasonably expect the conversation will be "confined to the parties thereto." (Id. at p. 247, 273 Cal.Rptr. 674)
Amplicon asserts whether Burns had a reasonable expectation of privacy is a question of fact that was resolved in his favor by the jury. It urges us to defer to the jury as fact-finder and uphold its finding as supported by substantial evidence. But the issue presented is a question of statutory interpretation; accordingly, we are not bound by either the jury's determination of fact or the trial court's determination of law, and we undertake an independent review. (California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692, 699, 170 Cal. Rptr. 817, 621 P.2d 856.) "Questions of fact concern the establishment of historical or physical facts; their resolution is reviewed under the substantial-evidence test. Questions of law relate to the selection of a rule; their resolution is reviewed independently." (Kennedy/Jenks Consultants, Inc. v. Superior Court (2000) 80 Cal. App.4th 948, 959, 95 Cal.Rptr.2d 817, quoting Crocker National Bank v. City and County of San Francisco (1989) 49 Cal.3d 881, 888, 264 Cal.Rptr. 139, 782 P.2d 278.)
Penal Code section 632 makes it illegal to record a confidential communication without the consent of all parties. (§ 632, subd. (a).) The statute defines a "confidential communication" as "includ[ing] any communication carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto, but excluding] a communication made in a public gathering or in any legislative, judicial, executive or administrative proceeding open to the public, or in any other circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded." (§ 632, subd. (c).)
In Coulter v. Bank of America, supra, 28 Cal.App.4th 923, 33 Cal.Rptr.2d 766, a bank employee (Coulter) secretly recorded over 160 conversations with fellow employees, supervisors, and officers in anticipation of the litigation he would later file against them and the bank. The conversations were either face-to-face or on the telephone and concerned Coulter's job performance, his complaints, his relationship with co-workers, and other job-related subjects. All the employees signed declarations stating they intended the conversations to be confidential.
*885 Coulter produced the tapes during discovery. The employees then filed a cross-complaint against Coulter for violation of section 632, and successfully moved for summary judgment. On appeal, Coulter claimed there was a question of fact whether the conversations were confidential, contending they were not because "it was expected that the subject matter of the conversations would be repeated to other bank employees...." (Id. at p. 929, 33 Cal.Rptr.2d 766.)
This court affirmed the summary judgment, holding "that the subject matter might be later discussed has no bearing on whether section 632 has been violated...." Quoting from Frio v. Superior Court (1988) 203 Cal.App.3d 1480, 1490, 250 Cal.Rptr. 819, we continued, "`[U]nder section 632 "confidentiality" appears to require nothing more than the existence of a reasonable expectation by one of the parties that no one is "listening in" or overhearing the conversation.'" (Coulter v. Bank of America, supra, 28 Cal.App.4th at p. 929, 33 Cal.Rptr.2d 766.)
In Frio v. Superior Court, supra, a record producer secretly taped telephone conversations with business associates with whom he later became involved in litigation. In a pretrial order, the trial court excluded the producer's testimony about the contents of the conversations based on section 632, subdivision (d), which excludes any evidence obtained as a result of eavesdropping upon or recording a confidential communication in violation of section 632. On petition for writ review, Frio argued that conversations relating to business matters could not reasonably be considered confidential. The court disagreed: "[B]ecause Frio's business involved a few key people, a highly visible product and the potential for substantial profit, there is every reason to believe each of the tape recorded parties reasonably expected their communications would not be simultaneously disseminated to an unannounced second auditor. [¶] All the telephone communications were conducted on a one-on-one basis and related to a profitable venture which the speaker reasonably might expect would be confined to the parties .... [¶] In sum, under section 632 `confidentiality' appears to require nothing more than the existence of a reasonable expectation by one of the parties that no one is `listening in' or overhearing the conversation. Clearly, the communications in issue meet this threshold standard." (Id. at p. 1489-1490, 250 Cal.Rptr. 819.)
O'Laskey v. Sortino, supra, 224 Cal. App.3d 241, 273 Cal.Rptr. 674 articulated a different definition of confidentiality than Frio. In O'Laskey, an investigator hired to determine whether the defendant had traveled outside the state during the year following the accident, posed as a television producer and told the defendant he was one of ten finalists for a $100,000 prize based on his vacationing habits. The investigator recorded the telephone conversation in which the defendant confirmed he had vacationed in Las Vegas. The court reversed the trial court's exclusion of the conversation transcript, stating, "Nothing in this conversation supports [defendant's] claim that a reasonable person would view it as confidential. To the contrary, [defendant] had every reason to hope that his statements would be broadcast into every home with cable television." The court held the test of confidentiality under the statute is whether either party "reasonably expected, under the circumstances ... that the conversation would not be divulged to anyone else." (Id. at p. 248, 273 Cal.Rptr. 674.)
The Ninth Circuit acknowledged that California appellate courts had stated "competing formulations of what a party must reasonably expect for a communication *886 to be confidential" in Deteresa v. American Broadcasting Companies, Inc. (9th Cir.1997) 121 F.3d 460. Deteresa involved a conversation between a television producer and Deteresa, who was a flight attendant on the flight taken by O.J. Simpson shortly after the murders of his ex-wife, Nicole Brown Simpson, and her friend, Ronald Goldman. The producer went to Deteresa's house, identified himself, and told her he wanted to speak to her about appearing on a television show to discuss the flight. Although she said she was not interested in appearing on the show, the producer engaged her in conversation, which he surreptitiously recorded. Deteresa sued ABC for, among other things, violation of section 632 of the Privacy Act. Appealing the summary judgment against her, she argued there was a question of fact whether the conversation was confidential within the meaning of the statute.
The Ninth Circuit described the difference between the Frio and O'Laskey approaches to confidentiality as follows: "Suppose X and Y are hiking in the woods. Y offers to pay X the $5.00 that Y owes X. X tells Y to pay the money to Z, because X owes Z $5.00. When X finds out that Y had taped the conversation, he sues Y. Under Frio, X wins because in the wilderness he had a reasonable expectation that no one overheard their conversation. Under O'Laskey, Y wins, because X had a reasonable expectation that Y would divulge the conversation to Z." (Deteresa, supra, 121 F.3d at p. 464, fn. 1.)
Predicting the California Supreme Court would adopt the O'Laskey approach, the court stated, "The problem with Frio is that it transforms a specific exclusion to the definition of `"confidential communication" into the definition itself. The first clause of section 632(c) explains that `confidential communication includes any communication carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto....' [Citation.] If, therefore, neither party reasonably expects the communication to be confined to the parties, it is not confidential. [¶] The second clause of section 632(c) goes on specifically to exclude communications `made in a public gathering ... or in any other circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded.' [Citation.] Thus, where someone reasonably expects that the communication may be overheard, the communication is not confidential. Frio implies, however, that unless someone reasonably expects that the communication will be overheard, the communication is confidential. That interpretation renders the first clause of section 632 surplusage. Under the terms of the statute, if someone does not reasonably expect the conversation to be confined to the parties, it makes no difference under the statute whether the person reasonably expects that another is listening in or not. The communication is not confidential." (Deteresa v. American Broadcasting Companies, supra, 121 F.3d at pp. 464-465, italics added.)
Applying O'Laskey, the Ninth Circuit found Deteresa could not have had an objectively reasonable expectation that the conversation would not be divulged to anyone else. She knew the producer wanted her to appear on television; she did not tell him her statements were in confidence or ask that he not reveal them to anyone else; and he made no promises of confidentiality. "[N]o one in Deteresa's shoes could reasonably expect that a reporter would not divulge her account of where Simpson had sat on the flight and where he had or had not kept his hand." (Id. at p. 465.)
*887 The Supreme Court has not yet decided a case squarely resolving the question of confidentiality under section 632, but it has flirted with the issue. In Ribas v. Clark (1985) 38 Cal.3d 355, 212 Cal.Rptr. 143, 696 P.2d 637, the court referred to section 632 in dicta while discussing another section of the Privacy Act. There, Clark used an extension to listen to a telephone conversation between a recently divorced couple at the ex-wife's request and later testified about the conversation in litigation between the former spouses. The ex-husband filed an action against Clark, alleging, inter alia, a violation of section 631 of the Privacy Act, which prohibits the surreptitious interception of a telephone call; Clark claimed section 631 only applied to wiretaps. The court stated, "We have read section 631 as prohibiting far more than illicit wiretapping. (Tavernetti v. Superior Court (1978) 22 Cal.3d 187, 192-193 [148 Cal.Rptr. 883, 583 P.2d 737].) In Tavernetti, we considered the section to proscribe three separate acts: (1) intentional wiretapping, (2) willful attempts to learn the contents of a communication in transit, and (3) attempts to use or publicize information obtained in either manner. (Id. at p. 192 [148 Cal.Rptr. 883, 583 P.2d 737]; see also People v. Suite (1980) 101 Cal.App.3d 680, 686 [161 Cal.Rptr. 825].) Additionally, the Privacy Act has long been held to prevent one party to a conversation from recording it without the other's consent. (People v. Wyrick (1978) 77 Cal.App.3d 903, 909 [144 Cal.Rptr. 38]; Forest E. Olson, Inc. v. Superior Court (1976) 63 Cal.App.3d 188, 191 [133 Cal. Rptr. 573].) While one who imparts private information risks the betrayal of his confidence by the other party, a substantial distinction has been recognized between the secondhand repetition of the contents of a conversation and its simultaneous dissemination to an unannounced second auditor, whether that auditor be a person or mechanical device. (Warden v. Kahn, supra, 99 Cal.App.3d 805, 813-814 [160 Cal.Rptr. 471].)" (Ribas v. Clark, supra, 38 Cal.3d at p. 360, 212 Cal.Rptr. 143, 696 P.2d 637.)
"As one commentator has noted, such secret monitoring denies the speaker an important aspect of privacy of communicationthe right to control the nature and extent of the firsthand dissemination of his statements. (Comment, Electronic Surveillance in California: A Study in State Legislative Control (1969) 57 Cal.L.Rev. 1182, 1232.) Partly because of this factor, the Privacy Act has been read to require the assent of all parties to a communication before another may listen. (Id. at p. 1202.) Thus, the Legislature could reasonably have contemplated that section 631, subdivision (a), would prohibit the type of surreptitious monitoring of private conversations alleged here, and there is no indication that it did not. Indeed, it is probable that the Legislature viewed section 631 as a means of proscribing attempts to circumvent other aspects of the Privacy Act, e.g., by requesting a secretary to secretly transcribe a conversation over an extension, rather than tape recording it in violation of section 632." (Ribas v. Clark, supra, 38 Cal.3d at p. 361, 212 Cal.Rptr. 143, 696 P.2d 637.)
In Shulman v. Group W Productions, Inc. (1998) 18 Cal.4th 200, 74 Cal.Rptr.2d 843, 955 P.2d 469, the court discussed the expectation of privacy of accident victims who had sued television producers under common law tort doctrine for publication of private facts and intrusion. The nurse in charge of a helicopter-based medical team wore a remote microphone on her clothing, allowing her ongoing conversation with one of the victims to be heard during the victim's rescue from an overturned car and her subsequent transfer to a hospital in the helicopter.
*888 Reversing summary judgment, the court found "triable issues exist as to whether defendants tortiously intruded by listening to [the victim's] confidential conversations with Nurse Carnahan at the rescue scene without [the victim's] consent." Shutman, supra, 18 Cal.4th at p. 213, 74 Cal. Rptr.2d 843, 955 P.2d 469.) Pointing to the Privacy Act as possible support for the conclusion that the victim had a reasonable expectation of privacy in her conversations with the nurse, the court quoted from its opinion in Ribas: "`While one who imparts private information risks the betrayal of his confidence by the other party, a substantial distinction has been recognized between the secondhand repetition of the contents of a conversation and its simultaneous dissemination to an unannounced second auditor, whether that auditor be a person or a mechanical device. [Citation.] [¶] ... [S]uch secret monitoring denies the speaker an important aspect of privacy of communication the right to control the nature and extent of the firsthand dissemination of his statements.' (Ribas, supra, 38 Cal.3d at pp. 360-361 [212 Cal.Rptr. 143, 696 P.2d 637].)" (Shulman v. Group W Productions, Inc., supra, 18 Cal.4th at pp. 234-235, 74 Cal.Rptr.2d 843, 955 P.2d 469.)
In a footnote, however, the court was careful to deflect any suggestion that it was resolving the appellate court split over the meaning of confidentiality under section 632. "Neither in Ribas nor in any other case have we had occasion to decide whether a communication may be deemed confidential under Penal Code section 632, subdivision (c) when a party reasonably expects and desires that the conversation itself will not be directly overheard by a nonparticipant or recorded by any person, participant or nonparticipant, but does not reasonably expect that the contents of the communication will remain confidential to the parties. (Compare Coulter ... and Frio ... [both holding section 632 requires only that a party to the conversation reasonably expects it to be private from recording or eavesdropping] with O'Laskey ... [referring to expectation the conversation would not be `divulged' to third party] and Deteresa ... [reading O'Laskey ... as requiring expectation of secrecy of contents and predicting this court would adopt such interpretation of section 632].) We need not resolve that issue here, because under either interpretation of section 632, subdivision (c) triable issues exist whether [the victim] had a reasonable expectation of privacy in her communications to medical personnel." (Shulman, supra, 18 Cal.4th at p. 235, fn. 15, 74 Cal.Rptr.2d 843, 955 P.2d 469.)
Back in the body of the opinion, however, the court summarized: "Whether the circumstances of [the victim's] extrication and helicopter rescue would reasonably have indicated to defendants ... that [she] would desire and expect her communications to Carnahan and the other rescuers to be confined to them alone, and therefore not to be electronically transmitted and recorded, is a triable issue of fact in this case." (Shulman, supra, 18 Cal.4th at p. 235, 74 Cal.Rptr.2d 843, 955 P.2d 469.)
A year later, the Supreme Court decided Sanders v. American Broadcasting Companies (1999) 20 Cal.4th 907, 85 Cal. Rptr.2d 909, 978 P.2d 67. In Sanders, the plaintiff was employed as one of many telepsychics who gave readings to customers who telephoned the employer's 900 number. Each telepsychic took his or her calls in a three-sided cubicle, of which there were about 100 in the large work area. Defendant Lescht, an investigative reporter with defendant ABC, obtained employment as a telepsychic with plaintiffs employer and secretly videotaped and audiotaped her conversations with co-workers using a small hidden camera and microphone.
The plaintiff sued the defendants for violation of section 632 and the common *889 law tort of invasion of privacy by intrusion. The trial court bifurcated the causes of action and tried the section 632 count first. The jury was asked, "Did the communications of plaintiff ..., which were electronically recorded ..., include any communications carried on in circumstances which reasonably indicated that plaintiff ... desired such communications be confined to the parties thereto?" (Sanders v. American Broadcasting Companies, supra, 20 Cal.4th at p. 924, 85 Cal.Rptr.2d 909, 978 P.2d 67.) The jury answered affirmatively. Then the jury was asked, "Were the communications which gave rise to the `yes' answer to Question No. 1 made in circumstances in which the parties to the communication may reasonably have expected that the communications may have been overheard?" The jury answered yes again. (Ibid.) Based on the jury's second affirmative answer, the trial court entered judgment for the defendant on the section 632 cause of action. It denied defendants' motion to dismiss the remaining cause of action for intrusion, however, and allowed trial to go forward. The court of appeal reversed, holding that the jury's finding on the section 632 action barred any recovery for intrusion.
The Supreme Court disagreed with the appellate court and reinstated the cause of action for intrusion. It stated, "The evidence and argument indicating that the conversations could be overheard related only to possible overhearing by co-workers. There was no evidence the public was invited into the ... office, or that the office was visited by the press or other public observers on a routine basis or was ordinarily subject to videotaped surveillance by the mass media." (Sanders v. American Broadcasting Companies, supra, 20 Cal.4th at pp. 924-925, 85 Cal.Rptr.2d 909, 978 P.2d 67.) Relying on Shulman, the court explained, "[P]rivacy, for purposes of the intrusion tort, is not a binary, all-or-nothing characteristic. There are degrees and nuances to societal recognition of our expectations of privacy: the fact that the privacy one expects in a given setting is not complete or absolute does not render the expectation unreasonable as a matter of law." (Id. at p. 916, 85 Cal.Rptr.2d 909, 978 P.2d 67.) Confining its discussion to the common law intrusion tort,[2] the court held a person may reasonably expect privacy against the electronic recording of a communication, even though he or she had no reasonable expectation as to the confidentiality of the communication's contents. The court concluded, "In an office or other workplace to which the general public does not have unfettered access, employees may enjoy a limited, but legitimate, expectation that their conversations and other interactions will not be secretly videotaped by undercover television reporters, even though those conversations may not have been completely private from the participants' co-workers." (Id. at p. 911, 85 Cal. Rptr.2d 909, 978 P.2d 67.) Again citing Shulman, the court reiterated that "liability under the intrusion tort requires that the invasion be highly offensive to a reasonable person, considering, among other factors, the motive of the alleged intruder. [Citations.]" (Ibid.)
Shulman and Sanders demonstrate that, for purposes of the common law tort of intrusion, a person may have a reasonable expectation of privacy against electronic recording of a conversation even if he expects it to be divulged to others. But this is not the case for a statutory *890 claim under section 632.[3] The statutory language defines a confidential communication as one in which there is an objectively reasonable expectation by at least one party that the conversation will be confined to the participants. Thus, the statement in Coulter "that the subject matter might be later discussed has no bearing on whether section 632 has been violated" (Coulter v. Bank of America, supra, 28 Cal.App.4th at p. 929, 33 Cal. Rptr.2d 766) is too broad when taken out of context and applied to facts such as those before us.
The trial court followed this broad statement in Coulter when making evidentiary rulings and instructing the jury. On cross-examination, Nature's Best tried to ask Burns about his expectation of privacy during the conversation: "During the course of those conversations did you desire that the information be confined only to those individuals?" And later, "Isn't it true that during those conversations or that conversation with Mr. Groff, that you had no expectation that Mr. Groff or Lira would not divulge what was said during the taped conversation?" Relevancy objections to both questions were sustained.
The trial court instructed the jury, in accordance with the statutory language, that a communication is confidential under the statute if "any party to the communication desired it to be confined to the parties," but not if "circumstances were such that the parties ... could reasonably expect that the communication may be overheard or recorded." But it refused the instruction requested by Nature's Best which stated that a communication is not confidential unless "there was a reasonable expectation that the parties to the communication would not subsequently convey the information to anyone else." Instead, it told the jury, "Whether the parties could anticipate that the content of the communication may later be repeated to others has no bearing on whether the communication was confidential at the time it was made. If it was reasonable for any party to expect that the communication was confined to the parties at the time the communication was made, the communication is confidential."
Furthermore, the trial court instructed the jury: "It is objectively reasonable to expect that telephone conversations between business associates relating to ongoing ventures are private." The only telephone conversation at issue was the taped conversation between Burns and Groff. Because that conversation involved a potential lease transaction between two businesses, and the two companies had previously done business with each other, the jury could have interpreted the instruction as requiring a finding that the conversation was confidential.
These instructions and evidentiary rulings precluded the jury from considering whether Burns expected the taped conversation to be repeated to others, an essential element of the statutory claim, and suggested that its context rendered it confidential. This was error.
Disposition
The judgment is reversed. Nature's Best is entitled to costs of appeal.
WE CONCUR: BEDSWORTH, J., and MOORE, J.
NOTES
[1] All statutory references are to the Penal Code.
[2] Apparently, no one challenged the trial court's dismissal of the section 632 cause of action. The Supreme Court merely acknowledged the dismissal by referring to the statutory language in a footnote. (Sanders, 20 Cal.4th at p. 913, fn. 2, 85 Cal.Rptr.2d 909, 978 P.2d 67.)
[3] Two recent appellate court cases have addressed the distinction in the context of section 632. The Supreme Court has ordered one depublished (Marich v. QRZ Media, Inc. (July 2, 1999, B122834), 86 Cal.Rptr.2d 406) and has taken the other for review (Flanagan v. Flanagan (1999) 77 Cal.App.4th 122, 91 Cal.Rptr.2d 422, review granted Mar. 22, 2000, S085594).
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Filed 7/18/16 Loughlin v. County of Los Angeles CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
LAWRENCE LOUGHLIN, B263846
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC539390)
v.
COUNTY OF LOS ANGELES, et. al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los Angeles County, Barbara
Scheper, Judge. Affirmed.
Law Offices of Carlin & Buchsbaum, Brent S. Buchsbaum and Ana L. De La
Torre, for Plaintiff and Appellant.
Law Offices of David J. Weiss, David J. Weiss and Michael H. Forman, for
Defendants and Respondents.
Plaintiff and appellant Lawrence Loughlin (plaintiff), at age 72, went to work for
the County of Los Angeles Department of Children and Family Services (Department).
He resigned five years later and sued the County of Los Angeles (County) for age
discrimination, disability discrimination, retaliation, failure to accommodate disabilities,
and failure to engage in the interactive process under the California Fair Employment and
Housing Act (FEHA) (Gov. Code,1 § 12900 et seq.). He also brought a claim for
intentional infliction of emotional distress against the County and his former supervisor,
Liliana Camberos (Camberos). Defendants moved for summary judgment, which the
trial court granted. We consider whether plaintiff established a material dispute of fact
on the theory of liability as alleged in his complaint, which asserted that Camberos (not
his other previous supervisors) subjected him to unlawful adverse employment actions.
I. BACKGROUND
A. Facts
Plaintiff began working for the Department in June 2008. Department social
workers supervise and place children who need protection on account of abuse, neglect,
or exploitation. The essential functions of the job “include producing periodic timely and
legally sufficient written reports to the court, assessing children’s safety and welfare
through monthly home visits, assessing parents’ compliance with the child’s case plan,
maintaining detailed files regarding each child, and responding to a variety of casework
emergencies, among other things.”
1. Plaintiff’s medical history and requests for accommodation
In October 2010, a water main broke and flooded plaintiff’s house, requiring
plaintiff and his wife to relocate to a hotel. Plaintiff experienced stress as a result of the
damage and temporary relocation, and he took a leave of absence from his job at the
1
All further undesignated statutory references are to the Government Code.
2
Department. He saw a psychiatrist for depression and anxiety, Dr. Talag, who authorized
plaintiff’s absence from work from December 2, 2010, through June 15, 2011. Plaintiff’s
return to work was authorized by Dr. Talag “without any restriction.”
Within a week of returning to his job in June 2011, plaintiff informed his
supervisor, Guadalupe Lopez (Lopez), that he intended to retire at the end of July.
Plaintiff changed his mind, however, and did not retire. In July, plaintiff informed Dr.
Talag that the Department was planning to assign him 38 cases in August, which he
thought would be too stressful.2 Plaintiff took a medical leave of absence from July 11,
2011, through August 21, 2011.
According to plaintiff, when he returned to work in August, Lopez told him: “You
shouldn’t have returned to work. You should have retired instead. You[’re] old enough
to retire.” (Plaintiff would later acknowledge in a deposition that it was “very possible”
that Lopez’s comment related to his previously announced intention to retire, although he
also believed the comments were discriminatory.) In late August, Dr. Talag
recommended in a written “Work Status Report” that plaintiff receive a reduced
workload until September 26, 2011, when she would reevaluate him.
Plaintiff submitted his doctor’s report to Lopez, who forwarded it to the
Department’s Office of Health and Safety Management. On September 1, a Department
personnel employee wrote plaintiff and Lopez to set up a meeting to discuss
accommodations. The personnel employee asked Lopez to “make every effort to
temporarily accommodate” plaintiff prior to the meeting. Plaintiff was handling 29 cases
at the time.
When the interactive process meeting was held on September 14, plaintiff asked
for a reduction in caseload, a new keyboard, speech recognition software, and a magnifier
for his computer monitor screen. The following day, the Department reduced plaintiff’s
caseload to 17. The Department replaced plaintiff’s keyboard and, in order to satisfy his
2
Department social workers were required to maintain a caseload of at least 31 and
no more than 38 cases, with most social workers handling 35-38 cases.
3
other requests, asked him to provide a doctor’s note within two weeks for an ergonomic
evaluation and voice recognition software.
In mid-January 2012, plaintiff provided a note from his family physician, Dr.
Scott, requesting that his caseload be set at no more than 17 cases for a full year and
recommending he receive an ergonomic evaluation and voice recognition software. The
Department continued to maintain plaintiff’s caseload at no more than 17 cases.3
2. Plaintiff’s work performance
Lopez became plaintiff’s supervisor in September 2010, just one month before he
started his leave of absence following the flood at his home. After plaintiff was out of the
office on leave, Lopez reviewed his cases in order to reassign them to other social
workers during his absence. When she did so, she “was alarmed to discover [the] cases
had been inappropriately handled to a potentially dangerous degree.” Lopez created
memoranda documenting areas of concern, which included general disorganization, lack
of updating, departures from standard case formatting, and missing medical records and
photos.
Lopez was required to complete plaintiff’s next work performance evaluation in
April 2011, while plaintiff was still on leave. Consequently, Lopez spoke with plaintiff’s
previous supervisor, Cheryl Gilcrest, about his work performance in 2010.4 According to
Lopez, Gilcrest said she would rate plaintiff as “improvement needed” if she were the
one evaluating him (1) because he consistently failed to file or organize his case materials
according to Department policy despite being offered additional assistance and (2)
because he needed close supervision to perform his job functions. Based on her
discussion with Gilcrest and her independent review of plaintiff’s work, Lopez rated
plaintiff as “improvement needed” in the following evaluative categories: social work
3
Plaintiff’s voice recognition software was installed, and an ergonomic assessment
scheduled, later in April.
4
Plaintiff testified in his deposition that Gilcrest did not discriminate against him.
4
skills, work knowledge, work habits, recording (recording information, following
guidelines, and meeting deadlines), and use of supervision. She rated plaintiff
“competent” in terms of his “work ethics,” work relationships, and adaptability. Lopez
gave plaintiff an overall rating of “competent,” 5 but she recommended the Department
place him on a “Needs Improvement” plan once he returned to work to address issues
involving his organization and completion of case files and documents.
In January 2012, after plaintiff had returned to work, Lopez requested a meeting
with a Department personnel employee because she was “having many performance
issues [with plaintiff] despite him having a reduced caseload” and “need[ed] to be able to
document him.” Then, in March 2012, Lopez was again responsible for evaluating
plaintiff’s work performance. She rated plaintiff as “improvement needed” on his social
work skills, work knowledge, work habits, use of supervision, and adaptability. She rated
plaintiff “competent” in recording, work ethics, and work relationships. Overall, Lopez
rated plaintiff “competent.” She reported that plaintiff required significant supervision
and guidance, needed to improve his family interviewing and assessment skills, had
“difficulty staying on task and understanding and completing” his job requirements, was
frequently disorganized and behind on his work, failed to comply with Department time-
reporting policies and work instructions, and struggled to adapt to new and changing
situations.
The March 2012 evaluation and its supporting documentation provided specific
examples of plaintiff’s shortcomings and explained how they affected his child clients
and his coworkers. While Lopez acknowledged that plaintiff had a pleasant demeanor
and was quick to seek assistance, she found that plaintiff had “difficulty following
5
The available overall rating categories were “outstanding,” “very good,”
“competent,” “improvement needed,” or “unsatisfactory.” Department policy required
written factual evidence, including proof the employee was previously informed of
deficiencies and given guidance and assistance to correct them, to support an overall
rating of “improvement needed.” An overall rating of “unsatisfactory” subjected the
employee to demotion or discharge.
5
through with the work needed on his cases” notwithstanding his reduced caseload.
Plaintiff refused to sign the March 2012 evaluation but testified at his deposition that he
did not consider either that evaluation or the earlier evaluation in April 2011, also
completed by Lopez, to be discriminatory or retaliatory.
Camberos became plaintiff’s assigned supervisor in mid-February 2012. In the
spring and summer of that year, Department personnel issued plaintiff several written
disciplinary memoranda that documented various deficiencies in plaintiff’s work and
confirmed discussions between him and his supervisors regarding those shortcomings. In
May, for instance, Camberos issued plaintiff a written “warning” after he allegedly
detained a child without consulting a supervisor first, placed the child in an unapproved
foster home, and made other errors related to the case.6
In December 2012, Camberos completed plaintiff’s next annual evaluation. She
rated him as “improvement needed” in his social work skills, work knowledge, work
habits, recording, use of supervision, work ethics, and adaptability. She rated his work
relationships as “competent.” Overall, Camberos gave plaintiff an “improvement
needed” rating. Her evaluation noted, among other things, that in September and
October, two of plaintiff’s cases had been reassigned because of client complaints and
because plaintiff had violated confidentiality rules. Having concluded that plaintiff’s
work performance had dropped over the past several months, Camberos placed him on a
three-month “Corrective Action Plan” that required him to attend mandatory training on
social work skills, to keep his case files and work area organized, to prepare timely
6
Because Camberos was temporarily reassigned to a different position, Stacie
Ottley served as plaintiff’s acting supervisor from May or June to mid-September 2012.
In a declaration submitted after plaintiff filed this lawsuit, Ottley opined that plaintiff
“failed to perform the essential functions of his job adequately and in accordance with
[Department] standards” while under her supervision. Ottley said she would have
“disciplined him more frequently and more harshly for his mistakes, errors, poor
judgment, and poor work performance” if she had been his permanent supervisor. She
further stated that she would have rated him as unsatisfactory or needing improvement if
she had been called upon to evaluate him. Plaintiff testified in his deposition that Ottley
did not discriminate against him.
6
reports justified by policy, and to treat his clients and colleagues with professionalism
and respect. If plaintiff failed to achieve an overall rating of “competent” after three
months, he would be rated “unsatisfactory” and demoted or terminated. Plaintiff refused
to sign the December 2012 evaluation.
In early 2013, Department clients again complained about plaintiff. On March 5,
2013, Camberos asked plaintiff to submit affidavits describing his version of the events
related to the complaints, but there is no evidence in the record plaintiff did so. That
same day, however, plaintiff did send an e-mail to Department Regional Administrator
Stephen Long (Long) requesting a meeting. In the e-mail, plaintiff described the client
incidents and offered his side of the story. Plaintiff also claimed that an e-mail sent from
his account to Camberos over the weekend had not actually been sent by him, and he
wrote: “I can only deduce I am the subject of some kind of attack and that the
[Department] computer system has been compromised. Both of which is unacceptable.
[¶] I am sending this e-mail to my chain of command requesting an appropriate
investigation begin to find out why and how this has happened. I sense this has occurred
because there could be discrimination against me based on my age, sex, race or a
combination of all three.” At the close of the e-mail, plaintiff described two incidents
where he felt Camberos had taken cases from him without justification, but plaintiff did
not claim Camberos had done so based on discriminatory motives.
In mid-March 2013, Long evaluated plaintiff, rating him “unsatisfactory” in every
category and overall.7 According to Long, despite meeting with Camberos twice monthly
to improve plaintiff’s job skills, plaintiff still had difficulty organizing and timely
completing his case assignments. Long’s evaluation also noted that plaintiff failed to
make required client visits or to properly conduct or document interviews and other client
contacts, showed a lack of understanding of his job duties, was often difficult to locate
and did not respond to calls or e-mails, and submitted court reports that were frequently
7
Plaintiff’s pleadings and other documents state that Camberos completed this
evaluation, but the document in the record identifies Long as the evaluator.
7
incomplete, riddled with errors, or suffered from other problems. In addition, Long’s
evaluation reported that clients and service providers complained about plaintiff, and
plaintiff’s only response had been to assert that the complainants were lying.
Long and a Department human resources manager thereafter recommended that
the Department director discharge plaintiff for poor performance. On March 26, plaintiff
informed the Department he intended to retire effective March 30, 2013, “[d]ue to health
considerations.” Around the time of plaintiff’s final evaluation and notice of resignation,
the Department reassigned his cases to other social workers. Plaintiff testified at his
deposition that he had received a letter indicating the Department intended to discharge
him and that he retired in part because he was going to be discharged and also because he
felt discriminated against on account of his age and his reduced workload.
B. Plaintiff’s Lawsuit
After resigning, plaintiff sued the County for (1) age discrimination, (2) disability
discrimination, (3) retaliation, (4) failure to accommodate his disabilities, and (5) failure
to engage in the interactive process, all in violation of FEHA. He also brought a sixth
cause of action against Camberos and the County for intentional infliction of emotional
distress.
According to the complaint, plaintiff sought accommodations for disabilities
“including but not limited to blood pressure, heart condition, stress and anxiety,” but
defendants initially refused and then, after eventually providing accommodations,
retaliated against him because of it. Plaintiff also alleged Camberos treated him less
favorably than younger employees, “including micro managing and over scrutinizing his
work” on account of his age and disabilities. Plaintiff further alleged that Camberos’s
negative evaluations of him were due to his age and disability status. And plaintiff
contended the Department had constructively terminated him because he resigned when
the Department took his cases away and he no longer had any work to do. Importantly
for purposes of this appeal, plaintiff included no allegations in his complaint concerning
8
alleged discrimination by his former supervisor Lopez, nor did he allege the adverse
actions taken by Camberos were instigated by or taken at the behest of Lopez.
C. Defendants’ Motion for Summary Judgment
Defendants moved for summary judgment, contending that plaintiff’s claims of
age and disability discrimination failed because the adverse actions he alleged were
attributable not to discrimination but to his consistently poor job performance, both
before and after defendants provided him with various workplace accommodations.
Defendants also argued plaintiff could not establish a retaliation claim because plaintiff
never engaged in protected conduct and his poor work performance justified any adverse
employment decisions. With respect to plaintiff’s claims that the Department did not
adequately accommodate his disabilities or engage in the interactive process, defendants’
summary judgment motion emphasized the Department granted all accommodations he
sought and maintained there was no evidence the Department had failed to engage in the
interactive process in good faith. Finally, defendants argued plaintiff could not prevail on
his cause of action for intentional infliction of emotional distress because defendants’
conduct was not extreme or outrageous and plaintiff’s claim was preempted by
California’s worker’s compensation law.
In opposition, plaintiff contended material, disputed facts precluded summary
judgment, citing not just conduct by Camberos, but also relying on statements and actions
both by Long and by Lopez, although she was never mentioned in his complaint.
Plaintiff said when he returned to work in August 2011 after opting not to retire, Lopez
gave him “the cold shoulder” and made the “You[’re] old enough to retie” comment
described above. Plaintiff claimed Lopez had treated another older coworker, Harold
Daley, similarly by suggesting the job was for young people and that Daley should retire.
Plaintiff also asserted that Lopez and Camberos “were very good friends,” and he
claimed that once Camberos became his supervisor, she constantly criticized him,
evaluated his performance unfairly, denied him access to online programs offered to
younger employees that provided case-related information, and refused to make him the
9
lead of their unit, which he claimed he was entitled to under Department policy. Plaintiff
separately accused Long of screaming in his face and pointing a finger at his nose on one
occasion.
Plaintiff supported his opposition to summary judgment with, among other things,
portions of his deposition, his own declaration, and a declaration from his former
colleague Daley. According to Daley’s declaration, he worked as a children’s social
worker for the Department from 2008 to 2014. He was 70 years old when the
Department terminated him. The Department said it was for poor work performance, but
Daley attributed it to age discrimination. Daley claimed Lopez micro-managed him,
constantly criticized his work without suggesting training that would assist him, and
asked him more than once when he planned to retire, saying, “This job is for young
people. You should just enjoy your life.” In addition to his personal account of
discrimination, Daley said he saw plaintiff being called into Ronda Jacobs’s office, who
was Camberos’s superior, on a daily basis in 2012.
At the hearing on defendants’ motion for summary judgment, plaintiff argued that
even though he had not sued Lopez or identified her as a source of discrimination in the
complaint, the court should consider Lopez’s actions in deciding summary judgment.
Plaintiff cited the so-called “cat’s paw” doctrine (not argued in his opposition papers),
which some courts had applied in certain circumstances to impute discriminatory animus
harbored by one actor to another actor responsible for taking an adverse action against an
employee. Under this doctrine, plaintiff argued Lopez harbored discriminatory animus
against him, and this discriminatory motive could be deemed to have influenced adverse
actions taken by Camberos. If the court applied the “cat’s paw” doctrine (which we will
refer to as the “imputed motivation” doctrine), plaintiff contended Lopez’s statements
that plaintiff was old enough to retire and Daley’s statements allegedly corroborating
plaintiff’s account and documenting his own experiences of discrimination by Lopez
established a material dispute of fact on his age discrimination claim. Plaintiff also
argued there were disputed issues of material fact as to his retaliation claim, namely, the
fact that plaintiff was written up for poor performance soon after e-mailing Long about
10
discrimination against him, as well as his interactive process claim, namely, evidence that
an unnamed employee of the “Safety and Health” department purportedly told him he
should have received more interactive process meetings.
The court granted summary judgment, finding no triable issues of fact based on
admissible evidence. Because plaintiff’s complaint did not include allegations of
discrimination or harassment by Lopez and did not mention any conduct directed at
Daley, the court declined to consider plaintiff’s arguments relating to those two
individuals. Nor did the court grant plaintiff leave to amend his complaint to conform to
proof because plaintiff did not diligently seek to amend despite being aware of the
allegations regarding Lopez and Daley for some time.
The trial court ruled plaintiff could not raise a triable issue on his age
discrimination claim because the only evidence he offered of age-related motivation was
Camberos’s refusal to give him access to online programs or make him the lead social
worker of their unit. Although the court had said it would not consider the arguments
concerning conduct by Lopez and Daley, the court also found, apparently in the
alternative, that plaintiff failed to link Lopez to any adverse employment actions, e.g., the
negative evaluations by Camberos or the divestiture of his caseload, and he failed to
establish Camberos’s conduct was related to his age.
The court also granted summary judgment on plaintiff’s other causes of action. As
to his disability discrimination claim, the court found plaintiff offered no evidence that
defendants’ conduct was prompted by discriminatory animus related to plaintiff’s
disabilities. The court found summary judgment appropriate on plaintiff’s retaliation
claim because plaintiff’s e-mail to Long, in which he purportedly complained about
discrimination, was too vague to constitute protected activity and because it was not
connected to plaintiff’s later performance review. Next, on plaintiff’s claim for failure to
accommodate his disabilities, the court found there were no triable issues because the
evidence was undisputed that the Department provided “each and every one of plaintiff’s
requests” for accommodations. Regarding plaintiff’s interactive process cause of action,
the court ruled defendants were entitled to judgment because the sole evidence cited by
11
plaintiff to support it, the purported statement by a Health and Safety Department
employee that he should have been granted more interactive process meetings, was
inadmissible hearsay. Finally, the court ruled that plaintiff presented no triable issues
regarding his intentional infliction of emotional distress claim because the evidence
showed defendants’ conduct was based on legitimate personnel decisions unmotivated by
discrimination or retaliation.
II. DISCUSSION
Plaintiff argues the trial court should have denied defendant’s motion for summary
judgment because there were disputed issues of material fact, but our de novo review
leaves us convinced summary judgment was proper. The trial court properly disregarded
plaintiff’s theory of age discrimination based on evidence of Lopez’s conduct and the
imputed motivation doctrine because that theory was not fairly presented by the
allegations in plaintiff’s complaint. As the issues had been framed by his complaint, and
assuming for argument’s sake plaintiff made out a prima facie case of age or disability
discrimination, plaintiff presented no evidence to establish a dispute of fact concerning
whether the Department’s non-discriminatory reason for the challenged adverse
employment actions—namely, his poor job performance—was pretextual. The
remainder of plaintiff’s claims under FEHA fare no better for reasons we shall describe,
and defendants also negated his cause of action for intentional infliction of emotional
distress. Summary judgment was proper.
A. Standard of Review
To obtain summary judgment, a moving defendant must demonstrate that one or
more elements of the plaintiff’s cause of action cannot be established or that a complete
defense to the plaintiff’s cause of action exists. (Code Civ. Proc., § 437c, subd. (p)(2);
see also Nealy v. City of Santa Monica (2015) 234 Cal.App.4th 359, 370 (Nealy).) We
review a grant of summary judgment de novo, following the same three-step process as
the trial court: “‘we (1) identify the issues framed by the pleadings; (2) determine
12
whether the moving party has negated the opponent’s claims; and (3) determine whether
the opposition has demonstrated the existence of a triable, material factual issue.
[Citation.] Like the trial court, we view the evidence in the light most favorable to the
opposing party and accept all inferences reasonably drawn therefrom. [Citation.]’
[Citation.]” (DeJung v. Superior Court (2008) 169 Cal.App.4th 533, 549 (DeJung).)
A defendant is entitled to summary judgment where it shows plaintiff’s case has
no merit. (Code Civ. Proc., § 437c, subds. (a), (o) & (p)(2).) To do so, the defendant
may present affirmative evidence that conclusively negates an essential element of the
plaintiff’s case. (Nealy, supra, 234 Cal.App.4th at p. 370; see also Guz v. Bechtel Nat.
Inc. (2000) 24 Cal.4th 317, 335, fn. 7 (Guz).) In a FEHA discrimination or retaliation
case, the employer satisfies this burden by presenting evidence of “nondiscriminatory
reasons” for its adverse employment action “that would permit a trier of fact to find, more
likely than not, that they were the basis for the [adverse employment action]. [Citations.]
To defeat the motion, the employee then must adduce or point to evidence raising a
triable issue, that would permit a trier of fact to find by a preponderance that intentional
discrimination occurred. [Citations.]” (Kelly v. Stamps.com Inc. (2005) 135 Cal.App.4th
1088, 1097-1098.)
B. Consideration of Unpleaded Issues
Summary judgment proceedings, including our review, are restricted to the issues
raised in the pleadings. (Hutton v. Fidelity Nat. Title Co. (2013) 213 Cal.App.4th 486,
493 (Hutton).) Thus, the movant for summary judgment “need not refute liability on
some theoretical possibility not included in the pleadings,” and the opponent may not
raise issues beyond the pleadings in its separate statement, declarations, or other
oppositional evidence. (Ibid.) If the opponent desires to incorporate such issues into its
case in chief, the proper vehicle for doing so is an amendment to its complaint. (Ibid.)
Here, defendants contend the trial court properly disregarded the evidence concerning
Lopez, including Daley’s declaration, on the ground that it was not alleged in plaintiff’s
complaint; defendants urge we should likewise disregard the evidence.
13
Plaintiff first proposed his theory that Camberos’s adverse actions against him
were effectively motivated by Lopez’s discriminatory animus at the hearing on summary
judgment. Facts to support this proffered theory of liability on his age discrimination
claim were absent from his complaint.8 Instead, plaintiff’s complaint attributes the
Department’s adverse employment actions against him—two negative performance
reviews, the divestiture of his caseload, and constructive termination—solely to
Camberos’s discriminatory and retaliatory motives. Indeed, other than Camberos, the
only other Department employees even mentioned in the complaint are Long, to whom
plaintiff allegedly complained of Camberos’s discrimination, and Ottley, plaintiff’s
acting supervisor during part of 2012, who plaintiff says treated him fairly. Despite
failing to allege Lopez was the underlying source of the Department’s age discrimination
against him, plaintiff relied upon and sought to introduce evidence in support of that
theory in his opposition to summary judgment. Because such evidence constitutes a new,
unpleaded theory of liability that goes beyond merely clarifying or elaborating upon the
theory presented in the complaint, we, like the trial court, need not consider it.9 (See,
e.g., Hutton, supra, 213 Cal.App.4th at p. 496; Laabs v. City of Victorville (2008) 163
Cal.App.4th 1242, 1253-1258 (Laabs).)
Our conclusion relates not only to Lopez’s statements concerning whether plaintiff
should retire, but also to the evidence regarding Daley. Daley was never supervised by
Camberos and complains only of discriminatory conduct by Lopez. Thus, the Daley
8
Although plaintiff also claimed Lopez discriminated against him because of his
disability, and was motivated by a desire to retaliate against him, the conduct he attributes
to Lopez at most supports his age discrimination claim.
9
Plaintiff also failed to cite the evidence regarding Lopez and Daley in his separate
statement of material facts in opposition to summary judgment, which may “constitute a
sufficient ground, in the court’s discretion, for granting the [summary judgment] motion.”
(Code Civ. Proc., § 437c, subd. (b)(3); see also O’Byrne v. Santa Monica-UCLA Medical
Center (2001) 94 Cal.App.4th 797, 800, fn. 1 [evidence considered by court on summary
judgment must appear in parties’ separate statements].)
14
evidence serves to buttress not the allegations of discrimination by Camberos pleaded by
plaintiff but rather a theory that Lopez was the true fount of discriminatory conduct.
If plaintiff wanted to rely on the allegations relating to Lopez and Daley in an
effort to establish a dispute of fact warranting trial, he should and could have moved to
amend his complaint. (Laabs, supra, 163 Cal.App.4th at p. 1258, fn. 7 [“To allow an
issue that has not been pled to be raised in opposition to a motion for summary judgment
in the absence of an amended pleading, allows nothing more than a moving target. For
Code of Civil Procedure section 437c to have procedural viability, the parties must be
acting on a known or set stage”].) Plaintiff knew of the allegations regarding Lopez and
Daley before defendants moved for summary judgment, and he could easily have sought
leave to amend his complaint during that time. It is therefore immaterial whether
defendants became aware of potential issues involving Lopez and Daley during
discovery, or whether defendants intended to rely on their own evidence regarding Lopez.
Plaintiff should have timely moved to amend the complaint, he has no excuse for failing
to do so, and defendants’ summary judgment motion needn’t have (indeed, couldn’t
have) negated his imputed motivation theory of liability. (See, e.g., Laabs, supra, 163
Cal.App.4th at p. 1258 [“It is the allegations in the complaint to which the summary
judgment motion must respond”].)
C. Analysis
1. Plaintiff’s age and disability discrimination claims
FEHA prohibits employers from discriminating against an employee “in
compensation or in terms, conditions, or privileges of employment” on the basis of such
employee’s age, physical disability, mental disability, or medical condition. (§ 12940,
subd. (a).) Adverse employment actions are not limited to demotions and terminations;
they may be found within “the entire spectrum of employment actions that are reasonably
likely to adversely and materially affect an employee’s job performance or opportunity
for advancement in his or her career.” (Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th
1028, 1054 (Yanowitz).)
15
Resolution of the discrimination claims at issue, which plaintiff supports with
solely circumstantial evidence, proceeds under the McDonnell Douglas test. (DeJung,
supra, 169 Cal.App.4th at pp. 549-550; see also McDonnell Douglas Corp. v. Green
(1973) 411 U.S. 792.) First, “a prima facie case[] of age discrimination arises when the
employee shows (1) at the time of the adverse action he or she was 40 years of age or
older, (2) an adverse employment action was taken against the employee, (3) at the time
of the adverse action the employee was satisfactorily performing his or her job and (4)
the employee was replaced in his position by a significantly younger person.” (Hersant
v. Dept. of Social Services (1997) 57 Cal.App.4th 997, 1002.). A prima facie case of
disability discrimination is established by evidence that an employee (1) suffered from a
disability, (2) could perform the essential duties of the job with or without reasonable
accommodations, and (3) was subjected to an adverse employment action because of the
disability. (Sandell v. Taylor-Listug, Inc. (2010) 188 Cal.App.4th 297, 310 (Sandell).) If
a prima facie case is established, the burden shifts to defendant to produce evidence
demonstrating the adverse action taken against the plaintiff was unrelated to his age or
disability (i.e., a non-discriminatory reason). When an employer does so, the burden
shifts back to the plaintiff, who must demonstrate a triable issue by identifying evidence
that reasonably suggests the adverse action is instead attributable to intentional
discrimination. (Guz, supra, 24 Cal.4th at p. 357; see also DeJung, supra, 169
Cal.App.4th at p. 553 [once employer satisfies its burden, “the employee must
demonstrate a triable issue by producing substantial evidence that the employer’s stated
reasons were untrue or pretextual, or that the employer acted with a discriminatory
animus, such that a reasonable trier of fact could conclude that the employer engaged in
intentional discrimination”].)
Defendants’ motion for summary judgment sought to conclusively negate a
necessary element to establish a prima facie case, namely, that plaintiff was satisfactorily
performing his job (with or without accommodations) at the time of the adverse
employment actions he challenged. The motion and separate statement adduced
substantial evidence that plaintiff’s poor work performance, a non-discriminatory reason,
16
justified the adverse employment actions taken against him. Plaintiff’s performance
problems were supported by documentation of specific instances where plaintiff failed to
perform adequately, and these shortcomings were consistent over time. For example,
plaintiff was frequently counseled or critiqued for failing to maintain complete, organized
case files; missing deadlines; needing substantial, direct supervision; adhering to
overtime policy; communicating with and documenting his time spent with clients and
their families; preparing court reports; complying with Department instructions; and
being accessible to his colleagues, clients, and service providers. These facts
demonstrated plaintiff’s inability to perform essential job functions such as “producing
timely and legally sufficient written reports to the court,” “assessing children’s safety and
welfare through monthly home visits,” and “maintaining detailed files regarding each
child.”
The only contrary evidence plaintiff offered on the question of the adequacy of his
job performance at the time of the challenged adverse actions was his own declaration
and deposition testimony. While the requirements to establish a prima facie case are not
onerous, we doubt whether plaintiff’s often conclusory assertions that his performance
was satisfactory were sufficient under the circumstances to establish all the necessary
elements of a prima facie case of discrimination.10
Nevertheless, assuming for argument’s sake that plaintiff did make a sufficient
showing to establish a prima facie case of discrimination (or that such a showing was
unnecessary (Guz, supra, 24 Cal.4th at pp. 356-357)), plaintiff’s poor work performance
was undoubtedly a legitimate, non-discriminatory reason for the employment actions he
challenged. And plaintiff failed to rebut defendants’ non-discriminatory reason with
evidence “supporting a rational inference that intentional discrimination, on grounds
10
Paragraph three of plaintiff’s declaration, for instance, states in full as follows: “I
enjoyed my job at [the Department], was dedicated to it and did not hesitate to work long
hours during the week and on the weekends in order to get my job done. I performed my
job duties in a satisfactory manner, did not require significant individual supervision[,]
and I do not believe I ever placed in danger the general well being of the children I was
assigned to. I cared deeply for the children I was assigned to.”
17
prohibited by the statute, was the true cause of the employer’s actions. [Citation.]” (Id.
at p. 361, italics omitted.)
While plaintiff generally denied that his skills were lacking in the respects cited by
the Department, he provided no evidence that raised a genuine issue as to whether the
evidence of poor performance was just a cover for discrimination. The evaluations that
plaintiff claims were discriminatory did not show a sudden shift in plaintiff’s
performance reviews, leading to an inference of discriminatory animus. Rather, each of
plaintiff’s supervisors noted his deficient work, even supervisors like Ottley that plaintiff
conceded had not discriminated against him. (See ante, p. 6, fn. 6.) Notably, plaintiff
himself conceded during his deposition that he may have been falling short or have been
overwhelmed: “I was doing the job at 17 cases. Whether it was too much or not, it’s
hard to say. I think it might have been, but you know, I felt—I felt bad about getting a
reduction at 17 cases.” Plaintiff accordingly failed to establish a genuine dispute of fact
on the question of whether his negative performance reviews, and other criticism of his
work, were unwarranted.
Nor did plaintiff provide other evidence of discriminatory intent to contradict
defendants’ position. Plaintiff asserts that Camberos treated him differently than younger
employees by denying him access to unidentified online programs, “criticizing [him] over
everything,” and not making him lead of their unit in contravention of Department policy.
These unsupported, uncorroborated assertions are unavailing because they are
unconnected to the issue of plaintiff’s work performance so as to create a dispute of fact
concerning pretext or intentional discrimination. Without evidence plaintiff was
performing adequately—or that younger employees were treated better despite
performing similarly to plaintiff—a trier of fact could not reasonably infer the
Department treated plaintiff differently for discriminatory reasons. (See Guz, supra, 24
Cal.4th at p. 362 [summary judgment for employer appropriate where, “given the
strength of the employer’s showing of innocent reasons, any countervailing
circumstantial evidence of discriminatory motive, even if it may technically constitute a
prima facie case, is too weak to raise a rational inference that discrimination occurred”].)
18
Indeed, even if we were to consider the imputed motivation theory of liability
plaintiff belatedly advanced at the summary judgment hearing, we would find plaintiff’s
discrimination causes of action did not warrant a trial. Lopez was not a “significant
participant” in the adverse employment actions against plaintiff (see DeJung, supra, 169
Cal.App.4th at p. 551), and plaintiff’s unsupported and conclusory assertion in his own
declaration that Lopez and Camberos were “very good friends” does not justify an
inference that Camberos was acting as an “instrumentality or conduit” of Lopez’s
discriminatory animus (cf. Reeves v. Safeway Stores, Inc. (2004) 121 Cal.App.4th 95,
116). Daley’s declaration also is not evidence that would support a conclusion a factual
dispute exists as to pretext, in part because there is no evidence that Daley’s work
performance was adequate so as to suggest a pretextual motivation for his termination.
2. Plaintiff’s retaliation claim
Employers subject to FEHA may not “discharge, expel, or otherwise discriminate
against any person because the person has opposed any practices forbidden [by the
statute] or because the person has filed a complaint, testified, or assisted in any
proceeding under this part.” (§ 12940, subd. (h).) For a claim of retaliation under FEHA
to survive summary judgment, there must be evidence on which a factfinder could
conclude “(1) [the employee] engaged in a ‘protected activity,’ (2) the employer
subjected the employee to an adverse employment action, and (3) a causal link existed
between the protected activity and the employer’s action.” (Yanowitz, supra, 36 Cal.4th
at p. 1042.) If the employer demonstrates a legitimate reason for its adverse employment
action, the burden shifts back to the employee to prove intentional retaliation. (Ibid.)
Activity protected under FEHA includes seeking advice from government
agencies regarding employment discrimination, “participating in an activity perceived by
the employer as opposition to discrimination,” and participating in a legal proceeding
relating to the employer’s alleged violation of FEHA. (Nealy, supra, 234 Cal.App.4th at
pp. 380-381.) An employee’s opposition to conduct he or she reasonably believes to be
unlawfully discriminatory under FEHA is considered a protected activity, even if a court
19
later determines that the conduct was not discriminatory. (Yanowitz, supra, 36 Cal.4th at
p. 1043.)
Plaintiff claims that various acts of Camberos and Long, including Camberos’s
critical evaluations, their joint action to divest plaintiff of his caseload, and Long’s failure
to respond to plaintiff’s grievances, were retaliatory actions taken because plaintiff
sought accommodations for his disabilities in August 2011 and sent the March 2013 e-
mail to Long in which he made reference to discrimination. We conclude the County is
entitled to summary judgment on plaintiff’s retaliation claim because his email to Long
did not constitute protected conduct and because plaintiff cannot show a causal
connection between his request(s) for accommodations and the adverse employment
actions he challenges.
Plaintiff’s e-mail to Long is not protected activity. While informal complaints of
discrimination may amount to protected activity (see Yanowitz, supra, 36 Cal.4th at p.
1047 & fn. 7; Cal. Fair Employment and Housing Com. v. Gemini Aluminum Corp.
(2004) 122 Cal.App.4th 1004, 1018), “vague or conclusory remarks that fail to put an
employer on notice as to what conduct it should investigate will not suffice to establish
protected conduct.” (Yanowitz, supra, 36 Cal.4th at p. 1047.) Here, plaintiff’s reference
to discrimination in the Long e-mail was too indefinite to merit protection. Plaintiff did
not accuse Camberos or any particular person of discrimination, the type of
discrimination stated was presented only in speculative terms, and his description of what
he said “could be” discriminatory conduct, a purported computer “attack,” was
befuddling to say the least. And even if the email were protected activity, it could not
support an inference of retaliation because of the lack of a triable issue on causation:
Long completed plaintiff’s final evaluation approximately 10 days after the email, but the
timing of that evaluation was dictated by the terms of his three-month improvement plan.
As for plaintiff’s request for accommodations in August 2011 (and arguably a
follow up request in January 2012 with a note from Dr. Scott), a recent clarifying
amendment to FEHA indicates a request for an accommodation can be protected conduct.
(§ 12940, subdivision (m)(2) [added to the code by Stats. 2015, ch. 122, § 1(a)].) The
20
evidence submitted in connection with summary judgment, however, demonstrates
plaintiff cannot establish a causal retaliatory link between the request for
accommodations and the alleged adverse employment actions. For the same reasons we
have given in discussing plaintiff’s discrimination claims, Camberos’s evaluations of
plaintiff and the decision to remove him from his cases were justified by plaintiff’s poor
work performance, and plaintiff came forward with no evidence to establish a genuine
dispute over whether this was a mere pretext for a retaliatory motive. This is especially
true because the challenged evaluations by Camberos and Long occurred so long after the
accommodations sought. (Cf., e.g, Loggins v. Kaiser Permanente Internat. (2007) 151
Cal.App.4th 1102, 1112 [explaining a short temporal proximity between a plaintiff’s
protected activity and adverse employment action (not present here) can support a prima
facie case of retaliation, but once the defendant comes forward with a legitimate reason
for the adverse employment decision, a plaintiff must come forward with evidence
sufficient to permit a factfinder to infer intentional retaliation].) The same is, of course,
true for the Long evaluation that occurred even later.
3. Plaintiff’s claims for failure to accommodate his disabilities and
failure to engage in the interactive process
FEHA requires employers to “make reasonable accommodation” for an
employee’s “known physical or mental disability” (§ 12940, subd. (m)(1)) after
“engag[ing] in a timely, good faith, interactive process with the employee . . . to
determine effective reasonable accommodations, if any, in response” to the employee’s
request (§ 12940, subd. (n)). An employer is liable for failure to accommodate where (1)
the employee has a known physical or mental disability under FEHA, (2) the employee
was able to perform the essential functions of the job with reasonable accommodation,
and (3) the employer did not reasonably accommodate the employee’s disability. (Nealy,
supra, 234 Cal.App.4th at p. 373.)
As briefed, plaintiff’s argument that summary judgment was improperly granted
on his failure to accommodate and failure to engage in the interactive process claims is
21
merely perfunctory. Exclusive of citations to general statements of the law, the argument
in his opening brief consists of just three sentences, one of them being, “For the reasons
discussed above, Respondent failed to accommodate Appellant.” Accordingly, we
conclude plaintiff has waived both issues. (Badie v. Bank of America (1998) 67
Cal.App.4th 779, 784-785 [“When an appellant fails to raise a point, or asserts it but fails
to support it with reasoned argument and citations to authority, we treat the point as
waived”].)
Even if not waived, we would conclude summary judgment was proper on both
causes of action. The evidence submitted in connection with summary judgment
conclusively establishes plaintiff timely received all the accommodations he requested,
which establishes no trial was warranted on the failure to accommodate claim. As for
failure to engage in the interactive process, the only evidence plaintiff proffered in
support of that claim was a statement the trial court excluded as hearsay: “Prior to my
forced resignation, I received a call from a lady from the Safety and Health department.
This lady apologized to me and said my case had ‘fallen through the cracks’ and said I
should have received more Interactive Process Meetings.” Plaintiff did not object to the
evidentiary ruling in the trial court, nor does he challenge it on appeal. We therefore hold
the statement was properly excluded, which forecloses any dispute of fact on the
interactive process claim.
4. Plaintiff’s intentional infliction of emotional distress claim
A claim for intentional infliction of emotional distress obligates the plaintiff to
show “‘“‘“(1) extreme and outrageous conduct by the defendant with the intention of
causing, or reckless disregard of the probability of causing, emotional distress; (2) the
plaintiff’s suffering severe or extreme emotional distress; and (3) actual and proximate
causation of the emotional distress by the defendant’s outrageous conduct.”’”’
[Citations.]” (Hughes v. Pair (2009) 46 Cal.4th 1035, 1050 (Hughes).) Conduct is
“‘outrageous’” where “it is so ‘“‘extreme as to exceed all bounds of that usually tolerated
in a civilized community.’”’ [Citation.]” (Id. at pp. 1050-1051.)
22
The trial court did not err in granting summary judgment to defendants on
plaintiff’s claim for intentional infliction of emotional distress because plaintiff’s
evidence does not demonstrate extreme and outrageous conduct.11 As we have explained,
plaintiff failed to establish that defendants discriminated or retaliated against him, and the
alleged criticism by Camberos and an incident where Long was alleged to have yelled in
plaintiff’s face were not “‘“‘of such substantial quality or enduring quality that no
respectable [person] in civilized society should be expected to endure [them].’”’
[Citation.]” (Hughes, supra, 46 Cal.4th at p. 1051.) Rather, the supervisor interaction
with and evaluation of plaintiff were common personnel activities insufficient as a matter
of law to constitute intentional infliction of emotional distress. (Janken v. GM Hughes
Electronics (1996) 46 Cal.App.4th 55, 80; Trerice v. Blue Cross of California (1989) 209
Cal.App.3d 878, 883-884.)
11
Nor has plaintiff alleged a harassment cause of action under FEHA.
23
DISPOSITION
The judgment is affirmed. Respondents are to recover their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
BAKER, J.
We concur:
TURNER, P.J.
KRIEGLER, J.
24
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} |
329 B.R. 438 (2005)
In re SHC, INC., et al., Debtors.
Sierra Investments, LLC, Plaintiff,
v.
SHC, Inc. and Top-Flight, Inc., Defendants.
Bankruptcy No. 03-12002 (MFW), Adversary No. 04-52607-MFW.
United States Bankruptcy Court, D. Delaware.
August 25, 2005.
*439 *440 Joseph A. Malfitano, Young, Conaway, Stargatt & Taylor, LLP, Wilmington, DE, for debtors.
MEMORANDUM OPINION[1]
MARY F. WALRATH, Bankruptcy Judge.
Before the Court are the Motions of Sierra Investments, LLC ("Sierra") to dismiss the Counterclaims of SHC, Inc. and Top-Flight, Inc. (collectively the "Debtors"), the Committee of Unsecured Creditors (the "Committee"), and Bank of America, N.A. as agent for the pre-petition secured lenders (the "Lenders"). For the reasons set forth below, the Court will grant in part and deny in part the Motions to Dismiss.
I. FACTUAL BACKGROUND
On August 15, 1996, the predecessors in interest to Sierra and the Debtors executed a Recapitalization and Stock Purchase Agreement (the "SPA"). Under the SPA, *441 Sierra was obligated to pay, inter alia, taxes that arose before the closing date (September 30, 1996). To fund its indemnification obligations to the Debtors under the SPA, Sierra deposited funds into an escrow account pursuant to an Escrow Agreement between the parties. The Escrow Agreement specified that any funds remaining in the escrow account, after the expiration of the applicable deadlines for assessment of taxes, were to be returned to Sierra.
On April 14, 1997, the Commissioner of Revenue of the Commonwealth of Massachusetts ("Massachusetts") issued a Notice of Intent to Assess the Debtors' predecessor. On October 5, 1998, the Debtors were notified that Massachusetts had assessed taxes totaling $3,320,249 for tax years 1993 to 1995. In order to contest the assessment, Massachusetts law required that the tax be paid first. On October 19, 1998, Sierra directed the escrow agent to transfer funds from the Escrow Account to the Debtors to satisfy the tax assessment. On October 29, 1998, the Debtors paid the tax assessment and filed an appeal.
In the interim, on March 30, 1998, the Debtors executed a Security Agreement with the Lenders whereby the Debtors pledged substantially all of their assets (including proceeds) as collateral for loans. On April 19, 2002, Sierra and the Debtors executed an Assignment Agreement (the "Assignment"), pursuant to which the right to any tax refund which might be due from Massachusetts for 1993 to 1995 was transferred to Sierra in exchange for its prior payment of the tax assessment. In accordance with that agreement, the Debtors directed Massachusetts to pay Sierra any refunds to which the Debtors may be entitled.
On June 30, 2003, the Debtors filed petitions for relief under chapter 11. On August 5, 2003, the Court entered an Order (A) Authorizing the Use of Cash Collateral and (B) Granting Replacement Liens and Superpriority Claims to the Pre-petition Lenders (the "Cash Collateral Order"). That Order granted the Lenders adequate protection liens on all property of the Debtors, including after-acquired property and proceeds.
On September 19, 2003, the Debtors and Massachusetts reached a settlement agreement which acknowledged that Massachusetts owed the Debtors a tax refund of $1,937,603 (the "Refund") for tax years 1993 to 1995. The settlement was approved by the Court on March 24, 2004.
On February 17, 2004, Sierra filed a Complaint seeking a turnover of the Refund issued by Massachusetts. Sierra asserts that the Refund is not property of the estate and that a constructive trust in its favor should be imposed on the Refund.
The Debtors filed an Answer and Counterclaims on March 18, 2004. The Committee and the Lenders were permitted to intervene in the proceeding. On June 2, 2004, the Committee filed a response and counterclaim virtually identical to that of the Debtors. The Liquidation Trustee (the "Trustee") was substituted for the Committee on October 13, 2004. The Lenders filed a separate Answer and Counterclaims on April 20, 2004. The Lenders incorporated the Debtors' Counterclaims and added three additional ones.
Sierra filed Motions to Dismiss all the Counterclaims. The Motions have been briefed and are ripe for decision.
II. JURISDICTION
This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 157(b)(2)(B).
*442 III. DISCUSSION
A. Standard of Review
In deciding a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court must determine whether the plaintiff could be entitled to relief based on any reasonable reading of the pleadings. In doing so, the Court must accept as true the factual allegations in the complaint and all reasonable inferences that can be drawn from them. Langford v. City of Atlantic City, 235 F.3d 845, 847 (3d Cir.2000) (citations omitted).
In this case, the parties' dispute hinges on the interpretation of the various agreements between them. The Court may consider documents which are incorporated into the complaint or counterclaim, even if they contradict the allegations. See, e.g., ESI, Inc. v. Coastal Power Prod. Co., 13 F.Supp.2d 495, 497 (S.D.N.Y.1998) ("If the allegations of a complaint are contradicted by documents made a part thereof, the document controls and the Court need not accept as true the allegations of the complaint.") (citations omitted); Sunquest Info. Sys., Inc. v. Dean Witter Reynolds, Inc., 40 F.Supp.2d 644, 649 (W.D.Pa.1999) ("In the event of a factual discrepancy between the pleading and the attached exhibit, the exhibit controls.") (citations omitted).
A motion to dismiss should not be granted unless it "appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).
B. Debtors' Counterclaims
The Debtors (joined by the Trustee and the Lenders) filed several Counterclaims to Sierra's Complaint. Sierra seeks to dismiss them all.
1. Indemnification Provisions of the SPA
The Debtors seek a declaratory judgment that they have no obligation under the SPA to repay Sierra for the tax payment it made. The Debtors argue that the only indemnity obligations under the SPA are contained in Article VIII (which deals exclusively with taxes) and Article XI (which expressly excludes taxes from its coverage). The Debtors acknowledge that Article XI does provide for repayment to Sierra of claims it may have paid under its indemnification obligations. For example, the Debtors are obligated to repay Sierra if they recover any insurance for a claim on which Sierra has already indemnified them. (SPA at § 11.01(d).) However, Article XI expressly states that it is not applicable to any indemnification for taxes. (Id.)
Furthermore, the Debtors assert that Article VIII, the provision of the SPA which relates to taxes, does not have any similar provision which would require the Debtors to repay Sierra if it receives insurance or any other repayment of a claim already paid by Sierra under its indemnification obligations. This absence, the Debtors assert, requires the conclusion that they have no obligation to repay Sierra. They argue this is mandated by the maxim of contract interpretation expressio unis est exclusio alterius (to express or include one thing implies the exclusion of the alternative). See, e.g., VKK Corp. v. Nat'l Football League, 244 F.3d 114, 130 (2d Cir.2001). The Debtors assert this is particularly telling since Article VIII does require that the Debtors pay Sierra any tax refund they receive for the tax year ending September 30, 1996. (SPA at § 8.01(a).) Again, the Debtors argue that the absence of any reference to Sierra's entitlement to tax refunds for any other *443 years mandates the conclusion that Sierra is not entitled to them.
Sierra disagrees with the Debtors' conclusion that the SPA prohibits any reimbursement of Sierra for the tax overpayment it made. Sierra argues that it was only obligated under the SPA to indemnify the Debtors for taxes due to Massachusetts. It paid taxes assessed by Massachusetts in order to permit the parties to appeal the assessment. Sierra argues that, because Massachusetts reduced the amount of this assessment later, Sierra's payment included taxes that were never due. Because Sierra was never obligated to indemnify the Debtors for taxes that they did not owe, Sierra asserts that this overpayment (the Refund) should be returned to it.
Sierra argues that the Debtors' interpretation of the SPA ignores the plain meaning of the word "indemnify"[2] and expands it to require Sierra to pay items it did not agree to pay. Sierra argues that the mere fact that the Debtors did not have an express obligation under the SPA to reimburse Sierra for the overpayment cannot mean that Sierra has no remedy. Sierra argues it would be illogical to conclude that it was not entitled to the refund, when under the SPA it was permitted to appeal tax assessments and required to pay the expenses of those appeals. Sierra argues that the Debtors' interpretation defeats the intentions of the parties to the contract and would bestow a windfall on the Debtors. Thus, it argues, the interpretation may not be entertained by the Court. Hartford Fire Ins. Co. v. Novocargo USA, Inc., 257 F.Supp.2d 665, 675 (S.D.N.Y.2003); Price v. Price, 69 N.Y.2d 8, 511 N.Y.S.2d 219, 503 N.E.2d 684, 689 n. 3 (1986).
The Court agrees with Sierra that the Debtors' interpretation of the SPA leads to an absurd result. There is no express provision of the SPA which states categorically that Sierra is not entitled to recover the overpayment. Although Article VIII does not specifically provide that the Debtors must repay Sierra for any overpayment of taxes it makes, the Court concludes that the lack of such a provision is irrelevant. The SPA provided that Sierra was only to be liable for actual taxes due for tax years prior to 1996 and that the Debtors would be liable for tax years after 1996.[3] (SPA at § 8.01(a) & (b).) It provided that the party who was liable for the tax also had the right to control any audit or appeal of those taxes and the corresponding obligation to pay for the expenses of that audit or appeal. (Id. at § 8.03.) To conclude that the party who paid the expenses and had the right to control the appeal did not have the right to the fruits of that appeal is illogical.
The SPA also does not provide that if the Debtors paid more than they agreed for the stock they were purchasing (because of a mathematical or bank error for example), they would be entitled to recover the overpayment. Yet the Debtors surely would not concede that they would not be entitled to recover such an overpayment. An express "indemnification" provision is not necessary for a party to recover payments *444 made that exceed its obligation under a contract.
The Telemundo Group, Inc. v. Alden Press, Inc., 181 A.D.2d 453, 580 N.Y.S.2d 999 (N.Y.App.Div.1992) case is on point. In that case, Telemundo and Alden Holdings, Inc. had executed a stock purchase agreement which provided for a reduction of the purchase price for an anticipated tax refund. However, the contract did not expressly state that the tax refund was to be paid to the seller. The tax refund was received after closing and kept by the buyer. The seller sued for breach of contract, conversion and unjust enrichment. The lower court granted summary judgment in favor of the buyer, finding no provision of the contract required the payment of the tax refund to the seller. The appellate court reversed, concluding that the lack of a specific provision in the contract did not preclude the seller from asserting its entitlement to the tax overpayment. See also, Payne v. Witherbee, Sherman & Co., 132 A.D. 579, 117 N.Y.S. 15 (1909) (holding that overpayments made by mistake cannot be retained in the absence of proof of prejudice).
The logical interpretation of the SPA mandates that, if any party paid more than it was obligated to pay under that agreement, that party would be able to recover the overpayment. The Debtors acknowledge that the tax assessment paid by Sierra was more than what was owed to Massachusetts and, therefore, more than Sierra's obligation under the SPA. Therefore, the Court concludes that Count I of the Debtors' Counterclaims must be dismissed.
2. Lack of Consideration for Assignment
The Debtors also assert that the Assignment is void for lack of consideration. Therefore, they argue that Sierra cannot assert any claims based on it. The Assignment was executed more than three years after Sierra had paid the tax assessment. Further, the Debtors argue that the payment by Sierra simply fulfilled its indemnification obligation to the Debtors under the SPA. Consequently, the Debtors argue that Sierra cannot rely on consideration given for the SPA to support the Assignment.
Sierra disagrees. It argues that the Assignment was a written assignment, governed by New York law which states: "An assignment shall not be denied the effect of irrevocably transferring the assignors' rights because of the absence of consideration, if such assignment is in writing and signed by the assignor, or by his agent." N.Y. Gen. Oblig. Law § 5-1107. See also Whalen v. Gerzof, 206 A.D.2d 688, 615 N.Y.S.2d 465, 467 (N.Y.App.Div.1994) (denying an argument based on lack of consideration because section 5-1107 applied).
The Debtors admit that, if section 5-1107 applies, the grant to Sierra of the rights to the Refund without consideration would be enforceable. However, they argue that section 5-1105 applies rather than section 5-1107. This is so because the Assignment was not without consideration but was purportedly based on past consideration. Section 5-1105 provides:
A promise in writing and signed by the promisor or by his agent shall not be denied effect as a valid contractual obligation on the ground that consideration for the promise is past or executed, if the consideration is expressed in the writing and is proved to have been given or performed and would be a valid consideration but for the time when it was given or performed.
N.Y. Gen. Oblig. Law § 5-1105.
Sierra asserts that it is also entitled to recover the Refund under section 5-1105. *445 It asserts that past consideration can be found in its authorization of the payment of the taxes to Massachusetts from the escrow account.
The Debtors argue that under section 5-1105 Sierra must establish that past consideration was given which would be adequate but for the time when it was given. The Debtors argue that the alleged past consideration, the release of the escrow funds, is not sufficient because Sierra had an existing obligation under the SPA to release those funds. Therefore, the Debtors argue that the Assignment was not supported by adequate consideration because the alleged consideration was for the SPA, not the Assignment.
The Court concludes that the Debtors' arguments are without merit. Under New York law, section 5-1107 applies to the Assignment because it is more specific than section 5-1105. Eagle Comtronics, Inc. v. Northeast Filter Co., 1991 U.S. Dist. LEXIS 16965 *13, n. 5, 1991 WL 247551 *8, n. 5 (N.D.N.Y. Nov. 22, 1991). The Assignment was in writing and is, therefore, valid regardless of whether any consideration was given. N.Y. Gen. Oblig. Law § 5-1107. Consequently, the Court will grant the motion to dismiss as to Count II of the Debtors' Counterclaim.
3. Fraudulent Transfer under New York Law
The Debtors also assert that the transfer of the right to the Refund under the Assignment is avoidable under New York law as a fraudulent conveyance. 11 U.S.C. § 544; N.Y. Debt. & Cred. Law § 278. They allege that at the time of the Assignment, (1) the Debtors were already indebted to other creditors, (2) the Assignment was executed by the Debtors with the specific intent to hinder and delay other creditors' rights, (3) the Assignment was not disclosed to any other parties, and (4) the Debtors had unreasonably small capital remaining and incurred or intended to incur debts beyond what they could pay.
In addition, the Debtors argue that Sierra's prior release of the escrow funds does not constitute reasonably equivalent value for the Assignment, because it is not even valid consideration. See, e.g., Palmer v. Safe Auto Sales, Inc., 114 Misc.2d 964, 452 N.Y.S.2d 995, 996 (N.Y.Civ.Ct.1982) (holding that pre-existing duties cannot be consideration); Cronk v. State, 100 Misc.2d 680, 420 N.Y.S.2d 113, 117 (N.Y.Ct.Cl.1979) (finding that consideration was not present where promises exchanged were for performance of pre-existing legal duties).
Sierra responds that the Assignment merely confirmed its rights under the SPA. Thus, the Assignment was due to Sierra under an existing obligation of the Debtors (an antecedent debt). Therefore, Sierra argues, the Assignment does not constitute an avoidable fraudulent transfer. N.Y. Debt. & Cred. Law §§ 272 & 273 (defining fair consideration to include satisfaction of an antecedent debt). See also Rubin v. Mfrs. Hanover Trust Co., 661 F.2d 979, 991 (2d Cir.1981) (holding that discharging or securing an antecedent debt of substantially equivalent value does not give creditors a basis for a fraudulent conveyance action).
The Debtors counter that Sierra's release of escrow funds was required by section 8.01 of the SPA and thus was not a voluntary act. Because it was not voluntary, the Debtors argue, it cannot constitute consideration for the Debtors' assignment of the Refund.
Sierra responds that the amount it paid was more than it was required to pay under the SPA. The original assessment by Massachusetts was $3,320,249, which was paid by Sierra. The parties ultimately *446 agreed that only $1,382,646 was in fact due (meaning that Sierra had overpaid $1,937,603). Sierra argues that the excess payment is fair consideration for the Assignment.
The Court agrees with Sierra. The Assignment gave Sierra the right to any tax refund due as a result of Sierra's payment of taxes. If a tax refund was due to the Debtors from Massachusetts, it was only because (and in the amount) of the overpayment made by Sierra. The SPA required that Sierra pay taxes actually due by the Debtors, not pay more. Therefore, Sierra provided reasonably equivalent value for the Assignment by overpaying the taxes due by the Debtors. This Count of the Debtors' Counterclaims will also be dismissed.
4. Objection to Sierra's Claim
The Debtors assert two objections to Sierra's secured claim. First, the Debtors argue that the Assignment is unenforceable because it was a fraudulent conveyance, and Sierra, therefore, has no claim. As discussed in Part 3 above, however, the Debtors cannot establish that the Assignment was a fraudulent conveyance. Therefore, they have stated no valid basis to object to Sierra's claim.
The Debtors also argue that Sierra's claim is unsecured because the transaction between the parties constituted an unsecured loan and the SPA did not grant Sierra a security or other interest in the Refund. Thus, they request that Sierra's claim be reclassified as unsecured.
Sierra disagrees. It argues that nothing in the documents indicates an intention to treat the tax payment made by Sierra as an unsecured loan. Instead, Sierra argues that the payment remained its property until the tax owed to Massachusetts was finally determined. It did not intend that payment to be a loan to the Debtors. Rather, the payment was made in order to allow Sierra to protest the amount of the tax.
The Court agrees with Sierra. Neither the language of the SPA or the Assignment supports a finding that the payment of the taxes was intended as a loan. In fact, the Assignment expressly states that the payment was not property of the Debtors and any refund was to be held by the Debtors for Sierra:
The Claim Amount, or any portion thereof, will not constitute property of the [Debtors], and therefore must either be returned to the Escrow Agent for disbursement in accordance with the terms of the Cash Escrow Agreement or paid over to [Sierra]. . . . If, despite the intent of the parties, any right to a refund, in whole or in part, resulting from the payment and challenge to the Tax Assessment has not been effectively assigned and transferred to [Sierra], but remains with the [Debtors], then the [Debtors] intend to receive and hold in trust for the benefit of [Sierra] the whole or any portion of a refund received by the [Debtors] and to disburse the same as provided herein.
(Assignment at p. 2.)
Although the Debtors might have had legal title to the Refund, equitable title rested in Sierra. 11 U.S.C. § 541(d). Thus, Counts IV and VI of the Debtors' Counterclaims which seek the disallowance or reclassification of Sierra's claim as unsecured will be dismissed.
5. Equitable Subordination
The Debtors also seek equitable subordination of Sierra's claim. A court may subordinate a claim where: (1) the claimant engaged in some inequitable conduct; (2) the claimant realized an unfair advantage by doing so, and other creditors *447 were injured as a result of the misconduct; and (3) the subordination of the claim is in harmony with other provisions of the Bankruptcy Code. See, e.g., Citicorp Venture Capital Ltd. v. Comm. of Creditors Holding Unsecured Claims, 323 F.3d 228, 233-34 (3d Cir.2003); Bank of N.Y. v. Epic Resorts Palm Springs Marquis Villas, LLC (In re Epic Capital Corp.), 307 B.R. 767, 772 (D.Del.2004).
Where equitable subordination is requested against a non-insider creditor, the plaintiff's burden is heavier. Epic Capital, 307 B.R. at 772. It must allege "a more egregious level of misconduct" to satisfy the first prong of the test. Century Glove, Inc. v. Iselin (In re Century Glove, Inc.), 151 B.R. 327, 333 (Bankr.D.Del.1993). It must do so with particularity. Bank of N.Y. v. Epic Resorts-Palm Springs Marquis Villas (In re Epic Capital Corp.), 290 B.R. 514, 524 (Bankr.D.Del.2003). Fraud, spoliation, over-reaching, breach of fiduciary duties, undercapitalization, and the claimant's use of the debtors as a mere instrumentality are examples of egregious misconduct. See, e.g., Waslow v. MNC Commercial Corp. (In re Paolella), 161 B.R. 107, 118 (E.D.Pa.1993) (citations omitted); Aluminum Mills Corp. v. Citicorp N. Am., Inc. (In re Aluminum Mills Corp.), 132 B.R. 869, 896 (Bankr.N.D.Ill.1991); Epic Capital, 290 B.R. at 524.
Sierra argues that because it is neither an insider nor a fiduciary, the Debtors must show that it engaged in egregious inequitable conduct. Sierra alleges that the Debtors have not sufficiently alleged egregious conduct and thus have not stated a claim for equitable subordination.
The Debtors disagree. They argue that Sierra collaborated with the Debtors on the eve of their insolvency to enter the Assignment without any consideration given to the Debtors. The Debtors assert that by these actions, Sierra engaged in fraud. Their Counterclaims provide details of the circumstances of negotiating the Assignment, including allegations of fraudulent behavior.
The Court concludes that the Debtors have pled sufficient facts to put Sierra on notice of the alleged fraudulent conduct underlying the claim for equitable subordination. This suffices to pled a claim for equitable subordination against a non-insider. Epic Capital, 290 B.R. at 524. Therefore, Count V of the Debtors' Counterclaims will not be dismissed.
C. Lenders' Counterclaims
To the extent the Lenders' Counterclaims duplicate the Debtors', the Court makes the same rulings as above. The Lenders have asserted additional Counterclaims which are premised on their assertion that they have a perfected security interest in the Refund which has priority over Sierra's interest. The Lenders security interest was granted in March 1998, before the Assignment from the Debtors to Sierra in April 2002. Additionally, the Lenders assert that their security interest was confirmed (and given priority) by the Cash Collateral Order.
1. Entitlement to Constructive Trust
The Lenders assert in Count VII of their Counterclaims that Sierra is not entitled to a constructive trust because it cannot meet the four elements imposed by New York law: (1) a confidential or fiduciary relationship; (2) a promise made; (3) a transfer in reliance thereon; and (4) unjust enrichment. Sharp v. Kosmalski, 40 N.Y.2d 119, 123, 386 N.Y.S.2d 72, 351 N.E.2d 721 (N.Y.1976). The Lenders further argue that this Court may not make a finding of constructive trust because the Court would have to go outside the bounds of the Counterclaims to find the facts necessary *448 to impose a constructive trust, which the Court may not do in a motion to dismiss.
Sierra responds that it need not prove its right to a constructive trust in order to prevail on the Motion. It need only allege facts in its Complaint sufficient to support its claim to a constructive trust.
The Court agrees with Sierra. Arguments concerning whether a constructive trust should be imposed are properly brought as a defense to Sierra's Complaint (the Lenders did so in their affirmative defenses), or through a motion to dismiss Sierra's Complaint.
2. Avoidance of Constructive Trust
The Lenders assert in Count IX of their Counterclaims that any constructive trust in favor of Sierra would be avoidable by the Debtors under the strong arm powers of section 544(a)(1) of the Code. See e.g., Mullins v. Burtch (In re Paul J. Paradise Assocs.), 249 B.R. 360, 367 (D.Del.2000) (holding that section 544(a)(3) may be used to avoid a constructive trust); Loewen Group Int'l, Inc., 292 B.R. 522, 527 (Bankr.D.Del.2003) (applying Paradise to avoid a constructive trust).
Sierra disagrees. It argues that the Debtors may not avoid its constructive trust because the Refund was never part of the Debtors' estate. See, e.g., In re Columbia Gas Sys., Inc., 997 F.2d 1039, 1054, 1059 (3d Cir.1993). Sierra asserts that the Debtors do not hold legal or equitable title to the Refund. Even if the Debtors did hold legal title, Sierra contends that neither the Debtors nor the Lenders can avoid the assignment of the Refund under the strong arm powers of section 544. Sierra asserts that Paradise is distinguishable because it relied on section 544(a)(3) which applies to the avoidance of an unperfected lien on real estate.[4] The instant case implicates section 544(a)(1), which relates to avoidance of a constructive trust on personal property.
Courts disagree whether section 544 may be used to avoid a constructive trust on personal property. See, e.g., Mayer v. United States (In re Reasonover), 236 B.R. 219, 227 (Bankr.E.D.Va.1999) (discussing the split of authority over whether section 544 is trumped by section 541(d), which provides that property in which the debtor holds only legal, not equitable, title is not property of the estate). Compare City Nat'l Bank of Miami v. Gen. Coffee Corp. (In re Gen. Coffee Corp.), 828 F.2d 699 (11th Cir.1987) (holding that section 544 may not be used to avoid a constructive trust); Vineyard v. McKenzie (In re Quality Holstein Leasing), 752 F.2d 1009 (5th Cir.1985) (same) with Belisle v. Plunkett, 877 F.2d 512 (7th Cir.1989) (allowing section 544 to be used to avoid a constructive trust); Elliott v. Frontier Props. (In re Lewis W. Shurtleff, Inc.), 778 F.2d 1416 (9th Cir.1985) (same); Turoff v. Sheets (In re Sheets), 277 B.R. 298 (Bankr.N.D.Tex.2002) (same); Bank of Alex Brown v. Goldberg (In re Goldberg), 158 B.R. 188 (Bankr.E.D.Cal.1993) (addressing avoidance of proceeds held in a constructive trust).
However, the law in this Circuit is clear. The Third Circuit held in Universal Bonding Ins. Co. v. Gittens & Sprinkle Enters., Inc., 960 F.2d 366, 372 n. 2 (3d Cir.1992), that "Section 541(d)'s limitation on the scope of the bankruptcy estate prevails over the trustee's strong-arm powers under section 544 of the Code." As this Court explained in In re DVI, Inc.:
While the status of a hypothetical lien creditor as of the petition date may create a lien in real property, it does not *449 automatically create a lien in personal property. . . . Therefore, it would not be superior to a constructive trust claim on personal property. Even if the Debtors did obtain a lien on personal property under section 544(a)(1) or (2), that lien would arise only as of the petition date. Since the constructive trust arises when the wrong occurs . . . it is superior to the Debtors' rights because it is first in time.
306 B.R. 496, 503 (Bankr.D.Del.2004). Therefore, under existing precedent, a constructive trust in personal property cannot be avoided under section 544(a)(1). Id.
The question of whether Sierra's interest in the Refund can be avoided turns on whether a trust can be established. Because the Court reserved this question above, the determination of the avoidance issue will be reserved until trial. The Court notes, however, that should a constructive trust be established, the Debtors could not avoid such a trust because it is imposed on personal property, not real estate. As a result, the Court will not dismiss Counts VII and IX of the Lenders' Counterclaims.
3. Superior Security Interest
In Count VIII of the Lenders' Counterclaims, they seek a declaratory judgment that their interest in the Refund is superior to any interest Sierra could assert. They assert that their security interest was granted in March 1998 before Sierra received an Assignment of the Refund and was confirmed in the Cash Collateral Order.
Sierra seeks to dismiss this claim arguing that the Lenders had no interest in the Refund because the Debtors never had an interest in the Refund. Sierra asserts that the Assignment merely confirmed the right which Sierra has under the SPA to any overpayment of taxes made by it. Thus, Sierra argues that the Lenders' security interest never attached to the Refund. N.Y.U.C.C. Law § 9-203(b)(2).
Further, Sierra argues that the Lenders were not given a superior interest in the Refund by their Security Agreement because it expressly excluded any property of the Debtors that was otherwise encumbered. Sierra asserts that the Cash Collateral Order could not give the Lenders any interest in the Refund because the Debtors had no rights in the Refund. (Sierra also notes that the Cash Collateral Order did not grant the Lenders any interest in avoidance actions.)
The Lenders argue, in response, that the Debtors received the escrow funds from Sierra and held them in a bank account for ten days before transferring them to Massachusetts. This was sufficient, the Lenders assert, for their security interest to attach. See, e.g., Young v. Farmingdale Food Market, Inc. (In re Lasercad Reprographics, Ltd.), 106 B.R. 793, 798 (Bankr.S.D.N.Y.1989) (finding that title passes, and a security interest can attach, only when the funds are transferred out of escrow); Hassett v. Blue Cross & Blue Shield of Greater N.Y. (In re O.P.M. Leasing Servs., Inc.), 46 B.R. 661, 666-67 (Bankr.S.D.N.Y.1985) (holding that delivery of money from an escrow account divests the grantor of rights to the escrowed money).
Sierra disagrees. It asserts that the Lenders could not get a security interest in cash held in a bank account under Article 9 of the Uniform Commercial Code in effect at the time. See N.Y.U.C.C. Law § 9-104(1) (2000) (repealed 2001); In re Interstate Dept. Stores, Inc., 128 B.R. 703, 705 (Bankr.N.D.N.Y.1991) (section 9-104 excepts from the reach of Article 9 the transfer of an interest in any deposit account); In re O.P.M. Leasing, 46 B.R. at *450 670 (holding that a security interest in money is perfected by possession).
Sierra further argues that, even if Article 9 was applicable, the Debtors' possession was too limited to constitute control. Evergreen Marine Corp. v. Six Consignments of Frozen Scallops, 4 F.3d 90, 98 (1st Cir.1993) (holding that "mere possession" of a bailee does not amount to "rights in collateral" to which a security interest can attach); Eastman Kodak Co. v. Harrison (In re Sitkin Smelting & Ref., Inc.), 639 F.2d 1213, 1215-17 (5th Cir.1981) (distinguishing bailments as possessory from actual rights in the collateral and holding that a bailment is insufficient to create rights in the collateral).
Alternatively, the Lenders contend that their security interest extends to proceeds, and the Refund qualifies as a proceed. Sierra also disputes this point, arguing that in order for collateral to qualify as a proceed, it must flow from the Debtors' property. It argues that the Refund flowed from Sierra's property, not the Debtors. Furthermore, Sierra asserts that in order for proceeds to be covered by a security interest, the underlying collateral must be acquired by a debtor before the commencement of the bankruptcy proceeding. See, e.g., Northeastern Copy Servs., Inc. v. Bridgeport Park Assocs. (In re Northeastern Copy Servs., Inc.), 175 B.R. 580, 583 (Bankr.E.D.Pa.1994) (holding that a pre-bankruptcy perfected security interest in proceeds will only apply post-petition if the debtor had rights in the collateral pre-petition and the property fits within the relevant state law definition of proceeds). Sierra reasons that because Massachusetts did not determine the amount of the Refund prior to the petition date, the Debtors acquired an interest in the Refund post-petition. In re Gross-Feibel Co., 21 B.R. 648, 650 (Bankr.S.D.Ohio 1982) (holding that for a security interest to attach to a refund, "it must appear that debtor had a right to the refunds prior to the filing of the petition.") The Lenders argue, however, that the Cash Collateral Order gave them an interest in post-petition collateral, namely "all rights to payment including tax refund claims."
For the Lenders to assert a plausible claim for priority under New York law, they need to plead facts showing that the Debtors had an interest in the collateral to which their security interest could attach. N.Y.U.C.C. Law § 9-203. To determine if the Lenders have stated a claim, the Court must determine if the collateral could have been subject to the Security Agreement and whether the Debtors could have had an interest in the collateral. In doing so, the Court must accept as true the Lenders' factual allegations and any reasonable inferences that can be drawn from them. Langford, 235 F.3d at 847. To grant the Motion to Dismiss, there must be no set of facts on which the Lenders could get relief. Conley, 355 U.S. at 45-46, 78 S.Ct. 99.
The Court concludes that the Lenders cannot establish that their security interest is superior. As found above, the Assignment confirmed the parties' rights under the SPA: namely that the Debtors had no property interest in the Refund. Further, the Assignment states "the [Debtors] intend to receive and hold in trust for the benefit of [Sierra] the whole or any portion of a refund. . . ." (Assignment at p. 2 (emphasis added).) Whether this creates a trust or a bailment is irrelevant: under either form, the Debtors never had a right to the Refund. They may not pledge as collateral property in which they have no rights. Therefore, the Lenders' security interest did not attach and they cannot state a claim that their interest in the escrow funds has a higher priority than Sierra's. Consequently, the Court will *451 grant the Motion to Dismiss Count VIII of the Lenders' Counterclaims.
IV. CONCLUSION
For the reasons set forth above, the Court will grant the Motion to Dismiss Counts I, II, III, IV, and VI of the Debtors' Counterclaims and deny the Motion to Dismiss Count V. Further, the Court will deny the Motion to Dismiss Counts V, VII and IX of the Lenders' Counterclaims and grant the Motion to Dismiss Counts I, II, III, IV, VI and VIII.
An appropriate order is attached.
ORDER
AND NOW this 25th day of AUGUST, 2005, upon consideration of the Motions to Dismiss filed by Sierra Investments, LLC against SHC, Inc., the Committee of Unsecured Creditors, and Bank of America, N.A. as agent for the secured lenders, and the responses thereto, and as set forth in the accompanying Memorandum Opinion, it is hereby
ORDERED that the Motion to Dismiss Counts I, II, III, IV, and VI of the Counterclaims of the Debtors and the Committee is GRANTED, and it is further
ORDERED that the Motion to Dismiss Count V is DENIED, and it is further
ORDERED that the Motion to Dismiss Counts I, II, III, IV, VI, and VIII of the Counterclaims of Bank of America is GRANTED, and it is further
ORDERED that the Motion to Dismiss Counts VII and IX is DENIED.
NOTES
[1] This Opinion constitutes the findings of fact and conclusions of law of the Court pursuant to Federal Rule of Bankruptcy Procedure 7052.
[2] Sierra argues that "indemnify" is not an ambiguous term, it means to compensate or reimburse. Black's Law Dictionary 772 (7th ed.1999).
[3] The parties agreed to allocate the taxes for 1996 with Sierra being liable for taxes before September 30 and the Debtors being liable for taxes after that date. (SPA at § 8.02.) Because the SPA was executed prior to that date, the SPA specifically provided that Sierra would get any tax refund for taxes through September 30, 1996. (Id. at § 8.01(a).) This does not mean, however, that it would not be entitled to tax refunds for any prior year for which it was liable.
[4] Similarly, Loewen dealt with section 544(a)(3), not section (a)(1). 292 B.R. at 527.
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Filed 6/21/16 P. v. Meade CA4/3
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 THREE
THE PEOPLE,
Plaintiff and Respondent, G051923
v. (Super. Ct. No. 14HF1120)
DAVID JOHN MEADE, OPINION
Defendant and Appellant.
Appeal from a judgment of the Superior Court of Orange County, Michael
J. Cassidy, Judge. Affirmed.
Richard L. Fitzer, under appointment by the Court of Appeal, for Defendant
and Appellant.
Kamala D. Harris, Attorney General, Gerald A. Engler, Chief Assistant
Attorney General, Julie L. Garland, Assistant Attorney General, Barry Carlton and
Christopher P. Beesley, Deputy Attorneys General, for Plaintiff and Respondent.
David John Meade appeals from a judgment after a jury convicted him of
driving under the influence of alcohol with three or more priors and driving with a blood
alcohol level of 0.08 percent or higher with three or more priors. Meade argues
insufficient evidence supports his convictions. We disagree and affirm the judgment.
FACTS
One evening, Meade entered a Ralph’s grocery store where he took chicken
and a 750 milliliter bottle of vodka and consumed them in the bathroom. Brandon Roth,
a store employee who found the remnants and assumed Meade was homeless and living
in his car, did not call the police.
The next evening, Roth went to retrieve shopping carts from the parking lot
and saw Meade in his car. About an hour later, around 9:56 p.m., Roth saw Meade drive
through an empty parking lot for about 20 seconds, cutting through the stalls, traveling
about 20 or 30 yards and park. Roth did not see Meade consume alcohol in his car and
Meade did not drive erratically. Roth went back inside the store when his break ended at
10:09 p.m.
1
About 10:34 p.m., Meade entered the store and went to the floral section.
When Roth approached Meade, he asked Roth where the phone chargers were located.
After Roth assisted Meade, Roth left to help another customer. Meade went to the
alcohol aisle and a couple minutes later, he left the store with a white bag in his hand.
Roth, concerned Meade stole a phone charger, alerted the manager Stephanie Meyer, who
called the police and told them what Roth had observed. Roth later found a phone
charger in the floral section.
Within minutes, deputy sheriffs Rodney Elcock and Mihaela Mihai arrived
and saw a car parked improperly in the parking spot, which suggested to Mihai possible
intoxication. Meade was sitting in the driver’s seat with the engine off and the keys in his
1
Video surveillance of Roth’s movements in the store were played for the
jury.
2
pocket. Mihai detected a strong or moderate smell of alcohol coming from Meade, his
speech was slow and slurred, and his eyes were watery and glossy. When Mihai learned
Roth saw Meade drive his car and was willing to be a witness, sheriffs shifted their
investigation to drunk driving. Throughout the investigation, Meade maintained a
consistent level of intoxication, admitted to drinking alcohol hours earlier at a sports bar,
denied drinking in the hour before police contacted him, and blew a 0.217 on the
Breathalyzer.
Elcock had Roth sign a private citizen’s arrest form and sheriffs arrested
Meade. Sheriffs did not find any alcohol containers in or near Meade’s car.
At 12:52 a.m., Meade provided a blood sample indicating his blood alcohol level was
0.263, which based on Meade’s weight would require 14 to 15 drinks.
An information charged Meade with the following: driving under the
influence of alcohol with three or more priors (Veh. Code, § 23152, subd. (a), all further
statutory references are to the Veh. Code, unless otherwise indicated) (count 1); driving
with blood alcohol level of 0.08 percent or higher with three or more priors (§ 23152,
subd. (b)) (count 2); and misdemeanor driving with a suspended license with a prior
(§ 14601.2, subd. (a)) (count 3). The information alleged Meade had a blood alcohol
level of .20 percent or higher. The information also alleged there were three prior drunk
driving convictions. On the prosecution’s motion, the trial court dismissed count 3.
At trial, Roth testified that although he detected a “funk” coming from
Meade when they were in the store that he attributed to his possible homelessness, Meade
did not smell of alcohol and he did not appear to be intoxicated. He also testified that
during later interviews with Mihai and a deputy district attorney, he never said Meade
appeared intoxicated. He also said his memory of the events was fresher when they
happened. Meyer testified that when Roth told her that he suspected Meade stole
something, Roth also said Meade smelled of alcohol.
3
The jury convicted Meade of both counts but found untrue he had a blood
2
alcohol level of .20 percent or higher. Meade admitted he suffered three prior drunk
driving convictions. After the trial court denied his new trial motion, the court suspended
imposition of sentence on count 1 and placed him on formal probation for five years with
credits for time served. The court stayed the sentence on count 2 pursuant to Penal Code
section 654.
DISCUSSION
Meade argues there was insufficient evidence to establish he was
intoxicated while driving his car because the only witness who saw him drive, Roth,
testified he did not drive erratically and did not smell of alcohol or appear to be
intoxicated just 30 minutes later. We disagree.
When addressing a challenge to the sufficiency of the evidence, we view
the record in the light most favorable to the conviction and presume the existence of
every fact in support of the conviction that the trier of fact could reasonably infer from
the evidence. (People v. Maury (2003) 30 Cal.4th 342, 396.) “Reversal is not warranted
unless it appears ‘“that upon no hypothesis whatever is there sufficient substantial
evidence to support [the conviction].” [Citation.]’ [Citation.]” (People v. Duran (2002)
97 Cal.App.4th 1448, 1457 (Duran).)
Section 23152, subdivision (a), prohibits a person from operating a vehicle
if the person’s ability to operate the vehicle has been impaired by alcohol. Section
23152, subdivision (b), prohibits a person from driving with a blood alcohol level of
.08 percent or higher.
2
The trial court instructed the jury with a statutory presumption that
permitted it to conclude Meade’s blood alcohol level was over the legal limit at the time
of the offense if a chemical test revealed his blood alcohol level was 0.08 percent or more
within three hours of driving.
4
Here, based on the entire record, the jury could reasonably conclude Meade
was under the influence of alcohol, with a blood alcohol level of 0.08 or higher, when he
drove his vehicle. Roth saw Meade drive across the parking lot, through stalls, and park
askew in a parking spot. About 30 minutes later, Roth interacted with Meade and when
Roth became suspicious Meade stole a charger, he reported his suspicions to Meyer,
including that Meade smelled of alcohol. Less than one hour after Roth saw Meade
drive, Mihai concluded Meade was intoxicated based on the fact he smelled of alcohol,
he slurred his speech, his eyes were glossy, and he parked his car improperly.
Additionally, about three hours after Roth saw Meade drive his car,
Meade’s blood alcohol level was 0.263. Sheriffs found no evidence in or near his car to
suggest he had been drinking in his car from the time he drove to the time sheriffs
arrived. Meade would have had to drink about 14 to 15 drinks to achieve that level of
intoxication, and the jury would have had to believe he drank nearly all that in less than
one hour.
Meade cites to the following facts to support his contention insufficient
evidence supports the conclusion he was intoxicated when he drove: Roth testified he did
not see him drive erratically; Roth testified that less than 30 minutes after he drove,
Meade did not smell of alcohol or appear intoxicated; Meade could have stolen alcohol in
the white bag and he could have become intoxicated after he drove; Roth testified that at
subsequent interviews he never stated Meade appeared intoxicated; and the
prosecution/Mihai did not produce the citizen’s arrest form. Additionally, Meade asks
the court to watch the video surveillance, which shows him steady on his feet.
In conjunction with our review of the record, we have watched the video
surveillance. Essentially, what Meade asks us to do is reweigh the evidence and
substitute our judgment for that of the jury’s. As Meade knows, we cannot do that.
(Duran, supra, 97 Cal.App.4th at p. 1457.) Certainly, Meade is a heavy drinker and
could have consumed a large amount of alcohol in a short period of time. But it was
5
reasonable for the jury to conclude that based on the amount of alcohol Meade had drank,
in the amount of time he had to drink it, and the lack of evidence he drank in his car, he
was intoxicated when he drove. Thus, there was sufficient evidence supporting Meade’s
convictions.
DISPOSITION
The judgment is affirmed.
O’LEARY, P. J.
WE CONCUR:
BEDSWORTH, J.
THOMPSON, J.
6
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979 F.2d 1534
Bassingthwaightev.McDermott Int'l*
NO. 92-4099
United States Court of Appeals,Fifth Circuit.
Nov 19, 1992
1
Appeal From: E.D.Tex.
2
DISMISSED.
*
Fed.R.App.P. 34(a): 5th Cir.R. 34.2
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500 F.2d 1400
U. S.v.Bono
74-1159
UNITED STATES COURT OF APPEALS Third Circuit
8/9/74
1
E.D.Pa.
AFFIRMED
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188 U.S. 410 (1903)
CUMMINGS
v.
CHICAGO.
No. 136.
Supreme Court of United States.
Submitted December 19, 1902.
Decided February 23, 1903.
APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS.
*418 Mr. S.A. Lynde and Mr. Warren B. Wilson for appellants.
Mr. Charles M. Walker and Mr. Henry Schofield for appellees.
*425 MR. JUSTICE HARLAN, after making the foregoing statement, delivered the opinion of the court.
1. We hold that the Circuit Court had jurisdiction in this case. That the parties, plaintiffs and defendant, are citizens of the same State is not sufficient to defeat the jurisdiction; for by the act of March 3, 1887, c. 373, as corrected by the act of *426 August 13, 1888, c. 866, the Circuit Courts have jurisdiction, without reference to the citizenship of the parties, of suits at common law or in equity arising under the Constitution or laws of the United States. 24 Stat. 552; 25 Stat. 434. The present suit does arise under the Constitution and laws of the United States, because the plaintiffs base their right to construct the dock in question upon the Constitution of the United States, as well as upon certain acts of Congress and the permit (so-called) of the Secretary of War which legislative enactments and action of the Secretary of War were, it is alleged, in execution of the power of Congress under the Constitution over the navigable waters of the United States. Clearly, such a suit is one arising under the Constitution and laws of the United States. That it is a suit of that character appears from the bill itself. The allegations which set forth a Federal right were necessary in order to set forth the plaintiffs' cause of action.
2. The appeal was properly taken directly to this court, since by the act of March 3, 1891, c. 517, this court has jurisdiction to review the judgment of the Circuit Court in any case involving the construction or application of the Constitution of the United States. 26 Stat. 834. The present case belongs to that class; for it involves the consideration of questions relating to the power of Congress, under the Constitution, over the navigable waters of the United States.
3. We come now to the merits of the suit as disclosed by the bill. The general proposition upon which the plaintiffs base their right to relief is that the United States, by the acts of Congress referred to and by what has been done under those acts, has taken "possession" of Calumet River, and so far as the erection in that river of structures such as bridges, docks, piers and the like is concerned, no jurisdiction or authority whatever remains with the local authorities. In a sense, but only in a limited sense, the United States has taken possession of Calumet River, by improving it, by causing it to be surveyed, and by establishing lines beyond which no dock or other structure shall be erected in the river without the approval or consent of the Secretary of War, to whom has been *427 committed the determination of such questions. But Congress has not passed any act under which parties, having simply the consent of the Secretary, may erect structures in Calumet River without reference to the wishes of the State of Illinois on the subject. We say the State of Illinois, because it must be assumed, under the allegations of the bill, that the ordinances of the city of Chicago making the approval of its Department of Public Works a condition precedent to the right of any one to erect structures in navigable waters within its limits, are consistent with the constitution and laws of that State and were passed under authority conferred on the city by the State.
Calumet River, it must be remembered, is entirely within the limits of Illinois, and the authority of the State over it is plenary, subject only to such action as Congress may take in execution of its power under the Constitution to regulate commerce among the several States. That authority has been exercised by the State ever since it was admitted into the Union upon an equal footing with the original States.
In Escanaba Company v. Chicago, 107 U.S. 678, 683, the question was as to the validity of regulations made by the city of Chicago in reference to the closing, between certain hours of each day, of bridges across the Chicago River. Those regulations were alleged to be inconsistent with the power of Congress over interstate commerce. This court said: "The Chicago River and its branches must, therefore, be deemed navigable waters of the United States, over which Congress under its commercial power may exercise control to the extent necessary to protect, preserve, and improve their free navigation. But the States have full power to regulate within their limits matters of internal police, including in that general designation whatever will promote the peace, comfort, convenience, and prosperity of their people. This power embraces the construction of roads, canals, and bridges, and the establishment of ferries, and it can generally be exercised more wisely by the States than by a distant authority. They are the first to see the importance of such means of internal communication, and are more deeply concerned than others in their wise management. Illinois is more immediately affected by the bridges over the Chicago *428 River and its branches than any other State, and is more directly concerned for the prosperity of the city of Chicago, for the convenience and comfort of its inhabitants, and the growth of its commerce. And nowhere could the power to control the bridges in that city, their construction, form, and strength, and the size of their draws, and the manner and times of using them, be better vested than with the State, or the authorities of the city upon whom it has devolved that duty. When its power is exercised, so as to unnecessarily obstruct the navigation of the river or its branches, Congress may interfere and remove the obstruction. If the power of the State and that of the Federal Government come in conflict, the latter must control and the former yield. This necessarily follows from the position given by the Constitution to legislation in pursuance of it, as the supreme law of the land. But until Congress acts on the subject, the power of the State over bridges across its navigable streams is plenary. This doctrine has been recognized from the earliest period, and approved in repeated cases, the most notable of which are Willson v. The Blackbird Creek Marsh Co., 2 Pet. 245, decided in 1829, and Gilman v. Philadelphia, 3 Wall. 713, decided in 1865."
To the same effect is the recent decision in Lake Shore & Michigan Railway v. Ohio, 165 U.S. 365, 366, 368. See also Cardwell v. American Bridge Co., 113 U.S. 205, and Huse v. Glover, 119 U.S. 543.
Did Congress, in the execution of its power under the Constitution to regulate interstate commerce, intend by the legislation in question to supersede, for every purpose, the authority of Illinois over the erection of structures in navigable waters wholly within its limits? Did it intend to declare that the wishes of Illinois in respect of structures to be erected in such waters need not be regarded, and that the assent of the Secretary of War, proceeding under the above acts of Congress, was alone sufficient to authorize such structures?
These questions were substantially answered by this court in Lake Shore & Michigan Railway v. Ohio, above cited, decided in 1896. That case required a construction of the fifth and seventh sections of the River and Harbor Act of September 19, *429 1890, upon which sections the plaintiffs in this case partly rely. In that case this court said: "The contention is that the statute in question manifests the purpose of Congress to deprive the several States of all authority to control and regulate any and every structure over all navigable streams, although they be wholly situated within their territory. That full power resides in the States as to the erection of bridges and other works in navigable streams wholly within their jurisdiction, in the absence of the exercise by Congress of authority to the contrary, is conclusively determined. . . . The mere delegation to the Secretary of the right to determine whether a structure authorized by law has been so built as to impede commerce, and to direct, when reasonably necessary, its modification so as to remove such impediment, does not confer upon that officer power to give original authority to build bridges, nor does it presuppose that Congress conceived that it was loding in the Secretary power to that end. . . . The mere delegation of power to direct a change in lawful structures so as to cause them not to interfere with commerce cannot be construed as conferring on the officer named the right to determine when and where a bridge may be built." Referring to the seventh section of the act of 1890, the court said: "The language of the seventh section makes clearer the error of the interpretation relied on. The provision that it shall not be lawful to thereafter erect any bridge `in any navigable river or navigable waters of the United States, under any act of the legislative assembly of any State, until the location and plan of such bridge . . . have been submitted to and approved by the Secretary of War,' contemplated that the function of the Secretary should extend only to the form of future structures, since the act would not have provided for the future erection of bridges under state authority if its very purpose was to deny for the future all power in the States on the subject . .. The construction claimed for the statute is that its purpose was to deprive the States of all power as to every stream, even those wholly within their borders, whilst the very words of the statute, saying that its terms should not be construed as conferring on the States power to give authority to build bridges on streams not wholly within their limits, *430 by a negative pregnant with an affirmative, demonstrate that the object of the act was not to deprive the several States of the authority to consent to the erection of bridges over navigable waters wholly within their territory."
The decision in Lake Shore & Michigan Railway v. Ohio was rendered before the passage of the River and Harbor Act of 1899. But the tenth section of that act, upon which the permit of the Secretary of War was based, is not so worded as to compel the conclusion that Congress intended, by that section, to ignore altogether the wishes of Illinois in respect of structures in navigable waters that are wholly within its limits. We may assume that Congress was not unaware of the decision of the above case in 1896 and of the interpretation placed upon existing legislative enactments. If it had intended by the act of 1899 to assert the power to take under national control, for every purpose, and to the fullest possible extent, the erection of structures in the navigable waters of the United States that were wholly within the limits of the respective States, and to supersede entirely the authority which the States, in the absence of any action by Congress, have in such matters, such a radical departure from the previous policy of the Government would have been manifested by clear and explicit language. In the absence of such language it should not be assumed that any such departure was intended.
We do not overlook the long-settled principle that the power of Congress to regulate commerce among the States "is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations other than are prescribed in the Constitution." Gibbons v. Ogden, 9 Wheat. 1, 196; Brown v. Maryland, 12 Wheat. 419, 446; Brown v. Houston, 114 U.S. 630. But we will not at this time make any declaration of opinion as to the full scope of this power or as to the extent to which Congress may go in the matter of the erection, or authorizing the erection, of docks and like structures in navigable waters that are entirely within the territorial limits of the several States. Whether Congress may, against or without the expressed will of a State, give affirmative authority to private parties to erect structures in such waters, it is not necessary in *431 this case to decide. It is only necessary to say that the act of 1899 does not manifest the purpose of Congress to go to that extent under the power to regulate foreign and interstate commerce and thereby to supersede the original authority of the States. The effect of that act, reasonably interpreted, is to make the erection of a structure in a navigable river, within the limits of a State, depend upon the concurrent or joint assent of both the National Government and the state government. The Secretary of War, acting under the authority conferred by Congress, may assent to the erection by private parties of such a structure. Without such assent the structure cannot be erected by them. But under existing legislation they must, before proceeding under such an authority, obtain also the assent of the State acting by its constituted agencies.
For the reasons stated, the judgment of the Circuit Court is
Affirmed.
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173 F.3d 1192
99 Cal. Daily Op. Serv. 2623, 1999 DailyJournal D.A.R. 3397UNITED STATES of America, Plaintiff-Appellee,v.Gordon Paul COOPER, Defendant-Appellant.
No. 97-50296.
United States Court of Appeals,Ninth Circuit.
Argued and Submitted May 8, 1998.Decided April 9, 1999.
1
Roger S. Hanson, Santa Ana, California, for the defendant-appellant.
2
Melanie K. Pierson, Assistant United States Attorney, San Diego, California, for the plaintiff-appellee.
3
Appeal from the United States District Court for the Southern District of California; Judith N. Keep, District Judge, Presiding. D.C. No. CR-96-0804-JNK.
4
Before: CANBY and KLEINFELD, Circuit Judges, and PANNER, District Judge.*
PANNER, District Judge:
5
Gordon Paul Cooper appeals his convictions and sentence after a jury found him guilty of conspiracy, 18 U.S.C. § 371; aiding and abetting the unlawful disposal of sewage sludge, 33 U.S.C. §§ 1319(c)(2)(A) and 1342; and mail fraud, 18 U.S.C. § 1341. Cooper contends that he complied with federal regulations governing sewage sludge; that he cannot be criminally liable for violating a permit to which he was not a party; that the Clean Water Act is void for vagueness as applied; that the prosecution failed to disclose an exculpatory FBI report; that a government witness falsely testified that he had no agreement with the government; that the prosecutor committed misconduct during final argument; and that the district court improperly enhanced the sentence.
6
We affirm.
BACKGROUND
7
Cooper has been in the business of hauling sewage sludge for more than thirty years. In 1986, Cooper and Larry Vaughan incorporated Chino Corona Farms (CCF) in San Juan Capistrano, California. CCF transported, composted, and sold sewage sludge from several small cities.
8
Cooper was CCF's secretary-treasurer and Vaughan was its president. The district court described Cooper as the "nuts-and-bolts guy" who knew the business of handling sewage sludge, while Vaughan was the "bookkeeper partner" who stayed in CCF's office handling the finances.
9
The City of San Diego (the City) was shipping its raw sewage to a treatment site on Fiesta Island, where the sewage was partially dried but not composted. The City processed its sewage under a National Pollutant Discharge Elimination System (NPDES) permit issued by the California Regional Water Quality Board, San Diego Region (the Water Board). The NPDES permit required that the City "give prior written notice ... of any change(s) planned in the discharger's [i.e., the City's] sludge use or disposal practice." The NPDES permit also required that the City regularly report on its disposal of sewage sludge, describing the location, the rate of application in pounds per acre per year, and subsequent uses of the land.
10
In 1990, the City awarded CCF a contract to remove sewage sludge from Fiesta Island. CCF agreed to transport sewage sludge for about $20 per ton (later raised to about $24 at CCF's request) to Thermal, California, where CCF would compost the sludge. Because the City paid CCF by weight, the contract required that CCF submit weighmaster certificates (also called weigh or weight tickets) to verify the weight of sludge in each truckload. Weighmaster certificates are an official record of a truck's gross weight and the weight of its cargo. Valid weighmaster certificates are produced by a licensed scale and signed by the scale's operator. Cooper was convicted of mail fraud partly because CCF used false weighmaster certificates.
11
The contract required that CCF "obtain City approval to haul to the proposed site for which the required documentation has been submitted." CCF was required to submit bills of lading to show each truckload's ultimate destination. The contract did not refer to the City's NPDES permit.
12
CCF retained an attorney, James W. Anderson, who had experience on a Water Board, to determine whether CCF needed a permit to treat sewage sludge at its Thermal site. Anderson, who worked with Cooper, negotiated a memorandum of agreement with the governing Water Board. No permit was required. CCF voluntarily agreed to take precautions, such as building berms and drainage controls, to keep sewage sludge from entering surface or ground waters.
13
Soon after it began hauling for the City, CCF was overwhelmed by the volume of sewage sludge. CCF's site manager testified at trial that CCF received more sewage sludge each day at the Thermal site than it could compost in a month.
14
To prevent a further backlog of sewage sludge at the Thermal site, Cooper arranged to haul sludge directly from Fiesta Island to Mexicali, Mexico, without composting it at Thermal. In late spring 1992, after obtaining permission from authorities in Mexico, Cooper sought approval from the City and the Water Board. The City and Water Board accepted the Mexicali site because they decided they had no jurisdiction over it.
15
Cooper hired Manuel Mier, a citizen of Mexico, to supervise truckers hauling sludge from Fiesta Island to Mexicali. CCF paid Mier $500 a week plus expenses. Mier reported only to Cooper.
16
When CCF first hired a trucking company to haul sludge from Fiesta Island to its Thermal site, CCF paid by weight and required weighmaster certificates. According to Mier, however, that changed when CCF began hauling sludge to Mexicali. Mier testified that Cooper told him not to have the trucks weighed. Instead, Cooper instructed him to create phony weighmaster certificates using blank forms Cooper supplied. Mier was to write in a fabricated cargo weight so that the gross weight of the truck would be no more than 80,000 pounds, which Mier understood to be the maximum allowed by California law. Mier (or others who helped him) wrote in Mier's name and signature as the deputy weighmaster. Mier then used the false weighmaster certificates to prepare invoices for billing the City.
17
Mier also testified that he mailed or personally delivered completed weighmaster certificates and invoices to Cooper. Cooper testified that he often received envelopes from Mier, but never looked at the weighmaster certificates inside them.
18
In spring 1993, after Mexican authorities detained trucks carrying sewage sludge for CCF, Cooper decided that he needed a different site for sludge disposal. Cooper knew that in February 1993, effective February 1994, the United States Environmental Protection Agency (EPA) had issued new regulations governing the land application of sewage sludge. 40 C.F.R. Part 503. The new regulations provided that if sewage sludge met standards for pathogens, trace minerals, and "vector attraction" (i.e., attraction to rats or insects), the sludge could be applied directly to agricultural land as fertilizer with few restrictions. Cooper obtained an analysis of Fiesta Island sewage sludge, showing that the sludge met the new regulations' highest standards for sludge. Cooper concluded that the federal regulations authorized him to apply the sewage sludge directly to agricultural land.
19
For his new site, Cooper chose a farm owned by Jay Mason near Seeley, California, in Imperial County. Mason had purchased hundreds of tons of composted sludge from CCF's Thermal site. Cooper did not notify the City or the Water Board of his new site. Cooper testified that he did telephone the EPA's regional "sludge coordinator" about obtaining a permit for the Mason farm operation, and was told that no permit was required. There was no documentation or follow-up correspondence concerning Cooper's telephone call to the EPA.
20
The Planning Director for Imperial County, Urich Heuberger, testified that in spring 1993, CCF had asked about obtaining a conditional use permit for applying composted sewage sludge from CCF's Thermal site to certain agricultural land in the county. When Heuberger learned about the application of uncomposted sewage sludge at the Mason farm, he ordered CCF to stop applying sludge to county farm land without a permit.
21
By shipping sewage sludge directly from Fiesta Island to Mason's farm, CCF saved the expense of composting the sludge at the Thermal site, as well as the cost of shipping to and from Thermal. Cooper told Mason that rather than charge him for the sewage sludge, CCF would pay five dollars for each ton applied to his farm. Cooper assured Mason that he had permits for the sludge and that it was harmless.
22
Cooper arranged for trucks to leave Fiesta Island in the late afternoon so they arrived at the Mason farm during twilight. The sludge was immediately worked into the soil. Cooper testified that CCF hauled sludge at night to avoid traffic and to prevent sunlight from dissipating nitrogen.
23
During the several weeks in March and April 1993 that CCF shipped Fiesta Island sewage sludge to the Mason farm, Mier submitted weighmaster certificates to CCF indicating that the sludge was still being shipped to Mexicali. Mier testified that he did so under orders from Cooper. CCF sent the false weighmaster certificates to the City to support its invoices.
24
The owners of the two trucking companies that hauled sewage sludge for CCF to the Mason farm testified that Cooper paid them by the truckload, not by weight. Cooper did not ask them to weigh the truckloads. A foreman for one of the trucking companies testified that Cooper refused his offer to weigh trucks.
25
In late April 1993, acting on a tip from Russell Rodvold, the owner of a trucking company, city employees followed a truck hauling sewage sludge for CCF from Fiesta Island to the farm in Imperial County. When the City's auditors discovered that CCF had lied about the sludge's destination, they examined CCF's invoices and realized that the weighmaster certificates were false. The City Auditor found that out of about 1,500 weighmaster certificates submitted by CCF listing truckloads sent to Mexicali, about 425 truckloads, or 10,000 tons of sewage sludge, were dumped at the Mason farm.
26
When the City canceled its contract with CCF, Vaughan and others at CCF immediately blamed Cooper for the fiasco. A letter dated May 4, 1993, signed by Cooper and addressed to Vaughan, CCF's president, stated:Due to the problems with Contract # B1216/90 with the City of San Diego, problems which have arisen directly through my actions, I hereby tender my resignation as Director and officer of Chino-Corona Farms, Inc., a California corporation, efefective [sic] immediately.
27
I acknowledge that the decisions I made with regard to the diversion of wet biosolids material from the City of San Diego directly to agricultural users in Imperial [C]ounty were my own and done without the knowledge of the other directors or officers of Chino-Corona Farms, Inc.
28
At trial, Cooper testified that he did not write the letter and that its statements were false. He said that he signed the letter only because Vaughan told him the City would pay CCF about $566,000 for outstanding invoices if Cooper resigned. The letter did not save CCF. When the City wouldn't pay CCF, CCF couldn't pay what it owed the trucking companies, and it was forced out of business.
29
The FBI investigated CCF. During a search of CCF's offices pursuant to a warrant, an FBI agent, Jennifer Esposito, showed Cooper a copy of the City's NPDES permit. Esposito testified at trial that Cooper thumbed through the NPDES permit and appeared familiar with it, referring to it as a Water Board permit. Esposito testified that Cooper said "he was aware that Chino Corona Farms was required to report all sites where they dumped sludge taken from Fiesta Island to the Regional Water Quality Control Board and the City of San Diego."
30
When the case went to trial, Mier was one of the key witnesses against Cooper. On cross-examination, the defense established that Mier had told at least three conflicting stories about how and where he had obtained the blank weighmaster certificates used for the Mexicali operation. First, in an FBI report from March 1996, Mier said that Cooper went to a print shop in Mexicali by himself and later gave Mier a box of weighmaster certificates. Second, testifying before the grand jury in April 1996, Mier said that he went into a print shop in Mexicali with Cooper, translated for Cooper, and helped order the weighmaster certificates. Third, at trial, Mier testified that he went to a Mexicali print shop with Cooper and another person (either "Barilla" or "Padilla"), and that the three men arranged for printing the certificates.
31
Mier conceded that he had signed weighmaster certificates knowing that they were false. The defense also pointed out that Mier testified to the grand jury that he had estimated truckload weights without Cooper's knowledge on the assumption that Cooper would approve. The defense showed that CCF reimbursed Mier $5.00 for each truckload weighed, giving Mier an incentive to use false weighmaster certificates and pocket up to $200 a day. Mier admitted that during the Mason farm project, he had driven a truck himself, earning $300 per truckload, even though as supervisor he should not have been driving.
32
The defense was missing a document that would have further impeached Mier: an FBI report stating that a Mexicali print shop, identified by Mier as having produced the weighmaster certificates, had no records or knowledge of the certificates. The defense did not learn about the FBI report until after the trial.
33
Cooper testified at trial. He denied telling Mier to make false entries in weighmaster certificates. Cooper testified that he never looked at the weighmaster certificates before they were sent to the City with invoices. He stated that anyone familiar with legitimate weighmaster certificates would have noticed obvious discrepancies in those submitted by Mier. For example, Mier's certificates gave weights in single pound increments, more accurately than any truck scale. They were also numbered in sequence, while certificates normally would have gaps in the sequence because of other trucks being weighed.
34
Cooper denied seeking permission to transport sewage sludge to Mexicali. Witnesses from the City and Water Board contradicted that testimony, and the prosecution produced a letter from the Water Board, dated June 1992, addressed personally to Cooper at CCF. The letter stated that it was "in response to your verbal [i.e., oral] request for approval to transport sewage sludge to Mexico." Cooper also denied talking to Heuberger, the planner for Imperial County.
35
Cooper denied telling Esposito, the FBI agent, that he was familiar with the City's NPDES permit. As the district court summarized Cooper's testimony, Cooper blamed Mier and Vaughan for the false weighmaster certificates, while depicting himself as "just the dummy that they all danced around."
36
Besides Mier's testimony, the prosecution presented evidence and testimony that contradicted Cooper's testimony. Russell Rodvold, the trucking company owner who later tipped off the City that CCF was shipping sludge to the Mason farm, had hauled sludge for CCF to the Thermal site when CCF was paying by weight. Rodvold testified that when he complained to Cooper that it was taking too long to dump sludge, Cooper suggested that Rodvold drive his trucks over the scales more than once to generate false weighmaster certificates for additional payments. Rodvold refused, considering the practice fraudulent. At trial, Cooper admitted making the suggestion.
37
The manager for another trucking company testified that she was surprised to learn that CCF had used her business address as the address of the certified scale on weighmaster certificates. When she confronted Cooper, he told her that he was aware of it and that she should not worry. At trial, Cooper denied talking to the owner about the certificate.
38
The jury convicted Cooper on all five counts of the indictment. After a sentencing hearing, the district court adopted the presentence report's recommendations and sentenced Cooper to fifty-one months' imprisonment.
DISCUSSION
I. Preliminary Legal Issues
39
The district court denied Cooper's motion to dismiss the indictment. This court reviews the district court's rulings on legal issues de novo. United States v. Lester, 85 F.3d 1409, 1410 (9th Cir.1996).
40
A. Federal Regulations Do Not Supersede the NPDES Permit
41
Cooper argues that he did not need approval from the City or the Water Board to apply sewage sludge directly to the Mason farm because federal regulations preempted or superseded the notice requirements of the City's NPDES permit. At trial, the district court allowed Cooper to testify that he had relied on the federal regulations, and to present expert testimony that the Fiesta Island sewage sludge met federal standards for direct land application.
42
We agree with the district court that Cooper erroneously assumes that the federal sewage sludge regulations relieved him of a duty to comply with the City's NPDES permit. By their own terms, the regulations do not usurp local control over the disposal of sewage sludge. See 40 C.F.R. § 503.5(b) ("Nothing in this part precludes a State or political subdivision thereof ... from imposing requirements for the use or disposal of sewage sludge more stringent than the requirements in this part or from imposing additional requirements for the use or disposal of sewage sludge."). The Clean Water Act preserves local control. See 33 U.S.C. § 1345(e) ("The determination of the manner of disposal or use of sludge is a local determination."). The regulations encourage direct land application of sewage sludge, but they do not require that states or local governments allow it. See Welch v. Board of Supervisors, 888 F.Supp. 753, 758 (W.D.Va.1995) (EPA's "mere preference [for land application] is vastly different from legislation forcing states and localities to permit land application"). The district court properly concluded that the federal regulations do not supersede the NPDES permit.
43
B. Non-Permittees May Be Liable for Violating a Permit
44
Cooper argues that he cannot be liable for violating the City's NPDES permit because he was not a party to the permit. He contends that the government has criminalized conduct that at worst was a breach of CCF's contract with the City.
45
The Clean Water Act imposes criminal liability on "[a]ny person who knowingly violates ... any permit condition or limitation implementing any of such sections [of the Act] in a permit issued under section 1342 of this title." 33 U.S.C. § 1319(c)(2)(A). For Cooper to be criminally liable, there first must be a valid NPDES permit. The government presented evidence that the Water Board, acting under authority delegated by the EPA, properly issued the City's NPDES permit. See 33 U.S.C. § 1342(b) (state or regional agency may administer NPDES permits if state or regional regulatory scheme meets federal criteria); Russian River Watershed Protection Comm. v. City of Santa Rosa, 142 F.3d 1136, 1138-39 (9th Cir.1998) (describing statutory authority for Water Board).
46
The statute imposes criminal liability on "[a]ny person who knowingly violates" a permit condition. 33 U.S.C. § 1319(c)(2) (emphasis added). The phrase "any person" is broad enough to cover permittees and non-permittees alike. See United States v. Brittain, 931 F.2d 1413, 1419 (10th Cir.1991); United States v. Iverson, 162 F.3d 1015, 1025 (9th Cir.1998) ( "person" includes "any responsible corporate officer," 33 U.S.C. § 1319(c)(6), which includes a person who "has authority to exercise control over the corporation's activity that is causing the discharges").
47
The government also had to establish beyond a reasonable doubt that Cooper knowingly violated a condition of the NPDES permit. We need not resolve whether our law requires the government to prove that Cooper, who was not the permittee, knew of the permit and its requirements. See United States v. Weitzenhoff, 35 F.3d 1275, 1284 n. 5 (9th Cir.1994) (as amended). Here, the district court held the government to the higher standard, instructing the jury that Cooper "must know his conduct violates the City's permit."
48
Under this higher standard, there was ample evidence of Cooper's knowledge of the NPDES permit and its application to his conduct. Municipal sources of sewage sludge must operate under NPDES permits. Cooper, who had transported sewage sludge for thirty years and considered himself an expert on the subject, could hardly be ignorant of NPDES permits. Cf. United States v. International Minerals & Chem. Corp., 402 U.S. 558, 565, 91 S.Ct. 1697, 29 L.Ed.2d 178 (1971) (persons dealing with "obnoxious waste materials" "must be presumed" to be aware of applicable regulations). Cooper obtained legal advice to determine whether a permit was required when CCF was composting Fiesta Island sewage sludge at its Thermal site. Cooper sought approval from the City and the Water Board when he wanted to transport sludge to Mexicali, evidence that he knew about the NPDES permit and its application to him. An FBI agent testified that when she showed Cooper the City's NPDES permit, he thumbed through it and said he knew what it was. The evidence was sufficient to establish that Cooper knowingly caused a violation of the City's NPDES permit, making him criminally liable under § 1319(c)(2).
49
C. The Clean Water Act Provisions Are Not Vague as Applied
50
Cooper argues that 33 U.S.C. §§ 1319 and 1342 are void for vagueness as applied because the statutes do not distinguish between different grades of sewage sludge, which range from raw sewage to the more processed sewage sludge at issue here.
51
This court reviews de novo whether a law is void for vagueness. United States v. Hockings, 129 F.3d 1069, 1070 (9th Cir.1997). "A criminal statute is not vague if a 'reasonable person of ordinary intelligence' would understand what conduct the statute prohibits." Iverson, 162 F.3d at 1021 (quoting Easyriders Freedom F.I.G.H.T. v. Hannigan, 92 F.3d 1486, 1493 (9th Cir.1996)). "[W]here, as here, a criminal statute regulates economic activity, it generally 'is subject to a less strict vagueness test, because its subject matter is more often narrow and because businesses can be expected to consult relevant legislation in advance of action.' " Id. (quoting United States v. Doremus, 888 F.2d 630, 634 (9th Cir.1989)). "[A] scienter requirement may mitigate a law's vagueness, especially with respect to the adequacy of notice to the complainant that his conduct is proscribed." Village of Hoffman Estates v. Flipside Hoffman Estates, Inc., 455 U.S. 489, 499, 102 S.Ct. 1186, 71 L.Ed.2d 362 (1982).
52
The Clean Water Act defines "sewage sludge" as a "pollutant." 33 U.S.C. § 1362(6). A reasonable person who read the statutory definition and the City's NPDES permit would not conclude that the federal regulations encouraging land application of sewage sludge create an ambiguity in the statutory definition. The district court correctly concluded that § 1319(c)(2)(A) was not void for vagueness as applied.
53
Cooper argues that CCF's contract with the City requires that CCF comply with later enacted federal regulations. This argument is meritless. Cooper's actions did not comply with the new regulations because the new regulations did not supersede the City's NPDES permit requirements.
II. Use of Manuel Mier as a Witness
54
Cooper contends that the government's use of Mier as a witness requires reversal because (1) the government failed to turn over an exculpatory FBI report concerning Mier, violating its obligation under Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963); (2) the government allowed Mier to commit perjury; and (3) the government failed to disclose an immunity agreement with Mier.
A. FBI Report
55
Cooper claims that the government violated his rights under Brady by concealing an exculpatory FBI report. The government contends that the FBI report was available before trial for defense review, and that the report was not material.
56
To prevail on his Brady claim, Cooper must show that "(1) the evidence was exculpatory or impeaching; (2) it should have been, but was not produced; and (3) the suppressed evidence was material to his guilt or punishment." Paradis v. Arave, 130 F.3d 385, 392 (9th Cir.1997) (citing United States v. Steinberg, 99 F.3d 1486, 1489 (9th Cir.1996)). Evidence is material under Brady only if there is a reasonable probability that the result of the proceeding would have been different had it been disclosed to the defense. United States v. Service Deli, Inc., 151 F.3d 938, 943 (9th Cir.1998). "The question is not whether the defendant would more likely than not have received a different verdict with the evidence, but whether in its absence he received a fair trial, understood as a trial resulting in a verdict worthy of confidence." Kyles v. Whitley, 514 U.S. 419, 434, 115 S.Ct. 1555, 131 L.Ed.2d 490 (1995).
57
Here, the FBI report stated that an investigation of the Mexicali print shop identified by Mier as the source of weighmaster certificates revealed no evidence that the print shop had ever printed for Cooper, Mier, or CCF. The report would have impeached Mier, a government witness, so the first part of the Brady test is met. Service Deli, 151 F.3d at 943.
58
The parties dispute whether the government properly disclosed the report. The district court was not able to resolve the factual dispute.
59
Remand for an evidentiary hearing on disclosure is unnecessary, however, because the FBI report was not material. The defense was able to impeach Mier extensively. The defense established both through cross-examining Mier and through direct examination of Strange that Mier gave conflicting versions of events to FBI agents, to the grand jury, and at trial. The defense showed that Mier had an economic motive for falsifying the weighmaster certificates. The defense was also able to argue that Mier was lying when he denied the existence of an agreement with the government. One additional item of impeachment, showing that Mier lied about the source of blank weighmaster certificates, could not damage Mier's credibility much more than it already had been.
60
There was ample evidence of Cooper's guilt even without Mier's testimony. Given the already extensive impeachment of Mier and the independent evidence of Cooper's guilt, we conclude that the FBI report does not "put the whole case in such a different light as to undermine confidence in the verdict." Kyles, 514 U.S. at 435, 115 S.Ct. 1555. The government's case did not rise or fall on Mier's credibility.
B. Perjured Testimony
61
"If a prosecutor knowingly uses perjured testimony or knowingly fails to disclose that testimony is false, the conviction must be set aside if there is any reasonable likelihood that the false testimony could have affected the jury verdict." Ortiz v. Stewart, 149 F.3d 923, 936 (9th Cir.1998). Because Cooper did not argue at trial that the government presented perjured testimony, this court may review only if there was plain error affecting substantial rights. People of Territory of Guam v. Veloria, 136 F.3d 648, 652 (9th Cir.1998). If those conditions are met, the appellate court may exercise its discretion to review an error "only if ... the error seriously affects the fairness, integrity, or public reputation of judicial proceedings." Id. (citing Johnson v. United States, 520 U.S. 461, 467, 117 S.Ct. 1544, 137 L.Ed.2d 718 (1997)).
62
Here, even if we assume that Mier committed perjury and the government knew of it, the prejudice to Cooper was not great. Cooper's attorney was able to impeach Mier extensively with inconsistent statements. There was no plain error.
C. Immunity Agreement
63
Cooper contends that the government improperly failed to disclose an immunity agreement with Mier. The government denies that it had an agreement with Mier.
64
This court reviews de novo alleged violations of the government's obligation to disclose leniency agreements with prosecution witnesses. United States v. Bracy, 67 F.3d 1421, 1428 (9th Cir.1995); see Giglio v. United States, 405 U.S. 150, 154, 92 S.Ct. 763, 31 L.Ed.2d 104 (1972).
65
As the defense established at trial, Mier's credibility was shaky at best. He faced potential criminal prosecution in the United States, so it seems unlikely that he would return to testify only because he wanted to tell the truth. This, however, is at most circumstantial evidence of an immunity agreement with Mier. A defendant must present more direct evidence of an agreement to justify reversal on this ground. See United States v. Ramirez, 608 F.2d 1261, 1266-67 (9th Cir.1979).
III. Prosecutorial Misconduct
66
Cooper contends that the prosecutor twice committed misconduct during closing argument. This court reviews claims of prosecutorial misconduct for plain error when the defendant did not object at trial, and for abuse of discretion when the district court denied an objection to closing argument. United States v. Etsitty, 130 F.3d 420, 424 (9th Cir.1997), amended in part on other grounds, 140 F.3d 1274 (9th Cir.), cert. denied, --- U.S. ----, 119 S.Ct. 515, 142 L.Ed.2d 427 (1998). Cooper must show that it is " 'more probable than not that the misconduct materially affected the verdict.' " United States v. Peterson, 140 F.3d 819, 821 (9th Cir.1998) (quoting United States v. Hinton, 31 F.3d 817, 824 (9th Cir.1994)).
67
In the first incident, the prosecutor stated during closing:
68
What else did [Cooper] admit to you? Well, he admitted that he knew that those invoices and weight tickets contained false statements.
69
(Pause)
70
He also admitted that he let known false statements be sent to the City of San Diego.
71
Defense counsel objected, contending that the prosecutor had misstated the evidence. The district court responded that the jury would make its own evaluation of the evidence.
72
When the prosecutor resumed her argument, she explained that the "false statements ... sent to the City" referred to Cooper's letter of resignation, which Cooper had admitted contained false statements. Cooper argues that he was prejudiced because the mail fraud counts were not based on the letter of resignation. The indictment, the evidence at trial, and final argument on the mail fraud counts all focused on the false weighmaster certificates, so the jury could not have been confused by this reference to the resignation letter. See Hinton, 31 F.3d at 824 ("The prosecution's alleged misconduct must be viewed in the context of the entire trial.").
73
The prosecutor's reference to Cooper's testimony on the weighmaster certificates is more troublesome. The prosecutor arguably implied that Cooper admitted knowing the weighmaster certificates were falsified before CCF mailed them to the City. The jury should not have been misled, however, because it heard Cooper testify emphatically that he never looked at the certificates before they were mailed, and that he did not learn the certificates were false until after the City questioned their validity. Any remaining prejudice was eliminated by the court's instruction.
74
Cooper also contends that the prosecutor committed misconduct when she argued that if a hypothetical "ecoterrorist" who ruptured a sewage pipe flowing into the ocean would be responsible for causing a violation of an NPDES permit, then Cooper should be responsible for causing a violation the City's permit by depositing sewage sludge on an unauthorized site. Defense counsel did not object.
75
Considered in context, the prosecutor's analogy was not out of line. She was attempting to refute Cooper's argument that a non-permittee may not be criminally liable for causing a violation of a permit. To the extent that the term "ecoterrorist" could be prejudicial, the prejudice was not so egregious as to seriously affect the fairness or integrity of the trial. See United States v. Rewald, 889 F.2d 836, 862 (9th Cir.1989) (prosecutor's reference to defendant as a nine-headed monster not misconduct), amended in part on other grounds, 902 F.2d 18 (9th Cir.1990).
IV. Sentencing Issues
76
This court reviews the district court's findings of fact at sentencing for clear error. United States v. Shannon, 137 F.3d 1112, 1119 (9th Cir.) (per curiam), cert. denied, --- U.S. ----, 118 S.Ct. 2390, 141 L.Ed.2d 755 (1998). The court's application of the law to the facts is reviewed for abuse of discretion. United States v. Barnes, 125 F.3d 1287, 1290 (9th Cir.1997). This court reviews the district court's interpretations of the Sentencing Guidelines de novo. United States v. Blitz, 151 F.3d 1002, 1009 (9th Cir.), cert. denied sub nom. Marie v. United States, ---U.S. ----, 119 S.Ct. 567, 142 L.Ed.2d 473 (1998).
A. Obstruction of Justice
77
The district court found that Cooper had willfully testified falsely on material facts, justifying a two-level enhancement for obstruction of justice. U.S.S.G. § 3C1.1 (citations are to the Nov. 1995 edition). At sentencing, the court stated that Cooper's testimony "didn't make any sense--not only was he not convincing on it, but it didn't make any sense that it was all Vaughan and all Mier, and he didn't do anything, didn't know anything.... And then when you look in the right context, of all of those denials that he made, ... it was clearly testimony on very material facts that was not... credible, was not accurate, was not truthful."
78
The district court may enhance a sentence for obstruction of justice if the defendant's testimony was false, material, and willful. Shannon, 137 F.3d at 1119 (citing United States v. Dunnigan, 507 U.S. 87, 94, 113 S.Ct. 1111, 122 L.Ed.2d 445 (1993)). "Mere dispute or disagreement as to a defendant's perception of facts, without more, should not give rise to a charge of perjury in the context of sentencing." Id. at 1119 n. 3.
79
The district court saw Cooper testify and supported the obstruction of justice enhancement with the proper findings of fact. The record supports those findings. The two-level upward enhancement for obstruction of justice was not error.
B. Discharge of a Pollutant
80
The district court ruled that because the Clean Water Act defines sewage sludge as a "pollutant," 33 U.S.C. § 1362(6), Cooper should receive a six-level enhancement for discharging a pollutant. See U.S.S.G. § 2Q1.3(b)(1)(A) (enhancement for "ongoing, continuous, or repetitive discharge, release, or emission of a pollutant into the environment"). Cooper contends that the enhancement doesn't apply because the sewage sludge met the federal regulatory requirements for land application.
81
The district court was correct that the statutory definition of "pollutant" controls. The federal regulations on land application did not implicitly amend the statutory definition. Cf. United States v. West Indies Transp., Inc., 127 F.3d 299, 315 (3d Cir.1997) (rejecting contention that raw sewage was not a pollutant because it was fully biodegradable), cert. denied, --- U.S. ----, 118 S.Ct. 700, 139 L.Ed.2d 644 (1998). Under Cooper's direction, CCF dumped about 10,000 tons of uncomposted sewage sludge on the Mason farm. That dumping was "actual environmental contamination" as required by the guidelines. See U.S.S.G. § 2Q1.3 appl. n. 4; United States v. Ferrin, 994 F.2d 658, 664 (9th Cir.1993) (interpreting identically worded application note 5 to U.S.S.G. § 2Q1.2 and holding that "a finding that the hazardous waste came into contact with land ... is the appropriate predicate for an enhancement"). The enhancement requires "actual environmental contamination," not actual environmental harm. See Ferrin, 994 F.2d at 664 (defining "contaminate" as " 'to soil, stain, or infect by contact or association' or 'to make ... impure by admixture' ") (quoting Webster's New Collegiate Dictionary 245 (1977)); United States v. Bogas, 920 F.2d 363, 368 (6th Cir.1990) (concluding that enhancement under U.S.S.G. § 2Q1.2 applied even though "[t]here may have been no actual harm"). Cf. Welch v. Board of Supervisors, 888 F.Supp. 753, 756 (W.D.Va.1995) ("the regulations also make clear that land application of sewage sludge still carries with it some risks; it is, after all, a pollutant."). The background note to U.S.S.G. § 2Q1.3 explains that it "parallels § 2Q1.2 but applies to substances which are not pesticides and are not designated as hazardous or toxic." Thus the guideline applied here is for nonhazardous pollutants, and the parallel guideline is for designated hazardous pollutants. A substance therefore can be classified as a pollutant even though it is not designated as hazardous. That this sludge may have been class A, nonhazardous and permissible under appropriate conditions for application to farmland, does not avoid application of the guideline for nonhazardous pollutants.
C. Permit Violation
82
The district court applied a four-level enhancement for "a discharge ... in violation of a permit." U.S.S.G. § 2Q1.3(b)(4). Cooper contends that the enhancement should not apply because he was not required to secure a permit. This court rejected a similar argument in Ferrin, 994 F.2d at 664-65. Here, as in Ferrin, Cooper was convicted of a crime whose elements include violating a condition of a permit.
D. Amount of Loss
83
The presentence report calculated the intended loss caused by Cooper's conduct as $566,000, based on the amount of money CCF billed the City for shipments of sewage sludge to the Mason farm. The district court, which adopted both the presentence report's calculation of loss and an alternative calculation suggested by the prosecutor, imposed a ten-level enhancement for a loss of more than $500,000. U.S.S.G. § 2F1.1(b)(1)(K).
84
The Sentencing Guidelines define loss as "the value of money, property, or services unlawfully taken." U.S.S.G. § 2F1.1, appl. n. 7. "[T]he loss need not be determined with precision. The court need only make a reasonable estimate of the loss, given the available information." U.S.S.G. § 2F1.1, appl. n. 8; United States v. Watson, 118 F.3d 1315, 1319 (9th Cir.1997). "[I]ntended loss is a proper measure to use in fraud cases." Blitz, 151 F.3d at 1009.
85
Cooper contends that CCF, not the City, lost money. He argues that because CCF did haul sludge from Fiesta Island, the City benefited from CCF's services. See Blitz, 151 F.3d at 1012 (because a defendant's services may have some value although part of a fraudulent scheme, the district court when calculating intended loss "should give credit for any legitimate services rendered to the victims").
86
The district court reasoned, however, that "removal is not the sine qua non of whether [Cooper] should be paid" because CCF was required to compost the sludge, and was not authorized to dump sludge wherever it pleased. The district court stated, "There has to be a procedure [for hauling sewage sludge] that complies with the law. And that's why [Cooper] gets paid a lot of huge dollars to remove this stuff." (An auditor testified that the City paid CCF about $8 million over the two-plus years of the contract.)
87
In United States v. Frank, 156 F.3d 332, 335-36 (2d Cir.1998), cert. denied, --- U.S. ----, 119 S.Ct. 1257, 143 L.Ed.2d 353 (1999) (No. 98-1329), the Second Circuit dealt with a similar issue. There, the defendants agreed to ship sewage sludge by barge and dump it at sea 106 miles from shore. Instead, the defendants dumped the sludge well short of the required distance, and sent falsified invoices. The defendants were convicted of mail fraud.
88
On appeal, the defendants argued that the evidence was insufficient because "the municipalities got precisely what they bargained for-sludge disposal-and that, accordingly, the [defendants] neither intended nor caused the municipalities any harm." Id. at 335. The Second Circuit rejected this argument, reasoning that the defrauded municipalities paid defendants a premium for the full 106-mile transport, and that the defendants' "short-dumping" could have subjected the municipalities to fines and the loss of permits.
89
Here, CCF's removal of sludge from Fiesta Island had some value to the City, but that value was offset by the harm caused by CCF's failure to compost and legally dispose of the sludge. CCF's actions exposed the City to potential clean-up liability and to the loss of its NPDES permit. See 33 U.S.C. §§ 1319, 1342(b)(7) (permit holder subject to enforcement action for failure to comply with conditions of permit). These costs, while almost impossible to quantify, cannot be dismissed as phantoms. The district court noted that the City
90
should be able to control where [the sewage sludge is] going to go--so [the City doesn't] get stuck with that legal mess--the time, the energy, the legal fees, and the bad publicity ...--can you imagine how the people of Imperial [County] would feel if they are told that the City is illegally dumping its sewage waste on their farmland? All sorts of political problems.
91
The district court faced a daunting task in attempting to calculate the amount of the City's loss. Using the invoiced amount for the shipments of sludge to the Mason farm was in this case a reasonable, if rough, estimate of the intended loss. We cannot say that the district court's calculation was clearly erroneous.
E. More Than Minimal Planning
92
The district court applied a two-level enhancement for more than minimal planning. U.S.S.G. § 2F1.1(b)(2)(A). At sentencing, the court stated, "this was an ongoing scheme to submit false weighmaster certificates to the City. It was extensive. It was sophisticated."
93
" 'More than minimal planning' is deemed present in any case involving repeated acts over a period of time, unless it is clear that each instance was purely opportune." U.S.S.G. § 1B1.1, appl. n. (f). The district court did not clearly err in applying the enhancement.
F. Role in the Offense
94
The district court applied a two-level enhancement because of Cooper's role in the offense as a leader, manager, or supervisor. U.S.S.G. § 3B1.1. The court found that Cooper owned half of CCF, would have benefited more than others from the offense, knew about the CCF's day-to-day activities, and located a farmer to accept sludge.
95
When a defendant supervises other participants, he need exercise authority over only one of the other participants to merit the adjustment. United States v. Camper, 66 F.3d 229, 231 (9th Cir.1995) (citing United States v. Barnes, 993 F.2d 680, 685 (9th Cir.1993)). Here, the evidence supported the district court's finding that Cooper supervised at least one other participant. Cf. United States v. Lopez-Sandoval, 146 F.3d 712, 717 (9th Cir.1998). The court did not err in applying the enhancement.
96
AFFIRMED.
*
The Honorable Owen M. Panner, Senior United States District Judge for the District of Oregon, sitting by designation
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[Cite as State v. Metcalf, 2012-Ohio-4947.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
STATE OF OHIO, : APPEAL NO. C-120041
TRIAL NO. 11CRB-36181
Plaintiff-Appellee, :
vs. : O P I N I O N.
JOSHUA METCALF, :
Defendant-Appellant. :
Criminal Appeal From: Hamilton County Municipal Court
Judgment Appealed From Is: Affirmed
Date of Judgment Entry on Appeal: October 26, 2012
John Curp, City Solicitor, Charles Rubenstein, City Prosecutor, and David Sturkey,
Assistant City Prosecutor, for Plaintiff-Appellee,
Susannah M. Meyer, and Robert R. Hastings, Jr., Law Office of the Hamilton
County Public Defender, for Defendant-Appellant.
Please note: This case has been removed from the accelerated calendar.
OHIO FIRST DISTRICT COURT OF APPEALS
HILDEBRANDT, Presiding Judge.
{¶1} Defendant-appellant Joshua Metcalf appeals the judgment of the
Hamilton County Municipal Court convicting him of domestic violence, a misdemeanor of
the first degree.
The Complaint, Affidavit, and Trial
{¶2} Metcalf and Brandy Barrow have a daughter together. On November 19,
2011, Cincinnati Police Officer Jacob Hicks filed a complaint against Metcalf alleging
domestic violence under R.C. 2919.25. In setting forth the basis of the charge, the
document stated, “[t]he complainant states that this complaint is based on the defendant
striking the victim in the forehead with a closed fist.” In the affidavit accompanying the
complaint, Hicks alleged that “Metcalf did knowingly cause harm to Brandy Barrow by
striking her on her forehead with a closed fist. Defendant and victim have a child
together.”
{¶3} Metcalf was arrested pursuant to a warrant issued by the municipal
court, and the case proceeded to a bench trial. At trial, Barrow testified that Metcalf had
punched her after he had discovered that she had been communicating with other men.
The state produced photographic evidence of Barrow’s injury. Metcalf testified that he
had not assaulted Barrow, suggesting that she had fabricated the allegations to gain
leverage in their custody dispute.
{¶4} The trial court found Metcalf guilty and sentenced him to 180 days in jail,
with credit for 27 days served. The court suspended the remainder of the days and placed
Metcalf on community control.
Sufficiency of the Affidavit
{¶5} In his first assignment of error, Metcalf argues that the trial court lacked
jurisdiction because of the alleged deficiency of the affidavit accompanying the
complaint. He contends that the affidavit contained insufficient factual information for
2
OHIO FIRST DISTRICT COURT OF APPEALS
a neutral magistrate to determine that probable cause existed. Therefore, he maintains
that Officer Hicks in effect made the determination that there was sufficient evidence for
the issuance of a warrant.
{¶6} We find no merit in this argument. The filing of a complaint invokes the
jurisdiction of the municipal court. State v. Miller, 47 Ohio App.3d 113, 114, 547 N.E.2d
399 (1st Dist.1988). Under Crim.R. 3, a valid complaint must contain “a written
statement of the essential facts constituting the offense charged” in addition to “the
numerical designation of the applicable statute or ordinance.” Finally, the complaint
must be “made upon oath before any person authorized by law to administer oaths.”
Crim.R. 3.
{¶7} In this case, the complaint fully complied with Crim.R. 3. It cited R.C.
2919.25 and stated that Metcalf had caused physical harm to a person with whom he
had a child. The complaint was sworn to and subscribed before a deputy clerk of the
municipal court. Thus, the trial court had subject-matter jurisdiction.
{¶8} In arguing that the complaint was subject to dismissal, Metcalf in essence
contends that there was a defect in the institution of the prosecution. But Crim.R. 12(C)
provides as follows:
[t]he following must be raised before trial: (1) Defenses and objections
based on defects in the institution of the prosecution; (2) Defenses and
objections based on defects in the indictment, information, or complaint
(other than failure to show jurisdiction in the court or to charge an offense,
which objections shall be noticed by the court at any time during the
pendency of the proceeding.)
Crim.R. 12(H) states that the “[f]ailure by the defendant to raise defenses or objections or
to make requests that must be made prior to trial * * * shall constitute waiver of the
defenses or objections.” (Emphasis added.)
3
OHIO FIRST DISTRICT COURT OF APPEALS
{¶9} In the case at bar, Metcalf did not challenge sufficiency of the allegations
to support the warrant in a pretrial motion. Thus, we hold that he waived any challenge to
the allegedly defective affidavit.
{¶10} In doing so, we are guided by the holding of the Supreme Court of
Ohio in State v. Mbodji, 129 Ohio St.3d 325, 2011-Ohio-2880, 951 N.E.2d 1025. In
Mbodji, the court addressed the issue of whether the failure of the clerk of courts to
forward a privately filed complaint to a neutral “reviewing official” under R.C.
2935.09 divested the municipal court of jurisdiction. The court answered that
question in the negative, holding that the lack of review had been waived by the
defendant’s failure to file a pretrial motion to challenge the institution of the
proceedings. Id. at paragraph two of the syllabus. The court emphasized that “[a]ny
procedural defect in the prosecution or the complaint and associated affidavit
because of the lack of review pursuant to R.C. 2935.09 could have been remedied
through a Crim.R. 12(C) motion.” Id. at ¶ 19.
{¶11} Thus, the procedural protection of having a detached reviewing official
authorize the institution of a criminal proceeding is a safeguard that is waived if not
challenged in a pretrial motion.
{¶12} In arguing for reversal, Metcalf relies heavily on State v. Jones, 7th
Dist. No. 11 MA 60, 2012-Ohio-1301. In Jones, a police officer filed a complaint for
selling alcohol to an underage person without filing an accompanying affidavit. Id. at
¶ 7. The complaint merely contained a statement that the defendant had committed
the offense on a certain date at a certain place, without any statement as to the
source of the officer’s knowledge about the offense. Id. at ¶ 4. The trial court
overruled the defendant’s motion to dismiss based upon the defects in the institution
of the proceedings. Id. at ¶ 13. The Seventh Appellate District reversed the
4
OHIO FIRST DISTRICT COURT OF APPEALS
defendant’s conviction and ordered the warrant quashed based on the lack of
meaningful review of the complaint. Id. at ¶ 61.
{¶13} We find Jones to be distinguishable from the case at bar. The
defendant in Jones preserved her right to challenge the institution of the proceedings
by filing a motion to dismiss under Crim.R. 12(C). Thus, the issue of waiver
addressed in Mbodji was inapplicable. By contrast, Metcalf’s failure to file such a
motion resulted in a waiver of his rights, and we overrule the first assignment of
error.
The Oaths Supporting the Complaint and Affidavit
{¶14} In his second and third assignments of error, Metcalf argues that the trial
court lacked jurisdiction because the complaint and affidavit did not reflect that they
had been sworn before a person authorized to administer an oath. Specifically, he
argues that the documents did not identify the state and county where the oath was
administered and did not specify that the person administering the oath was a
deputy clerk of Hamilton County. We address the assignments of error together.
{¶15} As we have already noted, a complaint must be sworn before a
person authorized to administer oaths. Crim.R. 3. In this case, the documents
demonstrated that the person who notarized both the complaint and the affidavit
had the authority to do so. Both documents were captioned “Hamilton County
Municipal Court” and indicated that the person administering the oath was a deputy
clerk. The complaint included an additional stamp stating, “TRACY WINKLER,
COURT OF HAMILTON CO. MUNICIPAL COURT.” Under these circumstances, the
complaint and affidavit contained sufficient indicia that the oaths were administered
in Hamilton County, Ohio and were therefore valid. We overrule the second and
third assignments of error.
5
OHIO FIRST DISTRICT COURT OF APPEALS
Conclusion
{¶16} The judgment of the trial court is affirmed.
Judgment affirmed.
HENDON and CUNNINGHAM, JJ., concur.
Please note:
The court has recorded its own entry this date.
6
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233 Ga. 664 (1975)
212 S.E.2d 835
JOHNSON
v.
JOHNSON (two cases).
29461, 29517.
Supreme Court of Georgia.
Submitted December 30, 1974.
Decided February 11, 1975.
McDonald, McDonald & McDonald, Ralph F. Martin, Jr., E. Crawford McDonald, for appellant.
Mitchell, Mitchell, Coppedge & Boyett, William W. Keith, III, John A. Henderson, for appellee.
JORDAN, Justice.
Patsy Johnson, appellant here, brought a petition in the Superior Court of Murray County to modify as to custody and visitation rights a judgment rendered in October of 1972, in which she was granted a divorce from her husband and custody of the minor children born of the marriage. The decree allowed the father certain visitation rights and required him to pay certain sums as child support to the appellant.
After hearing evidence the trial court entered an order in which the appellee, Johnny Johnson, lost his visitation privileges and was relieved of his duty to pay child support.
The appellant contends that the trial court erred in entering the portion of its judgment relieving appellee of his duty to pay child support.
Code Ann. § 30-220 allows an upward or downward revision in child support payments as the financial condition of the parties changes over the years. It does not allow a mother to barter away child support in return for an elimination of visitation privileges awarded to a father. Glaze v. Strength, 186 Ga. 613 (198 SE 721). Whether the wife or child is entitled to support is not an issue at a hearing for modification under Code Ann. § 30-220, but only whether there has been a substantial *665 change in the financial status of the husband sufficient to warrant a change in the amount of the award. Code Ann. § 30-221.
The right to child support belongs to the child, not the mother, and after the award has become part of the court's judgment she has no authority to waive it. Code § 102-106; Livsey v. Livsey, 229 Ga. 368 (191 SE2d 859); Varble v. Hughes, 205 Ga. 29 (52 SE2d 303). Compare Lanning v. Mignon, 233 Ga. 665.
The court in its order stated that "The plaintiff stated that she did not desire to have child support if the defendant did not have visitation rights. On the other hand the defendant stated that if he did not have to pay child support he did not care about visitation rights." Such an agreement between the parents as to the elimination of child support is unenforceable. Livsey v. Livsey, supra.
Under the record in this case the trial court erred in relieving the defendant of his obligation to pay child support.
Judgment reversed. All the Justices concur.
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591 P.2d 87 (1979)
The PEOPLE of the State of Colorado, Plaintiff-Appellee,
v.
Donald Eric WIMER, Defendant-Appellant.
No. 28399.
Supreme Court of Colorado, En Banc.
February 26, 1979.
J. D. MacFarlane, Atty. Gen., David W. Robbins, Deputy Atty. Gen., Edward G. Donovan, Sol. Gen., David K. Rees, Asst. Atty. Gen., Denver, for plaintiff-appellee.
J. Gregory Walta, Colo. State Public Defender, Craig L. Truman, Chief Deputy State Public Defender, Paula K. Miller, Deputy State Public Defender, Denver, for defendant-appellant.
ROVIRA, Justice.
The defendant was convicted and sentenced under the first-degree assault statute, *88 section 18-3-202, C.R.S. 1973. He moved for resentencing under Crim.P. 35(b) on the basis that the conviction and sentencing for a class three felony under the first-degree assault statute rather than for a class four felony under the second-degree assault statute, section 18-3-203, C.R.S. 1973, violated his right to equal protection under the Fourteenth Amendment to the United States Constitution. The motion was denied, and he appealed to this court. We affirm.
On March 24, 1976, the Weld County Sheriff's Department was notified that the Morgan County Sheriff's Department was engaged in high speed pursuit of a motor vehicle driven by the defendant which had just entered Weld County. Weld County Deputy Sheriff Santiago Perez set up a road block by placing his patrol car across the highway and standing between it and the oncoming vehicle of the appellant. Deputy Perez was in uniform, and the lights of his vehicle were flashing. Rather than slowing down to avoid striking the deputy, the defendant maintained his speed and attempted to crash through the roadblock. Deputy Perez was forced to leap out of the way of the defendant's vehicle at the last moment. He was not injured.
The defendant pled guilty to first-degree assault, section 18-3-202(1)(e), C.R.S. 1973, which provides:
"(1) A person commits the crime of assault in the first degree if:
. . . . .
"(e) With intent to cause serious bodily injury upon the person of a peace officer or fireman, he threatens with a deadly weapon a peace officer or fireman engaged in the performance of his duties, and the offender knows or reasonably should know that the victim is a peace officer or fireman acting in the performance of his duties. . . ."
The defendant claims that his constitutional right to equal protection was violated by his prosecution under the above statute instead of section 18-3-203(1)(c) and (f), C.R.S. 1973, which states:
"(1) A person commits the crime of assault in the second degree if:
. . . . .
"(c) With intent to prevent one whom he knows, or should know, to be a peace officer or fireman from performing a lawful duty, he intentionally causes bodily injury to any person; or
. . . . .
"(f) While lawfully confined or in custody, he violently applies physical force against the person of a peace officer or fireman engaged in the performance of his duties . . . and the person committing the offense knows or reasonably should know that the victim is a peace officer or fireman engaged in the performance of his duties . . . ."
The defendant presents two arguments in support of his constitutional claim: first, that the "intent to cause serious bodily injury" under section 18-3-202(1)(e), C.R.S. 1973, is indistinguishable from the mental state implicit in "violently applies physical force" under section 18-3-203(1)(f), C.R.S. 1973; second, that the threat of serious bodily injury under section 18-3-202(1)(e) (first-degree assault statute) does not warrant a greater penalty than the actual infliction of bodily injury under section 18-3-203(1)(c), C.R.S. 1973 (second degree assault statute).
The principles which guide this court's review of constitutional attacks on legislation were set forth in People v. Benjamin, Colo., ___ P.2d ___, case No. 28403, announced by this court today. Cf. People v. Summit, 183 Colo. 421, 517 P.2d 850 (1974).
The defendant's first argument is that sections 18-3-202(1)(e) and 18-3-203(1)(f) proscribe indistinguishable behavior. We find it unnecessary to reach the merits of this contention. We stated in People v. Blue, 190 Colo. 95, 544 P.2d 385 (1975), that "no one is entitled to assail the constitutionality of a statute except as he himself is adversely affected." The defendant in this case could not have been prosecuted under section 18-3-203(1)(f) because he was not lawfully confined or in custody *89 as the terms of that statute require. Because that statute could not have been applied to the defendant under the facts of this case, he was not adversely affected by prosecution under the more severe provisions of section 18-3-202(1)(e), C.R.S. 1973. He thus has no standing to challenge the constitutionality of the distinction between the two statutory provisions. As such, we do not reach the merits of that issue.
The defendant's second argument is that, in cases such as this in which no actual injury was incurred by the victim, it is not minimally rational to impose a greater penalty upon the threat of injury under section 18-3-202(1)(e) than that imposed on actual injury under section 18-3-203(1)(c). We disagree.
We stated in People v. Montoya, Colo., 582 P.2d 673 (1978), that:
"The legislature is entitled to establish more severe penalties for acts which it believes have greater social impact and more grave consequences. [Citation omitted]. Harsher penalties for crimes committed under different circumstances than those which accompany the commission of other crimes do not violate equal protection guarantees if the classification is rationally based upon the variety of evil proscribed."
We do not find that the legislature was irrational in its determination that a threat of serious bodily injury is more grave than an act which results in bodily injury, however slight, as those terms are defined in section 18-1-901, C.R.S. 1973.
Neither of the defendant's contentions merits our holding that this statutory scheme violates his right to equal protection.
Accordingly, we affirm the district court order which denied defendant's motion for resentencing.
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528 F.2d 558
Ralph EASLEY, Individually and as Administrator of theEstate of Dorothy Easley, Deceased, Plaintiff-Appellee,v.STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant.
No. 74--2855.
United States Court of Appeals,Fifth Circuit.
Feb. 25, 1976.
Steven R. Berger, Miami, Fla., for defendant-appellant.
Edward A. Perse, Miami, Fla., for plaintiff-appellee.
Appeal from the United States District Court for the Southern District of Florida.
Before BELL,* DYER and SIMPSON, Circuit Judges.
PER CURIAM:
1
Appellee, Ralph Easley, brought this suit in Florida state court for damages from the appellant, State Farm Mutual Automobile Insurance Company, claiming bad faith in the settlement by State Farm of a claim resulting in a verdict in excess of applicable policy limits. State Farm removed the litigation to the district court on diversity grounds. Title 28, U.S.C., Section 1332. A trial before a jury resulted in a verdict in Easley's favor on his claim that State Farm had refused in bad faith to settle his claim by failing to pay the policy limits of the policy in effect on the automobile which collided with the automobile driven by Easley and in which Mrs. Easley was a passenger. The court below entered a final judgment for Easley for the excess in the amount of $33,554.00, and awarded him attorney's fees and costs. State Farm appeals from that judgment contending that the district court erred in denying appellant's motions for a directed verdict and for judgment n.o.v. on the grounds of insufficient evidence to support the jury finding of bad faith. We affirm the judgment.
2
The automobile accident giving rise to this litigation occurred in 1965. The automobile driven by Easley in which his wife, Dorothy, and two children were passengers was struck from the rear by an automobile owned and operated by State Farm's insured, Gary T. Lewis. In a jury negligence action against Lewis in state court appellee individually recovered judgment for $10,000, and for $35,000 as administrator of his wife's estate. Appellee then brought the suit against State Farm for the excess of the jury award over the policy limit of $10,000, charging bad faith by State Farm in refusing to settle the Easleys' claims. The jury rendered a verdict in favor of appellee for the full amount of the excess and this appeal followed. Pending the outcome of the appeal of the negligence action in the state courts, we withheld ruling in this appeal.
3
On August 12, 1975, the Florida Third District Court of Appeal affirmed the $35,000 judgment awarded appellee, as administrator of the estate of Mrs. Easley, and reduced to $5,000 the $10,000 judgment rendered in favor of appellee on his derivative claim. Lewis v. Gauzens, Fla.App.1975, 318 So.2d 174. The Florida court held that the state trial court had erred in allowing Easley to testify concerning commissions he allegedly lost during the time he was required to spend at home because of his wife's injuries. The derivative damage award to appellee was reduced accordingly in order to conform to the proper measure of damages. Id. at 175. On September 18, 1975, the Florida District Court of Appeal denied a motion for rehearing, and the thirty day period within which to file a petition for writ of certiorari with the Supreme Court of Florida expired on October 18, 1975.
4
Under Florida law it is well settled that an insurer is liable for the excess over policy limits of a judgment against its insured if it fails in its duty to exercise good faith in the defense or settlement of the claim upon which judgment is based. Campbell v. Government Employees Insurance Co., Fla.1974, 306 So.2d 525; Mutual Indemnity Co. v. Shaw, 1938, 134 Fla. 815, 184 So. 852. Whether the insurer has acted in bad faith in refusing to settle a claim is a question of fact for the jury. Cheek v. Agricultural Ins. Co. of Watertown, 5 Cir. 1970, 432 F.2d 1267, 1269; Liberty Mutual Ins. Co. v. Davis, 5 Cir. 1969, 412 F.2d 475, 481; Springer v. Citizens Casualty Co., 5 Cir. 1957, 246 F.2d 123. We hold that there was sufficient evidence of State Farm's bad faith to support the award for compensatory damages in the amount that the verdict against State Farm's insured exceeded the policy limits. In light of the decision in Lewis v. Gauzens, supra, however, we remand to the district court with directions to modify and reduce by $5,000 the amount of the final judgment. The judgment is affirmed in all other respects.
5
Affirmed and remanded with directions to modify.
*
Circuit Judge Bell participated fully in the decision of this case and concurred in this opinion prior to the effective date of his resignation, March 1, 1976
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NUMBER 13-07-00470-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
BARRAZA FAMILY LIMITED PARTNERSHIP, Appellant,
v.
CARLOS P. LEVITAS, INDIVIDUALLY
AND AS INDEPENDENT ADMINISTRATOR
OF THE ESTATE OF ALICIA P. LEVITAS
AND THE ESTATE OF SARAH PASOL
FACTOR, DECEASED, Appellee.
On appeal from the 357th District Court of Cameron County, Texas.
MEMORANDUM OPINION
Before Justices Rodriguez, Garza, and Vela
Memorandum Opinion by Justice Garza
Appellant, the Barraza Family Limited Partnership (the "Partnership), appeals the
trial court's granting of a motion for summary judgment in favor of appellee, Carlos P.
Levitas, individually and as independent administrator of the estate of Alicia P. Levitas and
the estate of Sara Pasol Factor, deceased. By three issues, the Partnership argues that:
(1) the trial court lacked subject matter jurisdiction; (2) the trial court erred in declaring that
the underlying foreclosure sale was void as a matter of law; and (3) the trial court erred in
calculating the amount of the note due to it as the mortgagee in possession. We affirm.
I. Factual and Procedural Background
The underlying dispute pertains to money loaned to Sara and Alicia by Pedro L.
Barraza and Maria Elena Barraza and to a piece of real property located in Cameron
County, Texas, owned by Sara. On February 4, 1994, the Barrazas loaned Sara and Alicia
$25,000. The loan was secured by a lien against the property through a deed of trust. The
Barrazas recorded their lien in the official records of Cameron County. Over the next few
years, the Barraza lien was modified several times. Each modification was subsequently
recorded in the official records of Cameron County.
On May 8, 1996, Sara borrowed an additional sum of money from a second lender,
B. Crowley Mack. Sara again used the property as collateral for the loan. Mack's security
interest was recorded in the official records of Cameron County.
In May 1997, the Barraza lien was modified once again; this time, the Barrazas
assigned their interest in the deed of trust to the Partnership. The Partnership
subsequently loaned Sara and Alicia an additional sum of money secured by a new deed
of trust on the property. On June 30, 1997, Sara and Alicia executed a promissory note
payable to the Partnership for the principal amount of $65,000.
On October 6, 1997, Sara filed a petition for bankruptcy with the United States
Bankruptcy Court for the Southern District of Texas. (1) The following day, October 7, 1997,
Mack initiated foreclosure proceedings on his lien on the property. A third-party purchaser,
Eric Williams, purchased the property at Mack's foreclosure sale.
On January 23, 1998, the Barrazas sent Sara and Alicia notice of their intention to
foreclose on their lien. In this notice, the Barrazas stated that Sara and Alicia had failed
to make any payments on the June 30, 1997 promissory note and were in default, and that
the Barrazas themselves were owners and holders of the promissory note. (2) The notice
also stated that the Barrazas intended to conduct a foreclosure sale of the property on
March 3, 1998.
On February 24, 1998, Sara filed a second bankruptcy petition in the United States
Bankruptcy Court for the Southern District of Texas. (3) While Sara's second bankruptcy
petition was still pending, the Partnership, on March 3, 1998, foreclosed upon its lien on
the property. In addition, William A. Faulk, Jr., counsel for the Barrazas and the
Partnership, issued a trustee's deed to the Partnership as buyers of the property. The
Partnership's foreclosure of its lien caused the title of the property to be transferred from
Williams.
On October 5, 2001, Alicia, on behalf of Sara's estate, filed suit against the Barrazas
and the Partnership, seeking a declaratory judgment that the foreclosure sales by Mack
and the Partnership were void because they were conducted in violation of the automatic
stay provision of the United States Bankruptcy Code. (4) See 11 U.S.C. § 362 (setting out
various acts subject to the automatic stay). In response, the Barrazas and the Partnership
moved for summary judgment, which the trial court granted. The trial court's granting of
the motion for summary judgment filed by the Barrazas and the Partnership was
subsequently appealed to this Court. See Levitas v. Barraza, No. 13-02-510-CV, 2004
Tex. App. LEXIS 6836, at **1-4 (Tex. App.-Corpus Christi July 29, 2004, no pet.) (mem.
op.) ("Barraza I").
In Barraza I, we concluded that the trial court erred in granting summary judgment
to the Barrazas and the Partnership "because the foreclosures and subsequent sales of
the property [by both Mack and the Barrazas] violated the bankruptcy stay and, thus, were
void . . . ." Id. at *6. We further concluded that Alicia had a justiciable interest and
standing to file the original declaratory judgment action. Id. at **6-7. As a result, the matter
was remanded to the trial court for further proceedings. Id. at *11.
On remand, both parties filed competing motions for summary judgment. The
Barrazas and the Partnership filed two such motions--their third and fourth motions for
partial summary judgment. In their third motion for partial summary judgment, the Barrazas
and the Partnership alleged that: (1) the trustee's deed executed by Faulk was prima facie
evidence that the foreclosure sale was valid; (2) Alicia did not provide evidence to rebut the
presumption that the foreclosure sale was valid; and (3) they are entitled to title and
possession of the property because the foreclosure sale was valid and because the
trustee's deed was "duly executed, recorded[,] and delivered to the Defendant [appellee]."
In their fourth motion for partial summary judgment, the Barrazas and the Partnership
contended that they were mortgagees in possession and that appellee was required to
"tender the amounts due under the debt, interest, advances for taxes, and improvements
made to the property" while the Barrazas and the Partnership had possession of the
property.
In her fifth amended original petition, Alicia sought (1) a declaratory judgment that
the foreclosure proceedings conducted by Mack and the Barrazas were without proper and
adequate notice and in violation of the automatic stay; (2) to quiet title to the property; and
(3) a return of the property based upon tender of the principal and interest on the
underlying promissory note. Alicia also re-urged a previously filed motion for partial
summary judgment in which she alleged that the foreclosure sales were in violation of the
automatic stay and, therefore, were void.
The trial court: (1) denied the third motion for partial summary judgment and
granted in part the fourth motion for partial summary judgment filed by the Barrazas and
the Partnership; and (2) granted Alicia's motion for summary judgment in part. In its final
judgment, the trial court concluded that Alicia was entitled to a declaratory judgment that
the foreclosures and subsequent sales of the Cameron County property were "void as a
result of the stay created by the bankruptcy of Sarah [sic] Pasol Factor . . . ." In addition,
the trial court awarded the Partnership "a Judgment for its debt, interest, advances for
taxes and improvements made to the property in the total amount of $137,399.71 through
the date of this Judgment" and noted that the Partnership "is a mortgagee in possession
and shall continue as such until such time as all amounts under this Judgment awarded
. . . have been paid in full." It is from this judgment that the Partnership now appeals. (5)
II. Standard of Review
We review the trial court's granting of summary judgment de novo. Provident Life
& Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). In our review, we take as
true all evidence favorable to the non-movant, and indulge every reasonable inference and
resolve all doubts in favor of the non-movant. Id. When both parties move for summary
judgment, and the trial court grants one motion and denies the other, the appellate court
considers the summary judgment evidence presented by both sides, determines all
questions presented, and if it determines the trial court erred, renders the judgment the trial
court should have rendered. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.
2005); FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872-73 (Tex. 2000).
III. Analysis
A. The Law of the Case Doctrine
In its first two issues, the Partnership (6) asserts that the trial court erred in concluding
that (1) it had subject matter jurisdiction over the claims in this case and (2) the Barraza
foreclosure sale was void as a matter of law.
With respect to subject matter jurisdiction, the Partnership contends that Alicia did
not have "standing to raise the protection of the automatic stay since [she was not] the
'debtor' in the original bankruptcy filing and therefore cannot claim the protection of the
automatic stay in this proceeding." Appellee argues that: (1) this Court has previously
resolved this issue and the issue is therefore governed by the law of the case doctrine; (2)
Sara's bankruptcy filings indicate that Alicia was a co-debtor and is therefore entitled to the
protection of the automatic stay; (3) "the Federal Rules of Bankruptcy Procedure allow for
the substitution of a personal representative of a party's estate upon the death of the
debtor"; and (4) this issue was waived under the doctrine of judicial estoppel.
The Partnership argues that the trial court erred in declaring the foreclosure sale
void as a matter of law because: (1) the trustee's deed executed by Faulk is prima facie
evidence that the foreclosure sale was valid; (2) appellee did not present evidence to rebut
the presumption that the foreclosure sale was valid; and (3) the Partnership is entitled to
title and possession of the property because the foreclosure sale was completed and
Faulk's trustee's deed was "executed, recorded[,] and delivered to the Appellant." Once
again, appellee argues that this Court has already resolved this issue and that the law of
the case doctrine governs.
1. Applicable Law
Law of the case applies only to prior determinations of issues of law. Turboff v.
Gertner, Aron & Ledet Invs., 840 S.W.2d 603, 608 (Tex. App.-Corpus Christi 1992, writ
dism'd). The law of the case doctrine has been defined by the Texas Supreme Court as
"that principle under which questions of law decided on appeal to a court of last resort will
govern the case throughout its subsequent stages." Hudson v. Wakefield, 711 S.W.2d
628, 630 (Tex. 1986). By narrowing the issues in successive stages of the litigation, the
law of the case doctrine attempts to achieve uniformity of decision as well as judicial
economy and efficiency. Pitman v. Lightfoot, 937 S.W.2d 496, 513 (Tex. App.-San
Antonio 1996, writ denied); Dessommes v. Dessommes, 543 S.W.2d 165, 169 (Tex. Civ.
App.-Texarkana 1976, writ ref'd n.r.e.). The doctrine is based on public policy and is
aimed at putting an end to litigation. Pitman, 937 S.W.2d at 513. The doctrine has no
application, however, where a party amends his pleadings and adds a new cause of action
following reversal and remand from the first proceeding. See Berryman v. El Paso Natural
Gas Co., 838 S.W.2d 610, 614 (Tex. App.-Corpus Christi, 1992), rev'd on other grounds
by 858 S.W.2d 362 (Tex. 1993) (per curiam); Kropp v. Prather, 526 S.W.2d 283, 286 (Tex.
Civ. App.-Tyler 1975, writ ref'd n.r.e.).
If the first appeal is from the granting of a summary judgment motion, the doctrine
will not apply if the parties or causes of action are different under the subsequent
proceeding, or if the summary judgment evidence offered in support of the second motion
materially differs from that offered in support of the first motion. See Hudson, 711 S.W.2d
at 631; Kropp, 526 S.W.2d at 286.
Moreover, a decision rendered on an issue before the appellate court does not
absolutely bar reconsideration of the same issue on a second appeal. Briscoe v.
Goodmark Corp., 102 S.W.3d 714, 716 (Tex. 2003) (citing Kempner v. Huddleston, 90 Tex.
182, 37 S.W. 1066, 1066-67 (1896)). Application of the doctrine lies within the discretion
of the court, depending on the particular circumstances surrounding the case. See id.; see
also BFI Waste Sys. of N. Am., Inc. v. N. Alamo Water Supply Corp., No. 13-04-00069-CV,
2006 Tex. App. LEXIS 3007, at *7 (Tex. App.-Corpus Christi Apr. 13, 2006, pet. denied)
(mem. op.).
2. Discussion
In this appeal, the Partnership raises essentially the same contentions made in
Barraza I with respect to the foreclosure sale. See Barraza, 2004 Tex. App. LEXIS 6836,
at **3-4. In Barraza I, we held that the Barraza foreclosure sale was in violation of the
automatic stay and was, therefore, void. Id. at **4-6. In addition, we concluded that Alicia
had a justiciable interest in the property and, as a result, had standing to file suit. Id. at **6-7.
Because the parties are substantially similar and the claims have not changed since
our decision in Barraza I, we conclude that the law of the case doctrine applies to the
Partnership's first two issues. See Hudson, 711 S.W.2d at 630; Pitman, 937 S.W.2d at
513. Further, the Partnership has not directed us to any newly discovered evidence that
would undermine this Court's original decision in Barraza I. See Turboff, 840 S.W.2d at
608 (noting that the law of the case doctrine does not apply if the decision made in the first
appeal is clearly erroneous).
Moreover, the Partnership's contention that Alicia lacks standing because she was
not a debtor in the original bankruptcy filing is without merit. The record contains a copy
of the real estate note and lien executed on January 23, 1995, referencing the original
$25,000 loan. Both Sara and Alicia were named as co-debtors for the original loan and
both signed the document. See 11 U.S.C. § 1301 (entitled "Stay of action against co[-]debtor" and providing that once a bankruptcy petition has been filed "a creditor may not
act, or commence or continue any civil action, to collect all of any part of a consumer debt
of the debtor from any individual that is liable on such debt with the debtor . . . ."); see also
Cont'l Casing Corp. v. Samedan Oil Corp., 751 S.W.2d 499, 501 (Tex. 1988) (holding that
actions taken against a debtor after the bankruptcy petition has been filed are void and
without legal effect). We hold that the trial court did not err in concluding that it had subject
matter jurisdiction and that the foreclosure sale was in violation of the automatic stay and,
therefore, void. Accordingly, we overrule the Partnership's first two issues.
B. Mortgagees in Possession and Calculation of the Amount Due Under the
Promissory Note
In its third issue, the Partnership asserts that the trial court erred in calculating the
amount due under the June 30, 1997 promissory note. In addition, the Partnership argues
that it has been the mortgagee in possession since it foreclosed on its lien and, therefore,
it is entitled to "debt and interest and reimbursement for the taxes and insurance premiums
paid . . . and the costs of necessary repairs."
1. Applicable Law
"A mortgagee lawfully in possession of the mortgaged property has a right to retain
possession until the mortgage debt has been paid in full." Valley Int'l Props., Inc. v.
Brownsville Sav. & Loan Ass'n, 581 S.W.2d 222, 225 (Tex. App.-Corpus Christi 1979, no
writ) (citing Jasper State Bank v. Braswell, 130 Tex. 549, 111 S.W.2d 1079, 1083 (1938));
see Abram v. Se. Fund, 404 S.W.2d 673, 677 (Tex. Civ. App.-Tyler 1966, writ ref'd n.r.e.).
In order for a mortgagee to be lawfully in possession of a piece of property, the possession
must be "peaceably and legally acquired[,] . . . taken in good faith, free from deceit, fraud,
or wrong, and without violation of any contract relation with the mortgagor." Dominey v.
Unknown Heirs & Legal Representatives of Lokomski, 172 S.W.3d 67, 74 (Tex. App.-Fort
Worth 2005, no pet.) (quoting Wilhite v. Yount-Lee Oil Co., 140 S.W.2d 293, 296 (Tex. Civ.
App.-Texarkana 1940, writ ref'd) and citing Robinson v. Smith, 133 Tex. 378, 128 S.W.2d
27, 30 (1939)).
In Robinson, the court held that a mortgagee who obtains possession with express
or implied consent of the mortgagor or who has purchased the property at a void or
irregular foreclosure sale is a mortgagee lawfully in possession. Robinson, 128 S.W.3d
at 30. However, "[u]nder our law[,] a mortgagee in possession of either real or personal
property with the consent of the mortgagor undoubtedly has special rights in the property,
but the mere transfer of possession does not vest all of the mortgagor's title and estate in
the mortgagee." Amco Trust, Inc. v. Naylor, 159 Tex. 146, 317 S.W.3d 47, 51 (1958).
Moreover, a mortgagee in possession is obligated to incur and pay expenses
necessary for the upkeep of the premises. See Pioneer Bldg. & Loan Ass'n v. Cowan, 123
S.W.2d 726, 730 (Tex. Civ. App.-Waco 1938, writ dism'd); see also Chitsey v. Lockshin,
No. 03-00-00663-CV, 2001 Tex. App. LEXIS 7297, at *20 (Tex. App.-Austin Nov. 1, 2001,
pet. denied). But, the mortgagee in possession "is entitled to his debt and interest and
reimbursement for the taxes and fire insurance premiums paid by him and the costs of
necessary repairs and is bound to account for the payments made to him and the rents
and profits received by him or which he ought to have received by the use of reasonable
diligence and care." Johnson v. Frierson, 133 S.W.2d 594, 597 (Tex. Civ. App.-Waco
1939, writ dism'd) (citing Cowan, 123 S.W.2d at 727).
2. Discussion
The parties do not dispute the trial court's characterization of the Partnership as the
mortgagee in possession of the property. Based on the governing case law, the
Partnership is entitled to hold the property until the underlying debt and interest and any
other costs associated with the upkeep of the property are paid. See Cowan, 123 S.W.2d
at 730; see also Chitsey, 2001 Tex. App. LEXIS 7297, at *20. However, appellee is
entitled to offset that amount by any payments received or "ought to have [been] received
by the use of reasonable diligence and care" by the Partnership in the form of rent or
profits. See Johnson, 133 S.W.2d at 597.
The trial court awarded the Partnership "a Judgment for its debt, interest, advances
for taxes and improvements made to the property in the total amount of $137,399.71
through the date of this Judgment" and noted that the Partnership "is a mortgagee in
possession and shall continue as such until such time as all amounts under this Judgment
awarded . . . have been paid in full."
In its fourth motion for partial summary judgment, the Partnership alleged that it was
entitled to $475,074.32 (7) from appellee "on the notes and advances, as evidenced by [an]
amortization scheduled attached . . . ." The record contains an uncontroverted affidavit
executed by Carlos P. Levitas noting that he contracted Chavez Automated Design
Consultants Corporation to perform an analysis of the property to determine any
reasonable offsets for rent or profits to which appellee would be entitled. Relying on the
analysis, Carlos concluded that, "with the use of due diligence," the property could have
yielded approximately $3,500 per month for the 105 months that the property had been in
the Partnership's possession. See Tex. R. Civ. P. 166a(c) (providing that a summary
judgment may be based on the uncontroverted evidence of an interested witness if it is
"clear, positive, and direct, otherwise credible and free from contradictions and
inconsistencies, and could have been easily controverted"). Based on this evidence,
appellee would be entitled to an offset of $367,500.00 from the Partnership.
By subtracting the $367,500.00 offset from the $475,074.32 figure alleged by the
Partnership and adding one year's worth of interest at 14% per annum, we arrive at a
figure that is approximately that which the trial court found. Therefore, the trial court's
figure appears to reconcile with the applicable case law regarding the amounts to which
a mortgagee in possession is entitled. See Johnson, 133 S.W.2d at 597; Cowan, 123
S.W.2d at 730; see also Chitsey, 2001 Tex. App. LEXIS 7297, at *20.
The crux of the Partnership's remaining argument is that the trial court used the
wrong interest rate to calculate the amount due. The Partnership alleges that the trial court
mistakenly used a 14% interest rate when it should have used an 18% interest rate to
calculate the interest due. However, in the June 30, 1997 promissory note, the parties
agreed to an annual 14% interest rate. The Partnership has not directed us to any
evidence in the record demonstrating that it was entitled to 18% interest. In addition, the
Partnership has not cited to any authority providing that it was entitled to ignore the agreed
upon interest rate of 14% and impose a higher interest rate of 18%. We therefore
conclude that the trial court did not err in using a 14% interest rate in calculating the
interest due on the note.
Based on the foregoing, we conclude that the trial court did not err in awarding the
Partnership the total amount of $137,399.71 through the date of the judgment.
Accordingly, we overrule the Partnership's third issue.
IV. Conclusion
Having overruled all of the Partnership's issues, we affirm the judgment of the trial
court.
DORI CONTRERAS GARZA,
Justice
Memorandum Opinion delivered and
filed this the 5th day of March, 2009.
1. The bankruptcy court dismissed Sara's October 6, 1997 bankruptcy petition on January 18, 1998.
2. In their notice, the Barrazas identified the June 30, 1997 promissory note as:
That certain Promissory Note (as the same may have been extended, renewed, modified or
replaced) dated June 30, 1997, executed by SARA PASOL and ALICIA P. LEVITAS payable
to the order of the Lender in the original principal amount of $65,000, as of this date, the
outstanding principal balance is approximately $65,000 and the outstanding secured but
unpaid interest is approximately $5,110.65 with the approximate per diem interest accrual
being $24.93.
3. Sara's second bankruptcy petition was dismissed on May 18, 2000.
4. Sara died on August 20, 2000, and Alicia was named the independent administrator of Sara's estate
and, therefore, was substituted as "plaintiff." See Tex. R. Civ. P. 151 ("If the plaintiff dies, the heirs, or the
administrator or executor of such decedent may appear and upon suggestion of such death being entered
of record in open court, may be made plaintiff, and the suit shall proceed in his or their name.").
5. On appeal, only the Partnership is listed as "appellant." Moreover, after Alicia's death on December
28, 2005, Carlos P. Levitas was named independent administrator of both Sara's and Alicia's estates and,
therefore, was substituted as "appellee." See Tex. R. Civ. P. 151.
6. Although they were named plaintiffs in the trial court, the Barrazas as individuals are not named as
parties to this appeal. See Tex. R. App. P. 25.1(d)(5) (requiring that the notice of appeal state the name of
each party filing the notice).
7. On appeal, the Partnership contends that the amount due is $490,145.32. This figure is also
referenced in the amortization schedule attached to its fourth motion for partial summary judgment. However,
the Partnership, in its live pleading in the trial court, alleged that it was only entitled to $475,074.32 from
appellee. Therefore, we will use the $475,074.32 figure that the Partnership used in its live pleading. See
Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 568 (Tex. 2001) ("'Assertions of fact, not plead
in the alternative, in the live pleadings of a party are regarded as formal judicial admissions. A judicial
admission that is clear and unequivocal has conclusive effect and bars the admitting party from later disputing
the admitted fact.'") (quoting Houston First Am. Sav. v. Musick, 650 S.W.2d 764, 767 (Tex. 1983); Gevinson
v. Manhattan Constr. Co., 449 S.W.2d 458, 467 (Tex. 1969)); see also Blitz Holdings Corp. v. Grant Thornton,
LLP, No. 01-04-00627-CV, 2008 Tex. App. LEXIS 3315, at **32-35 (Tex. App.-Houston [1st Dist.] May 8,
2008, pet. denied) (mem. op. on reh'g).
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452 Pa. Superior Ct. 508 (1996)
682 A.2d 783
COMMONWEALTH of Pennsylvania, Appellee
v.
Rolf LARSEN, Appellant (Three Cases).
Superior Court of Pennsylvania.
Argued May 7, 1996.
Filed August 5, 1996.
Reargument Denied October 16, 1996.
*513 Stanton D. Levenson, Pittsburgh, for appellant.
Robert A. Graci, Deputy Attorney General, Harrisburg, for the Commonwealth, appellee.
Before POPOVICH, SAYLOR and EAKIN, JJ.
*514 POPOVICH, Judge:
We are asked to review the judgment of sentence (two years probation, costs of prosecution and removal from judicial office) by the defendant/appellant, Rolf Larsen, by the Court of Common Pleas of Allegheny County (per O'Brien, J.) for two counts of conspiracy to obtain possession of controlled substances. We affirm the convictions but remand for resentencing.
The facts, viewed in a light most favorable to the verdict-winner and drawing all reasonable inferences therefrom, reveal that in 1960 the defendant graduated from law school and practiced in Allegheny County for thirteen years before election to the Common Pleas Court. Four years later, the defendant won a seat on the Supreme Court of Pennsylvania and served seventeen years before a grand jury indicted him on two counts of criminal conspiracy regarding controlled substances and fourteen counts of possession of controlled substances.[1]
During a week-long jury trial, the evidence produced indicated that, beginning in the 1960s, the defendant was in therapy and receiving prescription medications. Once the defendant obtained judicial office, however, he became the subject of newspaper accounts in the Philadelphia Inquirer and the Pittsburgh Post-Gazette which triggered his desire to keep his mental illness a secret and avoid the societal stigma associated with this malady. Toward that end, the defendant was able to convince his attending physician (Dr. Earl Humphreys) to issue prescriptions in the names of his office employees (Barbara Roberts, Janice Uhler, Jamie Lenzi and Vera Freshwater) to treat his clinical depression and anxiety. *515 This surreptitious activity continued for over twelve years before it was uncovered by the Attorney General's Office. During this time, prescriptions for Diazepam (a/k/a Valium) and Prozac would be retrieved at a pharmacy by the defendant's employees using their NPA[2] cards (issued to state judicial employees), which allowed for a discount in the payment of drugs and reimbursement by the defendant upon receipt of the medication.
The drugs would be issued on prescriptions written by Dr. Humphreys at the direction of the defendant utilizing a staff employee's name as the patient, for the purpose of maintaining the defendant's privacy concerning his diagnosed mental illness and treatment (weekly therapy and psychotropic drugs[3]) from the news media in particular and the public in general. To facilitate secrecy regarding the defendant's condition and treatment, Dr. Humphreys kept no written account of the type, quantity or the date drugs were prescribed for the defendant (via his employees) in his office medical records, all to insure the defendant's privacy, despite the violation of state and federal record-keeping laws in the dispensation of controlled substances.[4]
*516 The defense painted a picture of the defendant as one rising like Phoenix from the ashes of a dysfunctional home to the singularly prestigious position of Justice of the Pennsylvania Supreme Court. Also, the defense paraded a host of esteemed witnesses to give testament to Larsen's "excellent" reputation in the community for being law-abiding and truthful. Lastly, the defendant submitted a cascade of letters of commendation and awards extolling his altruism and integrity as beyond reproach.
Yet, despite the accolades bestowed upon the defendant by his character witnesses (friends and employees alike), his undoing was his rationale for anonymity from the press and public regarding his mental illness and treatment with a scheme (labelled by the defendant as a mere "arrangement") executed with the aid of his physician and employees to keep his use of Prozac and Diazepam private. This did not sway the jury, which returned a verdict of guilty on two of the sixteen counts of the indictment charging criminal conspiracy to possess Schedule IV substances in violation of The Controlled Substance, Drug, Device & Cosmetic Act (hereinafter the "Drug Act").[5] An oral motion for a judgment of acquittal or a new trial was denied, sentence was imposed and this appeal followed raising twenty-nine trial and sentencing issues, along with eighteen ineffectiveness of counsel claims.
The first issue we shall address challenges the sufficiency of the evidence in that the defendant's conduct "in obtaining his medically required and medically prescribed prescription medicines through the use of an agent does not constitute a crime[.]" We disagree and look, initially, to Subsections 12 and 14 of Section 780-113 of the Drug Act, which reads:
(a) The following acts and the causing thereof within the Commonwealth are hereby prohibited:
* * * * * *
*517 (12) The acquisition or obtaining of possession of a controlled substance by misrepresentation, fraud, forgery, deception or subterfuge. . . .
* * * * * *
(14) The administration, dispensing, delivery, gift or prescription of any controlled substance by any practitioner or professional assistant under the practitioner's direction and supervision unless done (i) in good faith in the course of his professional practice; (ii) within the scope of the patient relationship; (iii) in accordance with treatment principles accepted by a responsible segment of the medical profession.
35 P.S. § 780-113(a)(12), (14). Additionally, the law requires written prescriptions for all controlled substances to assure that pharmacists keep accurate records of the drugs dispensed and to whom they were dispensed. Id. at §§ 780-111(b), 780-112.
There is no dispute that Dr. Humphreys, as a physician of thirty years, was aware of the law requiring records to be kept, and he considered that ministerial act an "important" part of the physician's practice. Nonetheless, he avoided maintaining any documentation of the appellant's mental illness or drug prescriptions because of his long-standing friendship with the appellant and the need for privacy regarding his mental condition, a courtesy never extended to any other patient.
With regard to Subsection 14, the prescribing of drugs by a practitioner must be performed in "good faith," within the scope of the "patient-physician" relationship, and be in compliance with accepted treatment principles endorsed by "a responsible segment of the medical community."
At bar, regarding treatment principles accepted by a responsible portion of the medical community, Drs. Fuller, McCormick and Wettstein were in agreement that record-keeping was "very important" in the long-term care of any patient, and to monitor the effects of prescription drugs a face-to-face meeting with the patient was necessary to gauge *518 the continuation or change of treatment, none of which was adhered to by the appellant's physician.[6] Further, the physicians were adamant in their refusal to prescribe medication for a patient in another's name. It was felt to be too dangerous, nonetheless Dr. Humphreys indulged the appellant's wishes and issued medication for him through his employees.
In light of such behavior by the patient and physician, viewed against the backdrop of accepted medical treatment at odds with the events which transpired here, we find sufficient evidence to establish a violation of Subsection 14 of Section 780-113. See Commonwealth v. West, 261 Pa.Super. 246, 396 A.2d 380, 382 (1978) ("The purpose of [the Drug Act] . . . is to regulate the distribution of drugs, avoid abuse and insure proper medical use."). To hold otherwise would ignore the clear mandate of the Legislature in requiring record-keeping in controlled substance cases, with the obvious benefit of avoiding abuse, tracking sales and checking a patient's consumption. See generally Commonwealth v. Bernabei, 86 Pa.Super. 550, 555 (1926); People v. Oviedo, 106 Cal.App.2d 690, 235 P.2d 612, 613-14 (1951) (Use of false name to obtain prescription prohibited by Health and Safety Code, notwithstanding the defendant's ability to have received the narcotics if he had not committed acts forbidden by law).
Similarly, we find that the appellant's securement of Diazepam (Valium) was in direct contravention of Subsection 12 of Section 780-113. Once the appellant put in motion a scheme to deceive the pharmacists who dispensed drugs prescribed for his employees, but intended for his use, the subsequent possession of the drug was not lawful. Rather, it was a deception perpetrated upon a third party/pharmacist by the concerted acts of the appellant's unindicted co-conspirator/physician. For example, each pharmacist who testified *519 was unanimous in his refusal to fill a prescription for other than the named patient. Each physician testifying for the prosecution echoed the same sentiments by refraining from issuing prescriptions for other than the patient.[7] Anything less would violate the medical professionals' Code of Ethics. See Vol. II, 4/5/94 at 587, 601-02.
The appellant states that Dr. Humphreys intended the prescribed medication to end up in his possession ultimately, and it merely took a circuitous route by way of his staff before reaching its destination. We find this "end justifies the means" argument rings hollow when viewed against the clear and unambiguous language of Subsections 12 and 14 of Section 780-113. See Statutory Construction Act, 1 Pa.C.S.A. § 1921(b) (The clear language of a statute is not to be ignored under the pretext to pursue its spirit).[8] Likewise, the appellant's argument that he did not "know that the innocent use of an agent to obtain the medicine he medically needed would be deemed to be criminal conduct" was an issue of credibility decided against his interest by the jury, which had the right to believe all, some or none of the evidence presented. See Commonwealth v. Barnosky, 264 Pa.Super. 443, 400 A.2d 168 (1979).
Further, we wish to respond to the appellant's analogy of his employees' conduct to an agent acting for an undisclosed principal in a real estate transaction as missing the mark. In the context of a real estate deal, the seller cares not to whom he sells the realty, whereas the pharmacists here testified that a sale would not have occurred had they known that the prescriptions were destined for one other than the named patient/employee.
By contriving to obtain a controlled substance (Diazepam) by the use of his employees, the appellant precluded each pharmacist from complying with housekeeping measures (matching records of dispensed controlled substances with a *520 patient) mandated by 35 P.S. § 780-112(a) (for two years). No amount of importuning of efforts to keep the appellant's mental illness and treatment from the public can minimize the fact that deception was at the heart of the appellant's scheme to achieve anonymity. Such conduct cannot and will not be condoned, for to do so in the face of legislation to the contrary, would constitute selective application of the law. An argument for change or exceptions to prosecution is more appropriately directed to the Legislature and not this tribunal.[9]
*521 Next, the appellant raises for our consideration the claim that prosecution of his "innocent and legitimate" actions impinged upon his federal and state constitutional right to privacy.
As observed in our discussion of the sufficiency claim, the appellant's conduct was proscribed by the Drug Act, and, as such, not innocuous activity entitling him to the mantle of protection afforded by the federal and state constitutions' privacy doctrine. To explicate, under the specific facts of this case, the appellant's mental condition and care were known to his staff, who fall outside any physician-patient confidentiality sphere and would undermine any "privacy" shield raised to *522 protect disclosure of his diagnosed dysthymia (chronic low feeling) with concomitant anxiety. Cf. Tracy v. Tracy, 377 Pa. 420, 105 A.2d 122, 125 (1954) (Attorney-client privilege not applicable if it takes place in presence of third party).
More to the point, the United States Supreme Court has upheld legislation requiring physicians prescribing controlled drugs to report to the State identification information about the patient; to-wit:
... disclosures of private medical information to doctors, to hospital personnel, to insurance companies, and to public health agencies are often an essential part of modern medical practice even when the disclosure may reflect unfavorably on the character of the patient. Requiring such disclosures to representatives of the State having responsibility for the health of the community, does not automatically amount to an impermissible invasion of privacy.
Whalen v. Roe, 429 U.S. 589, 602, 97 S.Ct. 869, 878, 51 L.Ed.2d 64 (1977) (Footnote omitted); see also In re Grand Jury Proceedings, 801 F.2d 1164, 1169 (9th Cir.1986); United States v. Greenberg, 334 F.Supp. 364, 366-67 (W.D.Pa.1971). Therefore, with the Commonwealth's right to require records of dispensed controlled substances to avoid abuse or contraindication of different drugs to one patient at the same time, we find no merit to the appellant's right of privacy argument or his assailing the constitutionality of 35 P.S. § 780-113(a)(12), (14).
Also, the appellant proffers in Issue G of his brief that the trial court committed reversible error in requiring him to disclose the names of witnesses he proposed to call at trial.
At the outset of the jury selection process, the court requested a list of the appellant's prospective witnesses "to be able to read their names to the prospective jurors and ask them to indicate ... if they knew any of them * * * because if the jurors kn[e]w any of the witnesses, that could create a problem." The appellant provided five of his character witnesses before the court offered, as an alternative, to poll the jury each time a defense witness was called to the stand.
*523 The appellant objected to the alternative method and supplied his witness list. He now states that he "suffered extreme prejudice" by this forced disclosure of a witness list because the Attorney General and the Pennsylvania Supreme Court allegedly contacted these witnesses "and induced some of them to refuse to testify...." These bald allegations of misconduct against the prosecution are substantiated by no more than the self-serving complaint of prejudice by the appellant. As unsupported allegations of ineffectiveness of counsel will be held meritless when raised in a vacuum and unsubstantiated in the record, see Commonwealth v. Brown, 342 Pa.Super. 249, 492 A.2d 745, 751 (1985), citing Commonwealth v. Pettus, 492 Pa. 558, 424 A.2d 1332, 1335 (1981), we conclude that the present claim of trial court error is similarly devoid of merit. Id.
With Issue H, the appellant continues his assault upon the trial court by averring that the admission of prescription charts was prejudicial.
The decision to admit charts is left to the sound discretion of the trial judge and will not be considered prejudicial where such evidence assists the jury in clarifying facts. Commonwealth v. Hess, 378 Pa.Super. 221, 548 A.2d 582, 590 (1988). The charts were used to aid the expert witnesses and jury in appreciating the drugs as to the type, quantity, date prescribed and to whom issued over a nine-year period. We conclude that the charts clarified facts establishing violations of Subsections 12 and 14 of Section 780-113. The trial court did not abuse its discretion in admitting the charts into evidence.
The appellant assigns the trial court with error in Issue I in permitting the Commonwealth to introduce evidence and testimony of all prescription medicines used by the appellant between 1984 to 1993.
The scheme between the appellant and Dr. Humphreys encompassed the years stated. The purpose for such confederation was carried out by means of by-passing treatment principles accepted by a responsible segment of the medical *524 profession without monitoring the patient with office visits and physical examinations as to the efficacy of the numerous drugs prescribed. As such, we find the introduction of the prescription evidence germane and not an abuse of discretion calling for a new trial.[10]
At Issue K, the appellant contends that the admission of the testimony of Barbara Roberts and Vera Freshwater was irrelevant (regarding picking-up prescription drugs in their names for the appellant in 1984-89 and 1992-93, respectively) in that neither was mentioned in the counts charging violations of Subsection 12 of Section 780-113. As remarked by the trial court on this matter:
The law is clear that no specific overt act need be alleged in a count charging conspiracy. Commonwealth v. Hassine, 340 Pa.Super. 318, 490 A.2d 438[, 460 n. 27] (1985). Nonetheless, the testimony of th[e]se two women was ... relevant to establish the conspiracy counts. Since [the appellant] has not alleged surprise, his claim of prejudice must fail.
Trial Court Opinion, 1/19/95 at 14. We agree.
The appellant cites at Issue L that the trial court erred in permitting certain witnesses (Drs. Fuller, McCormick & Wettstein) to prove state and federal record-keeping violations, which were irrelevant, inflammatory and prejudicial. See discussion supra, wherein we recount in detail the relevance of the doctors' and pharmacists' account of the appellant's doctor's failure to follow accepted medical practices in the community as to evaluating, diagnosing and treating a patient with follow-up visits and written documentation of the course of procedure recommended in a patient's treatment, none of which was complied with by Dr. Humphreys when it came to documenting or even examining the appellant as to his *525 care with prescription drugs. All of the preceding witnesses' testimony was relevant to establish a violation of Subsection 14 of Section 780-113 (not following accepted medical practices in the community) in the conspiratorial web of deceit engendered and prolonged by the appellant and his unindicted co-conspirator doctor. No error will be assigned for admitting such evidence at trial. See West, supra; Oviedo, supra.
Appellant's Issue M provides no ground for relief for we hold that no error was committed by the trial court in denying his Motion to Compel a Response to a Bill of Particulars.
The purpose of a bill of particulars is to give notice to the accused of the offenses charged in the indictment or information to allow him/her to prepare for trial and prevent surprise. Commonwealth v. Dreibelbis, 493 Pa. 466, 426 A.2d 1111, 1114 (1981).
Sub judice, the Commonwealth submitted an eleven-page reply to the appellant's request for information, the substance of which detailed the Commonwealth's theory of the case and responded to all relevant factual inquiries. See Exhibit "B" attached to Appellant's "Motion to Compel Response For Bill of Particulars".
The appellant's assertion that his ability to prepare for trial was prejudiced by the Commonwealth's failure to comply with Pa.R.Crim.P. 304 (Bill of Particulars) is undermined by our review of the Commonwealth's response to the appellant's demand for a more detailed Bill of Particulars without any evidence of prejudice manifested therein. There is no evidence that the Commonwealth withheld exculpatory evidence or evidence otherwise favorable to the defense. Nor were any exceptional circumstances alleged. In addition, no "surprises" were shown to have occurred at trial. In such a situation, we decline the appellant's invitation to find an abuse of discretion.[11]Commonwealth v. Mamon, 449 Pa. 249, 297 A.2d 471, *526 *527 *528 *529 478 (1972); Commonwealth v. Hassine, 340 Pa.Super. 318, 490 A.2d 438, 461 (1985).
We now turn to the second phase of the case concerning a host of challenges relating to sentencing, the first of which questions the appellant's removal from office as a Justice of the Pennsylvania Supreme Court. This issue has been rendered moot by the appellant's impeachment (and removal from office) by the Senate of Pennsylvania on October 4, 1994, following his trial before the General Assembly. Cf. Com. of Pa., Dept. of Trans. v. Hettich, 542 Pa. 583, 669 A.2d 323 (1995) (Appellee's claim that his substantive due process rights were violated by categorizing him under an habitual offender statute was rendered moot with the subsequent amendment of the statute placing him outside the statute's reach); Pa.R.App.P. 1972 (Any party may move to dismiss for mootness). Accordingly, with the Legislature's impeachment of the appellant, to respond to the "removal" claim at this stage would be merely advisory since the relief sought ("reinstatement") is beyond the authority of this Court to grant. In the same vein, no mention is made of the need for a ruling on the "removal" issue to settle any "pension" rights which may be affected by the appellant's conviction. See Appellant's Supplemental Brief at 49-50 (Issue XVIII). Therefore, in keeping with this Court's reluctance to issue advisory opinions, we will refrain from addressing the "removal-from-office" issue.[12] See note 1, supra.
*530 The next sentencing question relates to the court's alleged lack of jurisdiction to order the appellant to pay a portion (ten percent) of the grand jury and prosecution costs with the perfection of an appeal prior to their issuance.
On June 13, 1994, the appellant was sentenced to two years probation, two-hundred-forty hours of community service and removal from office. Four days later, the removal-from-office order was appealed, but a hearing to assess costs on July 5, 1994 (without any resultant entry of a dollar figure) was delayed until July 7, 1994. It was not until July 13, 1994, that the court imposed costs totalling $38,875.16, following which another appeal was perfected charging that the July 13th order was "a legal nullity" with the appellant's July 7th appeal divesting the court of jurisdiction to issue the July 13th order.
Whether the "cost of prosecution" is part and parcel of the sentence or is a distinct entity that may be appealed at a different/later date necessitates that we examine first 42 Pa. C.S.A. § 9728(a), which reads:
All restitution, reparation, fees, costs, fines and penalties shall be collectible in any manner provided by law. However, such restitution, reparation, fees, costs, fines and penalties are part of a criminal action or proceeding and shall not be deemed debts. A sentence, pretrial disposition order... for restitution, reparation, fees, costs, fines or penalties shall, together with interest and any additional costs that my accrue, be a judgment in favor of the probation department upon the person or the property of the person sentenced or subject to the order. [Emphasis added]
Act of December 17, 1990, P.L. 726, No. 181, § 1, as amended, 42 Pa.C.S.A. § 9728(a) (Supp.1996). In Commonwealth v. *531 Gaddis, 432 Pa.Super. 523, 639 A.2d 462, 472 (1994), we made it clear that fines and costs are "penal sanctions" arising from a criminal conviction. As a form of "punishment," the imposition of costs amounts to a part of the judgment of sentence. See, e.g., Commonwealth v. Gill, 288 Pa.Super. 538, 432 A.2d 1001, 1004 (1981) ("The Court ... ordered ... defendant's sentence suspended upon payment of a fine and costs of prosecution."); see also Commonwealth v. Coder, 490 Pa. 194, 415 A.2d 406 (1980); Commonwealth v. Davy, 456 Pa. 88, 317 A.2d 48 (1974).
Albeit an appeal of the judgment of sentence divests a lower court of jurisdiction to proceed further in the matter, Pa. R.App.P. 1701(b)(1) creates a caveat allowing the "trial court... [to t]ake such action * * * permitted or required by these rules or otherwise ancillary to the appeal ... proceeding." (Emphasis added) Further, with the imposition of sentence (costs) on June 13, 1994, the court had thirty days therefrom to formalize the dollar amount making-up such costs (42 Pa.C.S.A. § 5505), which time-table was satisfied with the July 13th order setting costs at $38,875.16. Id. The court, having already indicated that the cost of prosecution would be part of the appellant's sentence, set forth the dollar amount to give the sentencing cost substance and enforcement perimeters to allow the collection agent for the court to act timely. Cf. Commonwealth v. Denson, 157 Pa.Super. 257, 40 A.2d 895, 896 (1945) ("The direction to pay the costs contained in the order of October 6, 1944, was not a sentence to pay something additional to the penalty imposed by law. It was rather an incident of the judgment entered on September 26, 1944, not expressed but implied, for the law imposes the payment of the costs on every defendant who pleads guilty to or is found guilty of a criminal charge.").
Issue Z charges that the assessment of costs and expenses was illegal and an abuse of discretion because no authority (statutory or otherwise) exists to impose costs associated with convening a multi-county grand jury, witness fees, clerk of court costs and attorney's fees upon the appellant.
*532 We start our reply with the observation that the statute which made all persons convicted of a crime liable for the costs of their prosecution was 19 P.S. § 1223. This section has been repealed and replaced by the Act of July 9, 1976, P.L. 586, No. 142, § 2, eff. June 27, 1978, 42 Pa.C.S.A. § 1726, which provides that the Pennsylvania Supreme Court "shall prescribe by general rule the standards governing the imposition and taxation of costs, including the items which constitute taxable costs [and] the litigants who shall bear such costs...." Our high Court has yet to promulgate such standards, which activates the Judicial Code (42 Pa.C.S.A. § 20003(b)) to preserve 19 P.S. § 1223 as part of our common law. See Turner v. May Corp., 285 Pa.Super. 241, 427 A.2d 203, 206 n. 4 (1981); see also Gill, supra, 288 Pa.Super. at 552-53, 432 A.2d at 1009.
Next, under 16 P.S. § 1403 a defendant is obligated for the costs of prosecution and trial by the district attorney, with the amount to be paid initially by the county subject to reimbursement by the defendant. A panel of this Court most recently had the occasion to interpret Section 1403 to preclude the imposition of costs upon a defendant for an offense for which he was found not guilty. In the course of vacating the judgment of sentence imposing the illegal expenses, we wrote, as herein relevant, that:
... the statute [16 P.S. § 1403] explicitly permits a District Attorney to be reimbursed for expenses incurred in prosecuting cases, with the proviso that the defendant be "convicted" and the expenses have arisen "in connection with such prosecution."
* * * * * *
... 16 P.S. § 1403['s] ... very verbiage provides for the District Attorney's expenses incurred in the investigation, apprehension and prosecution of a defendant to be paid by a defendant provided he/she "is convicted and sentenced ... in connection with such prosecution."
Commonwealth v. Moran, 450 Pa.Super. 283, 289-91, 675 A.2d 1269, 1272-73 (1996) (Emphasis in original). Accord Coder, *533 supra (Extradition costs part of the expenses to prosecute and payable by the defendant).
It is the appellant's position that, unlike 16 P.S. § 1403, the Investigating Grand Jury Act[13] (IGJA) provides that the expenses of any multi-county investigating grand jury, and the costs and expenses resulting from any trial of a person against whom a presentment has been issued by said jury, "shall be borne by the Commonwealth" and should exclude a defendant from any obligation for costs and expenses resulting from his trial.
We agree with the appellant that IGJA provides in clear and unambiguous language that where a trial results out of a *534 grand jury investigation, the costs are to be satisfied by the Commonwealth. However, IGJA must be viewed as to what it does not provide as well, meaning there is no discussion or provision as to what transpires when the investigation initiated under IGJA culminates in a trial and conviction of the object of the inquiry.
We know that under the predecessor statute (19 P.S. § 1223), a defendant could not be held liable for expenses associated with a crime for which he was found not guilty. See Commonwealth v. Cutillo, 294 Pa.Super. 560, 440 A.2d 607 (1982); Commonwealth v. Smith, 239 Pa.Super. 440, 361 A.2d 881 (1976). It was only in those instances where the defendant was adjudged guilty that the recoupment statute was activated. Id. This same precept of requiring a convicted individual to shoulder the costs in bringing him/her to trial has been articulated in 16 P.S. § 1403. With the statutes and the case law interpreting each as a backdrop, we conclude that the rationale for issuing costs against a defendant is to shift the monetary drain of investigating and prosecuting crime upon the person who prompted the expenditure of time and money to bring the accused to justice, while not depleting the revenues of the public in doing so. It would add insult to injury to cause the citizenry who were wronged to absorb the cost of bringing the accused to justice. Cf. Commonwealth v. Hower, 267 Pa.Super. 182, 406 A.2d 754, 756 (1979) ("... neither the United States Constitution nor the Pennsylvania Constitution was violated by the requirement that `a person who commits a crime thereby triggering the prosecutorial machinery of the Commonwealth, should repay the Commonwealth the necessary costs and expenses of prosecution, if he is found guilty beyond a reasonable doubt, and is financially able to do so.'" (Citation omitted)).
With the "accountability" goal of Hower in mind, we do not read IGJA to immunize those tried and convicted from the obligation of paying the government's costs to accomplish such a result. 19 P.S. § 1223 (repealed but a part of our common law via the Judiciary Act Repealer Act, 42 Pa.C.S.A. § 20003(b)) and 16 P.S. § 1403 provide the nucleus to hold a *535 convict responsible for the expenditure of the public's revenue to effectuate justice. Stated otherwise, we hold that where IGJA leaves off (by making no mention of the consequences flowing from a grand jury presentment conviction), the common law takes over and obligates a defendant to answer for the costs of prosecution with conviction.[14] The priority of payment requires a governmental entity (county or Commonwealth) to satisfy the expense and seek reimbursement from the defendant. See Moran, supra; Cutillo, supra; Smith, supra. We will not realign this obligation to pay, where conviction occurs, from a defendant to the citizenry of this Commonwealth. Cf. 42 Pa.C.S.A. § 4553 (Supp.1996) (Expenses of any multi-county investigating grand jury shall be borne by the entity which initially expends revenue, with reimbursement from the Commonwealth if the county outlays revenue in the first instance).
In a related argument, the appellant asserts the spectra that the costs associated with his prosecution were excessive with his exoneration of fourteen of the sixteen counts charged by the jury, not to mention the twelve dismissed at the District Justice level, and should necessitate a pro rata reduction. From our review of the trial transcripts, and the accompanying criminal indictments, we discern that "all evidence relevant to the substantive charges was also relevant to the conspiracy counts. Therefore, the investigative and trial costs cannot be apportioned between those two sets of charges." Trial Court Opinion, 1/19/95 at 21; see also Coder, supra; Commonwealth v. Soudani, 193 Pa.Super. 353, 165 A.2d 709 (1960) (A defendant convicted of two charges may still be liable for the entire costs of prosecution even though one of the two charges is vacated).[15]
*536 In the final sentencing claim, the appellant avers that the imposition of two years probation (one year for each of his conspiracy convictions) was illegal. Because the illegality of sentence is non-waivable, we find the Commonwealth's contention that this issue is waived for the appellant's "failure to properly brief this argument" to be specious. Commonwealth v. Ford, 315 Pa.Super. 281, 461 A.2d 1281 (1983).
Under 18 Pa.C.S.A. § 906 (Supp.1996):
A person may not be convicted of more than one of the inchoate crimes of criminal attempt, criminal solicitation or criminal conspiracy for conduct designed to commit or to culminate in the commission of the same crime.
Act of December 11, 1986, P.L. 1517, No. 164, § 1, as amended. Additionally, 18 Pa.C.S.A. § 903(c) reads:
Conspiracy with multiple criminal objectives. If a person conspires to commit a number of crimes, he is guilty of only one conspiracy so long as such multiple crimes are the object of the same agreement or continuous conspiratorial relationship.
Act of April 28, 1978, P.L. 202, No. 53, § 7(2), as amended. The preceding statutes are to be read to prohibit, following conviction of multiple conspiracies, sentencing for each count charged where the "object" of the conspiracies was the same. Commonwealth v. Perez, 381 Pa.Super. 149, 553 A.2d 79 (1988); Commonwealth v. Riquelmy, 303 Pa.Super. 403, 449 A.2d 750 (1982).
At trial, the prosecution portrayed the appellant and Dr. Humphreys as "friends" for over twenty years who, beginning in 1981, conspired to funnel Diazepam (as well as other *537 controlled and non-controlled substances[16]) to Larsen via his staff to protect his privacy. This was the singularity of purpose for which the duo embarked on a course of deception, and each prescription issued in the appellant's employees' names (for ultimate retrieval by their "boss") was but an incident along a continuum of criminal behavior. The heart of the conspiracy being to secure drugs in violation of Subsections 12 and 14 of Section 780-113, each discrete purchase by the appellant's employees (with the use of Dr. Humphreys' prescription input) sought to achieve the common, single comprehensive goal of drugs without publicity. For such conduct, only the one penalty prescribed by the Crimes Code under 18 Pa.C.S.A. § 906 can be entered. See Commonwealth v. Von Aczel, 295 Pa.Super. 242, 441 A.2d 750 (1981); see also Braverman v. United States, 317 U.S. 49, 54, 63 S.Ct. 99, 102, 87 L.Ed. 23 (1942); Commonwealth v. Lore, 338 Pa.Super. 42, 487 A.2d 841, 855 (1984). Thus, the appellant should have been sentenced on only a single charge of criminal conspiracy. Commonwealth v. Black, 267 Pa.Super. 598, 407 A.2d 403 (1979).
Even the Commonwealth, in its brief at 133, makes reference to the consequences flowing from the illegality of the sentences. This Court may, in its discretion, either modify the sentence imposed or remand for modification. Lore, supra. We choose to remand to rectify the matter with our inability to determine whether the sentencing scheme of the court would be compromised were we to vacate the sentence of probation for either Subsection 12 or Subsection 14 conviction. Prudence and better practice dictate that we allow the court below to impose a sentence consistent with the facts and the law to penalize the appellant. Ford, supra. A remand will be ordered to achieve that end.
In the third phase of the appellant's appeal, trial counsel's ineffectiveness is being argued by new appellate *538 counsel unassociated with prior counsel in a brief which measures fifty-one pages in length and contains eighteen issues (covering two pages), all of which is in direction violation of Pa.R.App.P. 2116(a) & 2135(1).[17] Nonetheless, as we did with trial counsel's appellate brief raising trial and sentencing issues covering one hundred sixty-five pages, we will examine the claims in the interest of justice. Prior to doing so, we outline the standard which has been oft-stated to assess counsel's stewardship: 1) whether the issue/argument/tactic which counsel has foregone and which forms the basis of the assertion of ineffectiveness is of arguable merit; 2) whether the course chosen by counsel had some reasonable basis to benefit his client; and 3) whether counsel's (in)action worked to his client's prejudice. Commonwealth v. Pierce, 515 Pa. 153, 527 A.2d 973, 975 (1987).
The first three issues center around the allegedly erroneous instruction to the jury to convict under Subsection 14 of Section 780-113 being at odds with Commonwealth v. Salameh, 421 Pa.Super. 320, 617 A.2d 1314 (1992), trial counsel's failure to object as proof of ineffectiveness and the prosecution's engagement in misconduct in failing to bring this decision to the trial court's attention.
In Salameh, this Court held that the jury was instructed accurately with regard to the elements of proof necessary to convict under Subsection 14; namely:
The trial court ... instructed the jury on this issue as follows:
Then you must find one of the following three: That the dispensing, delivery, or prescribing of the medication for [sic] the controlled substance was not done in accord with *539 the treatment principles accepted by a responsible segment of the medical profession, or, ...
... this part of the instruction ... is an accurate statement of the law. Next, the trial court instructed:
Or, the Commonwealth must prove, beyond a reasonable doubt, that the defendant in prescribing or dispensing the controlled substance did not do so in accordance with treatment principles accepted by a responsible segment of the medical profession.
... This statement is also accurate.
Id. at 324, 617 A.2d at 1316. It was only when the trial court attempted to explain how the jurors could determine whether the Commonwealth had established what it was required to prove that it erred; to-wit:
In order for you to find that the government has successfully met its burden, you must find that the evidence which is presented demonstrates beyond a reasonable doubt that a responsible segment of the medical profession would find that the defendant's prescribing of controlled substances to the patients involved in this case medically unacceptable.
... This is an inaccurate statement of the law and instructs the jury to convict under the wrong circumstances.
* * * * * *
The trial court continued with the following instruction which was likewise an inaccurate statement of the law:
If the evidence in the case leaves you with a reasonable doubt as to whether a responsible segment of the medical profession would accept as reasonable the treatment given by the defendant to the patients involved, then you must find that the government has failed to establish this element of the case....
... the doubt of the jurors which would prevent conviction under this statute is a doubt that no responsible segment of the profession would accept the treatment methods, or that all responsible segments of the profession reject those methods. The trial court erred by requiring a finding that the Commonwealth had failed to establish an element if the *540 jury doubted the proof of something which would have relieved appellant of guilt, i.e., whether a segment of the profession would accept appellant's practices.
Id. at 324-25, 617 A.2d at 1316-17 (Emphasis in original). Here, unlike in Salameh, the trial court did not attempt to elaborate on the burden of proof as it applied specifically to the elements to return a conviction under Subsection 14; to-wit:
The elements of the offense of A-14 are, first, the prescription of a controlled substance by a medical doctor; second, that the prescribing of the controlled substance was not done in accord with treatment principles accepted by a responsible segment of the medical profession and/or that the prescribing of the controlled substance was not done in good faith by a medical doctor and/or that the prescribing of the controlled substance was not done within the scope of the doctor/patient relationship.
* * * * * *
... the Defendant is presumed innocent throughout the trial unless and until you conclude based on careful and impartial consideration of the evidence that the Commonwealth has proven him guilty beyond a reasonable doubt.
It is not the defendant's burden to prove that he is not guilty. Instead, it is the Commonwealth that always has the burden of proving each and every element of the crime charged, and that the Defendant is guilty of that crime beyond a reasonable doubt.
The person accused of a crime is not required to present evidence or prove anything in his own defense. If the Commonwealth's evidence fails to meet its burden, then your verdict must be not guilty.
On the other hand, if the Commonwealth's evidence does prove beyond a reasonable doubt that the Defendant is guilty, then your verdict should be guilty.
Although the Commonwealth has the burden of proving that the Defendant is guilty, this does not mean that the Commonwealth must prove its case beyond all doubt or to a *541 mathematical certainty nor must it demonstrate the complete impossibility of innocence.
A reasonable doubt is a doubt that would cause a reasonably careful and sensible person to hesitate before acting upon a matter of importance in his or her own affairs.
A reasonable doubt must fairly arise out of the evidence that was presented or out of the lack of evidence presented with respect to some element of crime.
A reasonable doubt must be a real doubt. It may not be an imagined one nor may it be a doubt manufactured to avoid carrying out an unpleasant duty.
Vol. IV, 4/7/94 at 1149-50, 1155-56. In light of the preceding, we see no contravention of the holding in Salameh at bar. With no error attributable to the trial court's charge, the allegations of ineffectiveness of counsel and prosecutorial misconduct fall as well.[18]Pierce, supra.
*542 Issues IV and V deal with "good character" and "record-keeping" instructions, the former of which consisted of the following relevant excerpts:
The law recognizes that a person of good character is not likely to commit a crime which is contrary to his nature. Evidence of good character may by itself raise a reasonable doubt of guilt and require a verdict of not guilty.
You must weigh and consider the evidence of good character along with other evidence in the case.
If on all the evidence you have a reasonable doubt of the Defendant's guilt, you must find him not guilty.
Vol. IV, 4/7-8/94 at 1154. The appellant has no problem with the accuracy of the first paragraph. The second paragraph is taken from Commonwealth v. Neely, 522 Pa. 236, 561 A.2d 1, 3 (1989), which requires that character evidence is not to be viewed in isolation but "weighed against any present allegation to the contrary." This is what the trial court informed the jury to do, and, given the verdict, the proponents of the appellant's good character were not believed.
*543 As for the instruction on record-keeping, it pertained to the statutory requirements that necessitate recordation when controlled substances are prescribed by a physician or dispensed by a pharmacist. See 35 P.S. § 780-112; West, supra; Bernabei, supra. This is what occurred here, and the prosecutor committed no impropriety in mentioning the subject in his closing. Commonwealth v. Turner, 390 Pa.Super. 216, 568 A.2d 622 (1989). Viewing the court's charge as a whole, we find the commission of no error as argued by the appellant in regard thereto.
Issues VI, VII and VIII each consider acts of omission by trial counsel as tantamount to ineffectiveness for failing to move for dismissal of Count I (Subsection 12 violation being a felony) when the Pharmacy Act (63 P.S. § 390-8) punishable as a misdemeanor applied, not objecting to the court's charge that the appellant could be found guilty without having participated in the commission of the crime and not objecting to the court's failure to define all the elements of 35 P.S. § 780-113(a)(12), respectively.
The Commonwealth's attorney, being vested with the sole discretion as to what crime(s) to charge, will not have that discretion impinged absent a gross abuse of discretion. Commonwealth v. English, 446 Pa.Super. 569, 667 A.2d 1123 (1995) (District Attorney and not trial court has the sole discretion to decide what offenses to charge); Commonwealth v. Slick, 432 Pa.Super. 563, 639 A.2d 482 (1982) (Semble). No such abuse of discretion was shown here. Alternatively, because the Drug Act is more specific (allowing for conviction when a "controlled" substance obtained by fraud) than the Pharmacy Act (labelling unlawful the procurement of "any drug" by fraud), the Commonwealth was not required to prosecute under the Pharmacy Act. Contrast Commonwealth v. Vukovich, 301 Pa.Super. 111, 447 A.2d 267 (1982) (Conviction for forgery (a general penal provision) reversed and a new trial awarded on charge of violating Pharmacy Act (special penal provision)).
It is true that the court charged:
*544 You may find the Defendant guilty of a crime without finding that he personally engaged in the conduct required for commission of that crime.
Vol. IV, 4/7-9/94 at 1148. Viewed in isolation, we would agree with the appellant that it is erroneous. However, appellate review of the trial court's charge must take into consideration the entire charge and not select segments. Commonwealth v. La, 433 Pa.Super. 432, 640 A.2d 1336, 1344 (1994). With that in mind, the preceding complained-of charge was succeeded immediately by the following directive to the jury that:
A defendant is guilty of a crime if he is an accomplice of another person who commits that crime. He is an accomplice if with the intent of promoting or facilitating commission of the crime, he solicits, commands, encourages or requests the other person to commit it.
You may find the Defendant guilty of a crime on the theory that he was an accomplice as long as you are satisfied beyond a reasonable doubt that the crime was committed and that the Defendant was an accomplice of the person who committed it.
Vol. IV, 4/7-9/94 at 1149. Read in context, and given its juxtaposition with the "accomplice" instruction, we find sophomoric appellate counsel's argument that the jury could not make the association between the now complained-of charge and the "accomplice" charge without the trial court "relat[ing] the concept of accomplice liability to its above instruction." To hold so would discount the common sense and intelligence of the jurors to follow instructions, constitute a myopic view of the charge and rule with judicial blinders on the overall picture of what actually transpired.
The "accomplice" charge fully and adequately explained the relevant precepts, which would have made trial counsel's objection thereto futile.
With regard to Subsection 12 of Section 780-113, the court instructed the jury:
*545 In order to find him guilty of these offenses [Subsection 12], you must find beyond a reasonable doubt the following elements.
First, that the Defendant acquired or obtained possession of a controlled substance, the second, that the controlled substance was acquired by misrepresentation, fraud, forgery, deception or subterfuge.
* * * * * *
Fraud involves deliberate and intentional conduct calculated to deceive.
Id. at 1148. The appellant contests the court's failure to define "misrepresentation," "forgery," "deception," or "subterfuge," and trial counsel's failure to object to this misfeasance as prejudicial to his case warranting a new trial to remedy the alleged error.
We begin with the proposition that "in order to obtain relief on a claim of ineffectiveness, the defendant must prove that counsel's failure to object to an instruction was prejudicial to his case." Commonwealth v. Humpheys, 367 Pa.Super. 154, 532 A.2d 836, 840 (1987) (Citations omitted). Here, conceding the court's failure to define all of the terms under Subsection 12 of Section 780-113 does not end our inquiry. The appellant must show how he was prejudiced by trial counsel's omission. Save for the self-serving statement that "[h]ad the jury been properly instructed there is a reasonable probability that the Appellant would have been acquitted of all charges," (see Appellant's Supplemental Brief at 28), there is no basis in law or fact in support of the claim.
The crux of the case for the defense was Larsen's denial of any "knowledge" that what he and Dr. Humphreys were doing was criminal in nature. Each recounted being motivated by a desire to keep from all the media and public-at-large the mental illness afflicting the appellant. This was accomplished, for some twelve years, by the use of prescriptions issued in the appellant's employees' names to avoid disclosure of the true recipient of the controlled substance (Diazepam).
*546 No claim was made by the Commonwealth that the appellant "misrepresented" himself to any third parties to secure drugs, or that he "forged" any instrument to accomplish this deed. Thus, for the court to have defined these terms would have been to expose the appellant to a conviction predicated upon conduct never engaged in by him. On the other hand, the evidence was saturated with proof of "fraud" (defined as an intent to deceive) sufficient for the jury to return a verdict for violating Subsection 12 of Section 780-113. Since the court did instruct on the meaning of "fraud" as one element which if proven to the jury's satisfaction ("beyond a reasonable doubt") would be sufficient to convict under Subsection 12 of Section 780-113, there was "little room for speculation by the jury[. As a result,] this Court h[o]ld[s] that the failure to define an element to the jury was not prejudicial error." Humpheys, supra, 367 Pa.Super. at 164, 532 A.2d at 840 (Citations omitted).
The remaining four claims have either been addressed (Issue XVI (dealing with classifying crimes misdemeanor rather than felony) and Issue XVII (sentencing on both conspiracies illegal)) or responded to in reply to an earlier claim (Issue XV (acquittal of counts three through sixteen warrant acquittal of Subsection 12) and Issue XVIII (removal from office not appropriate until appeals exhausted)).
Accordingly, finding merit only in the appellant's claim of illegality of sentence for the two conspiracies, we will remand to correct the sentence; but, in all other regards, we affirm the underlying convictions as substantiated by the evidence.
Judgment of sentence vacated, case remanded for resentence; jurisdiction is relinquished.
NOTES
[1] With the defendant's indictment, the Pennsylvania Supreme Court suspended him from office, the Court of Judicial Discipline suspended him without pay until the outcome of a Judicial Conduct Board and the Pennsylvania House of Representatives voted Articles of Impeachment to be tried on the Senate floor, the ultimate result of which was former Justice Larsen's impeachment and removal from office.
The sixteen-count indictment is the number remaining after a preliminary hearing before the District Justice resulted in a dismissal of numerous other charges. Following trial, the court stayed the sentence pending exhaustion of appellant's appeal rights.
[2] NPA is an acronym for National Prescription Administrators, which is a drug benefit program administered by the NPA on behalf of the state judiciary for its employees. Vol. I, 3/30-31/94; 4/4/94 at 391.
[3] "Psychotropic" means that the drug has an effect on the central nervous system or the brain as it alters the mind and the mood of the patient. Vol. II, 4/5/94 at 567.
[4] Dr. Humphreys did testify that, albeit the defendant was his friend of over twenty years, he felt "uneasy" prescribing medication in the names of other than the patient/defendant. However, he did so to protect his "friend" from negative publicity ("stigma") associated with mental illness. Vol. II, 4/5/94 at 488, 495, 514 & 518. Similarly, the defendant's staff was not all enamored with the idea of picking up drugs in their names for the benefit of the defendant, but did so to protect his privacy and because he was the "boss". Vol. I, 3/30-31/94; 4/5/94 at 220-21 (Barbara Roberts felt "uncomfortable" and "distressed", but she had no choice because the defendant was the "boss"), at 246 (Janice Uhler: Defendant was the "boss"); contrast at 287 (Jami Lenzi: "didn't feel that there was anything wrong"); Vol. II, 4/5/94 at 311 (Vera Freshwater did not fear loss of job. She did it to maintain defendant's privacy from the media).
[5] Act of April 14, 1972, P.L. 233, No. 64, § 1, 35 P.S. § 780-101 et seq.
[6] Dr. Humphreys did not physically examine the appellant before prescribing medication, and the type of drugs being taken was changed with a phone call from the appellant without visiting the doctor. This conduct was condemned by the Commonwealth's experts as inconsistent with accepted medical practice in the community. Vol. III, 4/6/94 at 542-43, 546, 573 (Dr. Fuller); at 599, 601 (Dr. McCormick); at 623, 643 (Dr. Wettstein).
[7] Even the psychiatrist who has been treating the appellant since August of 1990 indicated his refusal to prescribe medicine to a patient in the name of someone else. Vol. III, 4/6/94 at 865-67.
[8] Act of December 6, 1972, P.L. 1339, No. 290, § 3.
[9] We find equally unpersuasive the appellant's (Issue B) request that we label his behavior "de minimis" in nature and so trifling in magnitude and consequence (no victim to complain "no harm no foul" logic) that his conviction should be dismissed.
We view the manipulation of a right (to prescription drugs) intended for individual use and obtained by subterfuge perpetrated with the aid of unwilling participants (physician stated he felt uncomfortable with the cover-up) over a number of years to be unprotected activity. In other words, the appellant's scheme was proscribed by law and not too trivial or unique in its cause to escape condemnation by the Legislature. See 18 Pa.C.S.A. § 312 (De minimis infractions and the allowance of dismissal).
Issue D fares no better in the appellant's effort to overturn his conviction for criminal conspiracy on grounds that his acquittal of all fourteen counts (numbered three to sixteen) of the underlying overt acts of the two conspiracy convictions warrants dismissal of his convictions. We think not.
In this jurisdiction, inconsistent verdicts are not a basis for reversal. Commonwealth v. Carter, 444 Pa. 405, 282 A.2d 375, 376-77 (1971). In fact, this Court has held that a conviction of conspiracy, even when coupled with an acquittal of the underlying overt act of conspiracy, will not be reversed provided the facts are sufficient to support sustaining the jury's verdict. See, e.g., Commonwealth v. Cassidy, 423 Pa.Super. 1, 620 A.2d 9, 12 (1993); Commonwealth v. Jackson, 385 Pa.Super. 401, 561 A.2d 335, 339-40 (1989); Commonwealth v. Wanamaker, 298 Pa.Super. 283, 444 A.2d 1176, 1178 (1982). We have examined the facts and hold them sufficient in quantity and quality to uphold the appellant's convictions. We see no reason to deviate from that finding now.
In Issue E, the appellant contends that prosecutorial misconduct and abuse of process was engaged in by the Attorney General's office in leaking information of grand jury activity relative to its report and presentment concerning his indictment. The appellant, in his brief to us, proceeds to list conduct attributable to the Attorney General which is reflective of alleged conduct occurring after the grand jury presentment had been prepared but before it was publicized.
Because the appellant's allegations fall short of producing evidence that the grand jury process was tainted by the Attorney General and/or personnel from his office entitles him to no relief. Specifically, the appellant's notation that the Attorney General "proceeded to `selectively' present witnesses and dubious evidence to the grand jury to obtain th[e] preordained end [of prosecuting the appellant]" lacks substance, which cannot be buttressed by mere rhetoric of post-indictment activity. See Appellant's Brief at 80-91. Thus, absent evidence of at least a prima facie showing of impropriety by the appellant dispenses with the need to determine whether a dismissal of the indictment is warranted. Commonwealth v. Williams, 388 Pa.Super. 153, 565 A.2d 160, 163-64 (1989).
In Issue F, the appellant protests, in a dual attack on his sentence, that his conspiracy conviction should be graded a misdemeanor and that a layperson cannot conspire to violate 35 P.S. § 780-113(a)(14), as it applies to medical practitioners with regard to the grade of the offense for which he was convicted. 18 Pa.C.S.A. § 905 of the Crimes Code permits the crime of conspiracy to be graded equal to the most serious offense which is the object of the conspiracy.
The violations of the Drug Act constituted separate and discrete offenses of ungraded felonies. See 35 P.S. § 780-113(f)(3); Appellee's Brief at 69-71; Criminal Complaint, Counts 1 and 2. Consequently, the felony grading will stand. As to the "impossibility of conviction" under Subsection 14 of Section 780-113 because the appellant was not a "practitioner" as that term is defined under the Drug Act to encompass a person licensed to distribute drugs in the course of professional practice, albeit not preserved for appellate review we will address it in the interest of judicial economy and to avoid its resurfacing as an ineffectiveness of counsel argument.
Having so stated, we observe that the Commonwealth proceeded on a theory of accomplice liability. See Vol. IV, 4/7-9/94 at 1149. As such, we hold that the appellant was properly convicted of conspiring to violate Subsection 14 of Section 780-113. Further, the appellant's "selective prosecution" claim, raised for the first time on appeal, will be responded to (see supra judicial economy and ineffectiveness of counsel avoidance), and in doing so, the unsubstantiated, self-serving claim is devoid of merit and allows for no relief.
[10] The appellant's Issue J, that the Commonwealth compounded the erroneous and prejudicial introduction of the charts with argument that he abused drugs, is not substantiated in the record. Moreover, the court instructed the jury that the appellant was not charged with abusing drugs, which we find eliminated any likelihood of prejudice. See Commonwealth v. Bonace, 391 Pa.Super. 602, 571 A.2d 1079, 1084 (1990).
[11] In his bid for a new trial, the appellant raises ten issues regarding the court's charge to the jury. Examining the issues in reverse order of presentment, the appellant contends (Issue W) that reinstructing the jury, rather than merely answering "yes", to a question whether the prosecution needed to prove "beyond a reasonable doubt a criminal intent and/or knowledge to find the Defendant guilty in regards to count 3 through 16?" was error. Because the appellant was found not guilty of counts three through sixteen, and no judgment was imposed, we need not address this issue. See Commonwealth v. Smith, 322 Pa.Super. 389, 469 A.2d 676, 679 (1983).
Next, the appellant points to the court informing the jury of the fact that this case did not involve drug abuse as highly prejudicial and justifying a new trial. Ironically, it was the appellant, in his Request for Jury Instructions at Nos. 7 & 8, who asked and received the trial court's imprimatur to advise on the subject he now complains should never have been broached. See Vol. IV, 4/7-9/94 at 1095-97. Despite this acquiescence by the appellant, we have examined the jury charge as a whole and hold that the disputed portion thereof (appellant "is not charged with abusing drugs, and the Commonwealth need not prove that [the appellant] did abuse drugs") guided the jury by narrowing its topic for deliberation. See Commonwealth v. Prosdocimo, 525 Pa. 147, 578 A.2d 1273, 1276 (1990).
Issue U charges that the trial court erred in failing to instruct the jury that "reckless or negligent conduct was not enough to convict." On this subject, the trial court informed the jury that the Commonwealth was required to prove beyond a reasonable doubt that the appellant knew he was receiving a controlled substance and was aware of the presence and nature of the substance. Vol. IV, 4/7-9/94 at 1148, 1180-81 & 1182 (appellant intended his acts and knew what he possessed constituted a controlled substance Diazepam). Nothing from our review of the charge suggests that either reckless or negligent conduct was sufficient to convict. The law presumes that the jury will follow instructions. Commonwealth v. Stoltzfus, 462 Pa. 43, 337 A.2d 873, 879 (1975). As such, we find no commission of error by the trial court.
At Issue T, the appellant argues that the trial court erred in not telling the jury that he was not charged with committing a crime involving NPA.
During the course of trial, the court gave a cautionary instruction, following a reading of the label on a vial that federal law prohibited transfer of drugs to anyone other than the patient, that no federal law had been violated nor had the appellant been charged with defrauding NPA. Vol. II, 4/5/94 at 329-30 & 333. As with the preceding issue, with the court's advising what the appellant was charged with by the prosecution at Vol. IV, 4/7-9/94 at 1147, we have no reason to believe that the jury did not comply with the instruction at the close of the case and direction during the course of trial regarding the purpose of the NPA testimony. Stoltzfus, supra.
In response to Issue S, we hold that the court properly instructed the jury that, "[a]lthough the [appellant] has not been charged with violating [35 P.S. §§ 780-111, 780-112 record to be kept by pharmacies], you may consider that these record-keeping requirements are, in fact, mandatory upon physicians and pharmacists when you decide this case." This instruction was needed to place in perspective testimony to establish the standard medical practice in the community (required to be contravened to establish a conspiracy to violate Subsection 14 of Section 780-113). Thus, the instruction was proper and not an abuse of discretion. Commonwealth v. Birdseye, 432 Pa.Super. 167, 637 A.2d 1036, 1043 (1994).
Appellant's Issue R raises a claim similar to the preceding issue, the rationale for which is equally applicable here, allowing the court to state to the jury that the record-keeping requirements mandated for physicians and pharmacists could be considered by the fact-finder, even though the appellant was not charged with the same, in deciding the case. Id. This instruction explained the relevant precepts applicable to the case, and it was a proper subject of inquiry given the Subsection 14 charge. Commonwealth v. West, 261 Pa.Super. 246, 396 A.2d 380 (1978) does not preclude the introduction of such information to complete the picture of conspiratorial activity charging a violation of Subsection 14 (whether prescription drugs were in compliance with treatment principles accepted by a responsible segment of the medical profession, which is required to keep records under 35 P.S. § 780-112).
Issue Q attributes the trial court with error in failing to direct the jury that the appellant could be found guilty of Subsection 14 of Section 780-113 because it applies solely to a medical practitioner or professional assistant under his/her direction. With the Commonwealth proceeding on a theory of accomplice liability as to Subsection 14, there was no basis for the court to have given the instruction complained-of by the appellant. The issue affords the appellant no remedy.
At Issue O, the appellant assails the court's charge on conspiracy because the evidence allegedly was insufficient to instruct on such a crime. Our discussion supra, wherein we held that the evidence was sufficient beyond a reasonable doubt to uphold the appellant's conspiracy convictions, dispenses with the need to respond, in detail, here to an argument which has already been answered and held meritless in a different context, but yielding the same result that the appellant conspired to violate Subsections 12 and 14 of Section 780-113.
In responding to Issue P, wherein the appellant verbalizes that the court erred in advising the jury that a conviction on the conspiracy charges could be returned if it found that on "one of the twenty-eight occasions" the drugs were prescribed by Dr. Humphreys for the benefit of the appellant, we hold that a verdict of guilty could be returned. This is so even though one-half of the twenty-eight occasions mentioned to convict on conspiracy for prescribing drugs were dismissed at the preliminary hearing and the remaining fourteen substance offenses (at counts three through sixteen) resulted in acquittal does not affect the soundness of the two conspiracy verdicts at counts one and two of the indictment. As observed by the Commonwealth:
... nothing in the law requires that an overt act in pursuance of a conspiracy must also be charged as a substantive offense.... [T]here is no requirement that the information even set out the avert acts. Commonwealth v. Steele, 408 Pa.Super. 128, 135, 596 A.2d 225, 229 (1991), appeal denied, 531 Pa. 653, 613 A.2d 559 (1992).
Larsen's acquittal of the fourteen substance offenses which were among the objects of the conspiracies charged does not effect the soundness of the verdicts of guilt on the conspiracy charges. It bears repeating that "the law has always considered criminal conspiracy and the completed substantive offense to be separate crimes." Commonwealth v. Miller, 469 Pa. 24, 364 A.2d 886, 887 (1984). The rationale for this distinction was summarized by the United States Supreme Court in Iannelli v. United States, 420 U.S. 770, 778, 95 S.Ct. 1284, 1290, 43 L.Ed.2d 616, 623 (1975): "In sum, the danger which a conspiracy generates is not confined to the substantive offense which is the immediate aim of the enterprise."
Appellee's Brief at 98-99. We agree and find meritless the assertion of trial court error presented here.
In the last of the appellant's attacks on the charge to the jury (Issue N), he postulates that the failure of the court to instruct the jury that to convict him "criminal intent" had to be established, and his conviction could not stand in its absence. Specifically, the appellant asserts that the court failed to instruct the jury that "criminal intent (guilty knowledge, conscious wrongdoing) is an essential element of the offense[s]" presented, which encompass counts one to sixteen. Since "not guilty" verdicts were returned as to counts three to sixteen, any assignment of error as to these counts is moot. See Smith, supra.
As for counts one and two, our review of the entire charge, which includes two questions by the jury as to the "criminal intent" element, satisfies us that the veniremen were placed on notice that proof of "guilty knowledge" was needed to return a verdict of guilty. On this point, the trial court told the jury that to find the defendant guilty the Commonwealth needed to prove beyond a reasonable doubt that the defendant "knew" he was obtaining Diazepam. Vol. IV, 4/7-9/94 at 1181. This comports with the spirit of and language in Commonwealth v. Lurie, 524 Pa. 56, 569 A.2d 329, 333 (1990), which provides that:
Fraud involves deliberate and intentional conduct calculated to deceive. Reckless conduct or negligence is not conduct deliberately calculated to deceive
....
Generally, when the proscribed conduct necessarily involves deceitful acts and acts of fraud, criminal intent or guilty knowledge is an essential element of the offense. [Citation omitted]
Subsection 12 of Section 780-113 prohibits the acquisition of controlled substances by "misrepresentation, fraud, forgery, deception or subterfuge," which conduct is deliberate behavior calculated to deceive. Id. Informing the jury that the Commonwealth must prove that the appellant "knew" he acquired or obtained a controlled substance is interpreted by this Court (along with the reasonable inferences to be drawn therefrom) to advise the jury that "guilty knowledge is an essential element of the offense." See Vol. IV, 4/7-9/94 at 1151 (Defendant agreed with another that either would engage in conduct constituting a crime or an attempt or solicitation to commit those crimes, and defendant did so with the intent of promoting or facilitating the commission of those crimes); at 1182 (In response to a second question, the jury was informed: "the Commonwealth must prove beyond a reasonable doubt that the Defendant knew he was receiving a controlled substance."). To read the preceding instructions as not informing the jury that "knowledge" was an element of the offenses would do violence to the tenet that jury charges are to be read as a whole to determine if they instruct the jury on the law, and the court may use its own language provided it adequately, accurately and clearly expresses the precepts of law. Commonwealth v. Jones, 449 Pa.Super. 58, 672 A.2d 1353, 1358 (1996); Commonwealth v. Balog, 448 Pa.Super. 480, 672 A.2d 319, 323 (1996); Commonwealth v. Whitner, 278 Pa.Super. 175, 420 A.2d 486, 490 (1980). Consistent with such remarks, we find the commission of no error by the trial court in failing to quote Lurie verbatim.
Interestingly, the appellant denied having any knowledge that his actions were prohibited (see Vol. III, 4/6/94 at 1062), a matter which the credibility-assessor-jury disbelieved despite the "good character" testimony for truthfulness proffered by the appellant. We will not invade the bailiwick of the jury on a credibility issue, an area foreclosed to us on appeal.
[12] Even if, arguendo, we could address the merits of the "removal-from-office" claim, we would not be able to grant the appellant any relief in the absence of authority ("subject matter jurisdiction") to entertain this claim since "the Supreme Court [has] exclusive jurisdiction over all appeal from the final orders of the courts of common pleas in all cases involving the right to public office. 42 Pa.C.S.A. § 722(2)." Commonwealth v. Spano, 451 Pa.Super. 226, 679 A.2d 240, 245 (1996). The appellant, being chosen by the electorate for a certain tenure and paid out of the public treasury, was a "public officer" as an elected Justice to the Pennsylvania Supreme Court. The appellant's removal from office, be it not for his impeachment by the Legislature, would be reviewable by the Pennsylvania Supreme Court. We see no need to transfer this matter to the high Court, however, in the face of "impeachment" that precludes the remedial relief ("reinstatement") sought by the appellant and exceeds the bounds of even the Supreme Court to grant.
[13] 42 Pa.C.S.A. § 4553(b) provides: "The expenses of any multi-county investigating grand jury shall be borne by the Commonwealth. In addition, the costs and expenses resulting from any trial of a person against whom a presentment has been issued by a multi-county investigating grand jury shall be borne by the Commonwealth. Costs and expenses under this subsection include, but are not limited to, all reasonable costs incurred by the county for the services of the courts, the county prison, the district attorney and any public defender appointed by the court and related costs and expenses incurred by the county in the course of the trial. Counties shall be reimbursed from the General Fund of the Commonwealth upon application to the State Treasurer through the Office of Attorney General pursuant to procedures prescribed by that office". As amended Dec. 19, 1984, P.L. 1089, No. 218, § 3, imd. effective; Dec. 19, 1984, P.L. 1189, No. 225, § 1 imd. effective, 42 Pa.C.S.A. § 4553(b) (Supp.1996).
In contrast, Section 1403 reads: "All necessary expenses incurred by the district attorney or his assistants or any officer directed by him in the investigation of crime and the apprehension and prosecution of persons charged with or suspected of the commission of crime, be paid by the county from the general funds of the county. In any case where a defendant is convicted and sentenced to pay the costs of prosecution and trial, the expenses of the district attorney in connection with such prosecution shall be considered a part of the costs of the case and be paid by the defendant." Act of Aug. 9, 1955, P.L. 323, § 1403, 16 P.S. § 1403.
In each statute, the initial costs associated with the investigatory and prosecutorial courses pursued by the government are to be paid by the county. Ultimate reimbursement occurs to said entity, as we interpret the statutory and common law framework existing in this Commonwealth, when and if the defendant is convicted and not before. See, e.g., Commonwealth v. Moran, 450 Pa.Super. 283, 675 A.2d 1269 (1996). Once this triggering mechanism of the guilt-determining-process has taken place, the imposition of costs as an incident of sentence comes into play.
[14] Even the Sentencing Code provides: "Any ... costs of ... appropriate governmental agency shall be borne by the defendant...." 42 Pa.C.S.A. § 9728(g) (Supp.1996) (Emphasis added).
[15] In Issues AA and CC, the appellant asserts that the failure of the Commonwealth to give him "notice" in advance of seeking to remove him from office and impose costs, along with the impropriety assigned to the Pennsylvania Supreme Court as to the manner and method it sought to regulate the appellant's retrieval of his office belongings, violated his due process rights. Each claim has been reviewed and found to be meritless.
Further, as to the appellant's assault upon the "reasonableness" of apportioning ten percent of the cost of convening the Ninth Statewide Grand Jury to him (i.e., $38,857.16), the record (Transcript of June 13, 1994) and law are supportive of the propriety of the amount to be paid by the appellant. Commonwealth v. Coder, 490 Pa. 194, 415 A.2d 406 (1980).
[16] Other Schedule IV drugs listed but not charged were: Serax, xanax, ativan, percocan, percocet, vicodin and propacet. Non-controlled drugs were: Buspar, robaxisol, flexeril, desyrel, trivil, proxac, elavil, norpramin and tylenol with codeine to name a few.
[17] The sheer number of ineffectiveness claims raises a question in this Court's mind as to the merit of any of them. Review the claims we must, but we have in our experience found that a profusion of issues masks a weak case for reversal. The better approach would be to select such issues exhibiting a reasonable likelihood of success, this way the resources of the court are not squandered on frivolous claims. See Commonwealth v. Sirbaugh, 347 Pa.Super. 154, 500 A.2d 453, 456 (1985).
[18] In a related argument (Issue IX), the appellant believes that counsel was ineffective when he neglected to object to the court's charge on Subsection 14, i.e., to the "good faith" issuance of prescriptions in a "doctor-patient" relationship. It is his contention that the Commonwealth's case did not consist of such elemental aspects, and, therefore, should not have been read to the jury. This is refuted by the evidence, which indicates that Dr. Humphreys was aware (when first approached by the appellant in 1981) that to issue prescription drugs in the name of someone other than the patient to circumvent record-keeping requirements was wrong, but it continued because of the doctor's friendship with the appellant and to protect his privacy.
Maintenance of records on a patient was considered "important" by Dr. Humphreys. Even so, he dispensed with this procedure in the appellant's case and provided this secrecy for no other patient. Vol. II, 4/5/94 at 471 & 483. Although the doctor felt "uneasy" in acceding to the appellant's request for anonymity, the practice continued for years before it was uncovered by the authorities. In this light, to allow the jury to consider the "good faith" and "doctor-patient" elements of Subsection 14 was proper and not reflective of inept trial counsel.
As to Issue X, wherein the "right to privacy" remarks of the court to the jury (as not being a defense) were permitted for jury consideration without counsel's objection, our discussion supra as to the inapplicability of such a defense (see Whalen v. Roe, 429 U.S. 589, 602, 97 S.Ct. 869, 877-78, 51 L.Ed.2d 64 (1977)) dispenses with the need to address it here under the cloak of an ineffectiveness of counsel claim.
Issue XI, claiming the failure of counsel to cite Commonwealth v. West, 270 Pa.Super. 301, 411 A.2d 537 (1979), in connection with Issue G (error to order disclosure of witness list) is specious and does not warrant extended discussion except to observe that the trial court was within its authority in seeking a witness list to inquire of the jury if anyone knew of the proposed witness(es) to avoid any chance of a mistrial in the absence of such a precaution. Similarly, counsel was not ineffective for failing to cite the definition of "infamous crime" from In re Braig, 527 Pa. 248, 590 A.2d 284 (1991) in his brief (Issue XII) since this related to the appellant's removal from office following his conviction by the trial court, an issue which we have held to be moot with the appellant's impeachment and removal from office by the Legislature. This renders any discussion on the issue superfluous.
Under the umbrella of Issue XIII, appellate counsel raises eight sub-issues attributing their waiver to prior counsel's incompetence. Because each sub-issue has either been held to be meritless in another portion of this opinion or meritorious (conspiracy convictions) and acted upon, we will not consume further time in replicating that which has already been stated labelling prior counsel effective.
Issue XIV assigns trial counsel with ineffectiveness for failing to object to the court's instruction of the term "prescription" or the Commonwealth's closing argument referencing the term's inapplicability to a hospital setting.
At trial, the defense elicited evidence that prescription drugs were issued at Allegheny General Hospital under a fictitious name to protect a patient's identity, but once released all prescription drugs were issued in the discharged patient's real name. Thus, since the defense placed the dispensing of drugs in a hospital at issue, the topic was a proper subject of the court's instruction and closing argument.
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HUB PARTNERS XXVI, LTD. v. BARNETT
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HUB PARTNERS XXVI, LTD. v. BARNETT2019 OK 69Case Number: 115995Decided: 10/29/2019THE SUPREME COURT OF THE STATE OF OKLAHOMA
Cite as: 2019 OK 69, __ P.3d __
NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.
HUB PARTNERS XXVI, LTD., Plaintiff/Appellant,
v.
THOMAS BURNELL BARNETT, Defendant/Appellee.
ON CERTIORARI FROM THE COURT OF CIVIL APPEALS, DIVISION IV.
¶0 Hub Partners XXVI, Ltd. filed a foreclosure action against Thomas Barnett. The district court granted Hub a money and foreclosure judgment. Barnett filed for bankruptcy. During the bankruptcy, Barnett made court-approved payments to Hub. Barnett failed to pay the debt in full, and the bankruptcy court dismissed his bankruptcy. Over a month after the dismissal, Hub issued an execution on the pre-bankruptcy judgment. Barnett objected to the execution arguing the judgment was dormant pursuant to 12 O.S., § 735, since more than five years had passed and Hub had not renewed the judgment. The district court agreed and granted Barnett's motion to release the dormant judgment and vacate the execution and sale order. Hub appealed, and the Court of Civil Appeals affirmed the district court's judgment. This Court granted certiorari.
COURT OF CIVIL APPEALS' OPINION VACATED;
DISTRICT COURT'S JUDGMENT AFFIRMED IN PART AND REVERSED IN
PART; REMANDED WITH INSTRUCTIONS.
Kelly M. Parker, LAMUN MOCK CUNNYNGHAM & DAVIS, P.C., Oklahoma City, Oklahoma, for Plaintiff/Appellant.
Charles C. Ward, THE LAW OFFICE OF CHARLES C. WARD, PLLC, Oklahoma City, Oklahoma, for Defendant/Appellee.
Winchester, J.
¶1 In 2011, Plaintiff/Appellant Hub Partners XXVI, Ltd. obtained a money judgment and foreclosure of a mortgage against Defendant/Appellee Thomas Burnell Barnett. Shortly thereafter, Barnett filed for bankruptcy, staying the execution of Hub's foreclosure judgment. In 2016, the bankruptcy court dismissed Barnett's bankruptcy for failure to maintain payments to Hub as ordered by the court. Hub attempted to execute the judgment. Barnett moved the district court to release the dormant judgment and to vacate the execution and sale. The district court granted Barnett's motion. Hub timely appealed, and the Court of Civil Appeals affirmed the district court's judgment. This Court granted certiorari. The issues before the Court are (1) whether Hub's foreclosure judgment is dormant, and (2) whether the mortgage at issue merges with the foreclosure judgment. For the reasons stated herein, we hold that the 2011 foreclosure judgment is dormant, but the mortgage lien does not merge into the foreclosure judgment and continues to secure Barnett's obligation owed to Hub.
I. FACTS AND PROCEDURE
¶2 On July 28, 2010, Hub filed to foreclose on real property and collect on a promissory note executed by two defendants, one of whom was Barnett. The district court granted judgment in Hub's favor and filed the judgment on February 24, 2011. Hub proceeded to execute on the judgment. Barnett then filed for Chapter 13 Bankruptcy on March 4, 2011, staying the execution and sale.
¶3 Barnett's bankruptcy plan, filed and confirmed on August 14, 2011, provided for payments to Hub. The plan covered principal, interest, and arrearages. However, Barnett failed to make payments under the plan, and on July 13, 2016, the bankruptcy court dismissed Barnett's case.
¶4 On August 19, 2016, thirty-seven days after the dismissal of Barnett's bankruptcy, Hub issued an alias execution on the foreclosure judgment. On September 22, 2016, Hub issued its second alias execution. On December 1, 2016, a sheriff's sale was held. However, a day prior, on November 30, 2016, Barnett filed a motion to release the dormant judgment and a motion to vacate the execution and sheriff's sale. Barnett claimed the judgment against him was unenforceable pursuant to Oklahoma's dormancy statute, 12 O.S.2011, § 735. He supported this argument before the district court by referencing facts that Hub attempted the second execution of its judgment over five years after the date of the first execution and Hub never filed a notice of renewal of judgment. In response, Hub argued Barnett's payments under the bankruptcy plan extended the dormancy period and it timely pursued its execution. Hub further contended the dormancy statute did not apply to foreclosure judgments.
¶5 The district court ruled Hub failed to file a notice of renewal of judgment, required by 12 O.S.2011, § 735, and ruled the bankruptcy did not stay the filing of the notice of renewal. The court also held Hub missed the additional thirty-day extension of time for a creditor to execute on its judgment after the dismissal of the bankruptcy per 11 U.S.C. § 108(2). The district court released the judgment and vacated the execution and sheriff's sale. The court further ruled that the note and mortgage merged into the dormant judgment. Hub timely appealed. The Court of Civil Appeals affirmed the district court's judgment, holding Hub's foreclosure judgment was dormant. This Court granted certiorari.
II. STANDARD OF REVIEW
¶6 The issues in this appeal concern the district court's legal interpretation of Oklahoma's dormancy statute and how it applies to foreclosure judgments. Statutory construction poses a question of law; the correct standard of review is de novo. State ex rel. Protective Health Servs. State Dep't of Health v. Vaughn, 2009 OK 61, ¶ 9, 222 P.3d 1058, 1064. Under the de novo standard of review, the Court has plenary, independent, and non-deferential authority to determine whether the trial tribunal erred in its legal rulings. Id.
III. DISCUSSION
¶7 The two primary issues before this Court are (1) whether Hub's foreclosure judgment is dormant, and (2) whether the mortgage at issue merges with the foreclosure judgment. We address each in turn.
¶8 We first examine Oklahoma's dormancy statute. When the Court examines a statute, our primary goal is to determine legislative intent through the "plain and ordinary meaning" of the statutory language. In re Initiative Petition No. 397, 2014 OK 23, ¶ 9, 326 P.3d 496, 501. Because the Legislature expresses its purpose by words, the plain meaning of a statute is deemed to express legislative authorial intent in the absence of any ambiguous or conflicting language. Id. Oklahoma's dormancy statute, 12 O.S.2011, § 735, provides in pertinent part:
A. A judgment shall become unenforceable and of no effect if, within five (5) years after the date of filing of any judgment that now is or may hereafter be filed in any court of record in this state:
1. Execution is not issued by the court clerk and filed with the county clerk as provided in Section 759 of this title;
2. A notice of renewal of judgment substantially in the form prescribed by the Administrative Director of the Courts is not filed with the court clerk;
3. A garnishment summons is not issued by the court clerk; or
4. A certified copy of a notice of income assignment is not sent to a payor of the judgment debtor.
. . . .
C. This section shall not apply to judgments against municipalities or to child support judgments by operation of law.
The provisions of § 735 are to be strictly construed. Chandler-Frates & Reitz v. Kostich, 1981 OK 74, ¶ 10, 630 P.2d 1287, 1290.
¶9 Oklahoma's dormancy statute applies to judgments filed in any court of record in this state. 12 O.S.2011, § 735(A). Under Oklahoma law, a judgment is defined as the final determination of the rights of the parties in an action. 12 O.S.2011, § 681. The judgment in a foreclosure proceeding is the order determining the amount due and ordering the sale to satisfy the mortgage lien. FDIC v. Tidwell, 1991 OK 119, ¶ 5, 820 P.2d 1338, 1341. It is a final, appealable judgment. Id. According to the plain language of § 735 and § 681, foreclosure judgments fall within the definition of judgments subject to the dormancy statute. Only two exceptions to the dormancy statute are noted--judgments against municipalities and judgments for child support by operation of law. 12 O.S.2011, § 735(C). Foreclosure judgments are not an included exception.
¶10 This Court in North v. Haning, 1950 OK 280, 229 P.2d 574, previously rejected a similar argument that the dormancy statute did not apply to a certain type of judgment. Although North involved a judgment for the foreclosure of a special assessment lien, this Court found the judgment was subject to the dormancy statute as there was no exception for such a judgment under § 735. Id. ¶ 21, 229 P.2d at 578. Later opinions from this Court recognized that the North decision stood for the proposition that the dormancy statute applies to foreclosure judgments. See State ex rel. Comm'rs of Land Office v. Landess, 1955 OK 148, ¶ 8, 293 P.2d 574, 577; State ex rel. Comm'rs of Land Office v. Keller, 1953 OK 371, ¶ 42, 264 P.2d 742, 750. We apply North and its progeny here and hold that a foreclosure judgment is subject to Oklahoma's dormancy statute, 12 O.S.2011, § 735.
¶11 Pursuant to Oklahoma's dormancy statute, a judgment will become unenforceable after five years unless a creditor renews its judgment by one of the following: (1) execution, (2) notice of renewal, (3) garnishment, or (4) income assignment. 12 O.S.2011, § 735(A). Hub failed to take any action regarding its foreclosure judgment within five years after the district court filed Hub's judgment. Nothing prevented Hub from renewing its judgment during the bankruptcy proceeding. See 3M Dozer Serv., Inc. v. Baker, 2006 OK 28, ¶ 13, 136 P.3d 1047, 1051. Hub also failed to file a renewal or execute on its judgment in the additional thirty days allowed after the dismissal of the bankruptcy. 11 U.S.C. § 108(c); see also 3M Dozer Serv., 2006 OK 28, ¶ 14, 136 P.3d at 1051. As a result, Hub's foreclosure judgment is dormant.
¶12 Hub contends Barnett's payments under the bankruptcy plan prevented the dormancy period from running. This Court previously rejected a similar argument in Chandler-Frates & Reitz, 1981 OK 74, ¶ 7, 630 P.2d at 1290, holding, "[i]n the absence of a statute to the contrary a partial payment will not prevent the running of a dormancy statute."1 The Court explained:
There was no judgment lien at common law. In granting a right which did not exist at common law, the legislature can prescribe certain conditions which must be met by all judgment creditors if dormancy is to be prevented and the lien of a judgment to be continued. There is no limitation other than that of a dormancy statute upon the effective duration of a judgment.
Id. ¶ 8, 630 P.2d at 1290; see also First of Denver Mortg. Investors v. Riggs, 1984 OK 36, ¶ 29, 692 P.2d 1358, 1363 (finding that a partial payment does not prevent the running of the dormancy statute), overruled on other grounds by Drllevich Constr., Inc. v. Stock, 1998 OK 39, 958 P.2d 1277. The Legislature's restriction on judgments is § 735--which does not carve out an exception for partial payments on judgments. We conclude Hub's payments under the bankruptcy plan did not prevent the dormancy period from running.
¶13 Hub alternatively argues that Barnett's bankruptcy plan payments satisfied the income assignment option under the dormancy statute, 12 O.S.2011, § 735(A)(4). We reject this argument as well. An "income assignment" and "notice of income assignment" are defined in 12 O.S.2011, §§ 1170(9) and (11).2 Section 1170's definitions relating to income assignments were promulgated prior to the Legislature's amendment to § 735 in 2000, which added the option of sending a notice of income of assignment. Based on the definitions outlined in §§ 1170(9) and (11), Hub's bankruptcy plan was not an income assignment contemplated by § 735(A)(4).
¶14 Although Hub's foreclosure judgment is dormant, that determination does not complete our analysis. The district court ruled Hub's mortgage lien merged into the foreclosure judgment. A mortgage gives the creditor a security interest in the debtor's real property. Mortgage, Black's Law Dictionary (11th ed. 2019), available at Westlaw. Foreclosure is the legal proceeding to terminate a debtor's interest in that property, instituted by the creditor. Foreclosure, Black's Law Dictionary (11th ed. 2019), available at Westlaw. Under Oklahoma law, foreclosure of a mortgage is a multi-step process. 12 O.S.2011, § 686. The foreclosure judgment determines only that there is a valid mortgage lien, which the creditor is entitled to enforce through a sale. FDIC, 1991 OK 119, ¶ 5, 820 P.2d at 1341. However, the mortgage lien itself is extinguished only by a sale. 42 O.S.2011, § 22 ("The sale of any property on which there is a lien, in satisfaction of the claim secured thereby . . . extinguishes the lien thereon.") Until such sale, the mortgage as a property right created by contract remains unaffected. Anderson v. Barr, 1936 OK 471, ¶ 25, 62 P.2d 1242, 1247. Due to the nature of a mortgage lien, this Court previously held in Anderson, Id., and Methvin v. Am. Sav. & Loan Ass'n of Anadarko, 1944 OK 177, ¶ 44, 151 P.2d 370, 376, that a mortgage lien does not merge into a foreclosure judgment, nor is it extinguished by a foreclosure judgment.3 See also Bank of the Panhandle v. Irving Hill, 1998 OK CIV APP 140, ¶ 12, 965 P.2d 413, 417 (relying on Anderson and Methvin, the court ruled a mortgage does not merge with a decree of foreclosure). We follow Anderson and Methvin and hold the mortgage lien did not merge into Hub's foreclosure judgment.
IV. CONCLUSION
¶15 The dormancy statute extinguished Hub's foreclosure judgment. However, the foreclosure judgment did not extinguish the mortgage lien. The lien can only be extinguished by a sale and application of the proceeds to the judgment, which has not yet occurred. 42 O.S.2011, § 22. We hold that the dormancy statute does not operate to invalidate the mortgage, which continues to secure the obligation owed by Barnett to Hub; the district court erred in finding that the mortgage merged into the dormant judgment. Hub may prosecute a new action for a judgment based upon the mortgage lien. Cf. State ex rel. Comm'rs of Land Office v. Weems, 1946 OK 28, ¶ 12, 168 P.2d 629, 633.
¶16 Based upon our analysis, we affirm the district court's ruling to release the foreclosure judgment and vacate the execution and sheriff's sale as the judgment is dormant. We reverse the district court's ruling that the note and mortgage sued upon merged into the foreclosure judgment. We remand for proceedings consistent with this opinion.
COURT OF CIVIL APPEALS' OPINION VACATED;
DISTRICT COURT'S JUDGMENT AFFIRMED IN PART AND REVERSED IN PART;
REMANDED WITH INSTRUCTIONS.
CONCUR: Gurich, C.J., Darby, V.C.J., Winchester, Edmondson, Colbert, Combs, and Kane, JJ.
NOT PARTICIPATING: Kauger, J.
FOOTNOTES
1 The Court similarly noted ancillary proceedings such as hearings on assets and garnishment proceedings do not prolong the life of a judgment in the absence of the issuance of a writ of execution to enforce the judgment within the statutory period. Chandler-Frates & Reitz, 1981 OK 74, ¶ 8, 630 P.2d at 1290.
2 Sections 1170(9) and (11) state as follows:
A. For the purposes of this subsection and Sections 1171.2 through 1171.4 of this title:
. . . .
9. "Income assignment" is a provision of a support order which directs the obligor to assign a portion of the monies, income, or periodic earnings due and owing to the obligor to the person entitled to the support or to another person designated by the support order or assignment for payment of support or arrearages or both. The assignment shall be in an amount which is sufficient to meet the periodic support arrearages or other maintenance payments or both imposed by the court order or administrative order. The income assignment shall be made a part of the support order;
. . . .
11. "Notice of income assignment" means the standardized form prescribed by the United States Secretary of Health and Human Services that is required to be used in all cases to notify a payor of an order to withhold for payment of child support and other maintenance payments.
3 It should be noted that this Court in North overruled Anderson and Methvin to the extent those cases found foreclosure judgments were not subject to the dormancy statute. North, 1950 OK 280, ¶¶ 24-25, 229 P.2d at 578-79. However, North did not address nor overrule the pronouncement in both Anderson and Methvin that a mortgage lien is not merged into or extinguished by a foreclosure decree or judgment.
Citationizer© Summary of Documents Citing This Document
Cite
Name
Level
None Found.
Citationizer: Table of Authority
Cite
Name
Level
Oklahoma Court of Civil Appeals Cases
CiteNameLevel
1998 OK CIV APP 140, 965 P.2d 413, 69 OBJ 3403, Bank of the Panhandle v. Irving HillDiscussed
Oklahoma Supreme Court Cases
CiteNameLevel
1991 OK 119, 820 P.2d 1338, 62 OBJ 3541, Federal Deposit Ins. Corp. v. TidwellDiscussed at Length
1946 OK 28, 168 P.2d 629, 197 Okla. 106, STATE ex rel. COM'RS OF LAND OFFICE v. WEEMSDiscussed
1953 OK 371, 264 P.2d 742, STATE v. KELLERDiscussed
1936 OK 471, 62 P.2d 1242, 178 Okla. 508, ANDERSON v. BARRDiscussed
1955 OK 148, 293 P.2d 574, STATE v. LANDESSDiscussed
2006 OK 28, 136 P.3d 1047, 3M DOZER SERVICE, INC. v. BAKERDiscussed at Length
2009 OK 61, 222 P.3d 1058, STATE ex rel. PROTECTIVE HEALTH SERVICES STATE DEPT. OF HEALTH v. VAUGHNDiscussed
2014 OK 23, 326 P.3d 496, IN RE: INITIATIVE PETITION NO. 397, STATE QUESTION NO. 767Discussed
1981 OK 74, 630 P.2d 1287, Chandler-Frates & Reitz v. KostichDiscussed at Length
1950 OK 280, 229 P.2d 574, 204 Okla. 321, NORTH v. HANINGDiscussed at Length
1998 OK 39, 958 P.2d 1277, 69 OBJ 1788, DRLLEVICH CONSTRUCTION, INC. v. STOCKDiscussed
1944 OK 177, 151 P.2d 370, 194 Okla. 288, METHVIN v. AMERICAN S&L ASS'NDiscussed
1984 OK 36, 692 P.2d 1358, First of Denver Mortg. Investors v. RiggsDiscussed
Title 12. Civil Procedure
CiteNameLevel
12 O.S. 681, Definition of JudgmentCited
12 O.S. 686, Mortgage Foreclosure - Deficiency JudgmentsCited
12 O.S. 735, Must Be Issued within Five Years or Judgment Becomes Dormant - Inapplicable to MunicipalitiesDiscussed at Length
12 O.S. 1170, DefinitionsCited
Title 42. Liens
CiteNameLevel
42 O.S. 22, Sale in Satisfaction of Secured Claim or Wrongful Conversion Extinguishes LienDiscussed
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215 B.R. 1012 (1997)
In the Matter of SOUTH BEND COMMUNITY SCHOOL CORP. and William Hugh Farrell, Appellants,
v.
Eugene Leroy EGGLESTON, Appellee.
Bankruptcy No. 96-32384 HCD, Cause No. 3:97 CV 472 AS.
United States District Court, N.D. Indiana, South Bend Division.
November 21, 1997.
*1013 Thomas E. Wheeler, II, Kightlinger and Gray, Indianapolis, IN, for Appellants.
Joseph D. Bradley, South Bend, IN, for Appellee.
MEMORANDUM AND ORDER
ALLEN SHARP, District Judge.
This cause is before the Court on Appellants', South Bend Community School Corporation (SBSC) and William Hugh Farrell (Farrell), appeal of Judge Dees' Bankruptcy Court decision finding certain attorneys' fees and costs were not excepted under the Bankruptcy Code, 11 U.S.C.A. § 523(a)(17) and were therefore dischargeable in appellee's, Eugene Leroy Eggleston (Eggleston) bankruptcy petition. As it was in the Bankruptcy Court, this is also an issue of first impression for this Court.
I. JURISDICTION
This Court has jurisdiction of this appeal pursuant to 28 U.S.C.A. § 158(a) as it is an appeal of a Bankruptcy Court's final order.
II. FACTS
This cause of action stems from a rather long history of animosity between Eggleston and his employer, SBSC. In 1992, after filing numerous grievances regarding his treatment and his evaluations, Eggleston sued SBSC and Farrell in this Court, alleging that he was the victim of age discrimination and retaliation. Eugene Leroy Eggleston v. *1014 South Bend Community School Corporation and William Hugh Farrell, Cause No. 3:92-CV-672AS. The parties eventually resolved the initial suit by way of a Settlement Agreement and Release dated September 23, 1994. In exchange for the payment of a substantial amount of money, Eggleston agreed to dismiss his claims against SBSC and Farrell. Incorporated into the agreement was a Consent Decree, in which Eggleston agreed to submit "all claims which have been or might be made" in relation to his employment to Magistrate Judge Pierce for resolution.
On December 12, 1994, Eggleston filed a new grievance with SBSC challenging his supervisor's evaluation of his 1993-94 coaching performance. The parties disputed whether this claim fell within the parameters of the Consent Decree. As a result, the charge did not progress through the normal grievance process. After much discussion and accusation by the parties, SBSC filed a Verified Motion to Enforce the Consent Decree on June 12, 1995. In August of 1995, Eggleston filed a response and Request for Relief from Ongoing Retaliation and Contempt of Court. On December 6 and 7, 1995, the parties litigated this dispute before Magistrate Judge Pierce. The Magistrate found that the claim was within the Consent Decree, SBSC was the "prevailing party," and that pursuant to the Consent Decree Eggleston was responsible for costs and attorneys' fees.[1] (Mem. and Ord. of July 9, 1996 at 5). The Magistrate awarded costs and fees to SBSC in the amount of $51,861.41 and to SBSC and Farrell in the amount of $9,486.50. (Jmt. of July 10, 1996 at 1).
Eggleston filed a voluntary petition for bankruptcy under Chapter 7 of the Bankruptcy Code on August 20, 1996. In his petition, Eggleston scheduled SBSC and Farrell in his list of creditors. SBSC and Farrell filed a Complaint and Amended Complaint to Determine Non-Dischargeability of Debt. They alleged that Eggleston's obligations to them were excepted from discharge under 11 U.S.C.A. § 523(a)(17) and/or 11 U.S.C.A. § 523(a)(7). Both parties then filed Motions for Summary Judgment. The Bankruptcy Court heard oral arguments and then found that neither exception applied and discharged the debt. (Jmt. of July 15, 1997). SBSC and Farrell now appeal to this Court.
III. STANDARD OF REVIEW
In reviewing a bankruptcy court decision, this Court acts as an appeals court and applies the same standards of review as govern appellate review in other cases. Sagamore Park Centre Assoc. Ltd. Partnership v. Sagamore Park Properties, 200 B.R. 332 (N.D.Ind.1996). Accordingly, this Court reviews the bankruptcy court's legal determinations de novo and reviews the bankruptcy court's factual findings using a "clearly erroneous" standard. Leibowitz v. Parkway Bank & Trust Co., 210 B.R. 298 (N.D.Ill. 1997); Divane v. A & C Elec. Co, Inc. (In re A & C Elec.), 193 B.R. 856 (N.D.Ill.1996); In re Tolona Pizza Prods. Corp., 3 F.3d 1029, 1033 (7th Cir.1993); Calder v. Camp Grove State Bank, 892 F.2d 629, 631 (7th Cir.1990). The bankruptcy court's conclusions on mixed questions of law and fact and or on questions pertaining to the application of facts to the law are reviewed de novo. In re Ebbler Furniture and Appliances, Inc., 804 F.2d 87, 88 (7th Cir.1986); Williams v. Comm'r of Internal Revenue, 1 F.3d 502, 505 (7th Cir. 1993), reh'g denied; Schiro v. Clark, 963 F.2d 962, 974 (7th Cir.1992), aff'd sub nom.; Schiro v. Farley, 510 U.S. 222, 114 S.Ct. 783, 127 L.Ed.2d 47 (1994); United States v. Levy, 955 F.2d 1098, 1103 n. 5 (7th Cir.), cert. denied, 506 U.S. 833, 113 S.Ct. 102, 121 L.Ed.2d 62 (1992).
*1015 De novo review requires the district court to make an independent examination of the bankruptcy court's judgment without giving deference to that court's analysis or conclusions. Smoker v. Hill & Assoc., Inc., 204 B.R. 966 (N.D.Ind.1997); see also, Moody v. Amoco Oil Co., 734 F.2d 1200, 1210 (7th Cir.), cert. denied, 469 U.S. 982, 105 S.Ct. 386, 83 L.Ed.2d 321 (1984); In re Sheridan, 57 F.3d 627, 633 (7th Cir.1995); Meyer v. Rigdon, 36 F.3d 1375, 1378 (7th Cir.1994); Magill v. Newman (In re Newman), 903 F.2d 1150, 1152 (7th Cir.1990); Calder, 892 F.2d at 631. Accordingly, this Court now considers the merits of this appeal.
V. DISCUSSION
The Bankruptcy Court granted judgment as a matter of law in favor of Eggleston, finding that the $51,861.41 awarded to SBSC in costs and attorneys' fees and the $9,486.50 awarded to SBSC and Farrell in costs and attorney's fees did not fall within the exception to discharge set forth in 11 U.S.C.A. § 523(a)(17) and that the debt was dischargeable. (Jmt. of July 16, 1997). The court further found that the debts did not fall within the exception to discharge established in § 523(a)(7) because they were not "a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit." 11 U.S.C.A. § 523(a)(7); 4 Collier on Bankr.(MB) ¶ 523.13, at 523-94 (15th ed.1997). (Am. Jmt. of July 15, 1997).
A. STATUTORY CONSTRUCTION
The basis of this appeal rests on the construction of § 523(a) of the Bankruptcy Code. It is settled law that if a statute is plain and unambiguous on its face, "judicial inquiry is complete." Connecticut Nat. Bank v. Germain, 503 U.S. 249, 254, 112 S.Ct. 1146, 1149-50, 117 L.Ed.2d 391 (1992) (citations omitted); In re Vasquez, 205 B.R. 136, 139 (Bankr.N.D.Ill.1997); In re Sinclair, 870 F.2d 1340, 1341 (7th Cir.1989). Accordingly, a court construing a statute should first look to the language of the statute. If it is clear and unambiguous, the court should look no further. In re Barker 768 F.2d 191 (7th Cir.1985). When a statute is not clear and unambiguous on its face, the court may conduct further inquiry. Furthermore, specifically relating to Bankruptcy law, if it is possible to construe an exemption statute in ways that are both favorable and unfavorable to the debtor, then the favorable method should be chosen. In re Heck, 212 B.R. 314 (Bankr. C.D.Ill.1997); In re Dealey, 204 B.R. 17 (Bankr.C.D.Ill.1997); In re Chavis, 207 B.R. 845 (Bankr.W.D.Pa.1997); In re Liston, 206 B.R. 235 (Bankr.W.D.Okla.1997); In re Cole, 205 B.R. 382 (Bankr.E.D.Tex.1997). In light of this, the Court now looks at the applicable statute.
B. EXCEPTIONS TO DISCHARGE
The party seeking to establish an exception to the discharge of a debt bears the burden of proof. Selfreliance Fed. Credit Union v. Harasymiw (In re Harasymiw), 895 F.2d 1170, 1172 (7th Cir.1990); Banner Oil Co. v. Bryson (In re Bryson), 187 B.R. 939, 961 (Bankr.N.D.Ill.1995). The United States Supreme Court has held that the burden of proof required to establish an exception to discharge is a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 291, 111 S.Ct. 654, 661, 112 L.Ed.2d 755 (1991); See also, In re McFarland, 84 F.3d 943, 946 (7th Cir.), cert. denied, ___ U.S. ___, 117 S.Ct. 302, 136 L.Ed.2d 220 (1996); In re Thirtyacre, 36 F.3d 697, 700 (7th Cir. 1994). No such preponderance exists in the present case.
It is a well recognized principle in bankruptcy law that exceptions to discharge are strictly construed against the objecting creditor and in favor of the debtor. This is based upon the strong policy of the Bankruptcy Code of providing a debtor with a "fresh start." Gleason v. Thaw, 236 U.S. 558, 35 S.Ct. 287, 59 L.Ed. 717 (1915); In re Marvin, 139 B.R. 202 (Bankr.E.D.Wis.1992); See also, 3 Collier on Bankruptcy § 523.05 (15th ed.1992). 11 U.S.C.A. § 523 lists eighteen exceptions to discharge. Only two of these are relevant to the present case.
1. Section 523(a)(7)
The specific language of this section provides that:
*1016 (a) A discharge under section 727 of this title does not discharge an individual debtor from any debt
(7) to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty
11 U.S.C.A. § 523(a)(7).
While it is possible to stretch and interpret the attorneys' fees and costs at issue here as a "fine or penalty," this Court agrees with Judge Dees' holding that the debts did not fall within the exception to discharge established in § 523(a)(7) because they were not "a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit." (Am. Jmt. of July 15, 1997). The court does so for several reasons. First, the applicable standard of review dictates that exceptions to discharge are strictly construed against the objecting creditor and in favor of the debtor. In re Heck, 212 B.R. 314; In re Dealey, 204 B.R. 17; In re Chavis, 207 B.R. 845; In re Liston, 206 B.R. 235; In re Cole, 205 B.R. 382. Secondly, case law shows that the costs and fees at issue here are not the type of "fine or penalty envisioned by the statute. See generally, In re Carlson, 202 B.R. 946 (Bankr.N.D.Ill.1996); In re Fogerty, 204 B.R. 956 (Bankr.N.D.Ill.1996); In re Betts, Nos. 94-2018, 94-2668, 51 F.3d 275, 1995 WL 108940 (7th Cir. March 14, 1995), cert denied, ___ U.S. ___, 116 S.Ct. 571, 133 L.Ed.2d 495. Specifically, in Kelly v. Robinson, 479 U.S. 36, 107 S.Ct. 353, 93 L.Ed.2d 216 (1986), the Supreme Court held that Section 523(a)(7) "preserves from discharge any condition a state criminal court imposes as part of a criminal sentence." Following this reasoning many courts, including the Seventh Circuit, have found that awards of costs associated with criminal sanctions are part of the underlying penalty and, as such are non-dischargeable under § 523(a)(7). See Fogerty, supra; see, e.g., In re Zarzynski, 771 F.2d 304, 306 (7th Cir.1985). However, costs awarded in conjunction with penalties are dischargeable. Fogerty, 204 B.R. 956, 962; see, e.g., In re Tapper, 123 B.R. 594, 605 (Bankr.N.D.Ill.1991).
In Fogerty the court held that attorneys' fees and expenses awarded by the Seventh Circuit in conjunction with a civil contempt award represented a reimbursement for costs and were dischargeable. 204 B.R. at 962. The Fogerty court stated that "for a debt to be non-dischargeable under § 523(a)(7), the debt must be for the benefit of a governmental unit and must be penal in nature."
Similarly, in the case of In re Betts, Nos. 94-2018, 94-2668, 51 F.3d 275, 1995 WL 108940 (7th Cir. March 14, 1995), cert denied, ___ U.S. ___, 116 S.Ct. 571, 133 L.Ed.2d 495, the court found that costs assessed against Betts for disciplinary proceedings instituted by the Attorney Registration and Disciplinary Commission were not dischargeable. The court reasoned that the primary objective of assessing costs was not compensation, but rather to deter attorneys from engaging in improper conduct. See e.g., In re Carlson, 202 B.R. 946 (holding similarly)
In comparison, the Tapper court found that a civil "penalty" authorized by statute was not dischargeable but that the award of allowed costs was dischargeable because the costs did not constitute a "fine, penalty or forfeiture." 123 B.R. 594. The court further noted that, generally, cases barring dischargeability under § 523(a)(7) involve criminal or tax-related penalties and not anything analogous to the award of costs in a civil proceeding. Id. at 605; see also, State of New York v. Hemingway, 39 B.R. 619, 621 (N.D.N.Y.1983).
The clear language of § 523(a)(7) and the judicial applications of this section provide sufficient evidence for this Court to find that Eggleston's debt is not excepted under this section.
2. Section 523(a)(17)
Section 523(a)(17) arose under the Prison Litigation Reform of 1995, Pub.L. 101-140, 110 Stat 1327, HR 3019 (May 3, 1996), and the Omnibus Consolidated Rescissions and Appropriations Act of 1996 added the section to the Bankruptcy Code. Its purpose was to add an additional exception to the discharge of debts for fees imposed relating *1017 to the filing of a case.[2]See 8 Norton Bankr.L. & Prac.2d (1997 Supp.), editor's comment. This section provides that:
(a) A discharge under section 727 of this title does not discharge an individual debtor from any debt
(17) for a fee imposed by a court for the filing of a case, motion, complaint, or appeal, or for other costs and expenses assessed with respect to such filing, regardless of an assertion of poverty by the debtor.....
11 U.S.C.A. § 523(a)(17). Unfortunately, because of its recent enactment, there is no interpretive case law. To date, less than a handful of cases even mention the new § 523(a)(17) and those cases provide little guidance for the issues involved here. See In re Vasquez, 205 B.R. 136, 139 (Bankr. N.D.Ill.1997), In re Smith, 205 B.R. 612 (Bankr.E.D.Cal.1997).
In Vasquez, the bankruptcy court discussed this new exception to § 523(a) in the context of certain non-dischargeable debts for which a debtor's exempt property is liable and determined that § 523(a)(17) was inapplicable to a claim under § 522(f). The court expressly noted, however, that if the creditor wished to allege that the debt owed it was non-dischargeable under § 523(a)(17) alone, the creditor needed to file the appropriate adversary proceeding and still had time to do so. The court did not opine as to whether an appropriately filed adversary proceeding would have any merit, however. Smith, was decided using § 523(a)(5) and (a)(15). 205 B.R. 612. Section 523(a)(17) was mentioned only in a footnote. 205 B.R. 612, 614, n. 1.
In the present case, the majority of cases cited in the parties' briefs were decided under exception provisions other than (a)(17). Additionally, as the court noted in Vasquez, those cases are not controlling because they were decided prior to the enactment of this provision.
The basis of this appeal rests solely on whether § 523(a)(17) was intended to apply to any and all debtors or to apply only to prisoners. Appellants focus on Judge Dees' interpretation of this section where he indicated that § 523(a)(17) should be applicable only to "filing fees and costs or expenses assessed by and payable to a court." (Mem. of July 9, 1997 at p. 7) (emphasis in original).[3] Appellants overlook the extensive reference to the Legislative History that the Bankruptcy Court laid out in detail on pages 6 and 7 of its July 15, 1997 Memorandum and Order. Because § 523(a)(17) does not clearly define its intended scope, Judge Dees' evaluation of this history was proper. Further investigation into the underpinnings of § 523(a)(17) and legislative history show that this exception was intended to apply to prisoner filings.[4] This Court declines to extend the *1018 reach of § 523(a)(17) beyond the intent of Congress and will not adopt the view that the section applies to all debtors, regardless of the fact that they may be prisoners. The section is unapplicable to the present case.
VIII. CONCLUSION
For the foregoing reasons, this Court AFFIRMS the decision of the Bankruptcy Court granting judgment as a matter of law to Eggleston.
IT IS SO ORDERED.
NOTES
[1] It is this issue that is at the heart of the current dispute. The Consent Decree provided that:
"This court shall retain jurisdiction of this matter for the purposes of enabling any of the parties to this Consent Decree to apply to the Court at any time for such further orders or directives as may be necessary or appropriate for the enforcement of compliance therewith . . . or for the punishment of violations thereof." (emphasis added).
The decree further provided:
"If court action is taken for the purpose of enforcement of this Consent Decree . . . the non-prevailing party will be obligated to pay the attorney's fees and costs incurred by the prevailing party in such proceedings." (emphasis added).
[2] It is important to keep in mind that this section was added specifically under the Prison Litigation Reform Act for the purported purpose of ensuring that prisoners did not continue to use in forma pauperis provisions as a way to avoid filing fees and to potentially reduce the number of frivolous prisoner filings. 1996-MAY NAAG Bankr.Bull. 2.
[3] This Court disagrees with Judge Dees' judicial gloss that (a)(17) costs and fees assessed by the court must be payable to the court as this is not the express language of the statute, however, that gloss is not dispositive of the outcome of this Court's review.
[4] Furthermore, this Court takes note of the pending bill H.R.Rep. No. 324, 105th Cong., 1st Sess. 1997, 1997 WL 664411, introduced February 13, 1997 and titled Bankruptcy Amendment Bill of 1997. This bill is part of the Bankruptcy Law Technical Corrections Act, H.R. 120. In the text of the bill the legislature expressly addresses the issue now faced by this Court. The bill "primarily consists of technical correction intended to clarify original intent and to correct drafting defects." Hearing on H.R. 764 and H.R. 120 Before the Subcomm. on Commercial and Administrative Law of the House Comm. on the Judiciary, 105th Cong., 1st Sess. 27 (1997). In addition to other changes in § 523, the amendments change § 523(a)(17) to narrow its application in accordance with its original intent. Paragraph (17) was enacted in the context of prison litigation reform. The committee noted that because of a drafting error, the section might be construed to apply to filing fees, costs or expenses incurred by any debtor, not solely by those who are prisoners. See H.R.Rep. 105-324, 1997. The new language of § 523(a)(17) is proposed as follows:
(17) for a fee imposed [by a court] on a prisoner by any court for the filing of a case, motion, complaint, or appeal, or for other costs and expenses assessed with respect to such filing, regardless of an assertion of poverty by the debtor under [section 1915(b) or (f) ] subsection (b) or (f)(2) of section 1915 of title 28 (or a similar non-Federal law), or the debtor's status as a prisoner, as defined in section 1915(h) of title 28 (or a similar non-Federal law).
Bankruptcy Amendments of 1997; and Bankruptcy Law Technical Corrections Act of 1997; Hearing on H.R.764 and H.R.120 Before the Subcomm. on Commercial and Administrative Law of the House Comm. on the Judiciary, 105th Cong., 1st Sess. 27 (1997).
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317 So.2d 141 (1975)
Charles Samuel JARRIEL, Appellant,
v.
STATE of Florida, Appellee.
No. 74-1579.
District Court of Appeal of Florida, Fourth District.
August 8, 1975.
Philip G. Butler, Jr., of Foley, Colton & Butler, West Palm Beach, for appellant.
Robert L. Shevin, Atty. Gen., Tallahassee, and Frank B. Kessler, Asst. Atty. Gen., West Palm Beach, for appellee.
WALDEN, Chief Judge.
After Jury trial defendant was found guilty of grand larceny. He appeals his conviction on the ground a statement made by him should have been suppressed. We agree and reverse.
After an officer had contacted defendant's wife to find out where defendant worked, he arrested defendant at his place of employment. Defendant was taken to the Sheriff's office and placed in a room for interrogation, and at no time was he booked or his location disclosed until after his statement had been given. It is undisputed that during interrogation the officer told defendant his wife would be arrested unless they could clear this thing up (by defendant's making a statement). The interrogating officer's testimony included the following:
"Q Did you talk to him and tell him that you could arrest the girls and if he would tell you about the incident you wouldn't have them arrested?
"A Based on what information I had I would have had to arrest his wife unless he could show me that she wasn't involved and that she was along because she was his wife.
"Q And did you tell him that you would only charge him with one incident if he gave you a statement?
"A I don't have that right. Probably if something of that nature was said I probably normally normally the courts would only require a conviction of one of the charges and they normally don't try them all separately. In this case I don't recall this part of the discussion with him."
It is undisputed that during interrogation the officer told defendant his wife would be arrested unless defendant made a statement. Further, the officer did not deny that he might have told the defendant that he would only charge him with one incident *142 if the defendant would make a statement.
We find that the defendant was improperly urged by direct or implied promises to make a statement, in violation of the basic tenet of law that a confessing defendant should be entirely free from the influence of hope or fear. The resulting statement here should be suppressed on authority of Lynumn v. Illinois, 372 U.S. 528, 83 S.Ct. 917, 9 L.Ed.2d 922 (1963); M.D.B. v. State, 311 So.2d 399 (4th DCAFla. 1975); State v. Chorpenning, 294 So.2d 54 (2d DCAFla. 1974); Kraft v. State, 143 So.2d 863 (2d DCAFla. 1962); and 13 Fla.Jur. Evidence § 248 (1957).
Reversed and remanded.
CROSS and DOWNEY, JJ., concur.
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NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 13a0426n.06
No. 12-3733 FILED
Apr 29, 2013
UNITED STATES COURT OF APPEALS DEBORAH S. HUNT, Clerk
FOR THE SIXTH CIRCUIT
CARLOS UMBERTO SANCHEZ-CRUZ, )
)
Petitioner, )
) ON PETITION FOR REVIEW
v. ) FROM THE UNITED STATES
) BOARD OF IMMIGRATION
ERIC H. HOLDER, JR., Attorney General, ) APPEALS
)
Respondent. )
)
BEFORE: BATCHELDER, Chief Judge; GUY and BOGGS, Circuit Judges.
PER CURIAM. Carlos Umberto Sanchez-Cruz petitions for review of an order of the Board
of Immigration Appeals (BIA) that affirmed an immigration judge’s (IJ) denial of his application for
asylum, withholding of removal, and relief under the Convention Against Torture (CAT).
Sanchez-Cruz is a native and citizen of Honduras. He claims to have entered the United
States on May 4, 2004. In July 2008, Sanchez-Cruz filed an application for asylum, withholding of
removal, and relief under the CAT, alleging that, if returned to Honduras, he will be persecuted or
tortured by his father, gangs, or enemies that his father made while trafficking drugs. The IJ denied
the asylum application as untimely and the remaining claims on the merits. The BIA affirmed the
IJ’s decision.
On appeal, Sanchez-Cruz argues that the IJ and BIA erred by denying his application for
withholding of removal and relief under the CAT because he established that he would be persecuted
No. 12-3733
Sanchez-Cruz v. Holder
or tortured if removed to Honduras. Where, as here, the BIA does not summarily affirm or adopt
the IJ’s reasoning and provides an explanation for its decision, we review the BIA’s decision as the
final agency determination. Ilic-Lee v. Mukasey, 507 F.3d 1044, 1047 (6th Cir. 2007). We review
legal conclusions de novo and factual findings for substantial evidence. Khozhaynova v. Holder, 641
F.3d 187, 191 (6th Cir. 2011). Under the substantial evidence standard, we will uphold
administrative findings of fact unless “‘any reasonable adjudicator would be compelled to conclude
to the contrary.’” Bi Xia Qu v. Holder, 618 F.3d 602, 605-06 (6th Cir. 2010) (quoting 8 U.S.C.
§ 1252(b)(4)(B)).
To qualify for withholding of removal, an applicant must demonstrate that it is more likely
than not that, if returned to the country of removal, his life or freedom would be threatened on
account of his race, religion, nationality, membership in a particular social group, or political
opinion. Vincent v. Holder, 632 F.3d 351, 354 (6th Cir. 2011). If an applicant demonstrates that he
has suffered past persecution in the country of removal on account of a protected ground, we employ
a rebuttable presumption that the applicant’s life or freedom would be threatened in the future. Id.
at 354-55. The government may rebut the presumption by showing by a preponderance of the
evidence either that there has been a fundamental change in circumstances such that the applicant’s
life or freedom would not be threatened or that the applicant could reasonably relocate to another
part of the country of removal to avoid a future threat. 8 C.F.R. § 1208.16(b)(1)(i)(A)-(B); Vincent,
632 F.3d at 355.
Substantial evidence supported the BIA’s conclusion that Sanchez-Cruz did not qualify for
withholding of removal on the basis that he feared persecution by his father. Even if we were to
-2-
No. 12-3733
Sanchez-Cruz v. Holder
assume that Sanchez-Cruz’s family constitutes a cognizable social group and that he established past
persecution, we would find that the government rebutted the presumption of future persecution by
showing that Sanchez-Cruz could reasonably relocate to another part of Honduras to avoid any future
threat from his father. The evidence presented to the IJ established that Sanchez-Cruz was not
harmed by his father during the three years he spent living in Honduras outside the family home, and
there was no evidence that his father had harmed any of his siblings who were living in Honduras
outside the family home.
Substantial evidence also supported the BIA’s conclusion that Sanchez-Cruz did not qualify
for withholding of removal on the basis that he feared persecution either from gangs or from enemies
that his father made while trafficking drugs. There was no evidence in the record suggesting that
gangs had targeted Sanchez-Cruz, or that they would target him, either because of his refusal to join
or on the basis of a protected ground. See Roblero-Berduo v. Holder, 439 F. App’x 532, 537 (6th
Cir. 2011). In addition, the evidence established that Sanchez-Cruz’s father stopped trafficking
drugs in 2003, and, aside from one incident of violence against Sanchez-Cruz’s brother in which a
man asked him if he was the “son of Armando,” there was no evidence demonstrating that Sanchez-
Cruz was likely to be targeted by his father’s enemies.
Finally, the BIA’s denial of relief under the CAT was supported by substantial evidence
because Sanchez-Cruz failed to present evidence demonstrating that it is more likely than not that
he would be tortured if removed to Honduras. See Bi Xia Qu, 618 F.3d at 610.
Accordingly, we deny the petition for review.
-3-
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507 S.E.2d 305 (1998)
STATE of North Carolina
v.
Ricky Dean ANDREWS.
No. COA98-107.
Court of Appeals of North Carolina.
November 17, 1998.
*307 Attorney General Michael F. Easley by Assistant Attorney General John G. Barnwell, for the State.
Paul Pooley, Durham, for defendant-appellant.
HORTON, Judge.
Defendant contends the trial court erred in: (I) finding Kori competent to testify; (II) admitting the testimony of Reverend Knight; and (III) failing to properly instruct the jury.
I.
Kori was born on 4 September 1992. She was four years old at the time of the incident and almost five years old at the time of trial. After a voir dire hearing, Kori was allowed to testify concerning her recollection of the incidents on 12 October 1996. Defendant did not object to her competency as a witness at trial.
Determining whether a child is competent to testify is a matter within the sound discretion of the trial court. State v. Jenkins, 83 N.C.App. 616, 621, 351 S.E.2d 299, 302 (1986), cert. denied, 319 N.C. 675, 356 *308 S.E.2d 791 (1987). Furthermore, the trial court's decision will not be reversed on appeal unless it is shown that it could not have been the result of a reasoned decision. State v. Spaugh, 321 N.C. 550, 554, 364 S.E.2d 368, 371 (1988). When exercising its discretion, the trial court "must rely on [its] personal observation of the child's demeanor and responses to inquiry on voir dire examination." State v. Fearing, 315 N.C. 167, 174, 337 S.E.2d 551, 555 (1985). "[T]he vast majority of cases in which a child witness' competency has been addressed have resulted in the finding, pursuant to an informal voir dire examination of the child before the trial judge, that the child was competent to testify." Jenkins, 83 N.C.App. at 621, 351 S.E.2d at 302-03.
N.C. Gen.Stat. § 8C-1, Rule 601(b) (1992) provides that "[a] person is disqualified to testify as a witness when the court determines that [she] is ... (2) incapable of understanding the duty of a witness to tell the truth." In State v. Jones, 310 N.C. 716, 722, 314 S.E.2d 529, 533 (1984), the North Carolina Supreme Court cited as evidence of competency that the child knew that if she did not tell the truth she would get a spanking.
In the instant case, the trial court determined during a voir dire hearing that Kori was competent to testify. During voir dire, Kori stated she would tell the truth, but then seemed confused and said it was not good to tell the truth. Thereafter, the prosecutor asked additional questions to determine whether Kori knew what it meant to tell the truth. The prosecutor asked Kori if it was true to say her blue dress was red, and she responded that it was not the truth. Additionally, she said she knew she would get a spanking if she did something wrong and she knew it was wrong to tell a lie. Furthermore, Kori told the prosecutor that she knew she was in court to talk about defendant shooting her mother and she wanted to tell the truth about the incident. Thus, the trial court was correct when it concluded that Kori was competent to testify.
II.
In addition, defendant contends the trial court, on its own motion, should have refused to allow the testimony of Reverend Knight, minister of the First Pentecostal Holiness Church in Lexington and the chaplain for the sheriff's office. The sheriff's office paged Reverend Knight to come to the jail to counsel defendant. Defendant contends the admission of the testimony was plain error.
The plain error rule requires defendant to show that he would not have been convicted if the error had not been made or that a miscarriage of justice would result if the error is not corrected. State v. Odom, 307 N.C. 655, 660-61, 300 S.E.2d 375, 378 (1983). In the instant case, defendant has not met his burden.
Our Supreme Court has held that the wording of N.C. Gen.Stat. § 8-53.2 has two requirements for the clergyman privilege to apply, including: (1) defendant must be seeking the counsel and advice of his minister; and (2) the information must be entrusted to the minister as a confidential communication. State v. West, 317 N.C. 219, 223, 345 S.E.2d 186, 189 (1986). In West, the minister was a personal friend of defendant and initiated contact with defendant instead of defendant seeking the advice of the minister. Thus, the Supreme Court concluded the privilege did not apply.
However, the instant case is distinguishable from the West case because the sheriff's office called Reverend Knight to talk to defendant because of the possibility of defendant being suicidal. Based on the potential conflict of interest because Reverend Knight worked for the sheriff's office, the privilege would be applicable to protect defendant. Reverend Knight, as the chaplain for the sheriff's office, was aware of defendant's privilege and asked defendant whether the Reverend could divulge the information to the officers. Defendant talked to Reverend Knight and agreed afterwards to allow Reverend Knight to share the information with the officers.
At trial, defense counsel initially objected to Reverend Knight being able to testify based on privilege, but withdrew his objection after defendant stated he waived that privilege. The trial court questioned defendant *309 to make sure he understood that he possibly had a privilege. The trial court specifically asked defendant whether he understood that the Reverend was paged by the sheriff's department to come talk to defendant, which could possibly keep it from being admissible. Defendant said he understood and still wanted to waive his privilege. N.C. Gen.Stat. § 8-53.2 (1986) provides that the statute "shall not apply where communicant in open court waives the privilege conferred." Therefore, the trial court did not err when it allowed Reverend Knight to testify.
III.
Finally, defendant contends the trial court failed to properly instruct the jury: (A) on the circumstances from which it could infer premeditation and deliberation; and (B) on false, contradictory, and conflicting statements. Defendant failed to object to these instructions at trial. Thus, the plain error rule requires defendant to show that he would not have been convicted if the error had not been made or that a miscarriage of justice would result if the error is not corrected. Odom, 307 N.C. at 660-61, 300 S.E.2d at 378.
(A)
Defendant claims the trial court committed plain error in the jury instructions when it allowed examples of circumstances from which premeditation and deliberation may be inferred, which were not supported by the evidence. For example, defendant claims the facts of this case do not disclose a "vicious and brutal" killing, and there is no showing that defendant used excessive force. However, our Supreme Court has already stated that these examples are offered only for illustrative purposes. State v. Leach, 340 N.C. 236, 241, 456 S.E.2d 785, 789 (1995). Thus, these examples did not amount to plain error.
Further, defendant claims the trial court committed plain error when it said "lack of provocation by the defendant" rather than "lack of provocation by the victim" in the jury instructions. However, "the trial court's charge to the jury must be construed contextually and isolated portions of it will not be held prejudicial error when the charge as a whole is correct." State v. Boykin, 310 N.C. 118, 125, 310 S.E.2d 315, 319 (1984). In fact, a "mere slip of the tongue by the trial judge in his charge to the jury which is not called to the court's attention at the time it is made will not constitute prejudicial error when it is apparent from the record that the jury was not misled thereby." State v. Simpson, 303 N.C. 439, 450, 279 S.E.2d 542, 549 (1981). A review of the record in the instant case shows that the trial court had a mere lapsus linguae, and the jury was not misled thereby. Thus, this assignment of error is overruled.
(B)
In addition, defendant argues the trial court committed plain error in its jury instructions regarding false, contradictory, and conflicting statements. The trial court gave the following instruction:
Now, the State contends and, of course, the defendant denies that the defendant made false, contradictory and conflicting statements. If you find that the defendant made such statements, they may be considered by you with the circumstances tending to reflect the mental process the person possessed of a guilty conscience seeking to divert suspicion or to exculpate himself, and you shall consider this evidence along with all other believable evidence in this case.
If, however, you find the defendant made such statements and they do not create a presumption of guilt and such evidence standing alone is not sufficient to establish guilt, such evidence may not be considered as tending to show premeditation and deliberation.
As already noted, the jury instructions must be construed contextually. Boykin, 310 N.C. at 125, 310 S.E.2d at 319. A review of this instruction shows the trial court essentially conveyed the appropriate pattern jury instruction. The given instruction enabled the jury to determine that the statements do not create a presumption of guilt and that the contradictory statements alone are not *310 sufficient to show guilt. Defendant has not met his burden of showing there would have been a different result in the outcome of this case by merely pointing out in the transcript that appropriate punctuation marks for the instructions are missing. Thus, this assignment of error is overruled.
For the foregoing reasons, the trial court's decision was free from prejudicial error.
No error.
JOHN C. MARTIN and TIMMONS-GOODSON, JJ., concur.
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22 A.3d 822 (2011)
BAILEY
v.
U.S.
No. 10-CF-779.
District of Columbia Court of Appeals.
June 29, 2011.
DECISION WITHOUT PUBLISHED OPINION
Affirmed.
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897 F.2d 1394
133 L.R.R.M. (BNA) 2863, 58 USLW 2603,Fed. Sec. L. Rep. P 95,209, 114 Lab.Cas. P 12,027
AIR LINE PILOTS ASSOCIATION, INTERNATIONAL, et al.,Plaintiffs-Appellees,v.UAL CORPORATION and International Association of Machinists& Aerospace Workers, AFL-CIO, Defendants-Appellants.
Nos. 89-2617, 89-2627.
United States Court of Appeals,Seventh Circuit.
Argued Jan. 17, 1990.Decided March 14, 1990.
Jonathan G. Bunge, Roy M. VanCleave, Robert W. Pratt, Keck, Mahin & Cate, Chicago, Ill., Robert S. Smith, David E. Nachman, John J. Sullivan, Gary Stein, Paul, Weiss, Rifkind, Wharton & Garrison, Michael E. Abram, Stephen Presser, Bruce H. Simon, Cohen, Weiss & Simon, New York City, for plaintiffs-appellees.
Joel H. Kaplan, Gary S. Kaplan, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, Ill., Robert A. Siegel, Jerman, O'Melveny & Meyers, Los Angeles, Cal., Lewis B. Kaden, James D. Liss, Davis, Polk & Wardwell, New York City, for UAL Corp.
Edward L. Foote, Duane M. Kelley, Winston & Strawn, Chicago, Ill., Henry L. King, Richard E. Nolan, Daniel L. Brockett, Susan L. Sommer, Lewis B. Kaden, James D. Liss, Davis, Polk & Wardwell, New York City, for Neil A. Armstrong, Andrew F. Brimmer, Edward E. Carlson, Richard P. Cooley, E. Mandell Dewindt, William M. Jenkins, Juanita M. Kreps, Charles F. Luce, Fujio Matsuda, John F. McGillicuddy, Harry Mullikin, James J. O'Connor, Frank A. Olson, Nicholas R. Petry, John C. Pope, Stephen M. Wolf.
Jacob N. Gross, Chicago, Ill., John A. Edmond, Sweeney, Edmond & James, Washington, D.C., for Intern. Ass'n of Machinists & Aerospace Workers.
Joel H. Kaplan, Gary S. Kaplan, Joel S. Siegel, Arvey, Hodes, Costello & Burman, Chicago, Ill., for United Air Lines, Inc.
Before POSNER, FLAUM and RIPPLE, Circuit Judges.
POSNER, Circuit Judge.
1
This case returns to us following our remand to the district judge to consider questions of state law left undecided on the first round. 874 F.2d 439 (7th Cir.1989). We can be brief, as the facts are set forth in our previous opinion.
2
The airline pilots' union wants to take over United Air Lines, and has sued to clear away two obstacles to its design in the form of two covenants in a collective bargaining agreement between United and the machinists' union, a traditional rival of the pilots' union. Section B(1)(b) of the agreement provides that in the event United is taken over, the machinists may file a section 6 notice under the Railway Labor Act, 45 U.S.C. Sec. 156. The filing of such a notice is the first step in renegotiating a collective bargaining agreement in the industries subject to the Act, a process that can end in a strike if the parties are unable to agree on new terms. Section C of the agreement provides that if United offers an employee stock ownership plan (ESOP) to any group of employees (namely the pilots, for it was through an ESOP that they meant to take over the company because of the tax advantages that the ESOP format confers), it must offer a similar, but potentially far more advantageous, plan to every other group of its employees (namely the machinists and the flight attendants). The pilots' suit charged that Section C violates the Railway Labor Act, and (in pendent counts) that both B(1)(b) and C violate Delaware's corporation law.
3
In the first round, Judge Zagel held that the Railway Labor Act preempted state corporation law with respect to both provisions of the collective bargaining agreement, and further that Section C of the agreement violated the Act. 699 F.Supp. 1309, 1330-34 (N.D.Ill.1988). Since the pilots had not challenged Section B(1)(b) as a violation of the Railway Labor Act, but only as a violation of Delaware law, the effect of the judge's ruling that the Act preempted that law was to clear away any possible objection to Section B(1)(b) founded on state law, and therefore to let that section stand. Both sides appealed, and we held that Section C was indeed a violation of the Railway Labor Act because it altered the pilots' employment entitlements without negotiation with the pilots, but that the Act did not preempt state law with regard to B(1)(b), the reopener provision. We thought the effect of that provision on the pilots' collective bargaining rights (as distinct from their investment interests) was too remote to justify the preclusion of state regulation. We remanded the case to Judge Zagel "for an initial determination concerning the lawfulness of sections B(1)(b) and C of the machinists' agreement under Delaware law." 874 F.2d at 447. On remand, Judge Zagel found both provisions to be contrary to Delaware law, and he entered a declaratory judgment to that effect, 717 F.Supp. 575 (N.D.Ill.1989), from which United and the machinists have appealed.
4
United's first contention is that the case has become moot and that we should therefore dismiss the appeal and vacate Judge Zagel's decision on remand. Since in our previous decision we had held Section C unlawful, and since the Supreme Court was not asked to review that decision, no purpose could be served, says United, by a declaration that Section C violates state law as well. Since, moreover, the machinists' agreement with United provides that "all covenants will expire at the end of the current collective bargaining agreement (October 31, 1989)," both Section B(1)(b) and Section C have expired. The "reopener" provision (as the parties term B(1)(b), although it is different from a conventional collective bargaining agreement reopener) is doubly moot, adds United, since the machinists served a section 6 notice in October. The only relief sought or granted by Judge Zagel on remand was a declaration that the two provisions violate Delaware law; no damages or other retrospective relief was sought. If the two provisions no longer have any force, then whatever force they may once have had and whatever mischief they may once have done, the case is now moot.
5
The test for mootness is simple to state but sometimes difficult to apply. It is whether the relief sought would, if granted, make a difference to the legal interests of the parties (as distinct from their psyches, which might remain deeply engaged with the merits of the litigation). North Carolina v. Rice, 404 U.S. 244, 246, 92 S.Ct. 402, 404, 30 L.Ed.2d 413 (1971). If it would make no difference at all to those interests then the court is not really deciding a "case," and (if a federal court) it is therefore exceeding the power conferred on it by Article III of the Constitution. The problem with the test is that it dichotomizes a continuum. United States v. Articles of Drug, 818 F.2d 569, 573-74 (7th Cir.1987); Charles v. Daley, 749 F.2d 452, 456 (7th Cir.1984); CFTC v. Board of Trade, 701 F.2d 653, 655 (7th Cir.1983). Unless the plaintiff has died and his cause of action has not survived (as would be true if the cause of action were for defamation), it is usually possible to conjure up a set of facts under which the relief sought would make a difference to the parties. But if it would be a very little difference, then to economize on judicial resources as well as to give expression to policies thought inherent in Article III the case will be declared moot and relief withheld. Id.; Moore v. Thieret, 862 F.2d 148, 150 (7th Cir.1988); James v. Department of Health & Human Services, 824 F.2d 1132, 1136 (D.C.Cir.1987).
6
This criterion might seem to imply that when a court decides that a challenged practice is unlawful on one ground, the question whether it is also unlawful on some other ground would generally be moot, because it can make little difference whether a practice is unlawful for one or for several reasons, provided only that it is indeed unlawful. It is easy to imagine exceptions--for example, a case in which attorney's fees are available to the plaintiff only under an alternative ground. But there might be a general rule that all but one of a set of alternative grounds of decision are moot. Yet we observe that in a vast number of cases the court, having decided that the defendant's conduct is unlawful on ground A, goes on to decide that it is also unlawful on ground B. Although the word "moot" is sometimes used to refer to an issue that need not be decided in light of the resolution in the same opinion of another issue, e.g., Bazemore v. Friday, 478 U.S. 385, 387 n. 2, 106 S.Ct. 3000, 3002 n. 2, 92 L.Ed.2d 315 (1986) (per curiam), it has never been thought that a court that does decide it thereby violates Article III's implied prohibition against deciding moot cases. United States v. Leon, 468 U.S. 897, 924-25, 104 S.Ct. 3405, 3421, 82 L.Ed.2d 677 (1984); 13A Wright, Miller & Cooper, Federal Practice and Procedure Sec. 3533, at p. 214 (2d ed. 1984).
7
The conceptual reason is that it is cases rather than reasons that become moot. Whether a court gives one or ten grounds for its result is not a question to which Article III prescribes an answer. The practical reason is that the alternative grounds are ripe for decision and deciding them may help a higher or a subsequent court. Aware of this practical reason, United points out that the time for filing a petition for certiorari to review our previous decision invalidating Section C of the machinists' agreement under the Railway Labor Act has lapsed. But this is wrong. Our decision was not a final decision; we remanded the case. A litigant in a federal case is not compelled to wait until the case is over before seeking certiorari, because it is not a requirement of certiorari to review an order of a federal court that the order be a final decision. 28 U.S.C. Secs. 1254, 2101(e); S.Ct. R. 18. But the litigant is perfectly entitled to wait until the case is over, then appeal from the final judgment and raise on that appeal the validity of any previous orders that have not become moot in the interim. Hughes Tool Co. v. Trans World Airlines, Inc., 409 U.S. 363, 365 n. 1, 93 S.Ct. 647, 650 n. 1, 34 L.Ed.2d 577 (1973); Stern, Gressman & Shapiro, Supreme Court Practice 316 (6th ed. 1986).
8
We could have ruled on the previous round of this litigation that Section C violated both the Railway Labor Act and Delaware law, without being accused of deciding a moot question, but we preferred to get the views of the district judge first. This interruption in the appellate proceeding does not preclude us from deciding the lawfulness of Section C on alternative grounds. Neither, of course, are we compelled. But when issues have been fully briefed, and can (as they can here, we shall see) be decided without entangling the court in difficult questions best left to percolate further before being resolved, it is desirable to decide them and head off further litigation between the parties.
9
A deeper problem with deciding the state law issues in this case may seem to be the ruling on preemption that preceded our determination that Section C violates the Railway Labor Act. We held that the Act--more precisely, the supremacy clause of the Constitution--precludes challenging Section C on the basis of state law. It seems paradoxical to rule that, even though state law cannot apply to C, C violates state law. But it is a superficial paradox. If we are right that the Railway Labor Act both preempts state law with respect to C and invalidates C, then indeed there is no occasion to consider whether C violates state law. But we may be wrong. If we are wrong, the next question is whether C violates state law. We can answer both questions without deciding a moot case.
10
Turning to the second ground on which United argues mootness, we agree that if the expiration clause quoted earlier made Sections B(1)(b) and C expire on October 31 of last year, the case is moot and we are required to vacate Judge Zagel's order on remand in order to make sure that an order which could not be reviewed on the merits by an appellate court is not given preclusive effect under the doctrines of res judicata or collateral estoppel. United States v. Munsingwear, 340 U.S. 36, 71 S.Ct. 104, 95 L.Ed. 36 (1950); Karcher v. May, 484 U.S. 72, 83, 108 S.Ct. 388, 395, 98 L.Ed.2d 327 (1987); McIntyre v. Fallahay, 766 F.2d 1078, 1081 (7th Cir.1985); CFTC v. Board of Trade, supra, 701 F.2d at 656-57. That is the rule; whether it is a good rule is a separate question, on which see id. at 657.
11
But in fact the expiration clause is ambiguous. It says the covenants will expire "at the end of the current collective bargaining agreement (October 31, 1989)." This may seem straightforward: the agreement expires by its terms on October 31, and when that happens the covenants in the agreement expire too. But collective bargaining agreements governed by the Railway Labor Act do not expire on their expiration dates. The Act abhors a contractual vacuum. If on the date of expiration the parties have not negotiated a replacement agreement (and they had not here, and still have not), the old agreement continues in force.
12
Perhaps, however, the quoted clause just means that the covenants expire on October 31, 1989, while the rest of the agreement continues in force. The covenants are a subset of the agreement's terms. To make them alone expire on schedule would not violate the statute, because the statute does not freeze the entire collective bargaining agreement after the date of expiration, but only the wages, rules, and working conditions agreed on in the old agreement. 45 U.S.C. Sec. 156. It is also possible that the date was included in the clause merely for identification (the collective bargaining agreement that is scheduled to expire on October 31 although the Act may prevent its expiring then), and that the purpose of the clause was merely to nix any suggestions that the covenants might outlive the rest of the agreement, as covenants sometimes do. In support of this interpretation we note that the machinists themselves, though otherwise aligned in this case with United in opposition to the pilots, disagree with United's reading of the clause. Emphasizing that the clause itself states that the covenants are to "become part of the collective bargaining agreement" and that the agreement itself states that it "shall remain in full force and effect through October 31, 1989, and thereafter shall be subject to change by service of notice as provided for in Section 6 of the Railway Labor Act," the machinists make a respectable argument that the parties intended the covenants to continue in force until the collective bargaining agreement was renegotiated.
13
It is more than respectable; it is an argument that persuaded us, in a case involving an identically worded provision in a collective bargaining agreement between the same employer and the same union, that the so-called date of expiration (October 31 here, November 1 in the otherwise identical contract at issue in that case) "really isn't a termination date at all; it is the date before which no changes can be made." EEOC v. United Air Lines, Inc., 755 F.2d 94, 99 (7th Cir.1985). The covenants here were explicitly made a part of the agreement, and the agreement was not terminable on October 31.
14
Though well aware that on its interpretation the case would become moot on October 31, 1989, United waited until nine days before the oral argument in this court to file a motion advising us that in its view the case was moot. Of course this delay did not forfeit its right to argue mootness; issues of subject-matter jurisdiction are not waivable. But United's delay is informative about its true view of the meaning of the contract.
15
United has failed to carry its burden (and it is its burden, Firefighters Local Union No. 1784 v. Stotts, 467 U.S. 561, 569-70, 104 S.Ct. 2576, 2582-83, 81 L.Ed.2d 483 (1984)) of proving that the case has become moot--at least its burden of proving that the case is moot because the challenged provisions have expired. For United has one more string to its bow. Last October the machinists filed their section 6 notice. What further harm, therefore, can a provision in the machinists' agreement entitling them to file such a notice if United is taken over do? The worst has happened. The section 6 notice has been filed. The countdown to a strike has begun.
16
In our previous opinion we puzzled over the question of precisely how Section B(1)(b), the reopener provision, could impede a takeover. A party to a collective bargaining agreement governed as this one is by the Railway Labor Act can file a section 6 notice at any time; what difference can it make if the agreement expressly allows it to do what the law entitles it to do anyway? We had failed to notice, however, that elsewhere in the agreement the machinists' union had waived its statutory right to file a section 6 notice until October 1, 1989. The reopener provision created an exception to this waiver, for the case where United was taken over. It enabled the machinists to accelerate the filing of a section 6 notice. That was what was scary to lenders. October 1 has come and gone; the scare is over.
17
Or is it? Although the question is a close one, we believe that the principle that an issue capable of repetition but evading review is not rendered moot by the occurrence of a condition that would otherwise have made it moot, Weinstein v. Bradford, 423 U.S. 147, 96 S.Ct. 347, 46 L.Ed.2d 350 (1975) (per curiam), is applicable to this case. The principle depends on two things: that the lawsuit is apt to outlast the injury, and that this plaintiff is likely to be victimized again by a repetition of the complained-of misconduct of this defendant. Burke v. Barnes, 479 U.S. 361, 364, 107 S.Ct. 734, 736, 93 L.Ed.2d 732 (1987). (The second condition is essential to the idea that courts adjudicate disputes between parties, rather than merely answering interesting questions of law.) Both conditions are satisfied here. The covenant of which the pilots complained was lethal while in force, but it was in force for only a brief time, and modern litigation is not characteristically brief. The filing of the section 6 notice by the machinists has set the stage for the negotiation of a new collective bargaining agreement in which United and the machinists will be free, if Judge Zagel's order is vacated, to reinsert the provisions waiving the machinists' statutory right to file a section 6 notice until a specified date and carving out from that waiver the case of a takeover of United. If the date specified is not far distant from the date on which the provisions are adopted, there may not be time, as there was not time here, for litigation challenging the lawfulness of the provisions to be completed before the date arrives and a new section 6 notice is filed. The parties could make the date as near or as distant as they wanted. They could make it terminate every thirty days, unless renewed, without impairing its efficacy as an anti-takeover device.
18
We conclude that the case is not moot and arrive finally at the merits. We can be brief in light of Judge Zagel's painstaking opinion on remand. As he pointed out, under Delaware law an anti-takeover provision is lawful only if the corporation adopting it has given due consideration to shareholder welfare; the business-judgment rule in Delaware allows less scope for an anti-takeover provision than for provisions less likely to generate a conflict of interest between management, eager to retain control of the corporation, and the shareholders, eager to maximize the value of their shares. Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 180 (Del.1985). The proper characterization of Sections B(1)(b) and C, which the pilots contend are anti-takeover provisions and United and the machinists contend are provisions regulating the company's labor relations, is a fact-bound issue on which Judge Zagel's determination, unless clearly erroneous, binds us. His determination that these are anti-takeover provisions is not clearly erroneous; it is not erroneous at all. There is abundant evidence that these provisions were adopted not to resolve a conflict between United and the machinists and thus head off a possible strike, as United and the machinists contend in this litigation, but to prevent the pilots from taking over the company.
19
Section C is particularly transparent; its only possible purpose is to discourage the pilots from making a takeover attempt by diluting the value of the stock that the pilots' employee stock plan would acquire by taking over the company. Although one can imagine the company's acceding to the machinists' request for such a provision not because the company wanted to defeat a takeover by the pilots but because it wanted to buy labor peace with the machinists, Judge Zagel found with ample support in the record that the object of both parties was to defeat a takeover by the pilots. As for Section B(1)(b), the evidence was again ample that its purpose was to scare off the lenders to whom the pilots might turn for the financing of their takeover attempt.
20
So these are anti-takeover devices, and of a unique lethality because unlike the usual "poison pills" the company could not rescind them. They were written into a collective bargaining agreement that the company could not alter unilaterally other than through the cumbersome process of a section 6 notice, followed by protracted mediation and cooling-off periods. They are the Doomsday Bomb in the arsenal of corporate defensive measures. Delaware law requires that defensive measures, and a fortiori defensive measures as irrevocable as these, be adopted with due concern for the interests of shareholders. The challenged covenants were adopted in haste and with due regard for nothing except their probable efficacy in defeating the pilots' takeover attempt. They violate Delaware law.
21
AFFIRMED.
22
RIPPLE, Circuit Judge, concurring in part and dissenting in part.
23
In my view, the dispute with respect to Section B(1)(b) is moot. The application of the so-called "capable of repetition yet evading review" exception to the mootness doctrine is always fact-specific and pragmatic. However, its invocation here involves more than pragmatism; it involves speculation.
24
In all other respects, I am pleased to join my brothers' disposition of the case.
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NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 13a0936n.06
No. 12-2403 FILED
Oct 31, 2013
DEBORAH S. HUNT, Clerk
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FREDERICK CHARLES PETTEY )
and HEIDI PETTEY, )
)
Plaintiffs-Appellants, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR THE
) EASTERN DISTRICT OF MICHIGAN
CITIMORTGAGE, INC., )
)
Defendant-Appellee. )
Before: KEITH, GUY, and GIBBONS, Circuit Judges.
JULIA SMITH GIBBONS, Circuit Judge. Plaintiffs-appellants Frederick and Heidi
Pettey (the “Petteys”) appeal the district court’s grant of defendant-appellee CitiMortgage, Inc.’s
(“CMI”) motion to dismiss and the district court’s denial of their motion for reconsideration. For
the reasons set forth below, we affirm.
I.
A.
This home mortgage foreclosure case involves real property located at 1525 West Marshall
Street, Ferndale, Michigan. The Petteys purchased the property in the early 1990s and currently
reside there. On November 10, 2006, the Petteys closed a loan in the amount of $163,900 with Ross
Mortgage Corporation and executed a promissory note, which was secured by a mortgage on the
property. Mortgage Electronic Registrations Systems, Inc. (“MERS”), as the nominee for Ross
Mortgage and its successors and assigns, was named the mortgagee. On April 23, 2010, MERS
assigned the mortgage to CMI. CMI is the servicer of the loan.
The Petteys defaulted on their repayment obligations, and CMI foreclosed by advertisement.
On January 5, 2011, six days prior to the sheriff’s sale of the property, an attorney for CMI signed
an affidavit of compliance that stated, in part:
2. This statement is being filed to show compliance with MCL 600.3204 and
600.3205 with regard to the foreclosure by advertisement of the loan herein
described . . . .
3. On or about November 10, 2006 a mortgage was executed between Fredrick
Charles Pettey and Heidi Pettey aka Heidi A. Pettey, husband and wife to Mortgage
Electronic Registration Systems, Inc., as nominee for lender and lender’s successors
and/or assigns for $163,900.00 on November 10, 2006, recorded November 29, 2006
in Liber 38441, Page 795, Oakland County Records.
4. Said mortgage is currently held by CitiMortgage, Inc.
5. The law firm of Orlans Associates, P.C. was retained to foreclose the above
mortgage by advertisement.
6. In processing the foreclosure for the above mortgage, Orlans Associates, P.C.
mailed a written Notice to the borrower(s) pursuant to MCL 600.3205(a)(1) and (2).
7. A form of the above Notice was also published in a qualified newspaper in the
manner provided in MCL 600.3205(a)(4).
8. Neither the borrower(s) nor a housing counselor requested the authorized
Designee to set up a meeting to modify the mortgage, within the required time period
as set forth in MCL 600.3205a(1)(d).
9. More than 24 days passed since the written Notice was sent to the borrower(s),
pursuant to MCL 600.3205a(1).
10. The Notice of Foreclosure was not published until Orlans Associates, P.C.
complied with MCL 600.3204(4).
CMI purchased the property at the sheriff’s sale held on January 11, 2011. The statutory
redemption period expired on July 11, 2011. The Petteys did not attempt to redeem the property.
-2-
B.
On August 9, 2011, following CMI’s initiation of eviction proceedings, the Petteys filed this
action in the Oakland County Circuit Court. The Petteys sought to quiet title in the property to
themselves, and asserted breach of Michigan Compiled Laws section 600.3205 and claims of unjust
enrichment and unfair business practices. On August 30, 2011, CMI removed this case to the
United States District Court for the Eastern District of Michigan on the basis of diversity of
citizenship. See 28 U.S.C. § 1332(a).
On September 27, 2011, CMI moved to dismiss all counts under Rule 12(b)(6). The district
court granted CMI’s motion and dismissed the suit. The district court concluded that any allegation
that CMI did not have authority to initiate foreclosure proceedings was without merit because the
Petteys relied on cases that had been reversed by the Michigan Supreme Court. The district court
concluded that CMI was not in violation of the notice or loan-modification requirements of
Michigan’s foreclosure-by-advertisement statute because the Petteys had failed to take action under
the statute that would have triggered CMI’s notice and loan-modification obligations. And the
district court concluded that all other alleged defects did not relate to the foreclosure process itself,
as required under Michigan law.
The district court dismissed the Petteys’ quiet-title claim for substantially similar reasons.
The district court rejected their unjust-enrichment claim because there was an express contract
governing the contested matter. The district court rejected their deceptive acts and unfair practices
claim because there is no common-law cause of action under Michigan law for deceptive acts or
unfair practices and the Petteys failed to plead a statutory cause of action. And the district court
rejected the Petteys’ argument that the complaint stated a cause of action for innocent
-3-
misrepresentation and constructive fraud and held, in any event, that the Petteys could not prevail
because the complaint was devoid of factual allegations regarding those causes of action. The
Petteys then filed a motion for reconsideration, which the district court also denied.
II.
Having thoroughly reviewed the record, the parties’ briefs, and the applicable law, we are
persuaded that the district court’s grant of CMI’s motion to dismiss and denial of the Petteys’ motion
for reconsideration were proper for the reasons stated in the district court’s August 21, 2012, and
September 7, 2012, opinions—with one caveat. In discussing the Petteys’ argument that CMI was
not the proper party to institute foreclosure proceedings, the district court noted, consistent with the
law in effect at that time, that a structural defect rendered foreclosure proceedings void ab initio,
while defects in the statutory notice requirements rendered the sale voidable. Davenport v. HSBC
Bank USA, 739 N.W.2d 383, 384–85 (Mich. Ct. App. 2007), on which the district court relied for
this proposition, has since been overruled. See Kim v. JPMorgan Chase Bank, N.A., 825 N.W.2d
329, 337 (Mich. 2012). “[D]efects or irregularities in a foreclosure proceeding result in a
foreclosure that is voidable, not void ab initio.” Id.
Accordingly, apart from the subsequent change in Michigan law, we adopt the district court’s
opinions and affirm those judgments. See Pettey v. CitiMortgage, Inc., No. 11-13779, 2012 WL
3887206 (E.D. Mich. Sept. 7, 2012); Pettey v. CitiMortgage, Inc., No. 11-13779, 2012 WL 3600342
(E.D. Mich. Aug. 21, 2012).
-4-
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483 F.Supp. 138 (1980)
EAZOR EXPRESS, INC., Plaintiff,
v.
UNITED STATES of America; Clifford L. Alexander, Jr., Secretary, Department of the Army; the United States Army Corps of Engineers; Lt. Gen. John W. Morris, Chief of Engineers, U.S. Army Corps of Engineers, and Weeks Dredging and Contracting Co., Inc., Defendants.
No. 78 C 2313.
United States District Court, E. D. New York.
January 15, 1980.
*139 Abourezk, Shack & Mendenhall, P. C. by Thomas G. Shack, Jr., Washington, D. C., and Abberley, Kooiman, Marcellino & Clay by John P. Keegan, New York City, for plaintiff.
Edward R. Korman, U. S. Atty., Eastern District of New York, Brooklyn, N. Y., Gilbert S. Fleischer, Attorney in Charge Torts Branch, Civil Division U. S. Dept. of Justice by Craig S. English, New York City, for Federal defendants.
Lester, Schwab, Katz & Dwyer by Saul Wilensky, and Lawrence M. Honig, New York City, for defendant Weeks.
MEMORANDUM AND ORDER
NEAHER, District Judge.
Defendants in this damage action arising out of the dredging of a waterway adjacent to plaintiff's property move to dismiss the complaint as barred by the applicable statute of limitations and laches. For the reasons set forth below, the motions are granted and the complaint is dismissed.
Plaintiff Eazor Express, Inc. ("Eazor") is the owner of a trucking terminal in Brooklyn, New York, which is adjacent to Newtown Creek, a navigable channel maintained by defendant United States Army Corps of Engineers ("ACE") for the use of commercial vessels. Between April 8 and April 17, 1974, Newtown Creek was dredged to remove accumulated silt by defendant Weeks Dredging and Contracting Co., Inc. ("Weeks") under a contract with ACE. Shortly after completion of the dredging operations, cracks began to appear in the side of the trucking terminal's bulkhead along Newtown Creek due to subsidence of the land beneath, apparently caused by overdredging of the channel.
Plaintiff allegedly spent the next two and a half years investigating the cause of the damage, and then filed a claim for property damage with ACE in November 1976. The claim was denied on April 20, 1978, and six months later, on October 20, 1978, plaintiff filed this action.
Turning first to plaintiff's claim against Weeks under the Extension of Admiralty Jurisdiction Act ("EAJA"), 46 U.S.C. § 740 (1948), we note that district court jurisdiction extends to claims of property damage "caused by a vessel on navigable water, notwithstanding that such damage or injury be done or consummated on land." For purposes of determining admiralty tort jurisdiction, the Supreme Court has stated that, in addition to a maritime locality, the wrong must "bear a significant relationship to traditional maritime activity." Executive Jet Aviation v. City of Cleveland, 409 U.S. 249, 268, 93 S.Ct. 493, 504, 34 L.Ed.2d 454 (1972). See Kelly v. United States, 531 F.2d 1144, 1146 (2 Cir. 1976). The federal courts have traditionally exercised their admiralty jurisdiction over claims for damages arising out of the operation and maintenance including the dredging of navigable canals and channels, Ex *140 parte Boyer, 109 U.S. 629, 3 S.Ct. 434, 27 L.Ed. 1056 (1884); Gulf Oil Corp. v. The Baltimore, 47 F.Supp. 770 (E.D.N.Y.1942), aff'd, 142 F.2d 557 (2 Cir. 1944); Otts v. I.M. Ludington's Sons, Inc., 229 F. 538 (2 Cir. 1915); 1 Benedict, Admiralty § 145 (6th ed. 1974), and, since the passage of EAJA, the same result appears proper where, as here, the damage claimed is to plaintiff's adjacent land.[1]
As there is no specific statute of limitations for a claim for property damage brought in admiralty, the doctrine of laches applies, and the court must look to the analogous State statute of limitations for guidance in determining whether plaintiff's claim should be barred by an inexcusable lapse of time. See Czaplicki v. The Heogh Silvercloud, 351 U.S. 525, 533-34, 76 S.Ct. 946, 100 L.Ed. 1387 (1956); Public Adm'r of County of New York v. Angela Compania Naviera S.A., 592 F.2d 58, 63 (2 Cir. 1979); Larios v. Victory Carriers, Inc., 316 F.2d 63 (2 Cir. 1963). The analogous statute of New York, the forum state here, is Civil Practice Law & Rules § 214(4) (CPLR), which provides a three-year limit for the commencement of actions to recover damages for injury to property. Plaintiff's claim accrued at the time it was injured by the invasion of its rights here, at the time of the dredging by Weeks which allegedly caused damage to plaintiff's terminal and the statute of limitations is not tolled by plaintiff's lack of complete knowledge of the facts. Schmidt v. Merchants Despatch Trans. Co., 270 N.Y. 287, 200 N.E. 824 (1936); Medina Medical Bldg., Inc. v. Erie County Sheriff's Dept., 55 A.D.2d 1026, 391 N.Y.S.2d 257 (4th Dept. 1977). See Kern v. Hettinger, 303 F.2d 333, 338 (2 Cir. 1962).[2]
Since this action was commenced in October 1978, approximately four and a half years after the allegedly negligent dredging occurred in April 1974, it is clearly brought well beyond the limitations period of CPLR § 214(4). In these circumstances, however, courts must not resort to a mechanical application of the State statute; rather, they must consider the equities of the parties in determining whether a plaintiff's action is barred by laches. Gardner v. Panama Railroad Co., 342 U.S. 29, 30-31, 72 S.Ct. 12, 96 L.Ed. 31; Hill v. Bruns & Co., 498 F.2d 565 (2 Cir. 1974). The approach to such a determination has been set forth by the Court of Appeals for this circuit:
"When the suit has been brought after the expiration of the state limitation period, a court applying maritime law asks why the case should be allowed to proceed . . ..
* * * * * *
"Moreover, although a plaintiff who has delayed bringing suit beyond the analogous state period has the ultimate burden of persuasion both as to the excuse for his own delay and as to lack of prejudice to the defendant, see Gilmore & Black, Admiralty (1957), 631, these two factors are not to be viewed independently. A weak excuse may suffice if there has been no prejudice . . ..
* * * * * *
"Even on this approach there may be cases where the plaintiff's evidence as to excuse for the delay is so insubstantial that the court need not call on the defendant to come forward with evidence of prejudice." Larios v. Victory Carriers, Inc., supra, 316 F.2d at 66-67.
*141 Applying these principles, the court concludes that plaintiff has failed to offer an explanation for its delay sufficient to excuse its commencement of this suit more than 17 months after the running of the State statute of limitations. Plaintiff cannot claim that it was not immediately aware of the damage to its property because, by admission of its president, cracks became apparent at the terminal site shortly after the completion of the dredging (Norton Aff., Exh. B). Nor can plaintiff claim it was unable to identify its alleged tortfeasor. In February 1976, more than 14 months before the running of CPLR § 214(4), a construction company retained by plaintiff reported that Weeks had conducted dredging operations in the area in 1974 (Bache Aff. ¶ 4). And on June 26, 1976, an engineering consulting firm retained by plaintiff issued a report which concluded that dredging had caused the subsidence.
Unlike Hill and Larios, supra, moreover, this is not an action involving seamen unaware of their rights or ill-advised by counsel. Plaintiff is a corporation that was represented in this matter by counsel at least since April 1976, and was able to obtain the intercession of a United States Senator on its behalf in negotiations with ACE. Under these circumstances, plaintiff's claim that the Corps was uncooperative has a hollow ring and can hardly excuse a delay of four and a half years after the initial discovery of injury before the bringing of suit. See A. Bottacchi, S.A. v. Philipp Bros. Latin Am. Corp., 410 F.Supp. 375, 378 (S.D.N.Y.1976).
Although defendant Weeks' assertions of prejudice are not overwhelming, a defendant may not be required to come forward with any evidence of prejudice where, as here, plaintiff's excuses for delay are insubstantial or non-existent. Larios v. Victory Carriers, Inc., supra, 316 F.2d at 67; A. Bottacchi, S.A. v. Philipp Bros. Latin Am. Corp., supra, 410 F.Supp. at 378. After balancing the equities, the court is of opinion that plaintiff's claim against Weeks is barred by laches.
Plaintiff also contends that its claim against the federal defendants is properly brought under the Federal Tort Claims Act ("FTCA"), 28 U.S.C. § 2671 et seq., and is not time barred. That argument runs counter to the clear law of this circuit.
The Extension of Admiralty Jurisdiction Act, 46 U.S.C. § 740, provides:
"That as to any suit against the United States for damages or injury done or consummated by a vessel on navigable waters, the Public Vessels Act or Suits in Admiralty Act, as appropriate, shall constitute the exclusive remedy for all causes of action . . .."
Since there is no claim here that a public vessel was involved, the Suits in Admiralty Act ("SIAA"), 46 U.S.C. § 742, is the appropriate statute. The SIAA provides in relevant part:
"In cases where if such vessel were privately owned or operated, or if such vessel were privately owned or possessed, or if a private person or property were involved, a proceeding in admiralty could be maintained, any appropriate nonjury proceeding in personam may be brought against the United States . . .." 46 U.S.C. § 742.
These provisions have been consistently held in this circuit to bring all admiralty claims against the United States within the ambit of the SIAA. Kelly v. United States, supra, 531 F.2d at 1149; Szyka v. U.S. Secretary of Defense, 525 F.2d 62, 64-65 (2 Cir. 1975). See also United States v. United Continental Tuna, 425 U.S. 164, 176 n. 14, 96 S.Ct. 1319, 47 L.Ed.2d 653 (1976); Roberts v. United States, 498 F.2d 520 (9 Cir.), cert. denied, 419 U.S. 1070, 95 S.Ct. 656, 42 L.Ed.2d 665 (1974). This result, moreover, is fully supported by the express prohibition against the application of the FTCA in these circumstances found in 28 U.S.C. § 2680(d), which makes jurisdiction under that act and the SIAA mutually exclusive. Kelly v. United States, supra, 531 F.2d at 1149; Roberts v. United States, supra, 498 F.2d at 525.
*142 The SIAA provides that suits authorized thereunder must be brought within two years after the cause of action accrues. 46 U.S.C. § 745. As discussed above, plaintiff's claim arose in April 1974 and the action was filed over four years later, in October 1978. Accordingly, the suit is barred under 46 U.S.C. § 745. See Kelly v. United States, supra.
Plaintiff argues that its action was timely brought because the dilatory actions of the United States in processing its claim and the alleged failure of ACE to notify it of the applicable limiting period served to toll the running of the statutory limit during the 17 months of the administrative proceedings. It is clear, however, that the provisions of 46 U.S.C. § 745 are jurisdictional and cannot be waived or tolled. Szyka v. U.S. Secretary of Defense, supra, 525 F.2d at 65; T.J. Falgout Boats, Inc. v. United States, 508 F.2d 855 (9 Cir.), cert. denied, 421 U.S. 1000, 95 S.Ct. 2398, 44 L.Ed.2d 667 (1974). The cases cited by plaintiff as authority for a doctrine of equitable tolling either involve extraordinary factual circumstances not present here, or are inapposite.
Finally, plaintiff contends that dismissal under Rule 12(b)(1), F.R.Civ.P., is inappropriate at this stage because the court's jurisdiction depends on controverted and material questions of fact. In the light of the discussion above, there are no substantial factual questions concerning accrual of the cause of action or the government's conduct which suffice to forestall dismissal at this time. Defendants have adequately established, moreover, that the Weeks dredge was a "vessel" for purposes of 46 U.S.C. § 740, since it was a "documented vessel" of the United States at all times relevant to this action (Norton Aff. ¶ 3).[3]
Accordingly, defendants' motions to dismiss the complaint are granted.
SO ORDERED.
NOTES
[1] The court's decision would be the same whether its jurisdiction were based on diversity, 28 U.S.C. § 1332, or on admiralty, 28 U.S.C. § 1333. In diversity, the application of New York's three-year statute of limitations, as discussed below, would bar this suit brought four and a half years after the events that allegedly damaged plaintiff's property. Under New York law, the cause of action accrued at the time of dredging, and, absent fraudulent concealment, which has not been alleged here, plaintiff's lack of complete knowledge concerning its claim does not toll the running of the statutory limit. Medina Medical Bldg., Inc. v. Erie County Sheriff's Dept., 55 A.D.2d 1026, 391 N.Y.S.2d 257 (4th Dept. 1977). See Kern v. Hettinger, 303 F.2d 333, 338 (2 Cir. 1962).
[2] Plaintiff's reliance on the New York rule concerning the discovery of concealed injuries applied in certain medical malpractice actions does not aid it here, since plaintiff concededly discovered the damage to its property shortly after the completion of the dredging.
[3] The character of the dredge is corroborated by a United States Coast Guard publication, and is uncontested except for plaintiff's bare claim that a factual issue exists. A party opposing a Rule 12(b)(1) motion, however, cannot rest on a mere denial to raise an issue of fact in the face of such a showing. Exchange Nat. Bank of Chicago v. Touche Ross & Co., 544 F.2d 1126, 1131 (2 Cir. 1976); Beal v. Lindsay, 468 F.2d 287, 291 (2 Cir. 1972).
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167 F.3d 1155
79 Fair Empl.Prac.Cas. (BNA) 203,75 Empl. Prac. Dec. P 45,770Charles O. ROBINSON and Belinda Taylor, individually and onbehalf of a class of similarly situated persons,Plaintiffs-Appellants,v.SHERIFF OF COOK COUNTY, Defendant-Appellee.
No. 98-2333.
United States Court of Appeals,Seventh Circuit.
Argued Dec. 10, 1998.Decided Feb. 8, 1999.
Kenneth N. Flaxman (argued), Chicago, IL, for Plaintiffs-Appellants.
Gina E. Brock (argued), Jack Murphy, Office of the State's Attorney of Cook County, Chicago, IL, for Defendant-Appellee.
Before POSNER, Chief Judge, and RIPPLE and EVANS, Circuit Judges.
POSNER, Chief Judge.
1
The appeal in this Title VII case presents questions of class action procedure. 42 U.S.C. §§ 2000e et seq.; Fed.R.Civ.P. 23. The suit was filed by Charles Robinson on behalf of those blacks (387 in all) who, although certified as eligible for appointment as Cook County correctional officers between roughly 1991 and 1995, had not been appointed when this suit was filed in 1995. The basis of the suit is disparate impact: only 34 percent of black applicants were hired during the period covered by the complaint, compared to 53 percent of white applicants. If disparate impact is proved, the burden shifts to the employer to show that the hiring methods responsible for the disparity are necessary to the efficient conduct of his business. 42 U.S.C. § 2000e-2(k)(1)(A)(i).
2
The defendant (the Sheriff of Cook County) denied that the plaintiffs' statistics demonstrated disparate impact and asserted that the methods used to choose among the applicants, methods that include review of the applicant's employment history, an interview, and a drug test, are necessary to assure the hiring of competent correctional officers. Challenging Robinson's suitability as a class representative, the Sheriff presented evidence that Robinson's application had been turned down because of his very poor employment record, which among other things contained an unexplained 27-month gap between jobs. The judge rejected Robinson as class representative but permitted Belinda Taylor to join the suit as a plaintiff and take Robinson's place as class representative. But when it was discovered that Taylor had never filed a charge of discrimination with the EEOC, which is a prerequisite to filing a Title VII lawsuit, the judge threw out her claim and disqualified her from serving as Robinson's successor as class representative.
3
Robinson at this point was still in the case, though just with his individual claim. At his lawyer's suggestion, the judge conducted a bench trial limited to the issue whether, assuming without deciding that there was a prima facie case of disparate impact, the defendant could show that Robinson's application had been turned down for compelling business reasons. (Conducting an evidentiary hearing limited to a discrete, potentially dispositive issue is an authorized and frequently a sensible method for expediting the decision of cases. Fed.R.Civ.P. 42(b); Thompson v. Mahre, 110 F.3d 716, 720-21 (9th Cir.1997). Separate trials on liability and relief are only the most common application of Rule 42(b). See, e.g., MCI Communications Corp. v. AT&T Co., 708 F.2d 1081, 1166-68 (7th Cir.1983); Saxion v. Titan-C-Manufacturing, Inc., 86 F.3d 553, 556 (6th Cir.1996).) The judge so found and dismissed Robinson's case. Robinson and Taylor appeal, arguing that the class should be certified with Robinson and Taylor as the class representatives irrespective of the deficiencies in their claims, and in addition that the dismissal of Robinson's discrimination claim should be reversed.
4
In effect the appeal asks us to graft Robinson's timely filing with the EEOC onto Taylor's untimely but not-yet-shown-to-be-unmeritorious discrimination case to create a composite plaintiff to represent the class of blacks denied employment by the defendant. We cannot find any basis in law or good sense for such ghastly surgery. Neither plaintiff is a suitable class representative, and zero plus zero is zero.
5
In considering the issue of class certification, we set to one side the results of the bench trial. The fact that the named plaintiff in a class action turns out not to have a meritorious claim does not doom the class action. If Robinson should have been approved as class representative before his bench trial, the fact that he lost at that trial would not be fatal to the class. Sosna v. Iowa, 419 U.S. 393, 399, 95 S.Ct. 553, 42 L.Ed.2d 532 (1975). Certification would make the members of the class parties, and one of them could be selected as class representative in place of Robinson. The bench trial was limited to the question whether Robinson had been turned down for innocent reasons, and the circumstances of other class members might be different, in which event the suit could continue--though not (as we are about to see) with him as class representative.
6
So we must focus on the situation as it appeared when the judge ruled that Robinson was not a suitable class representative. Under Rule 23, the class representative's claim must be typical of the claims of the class, and he must also be an adequate representative of the class. Fed.R.Civ.P. 23(a)(3), (4). The first of these requirements is really an aspect of the second; if his claim is atypical, he is not likely to be an adequate representative; his incentive to press issues important to the other members of the class will be impaired. General Telephone Co. v. Falcon, 457 U.S. 147, 157 n. 13, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982); In re American Medical Systems, Inc., 75 F.3d 1069, 1082-83 (6th Cir.1996). And if when class certification is sought it is already apparent--as it was here because of Robinson's employment history as shown on the application that he submitted to the Sheriff's office--that the class representative's claim is extremely weak, this is an independent reason to doubt the adequacy of his representation. East Texas Motor Freight System, Inc. v. Rodriguez, 431 U.S. 395, 403-04, 97 S.Ct. 1891, 52 L.Ed.2d 453 (1977); Hardy v. City Optical Inc., 39 F.3d 765, 770 (7th Cir.1994); Hanon v. Dataproducts Corp., 976 F.2d 497, 508-09 (9th Cir.1992). One whose own claim is a loser from the start knows that he has nothing to gain from the victory of the class, and so he has little incentive to assist or cooperate in the litigation; the case is then a pure class action lawyer's suit. Cf. Frahm v. Equitable Life Assurance Society, 137 F.3d 955, 957 (7th Cir.1998). Finally, if the class representative's claim is both weak and typical--if the case as a whole is as weak as the representative's individual claim--then the case should be dismissed, with or without class certification. E.g., Coe v. County of Cook, 162 F.3d 491 (7th Cir.1998). The plaintiffs' lawyer, who we assume is the real mover and shaker in this suit, would not be happy to have this case certified as a class action and then dismissed; that would have res judicata effect on any unnamed class members who did not opt out. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 176, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974); Pabst Brewing Co. v. Corrao, 161 F.3d 434, 439 (7th Cir.1998); Bieneman v. City of Chicago, 838 F.2d 962, 964 (7th Cir.1988) (per curiam).
7
The point is not that a plaintiff is disqualified as class representative if he may fail to prove his case or if the defendant may have good defenses. Wagner v. NutraSweet Co., 95 F.3d 527, 534 (7th Cir.1996). That would imply that the only appropriate class representative is a plaintiff who has a 100 percent chance of prevailing if the case is tried. But if his claim is a clear loser at the time he asks to be made class representative, then approving him as class representative can only hurt the class.
8
The class here has 387 members. If none of them has a better case than Robinson, the suit should certainly fail. If some have better cases, we don't understand why the lawyer for the class has not added any of them to the suit. The case cannot have much merit if the only claim of the only other candidate for representative that the lawyer has been able to extract from this large number of people is clearly time barred.
9
If Robinson had been an appropriate class representative and if, the other prerequisites to class certification besides an appropriate class representative having been satisfied, something later had happened to make him no longer an appropriate representative--death, for example, or (the example we gave earlier) a definitive rejection of his case on the merits--the class action could be kept alive by the appointment of a new class representative. Kremens v. Bartley, 431 U.S. 119, 134-35, 97 S.Ct. 1709, 52 L.Ed.2d 184 (1977); Walters v. Edgar, 163 F.3d 430, 432-33 (7th Cir.1998); In re Brand Name Prescription Drugs Antitrust Litigation, 115 F.3d 456, 457-58 (7th Cir.1997). It might even be someone like Taylor who had not filed a timely claim with the EEOC, because once a Title VII class action is up and running the class members are not required to inundate the EEOC with what amount to meaningless requests for right to sue letters. 42 U.S.C. §§ 2000e-5(e), (f)(1); Forehand v. Florida State Hospital, 89 F.3d 1562, 1565 n. 8 (11th Cir.1996); EEOC v. Wilson Metal Casket Co., 24 F.3d 836, 839-40 (6th Cir.1994). But there was no class action when Taylor was added to the suit. There was no class representative who had dropped the baton for her to pick up; Robinson had never been approved as the class representative. Taylor's suitability as class representative had thus to be determined independently of him. Wakeen v. Hoffman House, Inc., 724 F.2d 1238, 1245-46 (7th Cir.1983); Shempert v. Harwick Chemical Corp., 151 F.3d 793, 799 (8th Cir.1998); Griffin v. Dugger, 823 F.2d 1476, 1493 (11th Cir.1987). She was even more unsuitable than he, looked at by herself, because her failure to file a timely charge with the EEOC was an even more disabling weakness than Robinson's spotty employment record.
10
Class action certification having been properly denied, and the district judge having committed no clear error in finding in the bench trial that Robinson's individual Title VII claim had no merit, the judgment of the district court is
11
AFFIRMED.
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
RICHARD DAVID COOPER,
Plaintiff-Appellant,
v.
RICHARD A. LANHAM; MARIA
MAXIMO; NANCY WILLIAMS;
LLOYD L. WATERS, Warden; No. 97-7183
M. TILLIAM, Chaplain,
Defendants-Appellees,
and
SEWALL SMITH,
Defendant.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
J. Frederick Motz, Chief District Judge.
(CA-92-2464-JFM)
Submitted: March 17, 1998
Decided: May 7, 1998
Before MURNAGHAN and LUTTIG, Circuit Judges, and
HALL, Senior Circuit Judge.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
Howard L. Cardin, Mark L. Gitomer, CARDIN & GITOMER, P.A.,
Baltimore, Maryland, for Appellant. J. Joseph Curran, Jr., Attorney
General of Maryland, Stephanie Lane-Weber, Assistant Attorney
General, Baltimore, Maryland, for Appellees.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Richard Cooper, a Maryland inmate and practicing orthodox Jew,
appeals the district court order dismissing his claim that the refusal of
various officials in the Maryland Department of Corrections to pro-
vide him kosher meals violated his First Amendment right to the free
exercise of his religion. This court reviews a district court order grant-
ing summary judgment de novo. See Jones v. Wellham, 104 F.3d 620,
626 (4th Cir. 1997).
A prison regulation which infringes upon a prisoner's constitu-
tional rights will nevertheless be upheld if the regulation is "reason-
ably related" to promoting a legitimate penological interest. Turner v.
Safley, 482 U.S. 78, 87 (1987). The plaintiff bears the ultimate burden
of showing a prison regulation is unconstitutional. See Covino v.
Patrissi, 967 F.2d 73, 79 (2d Cir. 1992); see also Hause v. Vaught,
993 F.2d 1079, 1082 (4th Cir. 1993). The test used when determining
whether a regulation is permissible assesses four factors: (1) whether
the regulation is logically connected to the legitimate government
interests invoked to justify it; (2) whether an alternative means of
exercising the right on which the regulation impinges remains open
to prison inmates; (3) the impact that accommodation of the asserted
rights will have on prison staff, other inmates, and the allocation of
prison resources; and (4) the absence of ready alternatives that fully
accommodate the prisoner's rights at de minimis cost to valid peno-
logical interests. Turner, 482 U.S. at 89-90. In applying the Turner
test, this court must "respect the determinations of prison officials."
United States v. Stotts, 925 F.2d 83, 86 (4th Cir. 1991).
2
Applying the Turner factors, we find that the Defendants' refusal
to provide Cooper kosher meals is reasonably related to promoting
legitimate penological interests. First, there is a logical connection
between the prison regulation and the legitimate governmental inter-
est that justifies it. Defendants have demonstrated that MDOC's food
services program is designed to allow mass production of food and
that it is economically and administratively unable to accommodate
the special dietary requests of the over forty religious groups repre-
sented in the inmate population. See Ward v. Walsh, 1 F.3d 873, 877
(9th Cir. 1993) (finding a prison had a legitimate interest in running
a simplified food service).
Second, this Court must assess whether Cooper has an alternative
means by which he may practice his religion. "The relevant inquiry
under this factor is not whether [Cooper] has an alternative means of
engaging in the particular religious practice that he or she claims is
being affected," but whether Cooper has been denied all means of
religious expression. Ward, 1 F.3d at 877 (citing O'Lone v. Estate of
Shabazz, 482 U.S. 342, 351-52 (1987)). Here, Cooper does not allege
that prison officials are depriving him of his free exercise rights in
any other fashion. Therefore, this Court can assume that Cooper's
practice of Judaism is not entirely circumscribed in the prison, "and
that this factor . . . compensates for the prison's failure to satisfy [his]
dietary demand." Kahey v. Jones, 836 F.2d 948, 951 (5th Cir. 1988).
Considering the third factor, Defendants have made a substantial
showing that providing Cooper with a kosher diet will have a substan-
tial impact on prison officials, inmates, and on prison resources. The
cost of providing kosher meals to Jewish and Muslim inmates is sig-
nificant. (JA 79, 85-97). In addition, the Defendants expect that pro-
viding Cooper with a kosher diet will prompt other inmates of
different religious denominations to make similar requests. See Udey
v. Kastner, 805 F.2d 1218, 1220-21 (5th Cir. 1986) (noting likelihood
that if one dietary request is granted similar demands will proliferate).
MDOC cannot afford to honor these requests, and providing special
diets to some inmates and not to others would violate the prison's reli-
gious directives which is to treat all religions equitably. Further, any
perceived differential treatment among the inmate population poses a
threat to prison administration. See Kahey, 836 F.2d at 951 (recogniz-
ing failure to accommodate other prisoners' requests would have an
3
adverse impact on prison morale); see also O'Lone, 482 U.S. at 353
(noting that special arrangements lead to perceptions of favoritism).
Hence, the third Turner factor weighs in favor of the prison.
As to the final factor--the absence of ready alternatives that fully
accommodate the prisoner's rights at de minimis cost to valid peno-
logical interest, the Defendants allege there are no ready alternatives
to their current food policy due to the financial and administrative
costs of providing kosher meals. Indeed, the Defendants have put
forth evidence demonstrating the substantial costs associated with
purchasing, storing, and preparing kosher meals. Cooper, however,
alleges that there are ways that he could receive kosher meals at no
cost to MDOC. The record reflects that the Jewish Big Brother
League ("JBBL") is willing to pay for and deliver pre-packaged fro-
zen kosher meals to MDOC. Alternatively, JBBL is willing to provide
volunteers to prepare kosher meals in the prison kitchen, or pay
MDOC the costs associated with having MDOC kitchen personnel
prepare kosher meals.
In response to Cooper's suggestions, Defendants have put forth
evidence demonstrating that the already strained kitchen facilities at
MDOC are not equipped to handle the preparation and storage of spe-
cial meals, there are hidden costs associated with Cooper's sugges-
tions, and that Cooper's suggested alternatives do not address
MDOC's broader concern of treating all inmates in a uniform manner.
This court must give substantial deference to prison officials with
respect to matters of institutional administration, see O'Lone, 482
U.S. at 353, and Cooper offers no evidence refuting MDOC's claim
that his proposed alternatives are cost and administratively infeasible.
Therefore, despite Cooper's proposals, he has failed to demonstrate
that MDOC's decision to stop providing kosher meals is not reason-
ably related to legitimate penological interests.
Accordingly, we find that MDOC's refusal to provide kosher meals
does not violate Cooper's First Amendment right to free exercise of
his religion, and we affirm the district court order granting Defen-
dants' motion for summary judgment. We dispense with oral argu-
ment because the facts and legal contentions are adequately presented
in the materials before the court and argument would not aid the deci-
sional process.
AFFIRMED
4
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815 F.2d 1037
1987 A.M.C. 2170
The DOW CHEMICAL COMPANY, Plaintiff-Appellant,v.The M/V ROBERTA TABOR, and M/V SUGARLAND etc., et al., Defendants,American River Transportation Company and Scott Chotin,Inc., Defendants- Appellees.
Nos. 85-3388, 86-3251.
United States Court of Appeals,Fifth Circuit.
May 4, 1987.
Richard B. Foster, Lemle, Kelleher, Kohlmeyer, Dennery, Hunley, Moss & Frilot, New Orleans, La., for Dow Chemical Co.
Robert T. Lemon, II, Jones, Walker, Waechter, Poitenent, Carrer & Denegre, New Orleans, La., for American River Transp.
Paul N. Vance, Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, La., for Scott Chotin, Inc.
Appeals from the United States District Court for the Eastern District of Louisiana.
Before REAVLEY and RANDALL, Circuit Judges, and WOODWARD,* District Judge.
RANDALL, Circuit Judge:
1
Dow Chemical Company ("Dow") appeals the district court's judgment denying Dow's claim for loss of use damages against American River Transportation Company ("Artco") and awarding Scott Chotin, Inc. ("Chotin") attorneys' fees and costs against Dow. For the reasons that follow, we affirm in part, reverse in part, and remand for further proceedings.
I.
2
This litigation arose out of a collision between two tugs in the lower Mississippi River on September 20, 1979. The tugs were the M/V Roberta Tabor, owned by Artco, and the M/V Sugarland, owned by Chotin, but fully chartered to Dow. Three barges were damaged as a result of the collision: The barge ART-488, which was owned by Artco and which was in the tow of the Roberta Tabor, and the barges PTC-501 and SC-303L, which were bareboat chartered by Dow and which were in the tow of the Sugarland.
3
The charter agreement ("Bareboat Charter Party") between Dow and Chotin for the barge SC-303L required Dow to obtain hull insurance and protection and indemnity ("P & I") insurance on the barge and to name Chotin as an additional assured with a waiver of subrogation. Dow could, however, elect to self-insure.1 If Dow elected to self-insure, however, the charter agreement provided that Dow was to pay Chotin for any losses, and was to indemnify Chotin for any claims that would have been covered by insurance, including reasonable attorneys' fees and costs.2
4
The towing contract ("Fully Found Charter Out of Boat") for the Sugarland required Dow to obtain hull and P & I insurance on the barges to be towed, to name Chotin as an additional assured on the P & I policies, and to waive subrogation on the hull policies. The fully found charter required Chotin to obtain hull, P & I, and tower's liability insurance on the Sugarland. The fully found charter also provided that if Dow elected to self-insure, Dow would defend and indemnify Chotin to the same extent as would be required if Dow had purchased the specified insurance coverage.3 There is no dispute that Dow in fact elected to self-insure for losses under $1 million, and that Chotin was not named as an additional assured in Dow's hull and P & I insurance policies covering losses in excess of $1 million. Finally, the fully found charter purported to relieve Chotin of any liability for negligent towing.4
II.
5
On December 27, 1982, Dow sued Artco and Chotin for the damage to the barges and for the loss of their use. On February 9, 1983, Artco answered Dow's complaint and cross-claimed against Chotin for indemnity and contribution for its liability, if any, to Dow, and for damage to its barge, the ART-488. Chotin defended against Dow's claim for damage to and loss of use of the barges and against Artco's cross-claim for indemnity and contribution, and Artco's claim for damage to its barge. On February 25, 1985, Chotin filed a counter-claim against Dow for indemnity from its liability, if any, to Artco and for attorneys' fees and costs incurred in defending against Dow's claims.
6
On March 7 and 8, 1985, the case was tried to the district court. On March 8, 1985, the district court issued its findings of fact and conclusions of law from the bench. The district court found that the negligence of the Roberta Tabor was the sole cause of the collision. The district court held that Dow was therefore entitled to recover from Artco $28,645.03, the stipulated amount of the physical damage to the barges chartered by Dow. On Dow's loss of use claim, however, the district court held that Dow had failed to prove by a preponderance of the evidence the amount of its loss. The district court stated that Dow had failed to establish that it had no other substitute barges available to replace the two damaged barges, or that it had to turn away business due to the temporary loss of the barges. Hence, the district court denied Dow's loss of use claim. Finally, the district court granted Dow prejudgment interest from the date of the collision.
7
On March 22, 1985, the district court entered judgment in favor of Dow and against Artco for $28,645.03, plus prejudgment interest and costs. The court also entered judgment in favor of Chotin and the Sugarland and against Dow on Dow's claim for damages and against Artco on Artco's cross-claims for indemnity and contribution and for damage to its barge.
8
In its findings and conclusions disposing of the above claims, the district court did not rule on Chotin's claim against Dow for attorneys' fees and costs, but instead instructed the parties to pursue that claim in a supplemental proceeding. In essence, the basis for Chotin's counter-claim for damages was that Dow's claim against Chotin constituted a breach of Dow's obligations under the charter parties to defend and indemnify Chotin against such claims. In response, Dow argued that the insurance that it was obligated to obtain would only have required it to indemnify Chotin for claims based on the negligence of the vessels named in the insurance policies, i.e., the barges, and not the negligence of the Sugarland. Therefore, Dow argued, since its suit against Chotin was based upon the negligence of the Sugarland, it had no duty to indemnify Chotin for the costs in defending that action.
9
After receiving additional briefing by Dow and Chotin on the issue of Chotin's counter-claim for attorneys' fees and costs, the district court issued its first set of findings of fact and conclusions of law relating to Chotin's counter-claim. In this set of findings and conclusions, the district court stated that in order to determine whether Dow could properly maintain its claim against Chotin, it was necessary to determine what the effect would have been of the insurance that Dow was to provide under the Bareboat Charter Party and the Fully Found Charter Out of Boat. The district court, after examining the provisions of the charter parties and standard maritime hull insurance policies, concluded that the barge insurance specified in the charter parties would not have provided for the defense or indemnification of Chotin against the claims asserted by Dow. Hence, the district court held that Chotin could not recover attorneys' fees and costs from Dow because the policies required under the charter parties would not have covered losses stemming from the negligent operation of the Sugarland. Finally, the district court also held that the clause in the fully found charter purporting to relieve Chotin for any negligence in the operation of the Sugarland was void as against public policy. On June 3, 1985, judgment was entered in favor of Dow on Chotin's counter-claim.
10
On June 10, 1985, Chotin filed a motion to amend the judgment. In a minute entry of August 16, 1985, the district court granted Chotin's motion to amend. The district court held that since Dow elected to self-insure, it was effectively Chotin's hull underwriter for the barges, and that Dow therefore could not maintain a suit against its own assured. The district court held that in bringing such a suit, Dow was in breach of its contractual obligations to Chotin under the charter parties, and was therefore liable to Chotin for the attorneys' fees expended by Chotin in defending against Dow's claim. The court instructed Chotin to submit either a stipulated amount of attorneys' fees or an affidavit on the amount of attorneys' fees. After more briefing and argument by the parties on the issue of the quantum of attorneys' fees to be awarded Chotin, the district court, in a minute entry dated February 25, 1986, concluded that all of the reasonable attorneys' fees and costs incurred by Chotin in connection with this case were the direct and foreseeable result of Dow's bringing suit in breach of the charter parties. The district court therefore awarded Chotin attorneys' fees in the amount of $24,489.48. An order reflecting this minute entry was entered on March 18, 1986.
11
On March 27, 1986, Dow filed its notice of appeal from this judgment and from the judgment of March 21, 1985. On April 3, 1986, Artco filed its notice of cross-appeal. Amended notices of appeal were filed by Dow and Artco on April 9 and 10, 1986, to correct errors in the stated date of the district court's March 18, 1986 Order.
12
On appeal, Dow argues that the district court erred in holding that Dow had failed to prove its loss of use damages with reasonable certainty, erred in holding that Dow could not sue Chotin without breaching the charter agreements, and erred in holding that all of Chotin's attorneys' fees were a result of Dow's suit against Chotin. After setting out the applicable standard of review, we will address each of Dow's contentions separately.
III.
13
Our standard of review of decisions of district courts sitting in admiralty is well-settled. "[F]indings of fact by the trial court in admiralty cases are subject to the clearly erroneous rule. However, when essentially based on an incorrect legal principle, Rule 52(a) clearly erroneous does not apply and we disregard any such possible findings." Delta S.S. Lines, Inc. v. Avondale Shipyards, Inc., 747 F.2d 995, 1000 (5th Cir.1984), modified in part on rehearing, 753 F.2d 378 (5th Cir.1985). Conclusions of law made by district courts in admiralty cases are, of course, subject to de novo review by this court. Crisis Transp. Co. v. M/V Erlangen Express, 794 F.2d 185, 187 n. 5 (5th Cir.1986). Questions of contract interpretation are questions of law subject to de novo review. Clem Perrin Marine Towing, Inc. v. Panama Canal Co., 730 F.2d 186, 189 (5th Cir.), cert. denied, 469 U.S. 1037, 105 S.Ct. 515, 83 L.Ed.2d 405 (1984). "In an admiralty action, the district court's determination of damages ... is a factual finding subject to the clearly erroneous standard of review." Marathon Pipe Line Co. v. M/V Sea Level II, 806 F.2d 585, 592 (5th Cir.1986). With these principles in mind, we turn to our consideration of Dow's arguments.
IV.
A. Loss of Use Damages:
14
It is well-settled in this circuit that "[l]oss of profits or loss of the use of a vessel pending repair arising from a collision or a maritime casualty is a proper element of damages provided, however, profits are proved with reasonable certainty." Delta S.S. Lines, Inc., 747 F.2d at 1000.
15
Damages for lost profits arising from the loss of use of a vessel for repairs after a collision or other maritime tort has traditionally been called detention. Detention is allowed "when profits have actually been, or may reasonably [been shown] to have been, lost, and the amount of such profits is proved with reasonable certainty." The Conqueror, 1897, 166 U.S. 110, 125, 17 S.Ct. 510, 516, 41 L.Ed. 937. The burden of establishing that profits were lost is upon the shipowner. Skou v. United States, 5 Cir., 1973, 478 F.2d 343, 345.
16
Boliver County Gravel Co. v. Thomas Marine Co., 585 F.2d 1306, 1308 n. 2 (5th Cir.1978). Dow argues that the district court erred in holding that, because Dow had failed to show that it lost profits because the barges were retained, Dow had not met its burden of proving its damages for loss of use with reasonable certainty. Dow claims that the barges were not income-producing, in that they were to be used exclusively to move Dow products from one location to another, and that therefore it is unreasonable to require Dow to demonstrate the profit that it would have earned from the barges during the period that they were out of service for repairs. Dow argues that in a case where a barge generates no income, but only expense, the proper measure of damages for loss of use should be the charter hire paid by Dow for the barges during the period that they were being repaired.
17
We recognize that "there is not just one method of calculating detention damages." Delta S.S. Lines, 753 F.2d at 379. However, without deciding whether Dow's measure of damages is correct, we hold that even if we were to accept the cost of the charter hire for the damaged barges as the proper measure of detention damages, we would still affirm the district court's conclusion that Dow failed to prove its damages with reasonable certainty. This is because Dow failed to prove that it had no excess barge capacity with which to move its products during the period that the damaged barges were being repaired. It is clear to this court that, if Dow were able to move the same amount of its product with other barges chartered or owned by it while the damaged barges were being repaired, there would be no financial loss to Dow despite the fact that Dow was obligated to continue to pay charter hire on the damaged barges. In response to questioning on cross-examination by counsel for Artco, Thomas G. Pence, the business manager for marine transportation at Dow, testified that although it was "safe to say" that all of the other barges owned or chartered by Dow during the period of time that the damaged barges were out of service were "earning money," Dow did nothing more to substantiate this claim.5 Given Dow's failure to demonstrate that it had no extra barges with which to move its product at the time that the damaged barges were being repaired, the district court could reasonably have concluded that Dow's existing capacity was sufficient to accommodate the cargo that the damaged barges would have carried. We cannot say that the district court's conclusion that Dow failed to prove its loss of use damages with reasonable certainty is clearly erroneous. Cf. Brooklyn E. Dist. Term. Ry. v. United States, 287 U.S. 170, 53 S.Ct. 103, 77 L.Ed. 240 (1932) (disallowing damages for loss of use of damaged tug when tug owner's other two tugs were able to perform the work of the damaged tug); Domar Ocean Transp., Ltd. v. M/V Andrew Martin, 754 F.2d 616, 620 (5th Cir.1985) (holding that the district court correctly required proof that substitute vessels used to replace damaged vessels would otherwise have been hired during the substitution period); Inland Oil Transp. Co. v. Ark-White Towing Co., 696 F.2d 321, 326-27 (5th Cir.1983) (disallowing detention damages where there was no proof that damaged barges would have been chartered during a part of the time that they were under repair). Hence, we affirm the district court's conclusion that Dow failed to prove its loss of use damages with reasonable certainty.
B. Dow's Suit Against Chotin:
18
Turning to the second issue in this appeal, Dow argues that the district court erred in holding that the insurance provisions in the charter parties prevented Dow from suing Chotin for loss of use and hull damage to the barges. Dow argues that, had it obtained the requisite hull and P & I insurance, such insurance would only have insured Chotin for liability arising from the fault of the named vessel, in this case the barges, and would not have insured Chotin for liability for its negligence in the operation of the Sugarland. Dow also argues that, in any case, the hull and P & I policies that it was obligated to obtain would not have provided coverage for the loss of use of the damaged barges, and that Dow therefore was not Chotin's insurer with respect to these damages. Hence, Dow argues, the charter agreements did not prohibit Dow from suing Chotin for the loss of use of the barges.
19
Turning to Dow's first argument, that the insurance provisions would not have indemnified Chotin for its liability for negligent operation of the Sugarland, we hold that this argument is foreclosed by recent decisions of this court which hold that an insurer cannot by way of subrogation recover against its insured or an additional assured any part of its payment for a risk covered by the policy. See Marathon Oil Co. v. Mid-Continent Underwriters, 786 F.2d 1301 (5th Cir.1986); Wiley v. Offshore Painting Contractors, Inc., 711 F.2d 602 (5th Cir.), on rehearing, 716 F.2d 256 (5th Cir.1983). In Marathon, this court stated:The underwriters that wrote a policy containing a provision waiving "all subrogation" against an additional assured contend that the clause does not mean what it says: the insurers argue that the waiver of subrogation applies only with respect to claims covered by the policy. Because that interpretation would render the waiver meaningless, we hold that, when underwriters issue a policy covering an additional assured and waiving "all subrogation" rights against it, they cannot recoup from the additional assured any portion of the sums they have paid to settle a risk covered by the policy, even on the theory that the recoupment is based on the additional assured's exposure for risks not covered by the policy.
20
786 F.2d at 1302.
21
In Marathon, Marathon chartered a vessel from B & C Boat Rentals under an agreement requiring B & C to provide P & I insurance naming Marathon as an additional assured with waiver of subrogation. The underwriter was British Underwriters, and the P & I policy, by implication, only covered claims arising out of the operation of the vessel. A seaman on board the vessel was injured through the negligence of a crane operator employed by Marathon aboard a fixed platform owned by Marathon. The seaman filed two suits. The first suit was against Marathon in its capacity as charterer of the vessel, the vessel in rem, B & C, and the underwriters. The second suit was against Marathon in its capacity as the owner of the platform.
22
Unknown to Marathon, British Underwriters settled with the seaman for $60,000, with a collateral agreement that the seaman would pay British Underwriters the first $30,000 he recovered from Marathon. The district court held that these tactics did not violate any legal duty. On appeal, British Underwriters contended, as does Dow in this case, that the waiver of subrogation was co-extensive with the insurance coverage, and did not apply to Marathon in its capacity as platform owner. This court, in an opinion by Judge Rubin, reversed and rendered judgment for Marathon, stating that "[b]ecause they had waived 'all subrogation,' British Underwriters could not have sued in their own name to recover from Marathon any part of the $60,000 they paid Tye, even on the theory that Marathon, in its uninsured capacity as platform owner, was contributorily liable as a joint tortfeasor." Id. at 1304.
23
Similarly, in Wiley, Offshore Painting obtained a marine hull policy issued by Continental Insurance Company insuring the M/V Sandra P. Chevron was named as an additional assured with a waiver by Continental of all rights of subrogation against Chevron. The Sandra P was destroyed through Chevron's negligence in the construction and operation of an offshore platform. Continental paid Offshore Painting $160,000 for the loss of the vessel, and obtained a judgment against Chevron for that amount. In its initial opinion, the panel affirmed on the same theory that Dow is arguing to this court--that the provisions in the insurance policies naming Chevron as an additional assured and waiving subrogation did not apply to Chevron's acts of negligence as a platform owner, as opposed to its acts as the operator of the vessels named in the policies. See 711 F.2d at 614. On rehearing, however, the panel withdrew this part of its original opinion, and reasoned as follows:
24
Chevron was, however, an additional assured on the hull policy on the SANDRA P issued by Continental. Because that hull policy covered a fire loss whether or not it resulted from Chevron's ownership or operation of the SANDRA P, it is applicable here, and prevents Continental from recovering from Chevron under the principle that an insurer may not recover from its insured. It follows that the district court was incorrect in awarding Continental indemnification from Chevron for the $160,000 it had paid Offshore Painting for the loss of the SANDRA P.
25
716 F.2d at 257. We think that Marathon and Wiley control the disposition of this issue.6 Since Dow elected to self-insure, Dow was, in effect, Chotin's hull underwriter for any damage to the barges. Dow, as Chotin's hull underwriter, also agreed to waive all rights of subrogation against Chotin. Having done so, Dow could not recover from Chotin damages for a loss covered by the hull policy, on the theory that the policy did not cover damages to the barges resulting from Chotin's operation of the Sugarland. Hence, the district court was correct that Dow's suit against Chotin for hull damage to the barges was a breach of the charter agreements.
26
The same analysis yields a different result, however, when applied to Dow's claim against Chotin for the loss of use of the barges, because this claim is not one that would have been covered by the insurance that Dow was contractually obligated to obtain. Dow contends, and Chotin apparently does not dispute, that neither standard hull nor standard P & I insurance would insure against claims based on loss of use of the barges, absent a special clause in the maritime insurance policy. See L. Buglass, Marine Insurance & General Average in the United States 440-43 (2d ed. 1981); see also 7 Benedict on Admiralty Sec. 1.23 at 1-133--1-142 (7th ed. 1986) (loss of earnings clauses). We note that in Marathon and Wiley, the insurance would not have protected the co-assured with respect to liability arising out of the activity in which he was engaged--in both cases the operation of offshore platforms--but would have insured against the type of risk that occurred. In Marathon, the P & I insurance would have covered the injury to the seaman, and in Wiley, the hull insurance would have covered the fire damage to the vessel. In the case sub judice, however, neither the standard hull insurance nor the P & I insurance that Dow was obligated to obtain would have insured Chotin against the loss of use claim asserted by Dow. Hence, Dow was not Chotin's hull underwriter with respect to that claim. Since Dow was not Chotin's underwriter with respect to this claim, Dow was not prevented by the charter parties from suing Chotin for loss of use. Hence, we hold that the district court erred in holding that Dow's suit against Chotin for loss of use constituted a breach of Dow's obligations under the charter parties.7
C. Chotin's Attorneys' Fees:
27
Since Dow could properly maintain a suit against Chotin for Dow's loss of use of the damaged barges, it was improper for the district court to award as damages all of the attorneys' fees incurred by Chotin in defending against Dow's claims. Instead, the district court should, in computing Chotin's attorneys' fees on remand, attempt to apportion those fees expended in defending against Dow's claim for hull damage, as opposed to those expended in defending against Dow's loss of use claim.
28
This leaves only the issue of the district court's award to Chotin of attorneys' fees spent in prosecuting its counter-claim against Dow to establish its right to indemnity from Dow under the charter party agreements. In awarding these fees, the district court erred. " '[U]nder a general indemnity agreement, ..., the indemnitee enjoys no right to recover its legal fees incurred in establishing its right to indemnification.' " Weathersby v. Conoco Oil Co., 752 F.2d 953, 959 (5th Cir.1984) (quoting Signal Oil & Gas Co. v. Barge W-701, 654 F.2d 1164, 1178 (5th Cir. Unit A Sept.1981), cert. denied, 455 U.S. 944, 102 S.Ct. 1441, 71 L.Ed.2d 656 (1982)). Hence, in computing Chotin's damages on remand, the district court should not award Chotin its attorneys' fees expended in prosecuting its counter-claim against Dow for indemnification.
V.
29
For the above reasons, the judgment of the district court is AFFIRMED in part, REVERSED in part, and this case is REMANDED. Each party is to bear its own costs.
*
District Judge of the Northern District of Texas, sitting by designation
1
Clause 14 of the Bareboat Charter Party provides as follows:
14
Charterer agrees to maintain in force at Charterer's expense, Standard River form Hull Insurance with full collision coverage in the amount of See Table 'A' for the barge(s). Charterer also agrees to maintain in force at Charter's expense, Protection and Indemnity Insurance in the amount of See Table 'A' for the barge(s)
Deductibles for Hull Insurance and for Protection and Indemnity Insurance on the barge(s) will be for the Charterer's account. Owner warrants the full value of the barges to be See Table 'A'. Scott Chotin, Inc. shall be designated as Owner and as co-assured on the Hull Insurance and on the Protection and Indemnity Insurance as its interests may appear. Charterer shall provide Owner with written confirmation of insurance from its underwriters and shall provide Owner with waiver of subrogation.
* * *
... Owner agrees that Charterer may at its option and upon written notice to the Owner elect to be self-insured.
2
Paragraph 16 of the Bareboat Charter Party provides in full as follows:
16
Should insurance or any part thereof be vitiated, avoided or impaired because of the act or omission of the Charterer or anyone for whom the Charterer is responsible, the Charterer shall promptly pay to Owner any and all losses and will indemnify and save harmless the Owner and all of the equpment [sic] herein included from any and all claims, suits, judgements, demands, costs and expenses in connection therewith that would have been otherwise covered by the insurance and all reasonable attorney's fees, costs, and disbursements and expenses inconnection [sic] therewith
3
Clause 11 of the Fully Found Charter Out of Boat provides in full as follows:
11
INSURANCE: Owner shall provide at its expense and for its account full form Hull and Machinery and Protection and Indemnity Insurance including Tower's Liability to the full value of the vessel
Charterer agrees to obtain at its expense and keep in full force and effect for the life of this agreement, full form hull insurance and P & I insurance on any barges or floating equipemnt [sic] to be towed, not furnished by owner, and full form cargo insurance on all cargos to be transported in or on the barges to the full insurable values thereof, naming Owner and its Boat as co-assureds under such P & I clauses and having all its underwriters waive all rights to subrogation in force against Owner, its Boat, Operators, agents, managers and parties at interest therin [sic] under such hull and cargo insurance. Charterer will pay all deductibles under said policies. In the event Charterer shall fail or elect not to procure and maintain required insurance, Charterer shall defend and indemnify Owner and its Boat to the same extent that protection would have been provided had required insurance been maintained and in force.
4
Clause 12 of the Fully Found Charter Out of Boat provides in relevant part as follows:
12
FORCE MAJEURE: The Boat, its captain and owner shall not unless otherwise in this charter expressly provided, be responsible or liable in any was [sic] for any loss or damage for any failure or delay in the performance hereunder, arising or resulting from: any act, neglect, default or barratry of the master pilots, mariners, or other servants of Owner in navigation or management of the Tow
5
Dow also failed to prove traditional "lost profit" damages for detainage. Mr. Pence also testified that the Dow chemicals to be transported by the damaged barges could have been transported by rail at additional expense, but that Dow did not do this, that no Dow plants had to be shut down because the damaged barges were unable to carry their cargoes, that he did not know of any deliveries that were not made to Dow customers as a result of the barges being out of use, and that, so far as he knew, the cargoe that the damaged barges were to carry ultimately reached its destination. Another Dow witness, K. Don Smith, the superintendent of Dow's inland marine services, Louisiana division, testified on cross-examination that no additional barges were requested by Dow to replace the damaged barges, no rail or other method of transportation was utilized during the period of time that the barges were out of service, no additional storage facilities were required during this period, and no late charges were incurred by Dow as a result of the damaged barges being out of service. See First Supp. Record at 92-108, 114-19
6
Dow argues that this issue is controlled by this court's decision in Wedlock v. Gulf Miss. Marine Corp., 554 F.2d 240 (5th Cir.1977). Wedlock, however, is distinguishable from the case sub judice. In Wedlock, the issue before this court was only the scope of coverage under a P & I insurance policy, not the scope and effect of an underwriter's waiver of subrogation against an additional assured. See id. at 242. In Wedlock, the court correctly concluded that the P & I insurance on a tug did not cover a personal injury claim asserted against a charterer of the tug who was named a co-assured on the tug policy for acts of negligence arising out of the charterer's operation of a barge. Id. Unlike Marathon and Wiley, Wedlock did not involve an insurer who had waived subrogation against an additional assured attempting to recover from the additional assured monies paid on risks covered by the policy. Hence, we reject Dow's argument that Wedlock controls the disposition of this issue
7
At oral argument, counsel for Chotin suggested that the force majeure clause in the fully found charter, see note 4, supra, operated to relieve Dow from liability for any negligence in its operation of the Sugarland, and that therefore Dow was not entitled to sue Chotin for loss of use. The district court rejected this argument, holding that under Bisso v. Inland Waterways Corp., 349 U.S. 85, 75 S.Ct. 629, 99 L.Ed. 911 (1955), the clause in the charter party purporting to relieve Chotin from liability for negligent towing was invalid as contrary to public policy. We agree. We note, however, that the clauses in the charter parties requiring Dow to name Chotin as an additional assured on the insurance policies do not run afoul of Bisso. See Voisin v. O.D.E.C.O. Drilling Co., 744 F.2d 1174, 1178 (5th Cir.1984), cert. denied, 470 U.S. 1053, 105 S.Ct. 1757, 84 L.Ed.2d 820 (1985); Hercules, Inc. v. Stevens Shipping Co., 698 F.2d 726, 738-39 (Former 5th Cir.1983) (en banc) (collecting cases). Hence, the force majeure clause in the charter party was ineffective, and therefore did not prevent Dow from suing Chotin for loss of use
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484 P.2d 1180 (1971)
26 Utah 2d 50
The WESTERN CASUALTY AND SURETY COMPANY, Plaintiff and Respondent,
v.
TRANSAMERICA INSURANCE COMPANY et al., Defendants and Appellant.
No. 12265.
Supreme Court of Utah.
May 10, 1971.
*1181 John L. Chidester, Heber City, for appellant.
Glenn C. Hanni, of Strong & Hanni, Salt Lake City, for Western Casualty & Surety Co.
Raymond M. Berry, Allan L. Larson, Worsley, Snow & Christensen, Salt Lake City, for Transamerica Insurance Co.
ELLETT, Justice.
This appeal involves the interpretation of the omnibus clause of two separate insurance policies. The trial court granted a summary judgment holding that neither policy afforded any coverage to Dan Allison or to the estate of his deceased minor son Rick, who at the time of his death was sixteen years of age.
There is no dispute as to the facts of the case, and summary judgment would be proper if as a matter of law either party was entitled to a judgment.
The father, hereinafter called Dan, had a son-in-law, James. Dan and James decided to attend a livestock show, which required them to travel to another city and to be away from home overnight. It was necessary to take the automobile owned by Dan and used by Rick in going to and from his work. In order to afford transportation for Rick, it was decided to let him use a jeep belonging to James but with the specific direction from the owner that the jeep was to be used only in going to and coming from work and that he was not to be running around in it. That night Rick violated the conditions regarding the jeep by going to a dance, taking his girl friend home, and finally about midnight going twenty or more miles from his home with two of his friends to assist two other boys start their automobile which had run out of gasoline. While siphoning gas from the jeep to the stalled car, the boys were run into by another motorist, resulting in fatalities. An action was commenced against Dan and the estate of Rick. Dan had made himself liable for Rick's negligence by signing Rick's application for a driver's license.
Western Casualty and Surety Company wrote a policy for Dan containing the following language:
V. Use of Other Automobiles: If the named insured is an individual or individual and spouse and if during the policy period such named insured or spouse owns a private passenger automobile covered by this policy, such insurance as is afforded by this policy under coverages A, B and division 1 of coverage C with respect to said automobile applies with respect to any other automobile, subject to the following provisions:
(a) Except with respect to division 1 of coverage C, the unqualified word "insured" includes (1) such named insured and spouse, (2) any relative of such named insured or spouse * * *
* * * * * *
*1182 (d) This insuring agreement does not apply to any automobile:
* * * * * *
(2) used without the express or implied permission of the owner.
Dan gave no instructions to Rick about the use of the jeep.
James was insured under a policy written by Transamerica Insurance Company containing the following provision:
Persons Insured: The following are insureds under Part 1:
(a) with respect to the owned automobile,
(1) the named insured and any resident of the same household,
(2) any other person using such automobile with the permission of the named insured, provided his actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission, * * *
If both policies afford coverage, then that written on the jeep would be primary, and that written on Dan's car would be secondary or excess. Western brought this suit to have determined which policy, if either, would afford coverage to Dan and the estate of Rick in the negligence action.
We are not here concerned with the question of whether or not Rick was negligent or responsible in any manner for the collision. We are only asked to determine which, if either, of the two insurance companies should undertake the defense of the matter.
Dan claims protection under the provisions of Section 41-12-21(b), U.C.A. 1953 (Replacement Volume 5A), reading:
(b) Such owner's policy of liability insurance:
* * * * * *
(2) shall insure the person named therein and any other person, as insured, using any such motor vehicle or motor vehicles with the express or implied permission of such named insured, against loss from the liability imposed by law for damages arising out of the ownership, maintenance or use of such motor vehicle * * * [Emphasis added.]
Since Dan gave no instructions at all and knew Rick was to use the jeep, he contends that Rick was by Western's policy covered, since the use of the jeep was with the implied permission of the named insured.
We need not dwell on this provision of the statute, since it applies only to cases where one is compelled to secure a policy after an accident in order to be able to continue to drive his automobile. It pertains to policies secured under the Safety Responsibility Act and has no application to policies written before any accident occurs. Utah Farm Bureau Ins. Co. v. Chugg, 6 Utah 2d 399, 315 P.2d 277 (1957). The policies involved herein were written prior to accident and are to be interpreted the same as any other contract. In the Chugg case, supra, this court said at page 402 of the Utah Reports, 315 P.2d at page 279:
It being conceded that the policy was not issued because Chugg had been required by the Commission to furnish proof of financial responsibility in conformance with the Act, it follows that the provisions of the Act do not apply to it. Unless Chugg had been within the purview of the Act when the policy was issued, its provisions, unless illegal, are subject to the same construction as any other contract, in accordance with the expressed intent of the parties. * * *
There is a split in the authorities as to the meaning to be given to the words "express or implied permission of the owner" as used in the omnibus provision of the insurance policies. One group holds that any deviation by the permittee from the contemplated use of the vehicle will defeat the coverage. A second group holds that once permission is given to use the vehicle, coverage will extend to all uses whether in *1183 contemplation of the owner or not. The third group holds that a slight deviation from the contemplated use will not violate the omnibus provisions of coverage. See the annotation in 5 A.L.R.2d beginning with Section 10, page 622.
The cases cited under the second group mentioned above, that is, in jurisdictions which liberally construe the term permission to include all uses once the permittee is given the general control of the car, seem to be cases in which the permittee was given the general control of the car and the limitations, if any, were by general rules, or where no express limitations were placed upon the permittee. Examples are cases where employees are given an automobile with directions to use it in connection with the employer's business or where general rules of the company prescribe the use to which the car will be put.
Cases dealing with situations where the permittee violates express orders regarding the time, place, or manner of driving can be found under Section 20 of the annotation in 5 A.L.R.2d beginning at page 651.
The case of Caldwell v. Standard Acc. Ins. Co., 98 F.2d 364 (6 Cir.1938), is squarely in point with the instant matter. There the owner of the car gave her minor son permission to take her car and go to a picture show in Dalton, where they lived. She specifically told him to return as soon as the show was over. Instead of returning, he and his friend started to go to Resaca, where a dance was being held. On the way he was involved in a collision, and in that case the question of coverage under the omnibus clause of the owner's policy of insurance was involved. The court held that there was no coverage and in doing so said:
If the evidence had presented a conflict as to permission, a nice question would have arisen, for under this record undoubtedly W.R. Evans, Jr., had practically the exclusive use of the car, with his mother's consent. It does not appear that his mother drove at all. He drove the car in her business and used it constantly for his own school transportation and his personal pleasure. However, as to this particular transaction, the evidence is uncontroverted that permission to go to Resaca was not given, and in fact there was a positive prohibition against taking the car from Dalton. Both the son and the mother testified that Evans was given the car to go to the picture show, and was told to return immediately after the show. In addition, Mrs. Evans told her son "not to go anywhere else."
* * * * * *
* * * There is an even stronger reason, however, for holding that the policy does not cover the accident. The particular use was not only not specifically permitted; it had actually been forbidden. We have been cited to no decision which holds that under an omnibus clause such as here involved a specific prohibition as to manner of use is outweighed by a general permission so that coverage is extended actually against the orders of the named assured. In fact the authority is contra. [Citations omitted.]
Since the use made of the car was prohibited, it was not used with the permission of the named assured, and the company is not liable under the policy.
There is only one case cited in the annotation, supra, allowing coverage where the permittee violated specific restrictions made upon him regarding the time, place, or manner of driving, to wit, United States Fidelity & G. Co. v. De Cuers, D.C., 33 F. Supp. 710, and that case is criticized by the editor of the annotation as follows:
In one isolated case an opposite result was reached and the use of the car by the employee was held to be with the permission of the employer despite the fact that the employee violated an express instruction of his employer not to *1184 use the automobile for his own purposes. Although in this case the car was in the independent control of the employee this fact would not seem to justify the result reached by the court, even in a jurisdiction following the liberal deviation doctrine. * * *
It is a lower court ruling and has little to recommend it as authority for the holding announced.
In the instant case Rick was specifically instructed not to use the jeep except in going to and coming from work; and when he returned from work, he had no further permission to use the jeep. No implied permission of the owner can be found permitting the use to which the jeep was being put at the time of the collision.
As to the policy covering Dan Allison, it does not require that the driving be within the scope of the permission granted to Rick. It only requires that it be with the permission of the owner. In view of the overwhelming weight of authority to the effect that one is not driving with the permission of the owner when he drives contrary to the owner's express instruction, we hold that the policy with Western Casualty and Surety Company does not afford any coverage to either Dan or the estate of Rick.
The policy covering the jeep excludes coverage when the driving is not with the permission of the owner, and in addition thereto it excludes coverage unless the driving is within the scope of the permission granted. That provision in the policy makes a stronger case for noncoverage by Transamerica Insurance Company than does the policy of Western Casualty and Surety Company.
The judgment of the lower court is affirmed. No costs are awarded.
CALLISTER, C. J, and TUCKETT, HENRIOD and CROCKETT, JJ., concur.
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UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 98-31377
Summary Calendar
FRED ROSS, JR.,
Plaintiff-Appellant,
VERSUS
SCHOOL BOARD VERNON PARISH, ET AL.,
Defendants-Appellees.
Appeal from the United States District Court
for the Western District of Louisiana
(96-CV-1586)
June 11, 1999
Before DAVIS, DUHÉ and PARKER, Circuit Judges.
PER CURIAM:*
In this employment discrimination action, plaintiff complained
that the school board refused to promote him to an assistant
principal position because of his race. Defendants filed motions
to dismiss and for summary judgment. Defendants attached
affidavits to their motions for summary judgment negating any
discriminatory reasons for their hiring decision for this position.
*
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.
The plaintiff failed to respond to the motion and rested on his
pleadings. The district court granted summary judgment to
defendants.
On appeal, the plaintiff argues that the district court should
have warned him of the possible consequences of his failure to
respond to the defendants’ summary judgment motion. The plaintiff
was represented by counsel intermittently during the two-year
course of this litigation in the district court. He had ample
opportunity to develop the facts in support of his claim. Although
plaintiff was not represented when defendants filed their motion,
the record does not reflect that he was indigent nor did he offer
any other justification for his failure to have counsel handle his
suit. Under these circumstances, the district court was not
required to give specific warnings of the dangers of lack of
counsel. It is also noteworthy that appellant, who is represented
on appeal, makes no representations of facts he could develop in
opposition to the motion, if he were given an opportunity to do so.
AFFIRMED.
2
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132 N.J. 124 (1993)
623 A.2d 241
IN THE MATTER OF OPINION NO. 653 OF THE ADVISORY COMMITTEE ON PROFESSIONAL ETHICS.
The Supreme Court of New Jersey.
Argued October 26, 1992.
Decided May 4, 1993.
*126 David Samson argued the cause for appellant Schwartz, Simon & Edelstein, Esquires (Wolff & Samson, attorneys; Mr. Samson, Lawrence S. Schwartz, Stephen J. Edelstein, and Michael S. Rubin, on the briefs).
Joseph L. Yannotti, Assistant Attorney General, argued the cause for respondent Advisory Committee on Professional Ethics (Robert J. Del Tufo, Attorney General of New Jersey, attorney).
The opinion of the Court was delivered by HANDLER, Justice.
This case raises the issue of whether partners in a law firm may simultaneously serve as County Counsel and as counsel to a County Vocational School Board. The Advisory Committee on Professional Ethics determined that such an arrangement created an inherent risk of conflict of interest and, more important, the appearance of impropriety. Accordingly, the Advisory Committee determined that such an arrangement was prohibited.
Pursuant to Rule 1:19-8, petitioners requested review of Opinion No. 653 by this Court, and we granted their petition. The Advisory Committee stayed the effect of Opinion No. 653 pending our decision.
I
On January 1, 1991, Essex County Executive Thomas J. D'Alessio appointed Stephen Edelstein, Esq., a partner in the Schwartz, Simon and Edelstein firm ("the firm"), as Essex County Counsel ("County Counsel"). Pursuant to N.J.S.A. 40:41A-37, the Essex County Board of Chosen Freeholders ("Freeholders") confirmed Edelstein's appointment. The County Counsel serves as the chief legal adviser to the executive branch of county government. Essex County Administrative Code, § 9.4.3(a). The Department of Law, under the County *127 Counsel's supervision, advises the County Executive and all county agencies under the County Executive's jurisdiction. Id. at § 9.4.3(b)(1). The County Counsel renders legal advice on such issues as the form and sufficiency of contracts, deeds, correspondence, and other documents, and also represents the County Executive and agencies under his or her jurisdiction in litigation. Id. at § 9.4.3(b)(ii) and (iii). The County Counsel also renders advisory opinions when requested. Id. at § 9.4.3(b)(v).
On or about January 12, 1991, the Essex County Vocational School Board ("School Board") appointed Lawrence Schwartz, Esq., also a partner in the firm, as general counsel to the School Board. Schwartz had extensive experience in the field of education law and had previously represented the School Board from 1979 to 1986. Before 1979 and from 1987 to 1990, however, the School Board did not have separate counsel; during those periods the County Counsel represented the School Board as part of his or her duties.
The School Board consists of seven persons appointed by the County Executive with the advice and consent of the Freeholders. See N.J.S.A. 40:41A-37(b); N.J.S.A. 18A:54-16. The School Board's powers include purchasing, selling, and improving school grounds, taking and condemning land and other property for school purposes, employing faculty and administrators, and managing school property. N.J.S.A. 18A:54-20. The School Board's budget is determined in conjunction with the Board of School Estimate, which consists of the County Executive, two members of the Board of Chosen Freeholders, and two members of the Vocational School Board of Education. N.J.S.A. 18A:54-27.
On or before March 25, each year, the School Board delivers to the Board of School Estimate an estimated budget for the upcoming school year. N.J.S.A. 18A:54-28. The Board of School Estimate then determines, at a public meeting, the amount of money to be appropriated for the vocational school *128 district, exclusive of any amount to be received from the State, N.J.S.A. 18A:54-29, and certifies that amount to the School Board and to the county's Freeholders. N.J.S.A. 18A:54-29.1. The Freeholders appropriate the certified amount and, unless other arrangements have been made, the county must assess, levy, and collect the required funds. N.J.S.A. 18A:54-29.2. Slightly less than half of the School Board's budget is derived from the county tax levy; the rest is derived from the State and Federal governments.
In the event the School Board were to appeal its appropriated budget, the appeal would be taken to the State's Commissioner of Education. In 1979, such an appeal was taken. At that time, both the School Board and the Board of School Estimate retained special counsel for the appeal. The County is not a party to budget appeals. The record in this case indicates that the Office of County Counsel has never been asked to represent, nor has it ever represented, the Board of School Estimate, either during or before Edelstein's tenure as Counsel.
As noted above, prior to 1979, and from 1987 to 1990, the School Board and County did not have separate counsel. No objection, however, was raised to the arrangement. On or about March 25, 1991, one of the County freeholders wrote to the Advisory Committee on Professional Ethics ("the Advisory Committee" or "Committee") on behalf of himself and another freeholder. The freeholder asked the Advisory Committee whether it was proper for two partners in the same law firm to hold the positions of County Counsel and Counsel to the School Board.
In response, the Advisory Committee issued Opinion No. 653. 129 N.J.L.J. 514 (Oct. 17, 1991). The Committee noted that the Essex County Vocational School Board is appointed rather than elected. The Advisory Committee determined that the appointing authority and the funding source for both the County Counsel's office and the School Board are essentially the same. The opinion further observed that earlier Committee opinions *129 addressing similar situations expressed warnings about the appearance of impropriety. Although the Advisory Committee found that an actual conflict may not exist in such situations, it determined that the representation of both the County and the School Board by members of the same firm posed an unacceptable risk of conflict and appearance of impropriety. It concluded that, in specific instances, disqualification would not be a sufficient remedy to address the overriding ethical considerations presented by a conflict, because disqualification increases the cost of legal services and deprives the client of the services of the attorney it had selected. Accordingly, the Committee found that petitioners could not simultaneously serve both as County Counsel and as counsel to the Board.
II
One of the most basic responsibilities incumbent on a lawyer is the duty of loyalty to his or her clients. From that duty issues the prohibition against representing clients with conflicting interests. See Stephen Gillers & Roy D. Simons, Jr., Regulation of Lawyers Statutes and Standards 40 (1989). So fundamental is that duty that one legal commentator declared, almost a century and a half ago, "`The criminal and disgraceful offence of taking fees of two adversaries ought, like parricide in the Athenian law, to be passed over in silence in a code of professional ethics.'" Developments in the Law Conflicts of Interest in the Legal Profession, 94 Harv. L.Rev. 1244, 1247 (1981) (quoting George Sharswood, A Compend of Lectures on the Aims & Duties of the Profession of the Law (1854)).
That ethical transgression, however, is not passed over by our ethics rules. The New Jersey Rules of Professional Conduct (RPC) contain express provisions governing the representation of conflicting or potentially conflicting clients. RPC 1.7 provides:
*130 (a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client unless:
(1) the lawyer reasonably believes that representation will not adversely affect the relationship with the other client; and
(2) each client consents after a full disclosure of the circumstances and consultation with the client.
........
(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless:
(1) the lawyer reasonably believes the representation will not be adversely affected; and
(2) the client consents after a full disclosure of the circumstances * * *.
Accord American Bar Association Model Rules of Professional Conduct 1.7 (1983); Model Code of Professional Responsibility EC 5-5; DR 5-105(A) (1980).
The RPC and case law on this subject do not confine themselves to situations of actual conflict of interest. For example, RPC 1.7 does not alter the effect of ethics opinions or case law that find multiple representation impermissible in those "situations creating an appearance of impropriety rather than actual conflict." RPC 1.7(c). In "situations in which an ordinary knowledgeable citizen acquainted with the facts would conclude that the multiple representation poses substantial risk of disservice to either the public interest or the interest of one of the clients," such representation is prohibited. Ibid.
Significantly, under our law the appearance of impropriety is determined not from the perspective of the attorney involved but from the public's vantage. See Perillo v. Advisory Comm. on Professional Ethics, 83 N.J. 366, 373, 416 A.2d 801 (1980); Accord DR 9-101. Avoiding the appearance of impropriety is especially important when the representation of governmental entities is involved. "Positions of public trust call for even more circumspect conduct." In re Opinion 415, 81 N.J. 318, 324, 407 A.2d 1197 (1979). Attorneys like petitioners, who serve as counsel to governmental entities, must, therefore, be especially vigilant in avoiding "not only direct *131 conflicts of interest, but any situation which might appear to involve a conflict of interest." Ibid.
Accordingly, the Advisory Committee and this Court have gradually, but progressively, defined the instances in which the representation of multiple governmental bodies by the same attorney created an appearance of impropriety. Justice Pollock provided a survey of the development of our law, in this area, in his opinion for the Court in In re Ethics Opinion 452, 87 N.J. 45, 432 A.2d 829 (1981). There, the Court noted that an attorney cannot serve as counsel for a municipality and as county counsel, In re Opinion 415, supra, 81 N.J. 318, 407 A.2d 1197; that an attorney cannot represent the board of adjustment in the same municipality in which his or her partner serves as municipal attorney, Opinion 366; that an attorney cannot represent both the board of adjustment and the planning board of the same municipality, Opinion 164; and that an attorney cannot accept appointment as counsel to a municipal planning board when his or her partner is an attorney for the same municipality, Opinion 149. See In re Professional Ethics Opinion 452, supra, 87 N.J. at 49, 432 A.2d 829 (surveying development of conflict of interest law for government attorneys in New Jersey); In re Petition for Review of Opinion 569, 103 N.J. 325, 329-30, 511 A.2d 119 (1986) (summarizing history of New Jersey case law requiring attorneys to avoid appearance of impropriety).
From the history of our case law on this subject, the decision most closely related to the case before the Court is In re Opinion 415, supra, 81 N.J. 318, 407 A.2d 1197. In Opinion 415 the Court found that an office association or partnership between counsel for a municipality and counsel for the county in which that municipality was located presented an impermissible "appearance of impropriety." In evaluating the potential for conflict between the two prospective clients, the Court undertook a detailed and fact-specific examination of the frequency with which counties and municipalities negotiate contracts and transact business and the incidence of litigation *132 between municipalities and counties. Id. at 325, 407 A.2d 1197. On the facts of the situation before it, the Court concluded that such dual representation presented the appearance of impropriety because of the frequently antagonistic interests of the county and the municipality. Id. at 326, 407 A.2d 1197.
Nevertheless, the Court in Opinion 415 expressly declined to decide whether the partner or associate of a municipal or county attorney may represent a county or municipal board or commission. Id. at 322, 407 A.2d 1197. Thus, although closely analogous, In re Opinion 415 does not itself resolve the question of whether two law partners may assume the respective positions of County Counsel and Counsel to the County Vocational School Board.
Behind all the cases surveyed, however, stands a profound concern for "public confidence in our system of government" and the public's "perception of the independence and integrity of the legal profession." Ibid. That is reflective of a broader public policy that shares a similar concern. The Legislature has expressed the need for promoting public confidence in government officials in the 1991 Local Government Ethics Law, which prohibits government officials' employment that "might reasonably be expected to prejudice his independence of judgment in the exercise of his official duties." N.J.S.A. 40A:9-22.5(e). The Court's manifest concern about the appearance of impropriety, however, is directed to "something more than a fanciful possibility." Higgins v. Advisory Comm. on Professional Ethics, 73 N.J. 123, 129, 373 A.2d 372 (1977). The appearance of impropriety "must have some reasonable basis." Ibid. Moreover, the Court's analysis of actual or apparent conflict of interest does not take place "in a vacuum," but is, instead, highly fact specific. In re Opinion 415, 81 N.J. at 325, 407 A.2d 1197.
In assessing the reasonable basis for the appearance of impropriety, the Court adopts the perspective of an informed citizen. Id. at 331, 407 A.2d 1197. See In re Opinion 415, *133 supra, 81 N.J. at 325, 407 A.2d 1197; Perillo, supra, 83 N.J. at 373, 416 A.2d 801. Within that framework we must now undertake a careful consideration of the facts of petitioners' case to determine if there is a reasonable likelihood for an actual conflict of interest or if petitioners' situation would create an appearance of impropriety in the mind of a reasonable and informed citizen.
III
The Court, in In re Opinion 415, assessed the actual frequency and potential likelihood of conflicting interests between the governmental entities whose representation was involved in that case. That assessment was based on three factors: (1) contractual obligations and business transactions between the public entities; (2) the frequency of litigation that arises between the two public entities; and (3) the frequency with which the two entities have antagonistic interests. 81 N.J. at 325-26, 407 A.2d 1197. Based on those three factors, the Court concluded that dual representation of a municipality and its surrounding county "`invit[ed] a clash of the obligations each unit of government owes to its respective citizens.'" Id. at 325, 407 A.2d 1197 (quoting McDonough v. Roach, 35 N.J. 153, 159, 171 A.2d 307 (1961)).
In the present case, the governmental entities involved have minimal contractual obligations or business transactions. The School Board and Essex County are contractually bound by two contracts. One contract provides that the Essex County Hospital Center will train students enrolled in the licensed practical nurse program of the Essex County Vocational School ("Vocational School"). That agreement is one of several similar contracts the Vocational School maintains with various hospitals to provide training for the Vocational School's nursing students. The second contract between the School Board and the County provides that the Vocational School will run the educational program for juvenile detainees at Youth House, a *134 residential detention facility for juveniles awaiting adjudication by the Family Division of the Superior Court. That contract is a longstanding one and is renewed without substantial alteration.
The Advisory Committee argues that, in fact, the two contracts provide ample grounds for disputes between the County and the School Board. To illustrate its point, the Advisory Committee inventories each term of the two contracts and offers hypothetical disputes that might arise.
We find those hypothetical conflicts inadequate to establish a reasonable likelihood of conflict of interest. In fact, there has been no dispute over these contracts, which, as noted, are routinely renewed. By contrast, in In re Opinion 415, on which the Advisory Committee so heavily relied in its determination in this case, the Court identified more than fourteen different areas in which, by statute, counties and municipalities negotiate contracts and transact business with one another. In comparison with the situation in In re Opinion 415, the contractual and business relationship in this case is negligible.
Second, with one arguable exception, no history whatsoever exists of litigation between the School Board and the County. That exception occurred in 1979 when the School Board appealed to the Commissioner of Education from the decision of the Board of School Estimate establishing the budget of the vocation school. Significantly, at the time of that litigation, the School Board did not have separate counsel but was represented in most matters by the County Counsel. For the 1979 litigation, special counsel was appointed.
We have noted, in the past, that the withdrawal of counsel in cases of actual conflict is not a remedy for the appearance of impropriety. See In re Opinion 415, supra, 81 N.J. at 322, 407 A.2d 1197 (holding such withdrawal increases the cost of legal services to public and deprives public of representation by attorney it first selected). In the instant case, however, the possibility of litigation is so remote that *135 should actual conflict arise, the appointment of special counsel would be an appropriate remedy.
We would also note, in regard to the 1979 litigation, that the County was not, technically, the adverse party in that litigation. N.J.S.A. 40:41A-36 and -37 give the County Executive broad authority over county departments and agencies, including budgetary and supervisory responsibility. The County Executive has no such authority over the Board of School Estimate. See N.J.S.A. 18A:54-27 (establishing a County Vocational School Board of Estimate).
The Board of School Estimate consists of two members of the County Vocational School Board of Education, appointed by that Board; two members of the Board of Chosen Freeholders, appointed by that Board; and the County Executive. The County Executive is just one of five members of the Board of School Estimate, and has no appointing authority for the other members. Therefore, the Board of School Estimate is an independent entity, not subject to the control of the County Executive. It is not a county agency, and litigation involving the Board of School Estimate is not litigation involving the County.
Moreover, as pointed out in Board of Trustees of Mercer County College v. Sypek, 160 N.J. Super. 452, 461, 390 A.2d 629 (App. Div.), certif. den. 78 N.J. 327, 395 A.2d 196 (1978), the County has no authority "to control, alter, diminish or abolish county colleges and vocational schools." The issue presented in Board of Trustees of Mercer County Community College was whether the Optional County Charter Law, N.J.S.A. 40:41A-1 to -149, supersedes the legislation under Title 18A, pertaining to county colleges, N.J.S.A. 18A:64A-1 to -78. The Appellate Division found that county colleges and vocational schools are autonomous governmental entities designed to operate independently of the counties in which they are located. Id. at 460, 390 A.2d 629.
*136 The Advisory Committee, in Opinion 653, noted that because the County Executive appoints the members of the School Board, subject to Freeholder approval, and the Board appoints its own counsel, the appointing authority for the County Counsel and the School Board's counsel "is essentially the same." 129 N.J.L.J. 514 (1991). Although that proposition may be correct, we do not think that an inherent conflict of interest therefore necessarily results. The whole premise, after all, of the Department of the Public Advocate is that one department of State Government may sue another. See, e.g., Public Advocate v. Public Utilities Board, 189 N.J. Super. 491, 460 A.2d 1057 (App.Div. 1983). Both the Public Advocate and the Attorney General are appointed by the same authority, yet we have never found that arrangement to constitute an inherent conflict of interest.
We find that the interests of School Board and the County are rarely antagonistic. Accordingly, we conclude that the Advisory Committee erred in its determination in Opinion 653. An attorney or his or her partner or associate may serve as counsel to a vocational school board and as counsel to the county in which the vocational school board is located.
For reversal Chief Justice WILENTZ and Justices HANDLER, CLIFFORD, POLLOCK, O'HERN, GARIBALDI and STEIN 7.
For affirmance None.
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United States Court of Appeals
For the First Circuit
No. 05-1593
UNITED STATES OF AMERICA,
Appellee,
v.
GEORGE L. UPTON,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Patti B. Saris, U.S. District Judge]
Before
Lynch, Chief Judge,
Lipez and Howard, Circuit Judges.
Richard B. Klibaner, with whom Klibaner & Sabino, was on brief
for appellant.
John-Alex Romano, Attorney, Criminal Division, United States
Department of Justice, with whom Michael J. Sullivan, United States
Attorney and William F. Bloomer, Assistant United States Attorney,
were on brief, for appellee.
March 5, 2008
HOWARD, Circuit Judge. A jury convicted George Upton of
conspiracy to commit money laundering. In this appeal, he argues
that, by the time of his indictment, the statute of limitations
period had run on all of his conduct except for the filing of a
false tax return and the failure to file a tax return. Upton
asserts that, under governing Supreme Court precedent cabining the
government's ability to charge continuing conspiracies based on
subsequent acts of cover-up, the two tax offenses were not part of
the conspiracy. From this premise he contends both that he was
entitled to a jury instruction on the statute of limitations and
that the evidence was insufficient to convict him of conspiracy to
launder money within the applicable limitations period. He also
claims that the district court erred in admitting a hearsay
statement as an excited utterance. We affirm.1
I.
A. Background Facts
For purposes of assessing the sufficiency claim, we
recite the facts in the light most favorable to the verdict. See
United States v. Boulanger, 444 F.3d 76, 89 (1st Cir. 2006).
Upton owned Look Motors, Inc., a used car lot in Hyannis,
Massachusetts that sold automobiles and offered financing to
1
After oral argument in this case, the Supreme Court decided
Cuellar v. United States, 128 S. Ct. 1994 (2008). The case is
pertinent to the limitations issue raised and required further
consideration.
-2-
customers who could not afford to make large down payments. In
connection with this enterprise, he had a business relationship
with Steven Queen, a lender.
On July 9, 1997, Queen traveled to Florida and removed a
large amount of cash from his parents' safe deposit box. Queen had
told several people of his plans prior to making this trip,
claiming that the money was his inheritance. Upton had heard about
Queen's trip and its purpose.
Upon returning from Florida on the evening of July 12,
1997, Queen left a suitcase containing $900,000 in cash in the
trunk of a car that was parked in the Look Motors parking lot and
went to dinner. Upton's daughter saw Queen place the suitcase in
the trunk of the car. She told Upton and his girlfriend of twenty
years, Lynn Alberico, about the suitcase. While Queen was at
dinner, Upton and Alberico removed the suitcase from the car. When
Queen returned to Look Motors and discovered that the suitcase was
missing, he accused Upton of stealing the money. Upton denied the
accusation and told Queen to leave. Distraught, Queen went to the
apartment of a friend and told her that the money he had taken from
his parents was gone.
Queen accused Upton of stealing the money on several
occasions, in public confrontations. Upton did not admit to Queen
that he had taken the money. During the fall of 1997, however,
Upton did admit to an acquaintance that he had stolen a suitcase
-3-
with more than $900,000 in cash from Queen. In 1999, Alberico made
the same admission to her best friend.
On August 19, 1997, a month after the theft, Upton signed
a purchase and sale agreement to buy the property located at 89
Iyanough Road in Hyannis, Massachusetts for $120,000. He made a
$12,000 down payment by check; that check was returned for
insufficient funds, and Upton replaced it with $12,000 in cash.
Upton paid the $108,000 balance of the purchase price with thirteen
cashier's checks.
The cashier's checks had been acquired in several stages,
over the span of three days. Upton's brother, two friends, and a
Look Motors employee assisted Upton and Alberico. Upton provided
cash to these four people. Then, each person deposited the cash
into his or her personal bank account to purchase one or more
cashier's checks. Most of the deposits and checks were for sums
less than $10,000 and involved visits to multiple bank branches or
multiple visits to the same branch, in order to avoid federal
reporting requirements.2 The checks variously were made out to
Upton or to Alberico.
Alberico took title to the property in the name of "AU
Trust." That trust, created on the day of the closing, August 29,
1997, bears Alberico's and Upton's initials. Also on the day of
2
Pursuant to 31 U.S.C. § 5313(a) and 31 C.F.R. § 103.22, domestic
financial institutions are required to report currency transactions
involving more than $10,000 to the Internal Revenue Service.
-4-
the closing, Alberico granted a sham mortgage on the property to
"Bostonians Trust of Florida," which did not then even exist. The
property was then rented out for $1,000 per month.
The 89 Iyanough Road property was sold on January 5,
1999, for $202,000. On January 6, the real estate attorney wrote
separate checks to Upton and Alberico for $39,850 each, and, less
than a week later, purchased bank checks made out to Upton and
Alberico for $52,948.21 each. Bank records indicate that these
checks were deposited into the accounts of Look Motors and
Alberico, respectively, in January 1999.
Upton eventually filed his 1997 federal income tax return
in July 2000, reporting a total income of $14,165. At the same
time, he also filed returns for 1994, 1995, and 1996. All of his
returns were prepared by his accountant, based on information
provided by Upton. The 1997 return was false in that it did not
disclose any portion of the $900,000 stolen from Queen, nor did it
disclose any portion of the rental income from 89 Iyanough Road for
the partial year 1997. Alberico's tax return for 1997, filed in
August 1998, also neglected to report any portion of the stolen
money or the rental income. Upton did not file a return for 1998.
Alberico filed a false return for 1998 in October 1999, again
failing to report rental income. Neither Upton nor Alberico filed
a tax return for 1999, the year in which each earned a substantial
capital gain from the sale of the property.
-5-
B. Procedural History
In August 2002, a grand jury indicted Upton and Alberico
for money laundering and for structuring financial transactions to
evade reporting requirements, as well as for conspiracy to engage
in such structuring. On May 12, 2004, a superseding indictment
added counts of conspiracy to commit money laundering, in violation
of 18 U.S.C. §§ 1956(a)(1)(B), (h) and 1957(a); filing a materially
false income tax return for the year 1997, in violation of 26
U.S.C. § 7206(1); and failing to file an income tax return for the
year 1999, in violation of 26 U.S.C. § 7203.
The general five-year statute of limitations, 18 U.S.C.
§ 3282, applies to prosecutions for violations of the money
laundering and structuring statutes. For reasons not material to
this appeal, the filing of the superseding indictment established
May 12, 2004 as the relevant date for statute of limitations
purposes. Prosecution for alleged crimes committed prior to May
12, 1999 was thus barred by the statute of limitations.
Accordingly, the district court dismissed the counts carried over
from the original indictment alleging money laundering, structuring
and conspiracy to engage in structuring. Upton, 339 F. Supp. 2d at
196. Upton went to trial on the remaining charges of conspiracy to
commit money laundering and the two tax violations.3
3
Upton was tried in October 2004. Alberico's motion to sever had
been granted previously; she was tried separately in July 2005.
-6-
During the charge conference, Upton did not request a
jury instruction on a statute of limitations defense to the
conspiracy count. The next day, however, at the completion of the
government's case in chief, he did request such an instruction.
The trial judge denied this request on the basis that Upton had
waived the request by failing to raise it at the charge conference.
At the completion of the government's case, Upton moved
unsuccessfully for judgment of acquittal on the basis that the
money laundering conspiracy charge was time-barred. After the jury
had been instructed at the close of the evidence, Upton objected to
the denial of his request for a statute of limitations instruction.
The court again ruled that Upton had waived his right to a jury
instruction on the statute of limitations because he did not raise
it at the charge conference.
The jury found Upton guilty on each of the three counts:
conspiracy to commit money laundering, filing a false tax return,
and failure to file a tax return. Following the verdict, the
district court denied Upton's renewed motion for judgment of
acquittal, United States v. Upton, 352 F. Supp. 2d 92, 100 (D.
Mass. 2005), and sentenced him to 162 months' imprisonment.
II.
Upton appeals only his conviction for conspiracy to
commit money laundering. He does not challenge his tax
convictions. As to the conspiracy conviction, he claims that the
-7-
district court erred in not instructing the jury on the statute of
limitations; erred in denying his motion for acquittal on statute
of limitations grounds; and abused its discretion in admitting a
statement as an excited utterance.
A. Jury Instruction on Statute of Limitations
Upton contends that the district court erred by failing
to instruct the jury on the statute of limitations applicable to
the money laundering conspiracy. He argues that he has preserved
his objection to the court's failure to so instruct, and therefore
that harmless error is the appropriate standard of review. While
he acknowledges that he failed to request a written instruction at
the charge conference, Upton presses the fact that he raised his
objection after the charge conference but before the jury was
instructed, and again after the instructions were delivered to the
jury. Beyond this, he asserts that even if he has not preserved
his objection, the court's failure to give the instruction was
plainly erroneous. See United States v. Thurston, 358 F.3d 51 (1st
Cir. 2004), vacated on other grounds.
The appellant is not entitled to relief on this ground.
First, the claim of error is unpreserved. The requirements for
requesting a jury instruction are clear. Fed. R. Crim. P. 30(a)
provides as follows:
Any party may request in writing that the
court instruct the jury on the law as
specified in the request. The request must be
-8-
made at the close of evidence or at any time
that the court reasonably sets.
(emphasis added). Upton concedes that he did not submit in writing
a request for an instruction on the statute of limitations; indeed,
he acknowledges that he withheld the request for a jury instruction
at the charge conference as part of his trial strategy. As he did
not meet the requirements for requesting a jury instruction, his
later objections to the jury instructions were deemed waived by the
trial judge.
That brings us to the question of how to treat the
unpreserved jury instruction issue. In United States v. Muñoz-
Franco, 487 F.3d 25, 54 (1st Cir. 2007), we held that the failure
to request a jury instruction constitutes waiver. The defendants
in Muñoz-Franco claimed that the district court erred in not
instructing the jury on the applicable statute of limitations, but
they had not raised that issue at any time prior to or during
trial, including in their post-trial Rule 29(a) motion. We held
that their claim was waived and thus not reviewable on appeal.
Pointing to Thurston, Upton argues that plain error
review is appropriate in this case. 358 F.3d at 63. It is not
necessary, however, to resolve any potential conflict between
Muñoz-Franco and Thurston here. Waiver is the "intentional
relinquishment or abandonment of a known right." United States v.
Olano, 507 U.S. 725, 733 (citation omitted) (emphasis added). The
right to a jury instruction can be waived by not requesting the
-9-
instruction, or not objecting at the proper time. Fed. R. Crim. P.
30(a), (d). Upton deliberately chose not to request a statute of
limitations jury instruction at the charge conference as a matter
of trial strategy.4 The informed decision to decline to exercise
the right to request a specific jury instruction is a
straightforward example of an "intentional relinquishment" subject
to waiver.
Even were we to consider this an instance of forfeiture
and review the failure to instruct the jury on the statute of
limitations for plain error, we would conclude that there was no
plain error. Under the plain error standard, Upton must show that
"the trial court committed an error, that the error was 'plain,'
and that the error affected the substantial rights of the
appellant." United States v. Colon-Nales, 464 F.3d 21, 25 (1st
Cir. 2006) (citing Olano, 507 U.S. at 732). Further, error is to
be corrected only if it "seriously affects the fairness, integrity
4
Upton points out that a defendant may face a difficult decision
when a charge conference is held before the close of the
government's case: raising a defense at that point might alert the
government to a weakness in its case and encourage the government
to seek additional evidence. Nevertheless, the district court is
vested with the authority to manage trials, United States v.
Saccoccia, 58 F.3d 754, 770 (1st Cir. 1995), including setting a
time for the charge conference that parties must adhere to or face
the consequences. Here, the charge conference was the day before
the government closed the evidence in its case. The timing of the
conference was entirely reasonable, and we need not explore
application of the rule to situations presenting an extreme gap in
timing between the conference and the close of the evidence.
-10-
or public reputation of judicial proceedings." Olano, 507 U.S. at
736 (internal citation and quotation marks omitted).
The trial court did not commit plain error in declining
to instruct the jury on the statute of limitations. Rule 30(a) is
clear, and Upton failed to meet its strictures. The district judge
acted within her discretion to deny Upton's requested instruction
because the request was untimely.
B. Motion for Acquittal on Statute of Limitations
Presented as a challenge to the sufficiency of the
evidence, Upton argues that the district court should have granted
his motion for acquittal on the conspiracy count because the
statute of limitations bars his conviction. The essence of this
sufficiency claim is that there was no evidence that the conspiracy
continued to a time that was within five years of the May 12, 2004
superseding indictment. Upton argues that the money laundering
objective of the conspiracy was achieved no later than when the
conspirators sold the Iyanough Road property in January 1999. His
failure to file a return for 1999 and his July 2000 filing of a
false tax return for 1997 were, he says, at most unilateral acts
intended to cover up the conspiracy after its termination. Relying
on Grunewald v. United States, 353 U.S. 391 (1957), Upton argues
that the tax violations must be viewed as no more than attempts at
covering up a completed conspiracy. As such, under Grunewald they
cannot constitute acts in furtherance of the conspiracy.
-11-
The government counters that Grunewald does not bar this
prosecution. Rather, because the indictment charged a conspiracy
the main objective of which was concealment, Grunewald's limiting
principle has no applicability to this case.
1.
We review de novo the denial of a motion for judgment of
acquittal based on the insufficiency of the evidence. United
States v. Hatch, 434 F.3d 1, 4 (1st Cir. 2006). A motion for
judgment of acquittal is only granted if "the evidence and all
reasonable inferences to be drawn from the evidence, both taken in
the light most favorable to the government, are insufficient for a
rational factfinder to conclude that the prosecution has proven,
beyond a reasonable doubt, each of the elements of the offense."
United States v. Pimental, 380 F.3d 575, 583 (1st Cir. 2004).
To determine whether Upton's motion for acquittal based
on the statute of limitations should have been granted, we look
backward from the date of the superseding indictment and assess
whether the evidence, taken in the light most hospitable to the
verdict, was such that the jury could reasonably have concluded
that the conspiracy did not end until May 12, 1999 or later. See
United States v. Walsh, 928 F.2d 7, 11-12 (1st Cir. 1991). The
question boils down to whether the jury could have supportably
found that either or both of the tax offenses that Upton committed
in 2000 were part of the conspiracy, and the wrinkle is Upton's
-12-
assertion that Grunewald requires us to view the tax violations as
acts of cover-up beyond the scope of the conspiracy.
A conspiracy endures as long as the co-conspirators
endeavor to attain the "central criminal purposes" of the
conspiracy. Grunewald, 353 U.S. at 401. In this case, the
indictment charged that Upton and Alberico conspired to violate 18
U.S.C. §§ 1956(a)(1)(B) and 1957(a). Section 1956(a)(1)(B)
prohibits engaging in financial transactions involving the proceeds
of unlawful activities:
knowing that the transaction is
designed in whole or in part–-
(i) to conceal or disguise the nature,
the location, the source, the ownership, or
the control of the proceeds of specified
unlawful activity ...
18 U.S.C. § 1956(a)(1)(B) (emphasis supplied). The focus of the
prohibition is thus trained on the design to conceal or disguise.
The concealment feature distinguishes § 1956(a)(1)(B) from §
1957(a). Section 1957(a) prohibits monetary transactions in
criminally derived property, but does not contain an element of
concealment or disguise.
The Supreme Court has recently examined language in §
1956(a)(2) that is identical to the language of the section at
issue in this case, § 1956(a)(1)(B)(i). In Cuellar, 128 S. Ct.
1994, the Court considered whether certain conduct violated §
1956(a)(2)'s proscription against "transportation" of proceeds with
knowledge that the transportation was designed to conceal or
-13-
disguise the nature, location, source, ownership or control of the
proceeds. The Court emphasized that in the phrase "designed ... to
conceal or disguise," "'design' means purpose or plan"; i.e., the
intended aim of the transportation. 128 S. Ct. at 2003. As the
pertinent language of § 1956(a)(1)(B) is identical to that of §
1956(a)(2)(B), we conclude that Congress's use of "designed ... to
conceal or disguise" in (a)(1)(B) likewise requires the government
to prove that there was a purpose or plan to conceal or disguise.
See Gustafson v. Alloyd Co., Inc., 513 U.S. 561, 562 (1995) ("The
normal rule of statutory construction [is] that identical words
used in different parts of the same Act are intended to have the
same meaning."); see also Finnegan v. Leu, 456 U.S. 431, 438 n.9
(1982) (noting that "if Congress had intended identical language to
have substantially different meanings in different sections of the
same enactment it would have manifested its intention in some
concrete fashion.").
The conspiracy count in the indictment explicitly
invoked the concealment money laundering prohibition of 18 U.S.C.
§§ 1956(a)(1)(B), charging Upton with the intent to conceal
material characteristics of the stolen money. The indictment
alleged, as the "manner and means" of carrying out the conspiracy,
that the defendants used the stolen monies to make the multi-
layered purchase of 89 Iyanough Road in August of 1997; that Upton
commingled additional theft proceeds with business receipts of Look
-14-
Motors on more than twenty occasions during the remainder of 1997;
that Alberico filed a false tax return for 1997 in 1998 that did
not disclose the theft income or her rental income from the
Iyanough road property; and that:
"It was part of the conspiracy that
[defendants] attempted to conceal or disguise
the nature, location, source, ownership, or
control of the illegal cash proceeds by
failing to file income tax returns, or declare
a capital gain from the sale of the commercial
property, for the tax year 1999 [and Upton
attempted to conceal or disguise] by filing a
materially false federal income tax return . .
. that failed to declare the receipt of the
illegal income or the rental income from the
property in 1997."
The indictment thus put Upton on notice, at a minimum,
that his concealment of the capital gain from the sale of 89
Iyanough Road was part and parcel of the alleged means of carrying
out the charged conspiracy.5 To sustain its burden of proof, the
government had to establish that Upton conspired to engage in
transactions with the intended aim of concealing or disguising
certain attributes of the funds involved. And to avoid the statute
of limitations bar, it also had to prove that one of the tax
offenses was in furtherance of the central objective of the
conspiracy.
5
The indictment did not expressly allege the sale of the Iyanough
Road property in January 1999 as a money laundering transaction,
but as we have noted, the indictment did allege that the
concealment of capital gain on the sale was part of the conspiracy.
In any event, Upton does not make any claim of variance and does
not contest that the sale was part of the conspiratorial object.
-15-
Determining the contours of the conspiracy ordinarily is
a factual matter entrusted largely to the jury. United States v.
Moran, 984 F.2d 1299, 1303 (1st Cir. 1993). Consistent with the
allegations in the indictment, the government introduced evidence
that Upton and Alberico purchased the 89 Iyanough Road property in
August 1997 and sold it in January 1999. The pair converted cash
into cashier's checks to finance the initial purchase of the
property, set up the sham mortgage, and took title in the name of
"AU Trust." Upton commingled additional theft proceeds with
business income. Alberico filed a false 1997 tax return, omitting
the theft proceeds and rental income. Neither Upton nor Alberico
filed tax returns for 1999 -- the year in which they were required
to report a capital gain on the sale.
From this evidence the jury reasonably could have found
that Upton's failure to file the 1999 return was in furtherance of
the central objective of the conspiracy. Specifically, the jury
supportably could have concluded that the failure to file his 1999
return in the ordinary course facilitated the concealment aim of
the money laundering transactions. That act of omission may have
had special significance to the jury, because in his 1999 return
Upton was required to disclose not only any rental receipts but
also the capital gain he realized on the sale of the property. The
jury may have also found it significant that Alberico, too, did not
file a return for 1999, contrary to her practice in previous years.
-16-
The capital gains disclosures they were required to make easily
could have unraveled the entire money-laundering scheme, not only
subjecting them to prosecution, but also resulting in the
forfeiture of the proceeds. See 18 U.S.C. § 981(a). Avoiding such
an outcome, whereby their use of the proceeds would be thwarted,
was a primary goal of the concealment money laundering conspiracy,
or so the jury could have found.6
2.
In the face of this evidence, Upton argues that the
Grunewald imposes a limitation on the ability of subsequent acts of
6
The government says that Upton's filing in 2000 of a false 1997
return was also an act in furtherance of the conspiracy. It may
have been, although the act occurred more than two years after
Upton would have been expected to file a return, and almost two
years after his coconspirator Alberico similarly filed a false
return. We need not definitively resolve whether that Upton's false
filing was in furtherance of the conspiracy. The evidence of the
conspirators' parallel failures to file 1999 tax returns was
sufficient for the jury to conclude that the conspiracy lasted at
least until May 12, 1999. But that does not by any stretch render
Upton's 2000 filing irrelevant. At a minimum, the fact of the
false filing was admissible to show, and was strong evidence of,
Upton's knowledge that the 1997 purchase was designed to conceal
characteristics of the unlawful proceeds. In addition, coming as
it did in the same time frame as Upton's failure to file a tax
return for 1999, his guilty knowledge associated with the June 2000
false filing solidifies the inference that the reason for the
failure to file was in fact to prevent discovery of the money
laundering conspiracy. The 1997 returns filed by both conspirators
were false in that they did not disclose the receipt of the stolen
funds. Pointedly, they also failed to disclose the rental income
from the Iyanough Road property, further cementing the inference
that ownership of that property was part of a design to disguise or
conceal.
-17-
concealment to extend the life of a conspiracy.7 At bottom, as we
have noted, the argument is that acts that constitute an attempt to
cover up a completed crime do not extend the duration of the
conspiracy. See Grunewald, 353 U.S. at 401 (it is not enough that
the defendants "took care to cover up their crime in order to
escape detection and punishment"). According to Upton, his failure
to file a 1999 tax return and his July 2000 filing of a false 1997
tax return were, at most, attempts to cover up completed financial
transactions, namely, the buying and selling of the Iyanough Road
property in August 1997 and January 1999. Thus, he maintains,
under Grunewald the acts of concealment represented by the two tax
offenses could not extend the life of the conspiracy. In support
of this argument, Upton cites United States v. LaSpina, 299 F.3d
165, 176 (2d Cir. 2002), for the proposition that a conspiracy with
an economic transaction as its objective lasts only until the
"anticipated economic benefits" of that transaction are received.
Id.
7
In Grunewald, decided under the general conspiracy statute, 18
U.S.C. § 371,the defendants had been charged with conspiracy in
connection with a scheme to obtain "no prosecution" rulings by
bribing an IRS official in two discrete tax cases. Based primarily
on a concern that the statute of limitations otherwise would be
open-ended, the Court concluded that later acts of cover-up did not
extend the duration of the conspiracy. Subsequently, in Forman v.
United States, the Court held a conspiracy to have continued into
the relevant limitations period, where the indictment alleged that
the conspiracy included the acts of concealment, and where the
concealment was necessary for the successful completion of the
scheme. 361 U.S. 416, 423-24 (1960).
-18-
If covering up a completed conspiracy to violate 18
U.S.C. § 1957(a), by engaging in monetary transactions in
criminally derived property, were all that the two tax offenses
accomplished, the argument might have merit. Here, however, as we
have noted, Upton was also charged with conspiring to violate §
1956(a)(1)(B) by engaging in financial transactions designed to
conceal or disguise certain characteristics of the proceeds of
unlawful activity. The objective of the conspiracy was more than
the specific monetary transactions of buying and selling 89
Iyanough Road. The objective was to engage in concealment money
laundering in order to obscure the illicit source of the funds and
the conspirators' continued control of the proceeds. Accordingly,
Upton's argument fails to gain traction.8
To be sure, in some cases the crime of concealment money
laundering may be completed at the time the transaction itself is
consummated. In this case, for example, there was a wealth of
evidence that the purchase of the Iyanough Road property in 1997
constituted concealment money laundering. But that the evidence
might have shown that the 1997 purchase of property constituted
concealment money laundering does not mean that the conspiracy to
8
Upton's citation to LaSpina is inapposite. The conspiracy in
LaSpina differed materially from the conspiracy in this case.
LaSpina involved a conspiracy whose purpose was to engage in
monetary transactions in criminally derived property, in violation
of 18 U.S.C. § 1957(a). The reasoning in LaSpina thus applies to
conspiracies without an element of concealment.
-19-
commit concealment money laundering ceased at that time or, for
that matter, with the sale of the property in 1999.9
Where, as we have established is the case here, the
substantive crime that is the object of the conspiracy has the
intent to conceal as an element, the success of the conspiracy
itself may depend on further concealment. Consequently, additional
acts of concealment that facilitate the central aim of the
conspiracy are in furtherance of the conspiracy. See, e.g., United
States v. Goldberg, 105 F.3d 770, 774 (1997) (acts of tax evasion
were "integral and self-evident part of" fraud conspiracy charged
under 18 U.S.C. § 371); United States v. Mann, 161 F.3d 840, 859
(5th Cir. 1998) (acts designed to frustrate regulatory oversight
were "central" to conspiracy involving fraud within savings and
loan institution); United States v. Esacove, 943 F.2d 3, 5 (5th
Cir. 1991) (acts designed to protect money laundering conspiracy
against government investigation held "necessary" part of
conspiracy). And, as noted above, the jury was entitled to infer
that the conspirators' parallel failures to file tax returns for
9
In Grunewald, the court observed that subsequent acts of
concealment may well facilitate the success of the substantive
crime and thus be in furtherance of the conspiracy, as when a car
thief repaints the stolen vehicle. 353 U.S. at 405. The purpose
of concealment money laundering is to make proceeds appear
legitimate, especially to the government. Preventing the
authorities from discovering the illicit nature of the proceeds, by
concealing the existence or financial impact of the money
laundering transactions, is as much a part of the ongoing
conspiracy to launder money as repainting the car is a part of a
theft conspiracy.
-20-
1999 were part of an ongoing plan to engage in concealment money
laundering, rather than merely being later attempts to cover up a
completed crime. See United States v. Dazey, 403 F.3d 1147, 1159
(10th Cir. 2005) ("[T]he jury may infer conspiracy from the
defendants' conduct and other circumstantial evidence indicating
coordination and concert of action.").
3.
Upton presents another argument. Even assuming that he
engaged in acts of concealment that could be considered to be in
furtherance of the main objectives of the conspiracy, no conspiracy
could have existed in this case because he and Alberico never
expressly agreed to engage in acts of concealment. The Court's
decision in Grunewald, he posits, requires that the government
present proof of defendant's express agreement to conceal. See
United States v. Twitty, 72 F.3d 228, 234 (1st Cir. 1999). The
government, Upton contends, failed to present such evidence. In
fact, Upton argues that the record evidence actually supports his
contention that no such express agreement existed and that, as a
result, any acts of concealment were undertaken unilaterally. This
is because the record indicates that, by the summer of 1999, he and
Alberico were estranged.
Upton's argument misses the point. In Grunewald, the
Court drew a distinction between "acts of concealment done in
furtherance of the main objectives of the conspiracy," and "acts of
-21-
concealment done after these central objectives have been attained
for the purposes of covering up after the crime." 353 U.S. at 405.
Where the latter is involved, the government must present some
proof of an express original agreement to engage in the acts of
concealment. See Twitty, 72 F.3d at 234. However, nothing in the
case law imposes a requirement that conspirators expressly agree to
engage in acts of concealment where those acts are done in
furtherance of the main objectives of the conspiracy.10 Rather, the
acts of concealment committed by one co-conspirator need only have
been "foreseeable" to the other co-conspirator. See United States
v. Hansen, 434 F.3d 92, 103 (1st Cir. 2006); United States v.
Pinillos-Prieto, 419 F.3d 61, 69 (1st Cir 2005).
Here, as established above, a reasonable jury could
conclude that the acts of concealment in this case, specifically
the failure of Upton and Alberico to file 1999 tax returns, were
done in furtherance of the main objectives of the conspiracy.
And, moreover, these acts would have plainly been foreseeable to
both conspirators. Not filing returns was an "integral and
self-evident part of" the conspiracy -- had either Upton or
Alberico not hidden the proceeds of the house sale, this would have
10
In fact, cases like Mann, 161 F.3d at 859 and Davis, 623 F.2d at
192 indicate that no such requirement exists.
-22-
defeated the primary purpose of the conspiracy. Goldberg, 105 F.3d
at 774.11
4.
In his final attempt at excluding the tax offenses from
consideration, Upton suggests that his estrangement from Alberico
in the summer of 1999, alluded to above, amounted to a withdrawal
from the conspiracy. This argument is waived. See United States
v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) ("[I]ssues adverted to
in a perfunctory manner, unaccompanied by some effort at developed
argumentation, are deemed waived."). In any event, the standard
for recognizing a conspirator's withdrawal from a conspiracy is
exacting. Even were this argument not waived, Upton cannot
demonstrate his withdrawal from the conspiracy. See United States
v. Dunn, 758 F.2d 30, 38 (1st Cir. 1985) ("[A] conspirator must act
affirmatively to either defeat or disavow the purpose of the
11
Although it is unnecessary to our analysis, we note further that
a reasonable jury could have concluded that Upton and Alberico had
expressly agreed to engage in acts of concealment. Upton and
Alberico acted in tandem when they both failed to file returns in
1999. This concerted activity is circumstantial evidence that an
express agreement to conceal was in place.
Of course, Upton and Alberico did not act in complete concert
at all times. For example, in 1998 Alberico filed a false return
for 1997 omitting the stolen Queen money, whereas Upton waited
until 2000 to file a false return for 1997. But that other
evidence conceivably supports the absence of an express agreement
to conceal is not dispositive in this sufficiency of the evidence
case. See United States v. Ortiz, 447 F.3d 28, 34 (1st Cir. 2006)
("[C]ompeting inferences are not enough to disturb a jury's
verdict").
-23-
conspiracy"; mere disagreement with co-conspirators is insufficient
to constitute withdrawal.).12
C. Hearsay Evidence
Upton argues that the district court erred in admitting
as an excited utterance Queen's hearsay statement to his friend
Janet Hoell that "the money was gone" on the night of the theft of
the suitcase. Fed. R. Evid. 803(2) creates an exception to the
rule against hearsay for "[a] statement relating to a startling
event or condition made while the declarant was under the stress of
excitement caused by the event or condition." Upton contends that
because six hours elapsed between the startling event -- the
disappearance of the suitcase full of money -- and Queen's
statement to Hoell, the statement could not have been made while
Queen was "under the stress of excitement" of the loss of the
money. Fed. R. Evid. 803(2).
12
Upton does present an additional argument that merits only
summary treatment. He contends that, for statute of limitation
purposes, the indictment in this case barred consideration of his
tax crimes because it failed to: (1) allege that he and Alberico
agreed to commit those tax crimes and (2) charge him with
conspiring to commit money laundering with the intent to evade
taxes or file a false return in violation of 18 U.S.C. §
1956(a)(1)(A)(ii). "[A]n indictment is sufficient if it, first,
contains the elements of the offense charged and fairly informs a
defendant of the charge against which he must defend, and, second,
enables him to plead an acquittal or conviction in bar of future
prosecutions for the same offense." United States v. Cianci, 378
F.3d 71, 81 (1st Cir. 2004) (citation and internal quotations
omitted). A review of the indictment in this case makes plain
that the indictment's language was sufficient to put Upton on
notice of the conspiracy charge against him.
-24-
We review the admission of evidence after an objection
for an abuse of discretion. See United States v. Garcia, 452 F.3d
36, 38 (1st Cir. 2006). We will only vacate a jury verdict if an
improperly admitted statement was not harmless -- that is, if its
admission "'likely affected the outcome of trial.'" United States
v. Castellini, 392 F.3d 35, 52 (1st Cir. 2004) (quoting United
States v. Torres-Galindo, 206 F.3d 136, 141 (1st Cir. 2000)).
If the admission of the statement was error at all, which
we needn't decide, it was harmless for two reasons. First, the
statement itself likely did little to influence the jury.
Conspiracy to commit concealment money laundering involves an
agreement to conceal the nature of proceeds that were unlawfully
obtained. Here, in order to prove the element that the proceeds
had been illegally obtained, the government had to show that Upton
stole the money that he subsequently laundered. Queen's statement
does not demonstrate that the money was even stolen, much less that
Upton was the one who stole it. While Queen's statement does
provide support for the idea that the money disappeared from the
trunk of the car during a specific time frame, it does not
implicate Upton.
Second, the government presented plenty of evidence that
Upton did in fact steal the money. Upton's friend Phidias Dantos
testified that Queen accused Upton of stealing the money shortly
after the theft occurred. More significantly, Colleen Otto
-25-
testified that Alberico told her that Alberico and Upton had taken
the money, and Edwin Jones testified that Upton revealed to him
that he had stolen the money. Look Motors's bookkeeper, Lucy Webb,
testified that Upton declined to tell her where he got the money to
purchase 89 Iyanough Road, saying that he wanted to "maintain her
innocence." And the additional evidence of Upton's money
laundering activities provided strong support for the inference
that he and Alberico had obtained a large sum of money around the
time the suitcase was stolen from Queen. If it was anything,
Queen's statement was merely icing on the cake.
Upton nevertheless contends that the admission of Queen's
statement cannot constitute harmless error. He argues that Queen's
statement bolstered the testimony of Otto and Jones, witnesses who
he says were in need of bolstering because of their dubious
credibility.13 There are two problems with this argument. First,
the bolstering complaint applies only to Otto and Jones. As we
have explained, the testimony of Otto and Jones was not the only
evidence indicating that Upton stole the money from Queen. Second,
in addition to credibility being a matter for the jury to
determine, it is doubtful that the credibility of Otto and Jones
13
Upton challenges Jones's credibility in two aspects: Jones was
serving time on drug charges and testified in return for a
reduction in his sentence; and, Jones may have been seeking revenge
against Upton because Upton tipped off the police to Jones's drug
dealing activities several years ago. Upton also challenges
Alberico's comments to Otto as potentially motivated by a desire to
incriminate Upton following their breakup.
-26-
needed bolstering from Queen's statement in any event. Their
testimony was supported by other evidence. Otto's testimony that
Alberico admitted that she and Upton took the suitcase of money to
a hotel was supported by hotel records introduced at trial
revealing that Upton rented a hotel room for two people on the
night Queen returned from Florida. Otto's further testimony that
Alberico said she had spent part of her share of the money during
a trip to Italy was corroborated by airline and credit card records
showing that Alberico was in Italy during February 1999. Jones
testified that in 1997 Upton gave him cash from a "shoebox full of
money" and that the money "looked old" and was dated from the
1950s; this description is consistent with the proposition that the
money was earned by Queen's father throughout his life and
subsequently stored in a safe deposit box.
In short, Queen's statement to Hoell is cumulative of
other evidence in the record. Regardless of whether admitting the
statement as an excited utterance may have been error, any such
error was harmless.
For the reasons expressed above, we uphold Upton's
conviction.
Affirmed.
-Dissenting Opinion Follows-
-27-
LIPEZ, Circuit Judge, dissenting in part. The
relationship between the concealment at issue in Upton's conspiracy
to commit money laundering and the concealment associated with his
subsequent tax crimes is complex. The majority misapplies the
relevant legal principles and, consequently, wrongly concludes that
Upton's failure to file a 1999 tax return was conduct within the
scope of the money laundering conspiracy. In so doing, the
majority embraces the government's misguided attempt to remedy a
statute of limitations problem by stretching the money laundering
conspiracy beyond its justifiable limits to include Upton's
independent tax crime.
As the majority notes, the district court had dismissed
before trial, on statute of limitations grounds, counts alleging
money laundering, structuring, and conspiracy to engage in
structuring. To salvage its money laundering conspiracy charge,
the government sidestepped the Supreme Court's teaching in
Grunewald v. United States, 353 U.S. 391 (1957), which – given the
evidence presented – bars treating the tax fraud as conduct that
furthered the conspiracy. If, as Grunewald requires, Upton's tax
evasion were eliminated from the scope of the conspiracy, no act in
furtherance of the money laundering scheme would fall within the
five-year statute of limitations period – and the jury's guilty
verdict on the conspiracy count could not stand. Because the
-28-
majority's decision to uphold the verdict conflicts with the
governing precedent, I respectfully dissent.14
I.
In Grunewald, the Supreme Court drew a distinction
between acts of concealment that furthered a charged conspiracy and
subsequent acts of concealment done "for the purpose only of
covering up after the crime." Id. at 405. If the acts at issue
were of the latter type – i.e., they did not further "the main
criminal objectives of the conspiracy" – the concealment would not
extend the duration of the conspiracy for purposes of the statute
of limitations. Id.; see also United States v. Twitty, 72 F.3d
228, 233 (1st Cir. 1995).
That distinction, the Court explained, was governed by
"important considerations of policy" that hearkened back to prior
cases "repeatedly warn[ing] that we will view with disfavor
attempts to broaden the already pervasive and wide-sweeping nets of
conspiracy prosecutions." Grunewald, 353 U.S. at 404. Routinely
viewing concealment efforts as part of a conspiracy would "wipe out
the statute of limitations in conspiracy cases" and "result in a
great widening of the scope of conspiracy prosecutions" because
"every conspiracy will inevitably be followed by actions taken to
14
My objections to the majority's reasoning also apply to its
decision in the separate appeal of Upton's co-defendant, Alberico,
who also challenged her conviction for conspiracy to commit money
laundering on statute of limitations grounds.
-29-
cover the conspirators' traces." Grunewald, 353 U.S. at 402.
Hence, the Court rejected "the proposition that the duration of a
conspiracy can be indefinitely lengthened merely because the
conspiracy is kept a secret, and merely because the conspirators
take steps to bury their traces, in order to avoid detection and
punishment after the central criminal purpose has been
accomplished." Id. at 405.
Thus, if Upton's tax evasion were conduct designed to
cover up the money laundering conspiracy after the crime had been
accomplished, rather than conduct undertaken to further the
conspiracy's central criminal purpose – laundering the stolen money
– the money laundering conspiracy charge would be time-barred. Two
possible theories, however, could support a conclusion that the
failure to file a 1999 tax return furthered the charged conspiracy
for purposes of the statute of limitations. First, if the evidence
showed that the conspiracy embraced "an express original agreement
among the conspirators to continue to act in concert in order to
cover up" the crime, those acts of concealment could "properly be
regarded as in furtherance of the conspiracy." Id. at 404, 397.
In such instances, the cover-up would be not only foreseeable – as
it would be with all crimes – but the explicit objective of "a
subsidiary conspiracy to conceal." Id. at 402.
Second, the tax fraud would be within the scope of the
money laundering conspiracy if it could be viewed as an act of
-30-
concealment done in furtherance of the main criminal objective of
the conspiracy. In Grunewald, the defendants had fraudulently
obtained "no prosecution" rulings from the Bureau of Internal
Revenue on behalf of two companies seeking to avoid tax evasion
charges, and the defendants later took steps to conceal their
fraudulent activity. Id. at 395-96. The Supreme Court observed
that the "no prosecution" rulings obtained in 1948 and 1949 had
been the main objective of the conspiracy presented to the jury,
and the subsequent efforts to conceal the irregularities – the
conduct occurring within the statute of limitations period – could
only have been for the purpose of avoiding apprehension, rather
than to further the conspiracy's already completed objective. Id.
at 405-06. The Court acknowledged, however, that some acts of
concealment are so closely linked in time and purpose to the
accomplishment of the conspiracy that they are "in furtherance of
the objectives of the conspiracy itself." Id. at 405. The Court
cited the concealment of kidnappers who hide while awaiting ransom
and the repainting of a stolen car as instances in which "the
successful accomplishment of the crime necessitates concealment."
Id.
The majority premises its analysis primarily on the
second theory, concluding that "[n]ot filing returns was an
'integral and self-evident part of' the conspiracy," but it asserts
in a footnote that a reasonable jury could have concluded as well
-31-
that Upton and Alberico had expressly agreed to engage in acts of
concealment. I therefore consider both theories, looking first at
the possibility of an express agreement to conceal.
II.
In asserting that the conspiracy in this case embraced
the acts of concealment in the aftermath of the money laundering
transactions, the majority emphasizes that, pursuant to the money
laundering statute, the indictment charged Upton with conspiring
"to conceal or disguise," inter alia, the source and control of the
stolen $900,000. See 18 U.S.C. § 1956(a)(1)(B).15 The majority
concludes that, because of this concealment language, "[t]he
objective of the conspiracy was more than the specific monetary
transactions of buying and selling 89 Iyanough Road," but included
the purpose "to obscure the illicit source of the funds and the
conspirators' continued control of the proceeds." It reasons that,
because the money laundering crime that was the objective of the
15
That provision states, in relevant part:
(a)(1) Whoever, knowing that the property involved in a
financial transaction represents the proceeds of some
form of unlawful activity, conducts . . . such a
financial transaction which in fact involves the proceeds
of specified unlawful activity––
(B) knowing that the transaction is designed in
whole or in part––
(i) to conceal or disguise the nature, the location,
the source, the ownership, or the control of the proceeds
of specified unlawful activity . . . .
shall be sentenced to a fine . . . or
imprisonment . . . .
-32-
conspiracy included a concealment element, the tax fraud was within
the conspiracy's scope.
The concealment element in the money laundering statute
does not, however, bring within the scope of the money laundering
conspiracy all conduct undertaken by the defendants to conceal the
theft of the $900,000. The concealment element of section
1956(a)(1)(B) goes to the defendant's state-of-mind when engaging
in the prohibited transactions. The statute makes unlawful the
conduct of a financial transaction "knowing that the transaction is
designed in whole or in part . . . to conceal or disguise" the
origin or control of unlawfully obtained property. In other words,
the jury in this case had to find that Upton conspired to commit
money laundering transactions that were undertaken for the purpose
of concealing the crime from which the laundered proceeds were
derived (here, the theft of the $900,000). The statutory state-of-
mind requirement does not, however, transform subsequent acts of
concealment that do not involve financial transactions – whether
designed to hide the money laundering activity or, like the money
laundering itself, to hide the original theft – into conduct that
is within the money laundering conspiracy.
Under Grunewald, efforts to conceal the money laundering
conspiracy after the conspiracy's primary aim (the deceptive
financial transactions) has been achieved may be included within
the scope of the conspiracy only if the evidence permits the jury
-33-
to find that the defendants' "original agreement" explicitly
included a subsidiary objective to cover up their crime. See
Grunewald, 353 U.S. at 404 (emphasis added). In other words, there
must be some evidence of an agreement between the defendants,
entered into before they commit the crime that is the object of the
conspiracy, to continue to act jointly to cover up their unlawful
activity. Only where there is such a pre-crime agreement will acts
of covering up after the crime reveal "more than that the
conspirators do not wish to be apprehended – a concomitant . . . of
every crime since Cain attempted to conceal the murder of Abel from
the Lord." Id. at 406.
As in Grunewald, "[t]here is not a shred of direct
evidence in this record to show anything like an express original
agreement among the conspirators to continue to act in concert in
order to cover up, for their own self-protection, traces of the
crime after its commission." Id. at 404. Nor does the fact that
both Upton and Alberico failed to file 1999 tax returns reporting
the gain earned from the stolen funds constitute indirect evidence
of such an agreement to conceal. The Supreme Court in Grunewald
unequivocally held that such post-crime evidence was insufficient
to show the required pre-crime agreement:
[A] conspiracy to conceal is being implied [by
the government] from elements which will be
present in virtually every conspiracy case,
that is, secrecy plus overt acts of
concealment. . . .
-34-
Acts of covering up, even though done in the
context of a mutually understood need for
secrecy, cannot themselves constitute proof
that concealment of the crime after its
commission was part of the initial agreement
among the conspirators.
Id. at 404, 402; see also SEC v. Papa, No. 08-1172, Slip op. at 11-
12 (1st Cir. Feb. 6, 2009) (noting that "an agreement to conceal
after the fact could be viewed as inherent in a conspiracy or any
wrongful fraudulent scheme[,] but then all covert joint wrongdoing
would be a permanently continuing offense . . . an approach that
the Supreme Court has rejected"); United States v. Goldberg, 105
F.3d 770, 773 (1st Cir. 1997) (holding that "mere collateral
effects of jointly agreed-to activity, even if generally
foreseeable, are not mechanically to be treated as an object of the
conspiracy"); id. at 774 (noting that, in the case of a band of
bank robbers, "[a]ll know that the agreed-upon robbery will
generate 'income' that none of the robbers will report[, y]et it
would be straining to describe interference with the IRS as a
purpose or object of the conspiracy"). The inference of an
original agreement to conceal is particularly unwarranted here
given that, as the majority acknowledges, Upton and Alberico did
not consistently act in tandem following the money laundering.
Alberico filed a false return for 1997 that omitted the stolen
$900,000, while Upton filed his false return for that year in 2000.
In sum, "the essential missing element is a showing
that the act [of concealment] was done in furtherance of a prior
-35-
criminal agreement among the conspirators." Grunewald, 353 U.S. at
404 n.16. Because there is no evidence permitting the jury to find
that Upton and Alberico entered into an "express original
agreement" to cover up their money laundering activity, the tax
fraud may not be considered within the scope of the conspiracy on
that basis.
III.
Nor can the failure to file the 1999 tax return be viewed
as an act of concealment done in furtherance of the main objective
of the money laundering conspiracy. Although tax evasion is a
foreseeable consequence of virtually every financial crime,
Goldberg, 105 F.3d at 773, it is not inevitably within the scope of
every conspiracy to commit such crimes. The question is whether,
consistent with the second theory permitted by Grunewald, the jury
could find that "the successful accomplishment of the crime
necessitate[d]" that act of concealment.16 Id. at 405.
16
Count Four of the indictment alleged the following tax-related
conduct by Upton as part of the money laundering conspiracy:
5. It was a part of the conspiracy that defendants
George L. Upton and Lynn M. Alberico attempted to conceal
or disguise the nature, location, source, ownership, or
control of the illegal cash proceeds by failing to file
income tax returns, or declare a capital gain from the
sale of the commercial property, for the tax year 1999.
6. It was a part of the conspiracy that George L.
Upton attempted to conceal or disguise the nature,
location, source, ownership, or control of the illegal
cash proceeds by filing a materially false federal income
tax return in or about July 2000 that failed to declare
the receipt of the illegal income or the rental income
-36-
The majority states that, because the purpose of the
money laundering conspiracy was to conceal the Queen theft,
"additional acts of concealment that facilitate the central aim of
the conspiracy are in furtherance of the conspiracy." The majority
asserts that the tax evasion meets this description: "[C]oncealing
the existence or financial impact of the money laundering
transactions[] is as much a part of the ongoing conspiracy to
launder money as repainting the car is a part of a theft
conspiracy."
This case does not, however, involve an "ongoing
conspiracy" that allegedly was intended to last beyond the set of
transactions that laundered the stolen $900,000. Such a continuous
conspiracy was described in United States v. Gardiner, 463 F.3d
445, 463 (6th Cir. 2006), where the court discussed crimes with
"'no specific terminating event'" – such as a conspiracy to fix
court cases or generalized loan-sharking activity – in which mid-
conspiracy concealment is necessary for the scheme to continue.
See id. (recognizing that, "[i]n conspiracies where a main
objective has not been attained or abandoned and concealment is
from the property in 1997.
The government argues that Upton's filing of a false return for
1997 also was an act in furtherance of the conspiracy, although the
majority does not rely on that conduct. I would have the same
objections to any such reliance as I do for Upton's failure to file
the 1999 return.
-37-
essential to success of that objective, attempts to conceal the
conspiracy are made in furtherance of the conspiracy") (citation
omitted); see also United States v. Esacove, 943 F.2d 3, 5 (5th
Cir. 1991) (noting that "'concealment is sometimes a necessary part
of a conspiracy'" to "'protect it from those investigative agencies
which threatened its continuation'" (quoting United States v. Del
Valle, 587 F.2d 699, 704 (5th Cir. 1979))). The money laundering
conspiracy charged here, focused as it is on transactions designed
to conceal a single crime, ended at a fixed point in time – when
those specific transactions were completed. See Papa, slip op. at
12 ("'[T]hough the result of a conspiracy may be continuing, the
conspiracy does not thereby become a continuing one.'" (quoting
Fiswick v. United States, 329 U.S. 211, 216 (1946)).
The flaw in the majority's reasoning is further revealed
by considering the Supreme Court's illustrative crimes in
Grunewald. With its stolen car and kidnaping examples, the Supreme
Court was describing acts of concealment that occur – as with
"ongoing" conspiracies – in tandem with the criminal conduct that
is the object of the charged conspiracy. In such cases, where the
concealment occurs before the object of the conspiracy is completed
(as with the kidnapers awaiting ransom) or coincident with its
completion (as with the new paint job on a stolen car), the
concealment is closely related in time to the commission of the
crime that is the conspiracy's goal. Such concealment directly
-38-
facilitates the crime's completion and, as such, it is properly
viewed as part of the original criminal undertaking rather than as
post-conspiracy cover-up.
Indeed, the Court in Grunewald extended its kidnaping
example by noting that the concealment addressed by the
government's proof at trial in that case was "[m]ore closely
analogous to . . . conspiring kidnapers who cover up their traces
after the main conspiracy is finally ended – i.e., after they have
abandoned the kidnaped person and then take care to escape
detection." 353 U.S. at 405. By confining "necessary" acts of
concealment to those that occur contemporaneously with the overt
acts that comprise the substantive crime, the Supreme Court's
concern in Grunewald – that acts of concealment not be used to
indefinitely extend the duration of a conspiracy – does not arise.
Here, too, the concealment relied upon by the government
to extend the duration of the conspiracy is more akin to the cover-
up conduct of kidnapers who have pocketed their ransom and
abandoned their victim. There is no dispute that the overt acts
that were the objective of the charged conspiracy – the financial
transactions prohibited by section 1956(a)(1)(B) – had ended, at
the latest, with the sale of the Iyanough Road property in January
1999.17 The failure to file a tax return more than a year later –
17
Although Upton appears to presume that the money laundering
transactions included the house sale, the list of transactions in
the indictment concludes with the purchase of the house.
-39-
assuming the usual April 15th deadline – is materially different
from either of the Supreme Court's examples of within-the-
conspiracy concealment. First, the tax evasion was remote in time
from the targeted transactions. Second, the tax conduct did not
facilitate those transactions. Upton and Alberico successfully
changed the cash into cashiers' checks and purchased the house in
1997, completing the money laundering conduct that was the
objective of the charged conspiracy. Their failure to file returns
showing the gain from the house protected the scheme after the fact
by concealing it, but that function is not enough to bring the tax
evasion within the scope of the money laundering conspiracy.
Indeed, that tax evasion is precisely the sort of post-
conspiracy concealment that the Court in Grunewald – as a matter of
policy – deemed insufficient to extend the statute of limitations.
By contrast, a car thief's repainting of the car – and, even more
so, the hiding of kidnapers waiting for ransom – is necessary for
the successful accomplishment of the crime that is the object of
the conspiracy.
The problem with the majority's logic is demonstrable by
applying it to a scenario in which Upton and Alberico had sold the
Iyanough Road house ten years later, in 2009, and similarly failed
to file tax returns reporting their gain. The majority's analysis
leads to the conclusion – impermissible under Grunewald – that the
money laundering conspiracy would have continued for another
-40-
decade, despite the lack of money laundering transactions
throughout that period. The majority disclaims such a conclusion
in its opinion in Alberico's appeal, noting that "the failure to
file [returns for 1999] was within a short time and thus likely to
be part of the conspirators' agreement."
The majority offers no principled basis, however, for
drawing a distinction between a failure to file a return disclosing
gain earned in 1999 and a failure to file a return reporting that
same gain earned at a later date. The concealment function
performed by the tax evasion is the same in both instances, and I
do not see how such concealment can be deemed an essential part of
the money laundering conspiracy at the earlier time but not later.18
Moreover, in both instances the objective of the money laundering
conspiracy – the commission of the crime of money laundering – had
18
Beyond highlighting the flaw in the majority's reasoning, the
hypothetical shows the problem in viewing the sale of the Iyanough
Road house – as distinguished from its purchase – as part of the
money laundering conspiracy. The laundering was accomplished by
converting the cash to cashier's checks that were then converted
into real estate, from which Upton and Alberico earned rent of
$1,000 a month. As Upton points out, if the failure to report
down-the-line profits from the laundered money (such as gain from
the house sale) is held to be within the scope of the original
money laundering conspiracy, the result would be an open-ended
statute of limitations – the Supreme Court's concern in Grunewald.
See 353 U.S. at 402 ("Sanctioning the Government's theory would for
all practical purposes wipe out the statute of limitations in
conspiracy cases . . . ."); see also United States v. Magluta, 418
F.3d 1166, 1180 (11th Cir. 2005) (holding that purchases using
laundered proceeds years after the payment that constituted the
original laundering could not be considered part of the money
laundering conspiracy).
-41-
already been completed. Hence, the timing of the tax evasion does
not support the majority's conclusion that it was within the scope
of the original money laundering conspiracy. To the contrary, the
tax conduct's remoteness from the charged objective of the
conspiracy – to launder the $900,000 by means of financial
transactions – confirms that it was not necessary to the
accomplishment of the conspiracy in the sense required by
Grunewald.
IV.
The majority's confusion undoubtedly stems in part from its
failure to appreciate the critical difference between the
conspiracy alleged here and the type of conspiracy charged in
Grunewald and other cases on which the majority relies, including
Goldberg and United States v. Mann, 161 F.3d 840, 859 (5th Cir.
1998). Those cases involved conspiracies brought under 18 U.S.C.
§ 371, which criminalizes any conspiracy "to defraud the United
States, or any agency thereof in any manner or for any purpose."
18 U.S.C. § 371. Such a conspiracy "can have multiple objects, and
any agreed-upon object can be a purpose of the conspiracy and used
to define its character." Goldberg, 105 F.3d at 774 (citing Ingram
v. United States, 360 U.S. 672, 679-80 (1959)).
Thus, under section 371, a defendant may be charged and
found guilty of conspiring to defraud the government by means of
tax conduct whose purpose was to conceal earlier illicit activity
-42-
that was charged as a separate object of the same conspiracy. In
Mann, for example, the government alleged five separate objects of
the single conspiracy charged under section 371 in the indictment's
first count, including misuse of bank funds and the filing of false
income tax returns. Mann, 161 F.3d at 847-48. The court rejected
the defendants' Grunewald argument because "[t]he central aim of
the conspiracy" – as alleged in the indictment – included a purpose
to evade taxes. Mann, 161 F.3d at 859.
Grunewald also illustrates the potential breadth of
conspiracies under section 371. Although the case was tried on the
theory that the defendants' conspiratorial objective was to obtain
"no prosecution" rulings for certain taxpayers, the indictment
embraced the theory that the conspiracy's central object extended
beyond those provisional rulings "to immunize the taxpayers
completely from prosecution for tax evasion." Grunewald, 353 U.S.
at 408. The Supreme Court concluded that, under the limited theory
presented to the jury, the acts of concealment following the "no
prosecution" rulings could only be viewed as post-conspiracy cover-
up to protect the defendants. Under the broader theory, however,
those acts could be viewed as conduct in furtherance of the
conspiracy to fully protect the taxpayers from tax liability. Id.
at 409-411.
The Court remanded the case for a new trial because the
jury charge did not distinguish between concealment in order to
-43-
achieve the central purpose of the more broadly stated conspiracy
(immunization of the taxpayers from tax-evasion prosecution), and
concealment intended solely to cover up a completed crime
(obtaining the "no prosecution" rulings). Id. at 413-14. To find
that the acts of concealment that took place within the limitations
period were in furtherance of the conspiracy, the jury needed to
find that "the basic aim of the conspiracy was not yet attained" at
that time – a determination the jury was not asked to make. Id. at
414.
As far as we know, therefore, the present
convictions were based on the impermissible
theory . . . that a subordinate agreement to
conceal the conspiracy continued after the
central aim of the conspiracy had been
accomplished. . . .
[T]he judge's charge left it open for the jury
to convict even though they found that the
acts of concealment were motivated purely by
the purpose of the conspirators to cover up
their already accomplished crime. And this,
we think, was fatal error.
Id.
The majority fails to recognize that the indictment here
is not similarly elastic. The indictment charged a conspiracy to
commit money laundering, in violation of 18 U.S.C. § 1956(a)(1)(B),
not a more general conspiracy under section 371 "to defraud the
United States, or any agency thereof" by concealing, through
various unlawful actions, the theft of Queen's money. Although the
indictment's conspiracy allegations included, under the heading
-44-
"Manner and Means," that "[i]t was part of the conspiracy that
[defendants] attempted to conceal or disguise the . . . source
. . . or control of the illegal cash proceeds by failing to file
income tax returns . . . for the tax year 1999," the government's
description of a subsequent tax fraud that shared the same
concealment objective of the money laundering transactions cannot
turn the specific conspiracy alleged – to commit money laundering
– into a general conspiracy to conceal funds.19
Unlike the section 371 conspiracy charged in Mann, which
included a separate tax fraud objective, or the conspiracy charged
in Grunewald, whose general purpose to defraud the United States
could embrace acts of concealment subsequent to the "no
prosecution" ruling, a conspiracy to commit money laundering –
i.e., a conspiracy to conduct financial transactions – cannot, by
its terms, include a "central criminal purpose" to conceal income
from the IRS. Grunewald, 353 U.S. at 405. Put most simply, the
tax evasion did not further the "central aim" of the conspiracy,
which was to conduct financial transactions in order to conceal the
source of the $900,000. Hence, the tax evasion was not within the
19
The indictment originally included a count under section 371
alleging a conspiracy to structure transactions for the purpose of
evading federal currency reporting requirements. See 31 U.S.C.
§§ 5324(a)(3), 5322. As noted earlier, the district court
dismissed that count on the basis of the statute of limitations.
See United States v. Upton, 339 F. Supp. 2d 190, 196 (D. Mass.
2004).
-45-
scope of the charged conspiracy. The conspiracy charge was
therefore barred by the statute of limitations.
V.
The majority is correct, of course, that Upton's failure
to file the 1999 tax return bears some relationship to the money
laundering conspiracy. As I have noted, both crimes share a
purpose to cover up the theft from Queen, with the tax evasion
presumably having the added purpose to cover up the money
laundering. Both the facts and the law, however, preclude a
finding by the jury that there was an express original subsidiary
agreement among the conspirators to cover up their crime, or a
finding that the failure to file the 1999 return was an act of
concealment done in furtherance of the money laundering conspiracy
within the meaning of Grunewald. Thus, while Upton was charged and
properly convicted of the separate crime of failing to file a tax
return, the majority errs in treating that independent crime as a
part of the money laundering conspiracy.
Because the conspiracy charge was time-barred, Upton's
conviction on Count 4 of the indictment should be reversed.
-46-
| {
"pile_set_name": "FreeLaw"
} |
993 F.2d 1547
NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.Kenneth LOGSDON and Timothy Allen Luckenbill, an infant,Plaintiffs-Appellants,v.Dr. Harry J. COWHERD; Margery Chapleau; Walt Chapleau;and Steve Berry, Defendants-Appellees.
No. 92-6248.
United States Court of Appeals, Sixth Circuit.
May 18, 1993.
Before: GUY and NELSON, Circuit Judges, and WELLFORD, Senior Circuit Judge.
PER CURIAM.
1
This is a civil rights case that a Kentucky prison inmate sought to bring in forma pauperis. The plaintiff complained that his right of access to the courts was violated when prison officials refused to let an inmate legal aide accompany him to meetings at which a prospective termination of the plaintiff's parental rights was discussed with officials of the Kentucky Department of Human Resources. The district court dismissed the case as frivolous pursuant to 28 U.S.C. § 1915(d). We shall affirm the dismissal.
2
* On May 23, 1991, the Kentucky Department of Human Resources initiated a proceeding in the Jefferson County Circuit Court to terminate the parental rights of the plaintiff inmate, Kenneth Logsdon, with respect to Timothy Luckenbill, an infant. Mr. Logsdon represents that Timothy is his biological son.
3
Three employees of the Department met with Mr. Logsdon at the Kentucky State Reformatory on July 9, 1991. Mr. Logsdon requested permission for inmate legal aide John Reneer to accompany him to the meeting, but the request was denied by Deputy Warden Steve Berry.
4
In the course of the July 9 meeting one of the Department's employees, Linda Waller, outlined plans for evaluating possible home placements for Timothy. Mr. Logsdon took exception to Ms. Waller's proposal, and he filed a complaint against her with the Department soon after the meeting.
5
Another employee of the Department, defendant Margery Chapleau, arranged a meeting with Mr. Logsdon on July 23, 1991, in an attempt to reach an informal resolution of the complaint against Ms. Waller. Deputy Warden Walt Chapleau granted Mr. Logsdon's request that Mr. Reneer be allowed to accompany him to this meeting. No resolution of the complaint was reached at the meeting.
6
On August 12, 1991, a representative of the Department of Human Resources notified Mr. Logsdon that an important meeting would be held in late August concerning Timothy. Mr. Logsdon made a written request that Mr. Reneer be allowed to accompany him to the meeting. Deputy Warden Berry responded with a memorandum refusing to allow Reneer to attend any such meetings. Mr. Berry wrote that his decision was dictated by rules of the state Corrections Cabinet.
7
Mr. Logsdon promptly filed the present action under 42 U.S.C. § 1983 seeking various remedies: an injunction that would forbid prison officials from allowing prison legal aides to decide in their discretion whether to assist in legal actions such as those in which Mr. Logsdon is involved; appointment of a guardian ad litem; an injunction prohibiting Department of Human Resources officials from conducting a hearing on Mr. Logsdon's complaint against Ms. Waller as long as Mr. Logsdon does not have legal representation; and compensatory and punitive damages.
8
The district court dismissed the complaint with prejudice. Insofar as Mr. Logsdon sought legal representation in the termination proceedings, the court determined that it was required to abstain from the exercise of jurisdiction because the proceedings were pending before the Kentucky state courts. Insofar as Mr. Logsdon was complaining of a denial of access to the courts, the district court determined that the complaint did not state a valid claim and was frivolous under 28 U.S.C. § 1915(d). Mr. Logsdon has appealed on behalf of himself and Timothy.
II
9
The dismissal of a case under 28 U.S.C. § 1915(d) is reviewed by this court under an abuse of discretion standard. Denton v. Hernandez, 112 S.Ct. 1728, 1734 (1992). An abuse of discretion exists when the reviewing court is firmly convinced that a mistake has been made. In re Bendectin, 857 F.2d 290, 307 (6th Cir.1988), cert. denied, 488 U.S. 1006 (1989). "A complaint, containing as it does both factual allegations and legal conclusions, is frivolous where it lacks an arguable basis either in law or in fact." Neitzke v. Williams, 490 U.S. 319, 325 (1989).
10
Mr. Logsdon has not alleged that defendants Harry Cowherd and Margery Chapleau played any role in the decision not to allow the inmate legal aide to accompany the plaintiff to meetings and hearings. Dismissal as to both these defendants was thus clearly appropriate.
11
It is equally clear that under the doctrine of Younger v. Harris, 401 U.S. 37 (1971), the district court could abstain from the exercise of jurisdiction during the pendency of the Kentucky parental termination proceedings. The United States Supreme Court has extended the Younger doctrine to civil proceedings in which the state has a substantial legitimate interest. New Orleans Public Service, Inc. v. Council of City of New Orleans, 491 U.S. 350 (1989). The Court has specifically sanctioned Younger abstention where a state department of human resources sought custody of a family's children because of allegations of child abuse. Moore v. Sims, 442 U.S. 415 (1979). "[A]bstention is appropriate unless state law clearly bars the interposition of the constitutional claims [raised by the plaintiff]." Id. at 425-26. The Kentucky statutes pertaining to termination proceedings do not foreclose constitutional claims. See K.R.S. Chapter 625.1
12
Dismissal of the case with prejudice cannot be justified on abstention grounds, however. Where, as here, a plaintiff sues in federal court for damages, and damages are not available in the parallel state proceeding, the abstention doctrine justifies only a stay of the federal case, not a dismissal. Deakins v. Monaghan, 484 U.S. 193, 202 (1988) (underlying state proceedings were criminal; federal action included a § 1983 claim against law enforcement officers for their actions during a search). See also Watts v. Burkhart, 854 F.2d 839 (6th Cir.1988) (initial appeal).
13
Although the abstention doctrine did not warrant the outright dismissal of Mr. Logsdon's case, we believe that the dismissal was nonetheless warranted under 28 U.S.C. § 1915(d). The case turns on the claim that Mr. Logsdon's constitutional rights were violated by the refusal to let an inmate legal aide accompany him to meetings concerning the termination of parental rights and his related complaint against Ms. Waller. This claim is frivolous as a matter of law. The Constitution requires prison authorities to furnish inmates some degree of affirmative assistance in preparing "meaningful legal papers," Bounds v. Smith, 430 U.S. 817, 828 (1977), but that requirement extends only to "cases involving constitutional rights and other civil rights actions related to their incarceration." Knop v. Johnson, 977 F.2d 996, 1009 (6th Cir.1992), cert. denied, 113 S.Ct. 1415 (1993), quoting John L. v. Adams, 969 F.2d 228, 235 (6th Cir.1992) (determining the scope of the right to access as it applies to juveniles). Because the state termination proceedings in question here do not relate to Mr. Logsdon's incarceration, the Kentucky correctional system is under no constitutional obligation to provide him legal assistance in connection with the proceedings.
14
AFFIRMED.
1
In fact, Mr. Logsdon has a right to have counsel appointed to represent him in the state termination proceedings if he is indigent. See K.R.S. § 625.080(3). There is no indication in the record before this court that the plaintiff ever requested appointment of counsel pursuant to the statute
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511 P.2d 893 (1973)
The PEOPLE of the State of Colorado, Plaintiff-Appellant,
v.
Kenneth Wayne PARIS, Defendant-Appellee.
No. 25488.
Supreme Court of Colorado, En Banc.
July 2, 1973.
*894 Robert R. Gallagher, Jr., Dist. Atty., James C. Sell, Deputy Dist. Atty., Littleton, for plaintiff-appellant.
Kuttler, Redman & Anderson, P. C., Roger W. Redman, John E. Byron, Aurora, for defendant-appellee.
PRINGLE, Chief Justice.
Defendant Kenneth Paris was charged with the felonies of theft and receiving stolen goods in violation of 1967 Perm. Supp., C.R.S. 1963, 40-5-2. At the close of the People's evidence, the trial judge granted defendant's motion for judgment of acquittal. The People ask us to disapprove the ruling of the trial court.
During the trial to jury, the People introduced into evidence an AM radio and a light bar, used in conjunction with a small movie camera, both of which had been seized from defendant's home pursuant to a search warrant. H. John Flink, who was the owner of these items and from whom they had been taken offered the only testimony as to their value. He stated that he had paid seventy-five dollars for the radio four years prior to trial and fifty dollars for the light bar three years prior to trial. He further testified that he did not know the present market value of either of these items.
Further testimony adduced by the People revealed that a third party had allegedly sold a stolen guitar to the defendant. However, the guitar itself was not introduced into evidence, and there was no testimony as to its fair market value, its age or its condition.
At the close of the People's case, defendant asked that the court grant a motion for judgment of acquittal on the ground that the People had failed to present any evidence showing that the current market value of the stolen goods was in excess of one hundred dollars, as required for conviction under both counts as a felony. The motion was granted.
On appeal, the People urge that (1) the owner's testimony was competent evidence of current fair market value, and thus, the value of the stolen items was a question that should have been submitted to the jury, and (2) even if the fair market value of the goods was less than one hundred dollars, the case should have been submitted to the jury on two misdemeanor counts.
I.
In order to justify submission of a case to the jury, the People must introduce competent evidence going to each and every element of the crime charged. One of the essential elements of both the felony offenses of theft and theft receiving is that the stolen goods must be of a value in excess of one hundred dollars, 1967 Perm. Supp., C.R.S. 1963, 40-5-2(2) (b). To make a prima facie case, it was incumbent upon the People to present competent evidence of the reasonable market value of the goods in question at the time of the commission of the alleged offense. Nobel v. People, 173 Colo. 333, 478 P.2d 662.
In this case, the only evidence of value adduced by the People was testimony by the original owner of the goods of their original purchase price. While an owner of goods is always competent to testify as to the value of his property, Rodriquez v. People, 168 Colo. 190, 450 P.2d 645; Burns v. People, 148 Colo. 245, 365 P.2d 698, it must, as we have said, relate to its value at the time of the commission of the crime. Where, as here, the owner testifies only as to the purchase price of the goods, such testimony is competent evidence of fair market value only where the goods are so new, and thus, have depreciated in value so insubstantially, as to allow a reasonable inference that the purchase price is comparable to current fair market value. In the instant case, the goods in question were at least three years old, and thus, the purchase price could not reasonably be equated with the fair market value at the time of taking. In addition, the owner specifically stated on cross-examination that he did not know the fair market value at the time of the commission of the crime. Without *895 competent evidence of fair market value, the jury would have had to base its determination of the value of the goods in question at the critical time on pure speculation. The judge properly removed the case from the jury's consideration.
II.
Secondly, the People state, parenthetically, that even if the fair market value of the goods was less than one hundred dollars, the case should have been submitted to the jury on the basis of misdemeanor counts of theft and theft receiving (goods valued at less than one hundred dollars).
However, as stipulated at trial, the Information charged only the felony counts. When the court announced that it was dismissing the felony counts, the People did not request that the matter be submitted on the basis of a lesser included misdemeanor. The record reveals that the People were relying on either a conviction on the felony counts or an acquittal. The question of submission to the jury of misdemeanor counts was first raised on appeal, and comes too late.
The ruling of the trial court is approved.
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United States Court of Appeals
FOR THE EIGHTH CIRCUIT
_______________________
Nos. 00-3919NI, 00-3920NI
_______________________
_____________
*
No. 00-3919NI *
_____________ *
*
Rapid Leasing, Inc., *
*
Plaintiff-Appellant, *
*
Calvin Veasley and Sharon Veasley, *
*
Intervenor Plaintiffs, *
*
v. * On Appeal from the United
* States District Court
National American Insurance Company, * for the Northern District
* of Iowa.
Defendant-Appellee. *
*
----------------------------------- *
*
CRST, Inc., *
*
Plaintiff, *
*
Rapid Leasing, Inc., *
*
Intervenor Plaintiff-Appellant, *
*
v. *
*
National American Insurance Company, *
*
Defendant-Appellee. *
_____________ *
*
No. 00-3920NI *
_____________ *
*
Rapid Leasing, Inc., *
*
Plaintiff, *
*
Calvin Veasley and Sharon Veasley, *
*
Intervenor Plaintiffs, *
*
v. * On Appeal from the United
* States District Court
National American Insurance Company, * for the Northern District
* of Iowa.
Defendant. *
*
----------------------------------- *
*
CRST, Inc., *
*
Plaintiff-Appellant, *
*
Rapid Leasing, Inc., *
*
Intervenor Plaintiff, *
*
v. *
*
National American Insurance Company, *
*
Defendant-Appellee. *
-2-
___________
Submitted: June 13, 2001
Filed: August 27, 2001
___________
Before McMILLIAN and RICHARD S. ARNOLD, Circuit Judges, and
ROSENBAUM,1 District Judge.
___________
RICHARD S. ARNOLD, Circuit Judge.
Rapid Leasing, Inc. (Rapid), and CRST, Inc., appeal the District Court's2
judgment in favor of National American Insurance Company (NAICO). NAICO denied
coverage under an automobile liability insurance policy when a tractor-trailer owned
by Rapid and leased to CRST was involved in an accident. We affirm.
I.
Rapid leased tractor-trailers to CRST, and CRST leased the services of drivers
from Lincoln Sales and Service. CRST and Lincoln are subsidiaries of CRST
International, Inc., and Rapid is a subsidiary of Lincoln. In 1989, NAICO issued an
automobile liability excess insurance policy to CRST, CRST International, Rapid, and
Lincoln. Under the terms of the policy NAICO covered claims exceeding $750,000.
NAICO also provided the group with a workers compensation liability insurance
policy. In 1990, both policies were renewed.
1
The Hon. James M. Rosenbaum, Chief Judge, United States District Court for
the District of Minnesota, sitting by designation.
2
The Hon. Edward J. McManus, United States District Judge for the Northern
District of Iowa.
-3-
Calvin Veasley was a Lincoln employee on loan to CRST as a tractor-trailer
driver. Mr. Veasley was a passenger in the tractor-trailer when it was involved in an
accident, and he was seriously injured. Mr. Veasley and his wife filed a tort action
against Rapid, CRST, Lincoln, and CRST International in an Iowa state court. The
court granted the defendants' motion to dismiss, holding that Rapid and Lincoln were
a single entity, and that both were Veasley's employer; thus, a tort action was barred
by the workers compensation law. Mr. Veasley appealed to the Iowa Supreme Court,
which reversed and held that Rapid was a separate entity, that the workers
compensation bar did not apply, and that Rapid was subject to suit.3
Rapid advised NAICO of Mr. Veasley's suit. After five years of litigation, and
one month before trial, NAICO sent Rapid a letter denying coverage on the basis of an
exclusion in the self-insured retention endorsement (the "SIR endorsement"). Section
IV(C) of the SIR endorsement excludes all claims "under Coverage A,4 to bodily injury
. . . of any employee of any Insured arising out of and in the course of his employment
by any Insured." Joint Appendix (JA) 108. Additionally, NAICO stated that coverage
was denied because Lincoln, Veasley's employer, might be held liable under workers
3
Veasley v. CRST Int'l, Inc., 553 N.W.2d 896 (Iowa 1996).
4
Coverage A applies to bodily injury liability, which is defined as
loss sustained by the Insured on account of liability imposed
upon the Insured by law for damages, including damages for
care and loss of services, on account of bodily injury,
sickness or disease, including death at any time resulting
therefrom, sustained by any person, caused by accident and
arising out of the ownership, maintenance or use of any
covered automobile.
JA 106.
-4-
compensation laws. JA 165-66. Rapid proceeded to trial but eventually settled the
claim.
Rapid filed this suit in the District Court5 seeking a declaratory judgment as to
its rights under the policy. It asserted that the policy issued by NAICO did not contain
the SIR endorsement, and that if the SIR endorsement formed a part of the policy, it
rendered the policy ambiguous. Alternatively, Rapid asserted that coverage should be
afforded under the doctrines of waiver, estoppel, and reasonable expectations. Alleging
that NAICO acted in bad faith and was stubbornly litigious, Rapid sought
compensatory and punitive damages.
Pursuant to a lease agreement between CRST and Rapid, Rapid demanded
indemnification from CRST for costs it incurred settling and defending the Veasley
claim. CRST demanded coverage of Rapid's indemnification claim from NAICO under
the terms of the same insurance policy. The Truckers Coverage Form in the policy
excludes "[l]iability assumed under any contract or agreement. But this exclusion does
not apply to liability for damages: Assumed in a contract or agreement that is an
'insured contract.' " JA 87. The Form defines an insured contract to include
That part of any other contract or agreement pertaining to your business
under which you assume the tort liability of another to pay damages
because of "bodily injury" or "property damage" to a third person or
organization, if the contract or agreement is made prior to the "bodily
injury" or "property damage." Tort liability means a liability that would
be imposed by law in the absence of any contract or agreement.
5
Diversity of citizenship provided subject-matter jurisdiction in the District
Court: Rapid is a Montana corporation; CRST and Lincoln are Iowa companies;
NAICO is a Nebraska company with its primary place of business in Oklahoma; and,
there is more than $75,000 in controversy.
-5-
An "insured contract" does not include that part of any contract or
agreement: 1. That pertains to the loan, lease or rental of an auto to you.
JA 113.
An endorsement to the Truckers Coverage Form amends the definition of an
insured contract to include "[t]hat part of any contract or agreement entered into, as part
of your business, by you or any of your employees pertaining to the rental or lease of
any 'auto'." JA 104. It also amends the definition to exclude coverage for that part of
any contract or agreement that "pertains to the loan, lease or rental of an 'auto' to you
or any of your employees, if the 'auto' is loaned, leased or rented with a driver." Id.
Section IV(A) of the SIR endorsement excludes coverage for liability assumed by the
"Insured under any contract or agreement." JA 108.
NAICO refused coverage and CRST filed suit. The District Court consolidated
the two cases for trial. After a bench trial, the Court ruled for NAICO on all claims.
The Court held that the policy provision excluded coverage for the ". . . bodily injury
. . . of any employee of any Insured arising out of and in the course of his employment
by any Insured" and therefore precluded both Rapid's and CRST's claims. The Court
also held that neither Rapid nor CRST had established the basis for the application of
the doctrines of estoppel or reasonable expectations. This appeal followed.
II.
A. Rapid
On appeal, Rapid advances several arguments. Rapid argues that either the SIR
endorsement was not a term of the insurance contract, or, if it was, it rendered the
policy ambiguous and eviscerated all other provisions and coverage. Rapid also argues
that the District Court erred (1) in holding that it had not established the basis for the
-6-
application of the doctrines of estoppel and reasonable expectations, and (2) in failing
to address the issues of waiver, implied warranty, NAICO's bad faith, or whether
NAICO had been stubbornly litigious.
First, Rapid argues that even though the District Court determined that the SIR
endorsement was included in the papers NAICO represented to be the policy, the
endorsement was not a term of the insurance contract. Rapid cites Essex Ins. Co. v.
Fieldhouse, Inc., 506 N.W. 2d 772, 776 (Iowa 1993), for the proposition that "[to] be
effective, an endorsement must be made a part of the policy and incorporated by
reference." According to Rapid, the SIR endorsement is not referred to on the
declarations page, and it has no form number, no edition number, and no dates
indicating when it was promulgated. It is not countersigned, and it does not refer to any
particular parties. Thus, Rapid argues, the SIR endorsement may be a part of the
policy, but it was not incorporated by reference, and therefore it is not a term of the
contract. We disagree.
The construction and legal effect of a written contract are questions of law we
review de novo. United Fire & Cas. Co. v. Gravette, 182 F.3d 649, 654 (8th Cir.
1999). While Essex makes clear that an endorsement is effective when it is made part
of the policy and incorporated by reference, it is also clear that an endorsement need
not be attached and incorporated by reference to be effective. See Imperial Cas. &
Indem. Co. v. Mutual Fire and Auto. Ins. Co., 252 F. Supp. 906, 909 (S.D. Iowa 1966)
(interpreting Iowa law) (stating as a general rule "an endorsement attached to an
insurance policy is a part of that policy"); Motor Vehicle Cas. Co. v. LeMars Mut. Ins.
Co. of Iowa, 254 Iowa 68, 116 N.W.2d 434, 436 (1962) (same); Hawkeye Clay Works
v. Globe & Rutgers Fire Ins. Co., 202 Iowa 1270, 211 N.W. 860 (1927) (holding
endorsement attached to face of policy became part of the contract).
Here, the District Court held that the SIR endorsement was a provision of the
policy. Implicit in this conclusion is the Court's finding that the SIR endorsement was
-7-
physically attached to the policy and its legal determination that it was a term of the
contract. In light of evidence that both in the Veasley suit and in this case in the
District Court, Rapid submitted a copy of the insurance policy which contained the SIR
endorsement, we hold that the Court's finding that the SIR endorsement was physically
attached to the policy was not clearly erroneous. See Duffie v. Deere & Co., 111 F.3d
70, 72 (8th Cir. 1997) (standard of review).
Neither is the fact that the SIR endorsement is not countersigned fatal to its
inclusion in the policy.
If an 'endorsement is physically attached to an insurance policy
contemporaneous with its execution, and is delivered to the insured as
attached, and sufficient reference is made in either the policy or the
attached matter to identify the papers as related, the fact that the matter
so attached is without the signature of the insurer or its authorized agents
will not preclude its inclusion and construction as a part of the insurance
contract.'
Essex, 506 N.W.2d at 777 (quoting 13A John Alan Appleman & Jean Appleman,
Insurance Law and Practice § 7538, at 163-64 (1976)).
A NAICO employee testified that she remembered typing the SIR endorsement
as a part of the 1989-90 NAICO policy. CRST's insurance agent testified that he
delivered the policy with the SIR endorsement to CRST. What is more, the 1990-91
policy refers to the SIR endorsement. Paragraph 35 of a document titled "Common
Policy Conditions" contains a provision entitled "Self-Insured Retention Endorsement."
JA 124. This provision expressly provides that "In the event of conflict with any
provision elsewhere in the policy, the provisions of this Endorsement shall control the
Application of Insurance to which the policy applies." Id. Thus, because it was
physically attached to and referred to in the policy, we hold that the SIR endorsement
was a term of the insurance contract.
-8-
Next, Rapid contends that the policy is ambiguous, and that the District Court
should have considered extrinsic evidence to determine whether or not the policy
covered Rapid's claim. An insurance policy is ambiguous if a reasonable person would
read more than one meaning into the words. Farm & City Ins. Co. v. Anderson, 509
N.W.2d 487, 491 (Iowa 1993). " 'Ambiguity exists if, after the application of pertinent
rules of interpretation to the policy, a genuine uncertainty results as to which one of two
or more meanings is the proper one.' " Essex, 506 N.W.2d at 776 (quoting A.Y.
McDonald Indus., Inc. v. Insurance Co. of North America, 475 N.W.2d 607, 618 (Iowa
1991)). Moreover, "mere conflict [between provisions] does not, in and of itself, serve
to create uncertainty or ambiguity." Small v. Ogden, 259 Iowa 1126, 1131, 147
N.W.2d 18, 21 (1966).
After reviewing the policy, we do not think that it is ambiguous. The Truckers
Coverage Form excludes coverage for bodily injury to "[a]n employee of the 'insured'
arising out of and in the course of employment by the 'insured.' " JA 86 (emphasis
added). On the other hand, section IV(C) of the SIR endorsement excludes coverage
for bodily injury to "any employee of any Insured arising out of and in the course of his
employment by any Insured." JA 108 (emphasis added). This exclusion casts, if
anything, a broader net than does the exclusion contained in the Truckers Coverage
Form. The Truckers Coverage Form serves to exclude claims arising out of and in the
course of an employee's employment with his employer/insured. These claims might
also be covered under the workers compensation insurance policy provided by NAICO.
In contrast, the SIR endorsement excludes coverage of claims arising out of or in the
course of an employee's employment even if he is temporarily working for another
insured company. Even though the SIR endorsement may redundantly exclude some
of the same claims as the Truckers Coverage Form exclusion, that does not render the
policy ambiguous. In fact, even if the two exclusions were in direct conflict, the
exclusion in the SIR endorsement would prevail. See Motor Vehicle Cas. Co., 254
Iowa at 72, 116 N.W.2d at 437 (holding excess clause in endorsement prevailed over
-9-
conflicting pro rata clause in policy). Thus, we hold that the policy is unambiguous and
the SIR endorsement excludes Rapid's claim.
Next, Rapid argues that the SIR exclusion does not control because its
application defeats Rapid's reasonable expectations. The reasonable-expectations
doctrine applies when the policy is such that an ordinary non-expert would
misunderstand the policy's coverage or there are circumstances attributable to the
insurer which would foster coverage expectations. Clark-Peterson Co. v. Independent
Ins. Assoc., 492 N.W.2d 675, 677 (Iowa 1992). Here, Rapid claims that it reasonably
expected to receive a standard Truckers Coverage policy with a standard self-insured
retention endorsement unlike the endorsement at issue here.
In Iowa the doctrine of reasonable expectations "seeks to avoid the frustration
of an insured's expectations notwithstanding policy language that appears to negate
coverage." Monroe Co. v. International Ins. Co., 609 N.W.2d 522, 526 (Iowa 2000).
An insured can use the doctrine to invalidate an exclusion that "(1) is bizarre or
oppressive, (2) eviscerates a term to which the parties have explicitly agreed, or (3)
eliminates a dominant purpose of the policy." LeMars Mut. Ins. Co. v. Joffer, 574
N.W.2d 303, 311 (Iowa 1998). However, the Iowa Supreme Court has held that "the
doctrine will not be applied to cases in which an ordinary layman would not
misunderstand the extent of the coverage provided from a reading of the policy and
there are no circumstances attributable to the insurer that would foster coverage
expectations beyond that which is provided." Monroe Co., 609 N.W.2d at 526. Such
is the case here. A reading of the policy would have revealed the exclusion in section
IV(C) of the SIR endorsement. Moreover, there is no evidence that NAICO led Rapid
to believe that the policy provided broader coverage than the policy language specified.
Thus, the doctrine of reasonable expectations does not apply.
Likewise, Rapid's theories of estoppel and waiver cannot avail. Neither waiver
nor estoppel may be used to extend coverage where it is expressly excluded in the
-10-
policy. See Randolph v. Fireman's Fund Ins. Co., 255 Iowa 943, 950, 124 N.W.2d
528, 531-32 (1963) (holding that implied waiver, based upon the conduct or action of
the insurer, cannot "bring within the coverage of a policy risks not covered by its terms,
or risks expressly excluded therefrom") (quoting 29A Am. Jur., Insurance, § 1135, at
289); Richardson v. Iowa State Traveling Men's Ass'n, 228 Iowa 319, 328, 291 N.W.
408, 412 (1940); Pierce v. Homesteaders Life Ass'n, 223 Iowa 211, 272 N.W. 543, 545
(1937). Rapid's brief refers to the doctrine of implied warranty but it does not set forth
an argument on the issue. Consequently, we do not consider the doctrine's application,
if any, to this case.
B. CRST
CRST asserts that the insurance policy affords coverage of its claim because its
lease agreement with Rapid was an insured contract which fell under an exception to
the policy's contractual liability exclusion. CRST also argues that section IV(C) of the
SIR endorsement does not apply to its claim because that exclusion applies to claims
arising out of tort and CRST's claim arises out of contract. Likewise, CRST contends
that the District Court erred in holding that (1) the SIR endorsement was a provision
of the contract,6 (2) the insurance contract was unambiguous, and (3) CRST failed to
establish the basis for the application of the reasonable expectations doctrine. We
respectfully disagree.
We hold that the CRST-Rapid lease agreement was not an insured contract under
Iowa law, because it was not specific enough to create an obligation in CRST to
indemnify Rapid against Rapid's own negligence. "[A]n indemnity agreement generally
will not be construed to cover losses to the indemnitee caused by his own negligence.
In order to do so the agreement must be clear and unequivocally expressed." Evans v.
Howard R. Green Co., 231 N.W.2d 907, 916 (Iowa 1975); Herter v.
6
We have already resolved this issue.
-11-
Ringland-Johnson- Crowley Co., 492 N.W.2d 672, 674 (Iowa 1992). "General, broad
and all-inclusive language is insufficient for the purpose." Evans, 231 N.W.2d at 916.
The CRST-Rapid lease agreement provides:
Indemnity. Lessee shall indemnify Lessor against, and hold Lessor
harmless from any and all claims, actions, suits, proceedings, costs,
expenses, damages and liabilities, including, but not limited to, reasonable
attorneys fees and court costs arising out of, connected with, or resulting
from the equipment, including without limitation the manufacture,
selection, delivery, possession, use, operation or return of the equipment.
JA 26.
Rapid seeks indemnification for amounts it paid in defense and settlement of Mr.
Veasley's negligence claim. Therefore, Rapid seeks indemnification for losses it
suffered because of its own negligence. The language in the indemnification provision
is insufficiently clear to cover losses to Rapid caused by its own negligence. The
indemnification provision at issue here is unlike the ones enforced in Thornton v.
Guthrie Co. Rural Elec. Coop. Assoc., 467 N.W.2d 574, 577 (Iowa 1991)
(indemnification provided "regardless of whether [losses] were caused in part by a
party indemnified hereunder"), Payne Plumbing & Heating Co. v. Bob McKines
Excavating & Grading, Inc., 382 N.W.2d 156, 160 (Iowa 1986) (subcontractor agrees
to indemnify contractor "regardless of whether or not [loss or damage] is caused in part
by a party indemnified hereunder"), Hysell v. Iowa Pub. Serv. Co., 534 F.2d 775, 785
(8th Cir. 1976) (applying Iowa law) (party agreed to indemnify city for loss or damage
that occurred "through any excavation, structure, or device of any kind, made, placed
or permitted to exist by" the city), or Employers Mut. Cas. Co. v. Chicago & North
Western Transp. Co., 521 N.W.2d 692, 694 (Iowa 1994) ("Licensee forever
indemnifies the Railway Company against and agrees to save it harmless from any and
-12-
all claims . . . even though the operation of the Railway Company's railroad may have
caused or contributed thereto").
In fact, the language here is more akin to the language considered too general in
Evans and Trushcheff v. Abell-Howe Co., 239 N.W.2d 116 (Iowa 1976). The
agreement in Trushcheff provided:
It is understood and agreed that the Sub-Contractor will indemnify and
save harmless the General Contractor and the Owner from and against
any and all claims for injury or death to persons or damage to property
(including cost of litigation and attorneys' fees) in any manner caused by,
arising from, incident to, connected with or growing out of the work to be
performed under this contract regardless of whether such claim is alleged
to be caused, in whole or in part, by negligence or otherwise on the part
of the Sub-Contractor, its employees, agents or servants.
Trushcheff, 239 N.W.2d at 134. Similarly, the agreement in Evans provided,
In the event of any suit against the Owner, its officers, engineers, or
employees on account of any alleged act or omission of the Contractor,
the Contractor shall defend said suits and shall pay any and all judgments
or settlements resulting therefrom and failing so to do, any judgments
against or settlements made on account thereof shall become a lien against
any funds due the Contractor and may be held by the Owner from any
funds due the Contractor.
Evans, 231 N.W.2d at 915-16.
Neither does the language in the indemnification provision here evidence a clear
intent to indemnify Rapid for its own negligence. See Hysell, 534 F.2d at 785 (stating
"a contract need not expressly specify that it will operate to indemnify a party for its
own negligence if the clear intent of the language is to provide such indemnification").
-13-
Since the indemnification provision is ineffective, CRST is not contractually obligated
to assume the "tort liability of another," and the lease agreement is not an insured
contract. Thus, CRST's claim for liability assumed under the CRST-Rapid lease
agreement is excluded by the policy.
Since we have determined that the CRST-Rapid lease agreement was not an
insured contract under Iowa law, and since CRST's assertions of ambiguity depend on
the definition of an "insured contract" under the policy, we hold that the policy
unambiguously excludes coverage. Also, for the same reasons that the doctrine of
reasonable expectations does not apply to Rapid , we hold it does not apply to CRST.
Because our holding disposes of CRST's claim, we do not address its remaining
assignments of error on appeal.
III.
For the foregoing reasons, the judgment of the District Court is affirmed.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
-14-
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} |
554 F.Supp. 613 (1982)
Sara RUSSO, David Russo, Mary Ann Parker, Plaintiffs,
v.
BACHE HALSEY STUART SHIELDS, INC., Defendant.
No. 82 C 4219.
United States District Court, N.D. Illinois, E.D.
November 18, 1982.
*614 *615 Lloyd A. Kadish, Michael A. Weinberg, Kadish & Weinberg, Ltd., Chicago, Ill., for plaintiffs.
N.A. Giambalvo, Giambalvo, Sears, Sugrue, Boodell & Crowley, Chicago, Ill., for defendant.
MEMORANDUM OPINION AND ORDER
ASPEN, District Judge:
Plaintiffs Sara Russo, David Russo and Mary Ann Parker have sued defendant Bache Halsey Stuart Shields, Inc. ("Bache") for securities fraud under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b),[1] Rule 10(b)5, 17 C.F.R. § 240.10b-5,[2] several rules of the Chicago *616 Board of Options Exchange,[3] Section 5(b) of the Securities Act of 1933, 15 U.S.C. § 77e(b)(2),[4] Regulation T of the Federal Reserve Board, 12 C.F.R. § 220.4(e)(2),[5] as well as various state law claims. Jurisdiction is asserted pursuant to 28 U.S.C. § 1332 and 28 U.S.C. § 1331. Presently before the Court is Bache's motion to dismiss plaintiffs' complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted. For reasons stated below, Bache's motion is granted in part and denied in part.
Plaintiffs have alleged that they each opened stock option accounts at Bache through an account executive, Phillip Reznick, in January 1981. According to plaintiffs, Bache subsequently engaged in a variety of acts and omissions, such as, inter alia, failing to deliver a prospectus, churning plaintiffs' accounts and making false representations, in violation of the aforementioned statutes, regulations and rules. In its motion to dismiss, Bache asserts that plaintiffs' complaint: (1) improperly joins several parties, in violation of Rule 20 of the Federal Rules of Civil Procedure; (2) fails to comply with Rules 8(a) and 9(b) of the Federal Rules of Civil Procedure; (3) fails to state a cause of action, in that the Chicago Board of Options Exchange Rules and Regulation T of the Federal Reserve Board, 12 C.F.R. § 220.4(e)(2), do not give rise to private rights of action; (4) insofar as it alleges violations of §§ 5 and 12 of the Securities Act of 1933, 15 U.S.C. § 77e and § 77l is barred by the statute of limitations set forth in § 13 of that Act, 15 U.S.C. § 77m, and in § 29 of the Securities Exchange Act of 1934, 15 U.S.C. § 78cc; and (5) fails to allege claims of common law fraud, breach of fiduciary duty, and breach of promise. When considering a motion to dismiss, the allegations of the complaint must be viewed in the light most favorable to the plaintiff. Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957); Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). With these standards in mind, each of Bache's arguments will be considered in turn.
Improper Joinder
Bache argues that the facts and circumstances concerning the three plaintiffs are substantially different, for their level of investment sophistication, financial positions, trades and losses varied, and the allegations made by the plaintiffs differ. Thus, according to Bache, plaintiffs are improperly joined in violation of Rule 20 of the Federal Rules of Civil Procedure, and they should therefore be severed pursuant to Rule 21. Rule 20 provides that:
All persons may join in one action as plaintiffs if they assert any right to relief jointly, severally, or in the alternative in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all these persons will arise in the action.
Under the Federal Rules of Civil Procedure, "joinder of claims, parties and remedies is strongly encouraged." United Mine Workers of America v. Gibbs, 383 U.S. 715, 724, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). For joinder of parties to be proper, there must be both common questions of law or fact and the rights asserted must arise out of the same transaction or series of transactions. Magnavox Co. v. APF Electronics, Inc., 496 F.Supp. 29, 34 (N.D.Ill.1980). It is clear from the complaint herein that Sara Russo, David Russo and Mary Ann Parker dealt with the same account executive, Phillip Reznick, at Bache. The complaint further alleges transactions involving Mr. Reznick, Sara Russo and David Russo, as well as Mr. Reznick, Sara Russo and Mary Ann *617 Parker.[6] The causes of action thus arise out of a series of transactions among plaintiffs and the agents of Bache. Moreover, plaintiffs present common questions of fact and law under the statutes, regulations and rules they have evoked. For these reasons, plaintiffs are properly joined in this action.
Rule 8(a) and Rule 9(b)
Bache argues that the complaint fails to comply with pleading requirements set forth in the Federal Rules of Civil Procedure. Count I of the complaint alleges violations of Section 10(b) and Rule 10(b)5 of the federal securities laws; Fed.R.Civ.P. 9(b) governs the pleading of Section 10(b) and Rule 10(b)5 claims, Schaefer v. First National Bank of Lincolnwood, 509 F.2d 1287, 1297 (7th Cir.1975), cert. denied, 425 U.S. 943, 96 S.Ct. 1682, 48 L.Ed.2d 186 (1975), and Rule 9(b) must be read together with Rule 8. Tomera v. Galt, 511 F.2d 504, 508 (7th Cir.1975). Rule 8(a)(2) requires that a complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief...." Rule 9(b), however, states that "circumstances constituting fraud or mistake shall be pleaded with particularity." Simply reciting conclusory allegations that defendant's conduct was fraudulent or in violation of Section 10 or Rule 10(b)5 does not satisfy Rule 9(b). Garner v. Enright, 71 F.R.D. 656, 658 (E.D. N.Y.1976). A plaintiff alleging securities fraud must specifically allege the acts or omissions upon which his or her claim rests. Ross v. A.H. Robins Co., 607 F.2d 545, 557 (2d Cir.1979), cert. denied, 446 U.S. 946, 100 S.Ct. 2175, 64 L.Ed.2d 802 (1980).
In the instant case, Count I of the complaint adequately sets forth the time periods and contents of the allegedly false representations, the alleged omissions of allegedly material facts, as well as the identity of the individuals who made them. Thus, the defendant has received the proper notice to which it is entitled. Darling & Co. v. Klouman, 87 F.R.D. 756, 758 (N.D.Ill. 1980). Plaintiffs have supplied, as they must, a brief sketch of the allegedly fraudulent transactions, where and when they occurred and the individuals involved. Tomera v. Galt, 511 F.2d 504, 509 (7th Cir. 1975); Alco Financial Services v. Treasure Island Motor Inn, 82 F.R.D. 735, 737 (N.D. Ill.1979). We therefore decline to dismiss Count I of plaintiffs' complaint in its entirety.[7]
However, insofar as Count I seeks damages for churning[8] of plaintiffs' options accounts, it is dismissed. Under federal securities law, churning is cognizable as fraud, Newburger, Loeb & Co. v. Gross, 563 F.2d 1057, 1070 (2d Cir.1977), cert. denied, 434 U.S. 1035, 98 S.Ct. 769, 54 L.Ed.2d 782 (1978). Churning does not involve a single trade or transaction, but rather, a series of transactions which are excessive in light of market conditions, commission size and customer sophistication. Fey v. Walston & *618 Co., 493 F.2d 1036, 1050 (7th Cir.1974); Polera v. Altorfer, Podesta, Woolard & Co., 503 F.Supp. 116, 118 (N.D.Ill.1980). While at least one court has held that a complaint for churning need not provide specific detail to support its allegations, Kaufman v. Magid, Fed.Sec.L.Rep. (CCH) ¶ 98713 (D.Mass. 1982), other courts have required considerably greater specificity, Vetter v. Shearson Hayden Stone Inc., 481 F.Supp. 64, 66 (S.D. N.Y.1979); Zaretsky v. E.F. Hutton & Co., 509 F.Supp. 68, 74 (S.D.N.Y.1981). In our view, the better rule is that specificity is required when pleading churning. See, e.g., Baselski v. Paine, Webber, Jackson & Curtis, Inc., 514 F.Supp. 535, 541 (N.D.Ill.1981). A plaintiff in pleading a churning claim must identify the securities involved, the nature, amount and dates of transactions in issue, as well as sufficient facts to allow for a determination of the turnover ratio in the account and/or the percentage of the account value paid in commissions. Shelley v. Noffsinger, 511 F.Supp. 687, 692 (N.D.Ill. 1981). In the instant case, the complaint fails to plead churning with the requisite specificity, and, therefore, paragraph F of Count I must be dismissed.
Implied Private Rights of Action Under Chicago Board of Options Exchange Rules
In Count II, plaintiffs allege that the identical factual allegations which gave rise to the violations of Section 10(b) and Rule 10(b)5 alleged in Count I of the complaint also violated several rules of the Chicago Board of Options Exchange ("CBOE"). Bache, in its motion to dismiss, asserts that the federal securities laws do not create a private right of action for violations of CBOE rules.
In Buttrey v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 410 F.2d 135 (7th Cir.), cert. denied, 396 U.S. 838, 90 S.Ct. 98, 24 L.Ed.2d 88 (1969), the Court of Appeals for the Seventh Circuit held that a violation of the New York Stock Exchange ("NYSE") Rule 405, when accompanied by allegations of fraud, stated an implied private right of action. Id. at 142. In so holding, the court discussed Colonial Realty Corp. v. Bache & Co., 358 F.2d 178 (2d Cir.), cert. denied, 385 U.S. 817, 87 S.Ct. 40, 17 L.Ed.2d 56 (1966), which emphasized that stock exchange rules can play an integral part in SEC regulation. The Court in Buttrey added that Rule 405 was designed in part to protect the public, and that a private action for its violation was consistent with the purposes of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a-78kk. Id. at 181-82. Moreover, in Sanders v. John Nuveen & Co., 554 F.2d 790 (7th Cir.1977), cert. denied, 450 U.S. 1005, 101 S.Ct. 1719, 68 L.Ed.2d 210 (1981), the Seventh Circuit emphasized that a finding of fraud is necessary to premise an implied private right of action upon a violation of a rule promulgated by the National Association of Securities Dealers.
However, since the Buttrey decision, the Supreme Court has provided considerable guidance concerning the implication of private rights of actions from federal statutes and regulations. The Court delineated four factors to examine in determining the existence of an implied remedy in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975).[9] And in Touche Ross & Co. v. Redington, 442 U.S. 560, 99 S.Ct. 2479, 61 L.Ed.2d 82 (1979), the Court held that § 17(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78q(a), does not create an implied right of action. The Court added that in deciding this issue, its inquiry was "limited solely to determining whether Congress intended to create the private right of *619 action...." Id. at 568, 99 S.Ct. at 2485. Moreover, Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 100 S.Ct. 242, 62 L.Ed.2d 146 (1979), held that § 206 of the Investment Advisors Act of 1940, 15 U.S.C. § 80b-180b-21, created no implied private remedy for damages. It is thus clear that the tendency toward creating implied private rights of action in federal statutes and regulations has been substantially tempered. But see Merrill Lynch, Pierce, Fenner & Smith v. Curran, ___ U.S. ___, 102 S.Ct. 1825, 72 L.Ed.2d 182 (1982) (The Commodity Exchange Act, 7 U.S.C. § 1-24, creates a private right of action for damages). In Gateway Industries v. Agency Rent A Car, 495 F.Supp. 92 (N.D.Ill. 1980), this Court summarized the recent trend away from inferring private rights of action and held that section 13d of the Exchange Act, 15 U.S.C. § 78m(d), did not create an implied private right of action. We also observed that the more conservative approach to implied private rights of action reflected dissatisfaction on the part of the Supreme Court with the willingness of the federal courts to infer private rights of action in a number of statutory schemes. 495 F.Supp. at 95-97.
Turning specifically to implied private rights of action for the violation of stock exchange and stock association rules, Jablon v. Dean Witter & Co., 614 F.2d 677 (9th Cir.1980), held that federal securities laws do not create an implied private right of action for the violation of NYSE Rule 405. The court in Jablon declared that it could find no congressional intent to provide for a violation of exchange rules in either § 6(b) of the Securities Exchange Act, 15 U.S.C. § 78F(b) or in § 27 of the Act, 15 U.S.C. § 78aa.[10]See also Thompson v. Smith Barney, Harris Upham, 539 F.Supp. 859, 865 (N.D.Ga.1982). We are persuaded that there is no implied private right of action for violations of exchange rules.[11] For these reasons, Count II, which alleges violations of CBOE Rules 9.7(b), 9.7(e), 9.15, 9.9 and 9.8, fails to state a claim upon which relief can be granted and is dismissed.
An Implied Private Right of Action Under Regulation T
Regulation T of the Federal Reserve Board, 12 C.F.R. § 220.4(c)(2) provides that:
In case a customer purchases a security (other than an exempted security) in the special cash account and does not make full cash payment for the security within 7 days after the date on which the security is so purchased, the creditor shall, except as provided in paragraphs (c)(3) through (7) of this section promptly cancel or otherwise liquidate the transaction or the unsettled portion thereof.[12]*620 Plaintiffs allege that Bache violated Regulation T by failing to liquidate their options positions after seven days of under-margining in Count IV of their complaint. In its motion to dismiss, Bache asserts that no private right of action may be implied for a violation of Regulation T.
A number of courts have considered whether Regulation T gives rise to an implied private right of action. In Pearlstein v. Scudder & German, 429 F.2d 1136 (1970), cert. denied, 401 U.S. 1013, 91 S.Ct. 1250, 28 L.Ed.2d 550 (1971), the court held that a customer had an implied right of action against a broker for losses suffered in connection with violations of Regulation T. That court, however, in so holding, emphasized the fact that federal margin requirements forbade a broker from extending undue credit, but did not forbid customers from accepting such credit; the Court interpreted this as an indication that Congress placed the responsibility for observing margin requirements on the broker. 429 F.2d at 1141. After Pearlstein, Congress added subsection (f), 15 U.S.C. § 78g(f) to § 7 of the Securities Exchange Act of 1934,[13] which, along with Regulation X, 12 C.F.R. § 224, made it unlawful for customers to obtain credit in violation of margin requirements. With customers, as well as brokers, responsible for observing margin requirements, the Pearlstein rationale for finding an implied right of action under Regulation T has been substantially undermined. Pearlstein v. Scudder & German, 527 F.2d 1141 (2d Cir.1975). Indeed, for this reason, several circuits have not recognized such a right of action for violation of Regulation T. Gilman v. Federal Deposit Insurance Corp., 660 F.2d 688, 692 (6th Cir. 1981); Stern v. Merrill Lynch, Pierce, Fenner & Smith, 603 F.2d 1073, 1088 (4th Cir. 1979); Utah State University, etc. v. Bear, Stearns & Co., 549 F.2d 164, 170 (10th Cir.), cert. denied, 434 U.S. 890, 98 S.Ct. 264, 54 L.Ed.2d 176 (1977). In light of the aforementioned legislative history, as well as the Supreme Court's recent approach to implied private rights of action, e.g., Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 100 S.Ct. 242, 62 L.Ed.2d 146 (1979), we hold that there is no private right of action under Regulation T.[14] Accordingly, Count IV of the complaint is dismissed.
Section 5(b)2 of the Securities Act of 1933
Plaintiffs allege in Count III that Bache failed to deliver a Prospectus of the Options Clearing Corporation ("OCC") to Mary Ann Parker, and that Bache delivered OCC prospectuses to Sara Russo and David Russo only after commencing to trade their accounts. Failing to deliver a prospectus, according to plaintiffs, violated Section 5(b)2 of the Securities Act of 1933, 15 U.S.C. § 77e(b)(2), thus rendering the options transactions voidable pursuant to § 29(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78cc(b). Bache seeks to dismiss Count III under a variety of legal theories.[15] We need not consider all of *621 these arguments, however, since we hold that Count III fails to state a cause of action and must be dismissed.
Section 5 of the 1933 Act, 15 U.S.C. § 77e(b)(2) declares that:
It shall be unlawful for any person, directly or indirectly
* * * * * *
(2) to carry or cause to be carried through the mails or in interstate commerce any such security for the purpose of sale or for delivery after sale, unless accompanied or preceded by a prospectus that meets the requirements of subsection (a) of Section 77j of this title.
This section, however, does not itself provide for a private right of action. Unicorn Field, Inc. v. Cannon Group, Inc., 60 F.R.D. 217, 223 (S.D.N.Y.1973). Rather, section 12 of the 1933 Act, 15 U.S.C. § 77l makes liable to a purchaser any person who "offers or sells a security in violation of section 77l of this title." No civil liability arises solely as a result of a violation of section 5. In re North American Acceptance Corp. Securities Cases, 513 F.Supp. 608, 618 (N.D. Ga.1981). Private civil liability for violations of section 5 exists only when the provisions of section 12 have been met. Greater Iowa Corp. v. McLendon, 378 F.2d 783, 790 (8th Cir.1967). At no point in the complaint do plaintiffs allege a violation of section 12; and we, therefore, hold that Count III must be dismissed.[16]
State Law Claims
Counts V, VI and VII allege, respectively, breach of fiduciary duty, common law fraud and breach of promise. In its motion to dismiss, Bache argues that these counts fail to state claims upon which relief may be granted. Specifically, as to the existence of a fiduciary relationship, Bache argues that rather than pleading the existence of such a relationship with particularity, the complaint is conclusory. The complaint clearly alleges broker-customer relations between Mr. Reznick and plaintiffs. While it is true that "[t]he mere existence of a broker-customer relationship is not proof of its fiduciary character," Fey v. Walston & Co., 493 F.2d 1036 (7th Cir. 1974), the allegation of a broker-customer relationship in a claim of breach of fiduciary duty is sufficient to withstand a motion to dismiss for failure to state a claim upon which relief may be granted. Sostrin v. Altschul, 492 F.Supp. 486, 489 (N.D.Ill. 1980). We therefore decline to dismiss Count V.
Turning to Count VI, the claim of common law fraud, Bache argues that this Count fails to meet the requirements of Rule 9(b) of the Federal Rules of Civil Procedure. We have earlier held that plaintiffs' complaint adequately stated a claim for relief under Section 10(b) and Rule 10(b)5 of the federal securities laws. When Count VI is considered in light of the paragraphs of the complaint which precede it, which plaintiffs have realleged in Count VI, we believe that Rule 9(b) is satisfied. The complaint alleges sufficient facts concerning the time periods, nature of alleged omissions and misrepresentations, as well as the individuals involved. Tomera v. Galt, 511 F.2d 504 (7th Cir.1975); Savino v. E.F. Hutton & Co., 507 F.Supp. 1225, 1232 (S.D. N.Y.1981); Alco Financial Services v. Treasure Island Motor Inn, 82 F.R.D. 735 (N.D.Ill.1979). Therefore, the motion to dismiss Count VI will be denied.
*622 Count VII seeks damages for breach of an alleged oral contract between Bache, Sara Russo and David Russo. Plaintiffs allege that Bache breached its promises (1) not to liquidate their options accounts until a certificate of deposit owned by Sara Russo matured, and (2) to waive the margin calls to which plaintiffs' options accounts were subject. However, at no point in their complaint do plaintiffs allege that they made any promises to Bache in exchange for Bache's promises to them. Under Illinois law, mutual promises are sufficient consideration to support a contract, Wilson v. Continental Body Corporation, 93 Ill.App.3d 966, 970, 49 Ill.Dec. 412, 415, 418 N.E.2d 56 (1981). Unilateral promises, however, cannot give rise to enforceable contracts for lack of mutuality. Kraftco Corp. v. Kolbus, 1 Ill.App.3d 635, 638-39, 274 N.E.2d 153, 155 (1971). Accordingly, Count VII fails to state a claim for breach of contract and is dismissed.
Conclusion
For the reasons set forth in this opinion, Bache's motion to dismiss is granted in part and denied in part. Paragraph F of Count I, Counts II, III, IV and VII are dismissed; the remainder of Count I, Counts V and VI are not. It is so ordered.
APPENDIX A
Plaintiffs allege violations of the following rules:
Rule 9F(b) Diligence in Opening Account. In approving a customer's account for options transactions, a member organization shall exercise due diligence to learn the essential facts as to the customer and his investment objectives and financial situation, and shall make a record of such information which shall be retained in accordance with Rule 9.8. Based upon such information, the branch office manager or other Registered Options Principal shall approve in writing the customer's account for options transactions; provided, that if the branch office manager is not a Registered Options Principal, his approval shall within a reasonable time be confirmed by a Registered Options Principal.
Rule 9.7(e) Prospectus to Be Furnished. At or prior to the time a customer's account is approved for options transactions, a member organization shall furnish the customer with a current Prospectus as defined in rule 9.15.
Rule 9.8(a) Duty to Supervise; Senior Registered Options Principal. Every member organization shall develop and implement a written program for the review of the organization's non-member customer accounts and all orders in such accounts, insofar as such accounts and orders relate to option contracts. This program shall be under the supervision of a designated Senior Registered Options Principal who is specifically identified to the Exchange and who is an officer (in the case of a corporation) or general partner (in the case of a partnership) of the member organization.
(b) Compliance Registered Options Principal. Every member organization shall designate and specifically identify to the Exchange a Compliance Registered Options Principal (who may be the Senior Registered Options Principal), who shall have no sales functions and shall be responsible to review and to propose appropriate action to secure the member organization's compliance with securities laws and regulations and Exchange rules in respect of its options business. The Compliance Registered Options Principal shall regularly furnish reports directly to the compliance officer (if the Compliance Registered Options Principal is not himself the compliance officer) and to other senior management of the member organization. The requirement that the Compliance Registered Options Principal shall have no sales functions does not apply to a member organization that has received less than $1,000,000 in gross commissions on options business as reflected in its FOCUS Report for either of the preceding two fiscal years or that currently has 10 or fewer Registered Representatives.
*623 (c) Maintenance of Customer Records. Background and financial information of customers who have been approved for options transactions shall be maintained at both the branch office servicing the customer's account and the principal supervisory office having jurisdiction over that branch office. Copies of account statements of options customers shall be maintained at both the branch office supervising the accounts and the principal supervisory office having jurisdiction over that branch for the most recent six-month period. Other records necessary to the proper supervision of accounts shall be maintained at a place easily accessible both to the branch office servicing the customer's account and to the principal supervisory office having jurisdiction over that branch office.
Rule 9.9. Every member, Registered Options Principal or Registered Representative who recommends to a customer the purchase or sale (writing) of any option contract shall have reasonable grounds for believing that the recommendation is not unsuitable for such customer on the basis of the information furnished by such customer after reasonable inquiry as to his investment objectives, financial situation and needs, and any other information known by such member, Registered Options Principal or Registered Representative.
No member, Registered Options Principal or Registered Representative shall recommend to a customer an opening transaction in any option contract unless the person making the recommendation has a reasonable basis for believing at the time of making the recommendation that the customer has such knowledge and experience in financial matters that he may reasonably be expected to be capable of evaluating the risks of the recommended transaction, and is financially able to bear the risks of the recommended position in the option contract.
Rule 9.15. Every member organization shall deliver a current Prospectus to each customer at or prior to the time such customer's account is approved for options transactions. Thereafter, each new current Prospectus shall be distributed to every customer having an account approved for options transactions, or, in the alternative, shall be distributed not later than the time a confirmation of a transaction is delivered to each customer who enters into an options transaction. Where such customer is a broker or dealer, the member organization shall take reasonable steps to see to it that such broker or dealer is furnished reasonable quantities of current Prospectuses, as requested by him in order to enable him to comply with the requirements of Section 5 of the Securities Act of 1933. The term "current Prospectus" means that edition of the prospectus of the Clearing Corporation as registrant which, at the time it is to be furnished to a given customer, meets the requirements of Section 10(a)(3) of the Securities Act of 1933. (Note: The Exchange will advise members when a new prospectus meeting the requirements of Section 10(a)(3) is available.)
NOTES
[1] 15 U.S.C. § 78j(b) declares that:
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange
* * * * * *
(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
[2] Rule 10(b)5 provides that:
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.
[3] For relevant Chicago Board of Options Exchange Rules, see Appendix A, infra.
[4] See text following note 14, infra.
[5] See text accompanying note 11, infra.
[6] In its Reply Memorandum in Support of the Motion to Dismiss, Bache objects to three affidavits supplied by plaintiffs in their response to Bache's motion to dismiss. Extrinsic evidence may not be considered in resolving a motion to dismiss pursuant to Fed.R.Civ.Pro. 12(b)(6). Grand Opera Co. v. Twentieth Century Fox Film Corp., 235 F.2d 303, 307 (7th Cir.1956). We therefore base this decision solely on the pleadings.
[7] Count I of the complaint seeks punitive damages. Plaintiffs, however, in their response to Bache's motion to dismiss have consented to the striking of this prayer for relief. Punitive damages are not available under the Securities Act of 1933, nor the Securities Exchange Act of 1934. Burkhart v. Allson Realty Trust, 363 F.Supp. 1286, 1290 (N.D.Ill.1973).
Additionally, plaintiffs seek an award of attorneys' fees in Count I. A court's power to award attorney's fees in § 10(b) actions is sharply circumscribed and requires a showing of bad faith. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 210 n. 30, 96 S.Ct. 1375, 1389 n. 30, 47 L.Ed.2d 668 (1976). Plaintiffs' request for attorney's fees at this stage is therefore premature, and it will be stricken. In the event that Bache defends this case in bad faith, the Court will consider any motions for attorney's fees which plaintiffs present.
[8] Churning "occurs when a dealer, acting in his own interests and against those of his customer, induces transactions in the customer's account which are excessive in size and frequency in light of the character of the account." Note, Churning by Securities Dealers, 80 Harv.L.Rev. 869 (1967).
[9] The four factors are:
[F]irst, is the plaintiff "one of the class for whose especial benefit the statute was enacted"that is, does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the states, so that it would be inappropriate to infer a cause of action based solely on federal law. 422 U.S. 66, 78, 95 S.Ct. 2080, 2088, 45 L.Ed.2d 26 (1975) (citations omitted).
[10] Section 6b requires exchanges to adopt rules in order to register as national securities exchanges under the Act. Section 27 provides for an action to be brought "to enforce any liability or duty created by this chapter or rules and regulations thereunder." Jablon observed that the Supreme Court in Touche Ross held that § 27 is purely jurisdictional and creates no cause of action; turning to § 6b, the Jablon court argued that it does not confer rights on private parties nor proscribe any conduct as unlawful. While § 6 protects brokers' customers, the court added that this does not mean that a private damages action must be implied on the customer's behalf. In using this reasoning, Jablon relied upon the analysis the Supreme Court used in Touche Ross to reject a private right of action under § 17(a) of the Securities Exchange Act, 15 U.S.C. § 78q(a).
[11] Two judges of the Northern District of Illinois have also declared that violations of NYSE Rules do not create implied private rights of action under federal securities laws. Doporcyk v. Weber, et al., Fed.Sec.L.Rep. (CCH) ¶ 98,635 (N.D.Ill.1982); Baselski v. Paine, Webber, Jackson & Curtis, Inc., 514 F.Supp. 535 (N.D.Ill. 1981).
[12] In their complaint, plaintiffs allege that Bache violated § 220.4(e)(2) of 12 C.F.R. Section 220.4(e), which contains no subsection (2), provides that "in a special commodity account, a creditor may effect and carry for any customer transactions in commodities." Plaintiffs nevertheless assert the elements of a violation of § 220.4(c)(2) in Count IV, and this opinion will therefore discuss part (c)(2).
Regulation T was promulgated pursuant to section 7(c) of the Securities Exchange Act of 1934, 15 U.S.C. § 78g(c):
It shall be unlawful for any member of a national securities exchange or any broker or dealer, directly or indirectly, to extend or maintain credit or arrange for the extension or maintenance of credit to or for any customer(1) as any security (other than an exempted security) in contravention of the rules and regulations which the Board of Governors of the Federal Reserve System shall prescribe under subsections (2) and (b) of this section.
[13] 15 U.S.C. § 78g(f) provides that:
It is unlawful for any United States person ... to obtain, receive, or enjoy the beneficial use of a loan or other extension of credit from any lender ... if under this section or rules and regulations prescribed thereunder, the loan or other credit transaction is prohibited....
[14] Although a decision in the Northern District of Illinois found that a private cause of action existed under Regulation T, Neill v. David A. Noyes & Co., 416 F.Supp. 78, 80 (N.D.Ill.1976), a subsequent decision by the Court of Appeals for the Seventh Circuit, in which the court declared its doubts concerning the existence of a private cause of action to enforce Regulation U (Regulation U governs margin transactions by banks), suggests that a private cause of action for violations of Regulation T may not be recognized in this Circuit. Capos v. Mid-America National Bank of Chicago, 581 F.2d 676 (7th Cir.1978).
[15] Bache first argues that the failure to deliver a CBOE prospectus violated CBOE rules and not Section 5. Assuming that the failure to deliver the prospectus violated Section 5, Bache further argues that (1) it was exempt from the requirements of Section 5 pursuant to 15 U.S.C. § 77e, (2) no use of the mails or interstate commerce was alleged by plaintiffs and (3) the claim for recision under Section 29(b) is barred by the statute of limitations in 15 U.S.C. § 77m and § 78cc(b).
[16] In support of Count III plaintiffs cite Shearson Hayden Stone, Inc. v. Feldman, Fed.Sec.L. Rep. (CCH) ¶ 97,846 (N.Y.Sup.Ct.1982), in which the plaintiff failed to deliver a CBOE options prospectus to the defendant. The Court, in dismissing the plaintiff's cause of action, stated that
The plaintiff by failing to deliver or cause to deliver a prospectus to defendant prior to or after effecting the instant transaction violated Section 5(b)(2) of the Securities Act of 1933 (15 U.S.C. 77e(b)(2) and the contract is void pursuant to Section 29(b) of the Exchange Act (15 U.S.C.A. Sec. 77cc(b)).
In the instant case, plaintiffs' failure to properly plead violation of Section 5 in Count III renders unnecessary a decision on the issue of whether failing to deliver an options prospectus would violate federal securities laws.
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23 So.3d 712 (2009)
REDMON
v.
STATE.
No. SC09-1236.
Supreme Court of Florida.
November 19, 2009.
Decision Without Published Opinion Habeas Corpus dismissed.
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62 Mich. App. 240 (1975)
233 N.W.2d 246
PEOPLE
v.
CHARLES JOHNSON
Docket No. 19594.
Michigan Court of Appeals.
Decided June 23, 1975.
Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, Thomas Kizer, Jr., Prosecuting Attorney (Prosecuting Attorneys Appellate Service, Edward R. Wilson, Director, by Lee W. Atkinson, Special Assistant Attorney General), for the people.
Muller, Holmes, Muller & Smith, for defendant.
Before: DANHOF, P.J., and J.H. GILLIS and R.M. MAHER, JJ.
*242 DANHOF, P.J.
Defendant pled guilty to a charge of assault with intent to commit a felony, MCLA 750.87; MSA 28.282. He was sentenced to 5 to 10 years in prison, and he appeals raising one issue. We affirm.
On September 11, 1971, the defendant escaped from the Southern Michigan State Prison at Jackson where he was serving a sentence for a previous felony conviction. He proceeded to Livingston County in the company of a fellow escapee where they encountered a woman in a service station. They forced her at knife point to accompany them while they drove to Detroit in her car. During the ride, the young woman was able to drop a note from the car; the state police were alerted and the defendant and his associate were arrested.
On January 27, 1972, the defendant pled guilty to a charge of prison escape, MCLA 750.193; MSA 28.390, in Jackson County Circuit Court. He was sentenced to a term of from 1 to 5 years in prison. He was also charged with kidnapping, MCLA 750.349; MSA 28.581, and armed robbery, MCLA 750.529; MSA 28.797, in Livingston County. Some uncertainty concerning the proper forum in which to bring these charges was resolved by this Court in People v Riley, 45 Mich App 338; 206 NW2d 458 (1973).
Thereafter, on June 19, 1973, defendant was allowed to plead guilty in Livingston County Circuit Court to an added count of assault with intent to commit a felony. The kidnapping and armed robbery charges were dismissed. Defendant filed a motion to set aside the plea arguing for the first time that further prosecution following his prison escape conviction was barred by the double jeopardy provisions of the Federal and Michigan Constitutions, US Const, Am V; Const 1963, art 1, § 15.
*243 The double jeopardy assertion was not made before or at the plea-taking proceeding. The Michigan Supreme Court has held that a claim of double jeopardy is waived if not raised before or during trial. People v Powers, 272 Mich 303; 261 NW 543 (1935), People v McDonald, 306 Mich 65; 10 NW2d 309 (1943), cited in People v Cooper, 58 Mich App 284, 290; 227 NW2d 319 (1975). Additionally, it appears that the defendant offered to plead guilty at a time when all charges were pending, and that he therefore waived his right to a single trial. See People v Goans, 59 Mich App 294; 229 NW2d 422 (1975). Nevertheless, to avoid further uncertainty in the present case, we will evaluate the defendant's double jeopardy claim in light of the same transaction test.
The Michigan Supreme Court in People v White, 390 Mich 245; 212 NW2d 222 (1973), adopted the same transaction test as the required standard to be applied when examining a claim of double jeopardy. As seen by our Supreme Court, the same transaction test consists of two elements; it must appear that "the crimes were committed in a continuous time sequence", and they must "display a single intent and goal". People v White, supra, 390 Mich at 259.
In White, the defendant was convicted of kidnapping following a jury trial in Wayne County Circuit Court, and subsequently was convicted of rape and felonious assault in Detroit Recorder's Court. The Supreme Court held that the second trial was improper and reversed the rape and felonious assault convictions because the crimes "were all part of a single criminal transaction" and that they shared a common objective, "sexual intercourse with the complainant".
Decisions of this Court applying the White same *244 transaction test have also required the close, unified purpose relationship between the crimes, and have demanded that the defendant support his double jeopardy claim by demonstrating a direct factual connection, not mere temporal happenstance. For example, in People v Rolston, 51 Mich App 146; 214 NW2d 894 (1974), lv den, 392 Mich 762 (1974), a barmaid was kidnapped and robbed in Wayne County and taken to Washtenaw County where she was raped and murdered. Defendant was convicted of murder in Washtenaw County and later tried and convicted of kidnapping in Wayne County. On appeal, the kidnapping conviction was reversed in an opinion which acknowledged the then very recent Supreme Court decision in White, and which restated the standard as found in the opinion of this Court in People v White, 41 Mich App 370; 200 NW2d 326 (1972). "It was held in White that where a defendant has one objective and commits several crimes in preparing for and attaining that objective, only one prosecution may be brought."
Again, the closely related crimes of kidnapping and rape were considered in conjunction with the double jeopardy test in People v Joines, 55 Mich App 334; 222 NW2d 230 (1974). The defendant there had been acquitted on a charge of kidnapping in Genesee County. He was thereafter convicted of assault with intent to rape in Livingston County. The later conviction was reversed by this Court which concluded that as in White, both crimes were part of one criminal transaction, committed in a continuous time sequence and with the single intent and goal of sexual intercourse with the complainant.
Another group of cases in which application of the same transaction test required reversal of *245 subsequent convictions involved less serious offenses. The defendant in People v Davenport (On Remand), 51 Mich App 484; 215 NW2d 702 (1974), lv den, 392 Mich 761 (1974), offered resistance when an officer attempted to arrest him for being a disorderly person. He was acquitted on a disorderly person charge, but later he was tried and convicted of resisting arrest. This conviction was reversed upon application of the White rule:
"As in People v White, supra, the two crimes with which defendant was charged were committed, if committed at all, in a continuous time sequence and in pursuit of a single intent or goal. When a police officer stopped defendant for a traffic infraction, defendant allegedly refused to cooperate with him and directed obscene epithets at him, and then, when the officer attempted to arrest defendant because of those epithets, defendant refused to submit peacefully. The continuousness of the time sequence is obvious. The unity of intent is also readily apparent a refusal to submit to a police officer's authority." 51 Mich App at 486.
Quoting the statement of the standard from Davenport, this Court in People v West, 54 Mich App 527; 221 NW2d 179 (1974), ruled that a motion to quash a resisting arrest charge should have been granted where the defendant had entered a plea of nolo contendere to a charge of being a disorderly person. Even though this case involved a plea, the Court found that the presence of the dual elements of a continuous time sequence and the unity of intent brought the case within the White rule as applied in Davenport.
In contrast to the result reached in these decisions, the White double jeopardy test has been discussed in numerous other cases wherein the test was not satisfied. Following an acquittal on a charge of possession of heroin in Federal court, the *246 defendant in People v Martin, 53 Mich App 321; 220 NW2d 186 (1974), was tried and convicted on a similar charge in Detroit Recorder's Court. He appealed arguing that the second trial constituted a double jeopardy violation. This argument was rejected, and the conviction was affirmed. The Court stated:
"While this case is one requiring application of the same-transaction test, it is clear, nonetheless, that defendant could be tried and convicted in Detroit Recorder's Court. His trial in that court was predicated upon evidence and testimony obtained prior to his arrest, and subsequent acquittal, on Federal charges. The fact that both acts occurred the same day does not make the defendant's possession one long continuous transaction." 53 Mich App at 322, 323.
A sale of heroin was made to the same police agent by the defendant on two occasions in People v Martinez, 58 Mich App 693; 228 NW2d 523 (1975). Defendant was convicted following a trial of possession of heroin for the first sale, and he pled guilty to the same charge resulting from the second delivery. On appeal, he argued that the double jeopardy provision required that both sales be viewed as a single transaction. The Court declined to accept this argument:
"The deliveries of heroin in the instant case were made to the same agent during the course of a continuous undercover investigation. But these facts alone do not relate the events intimately enough so as to characterize them as being a part of a single transaction under the test adopted in People v White. Nine days separated the two sales in the instant case; the amounts involved were substantially different; and the record does not disclose any connection between them, such as an agreement after the first delivery to return for another sale.
*247 "We hold that the two deliveries therefore constituted separate transactions and that the defendant's plea-based conviction for the second delivery did not place him twice in jeopardy. People v White, supra." 58 Mich App at 695.
In People v Teague, 57 Mich App 347, 350; 225 NW2d 761 (1975), the defendant was convicted of breaking and entering with intent to commit a larceny after he had pled guilty to an unspecified, related misdemeanor. His double jeopardy contention, relying on People v White, supra, was answered on appeal to this Court by the observation that White was not intended to apply to those facts because the defendant had "been convicted of two criminal offenses arising out of separate criminal transactions".
Finally, without mention of its decision in White, the Supreme Court in People v Jackson, 391 Mich 323; 217 NW2d 22 (1974), applied the same transaction test to refute defendant's double jeopardy claim. During an attempt to rob a bar, the defendant stole a credit card from a vending machine attendant. He pled guilty to the offense of attempted unlawful possession of a credit card, and was later also convicted after a bench trial of assault with intent to rob being armed. While reversing the conviction on other grounds, the Supreme Court addressed itself to the defendant's double jeopardy argument. Pointing out in a footnote that the defendant "was arrested when he attempted to use the credit card to make a purchase three hours after the attempted robbery at the bar" the Court concluded:
"Although the attempted unlawful possession of a credit card charge grew out of the assault with intent to rob charge, in the sense that the credit card was taken *248 from the vending machine operator, the assault with intent to rob and the attempted possession of a credit card were separate transactions. The Double Jeopardy Clause does not license subsequent offenses growing out of a theft or excuse the theft upon trial for one or another offense." 391 Mich at 342.
An analysis of the factual circumstances surrounding the reported cases which have applied the White same transaction test establishes that the appellate courts of this state have required a very close connection between the crimes. The crimes must be so interrelated that they comprise an "essentially unitary criminal episode". At least one of the crimes must be of an ongoing nature such that all of the offenses are committed at the same time to achieve a single purpose.
In the present case, the first element of the White same transaction test, that the crimes "were committed in a continuous time sequence", may appear to be met because both offenses occurred on the same day. However, that fact alone does not make the offenses one long continuous transaction. People v Martin, supra. Furthermore, the crime of prison escape was completed at the time that the defendant did "leave said prison without being discharged". MCLA 750.193; MSA 28.390.
The second element, that the crimes "display a single intent and goal", is not satisfied. The defendant could not have assaulted the victim with the same intent and goal that he had when escaping prison. The prison escape was a completed act. The assault was an independent act intended to allow the defendant to elude capture. As such, while the assault was made possible by the escape, the assault was a separate transaction. To paraphrase the concluding remarks of the Supreme *249 Court in People v Jackson, supra, 391 Mich at 342, the double jeopardy clause does not license subsequent offenses growing out of a prison escape or excuse the escape upon trial of one or another offense.
Affirmed.
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404 F.Supp.2d 1232 (2005)
RESOURCE LENDERS, INC., a California corporation Plaintiff,
v.
SOURCE SOLUTIONS, INC., a Nevada corporation, Defendant.
No. 1:05CV0999OWWLJO.
United States District Court, E.D. California.
December 12, 2005.
*1233 *1234 *1235 *1236 Mark D. Miller, Kimble, MacMichael and Upton, Fresno, CA, for Plaintiff.
Sharon Jane Adams, Adams Law Office, Walnut Creek, CA, for Defendant.
MEMORANDUM DECISION AND ORDER RE PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION (Doc. 5)
WANGER, District Judge.
I. INTRODUCTION
Plaintiff RESOURCE LENDERS, INC. ("Plaintiff" or "RESOURCE LENDERS") moves for a preliminary injunction against Defendant SOURCE SOLUTIONS, INC. ("Defendant" or "SSI"), enjoining SSI from using the designations "RESource" or "R.E.Source" or "R.E.*Source" (where the * is a house or other logo), or the introductory word "resource" or any representation of the word "resource" as the introductory word in its business name or service mark, in any manner in connection with the distribution, advertisement, promotion, offer for sale and/or sale of any real estate or mortgage services, SSI opposes the motion.
II. PROCEDURAL HISTORY
This trademark infringement, unfair trade practices, and dilution action arises out of the complaint of Plaintiff, a real estate mortgage loan provider, that defendant SSI has infringed on Plaintiff's service marks, which are (1) "Resource Lenders" and (2) "Resource Lenders Your Resource For Real Estate Loans." SSI, a real estate sales and mortgage loan company, currently uses the mark "R.E.*Source Redefining Real Estate." (where the * is a logo of a house) and argues that its mark does not infringe on or dilute Plaintiff's mark. Plaintiff argues that SSI's use of the terms "RESource", "R.E.Source", and/or "R.E.*Source" as the introductory word in its mark does infringe and should be enjoined.
Plaintiff filed its complaint on August 3, 2005. (Doc. 1, Compl.) Plaintiff brings six claims against Defendant: (1) Infringement of Federally Registered Service Mark (15 U.S.C. § 1114(1)); (2) Infringement of Service Mark; (3) Trade Name Infringement (Cal. Bus. & Prof.Code § 14330); (4) Unfair Competition and False Designation of Origin (15 U.S.C. § 1125(a)); (5) Unfair Competition and Unfair Business Practices (Cal. Bus. & Prof.Code § 17000, et seq., and § 17200); and (6) Dilution (15 U.S.C. § 1125(c); Cal. Bus. & Prof.Code § 14330). Defendant answered the Complaint on September 6, 2005. (Doc. 18, Answer)
On August 10, 2005, Plaintiff filed a motion for preliminary injunction (Doc. 5, Pl.'s Mot.) and three supporting declarations (Docs. 7, 8, 10). On September 2, 2005, defendant filed opposition. (Doc. 17, Def.'s Opp.) On September 12, 2005, Plaintiff filed a reply (Doc. 20, Pl.'s Reply) and three supplemental declarations (Docs. 21-23). *1237 Oral argument was heard on September 19, 2005. Mark D. Miller, Esq., appeared on behalf of Plaintiff. Sharon Jane Adams, Esq., appeared on behalf of Defendant. Additional briefing was scheduled to allow Defendant to object to supplemental evidence submitted by Plaintiff and to allow Plaintiff to submit additional evidence of actual confusion. On September 27, 2005, defendant filed a brief in compliance with the briefing schedule titled "Memorandum of Points and Authorities in Support of Defendant's Response to New Evidence Submitted with Plaintiffs Reply." (Doc. 30, Def.'s Sur-Reply) On September 30, 2005, Plaintiff responded, filing a brief titled "Plaintiff's Supplemental Reply Memorandum of Points and Authorities in Support of Motion for Preliminary Injunction." (Doc. 33, Pl.'s Sur-Reply) Plaintiff also filed twelve supplemental declarations. (Docs. 34-45) Defendant replied on October 7, 2005. (Doc. 47, Def.'s Mem. in Opp.)
III. BACKGROUND
Plaintiff RESOURCE LENDERS is a real estate mortgage and loan services provider headquartered in Fresno, California, with offices in Bakersfield, Visalia, Porterville, Hanford, and San Luis Obispo. RESOURCE LENDERS alleges it has engaged in extensive advertising and promotion of its real estate mortgage and loan services under the name "Resource Lenders" for the past fifteen (15) years including radio and newspaper advertising, circulating flyers and brochures, and advertising signs, including those posted on the scoreboard at Grizzlies Stadium in Fresno, California. The parties do not dispute that RESOURCE LENDERS owns two marks: (1) "Resource Lenders" and (2) "Resource Lenders Your Source for Real Estate Loans," Defendant SSI opened in 2004. SSI represents buyers and sellers in real estate transactions and also provides real estate loans. (Wren Decl. ¶¶ 2, 3) SSI asserts that the majority of its business is real estate transactions and not making loans. (Id. at ¶ 4) The mark currently in use by SSI is "R.E.*Source Redefining Real Estate" (where the * is a logo of a house). SSI has also used the mark "RESource Real Estate Mortgage," although SSI asserts it no longer used this mark.
In or about January 2005, RESOURCE LENDERS discovered that Defendant SSI had adopted the business name and designation "RESource Real Estate Mortgage" and that SSI was using these names to promote real estate mortgage and loan services in the Fresno area. (Barnes Decl. ¶ 8)
RESOURCE LENDERS sent a first demand letter to SSI on January 28, 2005 to which SSI failed to respond. (Miller Decl. ¶ 2, Ex. A) RESOURCE LENDERS made a follow-up telephone call in March 2005, with no response. RESOURCE LENDERS sent a second letter with a draft unfiled complaint to SSI on March 22, 2005. SSI responded to this letter, and several weeks of discussions and negotiations between the parties regarding SSI's business name followed. The discussions did not result in any agreement or resolution. (Barnes Decl. ¶ 8)
In its opposition, Defendant asserts that settlement discussions broke down because Plaintiff refused to include a "notice and cure" provision in the proposed settlement agreement. Defendant asserts that it began using the designation "R.E.*Source Redefining Real Estate" in response to Plaintiff's complaints and "with the approval of Plaintiff's counsel." (Doc. 17, Def.'s Opp. 2-3; Adams Decl. Ex. A) Defendant denies continuing to use the mark "RESource Real Estate Mortgage," and asserts that current appearances of this mark are merely infrequent and mistaken uses that have not yet been addressed in *1238 its transitioning process. (Doc. 17, Def.'s Opp. 2-3) Defendant argues it has taken steps to implement its name change, including ordering new business cards, signs, and filing a new fictitious business statement with the City of Fresno. (Id.; Doc. 17, T. Wren Decl., ¶ 5, Ex. A) However, Plaintiff notes that the mark "RESource Real Estate Mortgage" has appeared in the October 2005 issue of Guide to Better Homes. (Doc. 34, 09/30/05 Miller Decl. Ex. A) This advertisement lists two real estate agents at the top of the page and lists seven mortgage consultants and/or mortgage consultant/real estate agents at the bottom of the page. An almost identical advertisement appeared in the September 2005 issue of the Guide, which Plaintiff attached to its initial moving papers. (Doc. 23, 09/12/05 Miller Decl. Ex. F) Defendant states that it wants all of its agents to use its new mark, and attributes the appearance of this advertisement in the October 2005 issue to "confusion among Defendant's over 250 employees and contractors."
Despite defendant's changing its name to "RESource Redefining Real Estate", however, RESOURCE LENDERS argues that defendant's use of the mark "RESource" is nevertheless an infringing use because the term "RESource" is prominently displayed on the new mark, just as it was on the old mark.
RESOURCE LENDERS alleges that SSI uses the infringing marks in the following ways; (1) portable street signs (MacArthur Decl., Ex. H); (2) SSI maintains fictitious business name statements for "RESOURCE" and "RE-SOURCE" (Miller Decl. ¶ 8, Ex. E); (3) SSI has a mortgage broker's license listing its DBA's as "RESOURCE" and "RE-SOURCE" (Id. at ¶ 9, Ex. F); (4) SSI displays the mark on websites, including http://www.resource recruit.com; http://www.resource corporate.com; and http://www.resource ontheweb.com (Id. at Exs. H, I).
IV. LEGAL STANDARD
Certain prerequisites must be satisfied prior to issuance of a preliminary injunction. Under the so-called "traditional" standard, an injunction may issue if the court determines that (1) the moving party will suffer irreparable injury if the relief is denied; (2) there is a strong likelihood that the moving party will prevail on the merits at trial; (3) the balance of potential harm favors the moving party; and (4) the public interest favors granting relief. Under the "alternative" standard, an injunction properly issues when a party demonstrates either: (1) a combination of probable success on the merits and the possibility of irreparable injury if relief is not granted; or (2) the existence of serious questions going to the merits combined with a balancing of hardships tipping sharply in favor of the moving party. The requirement for showing a likelihood of irreparable harm increases or decreases in inverse correlation to the probability of success on the merits, with these factors representing two points on a sliding scale. Earth Island Institute v. United States Forest Service, 351 F.3d 1291, 1310 (9th Cir.2003).
The bases for injunctive relief (preliminary or permanent) in the federal courts have always been irreparable injury and the inadequacy of legal remedies. Weinberger v. Romero-Barcelo, 456 U.S. 305, 312, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982); High Sierra Hikers Ass'n v. Blackwell, 390 F.3d 630, 641-42 (9th Cir. 2004); Ford v. Reynolds, 316 F.3d 351, 355 (2nd Cir.2003). Under either the traditional or the reformed approach, to obtain a preliminary injunction, the Plaintiff must show that it is "likely" to prevail on the merits. Southern Oregon Barter Fair v. Jackson County, Oregon, 372 F.3d 1128, *1239 1136 (9th Cir.2004). As part of its balancing of factors, the court weighs the competing claims of injury and considers the effect on each party of the granting or withholding of the requested relief. Amoco Prod. Co. v. Village of Gambell, Alaska, 480 U.S. 531, 107 S.Ct. 1396, 94 L.Ed.2d 542 (1987); Clear Channel Outdoor, Inc. v. City of Los Angeles, 340, F.3d 810, 813 (9th Cir.2003).
In determining whether a preliminary injunction is warranted, the Court may consider otherwise inadmissible evidence, such as hearsay. See Flynt Distrib. Co., Inc. v. Harvey, 734, F.2d 1389, 1394 (9th Cir.1984) ("The urgency of obtaining a preliminary injunction necessitates a prompt determination and makes it difficult to obtain affidavits from persons who would be competent to testify at trial. The trial court may give even inadmissible evidence some weight, when to do so serves the purpose of preventing irreparable harm before trial."); Republic of the Philippines v. Marcos, 862 F.2d 1355, 1364 (9th Cir.1988); Rosen Entm't Systems, LP v. Eiger Vision, 343 F.Supp.2d 908, 912 (C.D.Cal.2004); Glow Indus., Inc. v. Lopez, 252 F.Supp.2d 962, 966 n. 1 (C.D.Cal. 2002).
V. ANALYSIS
A. Likelihood of Success on the Merits.
1. Counts I & II: Infringement of Federally Registered Service Mark (15 U.S.C. § 1114(1)) and Common Law Infringement of Service Mark.
Plaintiff's first and second claims for relief are service mark infringement in violation of Title 15, Section 1114(1), of the United States Code, and of common law service mark infringement. Plaintiff has a federally-registered service mark, "Resource Lenders Your Source for Real Estate Loans" and a common law trademark, "Resource Lenders."
Two elements are analyzed to show service mark infringement under either the federal or common law: (1) existence of a protectable service mark and (2) likelihood of confusion. Surfvivor Media, Inc. v. Survivor Productions, 406 F.3d 625, 630 (9th Cir.2005) (citing KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111, 125 S.Ct. 542, 548, 160 L.Ed.2d 440 (2004)). The first element is not disputed by the parties. Defendant does not contest Plaintiff's federally-registered service mark "Resource Lenders Your Source for Real Estate Loans" or that it has a common law trademark in the term "Resource Lenders."
Defendant argues that there is nevertheless no infringement because there is no likelihood of confusion. Courts in the Ninth Circuit apply an eight-factor test to determine whether a likelihood of confusion exists: (1) similarity of the marks; (2) relatedness of the goods or services; (3) common marketing channels; (4) strength of the mark; (5) evidence of actual confusion; (6) type of services and the degree of care likely to be exercised by the purchaser; (7) defendant's intent in selecting the mark; and (8) likelihood of expansion of the product lines. M2 Software, Inc. v. Madacy Entertainment, 421 F.3d 1073, 1080 (9th Cir.2005). The federal likelihood-of-confusion analysis applies to claims under California law. Mallard Creek Indus., Inc. v. Morgan, 56 Cal. App.4th 426, 434-35, 65 Cal.Rptr.2d 461 (1997) (citing Golden Door, Inc. v. Odisho, 646 F.2d 347, 349 (9th Cir.1980)).
These factors are not "rigidly" weighed. Dreamwerks Prod. Group v. SKG Studio, 142 F.3d 1127, 1129 (9th Cir. 1998). The court need not establish that each factor weighs in favor of the Plaintiff to establish a likelihood of confusion. "Some factors are much more helpful than others, and the relative importance of each individual factor will be case specific. . . . *1240 [I]t is often possible to reach a conclusion with respect to likelihood of confusion after considering only a subset of the factors." Thane Int'l, Inc. v. Trek Bicycle Corp., 305 F.3d 894, 901 (9th Cir.2002) (citing Brookfield Communications, 174 F.3d at 1054). The most important factors are the similarity of the marks, the relatedness of the services, and the use of a common marketing channel. CSC Brands LP v. Herdez Corp., 191 F.Supp.2d 1145, 1149 (E.D.Cal. 2001) (citing GoTo.com, 202 F.3d at 1205; Dreamwerks Production, 142 F.3d at 1130).
(a) Similarity of the Marks.
In analyzing the similarity of the marks, they must be considered in their entirety and as they appear in the market-place. M2 Software, 421 F.3d 1073, 1082 (9th Cir.2005) ("the trademark is not judged by an examination of its parts, but rather `the validity and distinctiveness of a composite trademark is determined by viewing the trademark as a whole, as it appears in the marketplace.'") (quoting Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1392 (9th Cir.1993)). Similarity is adjudged in terms of appearance, sound, and meaning. CSC Brands, 191 F.Supp.2d at 1149 (citing GoTo.com, 202 F.3d at 1206); M2 Software, 421 F.3d at 1082. Similarities are weighed more heavily than differences. CSC Brands, 191 F.Supp.2d at 1149.
The issue is whether Defendant's marks "RESource Real Estate Mortgage" and "R.E.*Source Redefining Real Estate" are similar to Plaintiff's marks "Resource Lenders" and "Resource Lenders Your Resource for Real Estate Loans,"[1] Plaintiff argues the marks are similar because of parallels in the appearance, sound, and meaning of the terms, Defendant disputes this contention.
First, the appearance of the terms is similar in that they all use the term "resource." Also, the term "resource" is prominent on both. The letter "R" appears in large, bold lettering on both logos. The term "resource" is the focal point of each mark, due to both its bold lettering and the fact that it is the introductory word of each term. However, the letters "E" and "S" also appear in large, bold lettering on SSI's logo, whereas "R" is the only letter of Plaintiffs logo that appears in large, bold font. Another difference is that Plaintiff's logo has a stylized stack of coins that overlap the stem of the "R", whereas defendant's logo contains a house (represented by a *) that separates the term resource (i.e., "R.E.*Source").
The second and third inquiries are whether the marks are similar in sound and meaning. When pronounced aloud, defendant's mark "RESource Real Estate Mortgage" does not sound similar to "Reresponsible *1241 source Lenders" or "Resource Lenders Your Source for Real Estate Loans." However, these phrases do have a similar meaning, in that both refer to resource in the context of real estate loans or mortgages. By contrast, defendant's mark "R.E.*Source Redefining Real Estate" does not contain either the word "mortgage" or the word "loan" and is even less similar in sound and meaning to Plaintiff's marks.[2]
Defendant cites case law holding that marks that bear some resemblance to each other were nevertheless found to be dissimilar. See, e.g., Official Airline Guides, 6 F.3d at 1393 (holding district court did not err in finding mark "OAG TRAVEL PLANNER" was not similar in sound and meaning to "THE TRAVEL PLANNER USA" or "USA TRAVEL PLANNER", but that it was similar in sound and meaning to "THE TRAVEL PLANNER"); Entrepreneur Media, Inc. v. Smith, 279 F.3d 1135, 1145-46 (9th Cir.2002) (holding that a reasonable juror could find the marks "Entrepreneur PR" and "Entrepreneur" to be dissimilar in sound and meaning, although the terms appear similar at first glance); Miss World Ltd. v. Mrs. America Pageants, Inc., 856 F.2d 1445, 1449 (9th Cir.1988) (holding that, despite some similarities in appearance, sound, and meaning, marks "Mrs. of the World" and "Miss World" were dissimilar), abrogated in part on other grounds, Eclipse Assoc. Ltd. v. Data Gen. Corp., 894 F.2d 1114, 1116 n. 1 (9th Cir.1990) (noting that the court in Miss World "misstated the standard of review" for a district court's finding of likelihood of confusion); but See Surfvivor, 406 F.2d at 633 (holding that similarity factor did not favor either party where disputed marks were "Surfvivor" and "Survivor"); M2 Software, Inc. v. Madacy, 421 F.3d 1073, 1083 (9th Cir.2005) (holding that similarity factor only slightly favored Plaintiff where marks were "M2 Entertainment" and "M2").
However, the law is that similarities of marks are weighed more heavily than their differences. CSC Brands, 191 F.Supp.2d at 1149; GoTo.com, 202 F.3d at 1206; Rodeo Collection, 812 F.2d at 1219.
The strongest similarity between the marks is the prominence and sound of the term "resource," in relation to home loans. This similarity harms Plaintiff. The RESource term has differences in visual appearance, sound, and meaning that favor Defendant as to this term.
(b) Relatedness of the Services Provided.
The next factor is the extent to which the services provided by the parties are related. "Where the [services] are related or complementary, the danger of confusion is heightened." M2 Software, 421 F.3d at 1082. "The parties' [services] need not be identical or directly competitive . . . for there to be a likelihood of confusion. They need only be related in some manner, or the conditions surrounding their marketing be such that they could be encountered by the same purchaser under circumstances that could give rise to the mistaken belief that the goods come from a common source." Moose Creek, Inc. v. Abercrombie & Fitch Co., 331 F.Supp.2d 1214, 1226 (C.D.Cal. 2004).
*1242 Plaintiff's sole business is providing real estate loans. Defendant's primary business is real estate sales, but it also provides real estate loans. The parties' customer base is the same. While the parties' businesses are similar, they are not identical, as Plaintiff contends. Both parties provide real estate mortgages and serve the same customer base. This factor weighs in favor of a finding of likelihood of confusion.
(c) Use of Common Marketing Channel.
"Convergent marketing channels increase the likelihood of confusion." M2 Software, 421 F.3d at 1083 (quoting Nutri/System, Inc. v. Con-Stan Indus., Inc., 809 F.2d 601, 606 (9th Cir. 1987)). Plaintiff argues that it uses the same primary marketing channel as Defendant, i.e., the print media. (Doc. 20, Pl.'s Reply 7) Plaintiff attaches one of Defendant's advertisements in a local magazine, Guide to Better Homes. (Doc. 34, Miller Supp. Decl., Ex. F) Plaintiff does not have an advertisement in this magazine, but does advertise in what it characterizes as "competing publications," including The Real Estate Book magazine, Real Estate Showcase, and The Fresno Bee. (Doc. 34, Miller Supp. Decl. Exs. G-I)
Plaintiff also uses the internet to advertise. Defendant concedes it owns web-sites, but denies that it uses the web-sites to advertise. (Doc. 17, Def.'s Mem. 9) Instead, Defendant uses the websites to recruit and hire employees. (Id. (citing Wren Decl. ¶ 13)) Defendant also contends that customers cannot find its website through search engines, and can only find the website by previously knowing the URL and typing it into an Internet web browser. However, Plaintiff asserts that Defendant's business cards direct users to the defendant's website. (Doc. 20, Pl.'s Reply 7).
Based upon the parties' submissions, the primary channel of marketing is the print media. This factor weighs in favor of a finding of likelihood of confusion.
(d) Strength of the Mark.
In the Ninth Circuit, the strength of a mark is measured depending upon how distinctive the mark is. Surfvivor Media, 406 F.3d at 631; M2 Software, 421 F.3d at 1080. The more descriptive the mark, the weaker it is. Id. Marks are classified as generic, descriptive, suggestive. or arbitrary. Id. An arbitrary or fanciful mark is the most distinctive. Id. If a mark is more descriptive, then the moving party must establish that a greater degree of secondary meaning has attached to the mark as the result of commercial success. M2 Software, 421 F.3d at 1081 ("Our court has previously recognized that a suggestive or descriptive mark, which is conceptually weak, can have its overall strength as a mark bolstered by its commercial success.") (citing cases).
Plaintiff argues that its marks are arbitrary and that they are entitled to the highest degree of protection. In the alternative, Plaintiff argues that this factor weighs in its favor because its marks have acquired secondary meaning within its market.
Here, Plaintiffs' mark "Resource Lenders" is suggestive. Although it does not necessarily evoke the meaning, real estate loans, the term "lenders" does evoke loans. Plaintiff's mark "Resource Lenders Your Source for Real Estate Loans" is descriptive, since it describes the services offered by Plaintiff's company. Plaintiff's marks are relatively weak. Plaintiff must establish some secondary meaning in order for this factor to weigh in its favor.[3]
*1243 Secondary meaning is "the mental association by a substantial segment of consumers and potential consumers between the alleged mark and a single source of the product [or service]." Levi Strauss & Co. v. Blue Bell, Inc., 778 F.2d 1352, 1354 (9th Cir.1985). In determining whether secondary meaning has attached, the following factors are considered: "(1) whether actual purchasers of the product [or service] bearing the claimed trademark associate the trademark with the producer [or service provider], (2) the degree and manner of advertising under the claimed trademark, (3) the length and manner of use of the claimed trademark, and (4) whether use of the claimed trademark has been exclusive." Yellow Cab Co. of Sacramento v. Yellow Cab of Elk Grove, Inc., 419 F.3d 925, 930 (9th Cir.2005) (quoting Levi Strauss, 778 F.2d at 1354).
Plaintiff has submitted evidence regarding all four of these factors to support its contention that its marks have acquired secondary meaning in its market, the Central Valley of California. First, Plaintiff has submitted evidence that its mark is associated with its company, specifically nine declarations of various real estate agents, employees of title companies, apprraisers. and customers who work or live in the Central Valley.[4] (Docs. 36-45) These individuals all testify in their declarations that "[w]henever anyone makes reference to "Resource' or `Resource Lenders' I immediately think of [Plaintiff's] business." In addition to these declarations, Plaintiff has also submitted evidence of a survey conducted by Media Specialists, a marketing survey company. (Doc. 35, Walker Decl.) Four hundred three (403) respondents were telephoned from Friday, September 23, 2005. through Monday, September 26, 2005. (Id. at ¶ 3) Of the respondents who had obtained a home loan in the last 5 years, 40.21% were familiar with RESOURCE LENDERS. The recognition score of a competitor (Royal Charter) among the same group was 14.43%. (Id. at ¶ 9) Of all the respondents, 23.57% recognized RESOURCE LENDERS' name. (Id. at ¶ 6)
Defendant objects that the declarants' association of the word "resource" with Plaintiff's business is irrelevant. Defendant argues that "the only issue before the [c]ourt is whether Defendant's mark is confusingly similar in sight, sound, and meaning to the marks Plaintiff has actually used in commerce: `Resource Lenders' *1244 and `Resource Lenders Your Resource For Real Estate Loans.'" Defendant does not otherwise object to the affidavits. Defendant's objection is misplaced as a confusion survey or secondary meaning (identification) is a classic method of proving public identification of a claimant with the contested trade name.
Second and third, Plaintiff has submitted the declaration of the president of RESOURCE LENDERS regarding the amount of advertising using the mark and the length of time Plaintiff has used the mark in advertising. (Doc. 8, Barnes Decl. ¶ 7) Specifically, RESOURCE LENDERS has engaged in advertising and promotion of its services under the name "Resource Lenders" for the past 15 years, including ads in newspapers, on the radio, and on signs, including the scoreboard at Grizzlies Stadium in Fresno. Additionally, the advertising expenditures for RESOURCE LENDERS over the past three years have averaged just over $100,000 per year. Fourth and finally, there is no evidence that any other real estate mortgage company has used a mark beginning with the term "resource" in the Central Valley of California.
Plaintiff has submitted sufficient evidence to show a likelihood of success in establishing that its mark, RESOURCE LENDERS, has acquired secondary meaning in its market, the Central Valley of California. This factor weighs in favor of Plaintiff.
(e) Evidence of Actual Confusion.
Plaintiff provides two examples of actual confusion in its reply. One was a phone call to RESOURCE LENDERS from a man who wanted to speak to a specific real estate agent. RESOURCE LENDERS' clerk informed the caller that RESOURCE LENDERS did not have any real estate agents only loan officers. The caller then said, "Aren't you Resource?" The caller then asked whether the office he called was still located near Shaw Avenue and Sixth Street, in Fresno. (Olander Decl. ¶ 2) The other example Plaintiffs provide is another phone call from a woman who asked whether the office was located on Shaw Avenue near the Old Spaghetti Factory. Defendant's former office was located on Sixth Street near Shaw.[5]
Plaintiff correctly notes that evidence of actual confusion is not determinative in actions seeking injunctions for service mark infringement such as this one. Rodeo Collection, Ltd. v. West Seventh, 812 F.2d 1215, 1219 (9th Cir.1987); see also Cohn v. Petsmart, Inc., 281 F.3d 837, 842 (9th Cir.2002) ("Because evidence of actual confusion can be difficult to obtain, its absence is `generally unnoteworthy' and is given little probative weight." (quoting Brookfield Communications, 174 F.3d at 1050)).
However, evidence of actual confusion is a useful factor and is not entirely disregarded by courts in their analyses. Surfvivor Media, 406 F.3d at 633 (scant evidence of actual confusion weighted against Plaintiff seeking to establish likelihood of confusion); Glow Indus. Inc. v. Lopez, 273 F.Supp.2d 1095, 1124-25 (C.D.Cal.2003) (noting that while evidence of actual confusion is not necessary to prevail on an infringement claim, lack of any such evidence weighed against finding of likelihood of confusion).
Defendant argues that the phone calls are not evidence of actual confusion because the callers were looking for defendant's businesses and not for Plaintiff's business. As Plaintiff argues, however, *1245 confusion is confusion, and that it is irrelevant that the callers were looking for defendant's business. That the callers mistakenly placed a call to the business they were not in fact looking for is evidence of actual confusion.
The two phone calls are the only evidence of actual confusion that Plaintiff submitted. This factor weighs only slightly in favor of a finding of likelihood of confusion.
(f) Type of Service Provided & Degree of Care Exercised by Consumers.
The service provided by Plaintiff is arranging real estate loans. The services provided by Defendant are conducting real estate sales and providing real estate loans. In evaluating the type of service provided, an important factor is the degree of care likely to be exercised by an individual seeking a real estate loan in choosing a loan provider. In analyzing this issue, courts ask what is expected of a reasonably prudent consumer, who:
is more discerning and less easily confused when he is purchasing expensive items, see, e.g., Official Airline Guides, 6 F.3d at 1393 (noting that confusion was unlikely among advertisers when the products in question cost from $2,400 to $16,000), and when the products being sold are marketed primarily to expert buyers, see, e.g., Accuride Int'l, Inc. v. Accuride Corp., 871 F.2d 1531, 1537 (9th Cir.1989). . . . On the other hand, when dealing with inexpensive products, customers are likely to exercise less care, thus making confusion more likely. See, e.g., Gallo, 967 F.2d at 1293 (wine and cheese).
Brookfield Communications, 174 F.3d at 1060.
Most real estate loans involve a large investment, causing a reasonably prudent consumer to be more discerning in choosing a mortgage loan provider, making confusion is less likely. See id.; see also Franklin First, 356 F.Supp.2d at 1052 (relying on party's declaration that "Mortgage loans often exceed $100,000; for many people, a home-mortgage loan is the single most important expenditure of their lives.")
Plaintiff argues that mortgage loan seekers are not likely to do more than internet and phone shopping before choosing a mortgage loan provider and that this factor therefore tips in favor of a finding of likelihood of confusion. Plaintiff notes that a verbal referral to Plaintiff as "resource" could result in a call to defendant. Defendant argues first that it does not use keywords for its websites, so a customer could not find its business in an Internet search. Plaintiff's arguments based on the Internet are therefore not persuasive. Second, defendant argues the names of defendant and Plaintiff's companies are not found near each other in the phone book, where defendant is listed under "R.E." and Plaintiff is listed under "Resource."
Plaintiff provides no evidence regarding how customers go about choosing a mortgage loan provider. Although the court in Franklin First found that the degree of customer care was high, it relied on evidence submitted by the parties. Here, there is no such evidence. Plaintiff has produced evidence that its mark has secondary meaning and its recognized by customers and potential customers in the Central Valley of California, which is circumstantial evidence supporting Plaintiff's argument that a verbal reference to "Resource" will result in a call to defendant. This factor slightly favors a finding of likelihood of confusion.
(g) Defendant's Intent in Selecting the Mark.
"It is settled that `[a] party claiming trademark infringement need not *1246 demonstrate that the alleged infringer intended to deceive consumers'" M2 Software, 421 F.3d at 1085 (quoting E. & J. Gallo, 967 F.2d at 1293). However, "[w]hen the alleged infringer knowingly adopts a mark similar to another's, [it is] presume[d] that the public will be deceived." Id. (citing Sleekcraft, 599 F.2d at 354); see also Interstellar Starship Svcs., Ltd. v. Epix Inc., 184 F.3d 1107, 1111 (9th Cir.1999) ("Adopting a designation with knowledge of its trademark status permits a presumption of intent to deceive."). The intent factor is relevant to the extent it bears upon the likelihood that consumers will be confused. Brookfield Communications, 174 F.3d at 1059. If there is little or no likelihood of confusion, then the intent cannot be inferred. Id.
Plaintiff argues, without citing any evidence or legal authority, that Defendant's intent to confuse or infringe in choosing a mark with the term, "resource" can be inferred based on speculations that a call to directory assistance seeking a real estate loan company named "Resource" might mistakenly be directed to Defendant instead of Plaintiff. Plaintiff also argues that a word-of-mouth referral to a real estate loan provider named "Resource" could similarly misdirect a customer to Defendant instead of Plaintiff.
Defendant denies that it knew about Plaintiff's mark before it chose its name. (Doc. 17, Def.'s Opp. 10) Defendant's company is named Source Solutions, and Defendant asserts that it initially chose the name RESource Real Estate Mortgage to represent it as the "Source for. Real Estate Homes and Loans." (Doc. 17, J.C. Wren Decl. ¶ 2; T. Wren Decl. ¶ 4) Plaintiff argues that Defendant's use of the name "Resource" is nevertheless "suspect," basing its argument on the declaration of Tara Wren, an officer of SSI, who stated that when she filed SSI's original fictitious business statement and a statement with the California Department of Real Estate, she understood that SSI was not allowed to have a d/b/a that was the same as another company's. Ms. When filed SSI's d/b/as as "Re-Source" and "Resource."
Plaintiff has not provided evidence that defendant knew of its existence before Defendant adopted its name. This factor does not weigh in Plaintiff's favor.
(h) Likelihood of Expansion of the Product Lines.
For the likelihood of expansion factor to weigh in favor of the service mark holder, it must show that the "existence of the allegedly infringing mark is hindering the Plaintiff's expansion plans." Surfvivor Media, 406 F.3d at 634. This factor weighs in favor of the service mark holder if there is a "strong possibility of expansion into competing markets." M2 Software, 421 F.3d at 1085 (quoting E. & J. Gallo, 967 F.2d at 1293) (emphasis added). However, where the parties compete closely, both geographically and in the same services offered, the likelihood of expansion "is relatively unimportant." Petsmart, 281 F.3d at 843 (citing Brookfield Communications, 174 F.3d at 1060).
Plaintiff argues that both its business and defendant's business are growing. Plaintiff states that, since its business opened 15 years ago, it has expanded beyond Fresno to Bakersfield, Visalia, Porterville, Hanford, and San Luis Obispo. Plaintiff also notes that one of SSI's officers stated his declaration that its business is "rapidly growing" and that it has a website set up for recruiting. (Doc. 17, J.C. Wren ¶ 13)
Plaintiff's self-identified market is the Central Valley of California. Plaintiff offers no evidence that there is a strong possibility of expansion to markets outside the Central Valley. This factor does not weigh in favor of Plaintiff.
*1247 (i) Conclusion.
Plaintiff's evidence establishes that likelihood of confusion exists between Defendant's use of the terms RESource or R.E.*Source in connection with the real estate lending business. The term "R.E.*Source Redefining Real Estate," is less similar to Plaintiff's marks, but "Resource Lenders" and "Resource Lenders Your Resource For Real Estate Loans" are deserving of protection by way of injunctive relief.
2. Trade Name Infringement (Cal. Bus. & Prof.Code § 14330).
"Trademarks (i.e., symbols used to identify and distinguish goods or services) and trade names (i.e., symbols used to distinguish companies, partnerships and businesses) are technically distinct; the major legal distinction between the two is that `trade names cannot be registered and are therefore not protected under 15 U.S.C. § 1114.'" First Franklin, 356 F.Supp.2d at 1050 (quoting Accuride Int'l, Inc. v. Accuride Corp., 871 F.2d 1531, 1534-35 (9th Cir.1989)). Under California law, there is a rebuttable presumption that, upon filing articles of incorporation, the corporation has the "exclusive right to use the name set forth in the articles or certificate as well as any confusingly similar name." Mallard Creek Indus., Inc. v. Morgan, 56 Cal.App.4th 426, 433, 65 Cal.Rptr.2d 461 (1997); Kelley Blue Book v. Car-Smarts, Inc., 802 F.Supp. 278, 289 (C.D.Cal.1992) (citing American Petrofina, Inc. v. Petrofina of California, Inc., 596 F.2d 896 (9th Cir. 1979)).
Plaintiff's name, as set forth in the articles of incorporation, which Plaintiff filed with the California Secretary of State in 1990, is "Resource Lenders." Plaintiff does not allege that Defendant is using this name. The use of the term "Resource" for Defendant's real estate loan business is confusing. Plaintiff has established a likelihood of success on its trade name infringement claim.
3. Dilution (15 U.S.C. § 1125(c); Cal. Bus. & Prof.Code § 14330).
Injunctive relief is available under the Federal Trademark Dilution Act if a Plaintiff can establish that (1) its mark is famous; (2) the defendant is making commercial use of the mark in commerce; (3) the defendant's use began after the Plaintiff's mark became famous; and (4) there is actual harm to the trademark holder. Nissan Motor Co. v. Nissan Computer Corp., 378 F.3d 1002, 1010 (9th Cir. 2004). In addition, the Plaintiff must initially show that the defendant's mark is identical or nearly identical. Id. at 1011; Thane Int'l, Inc. v. Trek Bicycle Corp., 305 F.3d 894 (9th Cir.2002). The analysis for California state law dilution is the same as that for a federal dilution claim. Panavision Int'l L.P. v. Toeppen, 141 F.3d 1316, 1324 (9th Cir.1998). Likelihood of confusion is not an element of dilution. Nissan Motor, 378 F.3d at 1011 ("Dilution is `the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of (1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake or deception.'") (quoting 15 U.S.C. § 1127); Thane, 305 F.3d at 904.
Defendant argues that Plaintiff is not entitled to injunctive relief because Plaintiff cannot establish a likelihood of success on its dilution claim. Specifically, defendant argues that defendant's mark is not identical to Plaintiff's, that Plaintiff's mark is not famous, and that Plaintiff cannot show actual dilution of its mark.
First, Plaintiff argues that its marks "Resource Lenders Your Source for Real Estate Loans" and "Resource Lenders" *1248 are identical to Defendant's marks using the term "resource," including "R.E.Source," "R.E.Source Redefining Real Estate," and "R.E.*Source." In the Ninth Circuit, courts use the "identical or nearly identical" standard. Thane, 305 F.3d at 907. Under this standard, marks are considered "identical" in a dilution analysis where they are "similar enough that a significant segment of the target group of customers sees the two marks as essentially the same." Thane, 305 F.3d at 906 (internal quotations and citations omitted). In Thane, the court found that a reasonable fact-finder could conclude TREK and OrbiTREK marks are nearly identical. Id. at 907.
Although both the Plaintiff's marks and the Defendant's mark feature the word "resource" prominently, the word is presented differently in the respective marks, and is succeeded by different words. The marks are not identical or nearly identical.
Second, Plaintiff argues that its mark is famous within a niche market as defined by the Ninth Circuit in Thane. Thane, 305 F.3d at 908 ("[M]arks famous in only a limited geographic area or a specialized market segment can be found `famous' for the purposes of the federal anti-dilution statute.") (quoting Avery Dennison, 189 F.3d at 877). Niche fame protection is limited to the extent that the alleged diluter uses the mark within the niche. Id. There is no dispute that Defendant uses the allegedly infringing marks within the niche market of the Fresno and Central Valley area. Defendant does dispute that Plaintiff's mark is famous, and argues that Plaintiff has also failed to establish a likelihood of success on its dilution claim for this reason.
The federal anti-dilution statute provides eight factors for courts to consider in determining whether a mark is famous:
(A) the degree of inherent or acquired distinctiveness of the mark;
(B) the duration and extent of use of the mark in connection with the goods or services with which the mark is used;
(C) the duration and extent of advertising and publicity of the mark;
(D) the geographical extent of the trading area in which the mark is used;
(E) the channels of trade for the goods or services with which the mark is used;
(F) the degree of recognition of the mark in the trading areas and channels of trade used by the marks' owner and the person against whom the injunction is sought;
(G) the nature and extent of use of the same or similar marks by third parties; and
(H) whether the mark was registered under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register.
15 U.S.C. § 1125(c)(1). Plaintiff argues that its marks are famous under these factors because it used them in advertising for the past fifteen years in the Fresno and Central Valley area. Plaintiff argues that its marks have acquired and inherent distinctiveness. Defendant disputes Plaintiff's contentions, and argues that Plaintiffs marks are neither distinctive nor famous because many other real estate businesses in the Central Valley use the term "resource" in their names.
Dilution usually protects marks such as "KODAK." "Buick," and "Coda-Cola" that are well-known to the general public to the point of being "household names." See Thane, 305 F.3d at 906; Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 875 (9th Cir.1999) ("Dilution is a cause of action invented and reserved for a select class of marks those marks with such powerful consumer associations that even non-competing *1249 uses can impinge on their value."). The only evidence Plaintiff has submitted of the famousness of its mark is the limited survey evidence, which showed that about 40% of a sample of persons in the Central Valley home loan market were familiar with Resource Lenders. Even if Central Valley home loan purchasers meet the requirements of a niche market as defined in Thane, recognition by 40% of a niche market is not sufficient to establish the degree of famousness and recognition required for a dilution claim. Avery Dennision, 189 F.3d at 875 ("to meet the `famousness' element of protection under the dilution statutes, a mark must be truly prominent and renowned." (internal quotation and citation omitted.)). Although Plaintiff has submitted some evidence in support of a few of the famousness elements, Plaintiff has failed to produce evidence that shows a likelihood of success in establishing the famousness element of its dilution claim.
Plaintiff has not established a likelihood of success on the merits of its dilution claim.
4. Unfair Competition and Unfair Business Practices; False Designation of Origin (Cal. Bus. & Prof.Code § 17000, et seq., § 17200; 15 U.S.C. § 1125(a)).
A claim for unfair competition under Cal. Bus. & Prof.Code § 17200 and false designation of origin under § 1125(a)(1)(A) are analyzed in the same manner as a claim for trademark infringement. M2 Software, 421 F.3d at 1080 n. 5. The test for unfair competition and false designation of origins is the same as for trademark infringement, i.e., likelihood of confusion. Id.; Thane, 305 F.3d at 901 n. 3.
The court has found that a likelihood of confusion exists between the Plaintiff's and Defendant's marks. The Plaintiff is therefore likely to prevail on the merits of its Unfair Competition and Unfair Business Practices and False Designation of Origin claims.
B. Irreparable Harm to Plaintiff; Balance of Hardships; Service to Public Interest.
In trademark infringement and unfair competition cases, once likelihood of confusion is established, it is usually presumed that the Plaintiff will suffer irreparable harm and that the balance of hardships tips in Plaintiff's favor. Vision Sports, Inc. v. Melville Corp., 888 F.2d 609, 612 n. 3 (9th Cir.1989); GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1209 (9th Cir.2000) (because Plaintiff succeeded in establishing likelihood of confusion, court "need not decide whether there exist serious questions on the merits or whether the balance of hardships tips sharply in favor of Plaintiff").
Plaintiff argues that the balance of hardshipstips in its favor. Plaintiff argues that SSI continues to use the term "resource" in new advertising, and cites as an example the appearance of "R.E.*Source Real Estate Mortgage" in the September and October 2005 editions of Guide to Better Homes, The Central Valley's Real Estate Publication. (Doc. 20, Pl.'s Reply 8; Doc. 33, Pl.'s Sur-Reply). Plaintiff contends these are not "holdover uses" or "infrequent and mistaken uses" as SSI claims. Defendant argues that it will be harmed by an injunction because changing its name once again will cause disruption to its business. Plaintiff argues that changes such as modifying business cards, letterhead, and telephone directory listings are minor costs.
"It is well established that trademark law protects not only the private interests of the trademark owner but also the public's interest in not being confused by the infringing products." Phillip Morris *1250 USA Inc. v. Shalabi, 352 F.Supp.2d 1067, 1075 (C.D.Cal.2004) (citing Inwood Labs., Inc. v. Lves Labs. Inc., 456 U.S. 844, 854 n. 14, 102 S.Ct. 2182, 72 L.Ed.2d 606 (1982)). In trademark infringement cases, the public interest is served when an injunction would protect the "right of the public not to be deceived or confused." Id. (quoting Opticians Ass'n of Amer. v. Indep. Opticians of Amer., 920 F.2d 187, 197 (3d Cir.1990)).
Here, because a likelihood of confusion was demonstrated, the public interest would be served by issuance of an injunction.
VI. CONCLUSION
Plaintiff's motion for preliminary injunction is GRANTED against Defendant's use of the terms "Resource." "RESource," or "R.E.*Source" for any advertising or commercial use of that term in connection with the real estate loan business. Plaintiff shall submit a form of preliminary injunction within three (3) days of service of this order.
SO ORDERED.
NOTES
[1] Defendant asserts it no longer uses the term "RESource Real Estate Mortgage." (Doc. 17, Def.'s Mem. 8) Plaintiff asserts Defendant does continue to use the phrase "RESource Real Estate Mortgage." (Doc. 20, Pl.'s Reply 5) Plaintiff further argues that the longer phrases are not defendant's mark, and instead, defendant's mark is the single word "resource" in all of its forms ("RESource"; "R.E.Source"; and "R.E.*Source"). (Doc. 33, Pl.'s Sur-Reply 3) Plaintiff argues that the term "resource" appears in much larger font on defendant's logo than the rest of the phrase. The law is that "marks must be considered in their entirety and as they appear in the marketplace." Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1392 (9th Cir.1993); GoTo.com. Inc. v. Walt Disney Co., 202 F.3d 1199, 1206 (9th Cir.2000); M2 Software, 421 F.3d at 1082. Although it is true that the term "resource" appears in bold and large lettering on defendant's mark, it does not follow that defendant's mark is the term "resource" alone. Defendant's mark will therefore be analyzed as it appears in the marketplace, i.e., "R.E.*Source Redefining Real Estate."
[2] Defendant asserts that the marks do not sound similar because, when pronouncing the term "RESource," employees of its business say "R [pause] E [pause] source" ("är [pause] -e [pause] s-ors") instead of pronouncing the term as it appears in the dictionary ("r-e's-ors"). cite. Although the ultimate holding is that the marks do not sound similar, this holding is not based on defendant's argument regarding how employees of SSI pronounce the term "resource." One does not naturally pronounce the term as defendant pronounces it. Instead the natural pronunciation is "r-e's-ors." The punctuation and capitalization used by Defendant do not change this.
[3] Defendant argues that Plaintiff's marks are weak because "resource" is used widely in the real estate field. Specifically, Defendant argues that Plaintiff's mark is conceputally weak based on a "crowded filed" theory, which holds that a mark, even if not necessarily descriptive, is nevertheless weak due to its existence in a market of similar marks. Miss World, 856 F.2d at 1449 ("In such a crowed, customers will not likely be confused between any two of the crowd and may have learned to carefully pick out one from the other."). In support of its arguement, defendant citeses the Department of Real Estate's list of licenses (92 companies with the term "resource"); California Secretary of State's corporate/LP/LLP listings (8 companies using the term "resource" and "real estate" in their title); and the U.S. Patent & Trademark Office (six pending or issued trademarks use the combination of "resource" and "real estate"). (Doc 17, Def.'s Opp. 6)
Defendant has produced no evidence that the term "resource" is widely used in the real estate filed in the Central Valley of California. Even if defendant had produced such evidence, it would not necessarily overcome Plaintiff's showing that its marks have obtained secondary meaning in the Central Valley.
[4] David Spurlock (real estate appraiser); Joyce Simas (real estate agent); Anthony Gamber (real estate agent); Paul Parano (real estate agent); Don Fulmer (tools distributor); Marnie Gotfried (recent real estate refinancing customer); Mark Crawford (insurance agent); Sandy Richardson (recent Resource Lenders customer); Teddi Peters (Madera real estate agent); Mark Barsotti (title company employee).
[5] Plaintiff concedes that the first caller was looking for a real estate agent, which is a service provided by Defendant but not by Plaintiff.
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657 F.Supp. 638 (1986)
Kareem FAHEEM-EL, et al., Individually and on behalf of all others similarly situated, Plaintiffs,
v.
Michael P. LANE, et al., Defendants.
Nos. 79-2273, 80-2222, 81-2157 and 81-2158.
United States District Court, C.D. Illinois.
May 30, 1986.
*639 Reico Cranshaw-El, pro se.
Thomas Peters, Chicago, Ill., for plaintiffs.
Bart Murphy, Thomas Morrissey, Chicago, Ill., for defendants.
FINDINGS OF FACT, CONCLUSIONS OF LAW, MEMORANDUM OPINION AND FINAL ORDER
BAKER, Chief Judge.
This civil rights litigation poses the question whether persons incarcerated in the Illinois Department of Corrections who are members of the El Rukn Suni Mosque, 3947 South Drexel Boulevard in Chicago, Illinois (formerly Moorish Science Temple of America, El Rukn Tribe) are entitled to hold separate religious services and wear and possess emblems showing membership in their organization.
The individual plaintiffs, Kareem Faheem-El, El Barr-El, Hasib-El, Mohammad C. Ali-El, Mosham Bay-El, Roland Lewis-El, Otis Dorsey-El, Michael Williams-El, and Harvey Costick-El, are convicted felons who are inmates of the Illinois Department of Corrections. They are representative of a class of plaintiffs defined as:
All members of the Moorish Science Temple of America, El Rukn Tribe, who *640 are currently incarcerated in an Illinois state penitentiary.[1]
The plaintiffs claim that they are members of a bona fide religious organization. They complain that the defendant forbids the plaintiffs to congregate in religious worship services, wear identifying emblems, or possess certain printed materials, and thus the defendant interferes with the plaintiffs' rights to the free exercise of religion under the First Amendment to the Constitution of the United States. The plaintiffs seek only declaratory and injunctive relief. Originally, the plaintiffs also sought money damages, but the parties subsequently limited the relief sought to equitable remedies and consented to trial of the case before the court.[2]
The defendant denies that the plaintiffs are a bona fide religious organization. The defendant asserts that the El Rukns are a street gang organized for the pursuit of criminal activities. The defendant admits that he restricts the activities of the El Rukns within the penitentiaries operated by the State of Illinois, but he asserts that the state does so for the legitimate purposes of institutional security and discipline. The plaintiffs' claims are brought under 42 U.S.C. §§ 1983, 1985, and 1986. Jurisdiction is granted by 28 U.S.C. § 1343.
The case has had a history of delay from its inception. The parties have conducted extensive discovery and amended the pleadings several times. Between November 18, 1985, and April 15, 1986, the court heard four days of testimony from twenty-six witnesses. The parties presented oral argument and written briefs. Having considered the evidence and the arguments, the court now makes the following findings of fact and conclusions of law.
Factual Findings
Chicago Police Detectives Daniel Brannigan and Richard Peck testified for the defendants. The court credits the testimony of these detective witnesses about the origins and operations of the El Rukns. Detectives Peck and Brannigan are police officers with first hand experience on the street. They have been assigned to gang crime squads on Chicago's South Side for many years and have been involved directly with investigation of the El Rukns and in dealing with its members. They have arrested El Rukns, been shot at by them, and chronicled the organization's activities. Their testimony is persuasive.
The El Rukns' origins go back to the formation of the Black Stone Rangers in the late 1960's on the South Side of Chicago. *641 The leaders of the Rangers were Jeff Fort and Eugene Hairston.[3] Fort was the chief of the Black Stone Rangers and he governed the organization through a group called the Main 21. Although the Rangers were a street gang, in their early days they were allowed to meet once a week in the First Presbyterian Church in Woodlawn after church services. They even obtained a federal grant for educational purposes. The Rangers evolved into the Black Peace Stone Nation under the same leadership. As Detective Peck put it, "[t]here was nothing religious about the Black Peace Stone Nation." It was a street gang organized to engage in extortion, robbery, burglary, and prostitution all over the City of Chicago and in the suburbs. The gang had up to 15,000 members, Dectective Peck testified, ranging from 6 to 60 years in age.
Following a Senate investigation into some of this criminal activity, Jeff Fort and five of the Main 21 were indicted. Fort was convicted and he received a prison sentence. At that point, according to Detective Peck, the Black Peace Stone Nation died out and the leaders kept the money they had received from the gang activities.
In 1976, Detective Peck says, Jeff Fort was released from prison. When Fort returned to Chicago, the El Rukns were formed. Detective Peck says the people who are members of the El Rukn organization are in large part the same people who were members of the Black Peace Stone Nation. Peck says the El Rukns are carrying out the same activities as the Peace Stones but the El Rukns are now more sophisticated and do not engage in violence except for furtherance of the gang's activities and for economic advantage.
Detective Brannigan agrees with Detective Peck. Brannigan describes the El Rukns as a sophisticated street gang with a leader and hierarchy of members organized to engage in criminal activity. The leader of the El Rukns is Jeff Fort who is also referred to as "Chief Malik" or "The King Angel."
In his youth, Brannigan says, the membership would engage in violence for its own sake. Now that the members are thirty, forty, and fifty years of age, however, their violence is directed toward financial gain. The hierarchy of the El Rukn organization, Brannigan testified, is similar to the hierarchy of the Black Peace Stone Nation. Jeff Fort and the Main 21 of the Rangers and Jeff Fort and the "Generals" of the Peace Stone Nation have been succeeded by Jeff Fort (Chief Malik) and the Emirs of the El Rukns. It is still Jeff Fort and the hierarchy that determine the right to membership in the organization and discipline dissident members.
The sphere of influence of the organization now extends from 39th Street to 7900 South in Chicago and includes operations in Harvey, Evanston, and Milwaukee. If a person wishes to engage in criminal activity within the El Rukn sphere of influence, that person must pay tribute to the El Rukns. Detective Brannigan testified that the El Rukns assassinate those who fail to pay tribute. Brannigan says the standard procedure is for masked assassins to walk up to the victim and empty their guns into him. Approval of an assassination must come from Jeff Fort.
The El Rukns control several parcels of real estate in Chicago in addition to the mosque at 3947 South Drexel Boulevard. The buildings display El Rukn symbols and the El Rukn colors: black, red, and green. Detective Brannigan has participated in court sanctioned raids on these properties between 1978 and 1985. The properties are fortified and the police have been required to use force to gain entry. Searches have resulted in the seizure of firearms, ammunition, and controlled substances. The El Rukns, in Brannigan's opinion, are an ongoing criminal enterprise with about 250 to 300 adult, male members.[4] About 90 percent *642 of the members have been convicted of felonies. Brannigan estimates that the organization has been responsible for over 100 felonies including murder, narcotics trafficking, and weapons violations.
Assistant Deputy Director Richard DeRobertis and Warden James W. Fairman testified about the activities of the El Rukns and other gangs within the Department's institutions, and about the continuing threat to institutional security and discipline that gang activity creates. Warden Fairman observed the attempts by street gangs within the prisons to intimidate other inmates and the staff. The gangs seek power by means of extortion and violence and confrontation with the correctional officers. Director DeRobertis recounted an occurrence at Stateville in June, 1984, when an informant, an admitted and known El Rukn, reported that the El Rukns had smuggled firearms into the institution to settle an intra-organization dispute. The guns were located and confiscated. Randy Dillard, a class member, an admitted El Rukn member and a "General" in the organization, testified in a state court proceeding concerning a conspiracy by El Rukns to commit murder.[5] This testimony is persuasive that members of the El Rukn organization engage in continued criminal activity while incarcerated. It is Warden Fairman's opinion, which I credit, that any official recognition given a street gang would enhance the gang's prestige within a prison and tend to undermine the prison administration's ability to maintain security within the prison.
But criminal activity is only one facet of the El Rukn's identity. They have another side, a religious one. Eugene Hunter,[6] whose Muslim name is Salim Abdul Khaadim-El, is an Emir of the organization. He has been a member of the Moorish Science Temple of America, El Rukn Tribe since its inception in 1976. He described the form of worship and symbolism of the El Rukns by demonstrating the stances assumed in prayer and recounting to their history and beliefs.
In 1976, Jeff Fort founded the El Rukn Tribe of the Moorish Science Temple of America. Fort had converted to Al Islam and become a Muslim while he was in prison from 1972 to 1976. Fort became the spiritual leader of the El Rukn Tribe as well as the director of its criminal activities. Fort wrote Malik's Lessons, the six requirements for a proper life that form the basis of instruction for membership in the El Rukn Tribe (Plaintiffs' Exhibit 2). Hunter says that the El Rukns have about 500 to 1,000 members and about twenty Emirs govern the organization. He says that Jeff Fort went inactive about one and a half years ago and is no longer a member. Other El Rukns also testified that Fort had left the organization and was no longer a member. El Rukn witnesses were very evasive in their responses about Fort's present connections with the El Rukns and what part Fort plays in governing the organization. I find the assertion that Fort no longer has any connections with the El Rukns incredible. The clear preponderance of the credible evidence is that Fort is still the leader and chief of the El Rukns even though Fort is in prison.
The El Rukns are adherents of Islam. They believe there is no God but Allah and that Mohammed is His prophet. They now hold that Noble Drew Ali, the founder of the Moorish Science Temple in America, was a holy man but not the last prophet. Until 1985, the El Rukns had revered Noble Drew Ali as a prophet. El Rukn, Hunter said, means cornerstone of the Kaaba, the stone of the Temple established by Abraham.
Hunter testified that The Glorious Koran (Plaintiffs' Exhibit 1) is the basic holy book of the El Rukns. The Glorious Koran together with the Holy Koran of the Moorish Science Mosque of America (Plaintiffs' Exhibit *643 2) and the writings of Jeff Fort form the instructions and precepts of the El Rukn community.
The El Rukns hold religious services each week on Friday and on Sunday at their mosque at 3947 South Drexel Boulevard in Chicago. Jumah, the service on Friday, begins at noon and is attended only by males. Jumah is conducted by an Imam or, in the absence of an Imam, by the person considered most learned in Islamic theology. Mr. Hunter described the ceremony. After beginning prayers, the members sit in a circle and each person "demonstrates," reciting the teachings or tenets of the El Rukns' beliefs. The Imam may deliver a Kauba, which is like a sermon, and instruction may be given at any point in the service. See Plaintiffs' Exhibits 4 (Surahs from the Glorious Koran), 6 (Five Pillars of Islam) and 7 (the Al-Fatihah showing prayer sequence). The Sunday services are for women and children and have, as their primary focus, instruction and education.
El Rukns observe Ramadan which is a month-long period of study, prayer, and dietary restrictions to commemorate the revelation of The Glorious Koran to Muhammed. The observation of Ramadan requires a Muslim to take meals before sunrise and after sunset. The conclusion of the month of Ramadan is celebrated with a feast called Il Fitr.
Some items of clothing and ornamentation are symbols in El Rukn religious exercise. The El Rukn medallion (Plaintiffs' Exhibit 8A) is similar to a general Muslim medallion (Plaintiffs' Exhibit 8B), except the El Rukn medallion has the organization's name printed on it. El Rukns wear a kufi (Plaintiffs' Exhibit 9(b)) as a sign of their religion and on Friday may wear a fez (Plaintiffs' Exhibit 10) to display Moorish identity. El Rukns also carry a nationality card (Plaintiffs' Exhibit 11) to show they are descendants of Moroccans and the Moabites.
The testimony clearly shows that the Department of Corrections refuses to grant official recognition to the existence of the El Rukns and will not permit the El Rukns to wear or to possess those materials that identify them as El Rukns. Anything that says "El Rukn" or symbolizes El Rukn is contraband and is confiscated from inmates by the Department.
Robert W. Horn, who currently is the Chaplain at Graham Correctional Center, was Administrator of Chaplain Services for the Department in 1974. His job included training chaplains and screening applications by religious organizations to hold religious services in the prisons. He handled the El Rukn's application for recognition in 1977. The El Rukns applied first at Stateville. Mr. Horn met with the institution administrators, the chaplain, and inmates. Horn tried to meet with members in the free community but when he wrote to the El Rukn Temple he received no response to his letters and could not reach anyone on the telephone. The telephone number given by the applicants was the number of a phone in a boxing gymnasium. The El Rukns never supplied a program statement as was required by Department regulations in effect at that time.
The El Rukns were never recognized by the Department. No program was accepted, nor was an outside clergyman approved to come into any institution to hold services. Mr. Horn says his superiors, presumably the directors of the Department, decided El Rukn was not a legitimate religion. Mr. Horn's memoranda about the El Rukns make clear that they were excluded from Ramadan and their organization symbols and writings were contraband. See Plaintiffs' Exhibits 16(b), 39, 40.
From the testimony of other Department chaplains, it is apparent that inmates in Illinois prisons are able to attend Christian, Jewish, or Islamic services. Muslims may participate in the observance of Ramadan if they have regularly attended Jumah services on Friday. The Islamic services that are sanctioned by the Department are those of the American Muslim Mission (now dissolved and decentralized) and the Moorish Temple of America, Baltimore Branch.
Imam Khalilalah, senior chaplain at the Pontiac Correctional Center, says that he has issued Islamic service cards to El Rukns allowing them to attend the American *644 Muslim Mission's Jumah services. Khalilalah also says he was acquainted with Eugene Hunter and Reico Cranshaw when they were inmates at Pontiac. Imam Khalilalah says he didn't bar Hunter from attending Ramadan but did insist that Hunter prostrate himself during prayer as Muslims are required to do. El Rukns, Hunter says, do not prostrate themselves when they pray.
Imam Agin Muhammad, Sr., the Islamic chaplain at Stateville, who, like Khalilalah, is associated with the American Muslim Mission (now dissolved and decentralized), says anyone may attend Islamic services. In fact, Imam Muhammad says, there is a Moorish Science Temple of America service at Stateville each Friday. That service is distinct and separate from the service of the American Muslim Mission and is conducted by an inmate. Anyone may attend the service as an individual, Imam Muhammad says, but not as an identified group. As of the date of this writing, it appears that the Department bars no individual from attending religious services and that anyone professing Al Islam may participate in Ramadan. It is true, as plaintiffs point out, that gang members attend religious services but they attend as individuals and not as a sanctioned or officially recognized groups. The significant fact is that El Rukns, qua El Rukns, were not allowed to hold their own services or to possess materials identifying them as El Rukns.
The defendant presented the testimony of Dr. John Gordon Melton, Director of the Institute for the Study of Religion. He is the editor of The Encyclopedia of American Religions, the recognized listing of American religious groups. Dr. Melton is of the opinion that the El Rukns are not an established religion, but only because they haven't existed for a sufficient length of time. They have all the indicia of a religion: belief in a deity, a holy book, a place of worship, and a form of worship. The El Rukns are obviously in a state of development and are moving, Dr. Melton believes, closer and closer to main-line Islamic teaching and practice.
Legal Conclusions
The parties have devoted significant portions of their presentations, through both evidence and argument, to the question whether the El Rukns are a genuine religious organization. The defendant argues that the El Rukns are shams who use religion as a cover to obtain First Amendment protection for their real business, which is criminal activity. Certainly the El Rukns profess beliefs that are consonant with the basic tenets of Islam. They are monotheists. They believe in one God, Allah, and that Muhammed Abdullah is His prophet. They study and revere the Glorious Koran which is their principal holy book and scripture. They have established ceremonies and have a regular time and place of worship. "The essence of religion is belief in a relation to God involving duties superior to those arising from any human relation." United States v. Seeger, 380 U.S. 163, 175, 85 S.Ct. 850, 858, 13 L.Ed.2d 733 (1964); quoting Chief Justice Hughes in United States v. Macintosh, 283 U.S. 605, at 633-34, 51 S.Ct. 570, at 578, 75 L.Ed. 1302 (1931). The El Rukns' professed beliefs undeniably meet that test.
It is true that the El Rukns are still in a state of development of their beliefs and practices and the members who testified showed a certain lack of uniformity in their understandings. The defendant's argument that the El Rukns' beliefs are not religious because their beliefs are changing, however, is without merit. "Courts should not undertake to dissect religious beliefs because the believer admits that he is `struggling' with his position or because his beliefs are not articulated with the clarity and precision that a more sophisticated person might employ." Thomas v. Review Board, Ind. Empl. Sec. Div., 450 U.S. 707, 715, 101 S.Ct. 1425, 1430, 67 L.Ed.2d 624 (1981).
The difficult question about the El Rukns is whether their beliefs are sincerely held, for even if "[t]he `truth' of a belief is not open to question, there remains the significant question whether it is `truly held.'" United States v. Seeger, 380 U.S. 163, 185, 85 S.Ct. 850, 863, 13 L.Ed.2d 733 *645 (1964). The defendant urges the conclusion upon the court that the El Rukns are insincere. The evidence concerning the criminal activities of the El Rukn organization is not completely persuasive of a lack of religious sincerity on the part of the individuals who testified. There is a gulf, however, that divides what the individuals profess and what the El Rukn organization does. Perhaps the El Rukns have created a division of labor within the organization, and the witnesses who came to testify are people whose primary duties are spiritual in nature while other members devote themselves to the more temporal pursuits of the group. The court need not to decide whether the plaintiffs truly hold the beliefs they claim, however, because the court concludes that the decision in this case rests on the discussion which follows.
The right to hold a particular religious belief is absolute, but the right to freely exercise a religious belief is not. Cantwell v. Connecticut, 310 U.S. 296, 60 S.Ct. 900, 84 L.Ed. 1213 (1940). Although prisoners do not lose their First Amendment rights upon incarceration, Meachum v. Fano, 427 U.S. 215, 96 S.Ct. 2532, 49 L.Ed.2d 451 (1976), those rights are subject to restriction when the limitations placed upon the rights further a legitimate governmental purpose. Pell v. Procunier, 417 U.S. 817, 94 S.Ct. 2800, 41 L.Ed.2d 495 (1974).
[A] prison inmate retains those First Amendment rights that are not inconsistent with his status as a prisoner or with the legitimate penological objectives of the corrections system. Thus, challenges to prison restrictions that are asserted to inhibit First Amendment interests must be analyzed in terms of the legitimate policies and goals of the corrections system, to whose custody and care the prisoner has been committed in accordance with due process of law.
Id. at 822, 94 S.Ct. at 2804.
The restrictions which the defendant places upon incarcerated El Rukns obviously infringe the First Amendment rights of association and the free exercise of religion which the plaintiffs would enjoy as El Rukns on the street. However, "[t]he operational realities of a prison dictate restrictions on the associational rights among inmates." Jones v. North Carolina Prisoners Association, 433 U.S. 119, 126, 97 S.Ct. 2532, 2538, 53 L.Ed.2d 629 (1977). The court must carefully scrutinize these restrictions on the plaintiffs' First Amendment rights and decide if the governmental policies are necessary to carry out the legitimate goals of the correctional system. Childs v. Duckworth, 705 F.2d 915, 920 (7th Cir.1983).
Put another way, "prison rules that incidently restrain the free exercise of religion are justified only `if the state regulation has an important objective and the restraint on religious liberty is reasonably adapted to achieving that objective.'" Madyun v. Franzen, 704 F.2d 954, 960 (7th Cir.1983); quoting LaReau v. McDougall, 473 F.2d 974, 979 (2nd Cir.1979), cert. denied, 414 U.S. 878, 94 S.Ct. 49, 38 L.Ed.2d 123 (1973). Cf. Shabazz v. O'Lone, 782 F.2d 416 (3rd Cir.1986) (state must show that challenged regulations are intended to serve and do serve the penological goal of security); Walker v. Blackweel, 411 F.2d 23 (5th Cir.1969) (state must show a compelling interest for restriction on First Amendment rights).
The evidence clearly shows that the defendant is justified in restricting the association of the El Rukns and in refusing to permit them to identify themselves in the prison setting as El Rukns. The security problem caused by street gangs in Illinois prisons is well documented. See Godinez v. Lane, No. 83-2057 (C.D.Ill. July 28, 1983), rev'd on other grounds 733 F.2d 1250 (7th Cir.1984). The testimony of Warden Fairman and Assistant Deputy Director DeRobertis highlights both the specific occasions on which El Rukns have threatened institutional security by smuggling weapons into a prison and the general security problems that would be created by recognition and grants of special associational rights to El Rukns. Credible evidence in the record also supports the contention that El Rukns continue their criminal activity while they are incarcerated. *646 The court cannot gainsay the decision of the prison administrators on this sensitive question of institutional security. See Bell v. Wolfish, 441 U.S. 520, 99 S.Ct. 1861, 60 L.Ed.2d 447 (1979); Rhodes v. Chapman, 452 U.S. 337, 101 S.Ct. 2392, 69 L.Ed.2d 59 (1981). The plaintiffs want to hold separate, El Rukn religious services and wear and possess El Rukn emblems. The court finds that the restrictions placed upon these activities by the defendants, necessitated by legitimate security concerns, do not violate the First Amendment.
Finally, the plaintiffs contend that the defendant's conduct works a denial of equal protection. The court rejects that contention. The policy which denies El Rukns the right to wear or possess emblems identifying them as El Rukns is the same policy that prevents other gangs from wearing identifying emblems. The policy which denies El Rukns the right to possess written material identifying them as El Rukns is the same policy that applies to other gangs. An El Rukn can possess a Koran, but not one titled "El Rukn." An El Rukn can possess a prayer rug or an Islamic medallion, but not one that says "El Rukn." An El Rukn can go to Islamic services or to Ramadan observance, but not as an El Rukn. "While every religious sect or group need not be provided with identical facilities for worship, a prisoner must be afforded `a reasonable opportunity of pursuing his faith comparable to the opportunity afforded fellow prisoners who adhere to conventional religious precepts.'" Childs v. Duckworth, 705 F.2d 915, 920 (7th Cir.1983), quoting Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 1081, 31 L.Ed.2d 263 (1972). Individual El Rukns are afforded that reasonable opportunity to pursue their belief in Al Islam, but not as El Rukns, for the evidence shows that the El Rukns are a street gang and a threat to institutional security.
For the foregoing reasons, the equitable and declarative relief sought by the plaintiffs is denied and the complaint is dismissed.[7] The Clerk is directed to enter judgment in favor of the defendant and against the plaintiffs. Each party shall bear its own costs.
NOTES
[1] The court's order of November 26, 1982, granting plaintiffs' motion to proceed as a class (Doc. 73), sets forth the rationale for permitting the plaintiffs to proceed as a class.
[2] At the inception of this litigation, the original plaintiff in 79-2273 was Reico Cranshaw-EI, pro se, and the defendant was Gayle Franzen, then Director of the Illinois Department of Corrections. The proceedings in the Central District of Illinois were stayed on December 14, 1979, pending the disposition of two cases in the Northern District of Illinois, El Rukn Kareem Faheem-El v. Illinois Department of Corrections, et al., 79-C-2034, and El Rukn Mohammad C. Ali-El, et al. v. Gayle Franzen, et al., 79-C-3279. On February 20, 1981, the stay order was lifted and on June 18, 1981, the two cases in the Northern District of Illinois were transferred to the Central District of Illinois. In the original Central District cases, the plaintiffs had appeared pro se, but on November 2, 1981, Thomas Peters, Esq. entered his appearance on behalf of the plaintiffs, and the parties were realigned in their present positions. Pursuant to Fed.R. Civ.P. 25(d)(1), Michael P. Lane has been substituted for Gayle Franzen, as Director of the Illinois Department of Corrections. The defendants originally named in the litigation were the Director of the Illinois Department of Corrections and other officials of that government agency who were supervisors of chaplains, wardens, or other correctional officers. In its present stance with relief sought only of an equitable or declaratory nature, the litigation now proceeds only against Michael P. Lane, Director of the Illinois Department of Corrections. Furthermore, because the plaintiff seeks only equitable and declaratory relief, the definition of the class has been modified by the court to eliminate sub-class B as set forth in the original statement of the class:
B. All members of the Moorish Science Temple of America, El Rukn Tribe, who are incarcerated in an Illinois state penitentiary on or after February 14, 1979, and who were subsequently released provided that said persons were members of the Moorish Science Temple of America while incarcerated and they still are members of the Moorish Science Temple of America.
See Fed.R.Civ.P. 23.
[3] Hairston was convicted of solicitation to commit murder in the late 1960's or early 1970's. Fort is presently serving a sentence in a federal penitentiary for conspiracy to distribute cocaine. Fort had been convicted previously in 1972 of misappropriating about $980,000 in funds from a federal grant given to the Black Peace Stone Nation for educational purposes.
[4] The women and children associated with the El Rukns, Brannigan says, have become visible only in the past two to three years and play no part in the management of the organization.
[5] The statements were admitted under Fed.R. Evid. 801(d)(2)(A). See Louisell & Mueller, Federal Evidence, § 423.
[6] Hunter was convicted of murder in 1975 and possession of marijuana in 1983.
[7] In their reply trial brief, the plaintiffs raised, for the first time, a request that the plaintiffs be permitted to submit to the Department of Corrections for approval a plan or program outlining proposed religious services for the El Rukns. The new proposal would eliminate any reference to El Rukn and permit the plaintiffs to have the "contents" of their beliefs without recognition of the name El Rukn. This is a departure from the relief sought up to this time. Moreover, the court would observe that the plaintiffs may submit any petition they choose to the Department. Their original petition was deficient. It never had an approved sponsor.
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781 S.W.2d 277 (1989)
STATE of Tennessee, Appellee,
v.
Timmy Lydell DULSWORTH and Robert Cordell Stewart, Appellants.
Court of Criminal Appeals of Tennessee, at Nashville.
June 29, 1989.
Permission to Appeal Denied October 2, 1989.
*280 James D. White, Jr., Celina, for Timmy Lydell Dulsworth.
A. Russell Brown, Lafayette, for Roger Cordell Stewart.
Charles W. Burson, Atty. Gen. & Reporter, Debra K. Inglis, Asst. Atty. Gen., Nashville, Tom P. Thompson, Jr., Dist. Atty. Gen., John D. Wootten, Jr., Asst. Dist. Atty. Gen., Hartsville, for appellee.
Permission to Appeal Denied by Supreme Court October 2, 1989.
OPINION
JONES, Judge.
The appellants, Timmy Lydell Dulsworth[1] and Roger Cordell Stewart, were found guilty of robbery with a deadly weapon by a jury of their peers. Dulsworth was also convicted of assault with intent to commit murder in the first degree. The trial judge found that Dulsworth was a persistent offender and committed especially aggravated offenses; and he imposed a Range II sentence of life imprisonment as to each offense. The two sentences are to be served concurrently. Stewart was found to be a standard offender, and the trial court imposed a Range I sentence of twenty-five (25) years.
After the trial court denied the appellants' respective motions for a new trial, they appealed as of right to this Court pursuant to Rule 3(b), Tenn.R.App.P.
ISSUES PRESENTED FOR REVIEW
Dulsworth has raised nine issues for our review. He contends that:
(a) the trial court committed error of prejudicial dimensions in denying his motion to suppress the evidence seized incident to his unlawful arrest;
(b) the trial court committed error of prejudicial dimensions in denying the motion to suppress the blood sample taken from his body after his arrest;
(c) the trial court committed error of prejudicial dimensions in denying his motion to suppress the victim's in-court identification;
(d) the instruction given by the trial court regarding the exiles of law governing the testimony of an accomplice was erroneous;
(e) the instruction given by the trial court regarding the range of punishment for the offense of assault with intent to commit murder in the first degree was erroneous; and the trial court committed error in imposing a sentence pursuant to T.C.A. § 39-2-103(b);
(f) the trial court erred in failing to instruct the jury as to all of the lesser included offenses of assault with intent to commit murder in the first degree;
(g) the trial court committed error in overruling his objections to evidence introduced by the State;
(h) the instructions given by the trial court regarding the issues of identity and voluntary intoxication were erroneous; and
(i) the trial court erred in sentencing him as a persistent offender.
Stewart has raised four issues for our review. He contends that:
(a) the evidence contained in the record is insufficient to permit a rational trier of fact to find him guilty of armed robbery beyond a reasonable doubt;
(b) the trial court committed error of prejudicial dimensions in denying his motion to suppress the evidence seized from his person after his arrest;
(c) the instruction given by the trial court regarding the rule of law governing the aiding and abetting of a criminal offense was erroneous; and
*281 (d) the sentence imposed by the trial court was excessive.
SUFFICIENCY OF THE EVIDENCE
On the morning of January 17, 1987, Elmer Lee Likens'[2] automobile became stuck in a creek. Dulsworth and Stewart discovered Likens' predicament as they were driving along a road near the creek. They stopped and helped Likens remove his vehicle from the creek. Later, Likens joined Dulsworth and Stewart.
During the morning and afternoon of the day in question, Dulsworth, Stewart and Likens drank beer and discussed the possibility of robbing the victim. Dulsworth initiated the discussion. He told his companions he knew where they "could make a good bit of money." All three agreed to participate in the robbery, and plans were made to rob the victim. Later, they drove past the victim's farm, located north of Lafayette, Tennessee, in Stewart's vehicle. The victim was in the barn. The victim waved at them, and they waved back at him. They then returned to Lafayette.
The appellants and Likens went to the victim's residence at 6:30 p.m. Likens went to the front door, knocked, and the victim opened the door. He told the victim that they had had a flat tire, and he asked to use the telephone to call for assistance. The victim advised Likens that he did not have a telephone. Dulsworth and Likens then forced entry into the residence while Stewart remained in the vehicle. Likens searched the residence for the victim's wife. He found her in the bathroom, and told her to lay on the floor until the robbery had been completed. Meanwhile, Dulsworth, armed with a hunting knife, immediately attacked the victim. He stabbed the victim four times. He then demanded the victim's wallet at knife-point. The victim gave him the wallet, and both Dulsworth and Likens left the victim's residence. The three fled from the scene in Stewart's car. Subsequently, they went to the home of Stewart's former wife in Lafayette.
While enroute to the home of Stewart's former wife, Dulsworth told Likens and Stewart that he thought he had killed the victim. Stewart replied that Dulsworth "did what [he] had to do." They also noticed that Dulsworth had cut his hand with the knife. After reaching their destination, an attempt was made to treat the cut on Dulsworth's hand. They also split the money found in the victim's wallet. The currency was stained with blood. The billfold was placed in a stove and burned.
The police recovered a bloody $50.00 bill from Stewart's pants pocket. A second bloody $50.00 was retrieved from a convenience store. Dulsworth had given Likens the bill to purchase a six-pack of beer at the store. The police also recovered $41.00 from a cell that Dulsworth had occupied. The currency had been placed in a crack in the cell wall.
The victim was taken to the hospital in Lafayette for treatment of his wounds. The sheriff interviewed the victim, and advised local law enforcement officers of the incident via radio. Two men, who had a scanner in their car, heard the broadcast. They went to the hospital and told the sheriff that, while enroute to Kentucky, they saw a four-door rust or burnt orange Datsun with damage to the rear of the vehicle in the area where the victim resided. There were three people in the vehicle. While enroute home, they saw the same vehicle enter the highway from a gravel road. The vehicle was enroute to Lafayette. It was the same vehicle they had seen while travelling to Kentucky. The sheriff gave local officers a description of the vehicle by radio. A deputy sheriff advised the sheriff that Stewart owned a vehicle meeting the description given by the two men.
Law enforcement officers converged on the residence of Stewart's former wife. A vehicle matching the description given by *282 the two men was parked in the driveway of the home. Some of the officers went to the front door and others went to the back door. Stewart exited through the back door and was detained by the officers. He was subsequently placed in the back seat of a police cruiser. The other officers entered the front door and searched the residence with the consent of Stewart's former wife. Likens was found in a rear bedroom. They noticed blood, indicating someone had been bleeding. There was evidence that this person had exited the residence through a window. Subsequently, Dulsworth was found hiding in shrubbery near the Stewart residence. The Datsun was examined. There was blood on the door on the passenger side of the vehicle as well as inside the vehicle. Dulsworth, Stewart and Likens were transported to the local jail.
Stewart gave the investigating officers a statement the next day. He admitted to the officers that he had been to the victim's residence on the evening in question, but contended he remained in his vehicle the entire time.
The victim made an in-court identification of Dulsworth. Since the victim did not see Stewart on the evening in question, he could not identify him.
Stewart testified in support of his defense. He related that the three of them were enroute to the Shiloh community when Dulsworth allegedly told him that a friend lived inside the victim's residence, and he asked Stewart to pull into the victim's driveway. Dulsworth and Likens went inside the residence. When they returned, Dulsworth's hand was bleeding. He told Stewart that someone slammed the door on his hand. Stewart claimed that he was not privy to the dialogue concerning the robbery earlier in the day, and he was unaware that Dulsworth and Likens were going to rob the victim when they entered the residence. He admitted that Dulsworth had given him $50.00, but he claimed this was a partial payment of money he had loaned Dulsworth.
There is sufficient evidence contained in the record from which a rational trier of fact could conclude that Dulsworth and Stewart were guilty of robbery with a deadly weapon beyond a reasonable doubt. Further, there is sufficient evidence from which a rational trier of fact could conclude that Dulsworth was also guilty of assault with the intent to commit murder in the first degree beyond a reasonable doubt. Tenn.R.App.P. 13(e); Jackson v. Virginia, 443 U.S. 307, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979).
This issue is without merit.
DULSWORTH'S MOTION TO SUPPRESS
Dulsworth filed a pretrial motion to suppress the victim's identification at the preliminary hearing, the blood sample obtained from a bandana, the money found in his jail cell, and "other items." The trial court conducted an evidentiary hearing on the merits of the motion. At the conclusion of the hearing, the trial court denied the motion.
In this Court, Dulsworth contends the evidence he sought to suppress was obtained in violation of the Fourth Amendment to the United States Constitution and Article I, § 7 of the Tennessee Constitution. He argues that his "arrest was illegal [and] any evidence obtained as a result of that illegal arrest should have been suppressed." In summary, Dulsworth contends that the evidence sought to be suppressed was seized incident to an invalid arrest.
It has long been established in this jurisdiction that there is no constitutional immunity from an unlawful arrest.[3] The fact that an accused has been unlawfully *283 arrested only becomes relevant when evidence tainted by the arrest is sought to be introduced by the State.
The trial court properly denied the motion as it pertained to the identification made by the victim at the preliminary hearing, assuming arguendo that the arrest was invalid. Wadley v. State, 634 S.W.2d 658, 661 (Tenn. Crim. App. 1982); State v. Miller, 608 S.W.2d 158 (Tenn. Crim. App. 1980). In Miller, the appellant moved to suppress the victim's pretrial lineup identification on the ground he was "illegally detained and arrested." This Court held that the trial court properly denied the appellant's motion to suppress. In ruling, this Court said:
Any subsequent witness identification [following an illegal arrest] is not characterized as a "fruit" of an unlawful arrest. The basis of the identification is not the arrest but the witness's perception of the accused during the crime. An identification otherwise valid does not come under the exclusionary rule because the arrest is illegal. The arrest merely provided the means for the confrontation with the victim more promptly than would otherwise have been the case. We cannot assume that the defendant would have remained at large indefinitely if he had not been arrested on this occasion. The arrest contributed neither to the knowledge of the witness nor to the accuracy of her identification. The trial judge properly admitted evidence of the lineup identification.
608 S.W.2d at 160.
The bandana was owned by a deputy sheriff. After Dulsworth was removed from the bushes, the officers discovered that Dulsworth's hand was bleeding. The deputy sheriff provided Dulsworth with the bandana to stop the bleeding and wipe the blood from his hand so that the officers could determine the severity of the wound. Later, Dulsworth voluntarily returned the bandana to the deputy sheriff. The deputy sheriff gave the bandana to another officer since it was filled with blood.
Our review of the record reveals that the bandana was not mentioned during the evidentiary hearing on the merits of the motion to suppress. Nor was it brought to the attention of the trial court at any other time prior to trial. Consequently, this issue has been waived. State v. Burtis, 664 S.W.2d 305, 310 (Tenn.Cr.App. 1983). See State v. Burton, 751 S.W.2d 440, 445 (Tenn. Crim. App. 1988).
Addressing this issue on the merits, the record clearly reveals that the bandana was not seized from the appellant incident to his arrest. To the contrary, the bandana was furnished to the victim by a deputy sheriff following his arrest, was used to wipe the blood from Dulsworth's hand, and was voluntarily returned to the deputy sheriff by Dulsworth.
Dulsworth also filed a pretrial motion to suppress a blood sample taken from his body following his arrest as well as the results of tests performed using the blood sample. The trial court denied the motion at the conclusion of the evidentiary hearing.
The evidence adduced at the hearing revealed that the sheriff talked to Dulsworth, who was incarcerated in the jail, about obtaining blood samples. He explained to Dulsworth the reason why the blood samples were necessary. He also explained that Dulsworth could voluntarily consent to the extraction of the blood sample, or, if he did not consent, the sheriff would obtain a court order requiring him to permit the taking of the blood sample.
According to the sheriff, Dulsworth stated he would consent to the blood drawn from his body; and he was transported to the hospital where the blood sample was taken. Before the blood was drawn, Dulsworth executed a consent form. He admitted at the hearing that the signature affixed to the form was his. The nurse subsequently removed the blood from Dulsworth's body, and he was returned to the jail.
The blood taken from Dulsworth's body was consistent with blood samples obtained from the currency found in the possession of Likens and Stewart, a brown paper bag found in the back yard of Stewart's former *284 wife, his clothing, the curtains found inside the residence, and the bandana.
Dulsworth testified at the hearing. He related that the sheriff told him he had a court order which required him to permit the withdrawal of a blood sample. While acknowledging that his signature was affixed to the consent form, he claimed that the form had been altered after he signed it. He also stated that one of the reasons he went to the hospital was to have his hand examined by medical health care providers.
The question of whether Dulsworth consented to the withdrawal of the blood sample was a disputed question of fact. The trial judge observed the witnesses, heard their testimony in open court, and was required to determine the credibility of the witnesses in order to resolve this factual dispute. For this reason, a trial judge's findings of fact at the conclusion of an evidentiary hearing on the merits of a motion to suppress are conclusive on appeal unless the evidence contained in the record preponderates against the trial court's judgment. State v. Killebrew, 760 S.W.2d 228, 233 (Tenn. Crim. App. 1988); State v. Roberts, 755 S.W.2d 833, 837 (Tenn. Crim. App. 1988). Since there is material evidence contained in the record to support the trial judge's findings of fact, this Court is required to affirm his judgment in this regard. State v. Killebrew, supra.
Dulsworth also filed a motion to suppress the in-court identification of the victim. The trial court denied the motion at the conclusion of the suppression hearing. In this Court, Dulsworth contends that the trial court should have granted his motion to suppress because the pretrial confrontation between the victim and the appellant was suggestive; and the suggestiveness of the confrontation rendered the identification unreliable.
The victim advised the sheriff on the evening in question that he could identify the two men who entered his home. However, no effort was made to conduct a lineup or present the victim with an array of photographs to see if he could identify either Dulsworth or Stewart. When the victim entered the courtroom shortly before the preliminary hearing was to commence, he immediately recognized Dulsworth as the person who stabbed and robbed him at knife-point. He also identified Likens during the course of the preliminary hearing. There were other people in the courtroom when the victim identified both Dulsworth and Likens.
No one asked the victim to make an identification or suggested to the victim that Dulsworth was one of the individuals who entered his home. To the contrary, he had seen Dulsworth before. Dulsworth was married to his nephew's former wife; and the victim had been to the home where they resided with his nephew. Consequently, the identification made by the victim prior to the preliminary hearing was not suggestive; and the trial court properly denied the motion to suppress the in-court identification made by the victim.
Dulsworth also contends that the $41.00 found in his jail cell should have been suppressed. The State did not introduce the money found in Dulsworth's cell. We parenthetically note that the trial judge was correct in ruling that this evidence was admissible. A prisoner does not have a justifiable, reasonable or legitimate expectation of privacy which is subject to invasion by law enforcement officers, as the United States Supreme Court ruled in Hudson v. Palmer, 468 U.S. 517, 104 S.Ct. 3194, 82 L.Ed.2d 393 (1984). See State v. Williams, 690 S.W.2d 517 (Tenn. 1985). The Fourth Amendment proscription against unreasonable searches and seizures does not apply within the confines of a prison cell. Palmer, 468 U.S. at 525-526, 104 S.Ct. at 3200, 82 L.Ed.2d at 403.
This issue is without merit.
INSTRUCTION ON TESTIMONY OF AN ACCOMPLICE
Dulsworth contends that the trial judge committed prejudicial error in charging the jury regarding the law governing the testimony of an accomplice. The challenged portion of the charge states:
*285 In this case, it is a question for the jury to determine whether the witness Elmer Likens was an accomplice in this crime. If you find from the proof that the witness was an accomplice, then the defendant cannot be convicted upon the uncorroborated testimony of this witness. If you find that the witness was not an accomplice, then you will judge the weight to be given this testimony, just as you do with that of the other witnesses in the case. In this case, the Court charges you that the witness, Elmer Likens, was an accomplice in this alleged crime, and before the defendants can be convicted, you must find that this accomplice's testimony has been sufficiently corroborated. [Emphasis added].
The balance of the instruction regarding the testimony of an accomplice was a complete and thorough statement of the law.
An examination of the Tennessee Pattern Instructions[4] reveals how the trial judge came to include the contradictory statements that are contained in the paragraph set forth above. The instruction on the testimony of an accomplice found in the Tennessee Pattern Instructions has two proposed concluding paragraphs. The first proposed paragraph is to be given when the question of whether the witness is an accomplice is disputed. The second proposed paragraph applies when the issue of whether the witness is an accomplice is undisputed. In this case, the trial judge erroneously encompassed both concluding paragraphs in his charge rather than deleting the proposed paragraph which was not applicable.
The question of who decides whether a witness is an accomplice hinges upon the facts present in each case. When it is undisputed that that witness participated in the criminal offense with the accused, the question is one of law for the trial court to resolve. See Ripley v. State, 189 Tenn. 681, 687, 227 S.W.2d 26, 29 (1950); Bethany v. State, 565 S.W.2d 900, 903 (Tenn. Crim. App. 1978); Conner v. State, 531 S.W.2d 119, 123 (Tenn. Crim. App. 1975). However, when the evidence adduced during the trial is in dispute or susceptible to an inference that the witness may or may not be an accomplice, the question is one of fact for the jury to resolve. See Ripley v. State, supra; Bethany v. State, supra; Bright v. State, 563 S.W.2d 908, 910 (Tenn. Crim. App. 1977); Conner v. State, supra. In this case, the record makes it clear that Likens was an accomplice of the appellants; and the trial court should have only charged the second proposed paragraph to the effect that Likens was an accomplice as a matter of law.
We parenthetically note that the pattern instructions have not been officially approved by our Supreme Court or the Tennessee General Assembly. Consequently, these instructions should only be used by a trial judge after he has made a careful analysis of the case on trial. As our Supreme Court said in State v. Martin, 702 S.W.2d 560 (Tenn. 1985):
They are merely "patterns" or suggestions and serve no other purpose. It is the responsibility of the trial judge to prepare the jury instructions, and while previously printed forms may be convenient, these must be revised or supplemented if necessary in order to state the applicable law fully and accurately.
702 S.W.2d at 564, n. 5.
Based upon our review of the entire instruction as well as the record, we conclude that the error committed by the trial judge was harmless. Tenn.R.App.P. 36(b); Tenn.R.Crim.P. 52(a). We cannot say, considering the entire instruction and the overwhelming evidence of the appellant's guilt, that this error more probably than not affected the judgment or resulted in prejudice to the judicial process.
This issue is without merit.
RANGE OF PUNISHMENT FOR ASSAULT WITH INTENT TO COMMIT MURDER FIRST DEGREE
Dulsworth filed a pretrial motion requesting that the trial court charge the jury as to the possible penalties for the *286 offenses charged in the indictment as well as all lesser included offenses. See T.C.A. § 40-35-201(b). The trial court granted the motion.
The trial court charged the jury that the punishment for the offense of assault with intent to commit murder in the first degree, accompanied by bodily injury, "carries a possible punishment of five years to life." See T.C.A. § 39-2-103(b). Dulsworth contends this instruction was erroneous because the indictment did not allege, and, therefore, did not give him notice, that the victim suffered bodily injury within the meaning of T.C.A. § 39-2-103(b). He argues that the trial court should have instructed the jury that the punishment for this offense was imprisonment for not less than five years nor more than twenty-five years in the Department of Correction. We disagree.
The indictment returned by the Macon County Grand Jury against the appellants alleged in part:
[O]n or about the 17th day of January, 1987, ... the said Timmy Lydell Dulsworth, Roger Cordell Stewart, and Elmer Lee Likens did unlawfully, feloniously, and with malice aforethought assault Elmer Saddler by stabbing him numerous times about the neck and chest with a knife, with the intent to commit Murder in the First Degree in violation of Section 39-2-103 T.C.A., and against the peace and dignity of the State of Tennessee.
As can be seen from a reading of the salient parts of indictment, the appellant was placed on notice that he was accused of assault with the intent to commit murder in the first degree, accompanied by bodily injury, as proscribed by T.C.A. § 39-2-103(b). The indictment alleges that the named individuals stabbed the victim several times about his chest and neck. A stab wound constitutes "bodily injury" within the meaning of T.C.A. § 39-2-103(b). Dulsworth's reliance upon Church v. State, 206 Tenn. 336, 333 S.W.2d 799 (1960), and State v. Lindsay, 637 S.W.2d 886 (Tenn. Crim. App. 1982), is misplaced.
The trial court properly charged the range of punishment for the offense of assault with the intent to commit murder first degree, accompanied by bodily injury; and the trial court properly sentenced the defendant within the sentence range provided in T.C.A. § 39-2-103(b).
This issue is without merit.
FAILURE TO CHARGE LESSER INCLUDED OFFENSES
Dulsworth contends the trial court committed error in failing to charge all of the lesser included offenses contained in the principal offense charged in the indictment, assault with the intent to commit murder in the first degree. The trial court charged the lesser included offenses of aggravated assault and assault and battery.
While Dulsworth does not state what lesser included offenses the trial court should have charged, the record reflects that Dulsworth's attorney made an oral request for an instruction on the lesser included offense of attempt to commit a felony. The trial court refused to include such an instruction in the charge given the jury.
The appellant's oral request for the instruction did not comport with Rule 30(a), Tennessee Rules of Criminal Procedure. This Rule requires that a party submit special requests for instructions in written form. In State v. Mackey, 638 S.W.2d 830, 836 (Tenn. Crim. App. 1982), this Court ruled that a trial court will not be placed in error for refusing to give an instruction which does not comport with the Rule. However, we opt to address this issue on the merits.
The facts contained in the record do not support an instruction for attempt to commit a felony. The record reflects that Dulsworth and Likens entered the home of the victim. Dulsworth stabbed the victim several times about the chest and neck and took the victim's wallet containing approximately $140.00. Dulsworth, Stewart and Likens then left the victim's residence. In summary, the record reflects two completed offenses, namely, assault *287 with the intent to commit murder in the first degree and robbery with a deadly weapon.
A trial court is not required to charge a jury on a lesser included offense unless there is evidence contained in the record to support a conviction for that lesser included offense. State v. Mellons, 557 S.W.2d 497, 499 (Tenn. 1977); Whitwell v. State, 520 S.W.2d 338, 343 (Tenn. 1975); State v. Dobbins, 754 S.W.2d 637, 642-643 (Tenn. Crim. App. 1988); State v. Rhoden, 739 S.W.2d 6, 11 (Tenn. Crim. App. 1987). Consequently, an accused is not entitled to an instruction on attempt to commit a felony when the criminal offense has been completed. Johnson v. State, 506 S.W.2d 815, 816 (Tenn. Crim. App. 1973); Murphy v. State, 4 Tenn. Crim. App. 610, 612, 475 S.W.2d 182, 183 (1971); Levasseur v. State, 3 Tenn. Crim. App. 513, 520-521, 464 S.W.2d 315, 319 (1970).
This issue is without merit.
RELEVANCY OF EVIDENCE
Dulsworth contends that the trial court allowed the State on four separate occasions to introduce evidence which was either not relevant or the prejudicial effect outweighed its probative value.
We have examined the evidence in the context of the issues to be determined by the jury and the remaining evidence introduced at the trial. In each instance, the evidence was relevant and the prejudicial effect of the evidence did not outweigh its probative value.
Any evidence which tends to establish the guilt of an accused is highly prejudicial to the accused, but this does not mean that the evidence is inadmissible as a matter of law.
This issue is without merit.
INSTRUCTIONS ON IDENTITY AND VOLUNTARY INTOXICATION
The trial judge incorporated in his charge an instruction on voluntary intoxication. See T.P.I. Crim. § 36.07 (2nd ed. 1988). The defendant contends that the trial court should have charged T.P.I. Crim. § 36.08 (2nd ed. 1988) instead. He argues that the instruction given should have gone further since the appellants were charged with assault with intent to commit murder first degree.
The instruction given was accurate. While counsel requested an instruction on voluntary intoxication, there was no special request submitted to the court.
If the appellant was not satisfied with the instruction given by the trial court, it was his duty to submit a special request to the trial judge for his consideration. Having failed to do so, the defendant cannot now contend that this constituted error. See Tenn.R.App.P. 36(a); Bolton v. State, 591 S.W.2d 446, 448 (Tenn. Crim. App. 1979). It has long been established in this jurisdiction that the mere meagerness of an instruction does not constitute reversible error in the absence of a special request for an additional instruction. State v. Haynes, 720 S.W.2d 76, 85 (Tenn. Crim. App. 1986); State v. Rollins, 605 S.W.2d 828, 832 (Tenn. Crim. App. 1980).
Dulsworth also contends that the trial judge failed to charge the jury on the issue of identity. See T.P.I. Crim. § 37.17.[5] He argues that there was an issue of fact regarding the identity of the appellants; and the issue was material to his defense.
The victim advised the sheriff on the evening in question that he could identify the two men who entered his residence. The victim had seen Dulsworth before, as indicated above. The victim immediately identified Dulsworth and Likens when he entered the courtroom shortly before the preliminary hearing was to commence. He was also able to identify Dulsworth during the trial.
*288 Likens testified that he accompanied Stewart and Dulsworth to the victim's residence, and that Dulsworth and Likens entered the victim's residence. Later, the three went to the home of Stewart's former wife. All three men were arrested either inside the residence, immediately outside the residence, or in close proximity to the residence.
Stewart testified that he went to the home of the defendant in the company of both Dulsworth and Likens. He further stated that Dulsworth and Likens went inside the residence. He simply denied having any knowledge that they were going to rob the victim.
The trial judge charged the jury on reasonable doubt. The instruction stated in part:
The State must prove beyond a reasonable doubt all the elements of the crimes charged and that the crimes, if in fact committed, were committed by the defendants and that they were committed before the finding of and returning of the indictment in this case, and that they were committed in Macon County, Tennessee. [Emphasis added].
While the trial judge should have given a more detailed instruction on the issue of identity, the failure to do so, in the absence of a special request, does not constitute reversible error. Furthermore, the identity of Dulsworth was clearly established in the record. Consequently, if the trial court can be said to have committed error in failing to instruct on the issue of identity, the error was harmless beyond a reasonable doubt. Tenn.R.Crim.P. 52(b).
This issue is without merit.
STEWART'S MOTION TO SUPPRESS
Stewart contends that the trial court committed error of prejudicial dimensions in overruling his motion to suppress a bloody $50.00 bill taken from his pants pocket on the evening in question. He argues that the search and seizure were incident to an illegal arrest.
The facts known to the police when Stewart was arrested did not directly link him to the commission of the two offenses alleged in the indictment. As previously indicated, two men saw a car matching the description of Stewart's vehicle on the highway near the victim's residence on the evening in question. However, there were no other facts from which the police could conclude that Stewart, Dulsworth and Likens went to the victim's residence and committed the offenses. Consequently, the officers did not have probable cause to arrest Stewart.
Based upon our review of the entire record in this cause, we conclude that the admission of the $50.00 bill into evidence was harmless beyond a reasonable doubt. The evidence of Stewart's guilt is overwhelming. See Chapman v. California, 386 U.S. 18, 87 S.Ct. 824, 17 L.Ed.2d 705 (1967).
This issue is without merit.
INSTRUCTION ON AIDING AND ABETTING
A portion of the trial judge's instruction on the law governing aiding and abetting was omitted. When the jury returned with a question, it was brought to the trial judge's attention out of the presence of the jury that he had omitted part of the instruction. The trial judge then read that portion of the instruction which he had omitted.[6] In summary, the jury was given a complete instruction by the trial judge on aiding and abetting.
Based upon a reading of the entire record, we are of the opinion that Stewart was not prejudiced by the trial judge's error. This is evidenced by the fact that Stewart was acquitted of the offense of assault with the intent to commit murder first degree.
This issue is without merit.
*289 SENTENCING ISSUES
Dulsworth contends that the trial court committed error of prejudicial dimensions by sentencing him as a persistent offender. T.C.A. § 40-35-106 (Supp. 1988). He argues that he has not been convicted of the requisite number of felonies because a guilty plea, which resulted in one of the convictions proven by the State, is constitutionally infirm.
Before a defendant may be sentenced as a persistent offender within the meaning of the Tennessee Criminal Sentencing Reform Act of 1982,[7] the judge must find beyond a reasonable doubt that the defendant has been previously convicted of (a) two or more felonies within five (5) years immediately preceding the commission of the offense for which the defendant was convicted;[8] or (b) four or more felonies within ten (10) years immediately preceding the commission of the offense for which the defendant was convicted.[9] In the case sub judice, Dulsworth was convicted of two felonies within the five year period which preceded the commission of the offense for which he was convicted.
Dulsworth committed the offenses in this case on January 17, 1987. The record reflects that he was convicted of second degree burglary and strong arm robbery[10] in Macon County, Tennessee, on March 17, 1981. He was released from the penitentiary on October 22, 1982. Since the time Dulsworth spent in prison is not to be considered when calculating the five year period,[11] these convictions are within the five year period. The record further reflects that he was convicted of grand larceny in Sumner County, Tennessee, on July 1, 1983. Thus, the record supports the finding of the trial court that Dulsworth was a persistent offender beyond a reasonable doubt.
The question of whether Dulsworth's guilty plea to the offense of second degree burglary in Trousdale County on November 28, 1983, is constitutionally infirm has been rendered moot by our determination that there are two other convictions which fall within the five year period. As a result, it is not necessary for this Court to resolve this issue.
Stewart contends that the sentence imposed by the trial court is excessive. He argues that the trial court failed to properly weigh the mitigating and enhancing factors and apply the principles of sentencing. We agree.
A review of the record reveals that the trial judge did not address the purposes of the Tennessee Criminal Sentencing Reform Act of 1982,[12] the sentencing considerations enumerated in the Act,[13] the mitigating factors that might be present,[14] or the enhancing factors which may also be present.[15] As the Supreme Court stated in State v. Moss, 727 S.W.2d 229 (Tenn. 1986), there is "[a] panoply of statutory provisions [which guide] sentencing courts in the exercise of their discretion." 727 S.W.2d at 237. As this Court stated in State v. Gauldin, 737 S.W.2d 795 (Tenn. Crim. App. 1987):
The Tennessee Criminal Sentencing Reform Act of 1982 makes it clear that the record of the sentencing hearing "shall include specific findings of fact upon which application of the sentencing principles were based." T.C.A. § 40-35-209(c). This provision is mandatory. See Stubbs v. State, 216 Tenn. 567, *290 393 S.W.2d 150, 154 (1965); Blankenship v. State, 223 Tenn. 158, 443 S.W.2d 442, 445 (1969). The fact that this Court must review the sentence imposed by the trial court de novo without a presumption of correctness does not relieve the trial judge from complying with this mandate. See T.C.A. § 40-35-402(d).
737 S.W.2d at 798.
In view of the deficiency in the record, this cause must be remanded to the trial court for a new sentencing hearing as to Stewart. If either party is dissatisfied with the sentence imposed by the trial court, they may appeal as of right to this Court.[16]
Stewart's conviction for the offense of robbery with a deadly weapon is affirmed. However, this cause is remanded to the trial court for a new sentencing hearing as to Stewart.
The judgment of the trial court as to Dulsworth's convictions and sentences is affirmed.
REID, J., and ALLEN R. CORNELIUS, Jr., Special Judge, concur.
NOTES
[1] He is also referred to as "Dulworth" and "Dullsworth" in the record.
[2] Likens, a co-defendant, entered pleas of guilty to the offenses of robbery with a deadly weapon and assault with intent to commit murder in the first degree. Pursuant to a plea bargain agreement, the trial court sentenced Likens to serve ten (10) years in the Department of Correction in each case.
[3] State v. Manning, 490 S.W.2d 512, 514 (Tenn. 1973); State ex rel. Wood v. Johnson, 216 Tenn. 531, 534-535, 393 S.W.2d 135, 136 (1965); Harris v. State, 206 Tenn. 276, 287, 332 S.W.2d 675, 680 (1960); Satterfield v. State, 196 Tenn. 573, 575, 269 S.W.2d 607, 608 (1954); State v. Miller, 608 S.W.2d 158, 160 (Tenn. Crim. App. 1980); Robinson v. State, 517 S.W.2d 768, 772 (Tenn. Crim. App. 1974); Graves v. State, 489 S.W.2d 74, 84 (Tenn. Crim. App. 1972); Berry v. State, 4 Tenn. Crim. App. 592, 598-599, 474 S.W.2d 668, 671 (1971); Nelson v. State, 4 Tenn. Crim. App. 228, 230-231, 470 S.W.2d 32, 33-34 (1971).
[4] T.P.I. Crim. § 37.09 (2nd ed. 1988).
[5] T.P.I. Crim. § 37.17 provides: "The state must prove beyond a reasonable doubt the defendant's identity as the person who committed the crime. If, after considering all the evidence in this case, you the jury are not satisfied beyond a reasonable doubt that the defendant is this person, then you must find him not guilty."
[6] A trial judge has the authority to give supplemental instructions when the jury poses a question that indicates the jurors are confused regarding a question of law. See State v. Moore, 751 S.W.2d 464, 467-468 (Tenn. Crim. App. 1988); State v. McAfee, 737 S.W.2d 304, 307 n. 2 (Tenn. Crim. App. 1987).
[7] T.C.A. § 40-35-106 (Supp. 1988).
[8] T.C.A. § 40-35-106(a)(1) (Supp. 1988).
[9] T.C.A. § 40-35-106(a)(2) (Supp 1988).
[10] The record does not reflect whether these two offenses were "committed as part of a single course of conduct within a period of twenty-four (24) hours during which there was no substantial change in the nature of the criminal objective ..." T.C.A. § 40-35-106(b)(1). However, we are not required to make this determination in view of Dulsworth's conviction for grand larceny on July 1, 1983, in Sumner County, Tennessee.
[11] T.C.A. § 40-35-106(b)(2) (Supp. 1988).
[12] T.C.A. § 40-35-102.
[13] T.C.A. § 40-35-103 (Supp. 1988).
[14] T.C.A. § 40-35-110.
[15] T.C.A. § 40-35-111. See State v. Gauldin, 737 S.W.2d 795, 798 (Tenn. Crim. App. 1987).
[16] T.C.A. § 40-35-402(d) (Supp. 1988) and 40-35-403.
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824 So.2d 908 (2002)
The STATE of Florida, Appellant,
v.
Kathy ROBERTS, Appellee.
No. 3D01-2894.
District Court of Appeal of Florida, Third District.
June 19, 2002.
Rehearing and Rehearing Denied September 4, 2002.
Robert A. Butterworth, Attorney General, and Susan Odzer Hugentugler, Assistant Attorney General, for appellant.
Bennett H. Brummer, Public Defender, and Valerie Jonas, Assistant Public Defender, for appellee.
Before GODERICH and SHEVIN, JJ., and NESBITT, Senior Judge.
Rehearing and Rehearing En Banc Denied September 4, 2002.
PER CURIAM.
The State appeals from the imposition of a downward departure sentence in a case in which the defendant pled guilty to the offense of selling cocaine to a police officer. Because there were no valid reasons for departure, we reverse. See Atwaters v. State, 519 So.2d 611 (Fla.1988) (holding that the quantity of drugs may not be used to support a departure): State v. Ford, 739 So.2d 629 (Fla. 3d DCA 1999) (holding that a defendant's substance abuse or addiction does not justify a downward departure). As we think that the State's objection was sufficiently specific to advise the court of the alleged error, we are not persuaded by the defendant's contention that the issue was not preserved. State v. Paulk, 813 So.2d 152, 154 (Fla. 3d DCA 2002).
Accordingly, we reverse and vacate the downward departure sentence and remand to allow the defendant to withdraw her plea and go to trial, or be resentenced within the guidelines.
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FILED
NOT FOR PUBLICATION DEC 14 2009
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 08-50538
Plaintiff - Appellee, D.C. No. 3:08-cr-02546-GT-1
v.
MEMORANDUM *
CLAUDIO JUAREZ-MENDEZ,
Defendant - Appellant.
Appeal from the United States District Court
for the Southern District of California
Gordon Thompson, District Judge, Presiding
Submitted December 10, 2009 **
Pasadena, California
Before: HALL and SILVERMAN, Circuit Judges, and CONLON, *** District
Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The panel unanimously finds this case suitable for decision without
oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Suzanne B. Conlon, United States District Judge for
the Northern District of Illinois, sitting by designation.
In July 2008, Defendant pled guilty to one count of unlawful reentry by a
removed alien, in violation of 8 U.S.C. § 1326(a)-(b). Because Defendant had
previously been convicted of committing lewd acts on a child, a felony under Cal.
Penal Code § 288(a), the district court applied a 16-level enhancement pursuant to
U.S.S.G. § 2L1.2(b)(1)(A)(ii), yielding a Guidelines range of 46 to 57 months’
imprisonment; the district court ultimately sentenced Defendant to a 51-month
prison term. Defendant now challenges the reasonableness of his sentence.
First, we reject several of Defendant’s arguments as foreclosed, namely: (1)
that his § 288(a) conviction did not constitute a crime of violence for purposes of
U.S.S.G. § 2L1.2’s 16-level enhancement, see United States v. Medina-Villa, 567
F.3d 507, 511-12 (9th Cir. 2009); and (2) that the prior conviction exception
established in Almendarez-Torres v. United States, 523 U.S. 224 (1998), should be
limited to its facts, has been implicitly overruled, and renders unconstitutional 8
U.S.C. § 1326(b). See United States v. Garcia-Cardenas, 555 F.3d 1049, 1051 (9th
Cir. 2009) (per curiam) (listing cases).
Second, we reject Defendant’s argument that, by applying the Guidelines
enhancement, the district court abused its discretion under Kimbrough v. United
States, 552 U.S. 85 (2007), because U.S.S.G. § 2L1.2 purportedly lacks an
empirical basis. The policy behind the enhancement is sound. See United States v.
Ramirez-Garcia, 269 F.3d 945, 947-48 (9th Cir. 2001); United States v. Ruiz-
-3-
Chairez, 493 F.3d 1089, 1091-92 (9th Cir. 2007). Moreover, even if the guideline
lacks an empirical basis, Kimbrough does not require a district court to reject it;
Kimbrough merely recognizes a district court’s discretion to do so.
Third, we reject Defendant’s argument that the district court denied him his
Sixth Amendment right to a jury trial, per Apprendi v. New Jersey, 530 U.S. 466
(2000), by finding the facts necessary to increase the statutory maximum
punishment applicable to his offense. Although the charging document in this case
did not specifically allege that Defendant had previously been removed after a
violent felony conviction—a necessary predicate to increasing the statutory
maximum sentence to 20 years, see 8 U.S.C. § 1326(b)(2)—Defendant admitted at
his change of plea hearing to a prior removal that occurred after his § 288(a)
conviction. This admission established beyond a reasonable doubt the temporal
relationship between Defendant’s violent felony conviction and his subsequent
removal. Accordingly, the absence of a jury finding on this issue did not constitute
an Apprendi violation. See United States v. Covian-Sandoval, 462 F.3d 1090,
1097-98 (9th Cir. 2006).
However, we vacate Defendant’s 51-month sentence and remand this case to
the district court to reconsider the weight to be afforded Defendant’s 18-year-old §
288(a) conviction in light of the court’s recent decision in United States v.
-4-
Amezcua-Vasquez, 567 F.3d 1050 (9th Cir. 2009), which had not yet been decided
at the time of Defendant’s sentencing.
VACATED and REMANDED.
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80 Ill. App.2d 237 (1967)
225 N.E.2d 80
People of the State of Illinois for the Use of John E. Cullerton, Director of Labor of the State of Illinois, Plaintiff-Appellee,
v.
John N. Crawford, Sr., d/b/a South Parkway Insurance Service, Defendant-Appellant.
Gen. No. M-51,332.
Illinois Appellate Court First District, Fourth Division.
March 3, 1967.
*238 *239 Rufus Sampson and R.E. Spurlark, Jr., of Chicago, for appellant.
William G. Clark, Attorney General, of Chicago (Richard A. Michael and Philip J. Rock, Assistant Attorneys General, of counsel), for appellee.
MR. JUSTICE DRUCKER delivered the opinion of the court.
This is an appeal from a judgment entered against the defendant in an action for debt (to collect taxes), brought by the plaintiff on a determination and assessment made by the Director of Labor under the provisions of the Unemployment Compensation Act. In this appeal defendant urges various improprieties with regard to the judgment and also argues that the court erred in striking certain of his interrogatories.
In paragraph 1 of its complaint (filed on January 4, 1965) plaintiff alleged that under authority of the Illinois Unemployment Compensation Act certain unemployment compensation contributions, interest and penalties were determined and assessed against the defendant. In paragraph 2 plaintiff alleged that:
Defendant(s) filed with the Director a timely written protest and petition for hearing; a hearing was *240 held; the Director rendered his decision affirming or modifying said determination(s) and assessment(s); duly served a copy of said decision and defendant(s) failed to file complaint to review said decision or cause to be issued summons within 35 days from the date of such service as provided under Section 4 of the Administrative Review Act of Illinois (Chapter 110, Paragraph 267, Illinois Revised Statutes 1963) whereupon, the said determination(s) and assessment(s) became final.
Defendant filed a verified answer on August 3, 1965, and neither admitted nor denied the allegations set forth in paragraph 2 of the complaint. In his answer defendant denied that the Act was applicable to him and also alleged that the Act deprived him of his constitutional right to a trial by jury. On November 5, 1965, defendant served interrogatories upon the plaintiff. These interrogatories were directed to the issues as allegedly determined at the hearing and to the allegations set forth in paragraph 2 of plaintiff's complaint as aforesaid. On November 24 plaintiff filed a motion to strike the interrogatories as irrelevant and immaterial, which was sustained on December 15. On January 7, 1966, plaintiff filed a motion to strike defendant's answer and for judgment, which was sustained on February 25, 1966. In accordance therewith judgment was entered for the plaintiff.
[1] The provisions of the Unemployment Compensation Act (Ill Rev Stats 1965, c 48, §§ 300-820) relating to administrative investigations, hearings, decisions and collection are constitutional. The principles of law are analogous to those enunciated by the Illinois Supreme Court in Department of Finance v. Cohen, 369 Ill. 510, 516-517, 17 NE2d 627, relating to the Retailer's Occupation Tax Act:
*241 The statute sets forth with great detail the matters which must go into the monthly return, and lays a guide which, when followed, leaves nothing open for arbitrary discretion. The legislature cannot deal with the details of every particular case, and reasonable discretion as to the manner of executing a law must necessarily be given to administrative officers.... The sections of the statute complained of do not violate the constitution by investing administrative officers with judicial powers, and the objection that appellant is deprived of property without due process of law has already been adversely decided in Reif v. Barrett, supra, [355 Ill. 104]. Moreover, . .. the act provides a method of reviewing the action of the department....
[2-4] In his answer defendant alleges that he was deprived of his right to a trial by jury. It is well settled, however, that a defendant is not entitled to a trial by jury in tax proceedings before an administrative agency. Hoffman v. Department of Finance, 384 Ill. 494, 30 NE 2d 34. Nor does the requirement that the defendant must file his complaint for judicial review within 35 days after the decision of the administrative agency violate any of his constitutional rights.
We find that defendant was not deprived of any constitutional right by the Unemployment Compensation Act or by the Administrative Review Act.
[5, 6] In his answer defendant also alleged that the provisions of the Unemployment Compensation Act were not applicable to him. However, since no judicial review was sought the issue was not properly before the trial court. A person seeking judicial review of an administrative decision must act promptly and within the time prescribed by the statute. Pearce Hospital Foundation v. Illinois Public Aid Commission, 15 Ill.2d 301, 154 NE *242 2d 691. Since no review was sought the assessment became final and cannot be attacked on its merits.
[7] No issues were raised for the court's determination by defendant's answer. Therefore the court properly allowed the plaintiff's motion to strike the answer and to enter judgment in plaintiff's favor.
[8-10] In his notice of appeal defendant asserts that his interrogatories were improperly stricken by the court. They related either to the merits of the claim or to whether plaintiff complied with the procedural requisites set forth in the Unemployment Compensation Act for assessing a tax claim. Those interrogatories relating to the merits of the claim were properly stricken because the issue was not properly before the court (defendant not having filed for judicial review). Those interrogatories relating to whether there had been compliance with the procedural requisites were properly stricken because no issue had been created by the pleadings. In paragraph 2 of its complaint plaintiff alleged that it had complied with the procedural requisites of the Unemployment Compensation Act, and further alleged that defendant failed to file a complaint to review the determination and assessment within the time allowed by the Administrative Review Act of Illinois (Ill Rev Stats 1965, c 110, § 267). In his verified answer defendant did not deny those allegations nor did he state that he had insufficient knowledge to form a belief. Section 40(2) of the Illinois Civil Practice Act (Ill Rev Stats 1965, c 110, § 40 (2)) provides that:
Every allegation, except allegations of damages, not explicitly denied is admitted, unless the party states in his pleading that he has no knowledge thereof sufficient to form a belief, and attaches an affidavit of the truth of the statement of want of knowledge, or unless the party has had no opportunity to deny.
*243 Where the allegations of plaintiff's complaint are admitted no issue is created by the pleadings.
[11-14] Defendant urges for the first time on appeal that he was denied equal protection of the law because the judgment in the instant case was entered by a magistrate and the tenure of that office is uncertain. A magistrate is a full judicial officer (Coleman v. Scott, 76 Ill. App.2d 417, 222 NE2d 5) and actions to collect taxes are properly assignable thereto. Ill Rev Stats 1965, c 37, § 622(a) (6). Furthermore, all objections to the propriety of an assignment to a magistrate are waived unless made before the trial or hearing begins. Ill Rev Stats, 1965, c 37, § 628. Defendant, having failed to interject a timely objection, is foreclosed from urging error at this point.
We find that the rulings of the trial court were proper and therefore the judgment is affirmed.
Affirmed.
ENGLISH, P.J. and McCORMICK, J., concur.
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618 F.Supp. 196 (1985)
The STATE OF NEW JERSEY on the Relation of Alan E. KUDISCH on the Behalf of Julio VARGAS, Petitioner,
v.
Albert A. OVERBECK, Warden, Hudson County Jail, and Irwin I. Kimmelman, Attorney General of the State of New Jersey, Respondents.
Civ. A. No. 85-1714.
United States District Court, D. New Jersey.
September 4, 1985.
*197 Fishman & Kudisch by Alan E. Kudisch, Kew Gardens, N.Y., for petitioner.
Irwin I. Kimmelman, Atty. Gen. of N.J. by Mildred Vallerini Spiller, Deputy Atty. Gen., Trenton, N.J., for respondents.
OPINION
CLARKSON S. FISHER, Chief Judge.
Julio Vargas, convicted of conspiracy to commit aggravated arson, making payment for the purpose of starting a fire, and reckless endangerment by arson, has filed a petition for a writ of habeas corpus. Although the petition is grounded on three arguments, the parties and the court have focused on the issue of whether the prosecutor's failure to inform the Grand Jury of exculpatory evidence of which he was aware violated the defendant's guarantees of due process under the Fifth and Fourteenth Amendments. After consideration of the papers filed and oral argument, this court concludes that the prosecutor committed error that rose to a level of constitutional magnitude. Accordingly, the petition for a writ of habeas corpus is granted.
After the Hoboken police department and fire marshals investigated a fire that destroyed Julio Vargas' grocery store, a Hudson County Grand Jury returned an indictment naming five men, including Vargas, as defendants. Upon reading the minutes of the Grand Jury proceedings, Vargas' attorney, Mr. Kudisch, filed a motion in limine to dismiss the indictment on the grounds that the prosecutor failed to inform the Grand Jury of exculpatory evidence and that the evidence presented to the Grand Jury was insufficient to sustain the indictment. The Superior Court of New Jersey, Law Division, however, denied defendant's motion, and Vargas was tried before a jury in that court in June 1982. On June 24, 1982, the jury returned verdicts of guilty on the charges mentioned above, and on October 15, 1982, the Superior Court sentenced Vargas to a term of 15 years with 5 years of parole ineligibility. The other four defendants had entered into plea negotiations with the State, and in return for the State's willingness to plea bargain, each of the other four defendants, all of whom received lighter sentences than Vargas, agreed to testify against any defendant who proceeded to trial.
*198 Immediately after the sentencing, Vargas appealed to the Appellate Division of the Superior Court. He raised the same arguments in the Appellate Division as are pressed now in the petition for a writ of habeas corpus. Vargas argued that the prosecutor violated his due process rights by withholding exculpatory evidence from the Grand Jury, that his attorney was not informed until late in the trial that the fire marshal's report revealed that no accelerant was found at the scene of the fire, and that one attorney's representation of two alleged co-conspirators created a patent conflict of interest. In an unpublished per curiam opinion filed February 14, 1984, the Appellate Division rejected these contentions and affirmed the conviction. A petition for certification to the New Jersey Supreme Court raising these same arguments was filed, but it was denied on May 16, 1984. State v. Vargas, 97 N.J. 602, 483 A.2d 140 (1984). Vargas' claims before this court are those that were raised in the state courts. He has therefore exhausted his state remedies and his habeas petition is properly before this court. See Santana v. Fenton, 685 F.2d 71, 73-74 (3d Cir.1982), cert. denied, 459 U.S. 1115, 103 S.Ct. 750, 74 L.Ed.2d 968 (1983).
The relevant facts of the alleged crime were set forth succinctly by the Appellate Division in its decision affirming the conviction:
Defendant operated a small supermarket which was substantially insured when destroyed by fire of suspicious origin. The co-conspirator Santos owed a debt to defendant and in order to obtain forgiveness of the debt he was allegedly induced by defendant to solicit the other three co-conspirators to burn the business. When implicated by the co-conspirators Santos confessed to his involvement and outlined the entire scheme inculpating this defendant. After he had given the statement however he refused to sign it stating it was not true and that he only made it in order to obtain his release from police custody and to protect his family. Thereafter Santos once more reversed his position, cooperated with law enforcement officials, and testified against defendant at trial.
State v. Vargas, No. A-638-82T4, slip op. at 2 (App.Div., Superior Court of New Jersey, February 14, 1984). The parties are in agreement that the evidence presented to the Grand Jury supporting the indictment consisted principally of the fact that Vargas' grocery store, which was suffering financially, burned by non-accidental means, and of co-conspirator Santos' statement to the police that he was induced by Vargas to solicit the other co-conspirators to set fire to the grocery store. It is uncontested that immediately after Santos made a statement to the police implicating himself and Vargas, the police told Santos that they were going to type the statement so he could sign it, but Santos refused, insisting that the statement was false and was made only so that he would be released and able to rejoin his family. There is no dispute that Officer O'Neill, who testified before the Grand Jury, and the prosecutor, were aware of Santos' recantation, but the Grand Jury was never informed of this fact.
Contesting Vargas' due process claim, the State has posited two arguments. First, the State has cited a line of cases for the proposition that the prosecutor had no duty to inform the Grand Jury of Santos' recantation. Second, the State has observed that the petit jury, after defense counsel had an opportunity to examine and cross-examine at trial, found Vargas guilty beyond a reasonable doubt. Therefore, the State has asserted that, even if the prosecutor erred, such error was "harmless." These arguments shall be considered seriatim.
It is undisputed, as the State maintains, that the Grand Jury proceeding is not an adversarial hearing to determine guilt or innocence, and an indictment, which is not evidence of guilt, is a finding that probable cause exists that a crime has been committed by the accused, United States v. Romano, 706 F.2d 370, 374 (2d Cir.1983); United States v. Ciambrone, *199 601 F.2d 616, 622 (2d Cir.1979). Respecting the Grand Jury proceedings, the prosecutor may exercise considerable discretion in determining what should be presented to the Grand Jury, and the prosecutor is not obligated "to search for and submit to a grand jury evidence favorable to the defense or negating guilt, when it has not been requested by the Grand Jury." Ciambrone, 601 F.2d at 622; United States v. Litman, 547 F.Supp. 645, 649 (W.D.Pa.1982).[1] In addition, the prosecutor's discretion in this regard is generally circumscribed only if it appears that the prosecutor "knowingly" used perjurious testimony to secure the indictment, or substantial evidence negating guilt was not presented to the Grand Jury. See Romano, 706 F.2d at 374; United States v. Purvis, 544 F.Supp. 68, 72 (S.D.N.Y.1982). The State thus concludes from these cases that Officer O'Neill's testimony before the Grand Jury was truthful, the prosecutor did not refuse willfully to disclose material information sought by the Grand Jury, and that the thrust of Vargas' claim, that the prosecutor has a duty to search for and present to the Grand Jury any and all evidence favorable to the accused, is unsupported by law.
The material fallacy in the State's argument is that no searching for exculpatory evidence was required in the instant case. The fact that Santos recanted his statement was readily apparent to the prosecutor, as he and Officer O'Neill had this information in their possession. Although Officer O'Neill's testimony before the Grand Jury respecting Santos' confession was true, given Santos' immediate recantation, of which the Grand Jury was not informed, the evidence presented to the Grand Jury constituted merely a half-truth. By failing to furnish the exculpatory evidence of which he was aware, the prosecutor presented a case to the Grand Jury that was incomplete and misleading.
This court acknowledges that there are cases holding that the prosecutor does not have a duty to present any exculpatory evidence to the Grand Jury. United States v. Sears, Roebuck & Co., Inc., 719 F.2d 1386, 1390-91, 1394 (9th Cir.1983), cert. denied, 465 U.S. 1079, 104 S.Ct. 1441, 79 L.Ed.2d 762 (1984); United States v. Al Mudarris, 695 F.2d 1182, 1185 (9th Cir. 1983); United States v. Cederquist, 641 F.2d 1347, 1353 n. 3 (9th Cir.1981). Other courts tend to the view that although an indictment may be dismissed if the prosecutor fails to present exculpatory evidence to the Grand Jury, at least if the circumstances are egregious, an accused's liberties are adequately safeguarded by the petit jury. If the petit jury finds the accused guilty beyond a reasonable doubt and convicts, then the accused cannot claim prejudice by virtue of an impropriety at the Grand Jury stage, and a court should not overturn the conviction. See Ciambrone, 601 F.2d at 625; United States v. Polizzi, 500 F.2d 856, 888 (9th Cir.1974), cert. denied, 419 U.S. 1120, 95 S.Ct. 802, 42 L.Ed.2d 820 (1975). See also United States v. Kennedy, 564 F.2d 1329, 1338 (9th Cir.1977), cert. denied, 435 U.S. 944, 98 S.Ct. 1526, 55 L.Ed.2d 541 (1978). Moreover, there is a line of authority holding that a prosecutor does have a duty to present exculpatory evidence of which he is aware to the Grand Jury. Ciambrone, 601 F.2d at 623; Litman, 547 F.Supp. at 649; United States v. Gold, 470 F.Supp. 1336, 1353 (N.D.Ill.1979); United States v. Phillips Petroleum Co., 435 F.Supp. 610, 619-22 (N.D.Okla.1977). *200 These cases emphasize that while the Grand Jury proceeding is not a mini-trial to determine guilt or innocence where the accused is given an opportunity as of right to present his case, a prosecutor who withholds exculpatory evidence destroys the existence of an independent and informed jury. Without information material to its determination, the Grand Jury cannot protect citizens from malicious prosecution, and the interests of justice are not served. See Ciambrone, 601 F.2d at 623, and at 628-29 (Friendly, J. dissenting); Gold, 470 F.Supp. at 1353; Phillips Petroleum Co., 435 F.Supp. at 618-21. In fact, the Third Circuit, in addition to the Second and Ninth Circuits, has stated that an indictment may be dismissed "in the exercise of the [court's] supervisory power ... to correct flagrant or persistent abuse, despite absence of prejudice to the defendant...." United States v. Serubo, 604 F.2d 807, 817 (3d Cir.1979). Accord United States v. Hogan, 712 F.2d 757, 761 (2d Cir.1983); United States v. Fields, 592 F.2d 638, 647 (2d Cir.1978), cert. denied, 442 U.S. 917, 99 S.Ct. 2838, 61 L.Ed.2d 284 (1979); Cederquist, 641 F.2d at 1352-53.
In order to prevail on the merits of his petition, Vargas must demonstrate that
at the time the Government presented its case to the grand jury, the prosecutor was aware of the existence of exculpatory evidence which could reasonably lead the grand jury not to indict and that he deliberately failed to include it or, at a minimum, to notify the grand jury of its existence.
Litman, 547 F.Supp. at 650. At the time the prosecutor presented his case against Vargas to the Grand Jury, Santos' confession was a principal piece of evidence. Had the Grand Jury been informed of Santos' recantation, the Grand Jury, in this court's view, reasonably could have given little or no weight to the confession in which Vargas was implicated, and concluded that there was no probable cause to charge Vargas. The State has responded by pointing to the fact that even if the prosecutor misled the Grand Jury by failing to present exculpatory evidence, any error must be "harmless" in light of the petit jury's finding that Vargas was guilty beyond a reasonable doubt. At the trial, Santos, who by that time had pleaded guilty, testified against Vargas. In addition, Officer O'Neill also testified that Santos recanted his original statement implicating himself and Vargas. Therefore, the State has urged, citing Ciambrone, if the petit jury found Vargas guilty beyond a reasonable doubt, then there cannot be a reasonable probability that the Grand Jury would not have found probable cause to charge Vargas.
The defendant in Ciambrone was charged with perjuring himself under oath while testifying as a witness in a criminal case. Ciambrone, 601 F.2d at 618. Defendant's defense was that he "had been coerced by threats against his life into giving the alleged perjurious testimony at the Blasich trial...." Id. Defendant claimed that the prosecution was well aware of these threats but refused to present this information to the Grand Jury, instead intimating to the Grand Jury that defendant "was motivated to testify falsely at the Blasich trial because of his friendship with Blasich." Id. at 618, 622. Although the trial judge instructed the petit jury "that coercion or compulsion may constitute a legal excuse", the judge refused to dismiss the indictment. Id. at 621. Affirming the district court, the Second Circuit concluded from its examination of the record that the prosecutor who presented the case to the Grand Jury was unaware that other government employees had information that defendant had been threatened, and that the prosecutor's responses to the grand jurors' inquiries were his honest views, and "[fell] far short of misleading conduct or deception that would call for dismissal of the indictment in the present case." Id. at 623-24. The Second Circuit buttressed its conclusion that there was no deliberate omission on the prosecutor's part by pointing out that defendant was invited to testify before the Grand Jury, and his lawyer was invited to submit his contentions. Id. at 625. Finally, the Second *201 Circuit held that any error would not warrant dismissal of the indictment, because if the petit jury rejected defendant's duress and coercion defenses and found him guilty beyond a reasonable doubt, then "the grand jury would surely have found probable cause to charge him with perjury". Id.
In a strong dissent, Judge Friendly wrote that not only was the prosecutor who presented the case to the Grand Jury aware that threats had been made against defendant, but also that in any event other members of the prosecution team were aware of the threats, and the prosecutor before the Grand Jury "cannot be insulated from the rest of the prosecution team...." Ciambrone, 601 F.2d at 627-28 (Friendly, J., dissenting). The record, according to Judge Friendly, indicated that the prosecutor evaded the grand jurors' questions, and failed to respond fully and fairly to their requests for advice. Id. at 628-29. He concluded that if the prosecutor had disclosed the threats made to defendant, then "even with all the qualifications which the Government was entitled to put forward," there was a "strong prospect" that the Grand Jury would not have found probable cause, and that "[a] substantial possibility of this is all that is needed to warrant our quashing the indictment." Id. at 629.
This court agrees with the position espoused by Judge Friendly, and adopts the view also that although a petit jury convicted an accused is relevant to an enquiry of whether a Grand Jury would have indicted, that fact is not conclusive. It does not follow necessarily that the Grand Jury would have indicted merely because the petit jury convicted, the higher burden of proof required for a conviction notwithstanding. It is true that Santos testified at trial, that his testimony was corroborated by a co-indictee, that the petit jury was informed of Santos' recantation, and that the petit jury found Vargas guilty beyond a reasonable doubt. Nonetheless, the issue before this court is not whether the evidence at trial supported the conviction. Rather, the relevant inquiry, as noted in Litman, is whether "at the time the Government presented its case to the grand jury, the prosecutor was aware of the existence of exculpatory evidence which could reasonably [have led] the grand jury not to indict...." Litman, 547 F.Supp. at 650 (emphasis supplied).
It may be argued that the prosecution had a plethora of evidence supporting a conviction by the time Vargas was tried, but at the time of the Grand Jury proceeding, Santos' confession was a crucial piece of evidence. Cf. United States v. Dunham Concrete Products, Inc. 475 F.2d 1241, 1248-49 (5th Cir.1973) (indictment not dismissed because even if some of the testimony presented to grand jury was improper, that testimony constituted only a small portion of the evidence presented, "and appellants cannot, and in fact do not, dispute that at least some competent evidence was presented to the grand jury"): Romano, 706 F.2d at 374 (appellants never contended that entrapment defense, labeled "frivolous" by the trial judge, would have caused the Grand Jury not to indict if defense had been presented); United States v. Purvis, 544 F.Supp. 68, 72 (S.D.N.Y. 1982) (tape calling into doubt defendants' involvement in an unidentified drug sale, trial judge held, would not have led Grand Jury not to indict because the tape "[did] not counter [defendant's] original enlistment in the conspiracy charged"). It is this court's conclusion that had the Grand Jury been informed of Santos' repudiation, there would be a reasonable probability or substantial possibility that Vargas never would have been indicted.
The view that an accused cannot claim error respecting improprieties at the Grand Jury proceeding if the petit jury in fact convicts is unsupportable. If courts take the position that the petit jury affords an accused adequate safeguards against constitutional violations, then it is unclear what purpose the Grand Jury serves. See Note, "Grand Jury Proceedings: The Prosecutor, the Trial Judge and Undue Influence," 39 U.Chi.L.Rev. 761, 775 (1972). See also Polizzi, 500 F.2d at 888. If the modern *202 Grand Jury has no reason for being, then the burden is on the people and their legislatures, by statute and constitutional provision, to do away with the Grand Jury. It is not the courts' function to eviscerate the Grand Jury's role of "protect[ing] citizens from malicious prosecutions...." Gold, 470 F.Supp. at 1353; Note, 39 U.Chi. L.Rev. 761, 775.
Vargas has met his burden of establishing that the prosecutor failed to present exculpatory evidence of which he was aware, and that there is a reasonable probability that had the Grand Jury considered that information, it would not have returned an indictment. Vargas' due process rights have been violated. The violation is of constitutional magnitude, and therefore, the petition for a writ of habeas corpus is granted and the indictment against petitioner is dismissed.
NOTES
[1] The trial judge in Litman refused to dismiss the indictment against defendants, whose appeal was dismissed by the Third Circuit on the grounds that the district court's refusal to grant the motion was not an appealable order. United States v. Litman, 661 F.2d 17, 18-19 (3d Cir.1981). Rather than holding "that denial of a motion to dismiss an indictment on grounds of gross prosecutorial misconduct may never be immediately appealable," id. at 19, the Third Circuit noted that a prior panel had rejected the merits of defendants' claims in their petition for a writ of mandamus or prohibition, and, therefore, the prior panel's disposition rendered it inappropriate for the court to consider the merits of defendants' arguments. The Third Circuit cited the prior panel's disposition as Litman and Portnoy v. Weber, No. 81-1526 (3d Cir. April 23, 1981). See 661 F.2d at 18 n. 1. On January 11, 1982, the Supreme Court denied certiorari. 454 U.S. 1150, 102 S.Ct. 1016, 71 L.Ed.2d 304 (1982).
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340 F.2d 887
Gerard PIEL and Eleanor Jackson Piel, Petitioners,v.COMMISSIONER OF INTERNAL REVENUE, Respondent.
No. 19.
Docket 28852.
United States Court of Appeals Second Circuit.
Argued October 15, 1964.
Decided January 25, 1965.
Eleanor Jackson Piel, New York City (Donner & Piel, New York City, of counsel), for petitioners.
Jeanine Jacobs, Department of Justice, Washington, D. C. (Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson and Robert N. Anderson, Department of Justice, Washington, D. C., of counsel), for respondent.
Before WATERMAN, MOORE and SMITH, Circuit Judges.
MOORE, Circuit Judge.
1
Petitioners, Gerard Piel and Eleanor Jackson Piel, seek to review a decision of the Tax Court upholding a deficiency in their income tax for 1957. This case again presents the troublesome question whether a taxpayer may take as a tax deduction from yearly income under the alimony provisions of the Internal Revenue Code of 1954 premiums paid toward life insurance on his own life for the benefit of his former wife. The facts are not seriously in dispute and may be summarized as follows.
2
In 1955 Gerard Piel was divorced from his then wife, Mary, in Nevada. A previously executed separation decree was incorporated into the Nevada divorce decree. Under the decree Gerard was to make periodic monthly alimony payments to Mary so long as she lived or remained unmarried. These payments were based on a sliding scale depending on Gerard's income. The minimum amount due in any calendar year was $3,750 if Gerard's income was $15,000 or less, and the maximum was $6,250, if Gerard's income was over $30,000, plus ten percent of the "amount in excess of $30,000." Gerard also agreed to maintain $45,000 of insurance on his life, designating Mary as the prime beneficiary. The decree further required him to pay the premiums to maintain these policies but provided that the premiums paid each year be credited up to $1,200 per annum against his total alimony obligation for that year. Under this formula one-twelfth of Gerard's total premium obligation per annum was deducted from the required monthly alimony payments. If he failed to make a premium payment as required, Mary was entitled to make the payment and to hold him accountable for the money advanced. Finally, the two children of the dissolved marriage were named as contingent beneficiaries of the insurance proceeds but they were to be designated as prime beneficiaries for a stated period of time in the event that Mary remarried or predeceased Gerard.
3
Each party retained certain rights in the policies. Under the decree Gerard could borrow on the policies up to fifty percent of their cash value, but his estate was obligated to repay such loans so as to preserve the value of the policies. Gerard retained the right to "substitute other policies" for those then held provided that $45,000 of insurance be maintained at all times. The policy also provided that he would receive any dividends paid by the insurer. Under the options set out in the policies he could apply such dividends toward his premium obligations. Mary, on the other hand, was given the exclusive right to choose the settlement option for the distribution of the insurance proceeds.
4
The Commissioner disallowed Gerard's 1957 premium payments as a deduction from his income and assessed a deficiency of $577.17 on a joint return filed by petitioners for that year. Subsequent to the Commissioner's action, the taxpayer executed an absolute written transfer of title in the policies to Mary and in 1961 the parties secured an amendment nunc pro tunc of their divorce decree from the Nevada court incorporating the provisions of this transfer. The Tax Court nevertheless upheld the assessment on the basis of its holding that Mary did not own the policies during 1957 since the incidents of ownership remained with the taxpayer.
5
Gerard contends that the terms of their separation agreement, as incorporated into the Nevada decree, establish the premium payments as part of his alimony obligation under this decree and thus as income deductions to petitioners. 26 U.S.C. §§ 71, 215 (1958). As support for this contention, they rely on Estate of Hart v. Commissioner, 11 T.C. 16 (1948), for their argument that "in addition to an irrevocable" transfer of a life insurance policy, the parties may specifically agree that these payments are part of Gerard's alimony obligation.
6
The facts of Hart are indeed very similar to those of the present case. In Hart the taxpayer and his wife obtained a divorce decree which modified and incorporated the provisions of a prior separation agreement. The decree required the insured taxpayer to pay the premiums on life insurance designating his wife as the prime beneficiary but such premiums were expressly "included" as part of his alimony obligation. The taxpayer had previously reserved the right to alter, amend or revoke the policies but the decree expressly barred him from the exercise of this power. The taxpayer's wife had to survive him in order to retain any interest in the proceeds of the policies and her share was decreased if she survived him but subsequently remarried. The Tax Court allowed the taxpayer to deduct the premium payments and disregarded the survival clause in the decree to hold that the benefits generated by the premium payments were not too contingent to be valued as a tax deduction. The court supported this conclusion by reasoning that all significant contingencies, including the right to decrease the amount of insurance and thus to increase the cash payments, were under control of the wife.
7
Although Hart could be distinguished on somewhat tenuous grounds, standing alone the decision would nevertheless be very persuasive in favor of the taxpayer in the present case. Grounds of distinction include, for example, the fact that the beneficiary wife in Hart had the power to increase the amount of the cash payments due from the taxpayer while in the present case Mary had no such power and Gerard alone retained the option to substitute other policies. In addition, the decree in Hart obligated the insured taxpayer not to exercise his reserved power to amend or revoke while a similar bar is omitted from the decree in the present case. However, the privilege of the beneficiary in Hart to increase the cash payments due from the insured would not be sufficient to compel disallowance of the claimed deduction. Moreover, Mary obtained more than ephemeral benefits in the present case since the contempt sanctions standing behind the Nevada decree are persuasive at least that the taxpayer will not avoid his obligations through his right of substitution.
8
But Hart has been limited by subsequent decisions although these rest on a variety of grounds. At first Hart was distinguished in order to hold that particular agreements regulating a marital split contemplated insurance policies on which premiums were paid for the benefit of a former spouse as mere security for the performance of other aspects of these agreements. These payments were thus not denominated as alimony since it was held that the beneficiary had not received sufficient benefits to justify a deduction. Blumenthal v. Commissioner, 183 F.2d 15 (3d Cir. 1950); Carmichael v. Commissioner, 14 T.C. 1356 (1950). Other decisions relied upon the standard death or remarriage clause found in most of these marital agreements, to hold that the policies represented mere security because the benefits conferred by premium payments were too remote to qualify as alimony. Baker v. Commissioner, 205 F.2d 369 (2d Cir. 1953); Smith v. Commissioner, 21 T.C. 353 (1953).
9
The determination of whether the policies were deposited as security for the performance of alimony obligations was subsequently held to present needlessly limited issues and was abandoned in favor of a broader evaluation of the economic benefits received by their beneficiary under the policies and premium payments. Seligmann v. Commissioner, 207 F.2d 489 (7th Cir. 1953); Mandel v. Commissioner, 229 F.2d 382 (7th Cir. 1956), affirming 23 T.C. 81 (1954). Under this test, the courts reasoned that "[t]he very essence of taxable income * * * is the accrual of some gain, profit or benefit to the taxpayer. * * *" 229 F.2d at 387, quoting Commissioner v. Wilcox, 327 U.S. 404, 407, 66 S.Ct. 546, 90 L.Ed. 752 (1946), and that the "bare receipt of property or money wholly belonging to another lacks the essential characteristics of a gain or profit within the meaning of [the] * * *" alimony provisions of sections 22(k) and 23(u) of the 1939 Code or sections 71 and 215 of the 1954 Code. Ibid., quoting 327 U.S. at 408, 66 S.Ct. 546. However, in their application of this standard the courts have again concentrated on the presence of death or remarriage survival clauses in the provisions regulating distribution of insurance proceeds to hold that premium payments made by the insured under such survival clauses were subject to too many contingencies for proper valuation and were thus never even constructively received by the beneficiary as required by sections 71 and 215, e. g., Mandel v. Commissioner, supra; Seligmann v. Commissioner, supra; Smith's Estate v. Commissioner, 208 F. 2d 349, 353 (3d Cir. 1953); Bradley v. Commissioner, 30 T.C. 701 (1958).
10
This court has not precisely followed the reasoning of this more recent line of authority. In Weil v. Commissioner, 240 F.2d 584 (2d Cir. 1957), cert. denied, 353 U.S. 958, 77 S.Ct. 864, 1 L.Ed.2d 909 (1957), this court held that a taxpayer had "clearly retained ownership" of certain policies and could not deduct premiums paid absent an assignment of these policies to his former spouse and in Hyde v. Commissioner, 301 F.2d 279 (2d Cir. 1962) held that a complete transfer of ownership is necessary to support a deduction.
11
Petitioners attempt to distinguish the cases following Hart on the ground that none of these decisions has discussed or balanced whether or not the beneficiary spouse has a realizable and substantial economic gain where the marital agreement stipulates that premium payments are to be considered as valuable periodic payments for support and stipulates further that the results of such payments are to be regarded as substantial benefits received during the tax year in question. Petitioners' argument is partially correct since the decisions applying the economic benefit test against a taxpayer do not discuss at length the terms of particular provisions, regulating the premium payments. Nevertheless, it is apparent that the weight of recent authority has equated benefits with ownership and has refused to allow a deduction where the beneficiary has failed to obtain non-contingent substantial proprietary rights in the proceeds of the policies and thus in the benefits generated by the premium payments.
12
In effect, petitioners ask that the weight of authority, including Weil and Hyde, be distinguished or reconsidered by this court and that we reverse the decision of the Tax Court. But after careful consideration of his arguments, we affirm the decision of the Tax Court and adhere to the position that ownership of the policies is necessary to support a deduction. State law cannot control the quantum of benefits, received by Mary, necessary to support a deduction under federal law of income taxation, however solicitous such state decisions may be of the rights of a beneficiary of life insurance. The label that the parties place upon their transactions is not binding upon the Commissioner. Merchant's Loan & Trust Co. v. Smietanka, 255 U.S. 509, 41 S.Ct. 386, 65 L.Ed. 751 (1921). In addition primary emphasis on the wording of a particular marital agreement will only produce a vague, over-refined and unsatisfactory line of precedent.
13
In the present case Gerard owed little more than a general contractual obligation to Mary. While performance of his obligation could be at Mary's option, she received nothing in the tax year in question from the premium payments beyond an aid to her "peace of mind," Seligmann v. Commissioner, supra, 207 F.2d at 494, through the realization that she had a chance of an eventual share in proceeds of the policies. Almost complete rights of ownership in the policies were retained by Gerard. He held title to the policies and retained the right to borrow on them as well as a contingent reversionary interest in the proceeds and his right of substitution. Moreover, under even a narrow definition of Gerard's retained interests, Mary was not the sole beneficiary of the benefits generated by the premium payments since the value of his right to the surrender value of the policies increased with each premium payment. Gerard reaped too many benefits from his premium payments in 1957 to justify their deduction as alimony and thus inferentially as income to Mary.
14
Petitioners also contend that the nunc pro tunc amendment of the Nevada decree effects an absolute transfer of Gerard's interest in the policies and justifies allowance of his claimed deduction. Petitioners reason that one of the factors the courts have considered is whether or not the policies were at any time assigned to the beneficiary. The benefits, however, conferred by the premium payments had to be actually received by Mary in 1957. "What is income is controlled by federal law," Daine v. Commissioner, 168 F.2d 449, 451, 4 A.L.R.2d 248 (2d Cir. 1948), and retroactive judgments of state courts cannot thus affect the rights of the federal government under its tax laws. In this light and absent a special carryback provision, it would be hard to justify a construction of the usual rules of income taxation which would allow a later transfer somehow to stand for benefits never available to Mary in 1957. Daine v. Commissioner, supra.
15
The decision of the Tax Court is affirmed.
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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
OCTOBER 3, 2007
No. 07-11215 THOMAS K. KAHN
Non-Argument Calendar CLERK
________________________
D. C. Docket No. 03-03103-CV-CAM-1
YOLANDA SEDLAK,
Petitioner-Appellant,
versus
E. W. SESSIONS, Warden,
Washington State Prison,
Respondent-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________
(October 3, 2007)
Before TJOFLAT, HULL and FAY, Circuit Judges.
PER CURIAM:
Yolanda Sedlak, who was convicted in Georgia state court of felony murder
for the stabbing death of her husband, Robert Sedlak, appeals the district court’s
denial of her counseled petition for writ of habeas corpus, filed pursuant to 28
U.S.C. § 2254. In her petition, Sedlak argued that her trial counsel was ineffective
for failing to timely uncover evidence that the victim had committed prior acts of
violence against third parties, which would have supported her defense that she
was suffering from battered woman’s syndrome when she stabbed her husband,
pursuant to Chandler v. State, 261 Ga. 402, 407 (Ga. 1991).1 On direct appeal, the
Georgia Supreme Court rejected Sedlak’s ineffective-assistance-of-counsel claim.
Sedlak now argues that the Georgia Supreme Court’s holding was unreasonable
given the facts presented at trial and the prevailing law regarding ineffective-
assistance claims. For the reasons discussed below, we affirm.
Approximately one month before Sedlak’s trial, Sedlak’s trial counsel filed a
notice of her intention to introduce evidence of the victim’s prior acts of violence,
namely, committing simple battery against “the son of Debbie Sedlak.” In the
notice, Sedlak reserved the right to supplement or amend this evidence. Then,
approximately one week after her trial had begun, Sedlak’s trial counsel filed
1
In Chandler, the Georgia Supreme Court held that “evidence of specific acts of violence
by a victim against third persons shall be admissible where the defendant claims justification.”
261 Ga. at 407.
2
another notice of her intention to introduce evidence of the victim’s prior acts of
violence, namely, against Debra Sedlak, a previous wife of the victim.
However, when Sedlak attempted to call as witnesses Daniel Holloway, who
was “the son of Debbie Sedlak” referred to in Sedlak’s first notice, and Debra
Sedlak, the previous wife referred to in Sedlak’s second notice, the state objected
on the grounds that Sedlak’s notices were incomplete and untimely.2 During a
proffer, Daniel Holloway and Debra Sedlak both indicated that they would testify
to an incident in which the victim beat Daniel Holloway with a baseball bat. The
trial court sustained the state’s objections. The trial court, however, allowed Debra
Sedlak and her daughter, Tracy Holloway, to testify to an incident in which the
victim got drunk and destroyed Tracy Holloway’s porcelain figurine collection
when she was 15 or 16 years old, and then punched her and hit Debra Sedlack
when they protested.
After her trial, Sedlak, represented by new counsel, filed a motion for a new
trial, arguing that her trial counsel was ineffective for failing to hire private
investigators to timely uncover Debra Sedlak’s testimony. The trial court held
hearings on this motion. At these hearings, two private investigators testified that
2
Pursuant to Georgia Uniform Superior Court Rules 31.1 and 31.6, a criminal defendant
who intends to introduce evidence of prior violent acts committed by the victim against a third
party must notify the prosecution at least ten days before trial, unless the time is shortened or
lengthened by the trial court.
3
they were hired in connection with Sedlak’s murder trial approximately two years
before that trial began, but that Sedlak’s trial counsel terminated this investigation
and diverted their attention to other matters in which Sedlak was involved, such
that they were never asked to, and never did, investigate the victim’s background.
Also, Sedlak’s trial counsel testified as follows. As part of his pre-trial
preparation, he personally visited courthouses, record rooms, the homes of the
victim’s ex-wives, and the offices of police officers in search of evidence of any
prior violent acts committed by the victim. His investigation did not yield any
usable evidence. Confident that he had exhausted all avenues of investigation and
knowing that Sedlak wanted to “get this matter behind her,” Sedlak’s trial counsel
went ahead with the trial. On the first day of the trial, however, he hired a private
investigator in a last-ditch effort. He had not hired one earlier because he believed
that Sedlak had very limited resources. Ultimately, this private investigator
discovered information that led Sedlak’s trial counsel to Debra Sedlak. The district
court denied Sedlak’s motion for a new trial .
Sedlak then filed a direct appeal to the Georgia Supreme Court on, inter
alia, ineffective-assistance-of-counsel grounds. The Georgia Supreme Court made
the following findings of fact.
A neighbor placed a 911 call to report a stabbing at the mobile home
occupied by the Sedlaks. The officers arrived at the Sedlaks’ residence
4
to find the victim on the floor in the master bedroom. He had been
stabbed several times with a five-inch kitchen knife; the fatal wound
had pierced the heart. While the police were investigating, Sedlak
confessed to another neighbor (an off-duty police officer) that she had
stabbed the victim.
Sedlak received Miranda warnings at the scene; she agreed to talk
with the officers and consented to a search of her residence. In this
initial statement, she told the officers that she and the victim had been
arguing and while she was in the kitchen preparing dinner, he
approached her with a knife in his hand; that she used a kitchen knife
to “just poke at him”; and that he walked to the bedroom where she
found him a few minutes later on the floor. She was unable to account
for the presence of bruises on her arms and legs. A State-administered
intoximeter test showed Sedlak’s blood alcohol level to be .103.
Sedlak was taken to the sheriff'’s office later that evening where she
was again read her Miranda rights and she executed a written waiver.
She gave a second statement to the investigating officers in which she
described her two-month marriage to Robert as tumultuous and
abusive. She related the same version of the stabbing as she had
previously.
Two days later, the police asked to interview Sedlak again. She
received fresh Miranda warnings, and this time she admitted that the
victim was unarmed when she stabbed him, and that she planted a
knife near the body because she was afraid that she would be arrested.
She claimed that the victim had been physically abusive toward her,
but acknowledged that she had never reported the alleged abuse.
Two forensic pathologists testified that it would have required a
significant amount of force to inflict the fatal wound because the
murder weapon was not particularly sharp or pointed, and the entire
blade of the five-inch knife had penetrated the victim's chest. Both
experts opined that a “poke” or accidental motion would have been
insufficient force to inflict the fatal wound. The experts further
testified that the bruises to Sedlak’s extremities were consistent with
chronic alcohol abuse; and that the absence of bruises to her face,
5
head, and upper chest indicates that she does not appear to have been
beaten.
After presenting a prima facie case of justification, the defense offered
expert testimony that Sedlak experienced both chronic post-traumatic
stress disorder and battered person syndrome.
. . . At a hearing on the motion for new trial, trial counsel testified that
one month prior to trial, he filed a notice of intent under Chandler.
That notice included the information that was known to counsel at the
time, i.e., two separate incidents of physical abuse by Robert Sedlak
directed at the children of his former wives; and it contained a request
to amend the notice as other evidence is discovered. In preparation for
trial, counsel attempted to locate other witnesses who could testify to
specific acts of violence directed against them by the victim, but
without success. Counsel employed a private investigator, but despite
the investigator’s efforts, no Chandler material was uncovered in this
case. While counsel did locate two additional witnesses who could
testify to the victim’s treatment of two of his former spouses, counsel
deemed that the information was not helpful to the justification
defense and he made the tactical decision not to amend the Chandler
notice with regard to those persons.
After the first week of trial, a second private investigative agency
hired by the defense located a stepson of the victim who related that
he had been physically and mentally abused by the victim about ten
years earlier. Through this witness, defense counsel was able to make
contact with Debra Grant,3 a former wife of the victim. It was shown
that Grant had generally attempted to conceal her whereabouts from
Robert Sedlak following the termination of their marriage, and that
she had changed her last name twice since that time.
Defense counsel sought to amend his Chandler notice and to offer
testimony from this witness that she and her children had suffered a
pattern of physical and mental abuse at the hands of Robert Sedlak
3
The Supreme Court used Debra Sedlak’s name from a marriage subsequent to her
marriage to the victim.
6
during the course of their marriage. The State objected based on
untimely notice under [Georgia Uniform Superior Court Rules 31.1
and 31.6]. Defense counsel made the necessary proffer by questioning
Grant and her son concerning specific acts of violence directed against
them by the victim. The trial court disallowed a great portion of the
proffered testimony, finding that the State had been prejudiced by the
lack of notice. However, Grant and two of her children were permitted
to testify before the jury to limited acts of violence directed against
them by Robert Sedlak because those acts were known to the
prosecution.
When asked at a hearing on the motion for new trial why he did not
seek a continuance or waive his speedy trial demand, defense counsel
replied that he felt confident that the defense had exhausted all their
efforts to locate additional Chandler material, that they were otherwise
prepared for trial, and that his client urged him to get the case
concluded.
Sedlak v. State, 275 Ga. 746, 747, 752-53 (Ga. 2002) (internal footnote omitted).
Given these findings of fact, the Georgia Supreme Court held that “[t]he
record amply support[ed] the trial court’s finding that counsel’s performance in
this regard did not fall below the range of reasonable professional conduct,” per
Strickland v. Washington, 466 U.S. 668, 697, 104 S.Ct. 2052, 2069, 80 L.Ed.2d
674 (1984). Sedlak, 275 Ga. at 752-53. The Georgia Supreme Court specifically
noted that (1) Sedlak’s trial counsel’s first notice included all the information that
he knew at the time and explicitly requested leave to amend if and when further
information was found; (2) Debra Sedlak “generally attempted to conceal her
whereabouts”; and (3) Sedlak’s trial counsel stated that he did not seek a
7
continuance because he felt confident that he had exhausted all efforts to locate
additional Chandler evidence, otherwise was prepared for trial, and Sedlak wanted
to begin. Id.
After reviewing the Georgia Supreme Court’s decision, the district court
denied Sedlak’s § 2254 petition. The district court reasoned that, while it was
obvious in hindsight that Sedlak’s trial counsel had prematurely terminated his
private investigators’s pre-trial investigation into the murder charge, it would not
have been so obvious to Sedlak’s trial counsel in the midst of his preparations that
further investigation would have revealed Debra Sedlak’s testimony. On Sedlak’s
subsequent motion, the district court granted a certificate of appealability as to
whether Sedlak’s trial counsel’s assistance was ineffective.
Pursuant to § 2254,
An application for a writ of habeas corpus on behalf of a person in
custody pursuant to the judgment of a State court shall not be granted
with respect to any claim that was adjudicated on the merits in State
court proceedings unless the adjudication of the claim–
(1) resulted in a decision that was contrary to, or involved
an unreasonable application of, clearly established
Federal law, as determined by the Supreme Court of the
United States; or
(2) resulted in a decision that was based on an
unreasonable determination of the facts in light of the
evidence presented in the State court proceeding.
8
28 U.S.C. § 2254(d)(1) and (2).
Regarding § 2254(d)(1), a state court decision is “contrary to” clearly
established federal law “if either (1) the state court applied a rule that contradicts
the governing law set forth by Supreme Court case law, or (2) when faced with
materially indistinguishable facts, the state court arrived at a result different from
that reached in a Supreme Court case.” Putnan v. Head, 268 F.3d 1223, 1241 (11th
Cir. 2001). A state court conducts an “unreasonable application” of clearly
established federal law “if it identifies the correct legal rule from Supreme Court
case law but unreasonably applies that rule to the facts of the petitioner’s case” or
if it “unreasonably extends, or unreasonably declines to extend, a legal principle
from Supreme Court case law to a new context.” “[A]n ‘unreasonable application’
is an ‘objectively unreasonable’ application.” Id.
The Supreme Court law that governs ineffective-assistance-of-counsel
claims is set out in Strickland. Per this law, a defendant must demonstrate both
professional error and prejudice to the outcome of the proceedings, and the failure
to demonstrate either is dispositive of the claim against the petitioner. Strickland,
466 U.S. at 697, 104 S.Ct. at 2069. Counsel’s performance is deficient only if it
falls below the wide range of competence demanded of attorneys in criminal cases.
Id. at 688, 104 S.Ct. at 2065. Counsel’s deficient performance is prejudicial if
9
there is a “reasonable probability that, but for counsel’s unprofessional errors, the
result of the proceeding would have been different.” Id. at 694, 104 S.Ct. at 2068.
Specifically with regard to trial counsel’s duty to investigate his client’s case, the
Supreme Court has held that “counsel has a duty to make reasonable investigations
or to make a reasonable decision that makes particular investigations unnecessary”
and that “a particular decision not to investigate must be directly assessed for
reasonableness in all the circumstances, applying a heavy measure of deference to
counsel’s judgments.” Id. at 690-691, 104 S.Ct. at 2066.
Regarding § 2254(d)(2), which applies when the state court’s decision was
based on an unreasonable determination of the facts, “the petitioner must rebut the
presumption of correctness [of a state court’s factual findings] by clear and
convincing evidence.” Gilliam v. Sec’y for Dept. of Corr., 480 F.3d 1027, 1032
(11th Cir. 2007) (alteration in original) (citing 228 U.S.C. § 2254(e)(1) (holding
that “a determination of a factual issue made by a State court shall be presumed to
be correct” and “[t]he applicant shall have the burden of rebutting the presumption
of correctness by clear and convincing evidence”)).
As a preliminary matter, although Sedlak stated in her § 2254 petition that
the Georgia Supreme Court’s decision was based on an unreasonable determination
of the facts, she fails to present any argument or evidence in support of this
10
statement. See Gilliam, 480 F.3d at 1032. Moreover, our review of the Georgia
Supreme Court’s findings of fact reveals that they are a reasonable determination
of the evidence presented at trial and at the hearings on Sedlak’s motion for a new
trial. See Sedlak, 275 Ga. at 747. Accordingly, Sedlak is not eligible for habeas
relief pursuant to § 2254(d)(2). See 28 U.S.C. § 2254(d)(2).
As to § 2254(d)(1), the record shows that the Georgia Supreme Court
applied the appropriate Supreme Court rule, namely, Strickland. See Putnam, 268
F.3d at 1241; Sedlak, 275 Ga. at 752-53. The record also shows that the Georgia
Supreme Court’s application of Strickland to the facts was objectively reasonable.
See Putnam, 268 F.3d at 1241. First, Sedlak’s trial counsel did not commit any
unprofessional error. See Strickland, 466 U.S. at 697, 688, 690-91, 104 S.Ct. at
2069, 2065, 2066. Sedlak’s trial counsel’s decision to divert his pre-trial private
investigators to other matters was not unreasonable, as he already had visited
courthouses, record rooms, the homes of ex-wives, and the offices of police
officers and had found no usable evidence that the victim had abused third parties.
Likewise, the decision not to hire a private investigator earlier in the investigation
was not unreasonable, as Sedlak’s trial counsel already had made the above
investigative efforts to no avail and as he believed that Sedlak had limited means.
Second, any errors committed by Sedlak’s trial counsel did not prejudice her
11
defense. See Strickland, 466 U.S. at 694, 697, 104 S.Ct. at 2068, 2069. The state
presented extensive evidence of her guilt, including her confessions. See Sedlak,
275 Ga. at 747. Also, the jury was exposed to evidence that Sedlak may have
stabbed her husband while suffering from battered woman’s syndrome and that the
victim had hit both Debra Sedlak and Tracy Holloway in the past. See Sedlak,
275 Ga. at 747. Therefore, there is no reasonable probability that the jury would
have reached a different result had it heard more testimony of the victim’s prior
violence. See Strickland, 466 U.S. at 694, 104 S.Ct. at 2068. Accordingly, Sedlak
is not eligible for habeas relief pursuant to § 2254(d)(1). See 28 U.S.C.
§ 2254(d)(1). Therefore, we affirm the district court’s denial of Sedlak’s § 2254
petition.
AFFIRMED.
12
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885 N.E.2d 25 (2008)
Jon S. JOHNSON, Appellant-Plaintiff,
v.
Stephon BLACKWELL, Individually, Cliff Cole, Individually, Anderson Police Department, Madison County Sheriff's Department, Appellees-Defendants.
No. 49A02-0709-CV-759.
Court of Appeals of Indiana.
April 28, 2008.
*27 Nathaniel Lee, Marcelino Lopez, Lee Cossell Kuehn & Love, LLP, Indianapolis, IN, Attorneys for Appellant.
Renee J. Mortimer, Jennifer Kalas, Hinshaw & Culbertson, LLP, Schererville, IN, Attorneys for Appellees, Stephon Blackwell and Madison County.
Jason A. Childers, Hulse Lacey Hardacre Austin & Shine, P.C., Anderson, IN, Attorney for Appellees, Cliff Cole and Anderson Police Department.
OPINION
VAIDIK, Judge.
Case Summary
Following his conviction in federal district court for possession with intent to distribute crack cocaine, the Seventh Circuit reversed Jon S. Johnson's conviction in 2005, and the indictment against him was dismissed in 2006. Nearly four years after his February 27, 2003, arrest, Johnson *28 filed a complaint against Stephon Blackwell, Cliff Cole, the Anderson Police Department, and the Madison County Sheriff's Department (collectively "Defendants") on November 21, 2006, in Marion Superior Court alleging civil rights violations, false imprisonment/false arrest, wrongful infliction of emotional distress, and invasion of privacy by intrusion. Finding that these causes of action accrued when Johnson was arrested or bound over for trial in 2003 and that the doctrines of continuing wrong and fraudulent concealment do not operate to toll the statute of limitations, we conclude that Johnson's complaint is barred by the two-year statute of limitations for injury to person. We therefore affirm the trial court.
Facts and Procedural History
We take our underlying facts for this case from the Seventh Circuit's opinion reversing Johnson's conviction for possession with intent to distribute crack cocaine, United States v. Johnson, 427 F.3d 1053 (7th Cir.2005). Johnson largely relies upon Johnson to set forth the facts in his complaint in this case. On February 27, 2003, Stephon Blackwell, a detective assigned to a Madison County, Indiana, narcotics task force, received an anonymous tip that a "John Johnson"[1] was in possession of a large amount of crack. The female caller stated that Johnson had picked up the crack in Muncie, Indiana, and brought it back to his "Fulton Street address" in Anderson, Indiana. The tipster also stated that Johnson picked up crack shipments on Thursdays and drove a white vehicle; however, she offered no other details and did not explain the basis of her knowledge. The information was not otherwise corroborated. Blackwell and another detective, Cliff Cole, went to Johnson's home to investigate the tip.
After watching Johnson's house for about five minutes, the detectives approached his girlfriend as she was leaving the house. She verified that Johnson lived there and was inside at the time. The detectives asked her to knock on the door, and, after she did, Johnson answered. The detectives told Johnson about the anonymous tip and asked to search his house. Johnson denied that there were drugs inside. After speaking to the detectives for several minutes, Johnson turned his back on them and retreated down a hallway. Detective Blackwell responded by drawing his gun, pointing it at the ground, and saying, "[I]f you go down that hallway, John, now it's an officer safety issue." Id. at 1055. Johnson stopped and turned back toward the detectives, and Detective Blackwell returned the gun to its holster. Detective Blackwell asked again if he could search the house while Detective Cole phoned a supervisor to discuss whether they could get a search warrant. When Cole returned, Johnson said, "Well, you might as well come on in." Id. The detectives entered the house, and Johnson told them to "go ahead and search." Id. The detectives found a package of crack in a dresser.
Johnson was charged in the United States District Court for the Southern District of Indiana with possession with intent to distribute crack cocaine. Johnson moved to suppress the drugs, arguing that his consent was involuntary and tainted by his illegal detention. The district court denied his motion to suppress, and, on May 1, 2003, Johnson was convicted as charged. The district court sentenced him to 240 months of imprisonment and 10 years of supervised release. *29 Thereafter, Johnson appealed the district court's denial of his motion to suppress to the Seventh Circuit. The Seventh Circuit retained jurisdiction but remanded the case to the district court for the limited purpose of allowing the court to make additional findings of fact on whether the detectives reasonably suspected that Johnson was engaged in or was about to engage in criminal activity and to analyze Johnson's motion in light of those findings. United States v. Johnson, 2004 WL 1873217, 107 Fed.Appx. 674 (7th Cir. Aug.18, 2004).
On remand, the district court heard additional evidence and concluded that the detectives lacked reasonable suspicion to seize Johnson. United States v. Johnson, 2005 WL 1528140, *4 (S.D.Ind. June 3, 2005). The case returned to the Seventh Circuit, which, on October 27, 2005, reversed Johnson's conviction and remanded the case to the district court. Johnson, 427 F.3d at 1058. The indictment was dismissed on July 14, 2006.
On November 21, 2006 nearly four years after his arrest Johnson filed a four-count complaint against Defendants in Marion Superior Court. Specifically, Count I alleged civil rights violations[2]; Count II alleged false imprisonment/false arrest[3]; Count III alleged wrongful infliction of emotional distress[4]; and Count IV alleged invasion of privacy by intrusion.[5] All counts were based upon the search of Johnson's home and his arrest on February 27, 2003. On February 16, 2007, Defendants filed a motion to dismiss pursuant to Indiana Trial Rule 12(B)(6) arguing that Johnson's complaint was barred by the applicable two-year statute of limitations. Defendants also argued that Blackwell and Cole were improper parties because they were government employees acting within the scope of their employment. Following a hearing, the trial court dismissed this case on August 6, 2007. Johnson now appeals. Appellees Madison County and Blackwell and Appellees Anderson Police Department and Cole respond with separate briefs.
Discussion and Decision
Johnson contends that the trial court erred in dismissing his complaint pursuant to Indiana Trial Rule 12(B)(6). A civil action may be dismissed under Trial Rule 12(B)(6) for "failure to state a claim upon which relief can be granted." Such a motion tests the legal sufficiency of the claim, not the facts supporting it. Charter One Mortgage Corp. v. Condra, 865 N.E.2d 602, 604 (Ind.2007). Thus, our review of a trial court's grant or denial of a motion based on Trial Rule 12(B)(6) is de novo. Id. When reviewing a motion to dismiss, we view the pleadings in the light most favorable to the nonmoving party, with every reasonable inference construed in the nonmovant's favor. Id. at 605. A complaint may not be dismissed for failure to state a claim upon which relief can be *30 granted unless it is clear on the face of the complaint that the complaining party is not entitled to relief. Id.
As detailed above, Johnson brings four state law claims in his complaint, namely, civil rights violations, false imprisonment/false arrest, wrongful infliction of emotional distress, and invasion of privacy by intrusion. Johnson, however, does not point to a specific statute of limitations for any of these claims. Rather, he proceeds under the assumption that a two-year statute of limitations applies to all of them. Defendants, on the other hand, argue that the statute of limitations governing injury to person, which is located at Indiana Code § 34-11-2-4, applies to all four counts. We agree with Defendants. Specifically, Indiana Code § 34-11-2-4 provides that "[a]n action for . . . injury to person . . . must be commenced within two (2) years after the cause of action accrues." "In general, the cause of action of a tort claim accrues and the statute of limitations begins to run when the plaintiff knew or, in the exercise of ordinary diligence, could have discovered that an injury had been sustained as a result of the tortious act of another." Filip v. Block, 879 N.E.2d 1076, 1082 (Ind.2008) (quotation omitted).
We now must determine the accrual date of the causes of action for civil rights violations, false imprisonment/false arrest, wrongful infliction of emotional distress, and invasion of privacy by intrusion. A quick review of Johnson's complaint shows that all of these claims are based upon the search of Johnson's home and his arrest, both of which occurred on February 27, 2003. In Livingston v. Consolidated City of Indianapolis, 398 N.E.2d 1302, 1303 (Ind.Ct.App.1979), this Court held that the plaintiff's causes of action for false arrest, false imprisonment, and assault and battery against the City of Indianapolis and the State of Indiana accrued on the date of the plaintiff's arrest.
More recently, the United States Supreme Court analyzed the accrual date of a § 1983 cause of action for false arrest/false imprisonment (which under Illinois law also had a two-year statute of limitations) in Wallace v. Kato, ___ U.S. ____, 127 S.Ct. 1091, 166 L.Ed.2d 973 (2007), reh'g denied. In that case, the police arrested Wallace for murder in 1994. He was tried and convicted, but the charges were ultimately dismissed in April 2002. In April 2003 Wallace filed a § 1983 suit against the City of Chicago and several police officers seeking damages arising from his unlawful arrest. The Seventh Circuit affirmed the district court's grant of summary judgment in favor of the defendants finding that Wallace's § 1983 suit was time barred because his cause of action accrued at the time of his arrest and not when his conviction was later set aside. On appeal, the United States Supreme Court set forth the general rule that the period of limitations begins to run when the alleged false imprisonment ends. Id. at 1096. Applying common law tort principles, the Court stated, "Reflective of the fact that false imprisonment consists of detention without legal process, a false imprisonment ends once the victim becomes held pursuant to such process when, for example, he is bound over by a magistrate or arraigned on charges." Id. (citations omitted). Thereafter, unlawful detention forms part of the damages for the entirely separate tort of malicious prosecution. Id. That is, if there is a false arrest claim, damages for that claim cover the time of detention up until the issuance of process or arraignment but not more. Id. From that point on, any damages recoverable must be based on a malicious prosecution claim rather than on the detention itself. Id. As such, the United States Supreme Court held that Wallace's "contention that his *31 false imprisonment ended upon his release from custody, after the State dropped the charges against him, must be rejected. It ended much earlier, when legal process was initiated against him, and the statute would have begun to run from that date, but for its tolling by reason of [his] minority." Id. (footnote omitted).
Applying Livingston and the common law principles relied upon in Wallace, Johnson's cause of action for false imprisonment/false arrest accrued when he was bound over for trial in March 2003, and his causes of action for civil rights violations, wrongful infliction of emotional distress, and invasion of privacy by intrusion accrued when his house was searched and he was arrested in February 2003.[6] Therefore, Johnson had until February or March 2005 to file his complaint in this case. Because Johnson did not file his complaint until November 2006, it is barred by the two-year statute of limitations.
In order to avoid the statute of limitations bar, Johnson argues that the continuing wrong doctrine applies. The doctrine of continuing wrong applies where an entire course of conduct combines to produce an injury. Garneau v. Bush, 838 N.E.2d 1134, 1143 (Ind.Ct.App.2005), trans. denied. When this doctrine attaches, the statutory limitations period begins to run at the end of the continuing wrongful act. Id. In order to apply the doctrine, the plaintiff must demonstrate that the alleged injury-producing conduct was of a continuous nature. Id. Specifically, Johnson claims that the continuing wrong ran from the search of his house and his arrest on February 27, 2003, until the indictment against him was dismissed on July 14, 2006, because the detectives provided false testimony throughout the legal proceedings. To show that the wrong was continuing, Johnson relies upon the Seventh Circuit's opinion in his case, where the court noted that although Detective Blackwell testified that he thought Johnson might retrieve a weapon when he walked away from the front door, the district court discredited this statement and concluded that Detective Blackwell did not really fear that Johnson was getting a weapon; rather, the district court determined that Detective Blackwell's "essential motivation" was to prolong the encounter until Johnson consented to a search of his home. Johnson, 427 F.3d at 1057.
However, the doctrine of continuing wrong does not prevent the statute of limitations from beginning to run when the plaintiff learns of facts that should lead to the discovery of his cause of action, even if his relationship with the tortfeasor continues beyond that point. Garneau, 838 N.E.2d at 1145. Here, there was only one act that led to Johnson's complaint: the search of his house and his arrest on February *32 27, 2003. Johnson was immediately aware of the facts surrounding these events, as he filed a motion to suppress less than one month after his arrest. The doctrine of continuing wrong does not toll the statute of limitations in this case.
Johnson next argues that the doctrine of fraudulent concealment tolls the statute of limitations in this case until July 14, 2006, when his indictment was dismissed. Pursuant to Indiana Code § 34-11-5-1, "If a person liable to an action conceals the fact from the knowledge of the person entitled to bring the action, the action may be brought at any time within the period of limitation after the discovery of the cause of action." "The law narrowly defines concealment, and generally the concealment must be active and intentional." Olcott Int'l & Co. v. Micro Data Base Sys., Inc., 793 N.E.2d 1063, 1072 (Ind.Ct.App.2003), trans. denied. "The affirmative acts of concealment must be calculated to mislead and hinder a plaintiff from obtaining information by the use of ordinary diligence, or to prevent inquiry or elude investigation. There must be some trick or contrivance intended by the defrauder to exclude suspicion and prevent inquiry." Id.
Here, the doctrine of fraudulent concealment does not apply. Johnson was present during the search of his house and his arrest on February 27, 2003. Indeed, Johnson told the detectives to search his house. The detectives concealed nothing from Johnson. If anything, the detectives were less than candid with the district court. Because Johnson was present during the entire encounter on February 27, 2003, he had actual knowledge of the facts and thus was equipped to challenge his unlawful arrest. It is this fact alone that distinguishes Johnson's case from the case upon which Johnson relies on appeal, Bell v. Milwaukee, 746 F.2d 1205 (7th Cir.1984) (concluding that doctrine of fraudulent concealment applied where police officers concealed facts concerning death of Daniel Bell), overruled on other grounds by Russ v. Watts, 414 F.3d 783 (7th Cir.2005). Accordingly, the doctrine of fraudulent concealment does not operate to extend the statute of limitations in this case.
As a final matter, we comment upon Johnson's doomsday argument in his brief that
The net effect of the trial court's ruling is that rouge [sic] police officers can commit a series of improper acts that result in the incarceration of an innocent citizen and not be subject to legal process. The police officers can mask their improper conduct by continuing to deliver false testimony that results in lengthy incarceration and no remedy is ever available.
Appellant's Br. p. 15. We strongly disagree. Defendants such as the ones here can of course be subject to legal process, but plaintiffs must file their complaints within the applicable statute of limitations. There is nothing that prevented Johnson from filing his civil complaint while his criminal case was pending. See Wallace, 127 S.Ct. at 1098 ("If a plaintiff files a false arrest claim before he has been convicted . . ., it is within the power of the district court, and in accord with common practice, to stay the civil action until the criminal case or the likelihood of a criminal case is ended."). This is especially so given that when the Seventh Circuit remanded Johnson's criminal case in 2004, which was still within the statute of limitations, the court said that it was a "close question" of whether the detectives had reasonable suspicion to seize Johnson. See Johnson, 2004 WL 1873217, *4. Because Johnson filed his complaint outside the two-year *33 statute of limitations, we affirm the trial court's dismissal of his complaint.[7]
Affirmed.
SHARPNACK, J., and BARNES, J., concur.
NOTES
[1] Although Johnson's first name is spelled "Jon" in these state civil proceedings, his first name is spelled "John" in the federal criminal proceedings.
[2] Count I alleges in part "That Johnson was arrested and held without probable cause and without a valid arrest warrant." Appellant's App. p. 11 (capitalization omitted).
[3] Count II alleges in part "That Blackwell and Cole did not have probable cause, nor reasonable suspicion, to arrest Johnson, search his home, and to retain or place him in custody." Id. (capitalization omitted).
[4] Count III alleges in part "That the conduct of Defendants caused Johnson extreme embarrassment, severe mental anguish, public humiliation and emotional trauma." Id. at 12 (capitalization omitted).
[5] Count IV alleges in part "That Blackwell and Cole intruded upon Johnson's solitude and seclusion when Blackwell and Cole arrested Johnson without probable cause and illegally searched Johnson's home." Id. at 13 (capitalization omitted).
[6] Still, Johnson, citing Scruggs v. Allen County/City of Fort Wayne, 829 N.E.2d 1049 (Ind. Ct.App.2005), reh'g denied, argues that the causes of action in this case did not accrue until his conviction was finally reversed. In Scruggs, this Court held that the plaintiff was not entitled to damages for false imprisonment because his conviction had not been overturned. Id. at 1051. We first note that Scruggs addresses damages, not the accrual date for the applicable statute of limitations, and is therefore readily distinguishable. In any event, Scruggs relies on Heck v. Humphrey, 512 U.S. 477, 486-87, 114 S.Ct. 2364, 129 L.Ed.2d 383 (1994), which holds that in order to recover damages for an allegedly unconstitutional conviction or imprisonment, a § 1983 plaintiff must prove that the conviction or sentence has been reversed. Wallace clarifies, however, that the Heck rule "is called into play only when there exists a conviction or sentence that has not been . . . invalidated, that is to say, an outstanding criminal judgment." 127 S.Ct. at 1097-98 (quotation omitted). Because that is not the case here, Scruggs and Heck do not dictate that Johnson's causes of action did not accrue until his conviction was reversed.
[7] Given this holding, we do not address Defendants' arguments that Blackwell and Cole are improper parties because they were government employees acting within the scope of their employment.
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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 9, 2007
No. 07-20023
Summary Calendar Charles R. Fulbruge III
Clerk
UNITED STATES OF AMERICA
Plaintiff-Appellee
v.
MORRIS D. HAUGHTON
Defendant-Appellant
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:05-CR-115-ALL
Before JOLLY, DENNIS, and PRADO, Circuit Judges.
PER CURIAM:*
Following the revocation of his supervised release due to his conviction for
making a false statement in an application for a U.S. passport by knowingly
presenting a fraudulent Louisiana birth certificate, Morris D. Haughton moved
the district court “[T]o Order Government to Release Appellant’s Louisiana Birth
Certificate to U.S. Immigration and Naturalization Agency.” The district court
summarily denied the motion.
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion
should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
No. 07-20023
Haughton conclusionally argues that the district court erred in failing to
order the Government to release his Louisiana birth certificate to immigration
officials. He asserts, without addressing the jury’s or district court’s findings to
the contrary, that he is in fact a U.S. citizen and that he requires a copy of his
original Louisiana birth certificate to prove the same and to avoid deportation.
Haughton provides no legitimate legal basis for his motion or for his
contention that the district court’s denial amounts to error. As the Government
points out, because Haughton is a Jamaican citizen and because the Louisiana
birth certificate is fraudulent, having provided the basis for both his criminal
conviction and the revocation of his supervised release, the motion for its release
was essentially a request to enable Haughton to once again attempt falsely to
establish U.S. citizenship. The district court did not err in denying the motion.
The instant appeal is wholly without merit and is dismissed as frivolous.
See 5TH CIR. R. 42.2; Howard v. King, 707 F.2d 215, 219-20 (5th Cir. 1983).
Haughton’s motion to expedite the appeal is denied.
APPEAL DISMISSED; MOTION DENIED.
2
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United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 08-1353
___________
Al McCullough, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Arkansas.
University of Arkansas for Medical *
Sciences; Jim Raczynski, individually *
and in his official capacity as Dean *
of the College of Public Health; Hosea *
Long, Assistant Vice Chancellor for *
Human Resources, in his individual and *
official capacities, *
*
Appellees. *
___________
Submitted: September 22, 2008
Filed: March 23, 2009
___________
Before BYE, BEAM, and COLLOTON, Circuit Judges.
___________
COLLOTON, Circuit Judge.
Al McCullough brought claims pursuant to Title VII of the Civil Rights Act,
42 U.S.C. § 2000e et seq., and the Arkansas Civil Rights Act (“ACRA”), Ark. Code
Ann. § 16-123-101 et seq., alleging that his employer, the University of Arkansas for
Medical Sciences (UAMS), and individuals Jim Raczynski and Hosea Long,
discriminated against him on the basis of sex and retaliated against him for
participation in a protected activity. He also brought claims alleging retaliation for the
exercise of his free speech rights under the First Amendment and the Arkansas
Constitution, Ark. Const. art. II, § 6, pursuant to 42 U.S.C. § 1983 and Ark. Code.
Ann. § 16-123-105, respectively. The district court1 granted summary judgment in
favor of the defendants on all claims. McCullough v. Univ. of Ark. for Med. Scis., No.
4:06-CV-0390, 2008 WL 150200 (E.D. Ark. Jan. 14, 2008). We affirm.
I.
Because we are reviewing a grant of summary judgment, we describe the facts
in the light most favorable to McCullough. McCullough worked as a Computer
Project Program Director for UAMS in the College of Public Health (COPH). During
McCullough’s employment, James Raczynski served as Dean of the COPH, and
Hosea Long served as Vice Chancellor for Human Services.
On June 28, 2005, Elaine Wooten, a female employee at the COPH, submitted
a formal complaint to Long stating that McCullough had sexually harassed her. On
July 7, 2005, another female employee at the COPH, Jodiane Tritt, filed a sexual
harassment complaint against McCullough. Pursuant to UAMS’s sexual harassment
policy, Long appointed Judy Sims and Ken Easter, two members of a group called the
Resource Panel, to investigate the complaints. According to UAMS policy, the
Resource Panel is a panel composed of individuals nominated by the heads of each
UAMS division, who are “trained in issues relating to sexual harassment, as well as
in the proper manner of investigating complaints.” In the case of a formal complaint
such as Wooten’s or Tritt’s, two members from the independent Resource Panel are
appointed to investigate the allegations of the complaint.
1
The Honorable James M. Moody, United States District Judge for the Eastern
District of Arkansas.
-2-
On July 12, Raczynski, Long, and Audrey Bradley, an employee relations
manager, notified McCullough that two complaints had been filed against him, and
that two resource investigators had been assigned to investigate them. McCullough
responded by sending an e-mail message to Long, with copies to his supervisor,
Raczynski, and Andrea Roy, a Human Resources Officer. He attached a sexual
harassment complaint against Elaine Wooten – the same employee who had accused
him of sexual harassment. On July 28, McCullough met with resource investigators
Easter and Sims to discuss the allegations against him. At that meeting, Easter and
Sims asked him to submit a written response. About a week later, McCullough
submitted a copy of the same complaint against Wooten that he had sent to Long, as
well as a new sexual harassment complaint against Tritt – the other employee who had
accused him of sexual harassment. He addressed his complaint against Tritt to Long,
Raczynski, Roy, and Bradley.
During the next few weeks, investigators Sims and Easter interviewed
McCullough, Wooten, Tritt, and eight other people listed in McCullough’s complaints
as potential witnesses. McCullough’s interview lasted roughly two hours, and the
investigators noted that McCullough spent the majority of the time attacking the
character of Wooten and Tritt, rather then responding directly to the allegations
against him. After completing their investigation, Easter and Sims submitted their
findings to Long. They found “the claims against Mr. McCullough more believable
than his response in defense of those claims,” and added that “if all the witnesses
interviewed were telling the truth, and there was no reason not to believe them, Mr.
McCullough was untruthful and used his response to cloud the real issues of the
investigation.”
After reviewing the findings, Long asked the investigators for more
information. The investigators submitted an addendum with specific notes from all
of the witness interviews they had conducted. On September 21, 2005, after
reviewing the investigators’ report and addendum, Long submitted his
-3-
recommendation to Raczynski, who as Dean of the COPH had final decision-making
authority on the matter. Long stated that “[t]here is a preponderance of evidence to
indicate that Mr. McCullough has in fact exhibited inappropriate behavior of a sexual
nature toward his co-workers.” He added that McCullough’s conduct “occurred on
more than one occasion, making [it] serious to the point of warranting disciplinary
actions.” Finally, Long recommended that McCullough receive a warning for
inappropriate sexual behavior with immediate termination upon any further offenses,
and that he attend both a sexual harassment workshop and counseling on co-worker
interactions.
After reviewing Long’s recommendation, Raczynski asked to review all three
complaints before making a decision. He also spoke with Long in person and over the
phone to discuss the matter. On October 2, 2005, Raczynski terminated
McCullough’s employment, effective immediately. In his termination letter,
Raczynski began by repeating Long’s statement that there was a “preponderance of
evidence to indicate that [McCullough] exhibited inappropriate behavior of a sexual
nature toward [his] co-workers,” and that he did so “on multiple occasions, making
these incidents serious.” He also stated, based on the investigators’ report, that
McCullough had spent most of his interview attacking Wooten and Tritt rather than
responding to their allegations; that no evidence was found indicating that Wooten or
Tritt had lied about him; and that, by contrast, “there was evidence to believe that [he]
had been untruthful to the investigators in [his] responses . . . about the two
complainants.” Raczynski further stated that “[t]he believed untruthfulness of
[McCullough’s] responses and the claims [he] made about the two complainants have
the appearance of being vindictive in nature and in response to the claims of sexual
harassment by the two women.” In his conclusion, Raczynski noted that “[f]or the
reasons stated above,” he had no option but to terminate McCullough’s employment.
McCullough filed a grievance with the Office of Employee Relations. Charles
White, Assistant Vice Chancellor for Employee Relations, concluded that
-4-
McCullough’s termination was proper and in accordance with UAMS policy. On
February 13, 2006, McCullough filed a charge of discrimination with the Equal
Employment Opportunity Commission (“EEOC”) claiming that he was sexually
harassed by a single co-worker, fired on the basis of sex, and retaliated against for
filing sexual harassment complaints of his own. On March 29, 2006, McCullough
filed a complaint in the district court, asserting violations of his right to free speech
under the First Amendment and the Arkansas Constitution, the prohibitions on sex
discrimination and retaliation in the Arkansas Civil Rights Act (“ACRA”), and the
Family and Medical Leave Act. On June 6, 2006, the EEOC concluded that his claim
of sex discrimination was untimely, and that the evidence showed that he was “not
discharged because of his sex, or in retaliation for complaining about sexual
harassment,” but rather fired for sexually harassing his co-workers.
After receiving a right to sue letter from the EEOC, McCullough filed an
amended complaint, in which he added retaliation and sex discrimination claims under
Title VII. Specifically, he claimed that he was terminated for filing sexual harassment
complaints, and that he was treated differently from the two women, Tritt and Wooten,
because he was fired and they were not. McCullough abandoned the FMLA claim,
and the district court granted summary judgment in favor of the defendants on all
remaining claims.2
2
McCullough sued Raczynski and Long in their individual and official
capacities, but individual employees cannot be personally liable under Title VII. See
Bonomolo-Hagen v. Clay Cent.-Everly Cmty. Sch. Dist., 121 F.3d 446, 447 (8th Cir.
1997) (per curiam). McCullough also sued UAMS, but UAMS lacks the capacity to
sue or be sued, because it is a campus of the University of Arkansas and not a separate
institution or corporate body. See Assad-Faltas v. Univ. of Ark. for Med. Scis., 708
F. Supp. 1026, 1029 (E.D. Ark. 1989), aff’d, 902 F.2d 1572 (8th Cir. 1990).
Defendants made these points in their motion for summary judgment, arguing that
McCullough’s Title VII claims against Raczynski and Long should be dismissed, and
that UAMS was not a proper party to the suit. In response, McCullough asked the
court for leave to amend his complaint to name the proper parties, which defendants
-5-
II.
We consider first the district court’s grant of summary judgment on the Title
VII and ACRA claims, which are governed by the same standards. See Clegg v. Ark.
Dep’t of Corr., 496 F.3d 922, 926 (8th Cir. 2007). We review the grant of summary
judgment de novo, viewing the evidence and drawing all reasonable inferences in the
light most favorable to McCullough, the nonmoving party. Id. Summary judgment
is appropriate “if the pleadings, depositions, answers to interrogatories, and
admissions on file . . . show that there is no genuine issue as to any material fact and
that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(c).
A.
Title VII and the ACRA prohibit employers from discriminating based on sex
with respect to compensation, terms, conditions, or privileges of employment. 42
U.S.C. § 2000e-2(a)(1); Ark. Code. Ann. § 16-123-107. In this circuit, under both
statutes, an employee may survive an employer’s motion for summary judgment in
one of two ways. McGinnis v. Union Pac. R.R., 496 F.3d 868, 873 (8th Cir. 2007).
The employee may produce direct evidence of discrimination, which is “evidence
showing a specific link between the alleged discriminatory animus and the challenged
decision, sufficient to support a finding by a reasonable fact finder that an illegitimate
acknowledged would be the University of Arkansas or its Board of Trustees. In its
order granting summary judgment, the court declined to allow leave to amend. It
reasoned that an amendment would be futile, because McCullough could not survive
summary judgment even if he named the proper defendants. McCullough, 2008 WL
150200, at *7. In effect, therefore, McCullough appeals the district court’s denial of
leave to amend as well as its grant of summary judgment on the merits. Because the
district court reached the merits of McCullough’s claims, while assuming for purposes
of analysis that McCullough could name a proper defendant for each of his claims, we
proceed in the same fashion.
-6-
criterion actually motivated the adverse employment action.” Russell v. City of
Kansas City, Mo., 414 F.3d 863, 866 (8th Cir. 2005). If the employee lacks direct
evidence of discrimination, he can survive summary judgment by showing a genuine
dispute for trial under the burden-shifting framework established in McDonnell
Douglas Corporation v. Green, 411 U.S. 792, 802-05 (1973). Under McDonnell
Douglas, the plaintiff first must establish a prima facie case of discrimination. If the
plaintiff establishes a prima facie case, then the burden of production shifts to the
defendant to articulate a legitimate, nondiscriminatory reason for discharging the
employee. If the employer meets this burden, then the employee must show that the
employer’s proffered reason for firing him is a pretext for unlawful discrimination.
At the summary judgment stage, under the 1991 amendments to Title VII, the issue
is “‘whether the plaintiff has sufficient evidence that unlawful discrimination was a
motivating factor in the defendant’s adverse employment action.’” Roberts v. Park
Nicollet Health Servs., 528 F.3d 1123, 1127 (8th Cir. 2008) (quoting Griffith v. City
of Des Moines, 387 F.3d 733, 735 (8th Cir. 2004)). If so, then “‘the presence of
additional legitimate motives will not entitle the defendant to summary judgment.’”
Id.
McCullough purports to have direct proof that he was discriminated against on
the basis of sex, but none of it constitutes direct evidence. He claims that because his
allegations were corroborated, while those made by Wooten and Tritt largely were
not, and because the final decisionmaker, Raczynski, could not identify during his
deposition what evidence supported McCullough’s termination, “[t]he evidence of
disparate treatment is so strong . . . as to constitute direct evidence.”
Disagreement with a decisionmaker’s conclusion on the credibility of an
employee’s story, however, does not constitute direct evidence of unlawful
discrimination. Neither does a decisionmaker’s alleged inability to pinpoint during
a deposition why he decided to discharge an employee. Direct evidence provides a
strong causal link between the alleged discriminatory bias and the adverse
-7-
employment decision. McGinnis, 496 F.3d at 873; Griffith, 387 F.3d at 736. It most
often comprises remarks by decisionmakers that reflect, without inference, a
discriminatory bias. See Duckworth v. St. Louis Metro. Police Dep’t, 491 F.3d 401,
406 (8th Cir. 2007); Beshears v. Asbill, 930 F.2d 1348, 1354 (8th Cir. 1991).
None of McCullough’s proof establishes a direct link between his discharge and
any bias against him because he is a man. The case on which he principally relies,
Russell, 414 F.3d 863, does not support the claim. In that case, a white female
employee was demoted after an investigation determined that she made racial and
sexually-oriented slurs and jokes against other employees. During her appeal to the
personnel board, the alleged victims of her remarks testified either that they never
heard her make such comments, or that even if they had, they were never offended
because she was always non-malicious, and banter of that sort was commonplace.
One alleged victim even “opined that [the white female employee] had been singled
out for discipline” on account of her race. Id. at 866. In determining whether such
evidence constituted direct evidence, this court suggested that “when two co-workers
who are the alleged victims of misconduct deny that misconduct occurred and assert
that the plaintiff is herself the victim of discrimination by the employer, that may well
be direct evidence of discrimination.” Id. at 867. Nothing in this record, however,
indicates that Wooten or Tritt ever denied being sexually harassed by McCullough or
ever stated that they were not offended by his actions. Wooten and Tritt never
retreated from their complaints or suggested that they were not injured by
McCullough’s behavior. Accordingly, McCullough’s reliance on Russell is
misplaced.
Because McCullough does not present direct evidence of sex discrimination,
we analyze his claim under the burden-shifting framework of McDonnell Douglas.
Because the record was fully developed in connection with the motion for summary
judgment, we address directly whether McCullough has presented a genuine issue for
trial on the ultimate question of sex discrimination vel non. See Riser v. Target Corp.,
-8-
458 F.3d 817, 821 (8th Cir. 2006); Johnson v. Ready Mixed Concrete Co., 424 F.3d
806, 810 (8th Cir. 2005).
The critical inquiry in discrimination cases like this one is not whether the
employee actually engaged in the conduct for which he was terminated, but whether
the employer in good faith believed that the employee was guilty of the conduct
justifying discharge. Hitt v. Harsco Corp., 356 F.3d 920, 924 (8th Cir. 2004);
Scroggins v. Univ. of Minn., 221 F.3d 1042, 1045 (8th Cir. 2000). A plaintiff seeking
to survive an employer’s motion for summary judgment must therefore show a
genuine issue for trial about whether the employer acted based on an intent to
discriminate rather than on a good-faith belief that the employee committed
misconduct justifying termination. Johnson, 424 F.3d at 811. McCullough has failed
to do so here. The employer’s legitimate, nondiscriminatory reason for termination
in this case was that McCullough engaged in sexual harassment and then filed
untruthful complaints against the female complainants. McCullough has not presented
sufficient evidence to create an issue for trial on the question whether the final
decisionmaker, Raczynski, and the principal recommender, Long, genuinely believed
that he had engaged in such conduct.
McCullough responds that summary judgment was inappropriate because the
evidence would support a finding that the employer’s explanation for his termination
was a pretext for unlawful discrimination. McCullough cites (1) the employer’s
“irrational” decision to believe the female complainants over him, (2) alleged
inconsistencies in the reasons given for his termination, (3) a failure to follow UAMS
policy by not interviewing all of the witnesses listed in his complaints, (4) the inability
of Long and Raczynski to specify what facts supported his termination, and (5)
improper speaking objections during depositions, which allegedly amounted to
spoliation of evidence. We conclude that McCullough’s evidence does not raise a
reasonable inference that unlawful sex discrimination motivated his termination.
-9-
McCullough argues that because “the only objective evidence regarding the
interactions between McCullough, Tritt, and Wooten favored McCullough,” the
decision to terminate him must have been based on “subjective, irrational factors.” We
disagree. The record in support of the employer’s conclusion is not so sparse, or the
employer’s conclusion so implausible, that McCullough’s challenge to the merits of
the decision can create a genuine issue about whether the employer’s motivation was
impermissible. Long testified that he looked at the totality of what was presented to
him during the investigation, including the complaints, the investigators’ findings, and
the notes from the witness interviews, and concluded that none of the witnesses
supported McCullough’s allegations. He further testified that he “made a judgment
call that was sound” based on the evidence before him. This evidence included an
explanation by the independent resource investigators as to why there was no reason
to disbelieve the female complainants, and how some of McCullough’s counter-
allegations were contradicted by neutral witnesses. McCullough points to nothing in
the record suggesting that Long did not honestly believe that McCullough had
committed sexual harassment on multiple occasions.
His arguments about Raczynski suffer from the same weakness. In the
termination letter to McCullough, Raczynski stated that “[t]he consensus of the
investigators and [Long] is that there is a preponderance of evidence to indicate that
you exhibited inappropriate behavior of a sexual nature toward your co-workers,” and
that you did so on “multiple occasions.” When asked during his deposition what facts
supported McCullough’s guilt, Raczynski read from the investigators’ report and the
attached addendum, and concluded that it was “the entire picture” that supported
McCullough’s guilt. Raczynski decided in favor of termination over lesser discipline,
but nothing in the record indicates that he did not in good faith believe that
McCullough committed sexual harassment and was untruthful to the investigators.
McCullough next claims that Raczynski and Long gave “shifting” and “false”
explanations for their decisions. Pretext may be shown with evidence that “the
-10-
employer’s reason for the termination has changed substantially over time,” Loeb v.
Best Buy Co., Inc., 537 F.3d 867, 873 (8th Cir. 2008), but that did not occur here. The
employer in this case relied consistently on the findings in the investigators’ report.
The investigators found that McCullough’s allegations against Wooten and Tritt were
not credible, and both Raczynski and Long testified to that effect in their depositions.
Long and Raczynski stated, again based on the investigators’ report, that “there is a
preponderance of evidence to indicate” that McCullough sexually harassed his co-
workers on multiple occasions.
Raczynski testified in his deposition that he also considered the high standards
to which the COPH must be held, a consideration that he did not include in his
termination letter. But we find nothing inconsistent or shifting about a decisionmaker
considering the reputation of the institution he oversees when deciding whether to
terminate an employee, even if he does not explicitly include that consideration in his
list of stated justifications. The reasons given by Long and Raczynski all centered on
the investigators’ findings that McCullough engaged in repeated sexual harassment
and was untruthful in his complaints. The record thus does not suggest that the
reasons given by the decisionmakers changed substantially over time.
McCullough next contends that because the investigators did not follow UAMS
policy to interview all of the witnesses whom he listed in his complaints, a jury
reasonably could infer that the employer’s justifications were a pretext for unlawful
discrimination. In response, appellees urge that the investigators interviewed
McCullough, Wooten, and Tritt, along with eight people listed in McCullough’s
complaints, and that they permissibly selected witnesses based on whom they believed
would have the most knowledge about the allegations.
Violation of UAMS policy, in and of itself, does not support a finding that
McCullough was fired on account of his sex. An employer “can certainly choose how
to run its business, including not to follow its own personnel policies regarding
-11-
termination of an employee or handling claims of discrimination, as long as it does not
unlawfully discriminate in doing so.” Haas v. Kelly Servs., Inc., 409 F.3d 1030, 1036
(8th Cir. 2005). The appropriate scope of investigation is a business judgment, and
shortcomings in an investigation do not by themselves support an inference of
discrimination. Wheeler v. Aventis Pharms., 360 F.3d 853, 859 (8th Cir. 2004). Here,
McCullough’s complaint listed twenty-six people to interview, including such
individuals as Raczynski’s assistant’s hair dresser, Elaine Wooten’s husband, and
another employee’s wife. The investigators spoke to eleven. UAMS policy provides
that “resource persons will attempt to interview all individuals identified by either
party,” and that “every effort will be made to ensure a thorough and timely
investigation of the complaint.” While the investigators in this case made a judgment
to limit the number of interviews, McCullough provides no evidence that the
investigators purposely ignored relevant information or otherwise truncated the
inquiry because of a bias against men.
McCullough also asserts that neither Raczynski nor Long could identify during
discovery what facts supported a finding that McCullough committed misconduct, and
that this inability to articulate the basis for termination supports an inference of sex
discrimination. This contention is not supported by the record. When asked in
depositions about the termination, both Raczynski and Long repeatedly stressed the
entirety of the evidence presented to them, including the report of the investigators.3
3
McCullough’s final argument in support of his claim of pretext is that counsel
for appellees lodged improper speaking objections during the depositions of
Raczynski and Long, and that the objections amounted to spoliation of evidence. He
cites no authority for the proposition that improper objections amount to spoliation,
and whatever the propriety of the disputed objections, the witnesses remained
available to testify about any facts that favored McCullough. Sanctions may be
appropriate in an egregious case of attorney misconduct, e.g., Unique Concepts, Inc.
v. Brown, 115 F.R.D. 292, 293-94 (S.D.N.Y. 1987) (awarding sanctions where
plaintiff’s counsel interposed statements other than objections as to form on ninety-
one percent of the pages of a deposition), but McCullough did not seek this remedy
in the district court.
-12-
For these reasons, we conclude that the district court properly granted summary
judgment on McCullough’s claims of sex discrimination.
B.
McCullough’s other discrimination claim is that Raczynski and Long retaliated
against him based on protected activity. Title VII makes it unlawful for an employer
to discriminate against an employee for “oppos[ing] any practice made unlawful by
[Title VII], or because he has made a charge, testified, assisted, or participated in any
manner in an investigation, proceeding or hearing” under Title VII. 42 U.S.C.
§ 2000e-3(a). The ACRA contains a nearly identical prohibition. Ark. Ann. Code.
§ 16-123-108.
To establish a prima facie case of retaliation under Title VII and the ACRA, a
plaintiff must show that he engaged in statutorily protected conduct, that defendants
took an adverse employment action against him, and that there was a causal link
between the two actions. Wallace v. Sparks Health Sys., 415 F.3d 853, 858 (8th Cir.
2005). Once a plaintiff has shown a prima facie case of retaliation, the burden shifts
to the employer to proffer a legitimate, non-retaliatory basis for the adverse
employment action. The plaintiff then bears the burden of proving that the employer’s
proffered reason was a mere pretext for a retaliatory motive. Id. at 860. Again,
because the record has been fully developed in connection with the motion for
summary judgment, we proceed to determine whether McCullough has provided
sufficient evidence of retaliation to create a genuine issue for trial about “whether the
employer acted based on an intent to retaliate rather than on a good faith belief that
the employee violated a workplace rule.” Richey v. City of Independence, 540 F.3d
779, 785 (8th Cir. 2008).
McCullough argues that he has direct evidence that he was terminated for filing
sexual harassment complaints. He claims that Raczynski’s termination letter states
-13-
that he was fired for filing complaints against Wooten and Tritt. The district court
determined that the evidence did not constitute sufficient evidence of retaliation to
make a submissible case, and we agree.
The termination letter lists several related reasons for McCullough’s discharge.
They can be reduced to two primary justifications, namely, that the evidence showed
that he (1) sexually harassed his co-workers on multiple occasions and (2) filed
untruthful complaints against Wooten and Tritt. Contrary to McCullough’s
conclusory assertion, the letter does not state that he was fired “because of the
complaints he made against Wooten and Tritt.” It states that he was discharged for
filing untruthful complaints, as well as for sexually harassing his co-workers.
Raczynski likewise testified that he fired McCullough not for “filing a complaint in
general,” but rather for filing untruthful complaints, and that he would have
terminated McCullough regardless of whether he filed the complaints, because
everyone “has a right to file a complaint.” Viewing the termination letter in the light
most favorable to McCullough, it indicates only that the decisionmakers believed that
McCullough committed sexual harassment and was untruthful in his complaints.
The conclusion of the investigators that McCullough lacked credibility was
supported by independent corroboration from neutral non-parties, see Richey, 540
F.3d at 785; cf. Gilooly v. Mo. Dep’t of Health, 421 F.3d 734, 740-41 & n.2 (8th Cir.
2005), and McCullough failed to produce additional evidence that the employer really
acted because of the employee’s protected activity.4 McCullough reiterates the
4
The investigators’ report explained that neutral non-party witnesses
contradicted important aspects of McCullough’s account. (App. 327-28).
McCullough claimed that he and his officemate asked Tritt to stop engaging in
flirtatious behavior at McCullough’s office while dressed inappropriately, but the
officemate said that this was “definitely not the case.” In response to Wooten’s
complaint that McCullough’s harassment began with McCullough bringing her
chocolate candy, McCullough asserted that he and Dr. John Chelonis collaborated to
get the candy for Wooten to cheer her up. Chelonis, however, denied any involvement
-14-
“spoliation” argument advanced in connection with his sex discrimination claim,
supra, at 12 n.3, and we again find it unpersuasive. Summary judgment was therefore
appropriate.
III.
We next consider McCullough’s claim that he was retaliated against for
exercising his free speech rights under the First Amendment and the Arkansas
Constitution. See Ark. Const. art. II, § 6; Ark. Code. Ann. § 16-123-105.
McCullough claims that his complaints against Wooten and Tritt constitute protected
speech, and that he was fired in retaliation for that speech. McCullough does not
contend that the protections under the free speech provision of the Arkansas
Constitution are more generous than those under the First Amendment, and we find
no Arkansas authority for that proposition. Accordingly, we analyze both his state
and his federal constitutional claims under the standards governing First Amendment
retaliation.
To establish his free speech retaliation claim, McCullough must prove that he
engaged in protected activity, and that this activity was a substantial or motivating
factor in his employer’s decision to terminate him. Altonen v. City of Minneapolis,
487 F.3d 554, 559 (8th Cir. 2007); Cox v. Dardanelle Pub. Sch. Dist., 790 F.2d 668,
672-676 (8th Cir. 1986). If he meets this burden, then the burden of proof shifts to the
in getting a gift for Wooten, and McCullough eventually admitted that he alone
presented the candy. In addition, one witness identified by McCullough, Leslie Hitt,
told investigators that Wooten had approached her on three separate occasions to
report that McCullough had engaged in what Wooten considered “inappropriate
conversations of sexual advances.” The decisionmakers, therefore, were presented
with more substantial evidence than a simple “he said, she said” dispute between two
employees. See Richey, 540 F.3d at 785.
-15-
employer to show that it would have taken the same action regardless of his free
speech activities. Altonen, 487 F.3d at 559.
To determine whether McCullough’s speech is protected, we follow the two-
step analysis developed in Pickering v. Board of Education, 391 U.S. 563, 568 (1968).
See Altonen, 487 F.3d at 559. The first question is whether McCullough’s speech can
be “fairly characterized as constituting speech on a matter of public concern.”
Connick v. Myers, 461 U.S. 138, 146 (1983); Sparr v. Ward, 306 F.3d 589, 594 (8th
Cir. 2002). If the answer is no, then McCullough’s claim fails because no protected
speech is at issue. If the answer is yes, then McCullough’s “right to comment on
matters of public concern must next be balanced with the [employer’s] interest in
promoting the efficiency of the public services it performs through its employees.”
Sparr, 306 F.3d at 594 (internal quotation omitted). “The inquiry into the protected
status of speech is one of law, not fact.” Connick, 461 U.S. at 148 n.7. Because we
answer the first question in the negative, we need not address the second.
McCullough argues that his speech is protected because he spoke as a citizen
on a matter of public importance, namely, sexual harassment in the workplace, and
that he did so with the hope of changing the environment at the COPH. He also
claims that he complained about matters beyond his personal interests, such as the
effect of sexual harassment on the COPH’s public image and efficiency. Appellees
respond that although McCullough’s complaints involve sexual harassment, they do
not constitute speech on a matter of public concern, because he was merely
responding to allegations against him and was therefore motivated to keep his job.
The district court concluded that McCullough’s speech was not constitutionally
protected. It determined that because McCullough filed his complaints in response
to an investigation against him, his primary interest was to remain employed rather
than to speak as a citizen on public matters. Further, the court noted that the principal
focus of his complaints was the propriety of the behavior of the female complainants,
-16-
as opposed to the propriety of the college’s discharge of its duties as a public
institution. We agree with this assessment.
“When speech relates both to an employee’s private interests as well as matters
of public concern, the speech is protected if it is primarily motivated by public
concern.” Altonen, 487 F.3d at 559. Motivation is gauged by evaluating the speech’s
content, form, and context. Id.
The context here is that McCullough filed his complaints only after the college
asked him to respond to the complaints of sexual harassment against him. He thus did
not inform the public about alleged sexual harassment at the COPH in the first
instance on his own initiative. In addition, McCullough’s complaints were entirely
internal to the COPH and the investigation team. See Sparr, 306 F.3d at 595. These
factors favor a conclusion that his primary motivation was private.
The content of McCullough’s complaints also supports the conclusion that his
primary motivation was a matter of private concern. In his complaint against Tritt,
McCullough wrote that he filed the complaint because she harassed him, and because
he wanted to stop her from spreading false rumors about him. He stated that because
she “thought it pertinent [in her complaint] . . . to bring in [their] historical work
relationship,” he would do the same in his complaint against her. McCullough’s
complaint against Wooten asserted that she was “jealous” and “possessive” of him,
that she spread rumors about other colleagues, that she commented on his behind and
directed cat-calls at him, and that she discussed her sex life with him. McCullough
also complained that Wooten’s behavior was not “good for the organization,” because
it allegedly disrupted the work environment, and would make others think that
management condoned her conduct. Finally, he claimed that Wooten exploited her
relationship with Raczynski.
-17-
These complaints broach multiple topics, but the dominant theme is that of an
employee engaged in a personal battle to retain his job. McCullough does raise
important public issues of sexual harassment and organizational disruption, but “the
mere fact that the topic of [an] employee’s speech [is] one in which the public might
or would have had a great interest is of little moment.” Morgan v. Ford, 6 F.3d 750,
754 (11th Cir. 1993) (internal quotation omitted). Our focus remains on
McCullough’s purpose in speaking, and we agree with the district court that the better
view is that these complaints are primarily oriented toward McCullough’s self-
interest, rather than the public interest. We therefore conclude that the district court
properly granted summary judgment on the free speech claims.
* * *
The judgment of the district court is affirmed.
______________________________
-18-
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238 N.J. Super. 614 (1990)
570 A.2d 485
LINDA M. KRONSTADT, PLAINTIFF-RESPONDENT,
v.
STUART KRONSTADT, DEFENDANT-APPELLANT.
Superior Court of New Jersey, Appellate Division.
Argued January 24, 1990.
Decided February 26, 1990.
*615 Before Judges DREIER, D'ANNUNZIO and WEFING.
Kevin A. Resnik argued the cause for appellant (Berlin, Kaplan, Dembling & Burke, attorneys; Colleen M. Ready, on the brief).
*616 Robert T. Costello argued the cause for respondent (Robert T. Costello, on the brief).
The opinion of the court was delivered by DREIER, J.A.D.
Defendant appeals from an order reviving and consolidating two earlier judgments that plaintiff had obtained against defendant, her former husband. The first judgment, entered June 3, 1982, was for a portion of proceeds from a pending legal action made payable to her pursuant to their property settlement agreement. The second was a December 1, 1982 judgment for support arrearages. Plaintiff was forced to obtain this revived judgment so that it could be entered in Florida which, according to the affidavit of plaintiff's Florida attorney, permits "enforcement of Foreign Judgments only within five (5) years of the Judgment's original rendering." Florida Statutes 55.509 and 95.11.
On notice to defendant, plaintiff successfully moved for an order entering the new judgment. Defendant contends that from a time shortly after the entry of the original judgment he has been a resident of the State of Florida and has had no substantial contacts with New Jersey since that time. Plaintiff does not dispute this fact, but asserts that the original jurisdiction obtained over defendant is sufficient to warrant the entry of the new judgment. N.J.S.A. 2A:14-5 provides in part:
A judgment in any court of record in this state may be revived by proper proceedings ... within 20 years next after the date thereof, but not thereafter.... [Emphasis supplied].
The issue in this case is what are "proper proceedings." The source statute for N.J.S.A. 2A:14-5 is C.S. Limitations of Actions, p. 3166 § 7, Rev. 1877, p. 595, which stated:
That judgments in any court of record of this state may be revived by scire facias ... within twenty years next after the date of such judgment, and not after ...
This language was carried with some minor changes into R.S. 2:24-6, and then into the present statute.
*617 The scire facias proceeding is noted in Blacks Law Dictionary 1208 (5th Ed. 1979) as:
A judicial writ, founded upon some matter of record, such as a judgment or recognizance and requiring the person against whom it is brought to show cause why the party bringing it should not have advantage of such record.... The most common application of this writ is a process to revive a judgment, after the lapse of a certain time, or on a change of parties, or otherwise to have execution of the judgment, in which cases it is merely a continuation of the original action.
The writ or proceeding is further explained in Garner, A Dictionary of Modern Legal Usage 491 (1987), using as an example the very problem facing this court:
Scire facias, literally `you should cause to know,' is the Latinism that has given its name to the judicial writ founded upon a matter of record requiring the person against whom it is issued to show cause why the record should not be [enforced]. E.g., `scire facias to revive a judgment being a continuation of the suit, jurisdiction thereon is in the court where the judgment was rendered, regardless of the residency of the parties.' (citation omitted in original).
The scire facias proceeding has been replaced in New Jersey by an order to show cause, R. 4:52-1 (79 C.J.S., Scire Facias § 2), although there would be no impediment to proceeding by motion, which in this instance would be in the nature of motion for summary judgment, R. 4:46-1 et seq.
This issue was treated in Huff v. Pharr, 748 F.2d 1553, 1554-1555 (11th Cir.1984), which in turn relied upon the procedures discussed in Watkins v. Conway, 385 U.S. 188, 87 S.Ct. 357, 17 L.Ed.2d 286 (1966) (upholding the constitutionality of a Georgia statute similar to that in Florida). In Watkins, the Supreme Court noted that the procedure followed by plaintiff here, i.e., returning to the state that had entered the original judgment to revive that judgment, and then proceeding anew on the revived judgment against defendant in his home state, meets constitutional muster. In Huff, the 11th Circuit noted:
Not at issue in Watkins, however, was whether the court in which the plaintiff sought renewal could exercise personal jurisdiction over the defendant only in accordance with the same due process requirements that were operative in the original suit....
The narrow issue of this appeal is whether the defendant's participation in the original litigation and his connection with the State of California prior to that litigation satisfy the minimum contacts requirement....
*618 We hold the defendant had the requisite minimum contacts with the State of California for the courts of that state to exercise personal jurisdiction over the defendant in the 1982 action. Such contacts were present when the original suit was filed in 1972.... The 1982 action involved a claim uniquely connected with the defendant's previous forum-related activities. Under these circumstances, we do not consider it unfair to require the defendant, when properly served, to submit again to the jurisdiction of the California courts in a suit based upon a judgment previously entered in an action involving the same claim. [748 F.2d at 1554-1555].
And see Berly v. Sias, 152 Tex. 176, 255 S.W.2d 505, 508 (1953); Duffy v. Hartsock, 187 Va. 406, 46 S.E.2d 570, 574 (1948); 49 C.J.S., Judgments § 548e.
We note that the elements to be proven when a judgment is revived are: (1) the judgment is valid and subsisting; (2) it remains unpaid in full, or, if in part, the unpaid balance; and (3) there is no outstanding impediment to its judicial enforcement, e.g., a stay, a pending bankruptcy proceeding, an outstanding injunctive order, or the like. A judgment debtor may contest the revival proceedings on such bases.
While we recommend to the Civil Practice Committee that the rules be amended specifically to define the "proper proceedings" noted in N.J.S.A. 2A:14-5 to revive a judgment, we find that the motion procedure employed by plaintiff in this case was acceptable.[1] As the procedure here was merely a continuation of the action resulting in the original judgments, the renewal judgment was properly entered.
Affirmed.
NOTES
[1] Plaintiff in this case gave notice to defendant, and therefore the issue of the validity of a revival proceeding without notice is not before us. Suffice it to say, the basis of the proceeding is an order to show cause why the revival should not be permitted, or a motion to revive the judgment. In either case, while in personam jurisdiction remains in the judgment state (Huff v. Pharr, supra), due process requires that defendant have notice so that matters such as payment or other satisfaction of the judgment may be brought before the court. As a double protection in the case before us, plaintiff has agreed that any question of payment may be raised anew in Florida.
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[J-80-2017]
IN THE SUPREME COURT OF PENNSYLVANIA
WESTERN DISTRICT
SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.
COMMONWEALTH OF PENNSYLVANIA, : No. 27 WAP 2017
:
Appellee : Appeal from the Order of the Superior
: Court entered December 13, 2016 at
: No. 1472 WDA 2015, affirming the
v. : Judgment of Sentence of the Court of
: Common Pleas of Mercer County
: entered June 23, 2015 at No. CP-43-
EDWARD STEPHEN DELGROS, : CR-0001496-2014.
:
Appellant : SUBMITTED: November 21, 2017
OPINION
JUSTICE BAER DECIDED: APRIL 26, 2018
We granted allowance of appeal to determine whether a defendant, who is
ineligible for statutory collateral review because he was sentenced to pay a fine without
incarceration or probation, may obtain review of ineffective assistance of counsel claims
presented in post-sentence motions filed in the trial court. The lower courts held that
Edward Stephen Delgros (“Appellant”) could not obtain review of his ineffectiveness
claims because he failed to satisfy any of the exceptions to this Court’s general rule
deferring such claims to collateral review under the Post Conviction Relief Act (“PCRA”),
42 Pa.C.S. § 9541 et seq. For the reasons set forth infra, we adopt a new exception to
the general deferral rule, requiring trial courts to examine ineffectiveness claims when
the defendant is ineligible for PCRA review. Accordingly, we vacate the Superior
Court’s judgment and remand to the trial court for consideration of Appellant’s post-
sentence claims of ineffective assistance of counsel.
I. Background
The record establishes that in June of 2001, Appellant hired Robert Croyle to
install a double-wide mobile home on his property. Croyle purchased two I-beams,
described as being lightweight magnesium and more than twenty feet long, for
$1,400.00 each and employed them to move the double-wide into position. Croyle left
the I-beams and other materials on Appellant’s property, intending to pick them up at a
later time. When Croyle returned, his materials were not at the site, and Appellant
denied knowledge of their whereabouts. Croyle reported the I-beams missing to the
Hermitage Police Department. When Deputy Chief Eric Jewel questioned Appellant
about the I-beams, he reiterated that he did not know where they had gone. With
Appellant’s authorization, Deputy Chief Jewel searched the premises to no avail.
Several months later, Appellant told his father that he had Croyle’s I-beams and
asked for his father’s assistance in hiding them in the woods. Five to seven years
thereafter, Appellant and his father used the I-beams to build a porch onto Appellant’s
house. In April of 2014, Hermitage police received a report that the I-beams were on
Appellant’s property. Appellant’s father subsequently told Deputy Chief Jewel that
Appellant had used Croyle’s I-beams in the construction of his porch.
Deputy Chief Jewel went to Appellant’s residence and saw the I-beams
supporting the porch roof in plain view. After obtaining a warrant, photographs and
samples of the I-beams were taken, which indicated that the beams were made of
aluminum. When Croyle was asked about his prior claim that the missing beams were
made of magnesium, he explained that he thought the beams were magnesium, but that
they could have been aluminum. Based on holes present in the I-beams, however,
[J-80-2017] - 2
Croyle identified the I-beams photographed in Appellant’s porch as being those that
went missing years earlier.
Appellant was thereafter charged with the third degree felony of receiving stolen
property. Following a jury trial, Appellant was convicted of this offense and was
sentenced to pay restitution in the amount of $2,800.00, and a fine of $15,000.00.
Appellant obtained new counsel and filed post-sentence motions seeking a new trial
and/or arrest of judgment, raising the following contentions: (1) the prosecution was
barred by the applicable statute of limitations; (2) the evidence was insufficient to
support his conviction; (3) the verdict was against the weight of the evidence; (4) trial
counsel was ineffective for failing to introduce evidence regarding the value of the I-
beams for purposes of lowering the grade of the offense; and (5) trial counsel was
ineffective for failing to seek suppression of the search warrant. Appellant requested an
evidentiary hearing on the ineffectiveness claims.
The trial court granted oral argument and ordered briefing on the questions
presented in the post-sentence motions. Thereafter, the trial court rejected Appellant’s
first three substantive claims on their merits. As to the remaining two claims, alleging
trial counsel’s ineffectiveness, the trial court denied Appellant's request for an
evidentiary hearing. The court held that Appellant was not entitled to relief because the
assertions of ineffectiveness constituted collateral claims that could only be raised
pursuant to the PCRA. Trial Court Opinion at 7. The court reasoned that the PCRA
requires a petitioner to be “currently serving a sentence of imprisonment, probation or
parole for the crime” at the time relief is granted, 42 Pa.C.S. § 9543(a)(1)(i), and that
Appellant was never incarcerated, on probation, or on parole as he was sentenced only
[J-80-2017] - 3
to pay a fine.1 Trial Court Opinion at 7 (citing Commonwealth v. Fisher, 703 A.2d 714
(Pa. Super. 1997) (holding that Subsection 9543(a)’s eligibility requirement of current
incarceration, probation or parole precludes PCRA relief for those petitioners who were
sentenced only to pay a fine)).
On appeal to Superior Court, Appellant contended, inter alia, that the trial court
erred by declining to entertain his ineffective assistance of counsel claims. Appellant
argued that while this Court in Commonwealth v. Grant, 813 A.2d 726, 738 (Pa. 2002),
set forth a general rule deferring ineffective assistance of counsel claims to collateral
review under the PCRA, we created exceptions to that rule permitting ineffectiveness
claims to be presented in post-sentence motions and on direct appeal under limited
circumstances. See Commonwealth v. Holmes, 79 A.3d 562, 563-64 (Pa. 2013)
(holding that a trial court retained discretion to entertain ineffectiveness claims on post-
verdict motions and direct appeal where: (1) the claim of ineffectiveness is apparent
from the record and meritorious to the extent that immediate consideration best serves
the interests of justice; or (2) where there is good cause shown and the defendant
knowingly and expressly waives his entitlement to seek subsequent PCRA review from
1Subsection 9543(a) provides, in relevant part, that to be eligible for PCRA relief, the
petitioner must plead and prove by a preponderance of the evidence . . . :
(1) That the petitioner has been convicted of a crime under the laws of
this Commonwealth and is at the time relief is granted:
(i) currently serving a sentence of imprisonment, probation or
parole for the crime;
(ii) awaiting execution of a sentence of death for the crime;
or
(iii) serving a sentence which must expire before the person
may commence serving the disputed sentence.
42 Pa.C.S. § 9543(a)(1).
[J-80-2017] - 4
his conviction and sentence). Appellant argued that he was entitled to review of his
ineffectiveness claims under both of the Holmes’ exceptions. He further maintained
that, absent the opportunity to challenge his trial counsel’s stewardship in post-sentence
motions, he would be denied the opportunity to litigate his Sixth Amendment right to
competent representation at trial, thereby depriving him of due process.
The Superior Court affirmed Appellant’s judgment of sentence in a memorandum
opinion rejecting, inter alia, his contention that the trial court erred by refusing to
entertain his ineffectiveness claims. Regarding the first Holmes’ exception to the
general deferral rule, the Superior Court held that neither of Appellant’s ineffectiveness
claims (alleging a failure to challenge the value of the stolen property and a failure to
challenge the validity of the search warrant) were apparent from the record and
meritorious. The intermediate appellate court went on to hold that the second Holmes
exception (good cause/waiver of future PCRA review) presumed that the defendant
would subsequently be entitled to PCRA review. Because Appellant was sentenced to
a fine and was not incarcerated, on probation, or on parole, the Superior Court held that
Appellant would never be entitled to PCRA review under Subsection 9543(a)(1)(i), and,
thus, could not satisfy Holmes’ second exception to obtain merits review of post-
sentence claims of ineffective assistance of counsel.
Finally, the Superior Court declined to find a due process violation resulting from
Appellant’s total inability to obtain review of his ineffectiveness claims, citing
Commonwealth v. Turner, 80 A.3d 754, 764-67 (Pa. 2013), for the proposition that there
is no due process right to non-custodial collateral review. Superior Court Memorandum
at 11-12. Similarly, the intermediate appellate court cited its previous decision in
Commonwealth v. Fisher, supra, which held that a PCRA petitioner sentenced only to
pay a fine is ineligible for collateral relief under Subsection 9543(a) of the PCRA. The
[J-80-2017] - 5
Superior Court did not observe any distinction between Appellant’s attempt to raise
ineffectiveness claims in post-sentence motions and the attempts made by the PCRA
petitioners in Turner and Fisher to obtain review of ineffectiveness claims presented in a
PCRA petition governed by the statutory requisites.2
As noted, this Court granted allocatur to address whether Appellant, who is
ineligible for collateral review under the PCRA because he was sentenced only to pay a
fine, is entitled to review of ineffective assistance of counsel claims presented in post-
sentence motions. This question constitutes a question of law; thus, our standard of
review is de novo and our scope of review is plenary. Commonwealth v. Baldwin, 58
A.3d 754, 762 (Pa. 2011).
II. The Parties’ Arguments
Appellant contends that he is entitled to the right to counsel under the Sixth
Amendment to the United States Constitution and Article I, Section 9 of the
Pennsylvania Constitution. He submits that this right encompasses the fundamental
right to effective trial counsel. According to Appellant, his right to due process was
violated when the lower courts declined to provide him an opportunity to litigate his
challenges to trial counsel’s representation, particularly considering that he can never
present ineffectiveness claims on collateral review due to his ineligibility under
Subsection 9543(a)(1).
Appellant asserts that the lower courts erred by concluding that his constitutional
right to challenge trial counsel's stewardship was subordinate to or dependent upon the
2 The Superior Court below additionally relied upon Commonwealth v. Reigel, 75 A.3d
1284 (Pa. Super. 2013), which involved ineffectiveness claims presented in a direct
appeal from the imposition of a fine. In Reigel, the Superior Court affirmed the trial
court’s refusal to address the ineffectiveness claims, holding that while it was not
unsympathetic to the defendant’s total inability to pursue such claims, the current law
did not allow for their review on direct appeal. Id. at 1289.
[J-80-2017] - 6
eligibility requirements of the PCRA. He contends that the evolution of this Court’s case
law regarding the general deferral rule supports his position that ineffectiveness claims
should be addressed during the appellate process when those claims cannot be
asserted under the PCRA. Specifically, Appellant relies on Holmes, which affords trial
courts discretion to review ineffectiveness claims where there is good cause shown and
the defendant knowingly and expressly waives his entitlement to seek subsequent
PCRA review of his conviction or sentence. He contends that the Holmes Court
recognized that review of ineffectiveness claims during direct appeal proceedings was
advantageous when it allowed defendants with shorter sentences, who would be
ineligible for PCRA review when they were no longer incarcerated, the ability to litigate
their ineffectiveness claims on direct appeal. Appellant posits that defendants who are
ineligible for PCRA review because they were sentenced only to pay a fine should
likewise be entitled to review of ineffectiveness clams to vindicate their constitutional
right to effective representation at trial, which would otherwise be forfeited.
Appellant argues that the Superior Court misinterpreted the good cause/PCRA
waiver exception in Holmes by presuming that application of such exception required
compliance with the statutory requisites for PCRA relief. Contrary to the lower court’s
holding, he submits, Holmes in no way suggests that a defendant, convicted of a felony
but sentenced only to pay a fine, should never have an opportunity to challenge his
counsel’s stewardship and/or to demonstrate that counsel ineffectiveness affected the
outcome of his case. To the contrary, Appellant posits, when read in its entirety,
Holmes recognizes the compelling need for the “short sentence exception” so that
PCRA petitioners will have at least one opportunity for review of ineffectiveness claims
due to their constitutional primacy. He concludes that defendants sentenced to pay a
fine without incarceration or probation should be afforded the same protections.
[J-80-2017] - 7
Finally, Appellant submits, the Superior Court erred by relying on this Court’s
decision in Commonwealth v. Turner, supra, in support of its holding that his due
process rights were not violated. He argues that Turner is distinguishable because it
did not involve a defendant’s attempt to raise ineffectiveness claims in post-sentence
motions, as occurred here. Rather, Appellant asserts, this Court held in Turner that the
PCRA’s eligibility requirement in Subsection 9543(a)(1), that a petitioner be “currently
serving a sentence of imprisonment, probation or parole,” was not unconstitutional as
applied to a petitioner who was no longer incarcerated, but had prior opportunities to
present ineffectiveness claims. Unlike in Turner, Appellant contends, the lower court’s
decision leaves him no opportunity to challenge trial counsel’s stewardship.
Accordingly, Appellant respectfully requests that we reverse the Superior Court and
remand to the trial court for consideration of his ineffectiveness claims.3
The Commonwealth responds that the lower courts correctly denied Appellant
review of his ineffectiveness claims because he failed to satisfy any recognized
exception to the general deferral rule. As Appellant relies exclusively on the second
Holmes’ exception (good cause/waiver of PCRA), the Commonwealth asserts that such
exception is inapplicable because to waive PCRA review, a petitioner must be eligible to
assert a claim under the PCRA in the first instance. Appellant is ineligible to do so here,
it submits, because he was sentenced only to pay a fine and, thus, cannot satisfy
Subsection 9543(a)(1).
3 The Defender Association of Philadelphia (“DAP”) has filed an amicus curie brief in
support of Appellant, reiterating his sentiments that the right to effective counsel is a
fundamental constitutional right necessary to ensure a fair trial. The DAP urges the
Court to treat defendants sentenced only to a fine in the same manner as we treated
defendants with a short sentence in Holmes, i.e., afford them the opportunity to raise
ineffective assistance of counsel claims on direct appeal.
[J-80-2017] - 8
In the Commonwealth’s view, the inability of a non-custodial defendant to seek
review of ineffectiveness claims does not offend due process because, for a due
process right to attach, a defendant’s liberty interest must in some way be infringed.
Brief for Appellee at 18 (citing Sandin v. Conner, 515 U.S. 472, 484 (1995) (holding that
liberty interests that are protected by due process are generally limited to freedom from
restraint)). As Appellant was not subject to detention or the threat of detention, the
Commonwealth maintains that there is no deprivation of liberty so as to create a due
process right compelling an opportunity for review of ineffectiveness claims under the
PCRA. It submits that there is no authority to support Appellant’s request for a “fine-
only” exception to the general deferral rule, particularly considering that the PCRA
expressly limits eligibility to those individuals whose liberty is restricted. See Brief of
Appellee at 17 (citing Commonwealth v. Reigel, 75 A.3d at 1288-89 (holding that a
defendant convicted of summary offenses and sentenced to pay fines and costs was
not eligible to litigate ineffective assistance of counsel claims on direct appeal) and
Commonwealth v. Fisher, 703 A.2d 714 (Pa. Super. 1997) (holding that Subsection
9543(a)’s eligibility requirement of current incarceration, probation or parole precludes
PCRA relief for those petitioners who were sentenced only to pay a fine)).
The Commonwealth further posits that this Court resolved the due process issue
in Turner, where we held that Subsection 9543(a)(1)(i)’s limitation of PCRA review to
individuals serving a sentence of imprisonment, probation, or parole comports with due
process because individuals who are not serving a state sentence have no liberty
interest and, therefore, no due process right to collateral review of that sentence. The
Commonwealth contends that the inability of a non-custodial defendant to obtain review
of ineffectiveness claims is a mere consequence of legislative choice. It argues that
there is no case law or statutory authority obligating this Court to exempt defendants
[J-80-2017] - 9
sentenced to non-custodial, fine-only punishments from the PCRA requirements when
attempting to raise claims challenging the effectiveness of trial counsel. To do so, the
Commonwealth contends, would convert post-sentence practice into quasi-PCRA
proceedings, which this Court rejected in Grant. It urges this Court to adhere to
precedent by deferring ineffectiveness claims to collateral review.
III. Evolution of Case Law on Treatment of Ineffectiveness Claims
A review of case law involving this Court’s historic treatment of ineffective
assistance of counsel claims is helpful to understanding the issue presented. In
Commonwealth v. Hubbard, 372 A.2d 687 (Pa. 1977), this Court declared that claims
challenging counsel’s effectiveness must be raised at the earliest stage of the
proceedings at which the allegedly ineffective counsel no longer represented the
defendant and, if not so raised, the claims were waived. Id. at 695 n.6.4 Thus, a
dichotomy arose in that the procedural rules traditionally did not permit issues to be
raised for the first time on appeal or provide for supplementation of the record on
appeal, yet the defendant, if represented by new counsel on appeal, was required to
assert and develop a challenge to prior counsel’s stewardship at that point of the
proceedings, upon pain of waiver.
This Court reconsidered that procedure in Commonwealth v. Grant, 813 A.2d
726 (Pa. 2002), observing the impracticalities of reviewing ineffectiveness claims on
direct appeal including: (1) the absence of a trial court opinion to facilitate meaningful
appellate review; (2) the inability of appellate courts to consider matters outside of the
4 Two years prior to Hubbard, in Commonwealth v. Dancer, 331 A.2d 435 (Pa. 1975),
this Court held that a defendant represented on direct appeal by new counsel waives
his ineffectiveness claim by failing to present the issue on direct appeal, subject to a few
enumerated exceptions. In Hubbard, we made such rule absolute. See Grant, 813
A.2d at 733 (discussing the history of the Hubbard rule).
[J-80-2017] - 10
record; and (3) the inability of appellate courts to make credibility determinations relating
to ineffectiveness claims based on the cold record. Id. at 733-34. To remedy these
concerns, the Grant Court abrogated the Hubbard rule and adopted a general rule that
a defendant “should wait to raise claims of ineffective assistance of trial counsel until
collateral review proceedings.” Id. at 738.
The Grant Court opined that generally deferring ineffectiveness claims to
collateral review proceedings was consistent with our procedural rules that prohibit
appellate courts from considering issues that were not raised and developed in the court
below, facilitating meaningful appellate review. Id. at 734; see also Pa.R.A.P. 302(a)
(providing that “[i]ssues not raised in the lower court are waived and cannot be raised
for the first time on appeal”). Additionally, the Court concluded that generally deferring
ineffectiveness claims to collateral review proceedings would allow for better
development of the claims as appellate counsel could focus on reviewing the record for
claims of error within the limited period for filing a direct appeal, while PCRA counsel
would be afforded more time to investigate and develop non-record claims challenging
prior counsel’s performance in collateral proceedings. Id.; compare 42 Pa.C.S.
§ 9545(b)(1) (setting forth the general rule that a PCRA petition “shall be filed within one
year of the date the judgment becomes final”) with Pa.R.Crim.P. 720(A)(3) (providing
the general rule that “[i]f the defendant does not file a timely post-sentence motion, the
defendant’s notice of appeal shall be filed within 30 days of imposition of sentence”).
Finally, the Grant Court recognized that the trial court is better suited than an appellate
court to make credibility determinations relating to both the quality of trial counsel’s
performance and the impact of any deficiencies in stewardship. Id.
Concluding that deferral of ineffectiveness claims until collateral review
proceedings offers a defendant “the best avenue to effect his Sixth Amendment right to
[J-80-2017] - 11
counsel,” the Grant Court clarified that “any ineffectiveness claim will be waived only
after a petitioner has had the opportunity to raise that claim on collateral review and has
failed to avail himself of that opportunity.” Id. at 738. Grant recognized the prospect of
exceptions to the general rule in future cases, id. at n.14, and applied the newly-
formulated rule to the parties before it by dismissing the ineffectiveness claims without
prejudice, thereby allowing the defendant to raise the claims on collateral review. Grant
further held that its new rule applies retroactively to “any other cases on direct appeal
where the issue of ineffectiveness was properly raised and preserved.” Id. at 738.
As occurs with all decisional law, this Court subsequently refined our holding in
Grant when confronted with discrete factual scenarios in subsequent cases. In
Commonwealth v. Bomar, 826 A.2d 831 (Pa. 2003), we declined to apply Grant’s
general deferral rule where: the defendant’s ineffectiveness claims had been preserved
by new counsel in post-sentence motions prior to our decision in Grant; the trial court
held hearings during which trial counsel testified; and the trial court evaluated the
ineffectiveness claims in its opinion based upon a sufficient record. This Court in Bomar
reviewed such ineffectiveness claims on direct appeal as the concerns that led this
Court in Grant to abrogate the Hubbard doctrine, which affected both the ability of the
defendant to develop his claims and the reviewing court’s ability to consider the claims,
simply did not exist. Bomar, 826 A.2d at 853. This decision resulted in what has been
colloquially referred to as the “Bomar exception” to Grant’s general deferral rule.
In Commonwealth v. O’Berg, 880 A.2d 597 (Pa. 2005), the Court declined to
recognize a categorical exception to Grant’s general deferral rule, which would have
permitted defendants with short sentences of incarceration, who would likely be
ineligible for PCRA review as they would no longer be in custody, to present
ineffectiveness claims on direct appeal. The Court held that the reasons for deferring
[J-80-2017] - 12
review of ineffectiveness claims espoused in Grant (i.e., the lack of a trial court opinion,
lack of a sufficient record, and transformation of an appellate court into a factfinder) are
all present in the short-sentence scenario, thereby suggesting that deferral to collateral
proceedings remained appropriate, even though some defendants may not be eligible
for PCRA review as they would no longer be serving a sentence of imprisonment,
probation or parole under Subsection 9543(a) of the PCRA. O’Berg, 880 A.2d at 601-
02. The O’Berg Court found the concept of a “short sentence” too ambiguous to provide
the lower courts any guidance on how to apply such an exception and feared that
adopting a “short sentence” exception “would undermine the very reasons that led to
our decision in Grant in the first instance.” Id. at 602.5 6
Notably, this Court again revisited Grant’s general deferral rule in Commonwealth
v. Holmes, supra, where we granted allowance of appeal to address uncertainty that
had arisen regarding whether the Bomar exception could be applied to cases litigated
on direct appeal after Grant;7 and to determine whether ineffectiveness claims could be
5 The O’Berg decision did not address the defendant’s due process claim, finding the
issue to be waived. Id. at 597 n.2.
6 Former Chief Justice Castille filed a concurring opinion in O’Berg in which he asserted
that ineffectiveness claims are quintessentially collateral claims that belong only in
collateral review pursuant to the PCRA. Justice, now Chief Justice, Saylor filed a
dissenting opinion, joined by this author, in which he opined that Grant’s general
deferral rule was premised upon the availability of collateral review, thus, fundamental
fairness supported the recognition of an exception to the general deferral rule for those
ineligible for PCRA consideration.
7 The uncertainty arose when trial courts continued to entertain ineffectiveness claims
after this Court declared in Grant that such claims should generally be deferred to
collateral review. The result was that appellate courts were presented with
ineffectiveness claims on direct appeal that did not suffer from the impracticalities
discussed in Grant in that they had been addressed by trial courts in their opinions after
supplementation of the record. Upon denial of relief on these claims on direct appeal,
some defendants would then assert additional claims of ineffectiveness in collateral
review proceedings under the PCRA, arbitrarily affording those defendants two separate
opportunities to challenge counsel’s stewardship.
[J-80-2017] - 13
considered by the trial court if accompanied by the defendant’s waiver of subsequent
review under the PCRA. This Court reaffirmed Grant’s general rule of deferral to PCRA
review and disapproved of expansions of the Bomar exception that permitted some, but
not all, defendants to obtain review of ineffectiveness claims during the appellate
process and then proceed to PCRA collateral proceedings for a second opportunity to
present additional ineffectiveness claims. Holmes, 79 A.3d at 563. Accordingly, we
limited the Bomar exception to apply to cases litigated in the trial court prior to our
decision in Grant. Id.
As noted, in Holmes, we recognized two exceptions to the general rule deferring
ineffectiveness claims to collateral review. The first exception, not invoked in this
appeal, affords trial courts discretion to entertain ineffectiveness claims in extraordinary
circumstances where a discrete claim of trial counsel ineffectiveness is apparent from
the record and meritorious to the extent that immediate consideration best serves the
interests of justice. Id. The second exception, relied upon by Appellant herein, gives
trial courts discretion to address ineffectiveness claims on post-sentence motions and
direct appeal if there is good cause shown and the defendant knowingly and expressly
waives his entitlement to seek subsequent PCRA review of his conviction and sentence.
Id. at 564. This waiver of subsequent PCRA review eliminated the unintended
consequence of some defendants obtaining two separate rounds of review of ineffective
assistance of counsel claims. We emphasized that the paradigm the Court was
adopting sanctioned unitary review only to the extent the review advanced and
exhausted PCRA review, and not as a means to obtain an accelerated, extra round of
collateral attack. Id.
Germane to the issue presented in this appeal, the Court in Holmes softened its
steadfast position adopted in O’Berg (prohibiting a categorical short sentence exception
[J-80-2017] - 14
to Grant’s general deferral rule) and observed that “unitary review offers defendants
who receive shorter prison sentences or probationary sentences the prospect of
litigating their constitutional claims sounding in trial counsel ineffectiveness; for many of
these defendants, post-appeal PCRA review may prove unavailable.” Id. at 578.
Considering that the United States Supreme Court had recently emphasized “the
constitutional primacy of claims involving the ineffectiveness of trial counsel,” id. (citing
e.g., Martinez v. Ryan, 566 U.S. 1 (2012) and Trevino v. Thaler, 569 U.S. 413 (2013)),
the Holmes Court found unitary review in short sentence cases to be valuable. Id.
Accordingly, we directed trial courts to “err on the side of favoring the vindication of
constitutional rights otherwise susceptible to forfeiture,” and conveyed confidence that
trial courts in short sentence cases will recognize these concerns and liberally permit
unitary review. Holmes, 79 A.3d at 578.
IV. Analysis
While our decision in Holmes did not address the particular facts currently before
us, i.e., where the defendant is ineligible for PCRA review because he was sentenced
only to pay a fine, we agree with Appellant that the reasoning in Holmes applies with
equal force to these circumstances. Recognizing the “bedrock” importance of effective
assistance of trial counsel and the derivative importance of opportunities to litigate
claims of ineffectiveness, id., at 583 (citing Martinez, 132 S.Ct. at 1317-18), the Holmes
Court crafted an exception affording trial courts discretion to entertain challenges to trial
counsel’s stewardship where the defendants may not have the ability to raise such
claims in collateral proceedings due to their potential ineligibility for PCRA review.
Here, Appellant’s ineligibility for PCRA review is more than potential; it is definitive, as
he can never satisfy Subsection 9543(a)(1) because he was sentenced only to pay a
fine. This PCRA ineligibility eliminates the concern addressed in Holmes regarding a
[J-80-2017] - 15
defendant obtaining a second opportunity to raise additional ineffectiveness claims on
collateral review.
Accordingly, to ensure that defendants are afforded an opportunity to challenge
trial counsel’s stewardship, we adopt an additional exception to Grant’s general deferral
rule, requiring trial courts to address claims challenging trial counsel’s performance
where the defendant is statutorily precluded from obtaining subsequent PCRA review.
While we have cautioned lower courts against creating exceptions to Grant’s general
deferral rule, there is no impediment to this Court establishing a change in procedure
where, as here, it serves the interests of justice. See Grant, 813 A.2d at 738 n. 14
(reserving in this Court the authority to create an exception to the general rule of
deferral); Commonwealth v. O'Berg, 880 A.2d 597, 602 (Pa. 2005) (same);
Commonwealth v. Liston, 977 A.2d 1089, 1094 (Pa. 2009) (same).
We reach this conclusion in recognition that Grant’s general deferral rule was
motivated in large part by an intent to enhance a defendant’s ability to effectuate his
constitutional right to competent representation at trial, and not to restrict that
opportunity. See Grant, 813 A.2d at 738 (providing that deferral of ineffectiveness
claims until collateral review proceedings offers a defendant “the best avenue to effect
his Sixth Amendment right to counsel”). We further acknowledge that our general
deferral rule was initially premised upon the assumption that the defendant would
subsequently be eligible to obtain review of such claims in collateral proceedings. See
Grant, 813 A.2d at 738 (providing that “any ineffectiveness claim will be waived only
after a petitioner has had the opportunity to raise that claim on collateral review and has
failed to avail himself of that opportunity”). Id. at 738.
Significantly, and contrary to the lower court’s reasoning herein, sanctioning
review of Appellant’s post-sentence motions, which challenge trial counsel’s
[J-80-2017] - 16
stewardship, does not afford him “collateral review” outside the confines of the PCRA.
See Trial Court Opinion at 7 (holding that claims alleging the ineffective assistance of
counsel are “collateral claims” reviewable only if the statutory requisites of the PCRA
are satisfied). A claim does not become “collateral” merely because it alleges the
ineffectiveness of trial counsel; rather, a claim is collateral when raised after the direct
appeal process has concluded. See Wall v. Kholi, 562 U.S. 545, 553 (2011) (holding
that “collateral review” of a judgment or claim is ordinarily understood as “a judicial
reexamination of a judgement or claim in a proceeding outside of the direct appeal
process”). Thus, Appellant’s challenges to trial counsel’s stewardship set forth in post-
sentence motions are not “collateral claims” subject to the requirements of the PCRA.
The express language of the PCRA confirms this observation by acknowledging
that the statute does not govern procedures applicable to a defendant’s direct appeal.
See 42 Pa.C.S. § 9542 (providing the scope of the PCRA and stating that “[t]his
subchapter is not intended to limit the availability of remedies in the trial court or on
direct appeal from the judgment of sentence”). Thus, the Superior Court erred by
holding that Appellant’s inability to satisfy Subsection 9543(a)(1) of the PCRA precluded
him from obtaining review of his post-sentence claims of ineffective assistance of
counsel. The statutory requisites for obtaining collateral relief pursuant to the PCRA are
relevant to our determination herein only to the extent that they inform us of the
consequences resulting from our adoption of a particular direct appeal procedure.
Having determined that an exception to the general deferral rule in Grant best
serves the interests of justice when the defendant is ineligible to obtain subsequent
PCRA review, we need not address Appellant’s claim that due process requires such
result as it is the policy of this Court to avoid deciding a matter on constitutional grounds
if the issue can be decided on other grounds. See Liston, 977 A.2d at 1094 (citing
[J-80-2017] - 17
Commonwealth v. Long, 922 A.2d 892, 897 (Pa. 2007) (providing that “[i]t is the policy
of this Court to avoid deciding a matter on constitutional grounds if the issue can be
decided on other grounds”)).8
Finally, as this appeal involves the examination of ineffectiveness claims
presented in post-sentence motions, prior decisions governed by the PCRA that
construe that statute’s eligibility requirements are left undisturbed. See, e.g.,
Commonwealth v. Fisher, 703 A.2d 714 (Pa. Super. 1997) (holding that Subsection
9543(a)’s eligibility requirement of current incarceration, probation or parole precludes
PCRA relief for those petitioners who were sentenced only to pay a fine). In a similar
vein, we find that this Court’s ruling in Commonwealth v. Turner, which involved a
PCRA petitioner and not a defendant presenting ineffectiveness claims in post-sentence
motions, has no bearing on our decision.9
Accordingly, for the reasons set forth herein, we vacate the judgment of the
Superior Court and remand to the trial court for consideration of Appellant’s post-
sentence claims of ineffective assistance of counsel.
Justices Todd, Donohue, Dougherty and Mundy join the opinion.
Chief Justice Saylor files a concurring opinion in which Justice Wecht joins.
8 Consistent with his dissenting opinion in Commonwealth v. Turner, supra, Chief
Justice Saylor would base the Court’s holding in this appeal on constitutional grounds.
See Saylor, C.J., Concurring, at 2-3. While we appreciate Chief Justice Saylor’s
concern, we find it unnecessary to issue a constitutional mandate. This Court’s
previous holdings in Grant and Holmes, which altered the procedure for reviewing
ineffectiveness claims on direct appeal, were likewise equitable determinations and not
constitutional rulings.
9As noted, this Court in Turner held that the PCRA’s eligibility requirement that the
petitioner be “serving a sentence of imprisonment, probation or parole” did not deny the
petitioner due process where she was no longer in custody and had previous
opportunities to present ineffectiveness claims.
[J-80-2017] - 18
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 01-7389
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
LACY FRUIT, JR.,
Defendant - Appellant.
Appeal from the United States District Court for the Southern Dis-
trict of West Virginia, at Beckley. Robert C. Chambers, District
Judge. (CR-00-13)
Submitted: December 20, 2001 Decided: January 2, 2002
Before LUTTIG, TRAXLER, and GREGORY, Circuit Judges.
Affirmed by unpublished per curiam opinion.
Lacy Fruit, Jr., Appellant Pro Se. Michael Lee Keller, OFFICE OF
THE UNITED STATES ATTORNEY, Charleston, West Virginia, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
Lacy Fruit, Jr. seeks to appeal the district court’s order
denying his motion seeking to challenge his conviction and sentence
pursuant to Fed R. Crim. P. 52(b). We have reviewed the record and
the district court’s opinion accepting the recommendation of the
magistrate judge and find no reversible error. Accordingly, we
affirm on the reasoning of the district court. See United States
v. Fruit, No. CR-00-13 (S.D.W. Va. July 23, 2001). 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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496 F.Supp. 922 (1980)
Kenneth BAKER and Audrey Catherine Baker
v.
J. C. PENNEY COMPANY, INC., d/b/a Treasury Drug Center, Howard, Stanley Purser, Clarence Benford, and J. C. Schlicker.
Civ. A. No. 78-1768 A.
United States District Court, N. D. Georgia, Atlanta Division.
September 15, 1980.
Alvin T. Wong, Atlanta, Ga., for plaintiffs.
A. Terry Sorrells, Carter, Ansley, Smith & McLendon, Atlanta, Ga., for defendants.
ORDER
VINING, District Judge.
On June 4, 1977, while the plaintiffs were on the premises of Treasury Drug Center, Kenneth Baker had verbal exchanges with Howard Stanley Purser, a Treasury Drug security guard. This confrontation lead to the arrest of both plaintiffs by J. C. Schlicker and Clarence Benford, two Atlanta police officers who responded to a call for assistance; Wanda Marie Schurtz, a Treasury Drug employee, also aided in the arrest. Upon arrest, Kenneth Baker was charged with aggravated assault on a police officer, simple battery, criminal trespass, obscene and abusive language, and creating a turmoil; Audrey Baker was charged with aggravated battery on a police officer, obstruction of an officer, and creating a turmoil. The plaintiffs allege that en route to the city jail, defendants Schlicker and Benford physically abused Kenneth Baker.
*923 On February 8 and 9, 1978, Kenneth Baker was prosecuted for two counts of simple battery and one count of simple assault; Audrey Baker was prosecuted for obstruction of an officer and simple battery. At the close of the state's evidence, the court directed a dismissal as to all counts in favor of the Bakers.
In October 1978, the Bakers filed this complaint against J. C. Penney, Howard Stanley Purser, Wanda Marie Schurtz, J. C. Schlicker, and Clarence Benford. The plaintiffs have dismissed Wanda Marie Schurtz as a party-defendant, and on September 2, 1980, filed a dismissal as to Howard Stanley Purser, "individually, except for the claims which Plaintiffs may have against Defendant PURSER for his violation of Plaintiffs' rights under Title 42, U.S.C., § 1983." Although denominated as a dismissal against Purser "individually," the court notes that there would be no section 1983 claim against Purser in his capacity as an employee and agent of J. C. Penney, and the court will treat the dismissal as dismissing all claims against Purser in any capacity except those stated against him under section 1983. Under Rule 41(a), Federal Rules of Civil Procedure, the dismissal is not effective except upon order of the court. However, this dismissal is unopposed, and the court hereby DISMISSES the action against Purser except for the section 1983 claims against him.
The remaining issue before the court is one involving jurisdiction. Both plaintiffs are citizens of the State of Georgia; J. C. Penney is incorporated under the laws of the State of Delaware with its principal place of business in a state other than Georgia; and defendants Schlicker and Benford are citizens of the State of Georgia. The claims against Schlicker, Benford, and Purser are for violations of the plaintiffs' civil rights; the claims against J. C. Penney are grounded in state law and are for illegal arrest, false imprisonment, malicious prosecution, and failure to keep its premises safe.
J. C. Penney contends that diversity jurisdiction does not lie, since the requirement of complete diversity between all plaintiffs and all defendants as first enunciated in Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1906), is not met in this case. To support its position, J. C. Penney cites Owen Equipment and Erection Co. v. Kroger, 437 U.S. 365, 373, 98 S.Ct. 2396, 2403, 57 L.Ed.2d 274 (1978), in which the Court stated, "[D]iversity jurisdiction does not exist unless each defendant is a citizen of a different State from each plaintiff." Although J. C. Penney urges the court to apply the plain and literal meaning of this language, the court believes that this language must be read in context with the Congressional purpose and judicial interpretations of the diversity requirement. Additionally, the court must consider the language of the jurisdictional statute itself, 28 U.S.C. § 1332(a)(1).
In recent years the Supreme Court has refused to expand federal court jurisdiction over pendent and ancillary state claims. Aldinger v. Howard, 427 U.S. 1, 96 S.Ct. 2413, 49 L.Ed.2d 276 (1976); Zahn v. International Paper Co., 414 U.S. 291, 94 S.Ct. 505, 38 L.Ed.2d 511 (1973). Most of the recent Supreme Court and courts of appeals cases involving diversity, pendent, and ancillary jurisdiction have arisen because of the third party practice provided for by the Federal Rules of Civil Procedure. In these cases the plaintiff has attempted to sue in federal court a third party over whom he would not otherwise be able to acquire federal jurisdiction. See Ortiz v. United States, 595 F.2d 65 (1st Cir. 1974); Fawvor v. Texaco, Inc., 546 F.2d 636 (5th Cir. 1977); Kenrose Manufacturing Co. v. Fred Whitaker Co., 512 F.2d 890 (4th Cir. 1972).
In the case sub judice, however, the plaintiffs have an independent basis of federal jurisdiction over each of the defendants: in the claim against J. C. Penney only, the plaintiffs would be able to assert diversity jurisdiction under 28 U.S.C. § 1332(a)(1), and as to Purser, Schlicker, and Benford, the plaintiffs would be able to assert civil rights jurisdiction under 28 U.S.C. § 1343(3). The question before the court resolves itself into whether jurisdiction over this case is destroyed simply because *924 the plaintiffs have chosen to join their different causes of action against these different defendants in one suit.
Under the diversity statute, the court does not have jurisdiction if the "matter in controversy" is not between citizens of different states. The anomalous result of not allowing a plaintiff to do in one federal suit what he would be entitled to do in two separate federal suits need not occur when the structure of the case before the court is analyzed. Although arising out of a common nucleus of operative facts, this suit actually involves two matters in controversy: (1) the alleged illegal arrest, false imprisonment, malicious prosecution, and premise liability (found in Counts 2, 3, and 4 of the complaint), and (2) the alleged deprivation of the plaintiffs' civil rights (found in Counts 5 and 6 of the complaint). In the "matter in controversy" involving the state law claims and in which the plaintiffs assert diversity jurisdiction, there is complete diversity. It is only in the civil rights controversy that complete diversity does not exist, but diversity is not required to invoke federal jurisdiction over that matter. The court concludes, therefore, that it does have jurisdiction over this suit.
This result in no way enlarges the court's diversity jurisdiction nor does it run contrary to the Supreme Court's requirement of complete diversity, for even in Aldinger the Supreme Court declined to place diversity jurisdiction on a procrustean bed and recognized that "[o]ther statutory grants and other alignments of parties and claims might call for a different result." 427 U.S. at 18, 96 S.Ct. at 2422. When asserting jurisdiction under 28 U.S.C. § 1332(a)(1), a plaintiff must still show complete diversity between himself and the defendant or defendants being sued on that jurisdictional basis; it is only when there is an independent basis of original federal jurisdiction (as opposed to pendent or ancillary jurisdiction) against non-diverse parties, said parties not being indispensible to adjudication of the diversity cause of action, that diverse and non-diverse defendants may be joined in the same action.
J. C. Penney makes the further argument that should this court find there is diversity jurisdiction, that such jurisdiction did not exist until the plaintiffs' diversity claims against defendant Purser were dismissed. J. C. Penney argues that since the court did not have jurisdiction over J. C. Penney until this dismissal and since the statute of limitations will now have run against J. C. Penney, the action should be dismissed as time-barred. J. C. Penney cites no authority for this proposition, and this court concludes that a dismissal of the non-diverse defendants will perfect jurisdiction and relate back to the time of the filing of the suit. O'Neal v. National Cylinder Gas Co., 103 F.Supp. 720 (N.D.Ill.1952). As the Fifth Circuit has noted, "Nonindispensible parties may be dropped on motion or by order of court to achieve the requisite diversity of citizenship." Ray v. Bird and Son and Asset Realization Co., 519 F.2d 1081, 1082 (5th Cir. 1975); see also Caperton v. Beatrice Pocahontas Coal Co., 585 F.2d 683 (4th Cir. 1978); Jett v. Phillips & Associates, 439 F.2d 987 (10th Cir. 1971).
For the foregoing reasons, the court declines to dismiss for lack of jurisdiction.
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Case: 10-10396 Document: 00511265498 Page: 1 Date Filed: 10/18/2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 18, 2010
No. 10-10396 Lyle W. Cayce
Summary Calendar Clerk
BRENDA L. COTHRAN,
Plaintiff–Appellant
v.
JOHN POTTER, Postmaster General,
Defendant–Appellee
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:08-CV-785
Before REAVLEY, DENNIS, and CLEMENT, Circuit Judges.
PER CURIAM:*
Brenda Cothran appeals the district court’s grant of summary judgment
on her Title VII retaliation claim in favor of her employer, John Potter,
Postmaster General. We AFFIRM.
FACTS AND PROCEEDINGS
Cothran, a black woman, was employed by United States Postal Service
(“USPS”) where she processed on-the-job injury claims. In 2006, Cothran filed
*
Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should
not be published and is not precedent except under the limited circumstances set forth in
5TH CIR . R. 47.5.4.
Case: 10-10396 Document: 00511265498 Page: 2 Date Filed: 10/18/2010
a complaint with USPS’s Equal Employment Office, alleging that her
supervisor, Angie Fuentes, who is Hispanic, discriminated against Cothran on
the basis of her race. Cothran alleges that Fuentes subsequently retaliated
against her by giving her a negative performance evaluation in 2006. Cothran
also alleges that Fuentes retaliated against her by denying her requests for
leave under the Family and Medical Leave Act, 29 U.S.C. §§ 2601, et seq.
(“FMLA”), and her requests for annual leave on two other occasions.
STANDARD OF REVIEW
“We review the district court’s grant of summary judgment de novo.”
Fahim v. Marriot Hotel Servs., Inc., 551 F.3d 344, 348 (5th Cir. 2008).
Summary judgment is appropriate only “if the pleadings, the discovery and
disclosure materials on file, and any affidavits show that there is no genuine
issue as to any material fact and that the movant is entitled to judgment as a
matter of law.” F ED. R. C IV. P. 56(c).
DISCUSSION
To establish a prima facie case of retaliation under Title VII a plaintiff
must show: (1) that the plaintiff engaged in activity protected by Title VII; (2)
that an adverse employment action occurred; and (3) that a causal link existed
between the protected activity and the adverse action. Evans v. City of Houston,
246 F.3d 344, 352 (5th Cir. 2001). After the plaintiff establishes a prima facie
case, the burden shifts to the employer to show a legitimate, nonretaliatory
reason for the adverse employment action. McCoy v. City of Shreveport, 492
F.3d 551, 556 (5th Cir. 2007). The employer’s burden is one of production, not
persuasion, and does not involve a credibility assessment. Id. The burden then
shifts back to the plaintiff to show either: “(1) that the defendant’s reason is not
true, but is instead a pretext for [retaliation] (pretext alternative); or (2) that
the defendant’s reason, while true, is only one of the reasons for its conduct, and
2
Case: 10-10396 Document: 00511265498 Page: 3 Date Filed: 10/18/2010
another ‘motivating factor’ is the plaintiff's protected [activity] (mixed-motive[s]
alternative).” Rachid v. Jack in the Box, Inc., 376 F.3d 305, 312 (5th Cir. 2004)
(third alteration in original); see also Smith v. Xerox Corp., 602 F.3d 320, 326
(5th Cir. 2010). Under the pretext alternative, the plaintiff “bears the ultimate
burden of proving that the employer’s proffered reason is not true but instead
is a pretext for the real . . . retaliatory purpose. To carry this burden, the
plaintiff must rebut each . . . nonretaliatory reason articulated by the
employer.” McCoy, 492 F.3d at 556. Under the mixed-motive theory, if the
plaintiff shows that the plaintiff’s protected activity was a motivating factor,
then the burden shifts to the employer to show that the adverse employment
decision would have been made regardless of the retaliatory animus. See
Rachid, 376 F.3d at 312.
The district court found that Cothran engaged in a protected activity
when she filed a complaint with the USPS’s Equal Employment Office and that
she suffered adverse employment actions in the form of a negative performance
review and denial of her request for leave under the FMLA. But the district
court also found that Cothran failed to make a prima facie case of retaliation
because she failed to show a causal connection between her protected activity
and the adverse employment actions. To establish a causal connection, Cothran
relies on the close timing of her protected activity and the adverse employment
actions. Two days after Fuentes learned of Cothran’s protected activity, Fuentes
gave Cothran an unfavorable performance review and Fuentes denied Cothran’s
FMLA leave request approximately two months later. The combination of
temporal proximity and knowledge of a protected activity may be sufficient to
satisfy a plaintiff’s prima facie burden for a retaliation claim. See, e.g., Jones v.
Robinson Prop. Group, L.P., 427 F.3d 987, 995 (5th Cir. 2005); Evans, 246 F.3d
at 354.
3
Case: 10-10396 Document: 00511265498 Page: 4 Date Filed: 10/18/2010
However, even if Cothran could make a prima facie case of retaliation, her
retaliation claim fails because she has not demonstrated pretext or mixed
motive. Potter offered a legitimate, nonretaliatory reason for Cothran’s
negative performance score on the periodic rolls management category:1
Cothran failed to meet individual performance objectives established by her
previous supervisor. Moreover, another employee with an identical performance
requirement, who had not complained of discrimination, received the same score
on the periodic rolls category. Potter has also explained that the temporal
proximity between Cothran’s complaint and her performance review was
coincidental. All performance reviews were originally due on November 24, 2006
but because of various delays, Fuentes did not submit those reviews until
November 29, 2006. Cothran’s bare assertion that Potter’s explanation is false
does not raise a genuine issue of material fact with respect to pretext.
Potter also provided a legitimate, nonretaliatory reason for the denial of
Cothran’s FMLA leave request: Fuentes denied her leave request because (1)
Cothran was on unauthorized, unscheduled leave-without-pay status at the
time; (2) Cothran failed to submit her request prior to the requested leave
period; and (3) the FMLA coordinator told Fuentes that Cothran was not
eligible for FMLA leave. Cothran alleges, citing only her own affidavit, that the
individual whom Fuentes consulted was not a FMLA coordinator. Cothran has
not disputed that she was in an unauthorized, unscheduled leave-without-pay
status at the time or that she did not submit her request prior to the requested
leave period. Cothran’s self-serving allegation does not create a genuine issue
of material fact as to pretext. Nor has Cothran identified any evidence of mixed
1
In 2006, Cothran was evaluated in four categories. On appeal, Cothran alleges
only that her score on the periodic rolls management category was retaliatory.
4
Case: 10-10396 Document: 00511265498 Page: 5 Date Filed: 10/18/2010
motive with respect to either of these adverse employment actions.
Even assuming (1) that the denial of Cothran’s annual leave requests on
two additional occasions are adverse employment actions and (2) that a causal
connection existed with Cothran’s protected activity—findings that the district
court did not make—Cothran has not demonstrated pretext. On one occasion,
Cothran arrived two hours late to work and subsequently submitted a request
for annual leave for those two hours. Potter avers that Fuentes denied that
request because Fuentes had already rejected Cothran’s request for annual
leave during that period due to Cothran’s heavy workload and backlog and
because Cothran had an extensive history of absences. Although Cothran
contends that Fuentes has granted similar requests by other employees,
Cothran has failed to offer evidence to rebut Potter’s reasons.
Fuentes also denied Cothran’s request for annual leave from March 26,
2007 through March 30, 2007. Potter states that Fuentes denied that request
because the department had a policy that only two employees could take leave
at the same time and two employees had previously been approved for leave
during that period. Cothran has failed to identify evidence that creates an issue
of material fact as to whether Potter’s legitimate, nonretaliatory explanations
are pretextual. Nor could a reasonable jury logically infer that her complaint of
discrimination was a motivating factor in Fuentes’ denials of annual leave.
Cothran has not carried her burden with respect to pretext or motivation and,
therefore, her retaliation claim fails.
AFFIRMED.
5
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20 Cal.3d 180 (1977)
571 P.2d 254
141 Cal. Rptr. 905
JAPAN LINE, LTD., et al., Plaintiffs and Respondents,
v.
COUNTY OF LOS ANGELES et al., Defendants and Appellants.
Docket No. L.A. 30703.
Supreme Court of California.
November 18, 1977.
*182 COUNSEL
John H. Larson, County Counsel, and James Dexter Clark, Deputy County Counsel, for Defendants and Appellants.
Graham & James, Reed M. Williams, Ronald L. Young, Peter L. Briger, Briger & Associates, Sheldon S. Cohen and Cohen & Uretz for Plaintiffs and Respondents.
OPINION
MANUEL, J.
In this action for recovery of ad valorem personal property taxes paid under protest, defendants City of Los Angeles and County of Los Angeles appeal from a judgment entered after a nonjury trial in favor of plaintiffs and against defendants for the recovery of said taxes together with interest and costs. After decision by the Court of Appeal, Second Appellate District, Division Three, reversing the judgment, we granted a hearing in this court for the purpose of giving further consideration to the issues raised. Having made a thorough examination of the cause, we have concluded that the opinion of the Court of Appeal prepared by Justice Cobey and concurred in by Acting Presiding Justice Allport and Justice Potter correctly treats and disposes of the issues involved and we adopt such opinion as and for the opinion of this court. That opinion (with appropriate additions and deletions) is as follows:[*]
The sole question presented by this appeal upon an agreed statement from a tax refund judgment is whether appellants, the County of Los *183 Angeles and the City of Los Angeles, may impose an apportioned ad valorem tax upon cargo shipping containers, taxed in Japan, used here essentially exclusively in foreign commerce and owned and controlled by Japanese taxpayers. These taxpayers are six shipping lines incorporated under the laws of Japan which have their principal places of business and commercial domiciles there.
FACTS
The facts as stipulated between the parties disclose that the containers at issue are in constant transit save for repair time and time awaiting new cargo. They are only intermittently physically present within the jurisdictions of appellants for an average stay of less than three weeks. They are used exclusively for the transportation of cargo for hire in foreign commerce. They are either full or empty. The full containers are loaded with cargo inbound from or outbound to foreign ports. The empty containers are moved intrastate within California and interstate from California solely to pick up cargo to be carried in foreign commerce or to return the containers themselves to ports (principally Los Angeles) for placement aboard the taxpayers' outbound vessels. The containers are never used for either intrastate or interstate transportation of cargo except in continuation of international voyages.
The Taxpayers' Contentions
Since the judgment under appeal was rendered, [] [this court] decided unanimously in the case of Sea-Land Service, Inc. v. County of Alameda (1974) 12 Cal.3d 772, 775-776 [117 Cal. Rptr. 448, 528 P.2d 56], that a California county may tax such containers, under circumstances of use essentially identical to those before us, where the containers were used mainly in foreign commerce[1] but were owned by a shipping company incorporated and commercially domiciled within this country.
The taxpayers contend that the Sea-Land decision is not dispositive of this case because, there, Sea-Land conceded that its containers were subject to local taxation within the United States. Its position was that such taxation must be done exclusively at the home port of its vessels. (Sea-Land, supra, at pp. 781, 786.) Here, the home ports of the taxpayers' *184 vessels, which are specifically designed to carry the containers at issue, are in Japan. The taxpayers' vessels are likewise registered there rather than in the United States.
The initial position of the taxpayers on this appeal was that under both the home-port doctrine and the most favored nation provisions of the 1953 treaty between the United States and Japan their containers are not subject to taxation by any jurisdiction except Japan.[2] In this connection, we note that the containers of the taxpayers are subject to property taxation in Japan and have actually been so taxed there. Similar containers, similarly used in Japan but owned and controlled by steamship companies domiciled in the United States, have not been so taxed there.
At oral argument [before the Court of Appeal] counsel for the taxpayers advanced a new ground and an additional factual basis for their position that their containers, notwithstanding the continuous use of the containers in the United States within appellants' jurisdictions, are not subject to property taxation by any government except that of Japan. They there argued that the property taxes at issue constitute indirect tonnage duties prohibited by article I, section 10, clause 3 of the United States Constitution and, in support of one of their initial contentions that these taxes are also prohibited by applicable treaties, called our attention for the first time to the existence of the supplementary convention of 1964 (15 U.S.T. 1824) to the 1939 convention between Sweden and the United States on double taxation. (54 Stat. 1759.)
We could disregard this new matter without any consideration thereof because, without any showing of justification therefor, it was presented after the normal briefing process had been concluded. (See Lotts v. Board of Park Commrs. (1936) 13 Cal. App.2d 625, 636 [57 P.2d 215]; Sinclair v. Aquarius Electronics, Inc. (1974) 42 Cal. App.3d 216, 229 [116 Cal. Rptr. 654].) But in the interest of being as fully informed as reasonably possible on the fundamental tax issue presented, [] [the Court of Appeal] waived this obvious impropriety in the taxpayers' appellate *185 procedure and asked for and obtained from the parties supplemental briefs on the new matter.
DISCUSSION
1. The Home-port Doctrine
(1) The taxpayers concede that in the field of interstate commerce the home-port doctrine has been superseded by the apportionment doctrine, but they argue that it is still extant in the area of foreign commerce where apportionment cannot be substituted except perhaps by treaty or other agreement. [] [They urge that] in Scandinavian Airlines System, Inc. v. County of Los Angeles (1961) 56 Cal.2d 11, 15, 17, 33, 36-37 [14 Cal. Rptr. 25, 363 P.2d 25] (hereafter SAS), [this court] applied the home-port doctrine to foreign owned, based, registered and taxed airplanes flying exclusively in foreign commerce and using Los Angeles quite infrequently as their sole United States terminus and thereby struck down the apportioned property taxes upon such planes which appellants had imposed.
[] [However, in Sea-Land we specifically addressed this very contention (12 Cal.3d at pp. 784-786), namely that the home-port doctrine retained vitality with respect to foreign commerce as distinguished from interstate commerce pursuant to our decision in SAS, and clearly rejected it. First, we concluded that "we are not inhibited by SAS from concluding that the home-port doctrine does not shield the property of a taxpayer from a fairly apportioned ad valorem tax levied by a nondomiciliary jurisdiction with which the taxpayer has sufficient contacts, even if the taxpayer is engaged in foreign commerce.... The principles of apportioned taxation enunciated in Pullman, Ott and Braniff are to be applied to instrumentalities so engaged." (Id. at p. 786.) Second, we specifically adopted the reasoning of Justice Traynor in his dissent in SAS to the effect that the threat of double taxation from foreign taxing authorities has no role in commerce clause considerations of multiple burdens, since burdens in international commerce are not attributable to discrimination by the taxing state and are matters for international agreement. (Id. at p. 788.)
The only asserted distinction between the case at bench and Sea-Land is that the cargo shipping containers in Sea-Land were owned by a *186 United States corporation whereas the containers herein are owned by foreign corporations. The taxpayers have failed to cite any authority which would support a conclusion that instrumentalities of commerce used in foreign commerce are subject to different constitutional protection depending upon whether they are owned by foreign or domestic corporations. Existing authority supports the opposite conclusion. For example in Canadian Pac. Ry. Co. v. King Co. (1916) 90 Wash. 38 (155 P. 416) the Washington Supreme Court rejected the home-port doctrine and applied to a Canadian railway corporation the apportionment rule applied by the United States Supreme Court to the rolling stock of a domestic railway corporation used in foreign commerce in Pullman's Car Co. v. Pennsylvania (1891) 141 U.S. 18, 23 (35 L.Ed. 613, 616, 11 S.Ct. 876). Sea-Land is fully dispositive of the commerce clause and federal exclusivity issues raised in the case at bench.]
2. The Tonnage Duty Prohibition
Article I, section 10, clause 3 of the United States Constitution prohibits the imposition by states [] of tonnage duties. (2) The taxpayers contend that this prohibition invalidates the local property taxes at issue since they in practical effect are tonnage duties upon the cargo containers.
We disagree. In the recent case of Michelin Tire Corp. v. Wages (1976) 423 U.S. 276 [46 L.Ed.2d 495, 96 S.Ct. 535], the United States Supreme Court held that the assessment by Georgia of a nondiscriminatory ad valorem property tax against imported tires was not within the constitutional prohibition against the laying of any impost or duty on imports. In support of this holding the court pointed out that imposts and duties "are essentially taxes on the commercial privilege of bringing goods into a country," while nondiscriminatory ad valorem property taxes of the kind before us are taxes by which a state apportions the costs of its general services among the beneficiaries thereof (Michelin, supra, at pp. 286-287 [46 L.Ed.2d at pp. 503-504]) and that the words "imposts" and "duties," as used in 1787, clearly meant only "exactions upon imported goods as imports." (Italics added.) (Id. at pp. 290-291, 283 [46 L.Ed.2d at pp. 506, 502].)[3] []
*187 [The taxpayers contend that the Michelin holding that a nondiscriminatory ad valorem property tax was not an "impost" or "duty" is not determinative of the case at bench because the cargo containers herein were in import-export transit. They urge that the court in Michelin specifically stressed that the goods in that case were no longer in import transit. (See 423 U.S. at pp. 286, 302 [46 L.Ed.2d at pp. 503-504, 512].) The contention is of no avail to taxpayers.
The cargo containers are not being taxed while in transit. Rather they are being taxed on an apportioned basis for their continuous presence in the state. Some containers are continuously present in the state throughout the year, even though not necessarily the same containers. The continuous presence of these containers, as well as any instrumentality of commerce, involves the constant use of many services provided by the state and, here, local entities; e.g., harbor facilities, roads, bridges, water supply, as well as fire and police protection. The Supreme Court has held that states may impose a property tax on these moving instrumentalities of commerce on an apportioned basis in order to meet the expenses of services within the taxing jurisdiction. (Clyde Mallory Lines v. Alabama (1935) 296 U.S. 261, 265-266 [80 L.Ed. 215, 218-219, 56 S.Ct. 194]; Cox v. Lott (1871) 79 U.S. (12 Wall.) 204, 213 [20 L.Ed. 370, 373]; Pullman's Car Co. v. Pennsylvania, supra, 141 U.S. 18.) In Sea-Land we affirmed the apportionment formula used in the case at bench to determine the continuous presence of the cargo containers there involved. It is the continuous presence within the jurisdiction drawing upon the service of that jurisdiction to a significant degree which permits reimbursement through nondiscriminatory property taxation as opposed to the fleeting presence of imported goods in transit which may possibly be exempted from such taxation by Michelin.
If Michelin is inapplicable to resolution of the issues herein as taxpayers contend, then the traditional tonnage clause analysis applies, viz., while the tonnage clause prohibits states from taxing access to their territories, it does not prohibit states from making charges for services rendered and enjoyed by those instrumentalities of foreign or interstate commerce within their jurisdiction. (Clyde Mallory Lines v. Alabama, supra, 296 U.S. 261, 265-266 [80 L.Ed. 215, 218-219]; Cox v. Lott, supra, 79 U.S. (12 Wall.) 204, 213 [20 L.Ed. 370, 373].) The court in Michelin *188 pointed out that nondiscriminatory ad valorem property taxes are taxes by which the state apportions the costs of services, such as police and fire protection. (423 U.S. at p. 287 [46 L.Ed.2d at p. 504].) Even under traditional tonnage clause analysis this property tax would be valid.
Thus plaintiffs' further insistent assertion that the tax liability is created by entry into the taxing jurisdiction must fall and with it the contention that the tax herein is a tonnage duty levied upon the entry of the containers into the jurisdiction.]
3. The Treaty Question
(3) The taxpayers contend that the local taxation at issue violates certain treaty obligations of the United States and is therefore invalid under the supremacy clause of the United States Constitution (art. VI, cl. 2). (SAS, supra, 56 Cal.2d 11, 37.) In support of this contention they point out first, that the aforementioned 1953 treaty between the United States and Japan (4 U.S.T. 2063) contains most favored nation provisions with respect to the ownership and possession of movable property and taxes. (Art. IX, § 2; art. XI, § 3; art. XXII, § 2; 4 U.S.T. 2071, 2072, 2079.) They then note that in the just-mentioned SAS case [] [we] held that the terms of the previously mentioned 1939 convention between the United States and Sweden respecting double taxation (54 Stat. 1759) prevented appellants herein from generally taxing Swedish-owned property, including particularly airplanes (56 Cal.2d at p. 39) and, therefore, the Japanese-owned containers before us are likewise exempt from taxation by appellants pursuant to the just mentioned most favored nation provisions of the 1953 treaty between the United States and Japan. [] [This court in SAS] based its holding largely on the provisions of article XIII, subdivision 2 of the Swedish convention (54 Stat. 1766), applying generally apparently to movable property, but the taxpayers argue that their containers are also exempt from local property taxation by appellants under other provisions of the aforementioned Swedish convention (arts. IV and XIII, subd. (1)(b); 54 Stat. 1761, 1766) exempting instrumentalities of foreign commerce (i.e., ships and airplanes). Finally, the taxpayers argue that by reason of the modification made in the Swedish convention by the aforementioned 1964 supplementary convention thereto (15 U.S.T. 1825) the local property taxation of appellants at issue is precluded by the provision in the convention prohibiting nonreciprocal taxation.[4]
*189 We reject the foregoing argument totally. We do not think that either the holding of the SAS case or the supplementary convention (which came into existence after the SAS decision) invalidates appellants' nondiscriminatory ad valorem taxation of these containers. The SAS holding on its facts prohibits only local taxation of foreign owned, based and registered airplanes. (56 Cal.2d at p. 42.) It does not apply to cargo containers as such. The taxpayers seek to extend this holding nevertheless and the relevant treaty prohibitions as well by describing both the airplanes involved in the SAS case and the containers involved here as instrumentalities of commerce. This generic description of ships and airplanes does not appear in the relevant provisions of the 1939 convention between Sweden and the United States. [] In any event, so far as the convention with Sweden is concerned, [] [as] Justice Traynor pointed out in his dissent in the SAS case that, properly interpreted, this treaty does not apply to local property taxation at all. (56 Cal.2d at pp. 47-48.)
The same thing, however, cannot be said with respect to the supplementary convention thereto. (4) (See fn. 5.) But in advising ratification by the United States of this convention, the United States Senate did so on the basis of a report from its Foreign Relations Committee, which stated that the replacement paragraph in its protocol (which we quoted in fn. 4) merely restated "for the sake of clarity" the requirement of its predecessor paragraph of nondiscriminatory tax treatment as between citizens and noncitizens (Tax Conventions and Protocols with Luxembourg, the Netherlands, Sweden and Japan, Rep. of the Sen. Foreign Relations Com., Ex. Rep. No. 10, 88th Cong., 2d Sess. at p. 65 (1964)).[5] Admittedly, the taxation at issue in this case does not violate this requirement.
*190 DISPOSITION
The judgment is reversed.
[]
Bird, C.J., Tobriner, J., Mosk, J., Clark, J., Richardson, J., and Jefferson, J.,[**] concurred.
Respondents' petition for a rehearing was denied December 28, 1977, and the opinion was modified to read as printed above.
NOTES
[*] Brackets together, in this manner [] without enclosing material, are used to indicate deletions from the opinion of the Court of Appeal; brackets enclosing material (other than editor's parallel citations) are, unless otherwise indicated, used to denote insertions or additions by this court. We thus avoid the extension of quotation marks within quotation marks, which would be incident to the use of such conventional punctuation, and at the same time accurately indicate the matter quoted. In so doing, we adhere to a method of adoption employed by us in the past. (See Chicago Title Ins. Co. v. Great Western Financial Corp. (1968) 69 Cal.2d 305, 311, fn. 2 [70 Cal. Rptr. 849, 444 P.2d 481], and cases there cited.)
[1] The interstate commerce therein involved was via international waters between California and the East Coast of the United States. (Sea-Land, supra, at p. 776.) [] [This] court made no distinction between the containers used in foreign commerce and those used in intercoastal commerce.
[2] The taxpayers do not now claim though that their cargo containers have not acquired a taxable situs within California. In any event, the following language [] in Sea-Land, supra, 12 Cal.3d at page 778, would appear to be entirely apposite: "While no specific container may be in the county for a substantial period of time, Sea-Land's containers are physically present in the county on every day of the year. Such habitual presence of containers creates a taxable situs, even though the identical containers are not there every day and even though none of the containers is continuously within the county." (Citations omitted.)
[3] In Sea-Land, supra, 12 Cal.3d at page 789, [] [we] expressly rejected the contention that the similar cargo containers therein involved were exempted from local property taxation by the [] [import-export] clause of the United States Constitution. [] [T]he protection against local taxation afforded by that clause extended only to goods and commodities in the import-export stream and not to the containers which were merely a means of transport suitable for repeated use.
[4] The supplementary convention, among other things, replaced paragraph 7 of its protocol (54 Stat. 1777) with a new paragraph 7, reading as follows:
"7. The citizens of one of the contracting States shall not, while resident in the other State, be subject therein to other or more burdensome taxes than are citizens of that other State residing in its territory. The term `citizens' as used in this paragraph, includes also all legal persons, partnerships, and associations created or organized under the laws in force in the respective contracting State. In this paragraph the word `taxes' means taxes of every kind or description, whether Federal[,] state, or municipal." (15 U.S.T. 1831-1832.)
[5] In determining the effect of an international agreement as domestic law, a court of the United States is to some extent required to take into account domestic sources in the formation of an international agreement such as committee reports indicative of the meaning that the United States Senate has attached to an international agreement in cases where the agreement, as a matter of internal law, requires the assent of the Senate (Rest.2d Foreign Relations Law of the U.S. (1965) § 151, com. (b)(i), pp. 462-463; compare Traynor, J., dissent, SAS, supra, 56 Cal.2d at p. 48).
[**] Assigned by the Chairperson of the Judicial Council.
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624 F.2d 194
U. S.v.McKay
79-1548
UNITED STATES COURT OF APPEALS Ninth Circuit
6/25/80
1
C.D.Cal.
AFFIRMED
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635 F.Supp.2d 1303 (2009)
Robert PLAYFORD, derivatively, on behalf of Colonial BancGroup, Inc., Plaintiff,
v.
Robert E. LOWDER, et al., Defendants.
Civil Action No. 2:09cv182-MHT.
United States District Court, M.D. Alabama, Northern Division.
July 20, 2009.
*1305 Earl Price Underwood, Jr., Law Offices of Earl P. Underwood, Jr., Fairhope, AL, Marc S. Henzel, Attorney at Law, Bala Cynwyd, PA, Sara E. Collier, William B. Federman, Federman & Sherwood, Oklahoma City, OK, for Plaintiff.
Enrique Jose Gimenez, James Fletcher Hughey, III, Samuel Holley Franklin, Lightfoot Franklin & White LLC, Larry *1306 Brittain Childs, Waller Lansden Dortch & Davis LLP, Birmingham, AL, Lea Carol Owen, Waller Lansden Dortch & Davis, LLP, Nashville, TN, for Defendants.
OPINION
MYRON H. THOMPSON, District Judge.
Plaintiff Robert Playford has filed this shareholder-derivative suit on behalf of Colonial BancGroup, Inc., charging that the defendants, certain officers and directors of Colonial, violated Delaware state law when they breached their fiduciary duties to the company and the shareholders, abused their control of the company, committed gross mismanagement and wasted corporate assets. The defendants are also sued for contribution and indemnification and for unjust enrichment. Jurisdiction is proper pursuant to 28 U.S.C. § 1332(a)(1) (diversity of citizenship).
This case is now before the court on the defendants' motion to dismiss in which they contend that Playford has failed to meet Federal Rule of Civil Procedure 23.1's `demand' requirement. For the reasons that follow, that motion will be granted.
I. THE DEMAND REQUIREMENT
In considering a defendant's motion to dismiss, the court accepts the plaintiff's allegations as true, Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984), and construes the complaint in the plaintiff's favor, Duke v. Cleland, 5 F.3d 1399, 1402 (11th Cir.1993). "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, 40 L.Ed.2d 90 (1974).
Generally, to survive a dismissal motion, a complaint need not contain "detailed factual allegations," Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), but "only enough facts to state a claim to relief that is plausible on its face." Id. at 570, 127 S.Ct. 1955. However, in a shareholder-derivative action, there is also the so-called `demand' requirement: the complaint must "state with particularity: (A) any effort by the plaintiff to obtain the desired action from the directors or comparable authority and, if necessary, from the shareholders or members; and (B) the reasons for not obtaining the action or not making the effort." Fed.R.Civ.P. 23.1(b)(3).
II. BACKGROUND
The "Substantive Allegations" section of Playford's complaint consists primarily of a series of press releases, issued between January 2008 and December 2008, which frequently quote defendant Robert E. Lowder (the Chairman, CEO, and President of Colonial). Generally, Playford offers little context or comment on these statements; they are simply reprinted in the complaint, as if their relevance or thrust spoke for itself. Playford does, however, address one press statement in much greater detail. Made on December 2, 2008, the statement quoted Lowder and announced that Colonial had been given "preliminary approval" by the Federal Government to receive $ 550 million in funding from the Troubled Asset Recovery Program (TARP). Although the statement asserted that this funding was "subject to certain conditions and the execution of definitive agreements," it failed to identify one significant condition: that Colonial would need to raise $ 300 million of its own equity before it could receive the TARP funding. Colonial did not reveal this specific requirement until January 27, 2009, when it released its fourth-quarter earning report. The following day, Colonial's price fell from $ 1.58 to 85¢ per share.
Playford alleges that the individual defendants in this action withheld the information *1307 concerning the $ 300 million and engaged in other misrepresentations and failures of oversight particularly related to Colonial's mortgage-related exposure, giving rise to claims for breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, and unjust enrichment.
III. DISCUSSION
The parties concede that the complaint must comply with the procedural demand requirement as set forth above of Federal Rule of Civil Procedure 23.1 and with the substantive demand requirements of Delaware State Law. See Kamen v. Kemper Financial Services, Inc., 500 U.S. 90, 95-96, 101-103, 111 S.Ct. 1711, 114 L.Ed.2d 152 (1991) (addressing demand futility and clarifying that "federal courts should incorporate state law as the federal rule of decision unless application of the particular state law in question would frustrate specific objectives of the federal programs") (internal quotation marks omitted); see also Stepak v. Addison, 20 F.3d 398, 402 (11th Cir.1994) ("Because Southern is a Delaware corporation, Delaware law governs the extent of the demand requirement and the circumstances under which Stepak may proceed derivatively notwithstanding the outside directors' refusal of his demand.").
"A cardinal precept of the General Corporation Law of the State of Delaware is that directors rather than shareholders, manage the business affairs of the corporation." Stepak, 20 F.3d at 402 (quoting Aronson v. Lewis, 473 A.2d 805, 811 (Del. Supr.1984)). Because shareholder-derivative suits encroach upon this authority, federal and Delaware law require an aggrieved shareholder to demand that the board take action before she brings suit. Id.; see also Del. Ch. R. 23.1; Fed. R.Civ.P. 23.1.
However, a plaintiff may be excused for failing to make a demand if she can show that a demand for action would have been futile. To do so, the "particularized factual allegations of [the] derivative stockholder complaint [must] create a reasonable doubt that, as of the time the complaint is filed, the board of directors could have properly exercised its independent and disinterested business judgment in responding to a demand." Rales v. Blasband, 634 A.2d 927, 934 (Del. Supr.1993); accord In re Coca-Cola Enters. Deriv. Litig., 478 F.Supp.2d 1369, 1374 (N.D.Ga.2007) (Thrash, J.), aff'd, 269 Fed.Appx. 888 (11th 2008).[1]
*1308 While the requirement to create a "reasonable doubt" may seem gentle enough, Rule 23.1 intentionally presents significant hurdles. The Delaware Supreme Court has clarified that pleadings "are held to a higher standard under Rule 23.1 than under the permissive notice pleading standard under Court of Chancery Rule 8(a)." In re Citigroup Inc. Share. Deriv. Litig., 964 A.2d 106, 120 (Del.Ch.2009). The pleadings concerning failure to make a demand "must comply with `stringent requirements of factual particularity' and set forth `particularized factual statements that are essential to the claim.'" Id. A plaintiff must plead particularized facts showing that a majority of the members of the board were either interested or lacked independence, Aronson, 473 A.2d at 817, and these facts must be pled as to "each defendant." Wood v. Baum, 953 A.2d 136, 142 (Del.Supr.2008).
Generally speaking, a director is interested where that director "will receive a personal financial benefit from a transaction that is not equally shared by the stockholders" or "where a corporate decision will have a materially detrimental impact on a director, but not on the corporation and the stockholders." Rales, 634 A.2d at 936. A director lacks independence where her decisions are not "based on the corporate merits of the subject before the board" but rather on "extraneous considerations or influences." Aronson, 473 A.2d at 816.
A. Board Interest
Playford makes four arguments as to why Colonial's board should be considered either interested or lacking independence. His first argument, one commonly advanced in such cases, is that the members of the board are "interested" because they are named in this lawsuit itself. Certainly, exposure to personal liability would put a director in a different position from that of the corporation or the shareholders, but this somewhat tautological argument has been significantly limited by Delaware courts. See Guttman v. Huang, 823 A.2d 492, 500 (Del.Ch.2003) ("If the legal rule was that demand was excused whenever, by mere notice pleading, the plaintiffs could state a breach of fiduciary duty claim against a majority of the board, the demand requirement of the law would be weakened and the settlement value of so-called `strike suits' would greatly increase."). "[T]he mere threat of personal liability for approving a questioned transaction, standing alone, is insufficient to challenge either the independence or disinterestedness of directors." Aronson, 473 A.2d at 815. Instead, the plaintiff must show "a substantial likelihood of director liability." Id.
To show a substantial likelihood of liability on these particular claims, however, Playford must surmount yet another obstacle, as Colonial's charter has an exculpatory clause protecting directors from liability for the breach of the duty of care. See In re Coca-Cola Enters. Deriv. Litig., 478 F.Supp.2d 1369 at 1374-75 ("In the event that the charter insulates the directors from liability for breaches of due care, then a serious threat of liability may only be found to exist if the plaintiff pleads a non-exculpated claim against the directors on particularized facts."); see also Wood, 953 A.2d at 141 ("Where, as here, directors are exculpated from liability except for claims based on `fraudulent,' `illegal' or `bad faith' conduct, a plaintiff must also plead particularized facts that demonstrate that the directors acted with scienter, i.e., that they had `actual or constructive knowledge' that their conduct was legally improper.").
Playford's complaint first asserts that, "Each of the director defendants face a substantial likelihood of liability ... because of their failure, as a director, to *1309 assure that reliable systems of financial controls were adequate and functioning to prevent the Company from improperly reporting its loan reserves and goodwill." Compl. at 29-30. Showing a substantial likelihood of liability on such a theory is a tall order. In fact, the Delaware Supreme Court has described such claims, based on oversight failures rather than self-dealing or other conflicts of interest, as "possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment." Stone ex rel. AmSouth Bancorp. v. Ritter, 911 A.2d 362, 373 (Del. Supr.2006) (quoting In re Caremark Int'l Inc. Deriv. Litig., 698 A.2d 959, 968 (Del. Ch.1996)). "[T]he necessary conditions predicate for director oversight liability [are]: (a) the directors utterly failed to implement any reporting or information system or controls; or (b) having implemented such a system or controls, consciously failed to monitor or oversee its operations thus disabling themselves from being informed of risks or problems requiring their attention." Stone, 911 A.2d at 373. The Delaware Supreme Court continued that, "In either case, imposition of liability requires a showing that the directors knew that they were not discharging their fiduciary obligations." Id.
Ultimately, this claim fails to overcome the many obstacles laid before it. To begin, there is nothing very "particularized" about Playford's factual allegations. He does not allege any facts suggesting that the board "utterly failed" to implement controls nor does he describe the controls Colonial did have. As such, he does not suggest how the controls were insufficient; how the board should have overseen matters differently; or how individual defendants were involved in any alleged failures. Even more, Playford fails to provide any particularized facts suggesting the directors knew they were failing to discharge their oversight duties or that they consciously disregarded such duties. See Stone, 911 A.2d at 373 (dismissing complaint because it failed to show that defendants were aware that the companies internal controls were inadequate or could lead to illegal activity). In the end, this argument is insufficient to excuse demand.
Playford next argues that the majority of the board members were subject to a substantial likelihood of liability because the board approved a series of allegedly false and misleading statements concerning the financial health of the company, including the December press release that failed to detail the prerequisites necessary for receipt of TARP monies. Once again, the complaint fails to plead facts with sufficient particularity. Specifically, the complaint fails to allege particularized facts suggesting that any members of the board, other than Lowder, were involved in the release of any of the statements, let alone that a majority of the board had knowledge of the falsity of the information contained in those statements. See Wood, 953 A.2d at 141 ("Delaware law on this point is clear: board approval of a transaction, even one that later proves to be improper, without more, is an insufficient basis to infer culpable knowledge or bad faith on the part of individual directors."); see also In re Citigroup, 964 A.2d at 133 n. 88 (Del.Ch.2009) (explaining that simply "pleading that director defendants `caused' or `caused or allowed' the Company to issue certain statements is not sufficient particularized pleading to excuse demand under Rule 23.1."). As such, Playford's second argument also fails to excuse demand.
Playford's third argument is that certain board members faced a substantial likelihood of liability because they served on either the auditing committee or the compensation committee, through which they knew or should have known that certain public statements were false and misleading. This argument has also been routinely *1310 rejected by Delaware courts. See Wood, 953 A.2d at 142 ("Plaintiff also asserts that membership on the Audit Committee is a sufficient basis to infer the requisite scienter. That assertion is contrary to well-settled Delaware law."); see also Rattner v. Bidzos, 2003 WL 22284323, at *12-13 (Del.Ch. Sept. 30, 2003) (dismissing complaint, noting that "conspicuously absent from any of the Amended Complaint's allegations are particularized facts regarding the Company's internal financial controls during the Relevant Period, notably the actions and practices of [the company's] audit committee" and "any facts regarding the Board's involvement in the preparation of the financial statements and the release of financial information to the market."). Therefore, Playford's third argument fails to excuse demand.
B. Board Independence
As explained above, to be independent a director's decision must be "based on the corporate merits of the subject before the board rather than extraneous considerations or influences." Aronson, 473 A.2d at 816. Therefore, to support his claim that the board lacked independence, Playford must allege particularized facts showing that a majority of the board members were unable to make decisions in the appropriate manner.[2]
Playford alleges that certain board members lack independence because they all have significant ties to Auburn University. He points out, for example, that defendants Milton McGregor and James Rane are members of the university's board of trustees and serve on several university committees and that defendant William Powell, III, received his Ph.D. from the university and defendant Robert Craft donated $ 25,000 to the university in 2007. Playford concludes that, because seven of the 15 board members have "intimate" ties to Auburn University, their "entangling professional, personal and business relationships" prevent them from having "sufficient independence to render a disinterested decision on whether to pursue the Derivative Claims on behalf of the Company." Compl. at 37.
Playford's complaint, however, sheds no light on how or why ties to Auburn University, whether "intimate" or not, undermine the directors' ability to make an independent or disinterested decision regarding any demand he may have made in this case. Playford does not highlight any conflict between the interests of Auburn University and Colonial BancGroup such that the directors' relationship to the university might seem inappropriate. Only one of the directors, Patrick F. Dye, is employed by the university, and, while the others make donations to the university and serve the university, they do not receive money from it, nor do they appear beholden to it.[3]*1311 This claim simply has not been explained or supported; it is, therefore, insufficient to excuse demand.[4]
Finally, Playford asserts that the board lacks independence because several of its members have contributed to Colonial's Federal Political Action Committee (PAC), which lobbies and provides contributions to politicians in Alabama and other areas where Colonial possesses a "business interest." Compl. at. 38. Once again, Playford's complaint is sorely lacking in detail. Even more, the complaint does not explain, nor is it apparent, how these allegations suggest a lack of independence.[5] The PAC is designed to serve Colonial's business interests; Playford concedes this point. Contributions to the PAC suggest the board members are invested in the success of the company; their attendance at board meetings suggests the same thing, but it does not suggest that they have conflicted interests or lack independence.
* * * * * *
For the reasons set forth above, the court finds that Playford has not pled the required particularized facts creating a reasonable doubt as to the independence or disinterestedness of Colonial's board of directors. His failure to make a demand on the board is therefore not excused.[6] Accordingly, an appropriate judgment granting the defendants' motion to dismiss will be entered.
NOTES
[1] The Delaware Supreme Court has established two approaches to demand-futility cases. The original test, established in Aronson, has two parts, asking "whether, under the particularized facts alleged, a reasonable doubt is created that: (1) the directors are disinterested and independent [or] (2) the challenged transaction was otherwise the product of a valid exercise of business judgment." 473 A.2d at 814. In Rales, the Delaware Supreme Court recognized that not all actions "fall into the paradigm addressed by Aronson and its progeny." 634 A.2d at 933. The court explained that, "Where there is no conscious decision by directors to act or refrain from acting, the business judgment rule has no application." Id. For such cases, the court created the single-step Rales test, in which the only inquiry is "whether or not the particularized factual allegations of a derivative stockholder complaint create a reasonable doubt that, as of the time the complaint is filed, the board of directors could have properly exercised its independent and disinterested business judgment in responding to a demand." Id. at 934.
The Rales approach is more appropriate in the case at hand. Playford alleges a failures to act rather than any conscious, inappropriate "transaction," decision, or self-dealing by the board. In fact, Playford's own complaint approaches the problem from this perspective. Although he advocates for the Aronson test in his opposition brief, he explicitly addresses only the first prong of that test. As such, he effectively uses the Rales test.
[2] From the outset, Colonial concedes that four members of its board, Lowder, John C.H. Miller, Jr., John Ed Mathison, and Patrick F. Dye, are not independent. Playford, therefore, must only demonstrate that four more board members also lack independence, such that eight of the 15 members, a majority, would lack independence.
[3] Playford cites to several cases supporting the general idea that "philanthropic relationships with institutions may give rise to questions about a director's independence." Opp. M. Dismiss at 10. But, these cases are easily distinguished from the instant situation, for each involved employees of the universities lacking independence from another director or directors who donated significant funds to that organization. See, e.g., In re Limited, Inc., 2002 WL 537692 (Del.Ch. March 27, 2002) (involving President of Brown University seeking and receiving contributions from another board member); In re Oracle Corp. Deriv. Litig., 824 A.2d 917, 944 (Del.Ch.2003) (professors at Stanford University not considered independent from "extremely generous and influential" Stanford alumnus also serving on the board). In the case at hand, only defendant Dye is an employee of Auburn University. Even if the reasoning of these cases were extended to include non-employee members of the university's board of trustees, the allegations would still fail to capture a majority of Colonial's board of directors.
[4] In fact, Playford essentially concedes that this claim is meritless in his Opposition to the Motion to Dismiss. He argues that, "Defendants have set up a proverbial `straw man' with respect to the Defendants' ties to Auburn University and have completely ignored Plaintiff's allegations with respect to the political lobbying activities engaged in by Defendants through the Colonial BancGroup Inc. Federal PAC." Opp. M. Dismiss at 9. If anyone set up this "straw man," however, it was Playford himself, who spent more lines of the complaint advancing his argument about Auburn University than he did addressing his PAC claims.
[5] Playford's opposition to the dismissal motion also fails to identify a single case in which contributions to a political action committee, or similar organization, have been held to demonstrate a lack of independence.
[6] While Playford, at the end of his brief, suggested that the court allow him to amend his complaint, he has not filed a motion to amend nor has he explained how an amended complaint would cure the defects identified by the court. Therefore, the court, in its opinion and accompanying judgment, has not addressed the issue of leave to amend. See Ferrell v. Durbin, 311 Fed.Appx. 253, 259 (11th Cir.2009) (determining that district court not required to grant leave to amend sua sponte where no motion to amend was filed and plaintiffs made only "a cursory and conditional request to amend" in their opposition to the motion to dismiss); see also Long v. Satz, 181 F.3d 1275, 1279-80 (11th Cir. 1999) (holding that district court did not abuse discretion in refusing to grant plaintiff leave to amend her complaint where she failed to move for such leave). However, if Playford believes he can correct the defects in the complaint, there is nothing to prevent him from filing a timely motion for reconsideration, as long as he attaches an amended complaint that cures the defects identified by the court. See M.D. Ala. Local Rule 15.1 ("A party who moves to amend a pleading shall attach the original of the amendment, and one copy, to the motion. Any amendment to a pleading, whether filed as a matter of course or upon a motion to amend, must, except by leave of court, reproduce the entire pleading as amended, and may not incorporate any prior pleading by reference.").
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101 B.R. 691 (1989)
In re Jerry P. CLUCK, SSN XXX-XX-XXXX, Carol A. Cluck, SSN XXX-XX-XXXX, Debtors.
Bankruptcy No. 88-00396.
United States Bankruptcy Court, E.D. Oklahoma.
January 12, 1989.
*692 David Nixon, for debtors.
Robert Inglish, Okmulgee, Okl., for Pollard and Sequoyah.
Doneen Douglas Jones, Oklahoma City, Okl., for Memphis.
Margaret Welch, a creditor, pro se.
Robert Hemphill, Chapter 12 Trustee.
A. Camp Bonds, Jr., Muskogee, Okl., for trustee.
ORDER
JAMES E. RYAN, Bankruptcy Judge.
On November 30, 1988, this Court conducted a confirmation hearing with regard to the Debtors' Chapter 12 Plan of Reorganization which was filed on November 1, 1988. Objections to the Plan were entered by First Bank & Trust of Memphis, Texas (Memphis), Pollard & Company (Pollard), Sequoyah State Bank of Muldrow, Oklahoma (Sequoyah) and Margaret Welch.
Also coming on for consideration were the following:
(a) Motion to Dismiss by Pollard with Response by the Debtors;
(b) Motion to Dismiss by Sequoyah with Response by the Debtors;
(c) Motion to Dismiss by Memphis with Objection by the Debtors;
(d) Motion to Modify Stay or in the Alternative for Adequate Protection by Pollard with Response by the Debtors.
After review of the evidence presented at the hearing, the arguments of counsel and the pleadings filed in the case, this Court FINDS:
FINDINGS OF FACT
1. This is a "core" proceeding thereby conferring jurisdiction to this Court pursuant to 28 U.S.C. § 157(b). This is a final Order for the purposes of Bankruptcy Rule 7052 and Rule 52, Federal Rules of Civil Procedure.
2. The business which the Debtors seek to reorganize is a horse breeding, training and boarding operation, with a facility located in Muldrow, Oklahoma. The Debtors rely on two stallions for the breeding portion of their business; namely, Impressive Bar Leo and Impressive Ben.
3. The Debtors have been operating from this facility for the last eight years. An examination of creditor's exhibit # 1, Income Tax Review-Schedule F, reveals the following net farm income (i.e., total gross income less total gross expenses) for the years of operation 1980 through 1987: *693
1980 = ($ 25,710.00)
1981 = ($ 88.00)
1982 = ($104,793.00)
1983 = ($250,438.00)
1984 = ($175,576.00)
1985 = ($260,297.00)
1986 = ($146,922.00)
1987 = ($129,893.00)
4. Debtor, Jerry Cluck, testified that problems began in the operation of his business when he was convinced to syndicate the stallion known as Impressive Bar Leo, selling shares to individual investors. The costs associated with the syndication of the horse, as well as the nonpayment on the shares that were sold created cash flow problems for the business. In addition, high interest rates on secured loans from creditors also created an atmosphere in which it was difficult to operate efficiently. However, Mr. Cluck further testified that he made no effort to collect payment from some 24 of 39 parties to whom syndicate shares had been sold, valued at approximately $20,000 per share. The reason given for this inaction was that creditors such as Memphis to whom payment was owed and delinquent were threatening the Debtor by some unexplained means thereby creating a "cloud" under which the Debtor was operating. Since he did not wish to involve any other persons in this predicament, he did not seek to collect on these accounts receivable.
This Court is without sufficient facts to determine whether the delinquent syndication payments are even enforceable now.
5. Mr. Cluck also testified that prospective clients did in fact bring their mares to be bred at the Debtors' operation with Impressive Bar Leo or Impressive Ben. However, they were turned away thus refusing business. The Debtor's explanation for this was again that he did not wish to involve any other party in any of his financial troubles.
6. The Debtors sought relief under Chapter 11 of the United States Bankruptcy Code on April 15, 1988.
7. The Debtors' post-Petition operation of the facility has resulted in the following accounting:
April, 1988 $1,497.21 profit; $95 unpaid administrative expenses
May, 1988 $1,426.61 profit; $710 unpaid administrative expenses
June, 1988 $649.49 loss; $2,079.65 unpaid administrative expenses
July, 1988 $1,857.95 profit; $2,262.46 unpaid administrative expenses
August, 1988 $918.19 loss; $2,265.07 unpaid administrative expenses
No reports for the months of September, October, November and December, 1988 have been received by this Court. The Debtor has not solicited new business nor has he expanded on his clientele in any way while under the protection of the United States Bankruptcy Code.
8. The Debtors' Plan contemplates income derived from several sources which were explained extensively through testimony by the Debtor at trial. Many of these new sources of income have never been attempted by the Debtors before or have only been a small portion of the Debtors' total operation. These new sources include the buying and raising of cattle to be accomplished by Mrs. Cluck's brother about whose qualifications this Court has no knowledge since no evidence was offered on this point. Also included in the Debtors' anticipated business is a variety of uses of the two primary stallions to derive income from breeding and the receipt of mares in lieu of breeding fees. However, testimony was offered by the creditors to refute the ability of the Debtors to derive sufficient income from these new endeavors to fund the Debtors' proposed Plan.
9. At the confirmation hearing, evidence was offered in the form of testimony from experts called by each side to substantiate the likelihood of success of the Debtors' proposed operation under the Plan of Reorganization. The experts seemed to agree that the success of a horse breeding operation depends largely on the demand for the particular breeding stallions, the reputation of the breeder and the competitive climate of the horse industry in general. In this regard, testimony revealed that the demand for breeding with the two stallions *694 owned by the Debtors has steadily declined over the past eight years of operation. Further, the economic climate in the horse industry has not been favorable and has likewise been steadily declining. The reputation in the industry of the Debtor as a horse breeder was generally demonstrated as favorable, although little evidence was offered on this point. However, the reputation of the Debtor may be greatly affected by the practice of turning away prospective business.
10. The Debtors' Plan offers a projection for the year 1989 only and states projected income of $284,115 and projected operating expenses of $205,222 for a net income from operations of $78,893. After deducting living expenses of $12,420 and $4,000 for payment of Federal and state income taxes, a total of $62,473 will allegedly be available for payment to creditors.
CONCLUSIONS OF LAW
A. A Chapter 12 Plan is confirmable upon the establishing of feasibility and the dedication of all disposable income to making Plan payments. Disposable income is the remainder of gross income following deductions for reasonable living expenses and reasonable operating expenses. Every indication demonstrates that the Debtors are indeed applying all disposable income toward payment of creditors under the proposed Plan of Reorganization.
A feasibility determination requires that the projected income and expense figures are achievable in light of past operations, present ability and anticipated future conditions in the particular market in which the debtor is involved. The Bankruptcy Code at 11 U.S.C. § 1225(a)(6) requires this Court to determine that "the debtor will be able to make all payments under the Plan and to comply with the Plan." In order to accomplish this mandate, this Court traditionally examines the debtor's business performance on two fronts: one, pre-Petition, wherein the history of the debtor is evaluated at its peaks and its valleys during operation; and two, post-Petition, wherein attempts at recovery are made after the debtor is afforded the protection of the U.S. Bankruptcy Code. These are the only sources for concrete information of the debtor's past, present and future abilities to succeed in consideration of economic conditions.
In both instances, the Debtors have failed to demonstrate an ability to make the necessary profits for Plan implementation. At times, special circumstances may exist to create exceptions that explain the frustration of a debtor to achieve viability in a business venture. However, in the case before this Court, the Debtors, for all intents and purposes, voluntarily ceased operation by turning away prospective clients citing a desire to keep these clients from getting involved in the Debtors' financial woes. No evidence, however, was presented at trial that demonstrated that the creditors had taken concrete, adverse actions against the Debtors to frustrate the business. A vague implication of a "cloud" is not sufficient to convince this Court that a special circumstance existed.
In addition, the Debtors failed to collect on nearly $500,000 in outstanding accounts receivable from syndicate shareholders when revenue was desperately needed for the continued operation of the Debtors' business. These imprudent actions are simply not reasonable in the evaluation of the Debtors' ability to perform based on pre-Petition operations.
Although the protection of prospective clients is admirable, most were from out of state and would have had no knowledge of the trouble that the Debtors were experiencing. As the expert for the creditors stated at the confirmation hearing, if he were trying to survive and do business, he would not let the fact that he was experiencing trouble with his creditors stop him from doing business and trying to work out of his problems.
The Debtors were engaged in somewhat of a paradox wherein they were refusing business, thus cutting off the life blood revenue necessary to pay creditors due to the fact that their creditors were demanding payment. Their reaction to the situation simply does not show good business acumen.
*695 The changes that the Debtors propose to employ in light of the history of losses incurred since the inception of the business and the past actions of the Debtors do not demonstrate feasibility.
Post-Petition, the Debtors have offered no evidence that any improvements in the operation were attempted while under the protective shield of the U.S. Bankruptcy Code and this Court. None of the projected changes in operation were attempted in order to convince this Court of the Debtors' ability and willingness to successfully proceed with the operation. This failure to begin a recovery as soon as practicable does not speak well of the Debtors' ability to proceed with this admittedly tenuous Plan.
B. The question has also been raised as to the Debtors' eligibility to file for Chapter 12 relief as a family farmer. Under the Bankruptcy Code, a "farming operation" includes "farming, tillage of the soil, dairy farming, ranching, production and raising of crops, poultry or livestock and production of poultry or livestock products in an unmanufactured state." 11 U.S.C. § 101(20). Courts have recognized that the definition of a farming operation "does not provide an all inclusive list of tasks and activities" and is therefore not limited to those operations specifically enumerated. In the matter of Bernard Armstrong, 812 F.2d 1024, 1026 (7th Cir.1987). However, the Courts have also warned against broadly interpreting the statute so as to eliminate the definition altogether by "bringing in operations clearly outside the nature or practices one normally associates with farming." In re Dakota Lay'd Eggs, 57 B.R. 648, 653 (Bankr.D.N.D.1986). A "family farmer" is defined in the Bankruptcy Code as an "individual and spouse engaged in a farming operation . . ." 11 U.S.C. § 101(17).
C. Several tests have been established to determine if a debtor is a family farmer as intended by the Congress in the formulation of the Chapter 12 scenario. In the case of Federal Land Bank of Columbia v. McNeal, 16 Bankr.Ct.Dec. (CRR) 673, 77 B.R. 315 (Bankr.S.D.Ga.1987), the Court set forth two such tests, to-wit:
(1) Is it a typical farming activity and, if so, whose farming activity is it the debtor's or someone else's?
Under this test, it is arguable whether this is actually a typical farming activity. However, the operation is primarily for the purpose of offering a service to others rather than serving as a self-contained farming operation. The fact that the Debtors accept mares in exchange for such services and also grow some of the feed used in the operation is insufficient to establish a farming operation under this test.
(2) Is the activity subject to the inherent risks of farming, such as being subject to drought or other temporary, uncontrollable circumstances of farming?
Although the Debtor offered some evidence of the cyclical nature of the breeding of horses, it would seem for the most part the Debtors' operation is only minutely affected by the typically devastating effect of weather and other uncontrollable conditions.
Under this criteria, it would appear that the Debtors again do not meet the requirements of eligibility for family farmer under Chapter 12.
D. The Debtors have directed this Court to several cases which purportedly demonstrate eligibility for a horse breeding operation. Most of these cases either intertwine the horse breeding operation with some other recognized and established farming activity or simply do not support the Debtors' position. [e.g., In re Wolline, 74 B.R. 208 (Bankr.E.D.Wisc.1987), wherein the debtor raised horses for his own use and had cattle for a dairy operation; and In re McKillips, 72 B.R. 565 (Bankr.N.D. Ill.1987) wherein only a breeding operation for the purpose of selling the horses is considered a farming operation]. In the instant case, the Debtors solely engage in a breeding, training and boarding operation, with the Debtors owning only a very few of the horses involved in the operation. As such, Debtors' eligibility fails on the grounds stated above.
*696 IT IS THEREFORE ORDERED that the confirmation of the Debtors' Chapter 12 Plan of Reorganization is hereby denied on multiple grounds of insufficient demonstration of feasibility and ineligibility of the Debtors as family farmers.
IT IS FURTHER ORDERED that the Debtors be given the opportunity to convert to a Chapter 7 within fifteen (15) days after the entry of this Order. If at the end of that time period conversion has not been accomplished by the Debtors, this Chapter 12 case shall be dismissed.
FURTHER, Pollard's Motion to Modify Stay or in the Alternative for Adequate Protection is rendered moot by this Court's action.
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9 F.3d 913
63 Fair Empl.Prac.Cas. (BNA) 838,63 Empl. Prac. Dec. P 42,727John M. HAIRSTON, Plaintiff-Appellant,v.The GAINESVILLE SUN PUBLISHING CO., Defendant-Appellee.
No. 92-2485.
United States Court of Appeals,Eleventh Circuit.
Dec. 21, 1993.Rehearing and Suggestion forRehearing En BancDenied Feb. 16, 1994.
Rodney W. Smith, Alachua, FL, for plaintiff-appellant.
Steven Munger, Atlanta, GA, for defendant-appellee.
Appeal from the United States District Court for the Northern District of Florida.
Before FAY and HATCHETT, Circuit Judges and JOHNSON, Senior Circuit Judge.
FAY, Circuit Judge:
1
This case involves a complaint filed pursuant to the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. Sec. 621 et seq. The district court granted summary judgment for the employer, holding that the employee had failed to comply with the applicable statute of limitations and further failed to establish a prima facie case of retaliatory suspension or retaliatory discharge. Appellant has abandoned (as time barred) those issues raised in the initial charge of age discrimination and appeals only the district court's determination as to the retaliation claims. We REVERSE the district court, finding that Appellant has established both a prima facie case of retaliatory suspension and retaliatory discharge sufficient to withstand a motion for summary judgment.
I. STATEMENT OF FACTS
2
Appellee, the Gainesville Sun ("Sun"), a newspaper of general daily circulation in Gainesville, Florida, hired John Hairston in the early 1970's. Appellant was assigned to manage the sports department, edit the content of the sports section and write a daily sports column. In February of 1987, John Fitzwater was hired as publisher of the Sun. A month later, Diane McFarlin joined the Sun as executive editor. A few days after McFarlin became executive editor, she advised Appellant that Bobby Tyler, twenty-eight years Appellant's junior, was to become the executive sports editor and assume that portion of Appellant's duty pertaining to the management of the sports department. McFarlin explained to Appellant that she preferred to have the administrative and operational functions of the sports department performed by an individual who would be in the office regularly. At that time, Appellant attached little significance to the structural change and accepted the stated purpose.
3
Thereafter, McFarlin began to criticize Appellant's work, recommending that he improve the length, variety, writing quality and content of his columns. Specifically, she requested that he shorten his columns, write fewer notes1, clear the subject matter of each column with the new executive sports editor, Pat Dooley, and write less on University of Florida football.2 The record contains evidence that Appellant attempted to comply with the new guidelines even though Appellant believed the criticisms were not well founded.
4
Appellant subsequently received numerous critical personnel memorandums and marginal performance evaluations, particularly an evaluation dated February 3, 1988. Appellant responded to this evaluation with a memorandum challenging its validity and informing his superiors that he suspected the true reason for his low appraisal was age discrimination. Thereafter, a series of incidents involving Appellant occurred in 1989 to which Appellee attaches great importance and believes supports the disciplinary actions taken against Appellant.
5
The first incident occurred on July 22, 1989. Appellant wrote a sports column about a former University of Florida basketball player. The article stated Appellant's involvement in the procurement of a tryout for the ex-Florida player with the Orlando Magic basketball team. The most controversial sentence in the article reads, "... the Magic personnel department ... changed [its] mind on the matter when it was pointed out to [it] that [University of Florida] Gator coach Norm Sloan, the Gainesville Sun and others were interested enough ... to call the team about him." Appellees opined that it was improper and unethical for Appellant to call the Orlando Magic President or represent in the article that the Sun had an interest in the player being given a tryout.
6
The record, however, does not reveal whether Appellant represented to the Magic President that he was calling of behalf of the Sun, nor was the article written as an opinion column. Rather, the article attributes the above quotation to the player as a loose paraphrase of his explanation as to why he was afforded a tryout. It was subsequent to this article that McFarlin insisted the subject matter of each of Appellant's columns be approved by Dooley and edited prior to release.
7
The next incident occurred in October 1989, when the Sun was reporting on an NCAA investigation of the University of Florida basketball program. Appellant phoned3 Norm Sloan, the Florida basketball coach, to request an interview. During the interview, Sloan asked Appellant what he had heard about the NCAA investigation. Appellant responded that he had heard "nothing new."4 McFarlin later learned of Appellant's "nothing new" statement to Sloan, concluded that such a revelation constituted a serious breach of confidentiality, and suspended him from any further involvement in the story or any coverage of any University of Florida sports for one week.
8
On October 27, 1989, Appellant filed a charge of age discrimination claiming he had been functionally demoted, harassed and denied wage increases because of his age. In December of 1989, Appellant again interviewed Sloan following his resignation as the University of Florida basketball coach. At the conclusion of the interview, Sloan stated to Appellant that Fitzwater and McFarlin had told him they planned on "relieving Appellant of his duties." Appellant, having recently filed his discrimination action, asked Sloan if he would be willing to testify to that effect. Sloan agreed and Appellant later relayed this message to his attorney. That evening, Appellant wrote an article concerning the subject matter of the interview that day with Sloan.5
9
On July 27, 1990, Appellant's counsel took a sworn telephone statement from Sloan in support of Appellant's age discrimination charge against Appellee. On August 15, 1990, at the conclusion of the investigation of the University of Florida athletic programs, Appellant wrote another column discussing the results of the NCAA investigation. The record suggests that this is around the time when Appellee learned of Sloan's willingness to testify on Appellant's behalf. On August 21, 1990, Gibson, the executive editor for Appellee, concluded that Appellant's August 15, 1990, column, written after Sloan had volunteered to testify for Appellant, created a conflict of interest.6 The following day Gibson sent Appellant a memorandum outlining the alleged conflict of interest and stating his belief that Appellant's actions were a breach of journalistic ethics. Appellant responded to Gibson's memo on August 23, 1990, denying all accusations. On August 28, 1990, Appellant was placed on thirty (30) days suspension with pay.
10
On January 11, 1991, Appellant filed a new EEOC charge of discrimination, alleging that this suspension was nothing more than disciplinary action in retaliation for Appellant's having filed charges of age discrimination against the Sun. On January 29, 1991, Appellant filed his initial ADEA lawsuit in the Northern District of Florida.
11
On February 27, 1991, Appellant set up an interview luncheon meeting with Dale Brown, the Louisiana State University basketball coach. Following the interview, Brown reiterated his earlier offer to testify on Appellant's behalf.7 Appellant later returned to his office to write a column concerning the subject matter of his interview with Dale Brown, which appeared in the February 28, 1991 edition of the Sun. Sometime between February 28, 1991 and June 4, 1991, Appellant submitted Brown's name, along with the names of many other South Eastern Conference coaches, to his attorney as possible character witnesses. On June 4, 1991, in Appellant's answers to Appellee's interrogatories, Appellant listed Dale Brown as a potential witness. Having received this information from Appellant, Gibson then reviewed Appellant's past columns. He declared Appellant's February 28, 1991, column concerning Brown and the LSU basketball team a direct contravention of his prior directives and an act of insubordination. On June 24, 1991, the Sun terminated Appellant's employment. The Sun stated that Appellant's termination was caused by his blatant disregard of Gibson's admonishment not to write about someone from whom he may receive a benefit.
12
Appellant then amended his initial complaint to include a count for retaliatory termination of employment. Appellant contends that Appellee's stated reasons for the suspension and termination were mere pretext, and that the underlying reason for the termination was in retaliation for having filed his initial age discrimination complaint. The district court granted summary judgment for the Sun on each of Appellant's four claims. Appellant has abandoned those issues raised in Count I of the amended complaint, and challenges only the district court's grant of summary judgment as to Counts II, III and IV. This Court REVERSES the district court's grant of summary judgment finding that material facts remain at issue as to Counts II, III and IV of Appellants amended complaint.
II. DISCUSSION
A. Standard of Review
13
The court of appeals reviews grants of summary judgment de novo, applying the same legal standard employed by the district court in the first instance. Browning v. Peyton, 918 F.2d 1516, 1520 (11th Cir.1990); Warrior Tombigbee Transp. Co. v. M/V Nan Fung, 695 F.2d 1294, 1296 (11th Cir.1983) (citations omitted). Federal Rule of Civil Procedure 56(c) authorizes summary judgment when all "pleadings, depositions, answers to interrogatories, and admissions on file, together with he affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The seminal case regarding summary judgment states:
14
[T]he plain language of Rule 56(c) mandates the entry of summary judgment after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine issue as to any material fact," since a complete failure of proof concerning an essential element of the non-moving party's case necessarily renders all other facts immaterial.
15
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986).
16
The party seeking summary judgment bears the initial burden to demonstrate to the district court the basis for its motion for summary judgment and identify those portions of the pleadings, depositions, answers to interrogatories, and admissions which it believes show an absence of any genuine issue of material fact. Taylor v. Espy, 816 F.Supp. 1553, 1556 (N.D.Ga.1993) (citation omitted). In assessing whether the movant has met this burden, the district court must review the evidence and all factual inferences drawn therefrom, in the light most favorable to the non-moving party. Welch v. Celotex Corp., 951 F.2d 1235, 1237 (11th Cir.1992); Rollins v. TechSouth, Inc., 833 F.2d 1525, 1528 (11th Cir.1987). If the movant successfully discharges its burden, the burden then shifts to the non-movant to establish, by going beyond the pleadings, that there exist genuine issues of material facts. Matsushita Electric Industrial Co. v. Zenith Radio Corp. 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986); Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.1991).
17
Applicable substantive law will identify those facts that are material. Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Genuine disputes are those in which the evidence is such that a reasonable jury could return a verdict for the non-movant. Id. For factual issues to be considered genuine, they must have a real basis in the record. Matsushita, 475 U.S. at 586-87, 106 S.Ct. at 1355-56. It is not part of the court's function, when deciding a motion for summary judgment, to decide issues of material fact, but rather determine whether such issues exist to be tried. Anderson, 477 U.S. at 249, 106 S.Ct. at 2135. The court must avoid weighing conflicting evidence or making credibility determinations. Id. at 255, 106 S.Ct. at 2513-14. Instead, "[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. Where a reasonable fact finder may "draw more than one inference from the facts, and that inference creates a general issue of material fact, then the court should refuse to grant summary judgment." Barfield v. Brierton, 883 F.2d 923, 933-34 (11th Cir.1989) (citation omitted).
B. The Age Discrimination in Employment Act
18
The ADEA forbids age discrimination in the employment of persons at least forty years of age but less than seventy years of age. 29 U.S.C. Sec. 621 et seq. The Eleventh Circuit has adapted to issues of age discrimination the principles of law applicable to cases arising under the very similar provisions of Title VII. Carter v. City of Miami, 870 F.2d 578, 581 (11th Cir.1989). The burden of proof in Title VII retaliation cases is governed by the framework established in McDonnell-Douglas v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973); Carter, 870 F.2d at 581.
19
The substantive law of this Circuit dictates that a plaintiff alleging retaliation must establish a prima facie case8 by showing: (1) a statutorily protected expression, (2) an adverse employment action, and (3) a causal link between the protected expression and the adverse action. Goldsmith v. City of Atmore, 996 F.2d 1155, 1163 (11th Cir.1993). Once plaintiff has established a prima facie case of retaliation, the burden shifts to the defendant to rebut the presumption of retaliation by producing legitimate reasons for the adverse employment action. Id.
20
"If the defendant carries this burden of production, the presumption raised by the prima facie case is rebutted," Burdine, 450 U.S. at 255, 101 S.Ct. at 1095, and "drops from the case," Id. at 255 n. 10, 101 S.Ct. at 1095 n. 10. Placing this burden of production upon the defendant serves to frame the factual issues with sufficient clarity so that the plaintiff will have a 'full and fair opportunity to demonstrate,' through presentation of his own case and through cross-examination of the defendant's witnesses, "that the proffered reason was not the true reason for the employment decision." St. Mary's Honor Center v. Hicks, --- U.S. ----, ----, 113 S.Ct. 2742, 2747, 125 L.Ed.2d 407 (1993) citing Burdine, 450 U.S. at 256, 101 S.Ct. at 1095. See also Goldsmith, 996 F.2d at 255-56.
21
Courts have recognized that in discrimination cases, an employer's true motivations are particularly difficult to ascertain, see United States Postal Service Board of Governors v. Aikens, 460 U.S. 711, 716, 103 S.Ct. 1478, 1482, 75 L.Ed.2d 403 (1983) (acknowledging that discrimination cases present difficult issues for the trier of fact, as "[t]here will seldom be 'eyewitness' testimony as to the employer's mental processes"), thereby making such factual determinations generally unsuitable for disposition at the summary judgment stage. Lowe v. City of Monrovia, 775 F.2d 998, 1009 (9th Cir.1985) (stating that very little additional evidence is required to raise a genuine issue of fact regarding motive, and concluding that summary judgment on the merits is ordinarily inappropriate once a prima facie case has been established).
C. The Prima Facie Case
22
The undisputed facts establish the first two elements of a prima facie case in regard to both the retaliatory suspension and retaliatory discharge allegations, Counts II and III respectively, of Plaintiff's Amended Complaint. In October of 1989, plaintiff filed a complaint with the EEOC, a statutorily protected participation. In August of 1990, plaintiff was the subject of an adverse employment action; he was suspended with pay for thirty days. On January 11, 1991, Appellant filed a new EEOC complaint and on January 29, 1991, Appellant filed the present ADEA case in federal court. Thereafter, Appellant suffered a second adverse employment action; to wit, he was discharged on June 24, 1991.
23
The district court held that Appellant failed to satisfy the third prong of the prima facie case; namely the establishment of a "causal link" between the protected statement and the adverse employment action. Hairston v. Gainesville Sun, No. 91-10040, Order of May 1, 1992. The district court stated that the "plaintiff has failed to meet the 'strict proof of causation' required by this circuit." Id. at 10 citing Doyal v. Marsh, 777 F.2d 1526, 1534 (11th Cir.1985). While it is true the court in Doyal determined that the plaintiff failed to substantiate the "causal link" necessary to establish a prima facie retaliation claim by a preponderance of the evidence, it did so only after five days of trial. Doyal, at 1532. This burden is patently different from Appellant's burden of establishing a "causal link" sufficient to survive a motion for summary judgment. As this Court observed:
24
[T]he causal link in the [retaliatory discharge] formula [is not] the sort of logical connection that would justify a prescription that the protected participation in fact prompted the adverse action. Such a connection would rise to the level of direct evidence of discrimination, shifting the burden of persuasion to the defendant. Rather, we construe the 'causal link' element to require merely that the plaintiff establish that the protected activity and the adverse action were not wholly unrelated.
25
Simmons v. Camden County Board of Ed., 757 F.2d 1187, 1189 (11th Cir.), cert. denied, 474 U.S. 981, 106 S.Ct. 385, 88 L.Ed.2d 338 (1985) (emphasis in original). "At a minimum, a plaintiff must generally establish that the employer was actually aware of the protected expression at the time it took the adverse employment action." Goldsmith, 996 F.2d at 1163.
26
Viewing all the evidence in the light most favorable to Appellant and resolving all inferences in his favor, as we must, this Court finds that the record, at the very least, establishes that Appellee was aware of Appellant's protected activities at the time the adverse employment action took place. This Court further finds that the record may support the proposition that the protected expression and the adverse employment action were not wholly unrelated. Therefore, we find that for the purposes of withstanding a motion for summary judgment, Appellant has carried his burden. Accordingly, we cannot affirm the district court's grant of summary judgment as to either the retaliatory suspension or retaliatory discharge claims.
27
At the summary judgment stage, assuming arguendo, that Appellee has articulated a legitimate, non-retaliatory reason for the adverse employment action, the burden then shifts back to Appellant to raise a genuine factual question as to whether Appellee's stated reason is mere pretext. Miller v. Fairchild Industries, Inc., 797 F.2d 727, 732 (9th Cir.1986). Although a defendant's stated non-discriminatory reasons could potentially overcome any inference of discrimination or retaliation, the instant record is not so one-sided and is therefore not deserving of summary judgment.
D. Pretext
28
The plaintiff may succeed by directly persuading the court at trial that a discriminatory reason more likely motivated the employer or indirectly by showing that the employer's proffered explanation is unworthy of credence. McDonnell, 411 U.S. at 804-05, 93 S.Ct. at 1825-26. In order to establish pretext, the plaintiff is not required to introduce evidence beyond that already offered to establish the prima facie case. Miller, 797 F.2d at 732 (citations omitted). Evidence already introduced to establish the prima facie case may be considered, and "[i]ndeed, there may be some cases where the plaintiff's initial evidence, combined with effective cross-examination of the defendant, will suffice to discredit the defendant's explanation" and establish pretext. Texas Dep't of Community Affairs v. Burdine, 450 U.S. 248, 256 n. 10, 101 S.Ct. 1089, 1095 n. 10, 67 L.Ed.2d 207 (1981). Accordingly, the grant of summary judgment, though appropriate when evidence of discriminatory intent is totally lacking, is generally unsuitable in Title VII cases in which the plaintiff has established a prima facie case because of the "elusive factual question" of intentional discrimination. Id. at 256, 101 S.Ct. at 1095.
29
In the instant case, there exists evidence beyond that introduced to establish the prima facie case, which tends to suggest Appellee's proffered reasons were mere pretext. In particular, Appellant introduced evidence that prior to the filing of his complaints, he regularly received above average performance evaluations. Immediately preceding and following his filing of his administrative complaints, however, Appellant received numerous unfavorable performance evaluations and was subject to increased scrutiny and harassment from his supervisors. If proven at trial, such incidents would bear on the pretext issue. See B. Schlei & P. Grossman, Employment Discrimination Law 554 (2d ed. 1983) (noting that surveillance "strongly suggests the possibility of a search for a pretextual basis for discipline, which in turn suggests that subsequent discipline was for purposes of retaliation").
30
The burden to avoid summary judgment is not to show by a preponderance of the evidence that the reasons stated were pretext. Rather, plaintiff's burden at summary judgment is met by introducing evidence that could form the basis for a finding of facts, which when taken in the light most favorable to the non-moving party, could allow a jury to find by a preponderance of the evidence that the plaintiff has established pretext, and that the action taken was in retaliation for engaging in the protected activity. Issues of fact and sufficiency of evidence are properly reserved for the jury. The only issue to be considered by the judge at summary judgment is whether the plaintiff's evidence has placed material facts at issue.
31
We find that Appellant has provided a sufficient factual basis in the record upon which a reasonable trier of fact may find that the stated reasons for the adverse employment actions were mere pretext. Accordingly, we REVERSE the District Court's entry of summary judgment as to Counts II, III, and IV of Appellant's Amended Complaint and REMAND this case to the District Court for trial.
32
Reversed and Remanded for trial.
1
A "notes" column is a column that contains snippets of information concerning any number of topics
2
From the record it appears as though Appellant had a commendable tenure on the Sun's staff. Appellant received the Associated Press Award for the best sports story of the year, the 1990 Burt McGrane Football Writing Award, and was the only sports writer ever to be inducted into both the Gator Bowl and Citrus Bowl Halls of Fame
3
There is some dispute as to whether Appellant was asked to call Norm Sloan. From the record it seems likely that Appellant was asked to call Sloan by his superiors as Appellant was not directly involved in the newspaper's report and evidence suggests that other Sun reporters' phone calls had not been returned
4
Appellee alleges that Appellant had asked McFarlin about the status of the Sun's report on the NCAA investigation on October 11, 1989. McFarlin allegedly responded to Appellant's question by stating that the President of the University of Florida, "tells our people that there is nothing new."
5
Appellee contends that the column was favorable to Sloan and insinuates that it was so in exchange for Sloan's having agreed to testify on Appellant's behalf. A simple reading of the article reveals that the article is not overly complimentary, although certain sentences when taken out of context, may appear biased. This Court finds Appellee's suggestion that Appellant's articles written immediately following his interviews with both Sloan and Brown unethical extremely unpersuasive. It is entirely logical and perhaps customary for a columnist, such as Appellant, to write an article about the subject matter of an interview conducted that day
6
The record suggests that this was not Appellant's only column about Norm Sloan during the period prior to his suspension when he knew of Sloan's willingness to testify. However, Appellee has not alleged that any of the other articles created a conflict of interest. Furthermore, this court finds Appellee's conflict of interest argument a bit disingenuous, noting that immediately following Appellant's firing and with the knowledge that Dale Brown was going to testify on Appellant's behalf, the Sun published an article criticizing coach Brown's character and truthfulness
7
The record indicates that Appellant did not initially react to Brown's February 1990 offer. Appellant states that he did not consider Brown as a potential witness until his February 1991 offer to testify, when Appellant needed character witnesses
8
The phrase "prima facie case" in the Title VII context denotes the establishment of a legally mandatory, rebuttable presumption. Texas Dep't of Community Affairs v. Burdine, 450 U.S. 248, 254 n. 7, 101 S.Ct. 1089, 1094 n. 7, 67 L.Ed.2d 207 (1981)
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636 N.W.2d 189 (2001)
2001 ND 187
LENTHE INVESTMENTS, INC., a corporation, Plaintiff and Appellant,
v.
SERVICE OIL, INC., a corporation and Steven Dirk Lenthe, Defendants and Appellees.
No. 20010085.
Supreme Court of North Dakota.
December 5, 2001.
*191 Bruce H. Carlson, McNair, Larson & Carlson, Ltd., Fargo, ND, for plaintiff and appellant.
Joseph A. Turman, DeMars & Turman, Fargo, ND, for defendants and appellees.
MARING, Justice.
[¶ 1] Lenthe Investments, Inc., appeals from a judgment dated January 22, 2001, holding the parties entered into an enforceable agreement and declaring the terms of the lease. We affirm.
I
[¶ 2] Lenthe Investments, Inc., ("Lenthe Investments") is a corporation owned by Reuben and Betty Lu Lenthe which owns a number of parcels of commercial property. One such parcel of property is located on Main Avenue in Fargo, North Dakota. Lenthe Investments leases a portion of this parcel to Kroll's Kitchen, Inc., ("Kroll's") which operates a restaurant on the premises. The other portion of the parcel is leased to Service Oil, Inc., ("Service Oil") which operates a Stamart gas station and convenience store on the premises. Service Oil is a corporation owned by Reuben Lenthe and Steven Dirk Lenthe, who is Reuben and Betty Lu's son.
[¶ 3] Beginning in 1994, Betty Lu's health began to deteriorate. In 1998, Reuben's health began to deteriorate as well. In May of 1999, Susan Lenthe, who is Reuben and Betty Lu's daughter, filed a petition in the district court for Clay County, Minnesota, seeking appointment of a general guardian for Reuben and Betty Lu. Steven Dirk Lenthe opposed the petition. A hearing on the petition was held on August 26, 1999.
[¶ 4] At the beginning of the hearing, Susan, joined by Reuben and Betty Lu's son, Roger Drew Lenthe, made a motion for summary judgment on the petition for guardianship. The court recessed to consider the motion. During the recess, the parties negotiated an agreement. After the recess, the parties discussed the agreement with the trial court. The hearing was adjourned, and the parties finalized the terms of the agreement in a document entitled "Stipulation and Agreement."
[¶ 5] As part of the Stipulation and Agreement, Susan Lenthe and Roger Drew Lenthe would be appointed co-guardians of the estate of Reuben Lenthe, and Reuben's interest in Service Oil would be sold according to the terms and conditions of a prior agreement between Reuben and Steven Dirk Lenthe. Additionally, the parties agreed "Lenthe Investment, Inc. shall enter into a lease with Service Oil, Inc. for that portion of the property commonly known and referred to as Stamart Service Station located at 2903 Main Avenue, Fargo, ND at a rental rate per square foot the same as and to the extent appropriate on and for the same length of term and other terms as Lenthe Investment, Inc. presently has with Kroll's Kitchen, Inc." The agreement was submitted to the trial court, and an order substantially incorporating the terms of the agreement was entered on September 17, 1999.
[¶ 6] Subsequent to the entry of the order, Lenthe Investments sent a proposed lease to Service Oil. Service Oil rejected this lease because it required Service Oil to pay rent for the area under its *192 fuel canopies. On January 24, 2000, Lenthe Investments filed a complaint seeking a declaratory judgment interpreting the provision of the order regarding the lease. After a bench trial, the trial court found "[o]n August 26, 1999, the parties entered into an enforceable agreement concerning the lease of the property occupied by Stamart at 2903 Main Avenue, Fargo, North Dakota." Furthermore, the court concluded "[t]he terms of the lease are the same as the terms entered into between Lenthe Investment and Kroll's Kitchen on June 29, 1999, and require Stamart to pay the same rental per square foot as Kroll's Kitchen pays under its lease." Additionally, the trial court concluded the "agreement does not include a requirement that Service Oil, Inc. pay a per foot rental charge for the area occupied by its gasoline and diesel canopies." A judgment reflecting these findings and conclusions was entered on January 22, 2001, and Lenthe Investments appealed.
II
[¶ 7] Whether a contract exists is a question of fact. See Stout v. Fisher Indus., Inc., 1999 ND 218, ¶ 11, 603 N.W.2d 52; Jones v. Pringle & Herigstad, P.C., 546 N.W.2d 837, 842 (N.D.1996). Likewise, "whether a contract is intended to be a complete, final, and binding agreement" is also a question of fact. Jones, at 842. We review questions of fact under the clearly erroneous standard. Id. "Under that standard, a finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if no evidence exists to support it, or if, on the entire record, we are left with a definite and firm conviction a mistake has been made." Lonesome Dove Petroleum, Inc. v. Nelson, 2000 ND 104, ¶ 15, 611 N.W.2d 154.
[¶ 8] Lenthe Investments argues the provision of the guardianship order regarding the lease was merely an agreement to agree and, therefore, was not an enforceable contract between the parties. Generally, once an agreement is merged into a judgment, "it is interpreted and enforced as a final judgment of the court, not as a separate contract between the parties." Sullivan v. Quist, 506 N.W.2d 394, 399 (N.D.1993). However, because both parties relied exclusively on contract principles in their arguments before the trial court and this Court, we analyze the issues presented under contract principles. See Gravseth v. Farmers Union Oil Co. of Minot, 108 N.W.2d 785, 789 (N.D.1961) (jury instructions not challenged by specifications of error become the law of the case).
[¶ 9] "To create an enforceable contract, there must be a mutual intent to create a legal obligation." Lire, Inc. v. Bob's Pizza Inn Restaurants, Inc., 541 N.W.2d 432, 434 (N.D.1995). "The parties' mutual assent to a contract is determined by their objective manifestations of contractual assent." Moen v. Meidinger, 1998 ND 161, ¶ 6, 583 N.W.2d 634. "It is the words of the contract and the manifestations of assent which govern, not the secret intentions of the parties." Amann v. Frederick, 257 N.W.2d 436, 439 (N.D. 1977).
[¶ 10] Lenthe Investments argues that the stipulation at issue is an unenforceable agreement to agree because the phrase "to the extent appropriate," as used in the stipulation, "begs for interpretation, and suggests that the parties would negotiate which terms of the Kroll's lease would be appropriate for the Stamart lease."
Generally, an agreement to agree is unenforceable because its terms are so indefinite it fails to show a mutual intent to create an enforceable obligation. An *193 agreement to agree in the future which is not sufficiently definite to enable a court to give it an exact meaning is not an enforceable obligation. However, an agreement to agree is enforceable if its terms are reasonably certain and definite.
Stout, 1999 ND 218, ¶ 12, 603 N.W.2d 52 (citations and internal quotation marks omitted).
[¶ 11] The definiteness of terms has bearing on both the parties' intent to be bound and on the finality of the agreement. 1 Corbin on Contracts § 2.8, at 131 (Rev. ed.1993). The issue of whether the parties intended the stipulation to be a contract or merely an agreement to negotiate the terms of a lease is a question of fact. See id. at 146 ("A transaction is complete when the parties mean it to be complete. It is a mere matter of interpretation of their expressions to each other, a question of fact.").
[¶ 12] The evidence at trial established the Kroll's Kitchen lease was in existence at the time of the guardianship hearing. This lease was incorporated by reference into the stipulation to provide the essential terms of the lease between Lenthe Investments and Service Oil. The evidence also established both parties were familiar with the terms of the Kroll's Kitchen lease, the amount of rent Kroll's paid under its lease, and the size of the building occupied by Kroll's and Service Oil. Furthermore, the final version of the stipulation was composed after hours of negotiating between the parties. Additionally, the trial court had before it Susan Lenthe's recitation of her understanding of the stipulation at the guardianship hearing:
SUSAN LENTHE: The new rental agreement for the property at 2901 Main Avenue in Fargo, which also includes 3001 and 3041, is the railroad property behind that same parcel, it would be the same $1,000.00 a month or $12,000.00 for the year, plus Lenthe Investment will also pay the real estate taxes on that property.
Then the third part of the agreement is that for the rental at the Stamart location there at 2903 Main Avenue, their rent will be based on the same dollars per square foot that is being paid by the Kroll's Kitchen in the other half of the building. Agreed?
MR. DEMARS: Sounds right, Your Honor.
THE COURT: Okay
MR. NORDHOUGEN: She did a much better job than I did.
THE COURT: With that clarification, then, Susan, is that your understanding of the total agreement that's been reached this morning?
SUSAN LENTHE: Yes, and I'm pleased.
THE COURT: And you've had enough time to talk that over with Mr. Klinger this morning?
SUSAN LENTHE: Yes.
Under these circumstances, the trial court's finding that the stipulation constituted an enforceable contract between Lenthe Investments and Service Oil was not clearly erroneous.
III
[¶ 13] Lenthe Investments also argues even if the stipulation is an enforceable contract, we should remand this case because the trial court did not determine how the percentage rent provision contained in the Kroll's Kitchen lease would be implemented in the Service Oil lease.
[¶ 14] The construction of a written contract to determine its legal effect is a question of law. See Jones, 546 N.W.2d at 842.
*194 Contracts are construed to give effect to the mutual intention of the parties at the time of contracting. The parties' intention must be ascertained from the writing alone if possible. A contract must be construed as a whole to give effect to each provision, if reasonably practicable. We construe contracts to be definite and capable of being carried into effect, unless doing so violates the intention of the parties. Unless used by the parties in a technical sense, words in a contract are construed in their ordinary and popular sense, rather than according to their strict legal meaning.
If a written contract is unambiguous, extrinsic evidence is not admissible to contradict the written language. However, if a written contract is ambiguous, extrinsic evidence may be considered to show the parties' intent. Whether or not a contract is ambiguous is a question of law. An ambiguity exists when rational arguments can be made in support of contrary positions as to the meaning of the language in question.
Lire, 541 N.W.2d at 433-34 (citations omitted).
[¶ 15] The provision of the guardianship order at issue in this case provides "Lenthe Investment, Inc. shall enter into a lease with Service Oil, Inc. for that portion of the property commonly known and referred to as StaMart Service Station located at 2903 Main Avenue, Fargo, North Dakota, at a rental rate per square foot the same as and to the extent appropriate on and for the same length of term and other terms as the lease Lenthe Investments, Inc. presently has with Kroll's Kitchen, Inc. for 2901 Main Avenue, Fargo, North Dakota." This provision does not distinguish between base rent or percentage rent. We conclude the language of the phrase "at a rental rate per square foot the same as and to the extent appropriate on and for the same length of term and other terms as the lease Lenthe Investments, Inc. presently has with Kroll's Kitchen, Inc.," indicates the parties intended Service Oil to pay the same base rent per square foot as Kroll's Kitchen, as well as the same percentage rent per square foot as Kroll's Kitchen. Therefore, the trial court's conclusion that "[t]he terms of the lease are the same as the terms entered into between Lenthe Investment and Kroll's Kitchen on June 29, 1999, and require Stamart to pay the same rental per square foot as Kroll's Kitchen pays under its lease," necessarily means Lenthe Investments must pay the same base rent per square foot as Kroll's Kitchen, as well as the same percentage rent per square foot as Kroll's Kitchen.[1]*195 We conclude the trial court did not err in its interpretation of the contract.
IV
[¶ 16] We, therefore, affirm the judgment of the trial court.
[¶ 17] GERALD W. VANDE WALLE, C.J., WILLIAM A. NEUMANN, DALE V. SANDSTROM, and CAROL RONNING KAPSNER, JJ., concur.
NOTES
[1] Determining the amount of rent requires only a mathematical calculation. Cf. Metcalf v. Security Intern. Ins. Co., 261 N.W.2d 795, 802-03 (N.D.1977) (plaintiff's claim for interest was not uncertain so as to deny the claim where the interest was "ascertainable by calculation in accordance with the proper construction of the contractual agreement existing between Metcalf and Security"). According to the trial court's findings, Kroll's Kitchen occupies 6,579 square feet of the building while Service Oil occupies 3,275 square feet of the building. The trial court found Kroll's Kitchen pays $3,750 per month, or $45,000 per year, in base rent and a percentage rent of 10% of its annual sales over $700,000. Based on these findings, Kroll's Kitchen pays $6.84 per square foot per year in base rent ($45,000/6,579 square feet). Therefore, according to the contractual agreement existing between Service Oil and Lenthe Investments, Service Oil would pay a base rent of $22,401.00 per year ($6.84 X 3,275 square feet). The percentage rent Service Oil would pay is determined in the same manner. For example, if Kroll's Kitchen pays percentage rent in a given year of $10,000, the percentage rent it would pay per square foot that year is $1.52 ($10,000/6,579 square feet). Therefore, under the terms of the contract, the amount of percentage rent Service Oil would pay that year is $4,978.00 ($1.52 X 3,275 square feet).
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In the Missouri Court of Appeals
Eastern District
DIVISION FOUR
MARY SIMMONS, ) No. ED102140
)
Respondent, ) Appeal from the Circuit Court
) of the City of St. Louis
vs. ) 1322-CC09225
)
FARMERS INSURANCE COMPANY, INC., ) Honorable Robert H. Dierker
)
Appellant. ) Filed: October 6, 2015
Farmers Insurance Company, Inc. (“Appellant”) appeals the trial court‟s grant of Mary
Simmons‟ (“Respondent”) cross-motion summary judgment on her claim for underinsured
motorist coverage under a policy issued by Appellant to Respondent‟s husband. We affirm.
I. BACKGROUND
James Simmons (“the Insured”) was a passenger in a vehicle driven by Respondent, his
wife, on November 3, 2009 which was involved in a collision with Jeremy Taylor, causing the
Insured‟s death. Taylor maintained automobile liability insurance through American Family
Insurance Company which had a bodily injury liability limit of $50,000 per person. At the time
of the accident, the Insured retained an insurance policy issued by Appellant which carried an
underinsured motorist limit of $50,000 per person (“the Policy”).
The Policy contained a declaration page which set underinsured motorist coverage at
$50,000 per person and $100,000 per accident, without stating any further limitations.
The Policy also contained a limits of liability section on page one of the underinsured
motorist endorsement which provided:
Limits of Liability
a. Our liability under the UNDERinsured Motorist Coverage cannot exceed the
limits of UNDERinsured Motorist Coverage stated in this policy, and the most
we will pay will be the lesser of:
1. The difference between the amounts of an insured person’s damages
for bodily injury, and the amount paid to the Insured person by or for
any person or organization who is or may be held legally liable for the
bodily injury; or
2. The limits of liability of this coverage.
(Emphasis in original). On page two of the same document, in the definitions section, an
additional endorsement provided:
c. Underinsured Motor Vehicle – means a land motor vehicle to which a
bodily injury liability bond or policy applies at the time of the accident but
its limits for bodily injury liability are less than the limits of liability for this
coverage.
(Emphasis in original). Respondent filed a petition seeking underinsured motorist benefits under
the Policy in the amount of $50,000. The parties filed cross-motions for summary judgment, and
the trial court held the Policy was ambiguous and granted Respondent‟s motion, awarding her
$50,000 in underinsured motorist benefits. This appeal followed.
II. DISCUSSION
Appellant brings two points on appeal. In its first point, Appellant claims the trial court
erred in entering summary judgment in favor of Respondent because Respondent‟s injuries were
not caused by an “underinsured motorist” as defined by the terms of the Policy. In its second
point, Appellant contends the trial court erred in entering summary judgment in favor of
Respondent because the trial court found it was not bound by the result in Rodriguez v. General
2
Accident Ins. Co., 808 S.W.2d 379 (Mo. banc 1991), which Appellant contends controls the
result here. The points are highly intertwined, and the applicability of Rodriguez is central to
both. As such, we address them together.
A. Standard of review
Summary judgment is reviewed essentially de novo and affirmed only where there are no
genuine issues of material fact and the movant is entitled to judgment as a matter of law. ITT
Commercial Finance Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo.
banc 1993). “When the underlying facts are not in question, disputes arising from the
interpretation and application of insurance contracts are matters of law for the court.” Grable v.
Atlantic Cas. Ins. Co., 280 S.W.3d 104, 106 (Mo. App. E.D. 2009) (quotations omitted).
Whether an insurance policy is ambiguous is a matter of law. Gulf Ins. Co. v. Noble Broadcast,
936 S.W.2d 810, 813 (Mo. banc 1997).
B. General law and the Rodriguez holding
In this case, Appellant argues the trial court erred in granting summary judgment in favor
of Respondent because the Respondent‟s damages were not caused by an “underinsured
motorist” as defined by the terms of the Policy. Specifically, Appellant asserts the limit of
liability for Taylor‟s, the tortfeasor‟s, bodily injury policy ($50,000) was equal to, not less than,
the limit of liability under the Policy‟s underinsured motorist coverage (also $50,000), and
therefore the Policy does not apply under its own unambiguous terms. We disagree.
The key issue before us is whether the Policy is ambiguous. Absent an ambiguity, an
insurance policy must be enforced according to its terms. Rodriguez, 808 S.W.2d at 382.
However, if the policy language is ambiguous, we construe the ambiguity against the insurer as
the drafter of the contract. Gulf Ins. Co., 936 S.W.2d at 814. “Though it is the duty of the court
3
to reconcile conflicting clauses in a policy so far as their language reasonably permits, when
reconciliation fails, inconsistent provisions will be construed most favorably to the Insured.”
Bellamy v. Pacific Mut. Life Ins. Co., 651 S.W.2d 490, 496 (Mo. banc 1983) (citations omitted).
In construing the policy terms, we apply “the meaning which would be attached by an ordinary
person of average understanding if purchasing insurance . . ..” Seeck v. Geico Gen. Ins. Co., 212
S.W.3d 129, 132 (Mo. banc 2007) (quotations omitted).
An ambiguity exists if the language used is reasonably open to different interpretations or
where there is duplicity, indistinctiveness, or uncertainty in meaning. Gulf Ins. Co., 936 S.W.2d
at 814. Similarly, a contract that promises something at one point and takes it away at another is
ambiguous. Behr v. Blue Cross Hospital Service, Inc., 715 S.W.2d 251, 256 (Mo. banc 1986).
Appellant asserts Taylor, the tortfeasor in this case, was not driving an “underinsured
motor vehicle” as the Policy defined that term, and the definition was unambiguous under the
analysis used in Rodriguez. In that case, the insurance policy provided $50,000 of underinsured
motorist coverage, and the policy holder was injured by another driver with $50,000 of liability
coverage. Rodriguez, 808 S.W.2d at 380. The policy defined “[u]nderinsured motor vehicle” as
one which had a “limit for bodily injury liability is less than the limit of liability for this
coverage,” and stated that its underinsured motorist award would be reduced by “all sums paid
because of the „bodily injury‟ by or on behalf of persons or organizations who may be legally
responsible.” Id. at 381. The Supreme Court held the policy holder was not entitled to recover
under the policy because the other driver was not an underinsured motorist under the policy. Id.
at 382-83. It reasoned that the policy clearly defined an underinsured motor vehicle as one
whose limits were “less than the limit of liability for this coverage,” whereas the other driver‟s
coverage was equal to the liability limit. Id. at 382. Further, that definition was reinforced by
4
the policy‟s explicit set-off provision, which explicitly reduced the under-insured motorist
coverage by the amount recovered from another legally responsible party. Id.
C. Developments following Rodriguez
Rodriguez was decided in 1991. In the years following, subsequent holdings by the
Missouri Supreme Court and Court of Appeals have further refined its analysis.
First, in Seeck, the Supreme Court found an underinsured motorist policy ambiguous
where the policy had defined an underinsured motor vehicle as one with a liability coverage limit
less than the policy‟s own stated limit, similar to Rodriguez. 212 S.W.3d at 133. However, the
policy also contained an “excess insurance clause,” which provided that the coverage in the
policy was “excess over any other insurance available to the Insured.” Id. at 132. The Court
reasoned that the excess insurance clause made the policy‟s other stated limits ambiguous, and
distinguished Rodriguez, noting “only the underinsured motor vehicle definition and the limit of
liability language were held unambiguous” in the policy at issue in Rodriguez. Id. at 133
(quotations omitted).
Next, the Supreme Court addressed ambiguities in underinsured motorist policies with
explicit set-off provisions. In Ritchie v. Allied Property & Cas. Ins. Co., 307 S.W.3d 132 (Mo.
banc 2009), the Court found an ambiguity in the policy resulting in a ruling that the insurer could
not set off the payment from the tortfeasor against its stated limit of liability; it could only set off
against the Insured‟s total uncompensated damages. Id. at 140-41. The Court noted that while
the policy ostensibly provided $100,000 of underinsured motorist coverage, the insurer would
never have to pay that amount if it was allowed to set off the payment from the tortfeasor, thus
creating an ambiguity, which was required to be resolved in the Insured‟s favor. Id. at 141 n. 10.
Jones v. Mid-Century Ins. Co., 287 S.W.3d 687 (Mo. banc 2009) produced a similar holding
5
under a similar set-off provision. Id. at 691-92. The Jones Court directly addressed the
Rodriguez holding, and found that it did not conflict with the result, because the policy at issue in
Rodriguez explicitly provided that its limits of liability would be reduced by payments from the
tortfeasor‟s insurer. Id. at 692 n. 3. The Rodriguez holding, therefore, allows for insurers to
place limitations on their coverage, but “Rodriguez did not give an insurer license to make
contrary-to-fact statements about the coverage it provides in a policy.” Id.
Finally, in Miller v. Ho Kun Yun, 400 S.W.3d 779 (Mo. App. W.D. 2013), the Western
District applied the reasoning in Seeck, Ritchie, and Jones to an ambiguity concerning
underinsured motorist coverage in the circumstances present here – where the policy‟s
declarations page and definitions page conflict. Miller, 400 S.W.3d at 781. On the declarations
page at issue in that case, the policy declared it included underinsured motorist coverage in the
amount of $100,000 per person or $300,000 per accident and did not list any further conditions
or limitations. Id. at 783. Later in the policy, the underinsured motorist endorsement stated
simply:
We will pay compensatory damages for bodily injury which an insured person is
legally entitled to recover from the owner or operator of an underinsured motor
vehicle. The bodily injury must be sustained by an insured person and must be
caused by accident and arise out of the use of the underinsured motor vehicle.
Id. at 783. However, on the definitions page, it defined an “underinsured motor vehicle” as one
that had liability coverage less that the specified underinsured motorist coverage limit. Id. at
785-86. The Western District held the policy holder was entitled to recover underinsured
motorist benefits under the policy. Id. at 793.
The Western District acknowledged the term “underinsured motor vehicle” was
unambiguously defined in the definitions section as one whose policy limits were less than the
specified underinsured motorist coverage. Id. at 785-86. Under that definition, the tortfeasor
6
was not driving an “underinsured motor vehicle” as contemplated by the policy under the
Rodriguez analysis. Id. at 785. However, the Miller Court found the Rodriguez analysis did not
ultimately resolve the issue, as “[s]ubsequent decisions have made clear that the fact that a
definition is clear and unambiguous does not end the inquiry as to the existence of an ambiguity
until the court has reviewed the whole policy to determine whether there is contradictory
language that would cause confusion and ambiguity in the mind of the average policy holder.”
Id. at 786 (quotations omitted). Specifically, even where a definition is unambiguous in one
section, if a contract “promises something at one point and takes it away at another, there is an
ambiguity.” Id. (quotations omitted).
With regard to underinsured motorist coverage, the Court noted that analysis of the
coverage must carefully examine the declarations page, which is generally less clear about the
fact that the coverage is designed as gap insurance between the other driver‟s liability policy
rather than excess coverage,1 and the language used in the declarations page does not adequately
alert the ordinary insured of its limitations. Id. at 787. “This fact makes it necessary to strictly
and carefully consider any language in the endorsement which might also suggest that the
coverage could be considered excess.” Id.
Using this analysis, the Court held the policy as a whole was ambiguous. Id. at 793. The
declarations sheet and the endorsement used language that would lead an ordinary insured to
believe he was entitled to compensatory damages above and beyond the coverage provided by
the other driver‟s liability coverage, and expressed no limitations. Id. at 792. The Court found
that language controlling in light of Seeck, Ritchie, and Jones, and held “that any contradictory
language anywhere in the policy was enough to create an ambiguity that would allow set-off
1
Gap insurance pays the difference between the tortfeasor‟s liability limit and the stated limit in the policy holder‟s
own coverage. Excess coverage pays the policy holder‟s coverage limit in addition to the tortfeasor‟s liability limit
up to the amount of the policy holder‟s actual damages. See Miller, 400 S.W.3d at 787.
7
only against total damages.” Id. (emphasis in original). The Western District affirmed its Miller
holding in Fanning v. Progressive Northwestern Ins. Co., 412 S.W.3d 360 (Mo. App. W.D.
2013), which involved similar facts.
D. Ambiguities in the instant Policy
Turning now to the facts in this case, the trial court held “the policy before the Court
provides coverage on both the Declarations page and in the Limits of Liability section, but
negates it in the definitions section. Accordingly, because a conflict exists between the
Declarations page and the Limits of Liability section of the policy and the definition of
underinsured motor vehicle, the policy must be construed in favor of the policy holder to provide
coverage.”
We agree with the trial court that the Policy at issue here contains two ambiguities. The
first ambiguity arises between the declaration sheet provided with the Policy, which provides
$50,000 bodily injury per person ($100,000 per accident) for underinsured motorist coverage,
without any further limitations stated. This lack of limitations conflicts with the definition of
underinsured motorist coverage set out in paragraph “c” of the definitions section which only
allows for underinsured motorist coverage where the tortfeasor‟s liability limits are less than
$50,000:
c. Underinsured Motor Vehicle – means a land motor vehicle to which a
bodily injury liability bond or policy applies at the time of the accident but
its limits for bodily injury liability are less than the limits of liability for this
coverage.
(Emphasis in original). Reading the declarations page in isolation means Appellant
would be obligated to pay Respondent $50,000, but reading paragraph “c” in isolation would
mean no recovery under these circumstances. As such, these sections are in conflict. Here, as in
Miller, the declarations page states the Insured was entitled to underinsured motorist coverage
8
and does not reference any limitations or offsets on that coverage. The limitations are not
introduced until the definitions page, which notes the coverage only applies in cases where the
tortfeasor‟s limit of liability is less than the stated coverage, regardless of the total extent of the
Insured‟s injuries. The Policy therefore provides coverage, then quickly negates in a section the
average insured is much less likely to examine. Nothing in the declaration sheet indicates the
coverage is merely gap coverage between the tortfeasor‟s liability limit and the underinsured
motorist limit, rather than comprehensive coverage necessarily excess to the tortfeasor‟s liability
coverage toward the Insured‟s total injuries. That limitation also follows in the less obvious
definitions page. Pursuant to Miller, where the declarations page states a coverage amount but
does not adequately alert the Insured to its limitations, we must strictly and carefully consider
any language in the endorsement which might also suggest that the coverage could be considered
excess. Miller, 400 S.W.3d at 787.
We also find there is a second ambiguity, found in the underinsured motorist
endorsement itself. The endorsement first states it provides coverage as follows:
Limits of Liability
a. Our liability under the UNDERinsured Motorist Coverage cannot exceed the
limits of UNDERinsured Motorist Coverage stated in this policy, and the most
we will pay will be the lesser of:
1. The difference between the amounts of an insured person’s damages
for bodily injury, and the amount paid to the Insured person by or for
any person or organization who is or may be held legally liable for the
bodily injury; or
2. The limits of liability of this coverage.
(Emphasis in original). Under section “a” the coverage is provided as the difference
between the amount of an insured person‟s damages for bodily injury and the amount paid to the
Insured person by or for the tortfeasor up to the limits of the coverage. Contrarily, under section
9
“c,” set out above, the Policy takes away the coverage it has already granted by limiting any
recovery to the limit of the liability amount for the coverage. Here, the parties have stipulated
that Respondent‟s total damages for the death of her husband exceed $100,000, and therefore a
$50,000 payment by the tortfeasor‟s liability coverage, would still leave unpaid damages which
exceed $50,000. Accordingly, reading section “a” in isolation, Appellant would be obligated to
pay Respondent $50,000, the total limit of liability coverage. However, reading paragraph “c” in
isolation, Respondent would not be obligated to pay Appellant anything, because the tortfeasor‟s
limit for liability was equal to, not less than the limits for liability under the Policy. These two
sections are therefore also in conflict with each other.
The Rodriguez holding does not change this outcome. As noted by the Supreme Court in
Seeck, “only the underinsured motor vehicle definition and the limit of liability language were
held unambiguous” in Rodriguez. 212 S.W.3d at 133 (quotations omitted). Rodriguez did not
address the additional ambiguity found in the declarations page here. As set out in Miller, the
declarations page is generally less clear that the coverage is designed as gap insurance between
the tortfeasor‟s liability policy and Policy‟s own coverage limit, and the language used in the
declarations page does not adequately alert the ordinary insured of its limitations. Miller, 400
S.W.3d at 787. This lack of clarity triggers an additional level of scrutiny when reading the rest
of the Policy, and the court must “strictly and carefully consider any language in the
endorsement which might also suggest that the coverage could be considered excess.” Id. This
additional level of scrutiny was not present in Rodriguez.
In light of these patent ambiguities and contradictions, we must construe the contract
against the party who drafted it ambiguously, the insurer. Gulf Ins. Co., 936 S.W.2d at 814.
As the Western District wisely observed in Miller:
10
The law is not concerned merely with what an ordinary insured would be caused
to believe from reading his existing policy after a bodily injury has occurred. The
law is also concerned with what an ordinary purchaser of insurance would be
caused to believe about the coverage from review of the policy upon initial receipt
of the policy, before an injury has occurred, while there remains time to adjust
coverages in light of his or her understanding of the policy contents. The auto
insurance purchaser, upon receipt of his policy (perhaps in the mail several weeks
after purchase) will certainly read the declaration sheet to ensure no
miscommunication about coverage levels, even if the purchaser reads little else.
Miller, 400 S.W.3d at 791 (citations omitted). The trial court did not err in finding the Policy
ambiguous. Point one is denied.
In its second and final point, Appellant asserts the trial court erred in finding it was not
bound by the result in Rodriguez. As stated above, Rodriguez is distinguishable and does not
control the outcome here. Therefore, Appellant‟s argument on whether the trial court
erroneously disregarded Rodriguez is irrelevant. Point two is denied.
III. CONCLUSION
The trial court‟s grant of summary judgment in favor of Respondent is affirmed.
ROBERT M. CLAYTON III, Judge
Patricia L. Cohen, P.J., and
Roy L. Richter, J., concur.
11
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MISCELLANEOUS SUPREME COURT DISPOSITIONS
BALLOT TITLE CERTIFIED
May 16, 2006
Brandis v. Myers (S53411). Petitioner's request for oral argument is denied. Petitioner's
arguments that the Attorney General's certified ballot title for Initiative Petition No. 158 (2006)
does not comply substantially with ORS 250.035(2) to (7) are not well taken. The court certifies
to the Secretary of State the Attorney General's certified ballot title for the proposed measure.
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553 F.2d 91
Franklin Life Insurance Co.v.Ramirez Vda de Lopez
No. 76-1009
United States Court of Appeals, First Circuit
1/25/77
1
D.P.R.
AFFIRMED
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180 B.R. 90 (1994)
In re David G. MARTIN, Debtor-Appellant,
v.
INTERNAL REVENUE SERVICE, Appellee.
No. 5:94-CV-672-F. Bankruptcy No. 93-02215-8-JRL.
United States District Court, E.D. North Carolina, Western Division.
December 14, 1994.
*91 David G. Martin, Wilmington, NC, pro se.
Lawrence P. Blaskopf, U.S. Dept. of Justice, Trial Atty., Tax Div., Washington, DC, for I.R.S.
ORDER
JAMES C. FOX, Chief Judge.
Statement of the Case
On August 18, 1993, David Martin (hereinafter "Martin"), debtor-appellant herein, filed a voluntary petition for bankruptcy, pursuant to Chapter 13 of the Bankruptcy Code. On December 22, 1993, the Internal Revenue Service (hereinafter the "IRS"), filed a proof of claim form in this matter, alleging a tax liability in the amount of $129,245.19. The IRS proof of claim, although not filed on the official form utilized by the Bankruptcy Court for the Eastern District of North Carolina, identified its total claim as being comprised of a $35,997.09 unsecured priority claim and a $93,248.10 unsecured general *92 claim. The proof of claim also itemized the amount of tax, interest and penalties the debtor owed for each tax year.
In January, 1994, Martin, proceeding without the assistance of counsel, filed an "Objection to Proof of Claim (IRS) and Motion to Require Creditor IRS to Provide All Underlying Agreements Proving Their Claim as Required," to which the IRS responded on March 7, 1994. On March 25, 1994, the IRS filed an amended claim form, utilizing the official form of the bankruptcy court. The IRS's amended claim identified the same composite claims as alleged on its first proof of claim form, as well as the same years providing the basis for its claim. The only significant difference between the original proof of claim and the amended proof of claim is that the latter was filed on the official form designated by the bankruptcy court.
On April 11, 1994, Martin filed an objection to the amended claim form, and the bankruptcy court held a hearing on April 12, 1994. Martin appeared without counsel, at which time the court entertained Martin's objections to the amended claim form. Finding that the IRS simply restated its precise initial proof of claim on the official form utilized by the bankruptcy court, the court allowed the amended claim over Martin's objections.
Turning to Martin's substantive arguments, the court entertained Martin's arguments on his own behalf, but offered Martin the option of continuing the hearing for thirty days during which time Martin could retain counsel. Martin elected to continue the matter to consult with counsel. The court advised Martin that, at the expiration of thirty days, if no counsel had entered an appearance for Martin, the court would resolve the remaining issues by written order.
Martin failed to retain counsel, but, on May 11, 1994, Martin did file a motion seeking to have the bankruptcy court compel the IRS to file Martin's delinquent tax returns. On June 15, 1994, the bankruptcy court entered an order denying Martin's objections to the IRS's amended proof of claim and denying Martin's motion to compel the filing of his tax returns by the IRS. It is this order from which Martin now brings this appeal.
Statement of Issues and Standard of Review
Martin raises the following three issues in his instant appeal:
(1) Whether the bankruptcy court erred in permitting the IRS's amended proof of claim, despite Martin's objections to both the initial and amended proofs;
(2) Whether the bankruptcy court erred in denying Martin's "motion to require creditor IRS to provide all underlying agreements proving their claim as required;" and
(3) Whether the bankruptcy court erred in denying Martin's motion to compel the IRS to file his delinquent tax returns.
The first issue above is subject to review for abuse of discretion. In re Davis, 936 F.2d 771, 775 (4th Cir.1991). The latter issues are each questions of law, which the court will review de novo.
Discussion and Analysis
(1) Whether the bankruptcy court erred in permitting the IRS's amended proof of claim, despite Martin's objections to both the initial and amended proofs.
The Court of Appeals for the Fourth Circuit has recognized that "`where there is anything in the record in the bankruptcy case which establishes a claim against the bankrupt, it may be used as a basis for amendment . . . were substantial justice will be done by allowing the amendment.'" Fyne v. Atlas Supply Co., 245 F.2d 107, 108 (4th Cir.1957). More recently, the court of appeals has reaffirmed this position, noting the "trend of modern decisions toward liberality in allowing the filing of amended proofs of claim." In re Davis, 936 F.2d at 775. There, the court also noted that "such amendments should be permitted if `such a course is in furtherance of justice.'" Id. (quoting Dabney v. Addison, 65 B.R. 348, 351 (E.D.Va.1985)).
In the case at bar, the IRS's initial proof of claim, filed on a form the bankruptcy court found to "conform substantially" to the official form of the court, see Bankruptcy *93 Rule 3001(a), adequately put Martin on notice as to the full nature and extent of its claim against him. In addition, the bankruptcy court, in allowing the amended proof of claim, recognized that Martin's substantive challenges would be preserved as against the amended proof of claim. The amended proof of claim merely allowed for the IRS's claim to be itemized upon the official form of the court, for the sake of clarity and convenience to the court and the litigants. Furthermore, the court cannot find, nor does Martin argue, that Martin suffered any prejudice from this technical amendment.[1]
Martin argues, to the contrary, that courts are reluctant to entertain amended proofs of claim, especially when objections to the original proof of claim have been filed with the court. In principal support of his argument, Martin relies on United States v. Owens, 84 B.R. 361 (E.D.Pa.1989), as an example of one situation in which the court refused to allow an amended proof of claim by the IRS. In Owens, however, the IRS's amended claim was disallowed because the IRS sought to increase the tax liability previously asserted in its original proof of claim, thereby asserting a new claim of which the debtor had no previous notice.
In his reply brief, Martin advances two further casesIn re Norris Grain Co., 81 B.R. 103 (M.D.Fla.1987), and In re Solari, 63 B.R. 115 (Cal.1986)in support of his argument in this regard. These cases, however, like Owens, concern situations wherein the creditor sought to amend its proof of claim to either assert a new claim or increase the amount of the claim asserted in the original proof of claim. In each case, the court disallowed the amended proof of claim, finding that the initial proof of claim provided no notice to the debtor of the subsequent claims, and that the debtor would be prejudiced by the allowance of the new claims after the statutory bar date.
It is evident, in light of the foregoing, that Martin's arguments find no support in the authority on which he relies. In the instant matter, the IRS sought neither to add a new claim or increase the value of the claim previously filed. Accordingly, the court finds that the bankruptcy court did not abuse its discretion in allowing the IRS to file an amended proof of claim which sought to assert no new tax liability, but merely sought to conform its previous proof to the official form desired by the bankruptcy court.
(2) Whether the bankruptcy court erred in denying Martin's "motion to require creditor IRS to provide all underlying agreements proving their claim as required."
Bankruptcy Rule 3001(f) provides: "(f) Evidentiary Effect. A proof of claim executed and filed in accordance with these rules shall constitute prima facie evidence of the validity and amount of the claim." Martin argues, however, that the IRS was required to come forward with all underlying evidence in support of its proof, which, having not been filed in conformity with Rule 3001, was not entitled to the presumption of validity provided for by the rule. Martin's attack on the validity of the IRS's proof of claim is based on his conclusory contention that, because he never filed any tax returns for the years in question, the IRS's assessments of taxes owed "must have been fraudulently based upon an unknown process and are obviously inaccurate and invalid." (Debtor's Objection to Proof of Claim, p. 3).
The court of appeals, in In re Landbank Equity Corp., 973 F.2d 265 (4th Cir.1992), has recognized that "it is well established that matters of proof . . . are properly considered to be part of the substantive tax laws. . . . Furthermore, Congress explicitly has attempted to accommodate the goals of the federal bankruptcy system and tax collection by way of the Bankruptcy Code." Id. at 270. The court therefore held that "no portion of the Bankruptcy Code expresses a policy or intent to replace any aspect of the federal tax law with any special legal requirement to be applied only in the context of a bankruptcy proceeding." Id.
*94 Turning, then, to the procedural considerations with respect to burdens of proof and persuasion as they are employed within the context of the tax laws, it is noted that "[w]here the taxpayer fails to keep or produce adequate records from which his income can be determined, the Commissioner [of Internal Revenue Service] `is at liberty to resort to the best procedure available under the circumstances in making his determinations.'" Cebollero v. Commissioner, 967 F.2d 986, 989 (4th Cir.1992) (quoting Burka v. Commissioner, 179 F.2d 483 (4th Cir. 1950)). The court of appeals has further held that
The burden of proof is on the Commissioner to show that the taxpayer received income. This burden is initially satisfied, however, by the fact that the Commissioner's deficiency determination is presumed correct. The burden is thus on the taxpayer to prove the incorrectness of the deficiency determination. This burden is procedural and is met if the taxpayer produces competent and relevant evidence from which it could be found that he did not receive the income alleged in the deficiency notice. If this burden is met, the burden of proof shifts back to the Commissioner to prove the existence and amount of the deficiency.
Foster v. Commissioner, 391 F.2d 727, 735 (4th Cir.1968) (emphasis added). In Higgenbotham v. United States, 556 F.2d 1173 (4th Cir.1977), the court of appeals reaffirmed this procedural burden shifting, holding that "a taxpayer need only prove by a preponderance of the evidence that the Government's assessment is erroneous, and, once that burden is met, the Government, not the taxpayer, must prove how much the taxpayer actually owes." Id. at 1175.
This approach has been adhered to within this circuit in the context of bankruptcy proceedings as well.
In bankruptcy, it is settled that a properly executed proof of claim is sufficient to shift the burden of producing evidence and to entitle the claimant to a share in the distribution of the bankrupt's estate unless an objector comes forward with evidence contradicting the claim. . . . While a properly executed claim does shift the burden of producing evidence to the objector, the burden of persuasion remains at all times with the claimant.
In re Friedman, 436 F.Supp. 234, 237 (D.Md. 1977) (citations omitted). The district court in Friedman then recognized the divergence in views as to the extent of evidence required by the objector to overcome the presumption of prima facie validity that attaches to the creditor's proof of claim.
Under the first approach, the objector must present "some evidence" contradicting the proof of claim, whereupon the bankruptcy judge must weigh the evidence presented by the objector against the proof of claim, which itself retains some weight as evidence . . . and any evidence presented by the claimant. . . . Under the other approach, the objector must put on enough evidence to rebut or overcome the prima facie case created by the proof of claim; only then, after a preliminary victory over the presumptive validity of the debt as expressed in the proof of claim, does the objector's additional evidence in nature or amount require the bankruptcy judge to weigh the evidence and find the facts.
Id.
Applying the above analyses of the respective burdens to the parties in the present action, the court finds that the bankruptcy court did not err in denying Martin's motion. The IRS filed an amended proof of claim that conformed to the requirements of Rule 3001 and that was allowed by the court. Having done so, the IRS's proof of claim was entitled to the presumptive validity attributed to it under Rule 3001(f). Martin then bore the burden of showing by a preponderance of the evidence, or, at the very least, by "some evidence," that the IRS's claim was erroneous or invalid in some regard. Martin having failed to come forward with any credible or competent evidence, aside from his own conclusory assertions that the process by which the IRS computed his tax liability was faulty and fraudulent, the IRS's proof of claim retained its presumption of validity as prima facie evidence of its claim. The bankruptcy court, therefore, did not err in denying *95 Martin's motion to compel the IRS to come forward with evidence in support of its claim.
(3) Whether the bankruptcy court erred in denying Martin's motion to compel the IRS to file his delinquent tax returns.
Martin's final argument is premised upon his construction of 26 U.S.C. § 6020(b) as imposing upon the IRS the mandatory obligation to file income tax returns when individual taxpayers fail to file such returns themselves. Title 26, United States Code, § 6020(b) provides as follows:
(b) Execution of return by Secretary. (1) Authority of Secretary to execute return. If any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefor, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.
Martin's primary argument in this regard is predicated upon his citation of numerous statutes, rules and regulations in which the word "shall" has been interpreted as meaning "must" or as imposing upon a person or entity an obligation to take an action. Martin argues, therefore, that the statute, stating that "the Secretary shall make such return" imposes upon the Secretary a binding obligation to file the delinquent returns for taxpayers who fail to file their own returns.
This very issue has been addressed and resolved by numerous courts in numerous contexts, from tax matters to criminal matters. The courts that have resolved this issue have consistently found that, although the IRS has the authority to file the return of a taxpayer who fails to do so, the IRS is not required to make or file such return for the taxpayer, and the IRS properly may determine or assess a deficiency based thereon in the absence of such a return. See e.g., Maisano v. Commissioner, 894 F.2d 1344 (9th Cir.1990); Roat v. Commissioner, 847 F.2d 1379, 1382 n. 1 (9th Cir.1988); Smalldridge v. Commissioner, 804 F.2d 125, 127-28 n. 2 (10th Cir.1986); Moore v. Commissioner, 722 F.2d 193, 196 (5th Cir.1984); United States v. Verkuilen, 690 F.2d 648, 657 (7th Cir.1982); United States v. Bowser, 1989 U.S. Dist. LEXIS 10690 (D.Md.1989).
In view of the overwhelming authority in this regard, the court finds that the bankruptcy court did not err in denying Martin's motion to compel the IRS to file his delinquent returns for him.
Conclusion
Having reviewed the record in this matter in its entirety, as well as the instant arguments by Martin and the IRS, the court finds that the bankruptcy court below acted within its sound discretion in allowing the IRS's technical amendment to its proof of claim. Similarly, the court finds no error in the bankruptcy court's denial of Martin's objections to the IRS's proofs of claim or in its denial of Martin's motions seeking to compel the IRS to disclose all documentary evidence in support of its claim or to file his delinquent tax returns on his behalf.
Accordingly, it is hereby ORDERED that the June 15, 1994, order of the bankruptcy court appealed from herein is AFFIRMED in all respects and that this appeal is therefore DISMISSED.
SO ORDERED.
NOTES
[1] Actually, Martin argues that he is prejudiced by the amended claim in that, if allowed, it asserts a tax liability against him based on approximately ten years of income, which is a substantial amount of money. Martin obviously mistakes the potential penalty for his dereliction as prejudice flowing from the amendment.
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773 A.2d 1256 (2001)
John BAHL, Timothy Bahl, William Bahl, Jeanne M. Jennings, Catherine Horton and Theresa Bacon, Appellants,
v.
LAMBERT FARMS, INC., Appellee.
Superior Court of Pennsylvania.
Submitted December 4, 2000.
Filed April 25, 2001.
*1257 John Kocsis, Athens, for appellants.
David J. Barrett, Athens, for appellee.
Before POPOVICH, TODD, and OLSZEWSKI, JJ.
TODD, J.:
¶ 1 The matter before us involves an action to partition real estate filed by Appellants John Bahl, Timothy Bahl, William Bahl, Jeanne M. Jennings, Catherine Horton and Theresa Bacon, seeking their father, William J. Bahl's intestate share of a farm sold to Appellee Lambert Farms, Inc. in 1991. Following trial, and the denial of Appellants' post trial motions, judgment was entered for Appellee. Upon review, we reverse.
¶ 2 The relevant factual background is as follows: In 1991, a group of the heirs of William Bahl and his wife, Rose Bahl, sold the family farm in Forks Township, Sullivan County, to Appellee. The farm had been in the Bahl family for many years. William predeceased Rose and after Rose died intestate in 1969, title to the farm vested in their children and grandchildren by virtue of intestate succession pursuant to the statutes governing intestacy in Pennsylvania, 20 Pa.C.S.A. §§ 2101-2110. When the farm was sold to Appellee in 1991, the deed to the farm listed the grantors as Geraldine McDonald, Zita Warman, Genevieve Friedah and Kenneth Friedah, her husband, Rosemary Holland and Michael Holland, her husband, Patricia Blasi and Alex Blasi, her husband, Joseph P. Bahl, Jr. and Beverly J. Bahl, his wife. The deed did not list William J. Bahl, Appellants' father who died in 1980, or any of Appellants, his heirs.[1]
*1258 ¶ 3 In 1998, Appellants brought an action in partition against Appellee seeking an intestate share of William J. Bahl's interest in the farm.[2] Appellants allege that their father, William J. Bahl, was the last child born to William and Rose Bahl and, therefore, his heirs are entitled to an order of partition for their father's intestate share of the farm as they were omitted from the deed. The case was tried before the Honorable Brendan J. Vanston, President Judge of the Sullivan County Court of Common Pleas, who entered an Order in favor of Appellee on February 29, 2000. Appellants moved for post-trial relief, which Judge Vanston denied by opinion and order on April 27, 2000. This timely appeal followed.
¶ 4 Appellants raise only one question for our consideration:
Whether William J. Bahl was the son of Rose and William Bahl, Sr. and, if so, whether the Appellants are entitled to an action in Partition of Real Estate against Appellee for their father's intestate share of the value of a farm owned by the Appellee.
(Appellants' Brief, at 4.)
¶ 5 William J. Bahl died in 1980. At the time the partition action was tried before Judge Vanston, the only siblings (children of William and Rose Bahl) who were still alive were Genevieve Friedah and Geraldine McDonald. In support of their Petition, Appellants submitted into evidence numerous documents in support of their position that their father, William J. Bahl, was a son and heir at law of William and Rose Bahl. The record before us contains many documents including letters to William J. Bahl from other family members referring to Rose Bahl as "Mom," various obituary notices listing William J. Bahl as the sibling of the other children of William and Rose Bahl, report cards for William J. Bahl signed by William Bahl as "parent," estate distribution notices including William J. Bahl as an heir, documents and correspondence to William J. Bahl containing various references to his position as a sibling of the other children of William and Rose Bahl, and William J. Bahl's baptismal certificate listing William and Rose Bahl as his parents.
¶ 6 Appellee argues that although the documents offered by Appellants purport to show that William J. Bahl was the natural son of William and Rose Bahl, in actuality, William J. Bahl was the out-of-wedlock son of William and Rose's daughter, Zita Bahl, who returned home to the farm unmarried at the age of 21 with a newborn infant. Appellee alleges that rather than face the inevitable community criticism of the 1920's, William and Rose Bahl decided to raise William J. Bahl as their own son, a sibling to the other natural Bahl children, including Zita Bahl.
¶ 7 In support of its position, Appellee offered the deposition testimony of Genevieve Friedah, daughter of William and Rose Bahl and younger sister of Zita Bahl. Friedah, who was 93 years old at the time of her deposition, testified that when she was 17 and living on the family farm, she specifically remembered Zita Bahl returning home with a baby boy after living away. She recalled under oath that her parents, William and Rose, named Zita's baby William, raised him as their own son, had him baptized as their own, and treated *1259 him as the sibling of their other children in order to avoid embarrassment and community criticism. She further testified that to her knowledge, her parents never formally adopted him as their own child. (N.T. Deposition of Genevieve Friedah, 6/2/98, at 6-10.)
¶ 8 Appellee argued at trial that despite the existence of the documentary evidence that William and Rose Bahl raised William J. Bahl as one of their children to avoid embarrassment, in the face of Genevieve Friedah's testimony, Appellants failed to prove that William J. Bahl was their natural (or formally adopted) son. Accordingly, Appellee maintains that William J. Bahl's heirs are not entitled to an intestate share of the family farm sold to Appellee.
¶ 9 The trial court, upon review of the documentary evidence, as well as the deposition testimony of Friedah, denied Appellants' petition and post-trial motion for relief. In his opinion, Judge Vanston held that Friedah's testimony of her personal recollections about William J. Bahl's origins provided more competent and compelling evidence than the documents submitted by Appellants purporting to prove that William J. Bahl was the natural child of William and Rose Bahl. (Trial Court Opinion, 4/26/2000, at 2.)
¶ 10 Our review of the relevant case law in this area reveals that challenges to maternity and paternity for purposes of proving entitlement to inheritance have been relatively uncommon. The vast majority of precedent concerns cases where paternity alone, not paternity and maternity, are challenged, such as where a named father denies paternity in an action by the mother for child support. The present case, in contrast, presents an atypical factual situation where the heirs of a deceased child are attempting to prove that his natural parents were the couple who raised him and claimed him during their lives as their own child.
¶ 11 For guidance, we first look to two decisions of this Court regarding proof of paternity for purposes of intestate succession. In In re Estate of Greenwood, 402 Pa.Super. 536, 587 A.2d 749 (1991), we held that:
the standard of proof required by a child born out of wedlock to establish a right to intestate succession by, from and through a person alleged to be the father of the claimant rises to a level of "clear and convincing" evidence. 20 Pa. C.S.A. § 2107(c)(3)[.]
Id. at 754 (citing Estate of Hoffman, 320 Pa.Super. 113, 466 A.2d 1087 (1983)). The standard to be applied should be the same to prove paternity or maternity. Accordingly, we hold that Appellants were required to prove by clear and convincing evidence that Rose Bahl, and not Zita Bahl, was William J. Bahl's mother.
¶ 12 In Estate of Hoffman, this Court heard and rejected the case of an individual described as a "foster child" who claimed inheritance from the family that took her in and raised her as their own without adopting her. This Court later summarized the facts and holding of Estate of Hoffman in In re Estate of Simmons-Carton, 434 Pa.Super. 641, 644 A.2d 791 (1994), as follows:
The facts of Hoffman, briefly stated, reveal that Ruth H. DeLong, the appellant in Hoffman, shortly after her birth in 1927 was taken to the home of her mother's sister, Mary Hoffman, and Mary's Husband, Sidney S. Hoffman. Ruth was raised by Mary and Sidney and lived with them until her marriage in 1946. However, around the time Ruth was twelve or thirteen, she learned by accident that her "Aunt" Marian Mentch was in fact her natural mother. Ruth was never adopted by Mary or *1260 Sidney. Sidney died in 1953 and Mary died in 1972. In 1978 Owen Hoffman, Sidney's brother died. Owen, whose wife had predeceased him, died without leaving issue. Ruth claimed to be the natural daughter of Sidney S. Hoffman, in an attempt to claim entitlement to one-half of Owen Hoffman's residuary estate. The trial court found that the claim of Ruth DeLong had not been sustained by clear and convincing evidence. The trial court stated:
The record merely indicates that Sidney and Mary took their illegitimate niece into their home to raise as their own child. There were no facts tending to support claimant's allegation that Sidney was her natural father. All of the evidence presented in this case is consistent with the fact that Mary and Sidney were raising claimant as their foster child.
Id. at 1090. This court observed "that claims of paternity made after the lips of the alleged father have been sealed by death are in that class of claims which must be subjected to the closest scrutiny and which can be allowed only on strict proof so that injustice will not be done." Id. at 1089.
In re Estate of Simmons-Carton, 644 A.2d at 796.
¶ 13 Where the findings of the trial judge are supported by competent evidence, "an appellate court will not reverse in the absence of an abuse of discretion, a capricious disregard of evidence, or an error of law." Estate of Hoffman, 466 A.2d at 1090 (citations omitted).
¶ 14 As in Estate of Hoffman, the record here indicates that William and Rose Bahl took their grandson into their home to raise him as their own child. None of the evidence of record supports Appellants' claims that their father was the natural child of William and Rose. In fact, the testimony of Genevieve Friedah further supports Appellee's contention to the contrary. Accordingly, we find no abuse of the trial court's discretion in its determination that Appellants failed to prove by clear and convincing evidence that William J. Bahl was the natural child of William and Rose Bahl.
¶ 15 However, our analysis must not end here, for Appellants next argue that Appellee should be estopped from denying that William and Rose Bahl were William J. Bahl's parents in light of the Bahls' conduct throughout their lives as William J. Bahl's parents. Appellants assert that the voluminous documentary evidence of record, coupled with the deposition testimony of Geraldine Friedah, all of which support the proposition that William and Rose Bahl wanted the world to view William J. Bahl as their son, warrants a legal determination that he was, for all intents and purposes, including intestate succession, their son. We agree.
¶ 16 In Curran v. Eberharter, 361 Pa.Super. 65, 521 A.2d 474 (1987), we defined the doctrine of equitable estoppel:
Equitable estoppel arises when a party by acts or representation intentionally or through culpable negligence, induces another to believe that certain facts exist and the other justifiably relies and acts upon such belief, so that the latter will be prejudiced if the former is permitted to deny the existence of such facts.
Id. at 479-80 (citation omitted). The concept of paternity by estoppel has been upheld in numerous circumstances where a child or mother seeks child support from a purported father who has held himself out to the child and community as the father, but then attempts to deny paternity when support is sought. See Brinkley v. King, 549 Pa. 241, 249, 701 A.2d 176, 180 (1997) *1261 (holding that the doctrine of estoppel embodies the fiction that, regardless of biology and the presumption of paternity, the person who has cared for the child is the child's parent) and citations therein.
¶ 17 In Brinkley, the Court repeated that "under certain circumstances, a person might be estopped from challenging paternity where that person has by his or her conduct accepted a given person as the father of the child." Id. (quoting Jones v. Trojak, 535 Pa. 95, 634 A.2d 201 (1993)).
¶ 18 Similarly, in Freedman v. McCandless, 539 Pa. 584, 654 A.2d 529 (1995), the Court stated:
Estoppel in paternity actions is merely the legal determination that because of a person's conduct (e.g. holding out the child as his own, or supporting the child) that person, regardless of his true biological status, will not be permitted to deny parentage, nor will the child's mother who has participated in this conduct be permitted to sue a third party for support, claiming that the third party is the true father.... [T]he doctrine of estoppel in paternity actions is aimed at "achieving fairness as between the parents by holding them, both mother and father, to their prior conduct regarding the paternity of the child."
Id. at 591-92, 654 A.2d at 532-33. More recently, in Fish v. Behers, 559 Pa. 523, 741 A.2d 721 (1999), the Supreme Court affirmed its view that public policy demands that children have the right to certainty in their relationships with their parents, stating:
Estoppel is based on the public policy that children should be secure in knowing who their parents are. If a certain person has acted as the parent and bonded with the child, the child should not be required to suffer the potentially damaging trauma that may come from being told that the father he has known all his life is not in fact his father.
Id. at 530, 741 A.2d at 724 (citations omitted).
¶ 19 Although the doctrine of paternity by estoppel originally was established for the protection of minor children, Appellants argue that it should apply in this case despite the fact that the "child" in this case already had reached majority and died before this litigation was commenced. Appellants rely on our decision in In re Estate of Simmons-Carton, supra, where we examined the concept of paternity by estoppel as it applied to a deceased child who had attained majority for purposes of intestate succession. In In re Estate of Simmons-Carton, we examined the question of whether both the natural mother and purported natural father qualified to be named co-administrators of the estate of their daughter, Dory, who died intestate in an automobile accident at the age of 20. The decedent's mother, Mirjam, in an attempt to prevent her estranged husband, Donald, from inheriting by intestate succession from Dory, denied that he was Dory's natural father. She testified that she had given birth to Dory in the Netherlands in January of 1965 and that she had met Donald the year before. Mirjam testified that she believed she had been impregnated by someone other than Donald, but she refused to provide the alleged natural father's name. The record is unclear whether Donald had access to Mirjam during the relevant time period prior to Dory's birth, but Mirjam acknowledged that she may have seen Donald sometime in the spring of 1964. 644 A.2d at 793.
¶ 20 The record in In re Estate of Simmons-Carton revealed, however, that the parties had lived together as a family until Mirjam and Donald separated in 1987. Donald had provided primary support for the family during the first 18 years of *1262 Dory's life and paid for at least two years of Dory's college tuition. Id. Following Dory's death in 1988, letters of administration were issued to Mirjam. Donald's name was added soon thereafter and Mirjam disputed the addition. Mirjam petitioned the Register of Wills to remove Donald's name as co-administrator of Dory's estate, alleging that Donald was not Dory's natural father. The Register of Wills revoked the letters of administration containing Donald's name and Donald appealed. Id. at 794. The trial court reversed the Register of Wills' decision and this Court affirmed, holding Donald proved that he had openly held out Dory to be his daughter throughout her life and therefore now should be considered her father for purposes of descent and inheritance. Accordingly, Mirjam was estopped from denying Donald's paternity of Dory. Id. at 797.
¶ 21 Appellants argue that our holding in In re Estate of Simmons-Carton is applicable to the case before us. We agree. Nothing in the evidence presented at trial by either party disproves the premise that William and Rose Bahl intended, throughout their lives and in their deaths, to regard William J. Bahl as their own son. The probate documents filed following Rose's death clearly indicate that William J. Bahl was a beneficiary of her estate, inheriting a portion equal to those inherited by her other children. To now allow Appellee, nearly 30 years after Rose's death, to attempt to disprove William and Rose Bahls' clear intent to raise and treat William J. Bahl as their son, would be a rejection of the public policy our Courts have affirmed many times: that a child has the right to expect the law will protect his rights and those of his heirs with regard to those whom the world knows as his parents. Accordingly, we find Appellants have demonstrated, through the concept of equitable estoppel, that William J. Bahl was the son of William and Rose Bahl for purposes of his right to inherit from them by intestate succession.
¶ 22 Appellants further argue that 23 Pa.C.S.A. § 5102[3] and 20 Pa.C.S.A. § 2107,[4] when read in the context of the *1263 record before us, support their argument that William and Rose Bahl were the parents by estoppel of William J. Bahl for purposes of intestate succession.
¶ 23 In evaluating the application of 20 Pa.C.S.A. § 2107 and 23 Pa.C.S.A. § 5102, also relied upon by the purported father in In re Estate of Simmons-Carton, we concluded:
The above statutory language, when applied to the facts of this case, indicates that Donald certainly would be held to be Dory's father for purposes of a determination of paternity. As the child of Donald, Dory would be able to inherit from him. It follows that Donald should be able to inherit from Dory under the intestacy provisions of § 2107.
In re Estate of Simmons-Carton, 644 A.2d at 798.
¶ 24 Appellee here argues, however, that the statutes in question were enacted in 1978, nine years after Rose Bahl died, thereby rendering them inapplicable to the case before us. We agree. The Statutory Construction Act of 1972, 1 Pa.C.S.A. § 1926, provides: "No statute shall be construed to be retroactive unless clearly and manifestly so intended by the General Assembly." The statutes at issue here make no provision for retroactivity and are therefore, strictly speaking, inapplicable to the case sub judice.
¶ 25 Nonetheless, there is no dispute that the ample, uncontroverted documentary evidence of record, including report cards, a baptismal certificate, estate notices and obituaries, as well as letters among family members, all demonstrate the lifelong intent of William and Rose Bahl to treat William J. Bahl as their son. The deposition testimony of Genevieve Friedah only serves to buttress Appellants' position that William J. Bahl was raised as Friedah's brother, not her nephew, by her parents, William and Rose.
¶ 26 Therefore, while we agree with the trial court that Appellants failed to produce clear and convincing evidence that William J. Bahl was the natural child of William and Rose, we find that the evidence of record produced by both sides unquestionably is clear and convincing that during William J. Bahl's lifetime, William and Rose openly held him out to be their son, received him into their home and provided support for him. The record is devoid of any evidence that at any time during their lives, or even upon their deaths, William and Rose Bahl denied being William J. Bahl's parents. William J. Bahl's heirs therefore must have the right to claim their father's fair intestate share as a child of William and Rose. Accordingly, the trial court's order of February 29, 2000 denying Appellants' petition for partition is hereby reversed and remanded for additional proceedings consistent with this Opinion.
¶ 27 Reversed and remanded. Jurisdiction relinquished.
¶ 28 OLSZEWSKI, J., files a concurring opinion.
OLSZEWSKI, J., Concurring:
¶ 1 While I agree with my esteemed colleagues that we must reverse the decision of the lower court, I do so for reasons other than those stated; thus, I write separately.
*1264 ¶ 2 I agree with the majority's assertion that the trial court did not abuse its discretion in its decision that appellants failed to prove by clear and convincing evidence that William J. Bahl was the natural or adopted child of William and Rose Bahl. I also agree that 23 Pa.C.S.A. § 5102 and § 2107 are inapplicable to the case before us. However, I would contend that under those circumstances alone, we would be constrained to follow the precedent established in In re Estate of Hoffman, 320 Pa.Super. 113, 466 A.2d 1087 (1983). The majority rejects In re Estate of Hoffman, as inapplicable to these facts because appellee should be estopped from denying William J. Bahl's parentage in light of the Bahl's conduct throughout their grandson's life. I cannot agree.
¶ 3 The majority's opinion, in effect, would create "common law adoption" for inheritance purposes. This is in direct conflict with In re Estate of Hoffman, which clearly established that "foster children" raised by relatives are not issue as defined by Pennsylvania's laws on intestate succession. See id. at 1090 (The Court determined that appellee was the Hoffman's "foster child" and not their issue). The majority reached this decision even though Ruth Hoffman DeLong established that the Hoffman's clearly held her out to the community as their daughter. See id.
¶ 4 Instead, the majority relies on In re Estate of Simmons-Carton, 434 Pa.Super. 641, 644 A.2d 791 (1994), to establish estoppel in intestate cases where maternity and/or paternity is at issue. However, that case is clearly distinguishable and inapplicable to the present facts. The father in In re Estate of Simmons-Carton believed throughout his daughter's life that he was her natural father. See id. at 793-94. In fact, he married the child's mother, lived with them as a family until the parties separated, and provided support for the child. See id. The Court determined that the child's mother was equitably estopped from denying paternity when she had never mentioned during the child's life that he might not be the father. See id. at 800. In the present case, it is clear that William and Rose Bahl knew that they were the grandparents of William, not his parents. They simply chose to forego the humiliation associated with his illegitimate status in the 1920's, and raise him as their own. As such, they were William's "foster parents," not his natural or adopted parents. See In re Estate of Hoffman, at 1090.
¶ 5 However, any party in interest should have brought these claims within five years of distribution of either William or Rose Bahl's estate. 20 Pa.C.S. § 3521; see Deposition Genevieve Friedah at 19. Because the beneficiaries never raised this issue, the lower court should not have reviewed it. Instead of properly contesting the proposed beneficiaries, the parties simply sold the property.
¶ 6 In addition, appellee had at least constructive notice of William J. Bahl's interest in the property. Constructive notice is what a party "could have learned by inquiry of the person in possession and of others who, they had reason to believe, knew of facts which might affect title, and also by what appeared in the appropriate indexes in the office of the recorder of deeds." Mid-State Bank and Trust Co. v. Globalnet Intern., Inc., 710 A.2d 1187, 1192 (Pa.Super.1998). Estate documentation recorded in the Orphan's Court lists William J. Bahl, as the son of Rose Bahl, and proposes distribution of 1/6 of the estate to him. Orphan's Court of Sullivan County, Pennsylvania 44th Judicial District Number 6 September Term 1969. Estate documentation dated August 23, 1988, lists William J. Bahl's issue as heirs to the *1265 Estate of Rose Bahl. Thus, appellee would have had constructive notice of appellants' intestate claim to Rose Bahl's farm when they purchased it in 1991.
¶ 7 Under these circumstances, the trial court should not have permitted appellee to challenge William J. Bahl's status or that of his issue. Therefore, I agree that the trial court's order denying appellants' petition for partition should be reversed and the case remanded.
NOTES
[1] Although the record is unclear, it appears that those individuals listed as grantors on the deed were the living heirs of Rose Bahl at the time of the sale, excluding the heirs of William J. Bahl.
[2] We note that the record is devoid of any mention of or objection to the seven-year delay in filing of Appellants' partition action.
[3] § 5102. Children declared to be legitimate
(a) General rule.All children shall be legitimate irrespective of the marital status of their parents, and, in every case where children are born out of wedlock, they shall enjoy all the rights and privileges as if they had been born during the wedlock of their parents except as otherwise provided in Title 20 (relating to decedents, estates and fiduciaries).
(b) Determination of paternity.For purposes of prescribing benefits to children born out of wedlock by, from and through the father, paternity shall be determined by any one of the following ways:
(1) If the parents of a child born out of wedlock shall have married each other.
(2) If, during the lifetime of the child, it is determined by clear and convincing evidence that the father openly holds out the child to be his and either receives the child into his home or provides support for the child.
(3) If there is clear and convincing evidence that the man was the father of the child, which may include a prior court determination of paternity.
23 Pa.C.S.A. § 5102.
[4] § 2107. Persons born out of wedlock.
(a) Child of mother.For purposes of descent by, from and through a person born out of wedlock, he shall be considered the child of his mother.
* * *
(c) Child of father.For purposes of descent by, from and through a person born out of wedlock, he shall be considered the child of his father when the identity of the father has been determined in any one of the following ways:
(1) If the parents of a child born out of wedlock shall have married each other.
(2) If during the lifetime of the child, the father openly holds out the child to be his and receives the child into his home, or openly holds the child out to be his and provides support for the child which shall be determined by clear and convincing evidence.
(3) If there is clear and convincing evidence that the man was the father of the child, which may include a prior court determination of paternity.
20 Pa.C.S.A. § 2107.
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953 F.2d 647
Tyler (Billy Roy)v.Lee (Patti)
NO. 91-3121
United States Court of Appeals,Eighth Circuit.
Oct 22, 1991
1
Appeal From: D.Neb.
2
AFFIRMED.
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190 Conn. 36 (1983)
ROGER N. DEVINO
v.
MARY ANN DEVINO
(10776)
Supreme Court of Connecticut.
Argued March 4, 1983.
Decision released May 3, 1983.
PETERS, HEALEY, PARSKEY, SHEA and GRILLO, JS.
William F. Gallagher, with whom, on the brief, was Elizabeth A. Dorsey, for the appellant (plaintiff).
Jeremiah M. Keefe, for the appellee (defendant).
PER CURIAM.
In this action for dissolution of marriage, the issue is the alleged abuse of discretion in the trial court's financial awards to the former wife. The action was initiated by the plaintiff, Roger Devino, who sought a dissolution of his marriage to the defendant, Mary Ann Devino, on the ground of irretrievable breakdown. The defendant, in a cross complaint, acknowledged that the marriage between the parties had broken down irretrievably, but in addition charged the plaintiff with intolerable cruelty, and asked the court for an award of alimony, a division of assets, and other appropriate equitable relief. The trial court, after dissolving the marriage, ordered payment to the defendant of $75,000 in lump sum alimony, $250 weekly alimony for one year with modification precluded, and $5000 for counsel fees. The plaintiff was also ordered to transfer title to a 1978 Camaro automobile to the *37 defendant. The plaintiff's appeal challenges the propriety of the awards of alimony and of counsel fees.[1] We find no error.
There is no basis in the present record for us to conclude that the trial court abused its discretion in awarding the defendant lump sum alimony and periodic alimony. The plaintiff takes no issue with the manner in which the trial court arrived at its determination to award alimony, and does not directly challenge the finding that it was the plaintiff, because of his indifference and lack of cooperation and affection, who caused the marriage to break down irretrievably.[2] Although the marriage was of short duration, the plaintiff's considerable assets, which increased during the marriage to $450,000, and his weekly income of $1200, were factors for the court to take into account pursuant to General Statutes § 46b-82.[3] The defendant's finances, *38 by contrast, as revealed by her affidavit, demonstrated assets of $2000 and a weekly income of $200. The trial court's memorandum of decision sufficiently indicates that it considered the other appropriate statutory criteria, including the parties' age, health, station and needs. In these circumstances, we cannot say that the trial court could not reasonably conclude as it did. Sands v. Sands, 188 Conn. 98, 100-101, 448 A.2d 822 (1982); Tutalo v. Tutalo, 187 Conn. 249, 251-52, 445 A.2d 598 (1982); Jacobsen v. Jacobsen, 177 Conn. 259, 262-63, 413 A.2d 854 (1979).
For similar reasons, the trial court's award of counsel fees to the defendant did not constitute an abuse of discretion. The statutory criteria governing counsel fees are found in General Statutes §§ 46b-62 and 46b-82.[4] We have recently restated the principles by which these statutory criteria are to be applied. In Fitzgerald v. Fitzgerald, 190 Conn. 26, 33-34, 459 A.2d 498 (1983), we held that, in the exercise of a trial court's discretion regarding an award of counsel fees, "the availability of `sufficient cash' to pay one's attorney's fees is not an absolute litmus test .... [A] trial court's discretion should be guided so that its decision *39 regarding attorney's fees does not undermine its purpose in making any other financial award." See Venuti v. Venuti, 185 Conn. 156, 162, 440 A.2d 878 (1981); Arrigoni v. Arrigoni, 184 Conn. 513, 519, 440 A.2d 206 (1981). Taking into account the totality of the circumstances reflected in the financial awards as a whole, we cannot find that the trial court abused its discretion and acted unreasonably in granting the defendant's request for counsel fees. Although the alimony awarded to the defendant provided her with liquid assets, the trial court could reasonably have concluded that it wanted to preserve these assets for the defendant's use without the burden of the contested $5000 attorney's fees.
There is no error.
NOTES
[1] The transfer of the Camaro is not an issue in the present appeal.
[2] Although the husband suffered a brain tumor, which manifested itself two months after the parties were married, there was considerable evidence that, after his uneventful recovery from successful surgery for removal of the tumor, his conduct toward his wife was marked by excessive criticism, inquisitiveness and parsimony. He took out-of-state trips and asked her not to accompany him. He finally asked her to leave the family home, which he immediately proceeded to sell.
[3] "[General Statutes] Sec. 46b-82. (Formerly Sec. 46-52). ALIMONY. At the time of entering the decree, the superior court may order either of the parties to pay alimony to the other, in addition to or in lieu of an award pursuant to section 46b-81. The order may direct that security be given therefor on such terms as the court may deem desirable. In determining whether alimony shall be awarded, and the duration and amount of the award, the court shall hear the witnesses, if any, of each party, except as provided in subsection (a) of section 46b-51, shall consider the length of the marriage, the causes for the annulment, dissolution of the marriage or legal separation, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate and needs of each of the parties and the award, if any, which the court may make pursuant to section 46b-81, and, in the case of a parent to whom the custody of minor children has been awarded, the desirability of such parent's securing employment."
[4] "[General Statutes] Sec. 46b-62. (Formerly Sec. 46-59). ORDERS FOR PAYMENT OF ATTORNEY'S FEES IN CERTAIN ACTIONS. In any proceeding seeking relief under the provisions of this chapter and sections 17-323a, 17-323b, 45-162, 46b-1, 46b-6, 46b-204, 47-14g, 51-348a and 52-362, the court may order either spouse to pay the reasonable attorney's fees of the other in accordance with their respective financial abilities and the criteria set forth in section 46b-82. If, in any proceeding under this chapter and said sections, the court appoints an attorney for a minor child, the court may order the father or mother, or both, to pay the reasonable fees of the attorney or may order the payment of the attorney's fees in whole or in part from the estate of the child. If the child is receiving or has received state aid or care, the reasonable fees of the attorney, as determined by the court, not exceeding one hundred dollars, and any costs incurred which have been approved by the court may be paid from the appropriation of the judicial department."
General Statutes § 46b-82 is reproduced in footnote 3, supra.
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In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 04-1964
ABDELHADI HOR,
Petitioner,
v.
ALBERTO R. GONZALES,
Respondent.
____________
Petition to Review an Order of the
Board of Immigration Appeals.
A79-286-712
____________
ARGUED JUNE 10, 2005—DECIDED AUGUST 29, 2005
____________
Before FLAUM, Chief Judge, and POSNER and KANNE, Circuit
Judges.
POSNER, Circuit Judge. Abdelhadi Hor was ordered
removed from the United States after his claim of asylum
was denied. A motions panel of this court denied his motion
to stay his removal, on the ground that the probability that
he could persuade the merits panel to reverse the order of
removal was low. Hor v. Gonzales, 400 F.3d 482, 485-86 (7th
Cir. 2005). A merits panel, however, is authorized to
reexamine a ruling made by a motions panel. In re
HealthCare Compare Corp. Securities Litigation, 75 F.3d 276,
279-80 (7th Cir. 1996); Johnson v. Burken, 930 F.2d 1202,
1205 (7th Cir. 1991). We don’t know whether Hor has been
2 No. 04-1964
removed from this country as yet, but it makes no differ-
ence; the alien’s departure no longer moots his challenge
to a removal order. Lopez-Chavez v. Ashcroft, 383 F.3d 650,
651 (7th Cir. 2004); Patel v. Ashcroft, 378 F.3d 610, 612 (7th
Cir. 2004); Rife v. Ashcroft, 374 F.3d 606, 615 (8th Cir. 2004).
Hor is an Algerian with a technical background who
before coming to the United States on a visitor’s visa in 2000
was the chief information officer for a large government-
owned manufacturer. He was also an active member of the
FLN, the ruling political party of Algeria. In March of 2000
he was stopped at a roadblock set up by members of GIA
(Groupe islamique armé), the military wing of the radical
Islamic movement that is engaged in what amounts to a
civil war with the Algerian government. Ahmed v. Ashcroft,
348 F.3d 611, 614 (7th Cir. 2003); Debab v. INS, 163 F.3d 21,
23 (1st Cir. 1998); U.S. State Department, Country Report on
Algeria (2004); U.S. State Department, Report on Human
Rights Practices in Algeria (2005); U.S. State Department, Fact
Sheet on Foreign Terrorist Organizations (2005),
http://www.state.gov/s/ct/rls/fs/37191.htm; U.S. Central
Intelligence Agency, World Fact Book on Algeria (2005),
http://www.cia.gov/cia/publications/
factbook/geos/ag.html; Amnesty International, Algeria:
Asylum-Seekers Fleeing a Continuing Human Rights Crisis, June
2003, http:// web.amnesty.org/library/Index/
ENGMDE280072003. Taken at gunpoint before a leader
of the GIA, Hor was ordered to furnish the organization
with a list of active members of the FLN and with the
security plan of his employer. He was released after promis-
ing to comply. He didn’t comply, but instead reported the
incident forthwith to the Algerian military, which told him
that it couldn’t protect everyone threatened by the
GIA—even an army veteran, as Hor was. It gave him some
advice on how to avoid falling into the GIA’s clutches.
No. 04-1964 3
Five months later, Hor was stopped at another GIA
roadblock. Armed men ordered him to lie down on the
ground and told him they were going to execute him on
the spot in retaliation for his having failed to supply the
GIA with the promised information. Hor’s uncle, like him
an active member of the FLN, had been killed just this way
a year earlier. But the police had received a tip about the
roadblock, arrived just in time, killed two of the armed men,
and saved Hor. Shortly afterwards, following a visit to a
psychiatrist who diagnosed Hor as suffering from post-
traumatic stress syndrome, and also following the issuance
of a “decision” by an Algerian court that “recommend[ed]
that [Hor] should be extra cautious and keep low profile,”
Hor left Algeria for the United States.
He claims that he was persecuted in Algeria on account of
his political activity and is at high risk of further persecu-
tion if he returns. His testimony, if believed, established
persecution. Compare INS v. Elias-Zacarias, 502 U.S. 478,
481-83 (1992); Ahmed v. Ashcroft, supra, 348 F.3d at 614-16.
The immigration judge, seconded by the Board of Immigra-
tion Appeals, rejected the claim. The judge believed Hor’s
testimony about “his involvement with the political
party, and his genuine fear of harm,” but not about his
encounters with the GIA. The judge didn’t think the GIA
would have allowed five months to elapse from the first
encounter before trying to kill Hor for breaking his promise
to give the group information: “the Court [i.e., the immigra-
tion judge] believes they would have approached the
respondent or harmed the respondent long before five
months have passed.” The judge also didn’t believe that,
given Hor’s status as a veteran and the sensitive information
he possessed because of his job, the Algerian military would
have refused to protect him against the GIA; or that the GIA
could have known that the second roadblock would inter-
4 No. 04-1964
cept him, because he was traveling to a seminar when he
was stopped rather than to or from work. The judge thought
that if Hor’s story were true, the GIA would have killed
members of Hor’s family in revenge, which it has not done.
He noted further that Hor had failed to submit newspaper
accounts or other documentary records of the shoot-out at
the second roadblock. He also thought it suspicious that the
psychiatrist’s report did not mention the cause of Hor’s
post-traumatic stress syndrome. He could “not fully
comprehend the purpose of the [Algerian] Court decision
recommending that the respondent be extra cautious and
keep a low profile. The respondent himself was fully aware
that he should keep a low profile and be very cautious,
and he did not need the Court to tell him that he should
be cautious.”
The judge thought that in any event Hor lacked a well-
founded fear of further persecution should he be returned
to Algeria because he “was not harmed for five months
by the GIA after he had promised them to provide the
information requested,” and “when he needed help, he was
able to go to his Government and seek their assistance”—
assistance that included the killing of the two assailants
at the second roadblock. He was also “able to seek assis-
tance from a Court in Algeria.”
It is conceivable that the evidence on which the immigra-
tion judge based his determination that Hor was exaggerat-
ing his persecution by the GIA really does show this, but
that would depend on a knowledge of conditions in Algeria
nowhere indicated in the opinion, a common failing in
asylum adjudications. Iao v. Gonzales, 400 F.3d 530, 533-
34 (7th Cir. 2005). It is hardly self-evident that the GIA never
allows five months to elapse before mounting an assault
against someone who has refused to play ball with it. The
group would have needed some time to realize that Hor
No. 04-1964 5
was not going to furnish the promised information, and
more time to organize an assault with a fair chance of
success. It would be no surprise, either, if the GIA had
penetrated the company where Hor worked and learned
from its mole where Hor would be on the day they tried
to kill him.
Algeria has a censored press, and the immigration judge
offered no reason for believing that the incident at the
second roadblock would have been allowed to be reported,
or even that it had been witnessed, other than by the
participants—the police, the GIA thugs, and Hor—all of
whom might well have decided against reporting the
incident to the media. And again one would have to know
a lot about Algeria and the GIA to know whether the failure
to seek revenge against members of Hor’s family, none of
whom was active in the FLN, as he had been, would be out
of character.
That a psychiatrist would not mention a terrorist inci-
dent in a psychiatric diagnosis seems hardly anomalous;
and the authenticity of the admittedly quite strange judicial
decision is not challenged. In short, there is no rea-
soned basis for the immigration judge’s conclusion, which
was based not on Hor’s demeanor on the stand but on
the unsubstantiated conjectures, summarized above, on
which the judge based his assessment of Hor’s credibility.
Such a decision cannot stand. Mamedov v. Ashcroft, 387 F.3d
918, 919 (7th Cir. 2004); Guchshenkov v. Ashcroft, 366 F.3d
554, 558 (7th Cir. 2004); Cordero-Trejo v. INS, 40 F.3d 482,
485 (1st Cir. 1994); Jara-Navarrete v. INS, 813 F.2d 1340,
1344 (9th Cir. 1986).
The government points to the recently enacted REAL ID
Act of 2005, which provides that “no court shall reverse
a determination made by a trier of fact [in a removal
case] with respect to the availability of corroborating
6 No. 04-1964
evidence . . . unless the court finds . . . that a reasonable trier
of fact is compelled to conclude that such corroborating
evidence is unavailable.” 8 U.S.C. § 1252(b)(4). All that this
means is that an immigration judge’s determination that if
there were evidence to corroborate the alien’s testimony the
alien could and should have presented it is entitled to
reasonable deference. The precondition to deference is that
the immigration judge explain (unless it is obvious) why he
thinks corroborating evidence, if it existed, would have been
available to the alien. Gontcharova v. Ashcroft, 384 F.3d 873,
877 (7th Cir. 2004); Zheng v. Gonzales, 409 F.3d 804, 810 (7th
Cir. 2005); Eta-Ndu v. Gonzales, 411 F.3d 977, 984 (8th Cir.
2005); Abdulai v. Ashcroft, 239 F.3d 542, 554 (3d Cir. 2001);
Diallo v. INS, 232 F.3d 279, 287 (2d Cir. 2000).
The judge criticized Hor’s failure to provide newspaper
articles, or affidavits from his co-workers, to corroborate his
story of the roadblock and the gun battle, and also Hor’s
failure to submit the documents he had filed with the
Algerian court in order to obtain that odd court order. The
judge concluded that “some of these incidents which are
central to the respondent’s claim either have been exagger-
ated or have not been supported by corroborating evidence
when it was available and could have been obtained.” But
the immigration judge offered no explanation for thinking
that this documentation had been available to Hor. It seems
unlikely that Hor’s co-workers, who surely have a healthy
respect for the murderous potential of the GIA, would
submit affidavits to the U.S. immigration authorities. Nor is
it obvious that Algeria—a military dictatorship in
2000—would have permitted newspaper articles about
terrorist attacks. Nor is there any apparent reason to doubt
that Hor does not have copies of the documents he filed
with the Algerian court. The notion that documentation is
as regular, multicopied, and ubiquitous in disordered
No. 04-1964 7
nations as in the United States, a notion that crops up
frequently in decisions by immigration judges, see, e.g., Iao
v. Gonzales, supra, 400 F.3d at 534; Gontcharova v. Ashcroft,
supra, 384 F.3d at 877-78; Muhur v. Ashcroft, 355 F.3d 958,
959-60 (7th Cir. 2004); Mulanga v. Ashcroft, 349 F.3d 123,
134 (3d Cir. 2003); Qiu v. Ashcroft, 329 F.3d 140, 153 (2d Cir.
2003), is unrealistic concerning conditions actually prevail-
ing in the Third World. To be entitled to deference, a
determination of availability must rest on more than
implausible assertion backed up by no facts.
At argument the government’s lawyer told us that if
Hor is entitled to asylum, so is the entire population of
Algeria. For he was a supporter of the government and
presumably the Algerian population consists largely,
though doubtless not entirely, of people who support either
the government, and so on Hor’s account are persecuted by
the GIA, or the Islamic radicals, who maybe are persecuted
by the government. But this is a considerable exaggeration.
Hor was persecuted by the GIA because he was an FLN
activist with access, by virtue of his job as chief information
officer of a large manufacturer, to a security plan that the
GIA could use to destructive ends. We do not know how
many Algerians are in a position similar to Hor’s—an FLN
activist with access to information prized by the GIA.
Perhaps few. Fewer still, presumably, are those who, like
Hor, having information prized by the GIA and having been
coerced into promising to supply it to the GIA, became
marked for death when they break their promise.
What is true is that nongovernmental persecution is much
less common than governmental persecution. You cannot
even claim asylum on the basis of persecution by a private
group unless the government either condones it or is
helpless to prevent it, but if either of those conditions is
satisfied, the claim is a good one. As explained in Balogun v.
8 No. 04-1964
Ashcroft, 374 F.3d 492, 499 n. 8 (7th Cir. 2004),
“ ‘[P]ersecution cognizable under the Act can emanate
from sections of the population that do not accept the
laws of the country at issue, sections that the government of
that country is either unable or unwilling to control.’ Borja
v. INS, 175 F.3d 732, 735 n. 1 (9th Cir. 1999) (en banc); see also
Chitay-Pirir v. INS, 169 F.3d 1079, 1081 (7th Cir. 1999); Sotelo-
Aquije v. Slattery, 17 F.3d 33, 37 (2d Cir. 1994) (’[T]he statute
protects against persecution not only by government forces
but also by nongovernmental groups that the government
cannot control.’); Bartesaghi-Lay v. INS, 9 F.3d 819, 822 (10th
Cir. 1993) (‘[I]t is apparently agreed that the possible
persecution to be established by an alien in order for him to
be eligible for asylum may come from a non-government
agency which the government is unwilling or unable to
control.’).” See also Guchshenkov v. Ashcroft, supra, 366 F.3d
at 557; Bace v. Ashcroft, 352 F.3d 1133, 1138-39 (7th Cir. 2003);
Al-Fara v. Gonzales, 404 F.3d 733, 739 (3d Cir. 2005); Lopez-
Soto v. Ashcroft, 383 F.3d 228, 234 (4th Cir. 2004); Andriasian
v. INS, 180 F.3d 1033, 1042-43 (9th Cir. 1999); Rosa v. INS,
440 F.2d 100, 102 (1st Cir. 1971). The Board of Immigration
Appeals so acknowledged more than thirty years ago. In re
Tan, 12 I. & N. Dec. 564, 568 (BIA 1967).
And here the response of the Algerian military to Hor’s
request for protection, and the curious judicial decision,
play a decisive role in our consideration of Hor’s peti-
tion. The fact that the military was unable to protect a
military veteran, and, even more, the fact that all a court
could offer Hor in the way of protection was advice to
maintain a low profile, is strong evidence that the govern-
ment of Algeria is indeed incapable of protecting Hor.
(There is corroboration in reputable-seeming reports on
conditions in Algeria. U.S. State Department, Patterns of
Global Terrorism, Appendix B, Background Information on
No. 04-1964 9
Designated Foreign Terrorist Organizations (2004), http://
www.state.gov /s/ct/rls/pgtrpt/2003/31711.htm; Human
Rights Watch, World Report: Middle East and Northern Africa
Overview (2003), http://www. hrw.org/wr2k3/
mideast.html; Amnesty International, Report on Algeria
(2002), http://web.amnesty.org/web/ ar2002.nsf/ mde/
algeria; Amnesty International, Algeria—Civilian Popula-
tion Caught in a Spiral of Violence, Nov. 1997, http://
web.amnesty.org/library/Index/engMDE280231997.)
The military and the court told Hor in effect: you’ll have
to protect yourself; we can’t protect you. A person
who cannot obtain official protection against persecution on
account of his politics (as here), or some other recognized
ground for asylum, by a rebel or terrorist group has a solid
claim for asylum. Balogun v. Ashcroft, supra, 374 F.3d at 499
n. 8; Chitay-Pirir v. INS, supra, 169 F.3d at 1081; Ochoa v.
Gonzales, 406 F.3d 1166, 1170 (9th Cir. 2005); Yan Lan Wu v.
Ashcroft, 393 F.3d 418, 423 (3d Cir. 2005); Estrada-Escobar v.
Ashcroft, 376 F.3d 1042, 1046 (10th Cir. 2004). That appears
to be Hor’s situation, though further proceedings may cast
it in a different light. We do not rule that Hor is entitled to
asylum, but only that the Board’s decision is not supported
by substantial evidence. The petition for review is therefore
granted and the case remanded to the Board for further
proceedings consistent with this opinion.
10 No. 04-1964
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—8-29-05
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F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
OCT 28 1998
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
JIM R. HOUSLEY,
Plaintiff-Appellant,
v. No. 98-6022
(D.C. No. 97-CV-1532)
LARRY BURROWS, Sheriff of (W.D. Okla.)
Washita County; ALFRED MILLER,
Washita County Commissioner;
GENE ETRIS, Washita County
Commissioner; FRANK HOHKE,
Washita County Commissioner;
BOBBY BOONE, Warden of MACC,
Defendants-Appellees,
and
DWAYNE MCFARLIN; CHARLIE
CARLTON; CARL MCBEE; CHIEF
REED, Head of Arkansas Highway
Patrol; OFFICER HUMPHRIES,
Highway Patrol Officer; THE
LIVING WORLD CHURCH; TOM
BRYANT; JOHN DOE, Director,
Energy; JOHN DOE, Officer at Hope
Arkansas; J. D. BIGGS, Dispatcher at
Marion County Sheriff’s Office;
OFFICER STAUBAH; LARRY
WILLIAMS; LEWIS FLOWERS;
SID COOKERLY,
Defendants.
ORDER AND JUDGMENT *
Before BRORBY , BRISCOE , and LUCERO , Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The case is therefore
ordered submitted without oral argument.
Plaintiff Jim R. Housley appeals from the district court’s dismissal of his
civil rights action filed pursuant to 42 U.S.C. § 1983. 1
Because we conclude the
appeal is frivolous, we dismiss the appeal.
Plaintiff commenced this civil rights action in the United States District
Court for the Eastern District of Oklahoma, alleging that defendants Larry
Burrows, Alfred Miller, Gene Etris, and Frank Hohke, the Sheriff and
Commissioners of Washita County, Oklahoma, violated his Eighth and Fourteenth
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
1
Plaintiff proceeded in the district court in forma pauperis. After the district
court denied leave to appeal in forma pauperis, he paid the filing fee.
-2-
Amendment rights by denying him access to a law library and physical exercise
during his incarceration in the Washita County jail. He also alleged that
defendant Bobby Boone, the warden of the Mack Alford Correctional Center in
Stringtown, Oklahoma denied him access to a law library. The district court
dismissed the action against the Washita County defendants as barred by the
statute of limitations. It dismissed the action against Boone as without merit.
Plaintiff appealed only the district court’s dismissal of his claims against the
Washita County defendants. See Housley v. Burrows , No. 95-7088, 1996 WL
293828, at **1 & n.1 (10th Cir. June 4, 1996) (unpublished order and judgment).
This court reversed and remanded for further proceedings on the claims against
those defendants. See id. at **2.
On remand, plaintiff filed three amended complaints naming additional
defendants and adding claims for, among other things, malicious prosecution and
false imprisonment. The district court struck the first two amended complaints as
the named defendants resided in Arkansas. Because the remanded claims and the
new claims in the third amended complaint concerned defendants who resided in
Washita County, which is in the Western District of Oklahoma, and all of the acts
complained of occurred in that district, the district court for the Eastern District
determined that proper venue was in the Western District and transferred the case
to that district.
-3-
Once transferred, the magistrate judge for the Western District
recommended that the case be dismissed for several reasons. First, he determined
that the original complaint and the third amended complaint were meritless and
legally frivolous. Second, he recognized that plaintiff was subject to in forma
pauperis filing restrictions in the Western District. See Housley v. Williams , Nos.
92-6110, 92-6113, 92-6190, 92-6189, 92-6119, 92-6212, 92-6115, 92-6191,
1993 WL 76250, at **3 n.8 (10th Cir. Mar. 12, 1993) (unpublished order and
judgment) (affirming filing restrictions); see also Housley v. Rowe , No. 94-6329,
1995 WL 94458, at **1 (10th Cir. Feb. 28, 1995) (unpublished order and
judgment) (recognizing this plaintiff’s abusive and lengthy litigation history and
restrictions imposed on his filing of pro se actions). The magistrate judge found
that plaintiff brought this frivolous and malicious action in the Eastern District to
circumvent those filing restrictions. Finally, the magistrate judge found that
plaintiff had failed to notify the court that he is no longer indigent.
Upon de novo review, the district court adopted the magistrate judge’s
findings and recommendations, except for the finding that plaintiff is no longer
indigent, and dismissed the action. The district court emphasized that plaintiff
abused the privilege of filing suits in forma pauperis and that he filed this suit in
the Eastern District to avoid the filing restrictions imposed in the Western
District. Further, the court noted that plaintiff abandoned the claims upon which
-4-
this court had remanded the case. The district court deemed the abandonment to
be a tacit admission that the claims lacked merit, again showing plaintiff’s abuse
of the litigation process.
On appeal, plaintiff continues to raise the same arguments he raised in the
district court. 2
Additionally, he argues that he did not violate the filing
restrictions or bring this case in bad faith, because he filed the action when he
was a prisoner confined in the Eastern District. He also challenges the striking of
his first two amended complaints.
All of plaintiff’s arguments on appeal are vague and conclusory, including
his argument that he did not violate the filing restrictions. For substantially the
reasons stated in the magistrate judge’s findings and recommendation filed
October 28, 1997, and the district court’s order filed December 30, 1997, we
agree that plaintiff abused the litigation process and circumvented the filing
restrictions. Neither our previous remand nor any actions by the Eastern District
precluded the Western District from dismissing plaintiff’s complaint for failing to
follow the filing restrictions of the Western District, where the case should have
been filed initially. See Housley v. Boone , No. 94-6026, 1994 WL 699172, at **1
2
For the first time on appeal, he also argues that, while he was incarcerated
in the Washita County jail, he suffered an allergic reaction when he was sprayed
with bug spray and he was forced to endure second hand smoke from other
inmates. We refuse to consider these newly raised arguments. See Lyons v.
Jefferson Bank & Trust , 994 F.2d 716, 720-21 (10th Cir. 1993).
-5-
& n.3 (10th Cir. Dec. 14, 1994) (unpublished order and judgment) (“[T]he Eastern
District’s [grant of leave to proceed in forma pauperis prior to transfer of the
action did] not preclude the Western District from dismissing the [habeas]
petition for failure to follow filing requirements. Housley was required to follow
the valid restrictions imposed by the jurisdiction in which his action properly
should have been filed.”). To the extent plaintiff seeks to challenge the transfer
of the action from the Eastern to the Western District or the striking of the two
amended complaints, it appears that he waived these arguments in the district
court and, in any event, they are without merit.
Accordingly, we conclude this appeal is frivolous under 28 U.S.C.
§ 1915(e)(2)(B)(i). The appeal is therefore DISMISSED. Plaintiff’s motion for
enforcement of remand is DENIED as moot. The mandate shall issue forthwith.
Entered for the Court
Carlos F. Lucero
Circuit Judge
-6-
Attachment not available electronically.
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59 F.3d 168NOTICE: 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.
Samuel James USSERY, Petitioner-Appellant,v.Charles HILL, Superintendent of Odom CorrectionalInstitution, Respondent-Appellee.
No. 95-6312.
United States Court of Appeals, Fourth Circuit.
Submitted May 18, 1995.Decided June 26, 1995.
Samuel James Ussery, Appellant Pro Se. Richard Norwood League, OFFICE OF THE ATTORNEY GENERAL OF NORTH CAROLINA, Raleigh, NC, for Appellee.
Before NIEMEYER and WILLIAMS, Circuit Judges, and BUTZNER, Senior Circuit Judge.
PER CURIAM:
1
Appellant seeks to appeal the district court's order dismissing his 28 U.S.C. Sec. 2254 (1988) petition. Appellant's case was referred to a magistrate judge pursuant to 28 U.S.C. Sec. 636(b)(1)(B) (1988). The magistrate judge recommended that relief be denied and advised Appellant that failure to file timely objections to this recommendation could waive appellate review of a district court order based upon the recommendation. Despite this warning, Appellant failed to object to the magistrate judge's recommendation.
2
The timely filing of objections to a magistrate judge's recommendation is necessary to preserve appellate review of the substance of that recommendation when the parties have been warned that failure to object will waive appellate review. Wright v. Collins, 766 F.2d 841, 845-46 (4th Cir.1985). See generally Thomas v. Arn, 474 U.S. 140 (1985). Appellant has waived appellate review by failing to file objections after receiving proper notice. We accordingly deny a certificate of probable cause to appeal and dismiss the appeal. We dispense with oral argument because the facts and legal contentions are adequately presented in the materials before the court and argument would not aid the decisional process.*
DISMISSED
*
We also deny Appellant's motion to appoint counsel
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In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 14-2405
WILLIAM H. SILK,
Plaintiff-Appellant,
v.
BOARD OF TRUSTEES, MORAINE VALLEY COMMUNITY COLLEGE,
DISTRICT NO. 524,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 12 C 01425 — John J. Tharp, Jr., Judge.
____________________
ARGUED FEBRUARY 12, 2015 — DECIDED JULY 30, 2015
____________________
Before EASTERBROOK, KANNE, and HAMILTON, Circuit
Judges.
KANNE, Circuit Judge. William H. Silk was an adjunct pro-
fessor at Moraine Valley Community College. Silk under-
went heart surgery in April of 2010. During the following
semesters, Silk’s teaching course load was reduced, and his
employment was ultimately terminated. Silk filed suit
against the College alleging violations of the Americans with
2 No. 14-2405
Disabilities Act (“ADA”) and the Age Discrimination in Em-
ployment Act (“ADEA”). The district court granted sum-
mary judgment for the College on all claims. For the reasons
below, we affirm in part and reverse in part.
I. BACKGROUND
A. Factual History
Silk began working in 1986 at Moraine Valley Communi-
ty College in Illinois as an adjunct professor. Adjunct profes-
sors are part-time, non-tenure track, at-will employees. They
are represented by the Cook County Teachers Union and
covered by a collective bargaining agreement. Silk’s typical
teaching load included four courses during the fall and
spring semesters and two or three classes during the sum-
mer.
Walter Fronczek was the dean of the Department of Lib-
eral Arts during the relevant period. The dean had ultimate
supervisory authority over the faculty in the Department of
Liberal Arts. Fronczek was on medical leave for much of the
spring 2010 semester. Lisa Kelsay, who was the assistant
dean of the Department of Liberal Arts, served as the acting
dean during that time. Aileen Donnersberger was a full-time
faculty member and the chair of the Social Sciences Depart-
ment (a branch of Liberal Arts) through the spring of 2010.
Ricky Cobb temporarily replaced Donnersberger as chair in
the fall of 2010, when she took sabbatical leave.
Donnersberger testified that, as department chair, she
was responsible for organizing the course assignments for
adjunct professors. Typically, mid-way (or so) through the
semester, she would send a form asking the adjuncts to state
which courses they would be interested in teaching during
No. 14-2405 3
the following semester. She would collect their responses
and develop a tentative schedule.
Donnersberger did not have final approval over the pro-
posed staffing—she would send her suggestions to the dean
of Liberal Arts. Kelsay testified that the dean would typically
defer to the department chair’s recommendations. After the
dean’s approval, the schedule would remain open to any
changes (necessitated by staffing issues or student enroll-
ment) until shortly before the start of the semester. Donners-
berger testified that the typical protocol of the College was to
finalize written contracts with the adjuncts one or two weeks
prior to the start of the semester.
In March 2010, Donnersberger sent Silk an offer to teach
two sociology courses during the upcoming summer term,
which Silk accepted. Beginning on April 19, 2010, however,
Silk took a medical leave of absence to undergo heart sur-
gery. He needed a triple bypass. This surgery was completed
on April 21, and Silk was discharged from the hospital on
April 26. Silk was on medical leave through the remainder of
the spring semester, and the record evidence suggests that
Silk did not inform the College of any anticipated return
date.
Because the remainder of Silk’s spring 2010 courses
would need to be covered by other faculty during his ab-
sence, Fronczek and Donnersberger visited those classes to
inform students of the change and to collect information for
the incoming instructors. During those visits, they discov-
ered several issues that they considered troubling. The stu-
dents in at least one class expressed concerns that they had
been given only one graded assignment (a quiz) during the
semester. In addition, the classes suffered from low student
4 No. 14-2405
attendance. Moreover, Fronczek and Donnersberger became
aware of problems with the syllabi for the courses: Fronczek
characterized the syllabi as “inadequate,” and Donners-
berger noted that in at least one class, the textbook refer-
enced in the syllabus was not the book actually being used in
the course.
By late April, Silk had not yet returned from leave and
had not notified the College of a possible return date. Don-
nersberger testified that she became concerned about cover-
age for Silk’s assigned summer school courses, because the
summer session typically began in mid-May. Donnersberger
testified that “by the time of April, I had to then—when he
was not back yet, I had to find someone to cover his summer
classes because it was already the end of April, and we were
starting in two weeks for the summer … I then looked for
someone else to teach those classes that were scheduled.”
Kelsay likewise testified that she, Donnersberger, or both de-
termined that Silk should not be assigned summer classes,
since they did not know when he would return. His courses
were reassigned to other instructors.
In early May, Silk attempted to contact Donnersberger
regarding his summer assignments, but he mistakenly sent
the email to another College employee with the same last
name. On May 5, 2010, Kelsay instructed Silk that before re-
turning for work, he needed to provide the College with a
doctor’s medical release. She also testified that she informed
Silk that his summer classes had been reassigned to another
instructor because the College did not know how long his
medical leave would last.
Silk received his medical release on May 10, and he pro-
vided it to the College on May 12. Silk testified that he want-
No. 14-2405 5
ed to maintain his summer school course assignment, alt-
hough the record is unclear as to whether (and if so, when)
Silk communicated that desire to the College. Donnersberger
testified that by the time she received Silk’s medical release,
she had already reassigned the summer school courses.
Fronczek testified that he had nothing to do with the deci-
sion to reassign the summer courses, as he was on medical
leave. On May 17, Silk sent Donnersberger an email stating
that he was ready to resume teaching and would be able to
take on a full course schedule for the fall 2010 semester.
Fronczek, after returning from his medical leave, sched-
uled a July 15 meeting with Silk to discuss the issues that
Donnersberger and Fronczek had discovered with Silk’s syl-
labi. Silk, Fronczek, Donnersberger, and Cobb participated in
the meeting, and Silk’s union steward Donald Stewart at-
tended to observe. Fronczek informed Silk that his syllabi
contained inaccurate course objectives, no contact infor-
mation, and no group exercises; in short, none of the ele-
ments that Fronczek considered the makings of “a solid
class.” In addition, Fronczek noted that Silk was not using
the correct textbook. Fronczek testified that he perceived Silk
to be argumentative and uncooperative during this meeting.
Fronczek testified that he decided on July 15 that Silk
should be assigned no more than two courses for the fall
2010 semester, because Fronczek was concerned about Silk’s
teaching performance. Silk, however, had a different under-
standing of why Fronczek wanted to assign him fewer
courses than normal. Silk testified that at the July 15 meet-
ing, Donnersberger stated that “we” assigned Silk only two
classes in the fall because “we didn’t think [he was] physical-
ly capable of handling them.” Donnersberger testified that
6 No. 14-2405
there was no discussion of Silk’s course assignments at that
meeting.
Silk was assigned two courses for the fall 2010 semester.
At the beginning of the semester, Fronczek and Cobb deter-
mined that they would each observe one of Silk’s classes.
Fronczek did so on October 15, 2010. Silk testified that
Fronczek entered the classroom late and interrupted Silk
during an exchange with a student. Fronczek noted that only
seven out of twenty-eight enrolled students were in attend-
ance, and that few were paying attention, taking notes, or
participating. He witnessed several students talking on their
cellphones, playing video games, and talking amongst them-
selves.
Fronczek had many criticisms of Silk’s performance, in-
cluding Silk’s over-relying on his notes; providing misinfor-
mation; improperly citing sourceless statistics; not asking
questions of the students; and appearing to base his lecture
largely on personal experiences. Fronczek testified that after
he left the class, several students approached him in the
hallway to discuss the poor quality of Silk’s instruction. After
speaking with them, Fronczek gave the students his business
card and told them to contact him if they had any further
concerns.
Cobb also attended one of Silk’s classes and reported
findings similar to Fronczek’s. He stated that “Silk’s class-
room performance was below-average and not to the stand-
ards of the Social Sciences Department. Sadly, I consider it
one of the poorest exhibitions of instruction I have witnessed
at the collegiate level. I do not believe learning was taking
place in that classroom.” Neither Fronczek nor Cobb made a
No. 14-2405 7
written report of their evaluations at that time, and they did
not share this feedback with Silk.
Fronczek testified that, at that point, he decided to fire
Silk. On November 17, Fronczek instructed the College’s
human resources director to place Silk on the “do-not-hire
list.” Various College personnel testified that this list is
maintained by the College and includes the names of prior
instructors who the College had determined should not be
rehired. On November 18, Fronczek informed Silk that there
would be no classes “available” for him in subsequent se-
mesters.
In mid-December, a number of students from one of
Silk’s courses filed a complaint with the College (and met
with Fronczek) regarding Silk’s instruction. Among other
complaints, they stated that Silk had given every student
identical comments and the same grade on an essay assign-
ment. Fronczek reviewed the assignments, and he adjusted
all of the students’ grades upward.
Because Silk had been informed that no further courses
would be available for him in Liberal Arts (and presumably
because he was not informed that his name had been added
to the do-not-hire list), he approached the dean of the Career
Programs Department seeking work. He was ultimately as-
signed to teach two criminal justice courses in that depart-
ment during the spring semester of 2011.
Fronczek happened to see Silk on campus in January
2011. Fronczek subsequently contacted the College’s human
resources director to ask how Silk had been rehired, despite
being on the do-not-hire list. He also called Peggy Machon,
dean of the Career Programs Department, to describe his ex-
8 No. 14-2405
periences with Silk. Also in January 2011, Silk filed an EEOC
complaint alleging that his Liberal Arts course load had been
reduced, and ultimately eliminated, because of age and dis-
ability-based discrimination.
Sometime in January, the College’s president, Dr. Vernon
Crawley, also became aware that Silk had been rehired.
Crawley instructed Machon to observe one of Silk’s classes.
After doing so, Machon reported that several students left
immediately after attendance was taken, and others worked
on other coursework during class. She also stated that Silk
read from the textbook for an extended period of time and
used no interactive techniques or instructional aides. She
submitted to Crawley a written report of her evaluation.
Crawley instructed Machon to fire Silk. Machon sent Silk a
letter notifying him that his employment was terminated,
effective February 14, 2011.
B. Procedural History
Silk filed this federal lawsuit against the College on Feb-
ruary 8, 2012, alleging discrimination based on age and dis-
ability in violation of the ADEA and the ADA. Silk alleges
that he suffered four adverse employment actions as a result
of age- and disability-based discrimination: (1) the College
“unlawfully rescinded” his summer 2010 course assign-
ments; (2) the College curtailed his fall 2010 course assign-
ments; (3) the College unlawfully terminated his employ-
ment by putting him on the do-not-hire list (or eliminating
his courses in the Department of Liberal Arts); and (4) the
College unlawfully terminated him from teaching in the Ca-
reer Programs Department. Silk also alleges that the College
unlawfully retaliated against him, in violation of both the
ADA and ADEA, for having filed an EEOC complaint.
No. 14-2405 9
The College moved for summary judgment on all of Silk’s
claims. The district court granted the motion in its entirety,
and Silk appeals.
II. ANALYSIS
We review de novo the grant of summary judgment, “re-
viewing the record and the inferences drawn from it in the
light most favorable to the nonmoving party.” Grayson v. City
of Chicago, 317 F.3d 745, 749 (7th Cir. 2003). Summary judg-
ment is appropriate when “the movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
A. The ADA Claims
1. Governing Standard for ADA Claims
We begin with the Supreme Court’s 1989 plurality deci-
sion in the Title VII case, Price Waterhouse v. Hopkins, 490 U.S.
228 (1989). That case involved what has come to be known as
a “mixed-motives” discrimination claim. In a mixed-motives
claim, an employer is alleged to have used both discrimina-
tory and legitimate grounds in taking an adverse employ-
ment action against an employee. The question presented
was whether such a mixed-motive action could violate Title
VII.
The Court concluded that it could. Price Waterhouse, 490
U.S. at 241. In other words, to violate Title VII, a discrimina-
tory motive need not be the sole basis for an employer’s ad-
verse employment action. In 1991, Congress amended Title
VII to add statutory language making clear that the statute
permitted such mixed-motive claims. But, at the same time,
Congress limited the relief available to mixed-motive plain-
tiffs.
10 No. 14-2405
In the wake of Price Waterhouse, we (along with other cir-
cuits) allowed mixed-motive cases to be brought under other
anti-discrimination statutes such as the ADA, for example.
See Serwatka v. Rockwell Automation, Inc., 591 F.3d 957, 959
(7th Cir. 2010) (collecting cases). But in 2009, the Supreme
Court decided Gross v. FBL Fin. Servs., Inc., 557 U.S. 167
(2009). In that case, the Court held that because the ADEA
lacked the language found in Title VII expressly authorizing
mixed-motive claims (the language added following Price
Waterhouse), mixed-motive claims were not authorized under
the ADEA. Gross, 557 U.S. at 173.
In light of Gross, we revisited our mixed-motive jurispru-
dence in Serwatka. In that case, we determined that because
the ADA, like the ADEA, did not include language compa-
rable to Title VII’s expressly authorizing mixed-motive
claims, those claims were not authorized under the ADA.
Serwatka, 591 F.3d at 962–63. We therefore concluded that in
order to satisfy the “because of” standard expressed by the
statute, a plaintiff would have to prove that his disability
was the but-for cause of his adverse employment action. Id;
see 42 U.S.C. § 12112(a) (“no covered entity shall discriminate
against a qualified individual because of disability”)
(amended 2008).
But, in a final wrinkle, Congress enacted significant
amendments to the ADA in 2008. As relevant here, the lan-
guage prohibiting discrimination “because of” a disability
was amended to prohibit discrimination “on the basis of” a
disability. 42 U.S.C. § 12112(a). Although Serwatka was ar-
gued after the relevant ADA amendment, the pre-
amendment law was in effect at the time of the Serwatka de-
fendant’s alleged violations. So we analyzed that case using
No. 14-2405 11
the “because of” and not the “on the basis of” language that
the statute now provides.
We noted in Serwatka, however, that because the post-
amendment ADA was not at issue, “[w]hether ‘on the basis
of’ means anything different from ‘because of,’ and whether
this or any other revision to the statute matters in terms of
the viability of a mixed-motive claim under the ADA, are not
questions that we need to consider in this appeal.” Serwatka,
591 F.3d at 961 n.1. So it is an open question whether the but-
for standard we announced in Serwatka survived the
amendment to the ADA.
Numerous district courts have noted the same uncertain-
ty we identified in Serwatka. And while the College raises the
question of whether Serwatka’s rule applies post-
amendment—i.e., whether the “on the basis of” language
changes the analysis—it does so in a cursory footnote and
without any briefing. Silk offers no meaningful guidance in
his reply brief. Without the benefit of adequate briefing on
the issue, we will not resolve this important question. Be-
cause Silk argues that his claims succeed even under the but-
for standard announced in Serwatka, we apply that standard
here. We reserve resolution of this question for a case in
which the issue is squarely before us and adequately briefed.
2. Establishing the ADA’s Applicability
The ADA provides that “no covered entity shall discrim-
inate against a qualified individual on the basis of disabil-
ity.” 42 U.S.C. § 12112(a). Disability is defined as (a) a physi-
cal or mental impairment that substantially limits one or
more major life activities of such individual; (b) a record of
such impairment; or (c) being regarded as having such an
12 No. 14-2405
impairment. 42 U.S.C. § 12102(1). In order to succeed on his
claim, Silk must provide sufficient evidence “from which a
reasonable jury could conclude that he was an individual
with a disability within the meaning of the statute.” Miller v.
Ill. Dept. of Transp., 643 F.3d 190, 195 (7th Cir. 2011).
Silk raises his claims under prong (c)—he contends that
the College regarded him as having an impairment. In satis-
fying the “regarded as” prong, Silk must show that the Col-
lege perceived him as having an impairment, “whether or
not the impairment limits or is perceived to limit a major life
activity.” 42 U.S.C. § 12102(3)(A).
The “regarded as” prong does not apply, however, “to
impairments that are transitory and minor. The statute speci-
fies that a transitory impairment is one “with an actual or
expected duration of 6 months or less.” 42 U.S.C.
§ 12102(3)(B). The statute does not define what constitutes a
“minor” impairment.
In an effort to head Silk off at the pass, the College argues
that Silk’s impairment qualifies as both transitory and minor,
and thus that Silk is not covered by the ADA. This would
block Silk’s claims from the outset. In raising this argument,
the College bears the burden of establishing that the im-
pairment was both transitory and minor. In addition, the
College “may not defeat ‘regarded as’ coverage of an indi-
vidual simply by demonstrating that it subjectively believed
the impairment was transitory and minor.” 29 C.F.R.
§ 1630.15(f). Instead, the standard is an objective one: the
College must prove that the perceived impairment actually
was transitory and minor. Id.
No. 14-2405 13
We agree with the district court that the College has not
demonstrated that Silk’s impairment was both transitory and
minor. Absent a more precise definition from Silk, we as-
sume that his impairment (or perceived impairment) was a
heart condition severe enough to require triple bypass sur-
gery. While the College seems to characterize the bypass
surgery itself as the impairment, we agree with the district
court that the surgery was the treatment, not the impair-
ment. The College has therefore not established that such a
heart condition is transitory, because it has provided no evi-
dence as to how long such a condition would last. Likewise,
the College has presented no evidence to establish that such
a condition could be considered “minor.”
Thus, Silk has passed the first hurdle en route to summary
judgment. We consider Silk’s argument that the College re-
garded him as having an impairment in the course of evalu-
ating each of his claims.
3. Summer 2010 Course Reassignment
Silk does not attempt to prove his claim under the “indi-
rect” McDonnell Douglas method of proof. See McDonnell
Douglas Corp. v. Green, 411 U.S. 792 (1973). So he necessarily
proceeds under the “direct” approach. In doing so, he may
provide either “smoking gun” evidence of discrimination, or
he may put forward circumstantial evidence that would
permit an inference of discrimination. That evidence can in-
clude “(1) suspicious timing; (2) ambiguous statements or
behavior towards other employees in the protected group;
(3) evidence, statistical or otherwise, that similarly situated
employees outside of the protected group systematically re-
ceive better treatment; and (4) evidence that the employer
offered a pretextual reason for an adverse employment ac-
14 No. 14-2405
tion.” Teruggi v. CIT Grp./Capital Fin., Inc., 709 F.3d 654, 659–
60 (7th Cir. 2013). Silk employs the direct method in each of
his discrimination and retaliation claims.
Silk argues that the College impermissibly decided to re-
assign his summer 2010 courses because it regarded him as
having a disability. In order to succeed on his claim, Silk
must prove that (1) the decision-maker regarded him as hav-
ing an impairment; and (2) she made her employment deci-
sion on the basis of that perception. We assume that Don-
nersberger, as department chair, and Kelsay, as acting dean,
were the decision-makers in this employment action. 1 Silk’s
claim fails because he cannot establish that the decision-
makers regarded him as having an impairment.
To demonstrate that the College regarded Silk as having
a disability, he must show that the decision-maker perceived
that Silk suffered (or would suffer from) an impairment at
the time that he would be teaching the summer courses. Silk
needed to be physically present in order to teach those
courses. Silk appears to concede that, at the time that he took
leave, he did not alert the College as to a possible or proba-
ble return date. And Silk does not dispute Donnersberger’s
or Kelsay’s testimony that as of two weeks prior to the start
of the summer session, the College did not know whether he
would return in time to teach the summer classes.
Donnersberger testified that she became concerned in
late April about her staffing needs for the summer. She stat-
ed that, “by the time of April, I had to then—when he was
1 Silk seems to suggest that Fronczek was also a decision-maker. We
cannot draw that conclusion, however, because it is undisputed that
Fronczek was on medical leave at the time that this decision was made.
No. 14-2405 15
not back yet, I had to find someone to cover his summer
classes because it was already the end of April, and we were
starting in two weeks for the summer … I then looked for
someone else to teach those classes that were scheduled.” So,
Donnersberger testified, she had already reassigned Silk’s
courses prior to him informing the College that he could re-
turn in time to teach.
This evidence suggests that Donnersberger, the decision-
maker, regarded Silk as absent during the relevant time peri-
od—not as suffering from a disability. Silk does not provide
any evidence to contradict Donnersberger’s testimony on
this point.
In addition, Kelsay made clear to Silk that he would not
be eligible to teach any courses until he provided the College
with a medical release. Silk does not argue that the medical
release requirement was improper, and he concedes that he
would not have been permitted to return to work without it.
He has provided no evidence to suggest that the course as-
signments were made after May 12, when he submitted his
release.
Because Silk cannot establish that the College regarded
him as an individual with a disability, we affirm the district
court’s grant of summary judgment on this claim.
4. Fall 2010 Course Assignment
Silk next claims that he was assigned only two courses
during the fall semester of 2010, instead of his usual four, as
the result of impermissible discrimination. By the time this
decision was made, Fronczek had returned from medical
leave. So we assume Fronczek and Donnersberger were the
decision-makers in this employment action.
16 No. 14-2405
Silk’s claim rests on one disputed fact. He alleges that
during the July 15 meeting attended by Silk, Donnersberger,
Cobb, Fronczek, and Stewart, Donnersberger stated that
“we” assigned Silk only two classes in the fall because “we
didn’t think [he was] physically capable of handling them.”
Silk alleges that “we” refers to Donnersberger and Fronzcek.
Donnersberger denied having made any such statement, and
she testified that there were no discussions of Silk’s fall 2010
course assignments at that meeting. 2
According to Silk, this statement demonstrates that
Fronczek and Donnersberger both regarded him as having
an impairment and reduced his course assignments on the
basis of that perception. There is a genuine dispute over
whether that statement was actually made: Donnersberger
testified that she didn’t make the statement, and Silk testified
that she did. In addition, that fact is material to Silk’s case: if
a jury credited Silk’s testimony and not Donnersberger’s, it
could reach the conclusion that the statement constituted an
admission on the part of the College that it reduced Silk’s
course load as the result of a perceived impairment.
We therefore conclude that summary judgment was not
appropriate on this claim.
5. Terminations
Silk argues that the College twice terminated his em-
ployment based on the perception that he was an individual
with a disability: first, when he was notified during the fall
2 In his briefs, Silk erroneously claims that “there is no dispute” that this
statement was made. The dispute is clear—Donnersberger attested that
she never made the statement attributed to her.
No. 14-2405 17
2010 semester that he would not be assigned any future
courses in the Department of Liberal Arts (and was placed
on the do-not-hire list); and second, when he was given a no-
tice of termination by the Career Programs Department in
February of 2011. Silk claims that the district court should
have excluded any reference to the do-not-hire list, based on
his contention that the list did not exist prior to his filing of
an EEOC complaint. This claim is without merit.
As for the first termination, the parties agree that
Fronczek was the decision-maker. Silk appears to argue that
Donnersberger’s alleged statement regarding the reduction
in Silk’s fall 2010 schedule constitutes evidence that Fronczek
regarded Silk as an individual with a disability at the time
that he was terminated. This claim is tenuous, at best. But
even assuming that Silk could establish that Fronczek re-
garded him as having an impairment, his claim fails. Silk
does not present any evidence that would permit an infer-
ence of discrimination.
Silk must establish that his perceived impairment was a
but-for cause of his termination. Fronczek, however, testified
that he terminated Silk’s employment solely because he be-
lieved the quality of Silk’s instruction to be poor. The record
evidence amply supports that reason. Recall the problems
with Silk’s syllabi, including the fact that he was using the
wrong textbook in at least one course; poor attendance in
Silk’s courses; a non-participatory classroom environment in
which students played video games, talked amongst them-
selves and on the phone, and did other course work during
class; problems with Silk’s lecture techniques; a variety of
student complaints, including that Silk had given every stu-
dent identical comments and grades on an essay assignment;
18 No. 14-2405
and Cobb’s assessment that “Silk’s classroom performance
was below-average and not to the standards of the Social
Sciences Department, “ and that “it one of the poorest exhi-
bitions of instruction [he had] witnessed at the collegiate
level.” Cobb did not believe students were learning in Silk’s
classroom.
Fronczek’s belief constituted a legitimate, non-
discriminatory reason for terminating Silk’s employment.
While Silk concedes some of those pieces of evidence, he ar-
gues that others were inaccurate. But “although [Silk] disa-
greed with his negative evaluations, that does not mean that
the evaluations were the result of unlawful discrimination.”
Dickerson v. Bd. of Trs. of Comty. Coll. Dist. No. 522, 657 F.3d
595, 603 (7th Cir. 2011) (citing Brill v. Lante Corp., 119 F.3d
1266, 1273 (7th Cir. 1997) (“The question is not whether the
employer’s performance ratings were right but whether the
employer’s description of its reasons is honest.” (emphasis in
original)). Silk argues that many of these negative assess-
ments were wrong, but he puts forward no evidence to sug-
gest that Fronczek did not honestly believe that Silk was a bad
instructor.
As for Silk’s second termination, in February of 2011, his
claim cannot get off the ground. Indeed, Silk’s arguments on
this claim are arguably waived for failure to develop. But, as
best we can discern, Silk does not dispute that the College’s
president (Crawley) directed the dean (Machon) to issue the
letter of termination. Silk offers no evidence that Crawley (or
Machon, for that matter) was aware that Silk had undergone
bypass surgery or had a history of a heart condition. So Silk
cannot establish that Crawley regarded him as an individual
with a disability.
No. 14-2405 19
Silk contends that Fronczek wielded influence over
Crawley (based on Fronczek’s own perception that Silk suf-
fered from an impairment), and convinced Crawley to ter-
minate Silk’s employment. We will not belabor the point—
Silk offers no evidence in support of such a contention, and
summary judgment was properly granted on that claim.
B. ADEA Claims
In the district court, Silk raised ADEA claims that mirror
the ADA claims described in Part A. He appeals summary
judgment only on his claims that his employment was
wrongfully terminated, in violation of the ADEA.
Apart from stating his claim for relief, Silk makes no ar-
gument in support of such a claim in his briefs to this court.
As we have repeatedly held, “[t]he absence of any support-
ing authority or development of an argument constitutes a
waiver on appeal.” Kramer v. Banc of Am. Sec., LLC, 355 F.3d
961, 964 n.1 (7th Cir. 2004). Silk has waived his ADEA dis-
crimination arguments.
C. Retaliation Claim
In January 2011, Silk filed an EEOC complaint, alleging
discrimination based on age and disability. The only adverse
employment action he suffered after this date was the termi-
nation of his employment in February 2011. He alleges that
this termination occurred in retaliation for his having filed
the EEOC complaint.
Both the ADA and the ADEA prohibit employers from re-
taliating against employees who exercise their rights under
those statutes. In order to prove a claim of retaliation, the
employee must show “(1) he engaged in a statutorily pro-
tected activity; (2) he suffered an adverse action; and (3) a
20 No. 14-2405
causal connection between the two.” Dickerson, 657 F.3d at
601. The parties agree that Silk engaged in a statutorily pro-
tected activity (his EEOC complaint), and that he suffered an
adverse employment action (his termination). Again, Silk’s
ADEA claim is waived for failure to develop.
As with his discrimination claim, Silk does not identify
who was responsible for his termination. Assuming it was
either Fronczek or Crawley, he provides no evidence that ei-
ther was aware of his EEOC complaint. And even assuming
they were aware, the College offers two legitimate, non-
discriminatory reasons for his termination: (1) that the Ca-
reer Programs Department erred in hiring Silk, given that he
had been added to the do-not-hire list; and (2) that the Ca-
reer Programs Department, like Liberal Arts, made a nega-
tive assessment of the quality of Silk’s instruction.
Silk does not offer any evidence that contradicts these le-
gitimate, non-discriminatory reasons. Silk contends, without
offering any evidence in support, that the do-not-hire list
didn’t exist prior to his EEOC complaint. He likewise offers
no evidence to contradict the College’s evidence of the list’s
existence. Second, while he again disputes the correctness of
the College’s assessment of his teaching abilities (Machon’s
evaluation, in this case), he does not offer any evidence to
suggest that Crawley and Fronczek did not honestly believe
that Silk was a poor instructor.
The only piece of evidence that Silk offers in support of
his claim is the “suspicious timing” between the filing of his
EEOC complaint and his termination. It is true—Silk was
fired within a few weeks of filing his complaint. But suspi-
cious timing alone “will rarely be sufficient ... to create a tri-
able issue.” Argyropoulos v. City of Alton, 539 F.3d 724, 734
No. 14-2405 21
(7th Cir. 2008) (quoting Culver v. Gorman, 416 F.3d 540, 546
(7th Cir. 2005)); see also Burks v. Wisconsin Dept. of Trans., 464
F.3d 744, 758–59 (7th Cir. 2012) (explaining that “suspicious
timing alone ... does not support a reasonable inference of
retaliation” because the “mere fact that one event preceded
another does nothing to prove that the first event caused the
second” (internal citation omitted)).
III. CONCLUSION
For the reasons above, we AFFIRM in part and REVERSE
in part. We REVERSE the district court’s grant of summary
judgment on Silk’s “fall 2010” discrimination claim and
REMAND for further proceedings consistent with this opin-
ion. We AFFIRM the district court’s ruling on all other
claims.
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In The
Court of Appeals
For The
First District of Texas
____________
NO. 01-00-00914-CR
____________
JOSEPH CHARLTON FOY, Appellant
V.
THE STATE OF TEXAS, Appellee
On Appeal from the 351st District Court
Harris County, Texas
Trial Court Cause No. 675217
O P I N I O N
This is an appeal of a 25 year sentence pursuant to a motion to adjudicate guilt. We
affirm the trial court’s sentence.
Procedural Background
This Court dismissed appellant’s appeal on the basis that we lacked jurisdiction
because the notice of appeal did not comply with Rule 25(b)(3) of the Texas Rules of
Appellate Procedure. Foy v. State, No. 01-00-00914-CR (Tex. App.—Houston [1st Dist.]
March 1, 2001). Appellant’s petition for discretionary review was granted. The Texas Court
of Criminal Appeals reconsidered the applicability of Rule 25.2(b)(3) to adjudication of guilt.
See Vidaurri v. State, 49 S.W.3d 880 (Tex. Crim. App. 2001). Vidaurri had not been issued
prior to our holding in Foy. The appeal has been remanded to our court for reconsideration
in light of Vidaurri.
Background
On July 18, 1994, appellant pled nolo contendere to aggravated sexual assault of a
child under the age of 14. In accordance with the terms of a plea bargain agreement, the trial
judge deferred adjudication of guilt, placed appellant on community supervision for 10 years,
and assessed a fine of $500. The State filed a motion to adjudicate guilt to which appellant
pled true on June 26, 2000. The trial judge proceeded to find appellant guilty of aggravated
sexual assault and assessed punishment at 25 years confinement. On July 25, 2000 appellant
filed a motion for new trial claiming that the trial court erred in adjudicating him guilty.
Appellant’s points of error claim the trial court abused its discretion in assessing his
punishment at 25 years confinement because it violates his federal and state constitutional
rights against cruel and unusual punishment. We overrule appellant’s two points of error.
Discussion
This court had originally held that, because appellant was complaining of the sentence
imposed, Rule 25.2(b)(3) of the Texas Rules of Appellate Procedure applied. Vidaurri held
that when a defendant pleads guilty in exchange for deferred adjudication, that initial plea
triggers the application of Rule 25.2(b)(3) limitations to his appeal. Id. at 882. Therefore,
if an appellant’s complaints are not related to his conviction, Rule 25.2(b)(3) limitations do
not apply and an appellate court retains jurisdiction. See id. at 885. In light of Vidaurri, we
find that appellant’s complaint for review was regarding punishment and not his conviction.
Therefore, this Court has jurisdiction over appellant’s points of error.
To preserve a cruel-and-unusual-punishment complaint for appellate review, a
defendant must object to the sentence during the punishment phase of trial or in a motion for
new trial. See Tex. R. App. P. 33.1(a); Curry v. State, 910 S.W.2d 490, 497 (Tex. Crim. App.
1995); Solis v. State, 945 S.W.2d 300, 301-02 (Tex. App.—Houston [1st Dist.] 1997, pet.
ref’d). Appellant did not object to the severity of his sentence at the time of sentencing.
Appellant’s motion for new trial does not complain that the sentence constituted cruel and
unusual punishment, but only that the trial court erred in adjudicating him guilty. Appellant
has failed to preserve any error for our review and we overrule appellant’s two points of
error.
Conclusion
We affirm the judgment of the trial court.
Sam Nuchia
Justice
Panel consists of Justices Nuchia, Jennings and Radack.
Do not publish. Tex. R. App. P. 47.
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178 Ariz. 431 (1994)
874 P.2d 988
LITCHFIELD PARK SERVICE COMPANY, Appellant,
v.
ARIZONA CORPORATION COMMISSION, Appellee.
No. 1 CA-CC 92-0004.
Court of Appeals of Arizona, Division 1, Department C.
April 21, 1994.
*433 Snell & Wilmer by Steven M. Wheeler, Thomas L. Mumaw, Phoenix, for appellant.
Arizona Corp. Com'n by Bradford A. Borman, Janice M. Alward, Phoenix, for appellee.
OPINION
EHRLICH, Judge.
Litchfield Park Service Company ("LPSCO") appeals from an order of the Arizona Corporation Commission ("Commission") which allowed only a portion of its requested rate increase for utility services. For the reasons which follow, we affirm the order of the Commission.
FACTS AND PROCEDURAL HISTORY
LPSCO, a subsidiary of SunCor Development Company, whose parent company is Pinnacle West, is an Arizona corporation authorized to provide water and sanitary sewer services. On May 13, 1991, LPSCO filed with the Commission an application seeking permanent increases in its water and sewer rates based on a 1990 calendar test year. Testimony with regard to the requested increase was heard on February 4 and 5, 1992. On June 5, 1992, the Commission's hearing officer issued a proposed order, to which LPSCO and the Commission staff filed exceptions. *434 The matter was heard by the Commission and, on July 6, 1992, it issued decision number 57944. LPSCO timely sought review pursuant to Arizona Revised Statutes Annotated ("A.R.S.") section 40-254.01.
DISCUSSION
The Commission is charged with establishing just and reasonable rates to be charged by public-service corporations. E.g., Ariz. Const. art. XV, § 3, cited in Tucson Electric Power Company v. Arizona Corporation Commission, 132 Ariz. 240, 242, 645 P.2d 231, 233 (1982); Southwest Gas Corporation v. Arizona Corporation Commission, 169 Ariz. 279, 283, 818 P.2d 714, 718 (App. 1991). To successfully challenge a Commission rate decision, a party "must make a clear and satisfactory showing that the order is unlawful or unreasonable." A.R.S. § 40-254.01(E); see also A.R.S. § 40-254.01(A) (appellate court may disturb Commission's order if it determines "upon a clear and satisfactory showing that the order is unlawful or unreasonable"). Accordingly, LPSCO is required to demonstrate, clearly and convincingly, that the Commission's decision is arbitrary, unlawful or unsupported by substantial evidence. Consolidated Water Utilities v. Arizona Corporation Commission, 178 Ariz. 478, 481, 875 P.2d 137, 140 (App. 1993), citing Tucson Electric, 132 Ariz. at 243, 645 P.2d at 234. The above-mentioned statutes do not provide for de novo appeals. Id.
Upon this standard of review, we consider the five issues raised by LPSCO. Two of the questions raised concern LPSCO's equity in its sewage plant and in its water division. One issue pertains to the exclusion of a well from the rate base. A fourth dispute involves an income-tax expense. The final issue addresses the depreciation expense of the sewer division.
A. Sewage Plant Amount of Equity
LPSCO first asserts that, with regard to its sewage-treatment facility, the Commission unlawfully or unreasonably, through a "mathematical sleight of hand" or "double counting," reduced its amount of common equity from 68.6 to 51.8 percent. To appreciate this argument, first, we must consider the separate determinations which the Commission makes to establish a utility's minimum rate of return.
A utility is entitled to a fair rate of return on the fair value of its property, "no more and no less." Arizona Corporation Commission v. Citizens Utilities Company, 120 Ariz. 184, 190 n. 5, 584 P.2d 1175, 1181 n. 5 (App. 1978), quoting Arizona Corporation Commission v. Arizona Water, 85 Ariz. 198, 335 P.2d 412 (1959); see e.g., Public Service Commission of Montana v. Great Northern Utilities Company, 289 U.S. 130, 135, 53 S.Ct. 546, 548, 77 L.Ed. 1080 (1933); Bluefield Waterworks & Improvement Company v. Public Service Commission of West Virginia, 262 U.S. 679, 690, 692-93, 43 S.Ct. 675, 678, 679, 67 L.Ed. 1176 (1923). Consequently, the Commission is obliged to "ascertain the fair value of the property within the State of every public service corporation," Ariz. Const. art. XV, § 14, and use this figure as a utility's rate base. Scates v. Arizona Corporation Commission, 118 Ariz. 531, 534, 578 P.2d 612, 615 (App. 1978). The Commission then exercises its discretion in determining a utility's rate of return. Id.; see e.g., Bluefield Waterworks, 262 U.S. at 692, 43 S.Ct. at 678-79 (rate "must be determined by the exercise of a fair and enlightened judgment, having regard to all relevant facts").
The Commission determines the original cost rate base[1] and reconstructed cost new rate base;[2] the average of these two *435 equals the fair value rate base. In making these determinations, the Commission excludes property not yet placed in service and held for future use and, in fact, LPSCO does not oppose the Commission's exclusion from rate base of the 47 percent of the sewage-treatment plant not currently used. After arriving at the rate base, the Commission then ascertains the utility's weighted cost of capital, typically by the following formula:[3] First, the Commission determines the utility's capital structure, the amount of equity and debt. In LPSCO's case, this was established separately for the sewer and water divisions. The ascertained percentage of debt is then multiplied by the cost of debt, and this amount is added to the product of the cost of equity and the percentage of equity. Generally, the cost of debt is not disputed because it is ascertainable as a fact. Sun City Water Company v. Arizona Corporation Commission, 26 Ariz. App. 304, 309, 547 P.2d 1104, 1109, vacated on other grounds 113 Ariz. 464, 556 P.2d 1126 (1976). The cost of equity, however, is less precise. See id. This sum, the weighted cost of capital, is multiplied by the utility's original cost rate base; this product then is divided by the fair value rate base.
As can be inferred from the above equation, a utility's capital structure is related to the actual rate of return on its common equity. Citizens Utilities Company, 120 Ariz. at 191, 584 P.2d at 1182; see C.F. Phillips, Jr., The Regulation of Public Utilities at 394 (3d ed. 1993). The Commission has discretion in determining a utility's capital structure. See Citizens Utilities Company, id.
With this background, we turn to LPSCO's argument that the Commission, after properly excluding the unused portion of the sewage plant from the sewage-treatment plant's rate base, went on improperly to exclude the unused portion of the plant a second time when calculating its capital structure, specifically that the plant consisted of 51.8 percent equity. LPSCO argues that such treatment was mathematically improper and resulted in compounding an exclusion that should only have occurred once.
LPSCO has asserted but failed to explain, either in its appellate briefs or at oral argument, why the Commission's approach was mathematically incorrect. To the contrary, it appears reasonable that the unused portion of the sewage-treatment plant, if removed from the rate base, should also be removed when determining the equity component which cost is relevant to determining a fair rate of return.
LPSCO next insists that the Commission's methodology was unsupported by the evidence. This argument is asserted in conjunction with LPSCO's contention that the second rate-of-return adjustment in decision 57944 is "unprecedented" and arbitrary.
Neill Dimmick, a consultant hired by the City of Litchfield Park to analyze LPSCO's rate application, testified that the portion of the sewage plant found not to be used and useful in providing utility service should be treated as being funded with equity capital and eliminated from the weighted cost of capital. He stated that such an adjustment would insure that the risk of unused property would be sustained by LPSCO's shareholders and not the ratepayers. Correspondingly, the hearing officer recommended using the *436 actual capital structure of the sewage-treatment plant and excluding that portion of the plant designated for future use. The Commission followed the hearing officer's recommendation; it determined that the plant consisted of 51.8 percent common equity. The capital-structure determination for the sewage-treatment facility is supported by the record.
We also find that, despite the earlier decision in 56362, the Commission's capital-structure determination is not arbitrary. In decision 56362 the Commission approved, without explanation, its staff's acceptance of LPSCO's proposed capital structure for the sewer division of 30.95 percent debt and 69.05 percent equity. In its most recent decision, the Commission recognized that "LPSCO's capital structure was substantially the same at the time of its last rate proceeding," from which decision 56362 ensued. However, the Commission concluded that "the appropriate capital structure can be obtained by using the actual capital structure of each division, with the amount of plant held for future use excluded from the equity capital component," and assigned the sewer division an equity percentage of 51.8.
From the foregoing, it appears that, in decision 57944, the Commission treated differently the sewage-treatment plant for rate-of-return purposes than it did in its previous decision. However, in arriving at the capital structure, the Commission also articulated the following reasonable, non-arbitrary basis for switching methodologies during the sewage-treatment plant's useful life:
This method ... eliminates the calculation of hypothetical expenses and revenues and it protects the ratepayers by not using the cost of equity in the amount of plant held for future use to determine the appropriate cost of capital. The use of a hypothetical capital structure would penalize LPSCO for its debt equity exchange which was approved in the last rate proceeding as being in the interest of the rate payers.
Thus, we do not find that the Commission's methodology was arbitrary.[4]
LPSCO also contends that the Commission's approach is contrary to a 1979 decision, number 50273, in which the Commission outlined the rate-making treatment of LPSCO's sewage-treatment facility. In that decision, the Commission found that LPSCO proposed to retire its sewage facility and ordered that "50% of the total installed cost" of the new sewage treatment plant would "be considered used and useful property for inclusion in rate base" and that the remaining 50 percent would "be included in rate base proportionate to the percentage of utilization in any given test year." Contrary to LPSCO's interpretation, the decision did not address whether the excluded portion of the plant could be considered in determining the equity component. Accordingly, the Commission did not act contrary to its earlier decision.
LPSCO also contends that the Commission is precluded by the doctrine of res judicata from adjusting the equity component to exclude from equity that portion of the sewer plant not used or useful because it did not do so in earlier decisions 50273, 52874 and 56362. Given the absence of cited authority, however, we decline to consider this contention. See Coggins v. Wright, 22 Ariz. App. 217, 219, 526 P.2d 741, 743 (1974); see also State Farm Mutual Automobile Insurance Company v. Novak, 167 Ariz. 363, 370, 807 P.2d 531, 538 (App. 1990); Ariz.R.Civ.App.P. 13(a)(6).
B. Water Division Cost of Equity
LPSCO challenges the rate of return for its water division by specifically alleging that the 10.1 percent cost of equity assigned by the Commission is not supported by substantial evidence. This assignment permitted LPSCO a 6.5 percent rate of return on fair value rate base for its water division.
Without offering any mathematical or other analytical support, LPSCO sought for its water division a cost of equity of 14 percent. Commission staff recommended a cost of 11.5 percent for both divisions of the utility, which it formulated from averaging four comparable earnings and four discounted-cash-flow *437 analyses, see Phillips, The Regulation of Public Utilities at 394-98, giving additional weight to the cash-flow approach to reflect dividend growth and also accounting for LPSCO-specific risks such as volatility of earnings and size. The discounted-cash-flow analysis produced a range of equity costs from 9.4 percent to 12.4 percent; the comparable earnings approach yielded a range from 10.6 percent to 12 percent. While it authorized the requested percentage for LPSCO's sewer division, the Commission stated that, because LPSCO entirely funded its water division with equity capital, there was no interest expense to reduce the investors' return, which, in turn, translated to reduced risk. The Commission consequently reduced LPSCO's cost of equity to 10.1 percent by accepting the average of the low range of staff's discounted-cash-flow and comparable-earnings analyses.
As has been discussed above and in Sun City Water Company, "[t]he cost of equity capital is not capable of such mathematical precision [as determining debt cost] and in fact is a judgment call, enlightened by consideration of all the relevant factors." 26 Ariz. App. at 309, 547 P.2d at 1109. Given this discretion, we are not convinced that it was abused when the Commission adjusted downward LPSCO's cost of acquiring equity capital for its water division to reflect reduced investor risk from its equity-rich plant. Indeed, the lowest equity cost calculated by the staff, with which LPSCO did not take exception, was 9.4 percent. Accordingly, we affirm that portion of the Commission's order assigning a 10.1 percent cost of equity to LPSCO's water division.
C. Exclusion of Well 23A From Rate Base
LPSCO next asserts that the Commission arbitrarily excluded Well 23A, a replacement for Town Well 1 retired by LPSCO during the test year and determined previously by the Commission to be used and useful, from its fair value rate base for its water division, effectively assigning it a zero fair value. The Commission responds that Well 23A properly was excluded from the rate base because it was not necessary to serve LPSCO's customers.
Town Well 1 was drilled and in use since 1946. It was removed from service in March 1990, three months into the test year, and retired the following summer. The construction of its replacement, Well 23A, began in 1991 and the well was fully operational in June 1992. Gerald Ellsworth, LPSCO's manager, testified that the water plant facilities, without Town Well 1 or its replacement, adequately met the needs of LPSCO's existing customers. He further stated that any plant additions were driven by SunCor's development. Ellsworth later agreed that Well 23A is not "absolutely essential to serve [LPSCO's] existing customers."
Dimmick testified that he recommended including out-of-test-year revenues to reflect a significant customer increase, and correspondingly proposed the recognition of Well 23A. He stated, however, that if these extra revenues were not included, Well 23A was not necessary for ratemaking purposes.
The Commission staff conducted its site inspection on January 31, 1992. It concluded that, as of that date, Well 23A lacked a pump and was not used and useful.
In decision 57944, the Commission agreed with its staff's removal of $218,000 from the rate base for construction work in progress ("CWIP") on Well 23A because the well was not used or useful during the test year. The Commission stated:
To include Well No. 23A in rate base without a corresponding inclusion of new customers and revenues results in a violation of the matching concept implicit in the use of a historical test year. Second, even if the well were in service during the test year, we are not convinced that it is necessary to serve the Company's customers. It is clear that LPSCO has been able to provide service to its customers without Well No. 23A.
Generally, although CWIP is not included in the rate base because it is not yet part of the fair value of property devoted to public use, see Arizona Water Company, 85 Ariz. at 202, 335 P.2d at 414, it is within the Commission's broad discretion to consider a plant under construction in determining a utility's fair value. Arizona Corporation *438 Commission v. Arizona Public Service Company, 113 Ariz. 368, 371, 555 P.2d 326, 329 (1976). Although the Commission properly could have considered the cost of Well 23A, construction of which was subsequent to the test year, see id., the record does support the Commission's exclusion of the construction of this well from the rate base. LPSCO has not cleared its hurdle on review of a satisfactory demonstration that the Commission acted unreasonably or unlawfully in determining LPSCO's just and reasonable rates.
D. Income Tax Expense
LPSCO next submits several theories that the Commission unlawfully determined its income tax expense by treating the sewage and water portions as separate, non-affiliated corporations. The Commission treated the sewage-treatment and water divisions as separate entities for the calculation of LPSCO's income tax expense. The parties have referred to this separate treatment in the briefs as a "stand-alone" approach. Although the Commission recognized that, in past decisions, it had combined the two operations for the purpose of determining such expenses, it stated that its current approach "more accurately represents the expense associated with providing each type of service." Accordingly, it made a downward adjustment of $4383 to income tax expense for the water division and increased the expense for the sewer division by $2928. LPSCO submits that these adjustments understated LPSCO's income tax expense attributable to its utility operations.
LPSCO contends that the hearing officer, at the hearing's conclusion, directed the parties to address any contested issues in their post-hearing briefs or waive consideration. It further maintains that, because the Commission staff did not discuss separate tax treatment in its post-hearing opening brief or after LPSCO "dutifully" raised this issue in its opening brief, it has waived consideration of its position on this issue. We disagree.
Following the hearing, the hearing officer established the briefing schedule and mentioned that the briefs should "include identification of all issues and agreement or disagreement of both parties' position on those issues." However, the hearing officer did not indicate that the failure to include an issue would bar it from consideration and we know of no such requirement. In its post-hearing reply brief, the Commission staff, contrary to LPSCO's assertion, did discuss taxing each division as a separate entity in response to LPSCO's proposed method.
LPSCO asserts that the Commission is barred by principles of res judicata from deviating from its past treatment of the sewer and water divisions as a consolidated entity. LPSCO has provided no legal authority in support of this assertion, however, and we decline to consider it. See Coggins, 22 Ariz. App. at 219, 526 P.2d at 743; see also State Farm Mutual Automobile Insurance Company, 167 Ariz. at 370, 807 P.2d at 538; Ariz.R.Civ.App.P. 13(a)(6).
LPSCO further maintains that it is entitled to have its rates based on the full amount of income tax expense attributable to the utility's operation and that the stand-alone approach attributes less income taxes than incurred by the sewer and water plants. LPSCO has not, however, supported this contention with any evidence that the stand-alone computation method denies it a fair return on the fair value of its property. Instead, James Rolle, a utility auditor for the Commission who examined LPSCO, testified that, as a combined operation, Pinnacle West, LPSCO's parent company, had net operating losses and incurred no income tax expense at all.
LPSCO next challenges as unlawful the Commission's tax determination because it is not supported by substantial evidence. Again, we disagree. Rolle testified that "[n]either LPSCO [n]or SunCor file[s] consolidated returns, it is Pinnacle West that does so and Pinnacle West has net operating losses and is not paying any income taxes." Although LPSCO emphasizes the expertise of Dan Neidlinger, its expert, Rolle's testimony supports the decision of the Commission.
LPSCO finally submits that the Commission's income tax expense determination is arbitrary because the Commission cites no instance in which this method was used and indeed acknowledges its deviation from prior LPSCO rate applications. We accept that the Commission has broad authority *439 to prescribe classifications for rate-making purposes and that the category of income tax expense is but one classification it may consider. Consolidated Water, 178 Ariz. at 481, 875 P.2d at 140. In the present case, the Commission justified its use of the stand-alone method to calculate LPSCO's income tax expense as the more accurate approach. Other methods may not have permitted LPSCO any adjustment for income tax expense. We are not at all convinced that the Commission's treatment of LPSCO's income tax expense is unlawful or unreasonable.
E. Sewer Division Depreciation Expense
LPSCO finally maintains that the Commission, which purportedly underestimated LPSCO's annual depreciation expense for its sewer division by $12,264, did not support its decision with substantial evidence and thus was arbitrary and capricious. LPSCO requests a depreciation rate of 4.1 percent.[5] It further inquires whether the Commission's decision allows it to maintain a depreciation account within the meaning of A.R.S. section 40-222.
In the 1989 decision which resulted from LPSCO's previous rate application, the Commission reinstated a previous three percent rate of depreciation for the water and sewer divisions. In doing so, it said that the parties did not submit quantitative evidence supporting the former five percent rate and that it had "greater confidence" in the historical accuracy of the three percent rate. The Commission ordered LPSCO to file in its next application for each division an account-by-account depreciation study and a comprehensive cost-of-service study.
In the present decision, the Commission reported that LPSCO did not submit the ordered studies and, for the sewer division, it instead used rates from a 1981 depreciation study. The Commission concluded that, in the absence of an account-by-account depreciation study, it would keep in effect for both divisions the three percent rate.
LPSCO has not provided further argument nor authority in support of its assertion that the three percent depreciation rate might not permit it to comply with section 40-222.[6] Thus we decline to address this concern. See Ariz.R.Civ.App.P. 13(a); Novak, 167 Ariz. at 370, 807 P.2d at 538.
As to the propriety of the three percent rate of depreciation for the sewer division, the Commission's decision is supported by the record. Despite testimony from LPSCO's expert that a three percent depreciation rate would significantly underestimate LPSCO's depreciation expense based on generally accepted norms for the expected physical life of its wastewater plant, Rolle testified that, in the absence of a depreciation study, the staff would continue to use the three percent composite rate which appeared in LPSCO's books. The next day, during cross-examination, he similarly said that he interpreted Commission decision 56362 as requiring a new depreciation study and that, without one, it was best to continue with the three percent rate. Although LPSCO complains that the Commission provided no direction as to how the depreciation rates were to be developed, it has failed to show clearly and convincingly that this rate is unlawful or unreasonable.
CONCLUSION
The Commission's decision is affirmed.
LANKFORD, P.J., and FIDEL, J., concur.
NOTES
[1] Arizona Administrative Code ("A.A.C.") R14-2-103(A)(3)(h) defines the original cost rate base as "the depreciated original cost, prudently invested, of the property (exclusive of contributions and/or advances in aid of construction) at the end of the test year, used or useful, plus a proper allowance for working capital and including all applicable pro forma adjustments." See also A.A.C. R14-2-103(A)(3)(e) (defining "depreciated original cost"); A.A.C. R14-2-103(A)(3)(l) (defining "prudently invested"); A.A.C. R14-2-103(A)(3)(i) (defining "pro forma adjustments").
[2] Reconstructed cost new rate base is defined as "[a]n amount consisting of the depreciated reconstruction cost new of the property (exclusive of contributions and/or advances in aid of construction) at the end of the test year, used and useful, plus a proper allowance for working capital and including all applicable pro forma adjustments. Contributions and advances in aid of construction, if recorded in the accounts of the public service corporation, shall be increased to a reconstruction new basis." A.A.C. R14-2-103(A)(3)(n).
[3] There is no required formula for this determination. E.g., United Railways & Electric Company of Baltimore v. West, 280 U.S. 234, 249-50, 251, 50 S.Ct. 123, 125, 125-26, 74 L.Ed. 390 (1930); Simms v. Round Valley Light & Power Company, 80 Ariz. 145, 154, 294 P.2d 378, 384 (1956). The Commission simply considers all relevant factors, including: (1) comparisons with other companies having corresponding risks, (2) the attraction of capital, (3) current financial and economic conditions, (4) the cost of capital, (5) the risks of the enterprise, (6) the financial policy and capital structure of the utility, (7) the competence of management, and (8) the company's financial history. C.F. Phillips, Jr., The Regulation of Public Utilities at 377 (3d ed. 1993), discussing Bluefield Waterworks, 262 U.S. 679, 43 S.Ct. 675, and Smyth v. Ames, 169 U.S. 466, 18 S.Ct. 418, 42 L.Ed. 819 (1898).
[4] The Commission consistently took this changed position into account when determining the cost of equity and the income tax expense for the sewer division.
[5] Depreciation rate is defined as "the percentage rate applied to the original cost of an asset to yield the annual provision for depreciation." A.A.C. R14-2-102(A)(4). Depreciation is "an accounting process which will permit the recovery of the original cost of an asset less its net salvage over the service life." A.A.C. R14-2-102(A)(3).
[6] Section 40-222 provides that "[t]he commission may, after hearing, require public service corporations to carry a proper and adequate depreciation account.... It may ascertain and fix the proper and adequate rates of depreciation of the several classes of property for each, and each corporation shall conform its depreciation accounts to the rates so ascertained and fixed, and shall set aside the money so provided for out of earnings and carry such money in a depreciation fund...."
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271 Wis. 278 (1955)
PAUL and wife, Respondents,
vs.
HODD and another, Appellants.
Supreme Court of Wisconsin.
November 7, 1955.
December 6, 1955.
*280 For the appellants there was a brief by William A. Cameron and Howard W. Cameron, both of Rice Lake, and oral argument by William A. Cameron.
For the respondents there was a brief by Douglas, Omernik & Bitney of Spooner, and oral argument by E. E. Omernik.
FAIRCHILD, C. J.
The jury found Gerald Hodd causally negligent as to the management and control of his automobile, and in failing to exercise the skill and judgment in its operation which he possessed. There is credible evidence which, when reasonably viewed, fairly admits an inference supporting the jury's findings. That being true, neither the trial court nor this court has authority to change the jury's findings. Auster v. Zaspel, 270 Wis. 368, 71 N. W. (2d) 417.
Appellants urge that the trial court erred in refusing to include in the verdict the appellants' proposed question on assumption of risk by the guest Gary Paul, deceased. They argue "that the evidence will show that the accident happened *281 only by reason of the defendant's lack of experience and lack of driving skill." In determining whether Gerald Hodd failed to exercise the skill and judgment he possessed in the operation of his automobile just prior to and at the time of the accident, the jury had evidence before it to show that he had been driving his father's car since December, 1953; that he had driven his own car from the time he acquired it in June, in the neighborhood of 3,200 miles; and that both his and his father's cars had manual shifts. In support of their contention as to this point they insist that there is no evidence "as to any negligent speed, lookout, or inattention." It plainly appears from the record that the trouble developed from appellant driver's increasing his speed to pass a preceding vehicle on a slippery pavement. It appears in the testimony of the witness Thara that a very brief interval of time elapsed between the instant the driver, Gerald Hodd, after passing Thara's vehicle, sought to regain his lane of travel and the tipping over of his automobile. He was going upwards of 40 miles an hour, on a slippery pavement, under conditions which afforded only poor visibility.
As to the acceptance by the guest of the driver with such skill as he possessed, appellants urge that Hodd was an inexperienced driver. The evidence submitted and accepted by the jury in arriving at its verdict, and confirmed by the learned trial judge on motion after verdict, bearing upon the experience of Gerald Hodd as a driver, is that he was eighteen years old; that he had been driving since December, 1953; that he drove to and from the county shop a distance of at least nine miles to get to his daily work during part of the time of the summer of 1954; that part of the time he drove an additional nine miles to the deer farm; and that part of the time he drove to and from Exeland to work, a round trip of 60 miles. In addition to driving to and from work, he had driven evenings during the week, and he had driven the *282 car to school. The jury answered the question with relation to his exercising the skill and judgment he possessed against the appellant driver, and that answer must be sustained.
Appellants' next contention is that this was an unavoidable accident due to skidding and not due to the driver's negligence, insisting that the car skidded on the highly slippery black-top and was out of control throughout the entire distance. However, on the testimony of disinterested witnesses and the physical facts, the jury had before them evidence warranting the findings made by them. It is in evidence that Gerald Hodd, after passing the car ahead of him, drove for some distance along the south lane of the black-top in a slightly diagonal direction to the southeast. He left the black-top, without swerving, at a point 48 to 60 feet west of a driveway crossing the ditch and connecting with the east-west highway at its south edge. He traveled on the soft shoulder in practically a straight line in the same southeasterly direction in which he had been going on the highway, for a distance of about 35 feet and into the ditch. The skidding, if any, occurred at the end of this 35-foot distance. The car, at a point very near the raised edge of the driveway, swung around, tipped over, and landed on the driveway with its four wheels in the air and its front facing south.
The sheriff, who reached the scene of the accident shortly after it occurred, gave testimony to the effect that: There were no skid marks on the black-top west of where the car left it. As the tracks proceeded from the south side of the black-top they went in a practically straight southeasterly direction running alongside the shoulder and toward the ditch. That straight line was about 35 feet long and brought the mark down into the ditch. The driveway was ahead of the straight line and was about 20 inches higher than the ditch. At the east end of that straight line and a few feet *283 from the driveway was the point at which the marks showed evidence of skidding. There was a plowing action of wheels in the dirt which threw the dirt sidewise toward the east. From the physical facts observed, the witness believed that the front wheels of the car struck the raised portion of the driveway and caused a sweeping curve by the back tires as the car swung around to the right. The tracks tend to show that the car rolled just as it reached the west edge of the driveway.
The coroner, who also made an inspection of the tracks of the Hodd car, testified that they were fairly straight, curving slightly to the right, and that there was evidence that the car skidded where dirt had been moved up and thrown to the east showing a skidding or plowing motion. He further testified that the rear bumper of the Hodd car was parallel and touching the south edge of the highway as the car came to rest on the driveway with the wheels in the air and its front facing south.
The witness Thara, the only eyewitness to the accident, gave the following testimony:
"He [Gerald Hodd] was then a couple of hundred feet behind me and he closed in and passed me, and we both proceeded eastward. I was about 500 feet away from the place of the accident when the Hodd car passed me, or maybe even a little farther. After he returned to his own side of the road he was about 60 or 70 feet ahead of me. When he returned to his own side of the road he would be a little closer than 400 or 430 feet from the place of the accident. I wouldn't say over a couple or 200 or 300 feet, so he traveled for a couple of hundred feet on his own proper side of the road getting along fine after he passed me but don't forget he wasn't going straight down the road, he was going across until he hit off the black-top. He was on the south side of the road. . . . When the Hodd car was about 500 feet ahead of *284 my car he didn't swerve, he just went right off the black-top. . . . As the car crossed the highway it was going southeast." Thara also stated in his testimony that he did not observe the Hodd car doing any zigzagging before it went into the ditch, and that he observed the car all the time from the time it passed him until it went into the ditch.
Thus it is clear from the testimony of competent and disinterested witnesses that the theory of unavoidable accident due to skidding is not applicable to the instant case. As a result of inattention and negligence in management and control, Hodd went straight off the road and created the emergency in which he found himself. The skidding did not occur until he tried to extricate himself from his position in the ditch after the car had made a sudden right turn.
The trial court correctly ruled that the evidence sustained the conclusion of the jury that, under the circumstances existing, Hodd was not an inexperienced driver and that he did not exercise the skill and judgment he possessed. The verdict of the jury as to liability must be sustained.
However, as to appellants' claim that the damages awarded by the jury were excessive, we find that the evidence does not justify an award to respondents of $6,400 for loss of services of their son. Appellants do not object to the award of $2,500 for loss of companionship and society. It is conceded by appellants that Gary Paul was a boy of good character and did help his father in the matter of chores, milking, etc. He was about seventeen and one-half years old at the time of his death. There would be another year at high school during which time he could assist with the chores as had been his custom. But the evidence shows that after graduation he was to enter college. The amount which may be allowed under circumstances as they are here, arising from a relationship such as we are concerned with, must be arrived at under the recognized rule that damages are a sum of money which *285 the law awards as pecuniary compensation. The facts of each case must be the basis upon which the amount in each case is predicated. The rule governing is well discussed in both the majority opinion and the dissenting opinion in the case of Ptak v. Kuetemeyer, 182 Wis. 357, 370, 196 N. W. 855, 197 N. W. 363. In that case there had been a reduction of damages, and there are there cited cases expounding the rule for such allowance. The late Mr. Justice DOERFLER, in concluding his opinion said: "It appears from the testimony that plaintiff had intended to give his child a high school and college education. Under such a state of the record there is little evidence upon which to base substantial damages." And he proceeded to hold under the rule that there should be an option providing a reduction of damages rather than a positive order for a new trial.
It is our opinion from the evidence submitted that the lowest amount which an impartial jury, properly instructed, should allow for loss of services would be $1,716. That amount is based upon a calculation of services rendered up to the time of engaging in his college effort.
By the Court. The judgment of the circuit court is reversed, and the cause remanded for a new trial as to damages only, unless plaintiffs, within twenty days after receiving written notice of the filing of the remittitur in the circuit court, stipulate in writing to the reduction of the amount of the judgment to the sum of $4,802.73, in which event the judgment is ordered to be entered in respondents' favor for that amount.
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741 So.2d 23 (1999)
Leon C. BRANNAN, Sr.
v.
Naida TALBOTT and Nadine Brannan.
No. 99-C-0881.
Supreme Court of Louisiana.
May 7, 1999.
Denied.
LEMMON, J., would grant the writ.
JOHNSON, J., not on panel.
TRAYLOR, J., would grant the writ.
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752 F.Supp. 956 (1990)
Elaine CANDELORE, Plaintiff,
v.
CLARK COUNTY SANITATION DISTRICT; E. James Gans; Michael G. Pierson; Fred Turnier; and Does I Through XXX, Inclusive, Defendants.
No. CV-S-89-165-PMP (RJJ).
United States District Court, D. Nevada.
December 10, 1990.
*957 John J. Tofano, Las Vegas, Nev., for plaintiff.
*958 Carol R. Davis, Beckley, Singleton De Lanoy, Jemison & List, Chtd., Las Vegas, Nev., for defendants.
ORDER
PRO, District Judge.
This case arises out of allegedly discriminatory treatment of Plaintiff while she was employed at the Defendant Clark County Sanitation District (the "District"). During the relevant time period, Defendant E. James Gans was the Director of the District. Defendant Fred Turnier was the Manager of the Administrative Services Division within the District, and Defendant Michael Pierson headed the Administrative Support section within Administrative Services. Plaintiff worked in the Administrative Support section before relocating to the Purchasing section and eventually out of the District.
Plaintiff alleges that she was subjected to poor treatment and harassment at the work place on the basis of her age and/or sex. The facts on which she bases this conclusion are as follows. Plaintiff began in the Administrative Services Division in 1978, where she received consistently good evaluations and appropriate promotions. She claims that her troubles started with the arrival of Ginger Woods, a substantially younger woman, in 1982. Woods had been in the District since late 1979, but later was promoted to Division Secretary, working for Defendant Turnier.
Plaintiff claims that Woods received preferential treatment including a lighter work load, longer lunch hours, and new office furniture because she had or was having an affair with Defendants Gans and Turnier. Plaintiff alleges that she complained about this preferential treatment, and that led to her being treated poorly in an effort to force her to leave.
Plaintiff filed charges of age discrimination with the Equal Employment Opportunity Commission, and charges of age and sex discrimination with the Nevada Equal Rights Commission. Having exhausted her administrative remedies, Plaintiff filed a Complaint in state court on February 3, 1989.[1] The case was removed to this Court by Defendants on March 2, 1989 (# 1). The Complaint basically alleges three causes of action. The first is for sex discrimination in violation of the Equal Protection Clause of the Fourteenth Amendment, pursuant to 42 U.S.C. § 1983.[2] The second is for age discrimination under the Age Discrimination in Employment Act ("ADEA"). Finally, Plaintiff alleges intentional infliction of emotional distress against the three individual Defendants.
On July 3, 1990 Defendants filed a Motion for Summary Judgment (# 62A). Plaintiff filed an Opposition and supporting exhibits on August 14, 1990 (# 66-69), including an affidavit of Plaintiff (# 68). Defendants filed a Reply on September 11, 1990 (# 75). Plaintiff filed a Supplemental Affidavit in Opposition to Defendants' Motion for Summary Judgment on October 4, 1990 (# 77), which Defendants Moved to Strike on October 12, 1990 (# 78). Plaintiff filed an Opposition to Defendants' Motion to Strike on October 18, 1990 (# 79) and an Affidavit of John J. Tofano in Support of Plaintiff's Opposition on October 22, 1990 (# 80). Defendants filed a Reply on October 31, 1990 (# 81).
MOTION FOR SUMMARY JUDGMENT
Pursuant to Fed.R.Civ.P. 56, summary judgment is proper "if the pleadings, depositions, *959 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."
The party moving for summary judgment has the initial burden of showing the absence of a genuine issue of material fact. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir.1982). Once the movant's burden is met by presenting evidence which, if uncontroverted, would entitle the movant to a directed verdict at trial, the burden then shifts to the respondent to set forth specific facts demonstrating that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). If the factual context makes the respondent's claim implausible, that party must come forward with more persuasive evidence than would otherwise be necessary to show that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986); California Arch. Bldg. Prod. v. Franciscan Ceramics, 818 F.2d 1466, 1468 (9th Cir.1987), cert. denied, 484 U.S. 1006, 108 S.Ct. 698, 699, 98 L.Ed.2d 650 (1988).
A material issue of fact is one that affects the outcome of the litigation and requires a trial to resolve the differing versions of the truth. See Admiralty Fund v. Hugh Johnson & Co., 677 F.2d 1301, 1305-06 (9th Cir.1982); Admiralty Fund v. Jones, 677 F.2d 1289, 1293 (9th Cir.1982).
All facts and inferences drawn must be viewed in the light most favorable to the responding party when determining whether a genuine issue of material fact exists for summary judgment purposes. Poller v. CBS, Inc., 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962). After drawing inferences favorable to the respondent, summary judgment will be granted only if all reasonable inferences defeat the respondent's claims. Admiralty Fund v. Tabor, 677 F.2d 1297, 1298 (9th Cir.1982).
The recent trilogy of Supreme Court cases cited above establishes that "[s]ummary 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.'" Celotex Corp., 477 U.S. at 327, 106 S.Ct. at 2555 (quoting Fed.R.Civ.P. 1); see also Avia Group Int'l, Inc. v. L.A. Gear Cal., 853 F.2d 1557, 1560 (Fed.Cir.1988).
Plaintiff brings a claim under 42 U.S.C. § 1983 for sex discrimination in violation of the Fourteenth Amendment's Equal Protection Clause. The Equal Protection Clause is only violated if such discrimination is intentional; that is, the actions must have been taken at least in part because of its adverse effects upon an identifiable group e.g. women. Personnel Adm'r v. Feeney, 442 U.S. 256, 279, 99 S.Ct. 2282, 2296, 60 L.Ed.2d 870 (1979); Village of Arlington Heights v. Metropolitan Housing Dev. Corp., 429 U.S. 252, 265, 97 S.Ct. 555, 563, 50 L.Ed.2d 450 (1977). The pleading and proof of liability in such a case is the same as that used in disparate treatment claims under Title VII of the Civil Rights Act of 1964 ("Title VII"). Riordan v. Kempiners, 831 F.2d 690, 695-96 (7th Cir.1987) and cases cited therein. These standards apply to claims under the ADEA as well. Palmer v. United States, 794 F.2d 534, 537 (9th Cir.1986).
In McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802-05, 93 S.Ct. 1817, 1824-26, 36 L.Ed.2d 668 (1973), the Supreme Court allocated the burdens of proof for a Title VII claim. Plaintiff initially bears the burden of establishing a prima facie case of discrimination which "in effect creates a presumption that the employer unlawfully discriminated against the employee." Texas Dep't of Community Affairs v. Burdine, 450 U.S. 248, 254, 101 S.Ct. 1089, 1094, 67 L.Ed.2d 207 (1981). Next, the burden shifts to the employer to "articulate some legitimate, nondiscriminatory *960 reason" for the action taken. McDonnell Douglas, 411 U.S. at 802, 93 S.Ct. at 1824. However, the defendant bears only a burden of production, not a burden of persuasion. "It is sufficient if the defendant's evidence raises a genuine issue of fact as to whether it discriminated against the plaintiff." Burdine, 450 U.S. at 254-55, 101 S.Ct. at 1094. The Plaintiff then "must have the opportunity to demonstrate that the proffered reason was not the true reason for the employment decision. This burden now merges with the ultimate burden of persuading the court that she has been the victim of intentional discrimination." Id. at 256, 101 S.Ct. at 1095.
Plaintiff may establish a prima facie case of sex discrimination in several different ways. First, she may demonstrate disparate treatment as between men and women. However, there is no allegation that any males were treated more favorably than Plaintiff, and Plaintiff admitted in her deposition that she knows of no males who received preferential treatment.
Secondly, Plaintiff may establish a claim based on sexual harassment. There are two types of such claims. The first is "quid pro quo" harassment in which the terms or conditions of employment are conditioned on consent to sexual favors. The second is "hostile environment" harassment, which is only actionable when the sexual harassment is "sufficiently severe or pervasive `to alter the conditions of [the victim's] employment and create an abusive working environment.'" Meritor Savings Bank v. Vinson, 477 U.S. 57, 67, 106 S.Ct. 2399, 2405, 91 L.Ed.2d 49 (1986) (quoting Henson v. Dundee, 682 F.2d 897, 904 (11th Cir.1982)).
It seems that Plaintiff is attempting to establish the first type of claim by showing that Ms. Woods, who allegedly had a sexual relationship with Defendants Gans and Turnier, was treated better than she and others in the office who were not engaged in such a relationship. However, Plaintiff does not allege that she was subject to any sexual advances by Defendants, nor does she have any evidence of any unwelcome sexual conduct by Defendants directed at anyone. Instead, she asserts that her claim is actionable because the different treatment was "bottomed on sex." Plaintiff's Opposition to Motion for Summary Judgment (# 66), at 38.
However, "[t]he gravamen of any sexual harassment claim is that the alleged sexual advances were `unwelcome.'" Vinson, 477 U.S. at 68, 106 S.Ct. at 2406 (quoting 29 C.F.R. § 1604.11(a) (1985)). In another case where an employee engaged in a romantic relationship with her boss received a promotion as a result of that relationship, the Second Circuit found that the claim of other qualified male employees who were denied the position was not actionable under Title VII. DeCintio v. Westchester County Medical Center, 807 F.2d 304, 308 (2d Cir.1986), cert. denied, 484 U.S. 825, 108 S.Ct. 89, 98 L.Ed.2d 50 (1987).
[The boss'] conduct, although unfair, simply did not violate Title VII. Appellees were not prejudiced because of their status as males; rather, they were discriminated against because [the boss] preferred his paramour. Appellees faced exactly the same predicament as that faced by any woman applicant for the promotion: No one but [the paramour] could be considered for the appointment because of [her] special relationship to [the boss]. That relationship forms the basis of appellees' sex discrimination claims. Appellees' proffered interpretation of Title VII prohibitions against sex discrimination would involve the EEOC and federal courts in the policing of intimate relationships. Such a course, founded on a distortion of the meaning of the word "sex" in the context of Title VII, is both impracticable and unwarranted.
Id. Further, in a case remarkably similar to the one at bar, the Western District of Pennsylvania held that there was no violation of Title VII where a female employee was treated less favorably than another female employee alleged to have had a romantic relationship with a superior. Miller v. Aluminum Co. of America, 679 F.Supp. 495, 501 (W.D.Pa.) (neither the plaintiff nor any male employees could get *961 the same treatment as the boss' paramour), aff'd without opinion, 856 F.2d 184 (3d Cir.1988). The court noted, "Favoritism and unfair treatment, unless based on a prohibited classification, do not violate Title VII." Id.
Plaintiff seeks to rely on King v. Palmer, 778 F.2d 878 (D.C.Cir.1985) to support her claim. However, in that case, the D.C. Circuit was not faced with the question of whether favoritism of a partner in a consensual relationship could constitute a Title VII violation because none of the parties had raised that issue on appeal. Id. at 880. Additionally, six judges of that court, in declining to hear the case en banc, noted that the applicability of Title VII to the facts before them was not raised on appeal and so was an improper subject for rehearing en banc. Id. at 883. Thus, the decision in King is not contrary to those in DeCintio and Miller.
This Court therefore concludes that preferential treatment of a paramour, while perhaps unfair, is not discrimination on the basis of sex in violation of Title VII or, in this case, the Equal Protection Clause of the Constitution. No term or condition of employment was conditioned on submission to unwelcome advances; rather, nobody but the one woman allegedly engaged in the affair could have received special treatment. This is not "quid pro quo" sexual harassment.
Plaintiff also seeks to establish a claim for sexual harassment of the hostile environment type. She again relies on the preferences shown toward Ms. Woods. Faced with the same type of claim in Miller, the Western District of Pennsylvania held:
"Snubs and unjust criticisms of one's work are not poisonous enough to create an actionable hostile work environment. As we have discussed [above], the favoritism shown [the boss' paramour] did not violate Title VII. Hostile behavior that does not bespeak an unlawful motive cannot support a hostile work environment claim."
679 F.Supp. at 502.
Plaintiff does add allegations regarding other alleged sexual conduct in the work place. With regard to these additional allegations, however, all they establish even if believed is that there were rumors of other affairs or sexual conduct and that there may have been improper harassment in other areas of the District. There is no admissible evidence of the kind of statements and actions that would establish a hostile or offensive environment for Plaintiff as a result of actions of the Defendants. As noted above, in order to defeat a motion for summary judgment, Plaintiff must designate specific facts demonstrating a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Further, this must be done by production of admissible evidence to support her claim. Fed.R.Civ.P. 56(e). This Plaintiff has failed to do, and summary judgment will be granted as to the hostile environment claim as well.
Plaintiff's claim for discrimination on the basis of age in violation of the ADEA must fail for the same reasons as the sex discrimination claim. Plaintiff has not presented evidence from which an inference of discrimination on the basis of age could reasonably be drawn. Moreover, to the extent she has established a prima facie case with regard to certain of the actions taken, Defendants have successfully articulated legitimate, nondiscriminatory reasons for those actions. McDonnell Douglas, 411 U.S. at 802, 93 S.Ct. at 1824. Plaintiff has failed to demonstrate that these reasons are a pretext for age discrimination. At best, Plaintiff has evidence that the reasons are a pretext for favoring a romantic partner. As noted above, this does not constitute actionable discrimination. Thus, Plaintiff has failed to establish that there are genuine issues of material fact as to her claim for age discrimination.
Finally, Plaintiff asserts claims for intentional infliction of emotional distress against the three individual Defendants.
Generally, the elements of this cause of action are (1) extreme and outrageous conduct with either the intention of, or *962 reckless disregard for, causing emotional distress, (2) the plaintiff's having suffered severe or extreme emotional distress and (3) actual or proximate causation.
Star v. Rabello, 97 Nev. 124, 125, 625 P.2d 90, 91-92 (1981) (citing Cervantez v. J.C. Penney, Inc., 24 Cal.3d 579, 156 Cal.Rptr. 198, 595 P.2d 975 (1979)). Plaintiff has deposition testimony of experts who examined her which indicates that she suffered from depression as a result of work-related stress. However, the actions by Defendants on which Plaintiff relies do not constitute extreme and outrageous conduct as required by the first element of the cause of action.
The only direct mention of Plaintiff's claim for intentional infliction in her entire Opposition to the Motion for Summary Judgment is in a footnote on the last page. There, the Plaintiff explains the theory on which she bases her claim. "Plaintiff contends that pervasive sexual harassment, creating a hostile work environment which has the effect of diminishing Plaintiff's tangible, and intangible work benefits, and which causes severe emotional distress and depression, constitutes extreme and outrageous conduct under Nevada law." Opposition (# 66), at 45 n. 29. Plaintiff goes on to state that the Defendants' actions take on an extreme and outrageous character because Defendants acted in retaliation for Plaintiff's complaints about the alleged sexual harassment, Defendants abused their positions with regard to Plaintiff, and Defendants knew Plaintiff was "peculiarly susceptible to stress by reason of what was occurring at the workplace." Id.
However, as this Court found above, there was no sexual harassment or hostile work environment. Furthermore, Plaintiff's attempted reliance on Priest v. Rotary, 634 F.Supp. 571 (N.D.Cal.1986), is unavailing. In that case, the plaintiff and other female employees had been subject to pervasive sexual harassment including unwanted touching of their bodies in a sexually suggestive manner. In addition, the plaintiff there was fired although her employer knew that she was the sole source of support for her minor son. The facts shown in Priest were far more offensive than any showing made by the Plaintiff here.
The Restatement (Second) of Torts § 41 and Comments thereto (1965) are helpful in determining what constitutes the extreme and outrageous conduct required for this tort. The following excerpts from the comments are instructive:
d. Extreme and outrageous conduct.... Liability has been found only where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community....
The liability clearly does not extend to mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities.
. . . . .
e. The extreme and outrageous character of the conduct may arise from an abuse by the actor of a position, or a relation with the other, which gives him actual or apparent authority over the other, or power to affect his interests.... Even in such cases, however, the actor has not been held liable for mere insults, indignities, or annoyances that are not extreme or outrageous.
. . . . .
f. The extreme and outrageous character of the conduct may arise from the actor's knowledge that the other is peculiarly susceptible to emotional distress, by reason of some physical or mental condition or peculiarity.... It must be emphasized again, however, that major outrage is essential to the tort ...
Thus, although Plaintiff's evidence may establish abuse of the position of her employers and although they were aware she was subject to depression resulting from work-related stress, the conduct on which she relies is not so extreme and outrageous as *963 to establish this claim.[3] Therefore, summary judgment will be granted as to the claims for intentional infliction of emotional distress as well.
SUPPLEMENTAL AFFIDAVIT AND MOTION TO STRIKE
Well after the motion for summary judgment was briefed by both sides and submitted to this Court, Plaintiff filed a Supplemental Affidavit (# 77) which asserts facts not previously raised and which shows much more personal knowledge regarding the relationship between Ms. Woods and Defendant Turnier than was previously demonstrated. Defendants' Reply regarding their Motion for Summary Judgment had argued convincingly that Plaintiff had produced no admissible evidence to establish such a romantic involvement, even if such involvement could be the basis for Plaintiff's claims.
Defendants filed a Motion to Strike the Affidavit (# 78) based on this Court's Local Rule 140.4, which provides a party opposing a motion only one opportunity to file a memorandum of points and authorities in opposition to the motion. Defendants argued that this affidavit, which was filed late and raised new facts and arguments, was an improper circumvention of the rule. Defendants moved in the alternative to strike portions of the affidavit which were not based on personal knowledge or in the alternative to permit Defendants a chance to reply to the new allegations. This Court is sympathetic to the position of Defendants faced with newly alleged facts (and no allegation they were not previously known) long after the Opposition and Reply thereto were on file. However, this Court's resolution of the Motion for Summary Judgment renders this Motion to Strike moot. Even if this affidavit is considered, it does not change the outcome. ORDERS
IT IS THEREFORE ORDERED that Defendants' Motion for Summary Judgment (# 62A) is granted.
IT IS FURTHER ORDERED that Defendants' Motion to Strike (# 78) is denied as moot.
NOTES
[1] Although Plaintiff exhausted state as well as federal administrative procedures, her Complaint does not assert violations of state statutes prohibiting discrimination, but only the federal Age Discrimination in Employment Act and portions of the United States Constitution. Further, Defendants' Motion for Summary Judgment (# 62A) seeks summary judgment as to any such claim under state statutes, and Plaintiff does not raise any opposition to those arguments. Therefore, this Court does not address any possible violations of the pertinent Nevada statutes. To the extent Plaintiff put them in issue, summary judgment is granted as to any such claim.
[2] Although Plaintiff's Complaint raises Due Process and First Amendment claims, Plaintiff made no attempt in her Opposition to Defendants' Motion for Summary Judgment (# 66) to support these claims or oppose the Motion with respect to these claims. Summary judgment will therefore be granted as to such claims. Local Rule 140-6.
[3] The actions complained of include demoting Plaintiff, giving her inferior equipment to work on, involuntarily transferring her to another section, denying her consideration to work overtime, and taking away her key to the main building when she was transferred to a section in a different building. These actions are not so beyond the bounds of decency or utterly intolerable in a civilized community as to establish this cause of action.
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17 So.3d 707 (2009)
WOODS
v.
STATE.
No. SC09-63.
Supreme Court of Florida.
August 14, 2009.
Decision without published opinion mandamus granted.
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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUITU.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
SEPT 14, 2010
No. 07-10718 JOHN LEY
________________________ CLERK
D. C. Docket No. 04-60206-CR-JIC
UNITED STATES OF AMERICA,
Plaintiff-Appellee-
Cross-Appellant,
versus
STEVE HEIN,
BERNARD ROEMMELE,
a.k.a. Bernie,
Defendants-Appellants-
Cross-Appellees.
________________________
Appeals from the United States District Court
for the Southern District of Florida
_________________________
(September 14, 2010)
Before BARKETT and MARCUS, Circuit Judges, and HOOD,* District Judge.
PER CURIAM:
I. BACKGROUND
Steve Hein seeks review of his convictions for RICO conspiracy, conspiracy
to commit mail and/or wire fraud, and conspiracy to commit money laundering.
Hein contends the government did not provide sufficient evidence to support the
jury’s conviction of him on all counts and that the district court failed to define
proceeds correctly as receipts to the jury in light of the money laundering charge.
The jury also convicted Bernard Roemmele of RICO conspiracy, conspiracy
to commit mail and/or wire fraud, conspiracy to commit money laundering, and
securities fraud. He makes a similar argument regarding the failure of the court to
correctly define receipts in light of his money laundering charge. Although
interwoven with his discussion of the jury instructions on his RICO conspiracy
conviction, Roemmele also raises a claim regarding the sufficiency of the evidence
on this charge. Roemmele also requests reversal on the basis of the district court’s
denial of a continuance, refusal to authorize assistance to court-appointed counsel,
and a violation of his Due Process rights resulting from evidentiary hearings
throughout the course of the trial. Roemmele also argues the district court erred by
*
Honorable Joseph M. Hood, United States District Judge for the Eastern District of
Kentucky, sitting by designation.
2
inappropriately enhancing the Sentencing Guidelines for obstruction of justice as
applied to his sentence.
The convictions arise from Hein’s role as the executive vice president of
CitX Corporation (CitX) and Roemmele’s role as chief executive officer and
founder of CitX. CitX claimed to have created internet-based technology and other
software used by clients around the world. CitX partnered with Professional
Resource Systems International, Inc. (“PRSI”) to market its software. In reality,
however, the two companies operated as a Ponzi scheme. Roemmele and Hein
also participated in investment fraud using resources from PRSI.
The government challenges the defendants’ assertions and has filed a cross-
appeal contending that the district court erred by relying only on the jury forfeiture
verdict when establishing the value of loss for purposes of the Sentencing
Guidelines. U.S. Sentencing Guidelines § 2S1.1 (2009). The jury returned a
special verdict of $0 forfeiture as to Hein and $480,000 as to Roemmele. No
findings were made as to the value of the losses.
For the reasons stated below, as to the errors assigned by Appellants, the
Court holds that the district court’s actions constituted harmless error, at worst,
without effect on the trial. The district court, however, did err by relying solely on
the forfeiture award in establishing loss under the Sentencing Guidelines § 2S1.1.
3
Accordingly, we AFFIRM the convictions of Defendants, but VACATE the
judgment of the district court as to sentencing and REMAND this matter to the
district court for further proceedings in accord with this opinion.
II. DISCUSSION
A. The district court was presented with sufficient evidence to prove
Hein and Roemmele guilty on all three counts at issue.
We review claims of sufficiency of the evidence de novo. United States v.
Lumley, 135 F.3d 758, 759 (11th Cir. 1998). In doing so, we view the evidence “in
the light most favorable to the government and drawing all reasonable inferences
and credibility choices in favor of the jury’s verdict.” Id. at 759 (citing United
States v. Chirinos, 112 F.3d 1089, 1095 (11th Cir. 1997)). Thus, if a reasonable
person could have found the appellants guilty beyond a reasonable doubt, the
verdict will stand. United States v. Jones, 933 F.2d 1541, 1546 (11th Cir. 1991)
(citing United States v. Migueles, 856 F.2d 117, 118 (11th Cir. 1988)).
Taking into consideration the oral arguments, the record, and the parties’
briefs, we conclude sufficient evidence does exist to convict Hein as well as
Roemmelle for both RICO conspiracy and conspiracy to commit mail and/or wire
fraud. In order to conspire to commit mail and/or wire fraud, the defendant must
agree “to engage in a scheme to defraud in which they contemplated that the mails
[or wire service] would likely be used.” United States v. Ross, 131 F.3d 970, 981
4
(11th Cir. 1997) (quoting United States v. Massey, 827 F.2d 995, 1002 (5th Cir.
1987)). Both Hein and Roemmele state they had no knowledge of the criminal
activities and made no agreement to engage in such a scheme. Taken in a light
most favorable to the government, however, and drawing all inferences in favor of
the jury verdict, the Court finds sufficient evidence exists to uphold their
convictions.
As to the RICO conspiracy charge, this Court has held the government can
show an agreement to participate in a RICO conspiracy “1) by showing an
agreement to an overall objective; or, 2) by showing that a defendant agreed
personally to commit two predicate acts and therefore to participate in a single
objective conspiracy.” United States v. Abbell, 271 F.3d 1286, 1299 (11th Cir.
2001) (citing United States v. Church, 955 F.2d 688, 694 (11th Cir. 1992)). Upon
review of the record, the parties’ briefs, and oral arguments of counsel, we again
find a reasonable person could find Hein and Roemmele guilty of RICO
conspiracy. Based upon the evidence discussed above, in addition to other
evidence in the record, the Court holds the government has not only shown an
agreement to commit two predicate acts but an agreement to the overall objective
of the conspiracy as well.
With regard to the conviction on conspiracy to commit money laundering,
5
appellants Hine and Roemmele base their appeal primarily on the district court’s
failure to define proceeds as receipts. This issue will be addressed in a subsequent
section of this opinion. See infra Part II.C. This Court, however, holds based on
the record, oral argument of counsel, and the parties’ briefs that sufficient evidence
also existed for a reasonable person to believe beyond a reasonable doubt that both
committed money laundering under the instruction given by the district court. As a
result, we AFFIRM their convictions for RICO conspiracy, conspiracy to commit
money laundering, and conspiracy to commit mail and/or wire fraud.
B. The jury is not required to come to a unanimous agreement on
predicate acts that form a RICO conspiracy.
Defendants argue for the first time on appeal that the district court must
receive unanimous agreement by the jury on the predicate acts that form a RICO
conspiracy. Accordingly, we review this issue for plain error. United States v.
Demarest, 570 F.3d 1232, 1241 (11th Cir. 2009) (citing United States v. Olano,
507 U.S. 725, 732 (1993)). We will not reverse based on a jury instruction “unless
‘the charge considered as a whole, is so clearly erroneous as to result in a
likelihood of a grave miscarriage of justice,’ or the error ‘seriously affects the
fairness, integrity or public reputation of judicial proceedings.’” United States v.
Pepe, 747 F.2d 632, 675 (11th Cir. 1984) (quoting United States v. Thevis, 665
F.2d 616, 645 (5th Cir. Unit B 1982)).
6
The jury convicted the appellants under the RICO conspiracy statute which
states “[i]t shall be unlawful for any person to conspire to violate the provisions of
[the prohibited activity stated in the RICO statute.]” 18 U.S.C. § 1962(d) (2006).
While the defendants wish to extend the United States Supreme Court’s ruling in
Richardson v. United States, 526 U.S. 813 (1999), requiring unanimous agreement
as to violations under the Continuing Criminal Enterprise (CCE) statute, we refuse
to do so in recognition of a prior holding that 18 U.S.C. § 1962(d) requires
violators to knowingly join a conspiracy that violates the substantive part of the
statute but does not require “overt acts, nor specific predicate acts that the
defendant agreed personally to commit . . . for a section 1962(d) offense.” United
States v. Glecier, 923 F.2d 496, 500 (11th Cir. 1991) (citations omitted).
When the district court instructed the jury on the law of RICO conspiracy
and specifically with regard to “pattern of racketeering activity,” it stated that the
jury
must find beyond a reasonable doubt that the defendant agreed that at
least one member of the conspiracy would commit at least two acts of
‘racketeering activity,’ sometimes called predicate offenses, as
described in the indictment, within ten years of each other. . . . You
must also unanimously decide on what type of racketeering acts were
involved in the conspiracy. (emphasis added)
The trial court further explained that “the government does not have to prove
7
that any racketeering acts were actually committed at all, or that the defendant
agreed to personally commit any such acts.”
The defendants’ claim as to the jury instruction on the RICO conspiracy is
not about whether or not there must be unanimous agreement on the predicate acts,
but rather what it is that the jury must unanimously agree upon. Roemmele and
Hein believe the law required the district court to instruct the jury that it had to
unanimously agree on the specific and individual acts that the conspirators
intended to engage in (or in fact did engage in) during the conspiracy. This,
however, is more than the law requires. To establish a RICO conspiracy the
government must show that the defendant agreed to participate in an enterprise
whose purpose was to engage in a pattern of racketeering activity. Thus in
explaining this law to the jury, the district court correctly instructed the jurors that
they had to agree that the enterprise would involve a “pattern of racketeering
activity,” which it further instructed would require unanimous agreement on the
type of predicate acts, i.e., money laundering, mail or wire fraud, or obstruction of
justice to name a few, that constituted a pattern of racketeering. Roemmele’s and
Hein’s argument that the jury had to unanimously agree on particular and
individual acts and not just the general types of predicate offenses is not supported
by the law and thus was not required in a jury instruction.
8
C. The district court did not err by failing to define proceeds as
receipts.
Defendants argue for the first time on appeal that the district court erred by
not defining proceeds as receipts with regard to their conspiracy to commit money
laundering convictions. Accordingly, we review this issue for plain error. United
States v. Demarest, 570 F.3d 1232, 1241 (11th Cir. 2009) (citing United States v.
Olano, 507 U.S. 725, 732 (1993)). This Court has defined plain error as “so
obvious that failure to notice it would seriously affect the fairness, integrity and
public reputation of judicial proceedings.” United States v. Walther, 867 F.2d
1334, 1343-44 (11th Cir. 1989) (citations omitted). While Defendants argue that
the United States Supreme Court’s decision in United States v. Santos, 553 U.S.
507 (2008), requires under the money laundering statute that the term proceeds
means profits and not receipts, this Court has long held otherwise. Demarest, 570
F.3d at 1241-42. For the following reasons, we decline to depart from precedent.
To begin, the Supreme Court decided significant portions of Santos by a
plurality decision requiring this Court to consider the holding “on the narrowest
grounds.” Id. at 1242 (quoting Marks v. United States, 430 U.S. 188, 193 (1976));
Santos, 553 U.S. 507. As a result, this Court has limited application of Santos
solely to the “gross receipts of an illegal gambling operation.” Demarest, 570 F.3d
at 1242. The district court, therefore, did not commit plain error, in failing to
9
define proceeds as receipts, and we AFFIRM the decision of the district court on
this issue.
D. The district court did not commit an abuse of discretion by
refusing to issue a continuance for Roemmele.
We review denials of a continuance under an abuse of discretion standard
“which resulted in specific substantial prejudice.” United States v. Verderame, 51
F.3d 249, 251 (11th Cir. 1995) (citing United States v. Bergouignan, 764 F.2d
1503, 1508 (11th Cir. 1985)). Roemmele, therefore, must “identify relevant, non-
cumulative evidence that would have been presented if [his] request for a
continuance had been granted.” United States v. Valladares, 544 F.3d 1257, 1262
(11th Cir. 2008) (quoting United States v. Saget, 991 F.2d 702, 708 (11th Cir.
1993)). Having considered the oral arguments of counsel, the briefs of the parties,
and the record, we find Defendant has not identified evidence that resulted in
specific substantial prejudice and find no violation of Roemmele’s constitutional
rights for failure to grant a continuance. We, therefore, AFFIRM the decision of
the district court with respect to the denial of a continuance.
E. The Court declines to vacate Roemmele’s sentence on the district
court’s refusal to grant assistance to court-appoitned counsel.
We will not hear an ineffective assistance of counsel claim on direct appeal,
“except in the rare instance when the record is sufficiently developed.” United
10
States v. Verbitskaya, 406 F.3d 1324, 1337 (11th Cir. 2005) (citing United States v.
Tyndale, 209 F.3d 1292, 1294 (11th Cir. 2000)). The record typically will not be
sufficiently developed to deal with an ineffective assistance claim since the
criminal trial record focuses solely on the guilt or innocence of the defendant, not
the reasonableness of counsel’s actions. Massaro v. United States, 538 U.S. 500,
505-06 (2003). Upon review of the parties’ briefs, oral arguments of counsel, and
the record, the Court does not find the record sufficiently developed to make this
determination on direct appeal. While Roemmele points to many issues in his
brief, including the failure to file pretrial motions, failure to review discovery
documents, and other alleged incompetence, the record does not show the extent of
these errors or their effect on the trial itself. As a result, we find the record
insufficient to review the claim of ineffective assistance of counsel at this time.
F. The district court did not violate Roemmele’s Due Process rights
with its evidentiary rulings.
We review the district court’s evidentiary rulings for “a clear abuse of
discretion.” United States v. US Infrastructure, Inc., 576 F.3d 1195, 1208 (11th
Cir. 2009) (quoting United States v. McLean, 138 F.3d 1398, 1403 (11th Cir.
1998)). Upon review of the briefs of the parties, the oral argument of counsel, and
the record, we do not find a clear abuse of discretion. Roemmele makes a number
of claims regarding excluded evidence and other evidentiary rulings but fails to
11
provide any legal argument or citations to show “a clear abuse of discretion” as
required. As a result, we AFFIRM the district court’s actions as to the evidentiary
rulings.
G. Enhancement of Roemmele’s Sentencing Guidelines Level was
appropriate for obstruction of justice.
The Court reviews the interpretation and application of the Sentencing
Guidelines de novo and the underlying factual findings for clear error. United
States v. Foley, 508 F.3d 627, 632 (11th Cir. 2007) (citing United States v. McVay,
447 F.3d 1348, 1352-53 (11th Cir. 2006)). The Sentencing Guidelines specifically
provide a two level increase in the offense level for a defendant that wilfully
obstructs an investigation or prosecution by, among other things, “producing or
attempting to produce a false, altered, or counterfeit document or record during an
official investigation or judicial proceeding.” U.S. Sentencing Guidelines Manual
§ 3C1.1, cmt. n.4 (2009).
Having reviewed the briefs of the parties, heard oral arguments of counsel,
and reviewed the record, we conclude that the underlying factual findings are not
clearly erroneous and that the evidence supports the district court’s obstruction of
justice enhancement to appellant Roemmele. Roemmele’s presentence report
pointed out his participation in creating false documents to mislead the grand jury
as well as other actions meant to conceal fraudulent activities. Roemmele has
12
given this Court no indication of clear error, and the district court’s application of
those facts to the guidelines is correct. The Court, therefore, AFFIRMS the
application of these notations in the district court’s two level enhancement for
obstruction of justice under Sentencing Guidelines § 3C1.1.
H. The district court erred by not making an independent factual
determination when sentencing appellants.
As stated above, the Court will review the interpretation and application of
the Sentencing Guidelines de novo. Foley, 508 F.3d at 632 (11th Cir. 2007)
(citation omitted). While the United States Supreme Court in United States v.
Booker made sentencing guidelines advisory, the Supreme Court still required
district courts to refer to them and take them into consideration during sentencing.
543 U.S. 220, 264 (2005). This Court has subsequently held “[t]his consultation
requirement, at a minimum, obliges the district court to calculate correctly the
sentencing range prescribed by the Guidelines.” United States v. Crawford, 407
F.3d 1174, 1178 (11th Cir. 2005). These guidelines include a table that enhances
the level appropriate for the crime based on losses that exceed $5000. U.S.
Sentencing Guidelines § 2B1.1 (2009).
The Court has noted the similarities between forfeiture and loss but has held
district courts must calculate each one distinctly as part of its calculations used for
sentencing. United States v. Hamaker, 455 F.3d 1316, 1337 (11th Cir. 2006)
13
(noting that forfeiture deals with punishment of the defendant while loss focuses
on the harm suffered by the victim). In adopting the forfeiture amount as the
amount of loss, the district court “failed to take into account all relevant conduct or
explain why certain conduct was not relevant, failed to understand the difference
between forfeiture and loss, and abdicated its responsibility to make independent
findings under the Guidelines.” United States v. Foley, 508 F.3d 627, 633 (11th
Cir. 2007). While the appellants argue the decision in Foley applies solely to fraud
cases, this Court notes neither the Guidelines nor previous precedent relied on in
our decision in Foley make that distinction. See U.S. Sentencing Guidelines §
2B1.1 (2009); Foley, 508 F.3d at 633; Hamaker, 455 F.3d at 1336-39. Though this
Court must disregard harmless errors in calculating the appropriate level using the
Sentencing Guidelines, the district court’s adoption of the amount of the forfeiture
as the loss under § 3C1.1 hardly qualifies as harmless. This becomes more
apparent when considering Hein, who the jury stated was responsible for $0 in
forfeiture but could be considered to have caused more substantial losses. We,
therefore, VACATE the judgment of the district court as to Defendants’ sentences
and REMAND this case to the district court for sentencing applying 1) an
independent calculation of loss and 2) consideration of all relevant conduct for the
purposes of the Sentencing Guidelines.
14
III. CONCLUSION
Accordingly, for the above-stated reasons, we AFFIRM the convictions of
Defendants, but we VACATE the judgment of the district court as to Defendants’
sentences and REMAND this matter to the district court for further sentencing
proceedings.
15
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188 F.Supp. 601 (1960)
In the Matter of Joseph Delbert SWINDLE, Sr., Bankrupt.
No. B-40513.
United States District Court D. Oregon.
February 18, 1960.
*602 Burke, Bounds & Courson, Portland, Or., for petitioner.
KILKENNY, District Judge.
The following questions are presented on the certificate of review obtained by Commerce Investment, Inc. on Referee's order entered October 30, 1959, to wit:
(1) Whether the Referee erred in holding that the Bankruptcy Court had summary jurisdiction over Commerce Investment, Inc. to determine this controversy.
(2) Whether the Referee erred in finding that Commerce Investment, Inc., in handling the closing of the sale of Lot 1 after bankruptcy, should be considered the agent of the trustee of the bankrupt's estate.
(3) Whether the Referee erred in finding that an assumption by the trustee of the earnest money contract for the sale of Lot 1 did not result in an assumption also of bankrupt's letter of instructions to Commerce Investment, Inc., in which Commerce Investment Inc. was authorized to pay out of the net proceeds of the sale the balance due on the note and unrecorded mortgage to Commerce Building, Inc.
(4) Whether the Referee erred in holding that Commerce Investment, Inc. has no right to set off the indebtedness of the bankrupt on the note and unrecorded mortgage to Commerce Building, Inc. against the obligation of Commerce Investment, Inc. to turn over the proceeds from the sale of Lot 1 to the trustee in the bankruptcy proceeding.
Commerce Investment, Inc., herein called claimant, and Commerce Building, Inc., herein called Building, have been and now are corporations existing under the laws of Oregon. The stockholders, directors and officers of both corporations have been and now are identical. On April 17, 1956, Building, for a consideration of $2,750, executed and delivered to the bankrupt and his wife a deed to the real property herein mentioned. On the same day, the bankrupt and his wife executed and delivered to Building their promissory note bearing the same date in the said sum of $2,750 payable upon sale of the property on or before April 1, 1957, with interest at 6%. Said note has not been endorsed by Building. On April 17, 1956, bankrupt and his wife executed and delivered to Building a mortgage on said real property to secure payment of said purchase money note. The mortgage was not recorded until April 23, 1957. On May 28, 1956, claimant made a construction loan in the sum of $13,500 to the bankrupt and his wife to enable bankrupt to construct a residence on said property. On the same date bankrupt and his wife executed and delivered to claimant their promissory note bearing the same date in the sum of $13,500 due and payable on or before January 28, 1957, the unpaid balance on said note on April 17, 1957 being $13,866.85. On the same date bankrupt and his wife gave claimant a mortgage on said property to secure payment of said note, which mortgage was recorded on May 31, 1956. On March 23, 1957, bankrupt entered into an earnest money receipt agreement with Paul Kinnersley and wife in which the bankrupt agreed to sell and the buyers agreed to buy said real property for $23,500. Buyers paid claimant $1,000 earnest money on execution. By the terms of said agreement bankrupt agreed to pay claimant a commission of $1,175. This earnest money receipt contained certain specific statements as to the distribution *603 of the sales price. On April 11, 1957, bankrupt and his wife executed a deed conveying said property to said buyers and on the same day the bankrupt and his wife delivered said deed to the claimant with a letter of instructions designating the claimant as escrow agent "to deliver and use this deed when you have for credit to our account the sum of $23,500.00, being the full purchase price of the above described property plus prorations of existing fire insurance and 1956/57 taxes as of May 1, 1957." Under such document claimant was further directed to make certain payments from said amount, including (1) payment of the balance of the construction loan note in the sum of $13,803.36, plus interest to date, (2) payment of the balance of the purchase money note in the said amount of $2,350, plus interest, and (3) claimant's commission in the amount of $1,175, and (4) discount fee for buyers' loan in the amount of $462.50. Bankrupt and his wife then directed in said communication that, "the balance of the funds are to be distributed to us. It is our understanding these funds will be available when title to subject property vests in the name of Paul M. Kinnersley, et ux. and your mortgage appears as a first lien."
On April 12, 1957, claimant agreed to make the buyers a loan in the sum of $18,500 to enable buyers to complete financing the purchase of said property and on said date the buyers gave claimant their note dated that date in the amount of $18,500 in connection with the loan to be made by claimant to buyers. On the same date buyers executed and delivered to claimant a mortgage on said real property to secure payment of their note. Again, on said date, buyers executed a closing statement showing the amount of the purchase price and charges, including a proration of taxes and insurance, the amount of earnest money, FHA mortgage loan and a balance of $4,697.82.
On April 17, 1957, bankrupt filed a petition in bankruptcy and was adjudicated a bankrupt. Thereafter, Alexander T. Bishop was appointed trustee of the bankrupt's estate. On April 22, 1957, the buyers deposited with the claimant said sum of $4,697.82, of which sum $4,000 was on account of the purchase price, $67.09 on account of the buyers' prorata share of the taxes and pre-paid insurance premium, and $630.73 was on account of loan costs and reserves. The buyers took actual possession of the property on May 1, 1957, the date mentioned in the purchase money receipt.
On May 22, 1957, the trustee filed a petition for an order to show cause with reference to the sale of said real property and served a copy of such order upon all the claimants, including Building. Claimant and Building filed motions to dismiss the trustee's petition on the ground, among others, that the court lacked jurisdiction to proceed in a summary manner. Building withdrew its motion to dismiss and its objection to summary jurisdiction at the time of the hearing. On July 22, 1957, the court entered an order with reference to the property involved directing, among other things,
"that the trustee be and he hereby is authorized and directed to complete the sale of the real property described as Lot 1, Block 6, Woodrow Wilson Park, City of Portland, County of Multnomah and State of Oregon to Paul M. Kinnersley and Maxine L. Kinnersley, his wife, as proposed by and as provided by the terms of the earnest money receipt agreement for the sum of $23,500.00 and to execute and deliver a bargain and sale deed of said real property to the said Kinnersleys, and that said sale be made free and clear of any and all liens and claims to or against said real property."
The order further provided for the distribution of the proceeds, but made no provision for the payment of the said sum of $2,350 plus interest, owing to the Building on the said note and unrecorded mortgage, which was the original purchase price of the property.
*604 I am of the opinion that the original purchase money contract of March 23, 1957, was modified by the additional escrow instructions of April 12, 1957, in which the escrow agent, the claimant, was specifically instructed by the bankrupt and his wife to deduct from the sales price of the property, said sum of $2,350 plus interest, before delivering the balance of the proceeds to the bankrupt. This additional burden was assumed by the claimant as the escrow agent. The claimant accepted, for escrow purposes, the warranty deed which is mentioned in the supplemental escrow instructions. The construction of contracts is generally determined by the law of the place of making. Jamieson v. Potts, 55 Or. 292, 105 P. 93, 25 L.R.A., N.S., 24; Sterrett v. Stoddard Lumber Co., 150 Or. 491, 46 P.2d 1023; Brace v. Gauger-Korsmo Construction Co., 8 Cir., 1929, 36 F.2d 661, certiorari denied 1930, 281 U.S. 738, 50 S.Ct. 333, 74 L.Ed. 1153. There can be no doubt but that the parties intended to modify the original escrow agreement by the supplemental contract. The intention of the parties must therefore control. ORS[1] 42.240 and ORS 42.220, 42.210. Biersdorf v. Putnam, 181 Or. 522, 182 P.2d 992. All of the parties considered the claimant as the escrow agent for distribution of the funds. The buyers, as late as April 22, 1957, deposited with the claimant the said sum of $4,697.82. The construction given to the contract by the makers thereof is important and the courts will not interfere with the practical construction placed thereon by the parties. Lease v. Corvallis Sand & Gravel Co., 9 Cir., 1950, 185 F.2d 570; Hugo V. Loewi, Inc. v. Geschwill, 9 Cir., 1951, 186 F.2d 849, rehearing denied 188 F.2d 366; Wood v. Davin, 122 Or. 74, 257 P. 690; Kontz v. B. P. John Furniture Corporation, 167 Or. 187, 115 P.2d 319.
Where the original agreement is changed with the acquiescence of all of the parties, the original contract is abrogated and changed to the extent of the modification. Good v. Smith, 44 Or. 578, 76 P. 354; Hayden v. City of Astoria, 74 Or. 525, 145 P. 1072. Therefore, at the time of the adjudication in bankruptcy, the supplemental instructions were an essential and binding part of the contract between the parties. If bankruptcy had not intervened, there is no doubt but that the claimant was under a direct obligation to pay the amount of the note and the interest to Building, on receipt of the funds. The appointment of the claimant as agent in this case was no ordinary appointment. This was an appointment coupled with an interest and as such, was irrevocable. Phez Co. v. Salem Fruit Union, 103 Or. 514, 201 P. 222, 205 P. 970, 25 A.L.R. 1090; Restatement of the Law, Agency, 2d, § 138; 2 Am.Jur., p. 66, §§ 81, 82. Thus, we have a complete irrevocable contract consisting of the original earnest money agreement and the supplemental escrow instructions. The trustee, of course, was under no obligation to complete this executory contract. Under § 70, Subdivision b of the Act, [11 U.S.C.A. § 110, sub. b,] the trustee is given the right to adopt or reject such a contract. However, he must do one or the other. If he deems the contract to possess no equity for the estate, he rejects it as burdensome. If, on the other hand, he concludes that the executory contract does have an equity for the estate, he adopts it. We quote from In re Italian Cook Oil Corporation, 3 Cir., 1951, 190 F.2d 994, 997:
"* * * The trustee, however, may not blow hot and cold. If he accepts the contract he accepts it cum onere. If he receives the benefits he must adopt the burdens. He cannot accept one and reject the other."
In conclusion, I am of the opinion that the Referee had jurisdiction to proceed in a summary manner and to direct a sale of the property pursuant to the terms and conditions of the executory contract consisting of the original earnest *605 money receipt and said supplemental instructions. The Referee had no power or authority to accept the benefits of such contract and reject its burdens. The order of the Referee dated the 30th day of October, 1959, should be modified so as to direct the claimant to deduct for the account of Building the additional sum of $2,350, plus interest at the rate of 6% per annum from the 1st day of April, 1956, until paid, the balance to be paid over to the trustee in bankruptcy.
In view of this holding, the other questions raised on the certificate of review are moot. Otherwise, the order of the Referee is affirmed. Counsel for claimant may draft an appropriate order.
NOTES
[1] Oregon Revised Statutes.
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561 S.W.2d 602 (1978)
Johnsie Jo POSEY, Appellant,
v.
Liston R. POSEY, Appellee.
No. 5803.
Court of Civil Appeals of Texas, Waco.
January 26, 1978.
Rehearing Denied February 23, 1978.
*603 L. L. Geren, Bradley & Geren, Groesbeck, for appellant.
Bobby Reed, Cannon, Cannon & Reed, Groesbeck, for appellee.
OPINION
JAMES, Justice.
This is a divorce case. Petitioner-Appellee Liston R. Posey, age 63, sued his wife Respondent-Appellant Johnsie Jo Posey, age 52, for divorce and division of property. The parties had four children, all over 18 years of age. The parties had been separated about five years at the time the suit was filed, Mrs. Posey having gone in 1971 to the State of Louisiana to teach school, where she has since resided. After hearing, the trial court granted a divorce to the parties and made the following division of "the community and separate property of the parties":
*604 I. To Petitioner-Appellee Liston R. Posey:
1. Five lots upon which a residence house was situated, located in Mexia, Texas, subject to an equitable lien to be impressed thereupon as security for his note to Mrs. Posey should he elect to forego payment of the $5000.00 in cash as set out in the award to her.
2. Any commemorative coins in his possession.
3. A 1966 Plymouth car, a 1966 Chevrolet pickup and a 1963 Plymouth car (the last-named car would not run).
4. All the funds on deposits in back accounts standing in his name and all funds on deposit to his account in the U. S. Postal Service Retirement Plan as well as any future benefits he may have accrued to him.
5. The U. S. Marine Corps Retirement Benefits growing out of his 21 years service in the Marine Corps, subject to $5000.00 to be paid by Mr. Posey to Mrs. Posey.
II. To Respondent-Appellant Johnsie Jo Posey:
1. All funds on deposit in her Louisiana Teachers Retirement and any future benefits to be derived therefrom.
2. The residence home located in Baton Rouge, Louisiana, together with all the furniture and furnishings therein, with her assuming the indebtedness on same.
3. All the "netsukes" (oriental ivory carved objects) in her possession except one, which was awarded to Mr. Posey.
4. A 1971 Chrysler car in her possession, with her assuming the indebtedness on same.
5. Any cash on deposit in her name.
6. $5000.00 to be paid by Mr. Posey to Mrs. Posey in lieu of her interest in the U. S. Marine Corps Retirement hereinabove referred to. Mr. Posey was given the option to pay this to her in cash within 30 days or make her a $5000.00 note bearing interest at 7% per annum payable in monthly installments of $125.00 each of principal including interest, such note to be secured by an equitable lien to be impressed upon the Mexia lots and house awarded to him as hereinabove pointed out.
7. 75 acres of land located near Doyle in Limestone County, which Mrs. Posey inherited through her people.
From this judgment Mrs. Posey appeals upon 18 points of error which may be grouped for convenience and discussion under three categories, to wit:
(1) The trial court erred in finding that Petitioner Mr. Posey resided in Limestone County for 90 days prior to the filing of his suit for divorce, because there is no evidence (legal insufficiency) and insufficient evidence (factual insufficiency) to support such finding.
(2) The trial court abused its discretion in making a property division between the parties.
(3) The trial court erred in refusing to admit the testimony offered by Appellant (except upon a bill of exception) on the motion for new trial concerning Petitioner-Appellee's residence during the 90 days immediately preceding Petitioner's filing of this suit.
We overrule all of Appellant's points and contentions and affirm the trial court's judgment.
We revert to Appellant's first and third group of points, to wit, to the effect that the trial court erred in finding that Petitioner-Appellee was a bona fide resident of Limestone County for 90 days immediately preceding the filing of this suit by Petitioner-Appellee Mr. Posey.
Mr. Posey filed this suit on April 6, 1976; therefore, the 90 days in issue concerning his residence was from January 6, 1976 to April 6, 1976. He pleaded that he had been a resident of Limestone County for the 90 days preceding the filing of his petition. Then at the divorce trial he testified that he had resided at 509 North McKinney Street in Mexia, Limestone County, since 1961; that he had been a resident there for the 90 days preceding the filing of the suit; that Mexia was his permanent place of residence; *605 that he had a phone listed in the Mexia directory; that he got his mail at a Mexia address; and did his banking in Mexia. He further testified that he had been temporarily staying with his mother in Navarro County because of her eye trouble, but that he considered Mexia as his permanent residence.
At the divorce trial Appellant Mrs. Posey never at any time presented any evidence contrary to the testimony above-recited by Appellee, nor did she in any manner deny Mr. Posey's testimony concerning his residence in Limestone County.
On the motion for new trial Appellant Mrs. Posey offered witnesses from the utility companies to the effect that only the minimum gas, electricity, and water were used in the Mexia home place for at least the 90 days before the filing of suit. Also Appellant sought to offer other witnesses in an attempt to show that Mr. Posey had been spending his nights with his mother in Navarro County during the 90 days in controversy. The trial court refused to admit this proffered testimony, but permitted Appellant to offer it upon a bill of exception.
In our opinion the trial court did not err in excluding this evidence proffered by Appellant on the hearing on the motion for new trial. In the first place, a temporary absence from the county of a plaintiff who is an inhabitant of the State during the 90 days next preceding the filing of his petition for divorce does not affect his right to maintain his suit for divorce. See Haymond v. Haymond (1889), 74 Tex. 414, 12 S.W. 90; Bomar v. Bomar (Dallas Tex.Civ. App.1950), 229 S.W.2d 859, no writ; Stacy v. Stacy (Waco Tex.Civ.App.1972), 480 S.W.2d 479, 482, no writ; Meyer v. Meyer (Austin Tex.Civ.App.1962), 361 S.W.2d 935, writ dismissed; 20 Tex.Jur.2d "Divorce and Separation," par. 67, pp. 411, 412.
Secondly, the evidence proffered by Appellant in the hearing on the motion for new trial constituted newly discovered evidence. The applicable rule of law for a new trial to be based on the grounds of newly discovered evidence is set out in 41 Tex. Jur.2d, "New Trial," Sec. 105, p. 253:
"Evidence discovered subsequent to trial is a proper ground of a motion for new trial in both civil and criminal cases. To justify the grant of a new trial it generally must be shown that the evidence was unknown to the movant before the trial, that his failure to discover it was not due to his want of diligence, that its materiality was such as would probably bring about a different result on another trial, and, generally, that it was competent, and not merely cumulative, corroborative, collateral, or impeaching.
"Motions for new trial on the ground of newly discovered evidence are not favored by the courts, and are received with careful scrutiny."
Also, see Dillingham v. Lynch (Austin Tex.Civ.App.1974), 516 S.W.2d 694, 701, NRE; Gonzales v. Diaz (El Paso Tex.Civ. App.1968), 424 S.W.2d 314, 315, no writ.
In the hearing on the motion for new trial, Appellant Mrs. Posey admitted that the proffered newly-discovered evidence was either known by her or available to her at the time of the divorce trial. We have carefully examined this proffered evidence, and without detailing same, suffice it to say that it is merely cumulative of the evidence presented at the divorce trial, and largely corroborates and strengthens such evidence.
With reference to the trial court's division of the property, Appellant asserts the trial court abused its discretion. Among other things Appellant particularly claims that the home place in Baton Rouge, Louisiana, and her Louisiana Teachers Retirement Fund awarded to her were her separate property under Louisiana law, and she presented Louisiana authorities to support this contention.
We do not express any opinion upon the question of whether this home place and retirement fund have a separate or community property status, because in either event we are of the opinion that the trial court did not abuse its discretion in the property division made. Without detailing the values *606 of the respective items of property awarded to each party, such division appears to have worked substantial justice to the parties, in view of the fact that each party was earning close to the same amount of money, in view of the age and health of the parties, and all other surrounding circumstances shown by the evidence.
It is well settled that the trial court has broad discretion in determining the disposition of property in divorce actions, and this discretion will not be disturbed unless an abuse of discretion is shown. That is to say, the trial court's action should be disturbed on appeal only when an abuse of discretion is shown in that the division made is manifestly unjust and unfair. Section 3.63, Texas Family Code; Hedtke v. Hedtke (1923), 112 Tex. 404, 248 S.W. 21, which holds that the trial court's discretion applies to dividing property which is separate as well as community property; Carle v. Carle (1950), 149 Tex. 469, 234 S.W.2d 1002; Bell v. Bell (Tex.1974), 513 S.W.2d 20; McKnight v. McKnight (Tex.1976), 543 S.W.2d 863. Also see Fortenberry v. Fortenberry (Waco Tex.Civ.App.1976), 545 S.W.2d 40, 42, no writ, and Smallwood v. Smallwood (Waco Tex.Civ.App.1977), 548 S.W.2d 796, 797, no writ.
There is no requirement under the above-stated rules that the trial court divide the property equally between the parties, Hedtke, supra; on the contrary, the trial court is required to view the case in its entirety in making a division that is just and right between the parties.
We have carefully considered all of Appellant's points and contentions, and overrule same.
Judgment of the trial court is accordingly affirmed.
AFFIRMED.
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369 F.2d 627
John J. KELLEY, Petitioner, Appellant,v.Raymond J. DUNNE, Respondent, Appellee.
No. 6786.
United States Court of Appeals First Circuit.
Heard Nov. 8, 1966.Decided Dec. 14, 1966.
Charles M. Burnim, Boston, Mass., with whom F. Lee Bailey, Boston, Mass., was on brief, for appellant.
Edward J. Lee, Asst. U.S. Atty., with whom Paul F. Markham, U.S. Atty., was on brief, for appellee.
Before ALDRICH, Chief Judge McENTEE and COFFIN, Circuit Judges.
OPINION OF THE COURT.
PER CURIAM.
1
Plaintiff appellant, in the prosecution of this appeal, has violated one of our basic requirements. If there be any lack of clarity in our Rules 22(2) and 23(1), dealing, respectively, with the content of and presentation of the record on appeal, our exposition of this obligation over the years has been repetitious to the point of redundancy. We cannot pass upon the correctness of findings when only a small portion of the transcript is made available. Even without a rule, this should be self-evident.
2
That would be the end of the case, except that in this instance we elect to deal with some of the matters that have been argued as if they had been adequately presented. Assuming for present purposes that the facts are as appellant contends, and disregarding inter alia, certain specific contrary findings of the district court, defendant, an investigatory agent of the Post Office removed $235 in currency belonging to the plaintiff from plaintiff's house without a warrant, and without consent. Four years later plaintiff instituted this action of replevin against the officer in the Massachusetts state court, which was removed to the district court pursuant to 28 U.S.C. 1442. We voice no criticism of the delay, but we mention it becasue it is hardly to be assumed, without proof, that the defendant was still in possession of this particular currency at the time of suit. No attempt was made to show that he was, and the uncontradicted testimony, so far as appears, is to the contrary. Replevin is a possessory action. Plaintiff fails at the threshold.
3
Plaintiff has further difficulties. It is conceded that prior to suit the defendant had offered to giver plaintiff $235, but not this particular currency, and that plaintiff refused. Plaintiff has not shown that it would be possible to identify the particular currency he seeks, let alone that these bills were in any way unique. The first omission alone would be fatal. Futhermore absent any showing that plaintiff has reason to prefer one particular piece of currency over another of the same denomination (and we observe that plaintiff did not even appear at the trail to testify that he did) we do not think the time of the district court should have been taken over this matter. We see even less reason, following the court's findings, why our time should also be taken.
4
Affirmed.
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651 F.2d 775
*E. E. O. C.v.Fuller
80-2097
UNITED STATES COURT OF APPEALS Fifth Circuit
6/30/81
S.D.Tex.
VACATED
1
---------------
* Fed.R.App.P. 34(a); 5th Cir.R. 18.
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470 F.Supp. 600 (1979)
John LEAKE, on behalf of himself and all other persons similarly situated, Plaintiffs,
v.
ELLICOTT REDEVELOPMENT PHASE II, Henry Van Landingham, Individually and in his capacity as manager of Towne Gardens Phase II Apartments and their agents, subordinates and employees, Defendants.
CIV-79-322.
United States District Court, W. D. New York.
May 4, 1979.
*601 James A. Kreuzer, Neighborhood Legal Services, Inc., Buffalo, N.Y., for plaintiff.
William A. Sims, Buffalo, N.Y., for defendants.
MEMORANDUM
ELFVIN, District Judge.
In my Order of May 3, 1979, I preliminarily enjoined defendants from "prosecuting the summary eviction action now pending in Buffalo City Court which is captioned TOWNE GARDENS, LTD. v. JOHN LEAKE, Index No. 62600." The following constitutes my Memorandum regarding said Order.
Plaintiff seeks a preliminary injunction under Fed.R.Civ.P. rule 65 enjoining defendants from evicting him and others similarly situated from a federally subsidized housing project designed for low and moderate income tenants. Inasmuch as plaintiff has not yet moved for class certification of the instant action, the discussion which follows and the relief ordered in my May 3rd Order is limited to him alone. Plaintiff asserts that his pending eviction is violative of Department of Housing and Urban Development ("HUD") regulations set forth at 24 C.F.R. § 450.1-7.
Oral argument was held April 26, 1979. Thereafter defendants agreed to delay any further eviction proceedings until May 4th or thereafter. The following facts alleged in plaintiff's verified complaint and exhibits thereto are not disputed by defendants. Plaintiff is a tenant of Towne House Gardens Phase II Apartments, a federally subsidized project within the meaning of 24 C.F.R. § 450.2(e). Among the provisions in plaintiff's rental agreement are a covenant that the tenant "pay the rent herein stated promptly when due" (¶ 9) and a provision permitting the landlord "at his election or option, to re-enter and take possession of the dwelling unit" if a tenant should fail to pay rent when due or fail to comply with any other provisions of the rental agreement (¶ 16).[1] By letter of February 27, 1979, defendant Van Landingham provided a thirty-day termination notice of the rental agreement. As grounds therefor, Van Landingham cited substantial violations of the rental agreement to wit, 12 late payments of rent, 3 late payments of rent in less than the full amount and 2 failures to pay any rent. Subsequently, defendants commenced summary eviction proceedings in the City Court of Buffalo (N.Y.) and a hearing was scheduled for April 25th.
A preliminary injunction may not be granted unless the moving party demonstrates "possible irreparable injury and either (1) probable success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting preliminary relief." Caulfield v. Board of Education, 583 F.2d 605, 610 (2d Cir. 1978).
*602 During oral argument, plaintiff asserted that the instant rental agreement does not contain provisions implementing subpart A of subchapter J of HUD's regulations (24 C.F.R. § 450.1-7), which set forth the requisite procedure and grounds for evicting tenants from federally subsidized projects.[2] In particular, plaintiff argues that defendants' failure to incorporate section 450.3 (which permits a landlord to evict such tenant for non-payment of rent) renders the pending eviction violative of plaintiff's due process rights in that plaintiff did not have notice that such non-payment constituted grounds for eviction. My examination of paragraph 16 of the rental agreement shows that while such provision does not conform in all respects with the criteria set forth in section 450.3, plaintiff was put on sufficient notice that he could be evicted for failure to pay rent. Inasmuch as plaintiff has not been prejudiced by defendants' failure to incorporate said section into the rental agreement, I find that plaintiff's due process rights have not been violated by such failure. In addition, I find unpersuasive an argument advanced by plaintiff that defendants are estopped from evicting him by reason of their past practice of accepting late rental payments. Paragraph 17 of the lease which assesses a penalty charge of $5.00 for late payments, clearly gives defendants the option of accepting such payments and does not estop them from evicting a tenant for his failure to make subsequent rental payments when due.
However, plaintiff further contends in his verified complaint that he was not given proper notice of termination as required by 24 C.F.R. § 450.4. Plaintiff argues that the notice he received did not contain information required by section 450.4(a) and was not served in the manner prescribed by section 450.4(b).
Section 450.3 provides in part that "[n]o termination shall be valid unless it is in accordance with the provisions of § 450.4." The pertinent portion of § 450.4 states:
"(a) Requisites of termination notice.
"The landlord's determination to terminate the tenancy shall be in writing and shall * * * (2) state the reasons for the landlord's action with enough specificity so as to enable the tenant to prepare a defense; (3) advise the tenant that if a judicial proceeding for eviction is instituted the tenant may present a defense; and (4) be served on the tenant in the manner prescribed by paragraph (b) of this section.
"(b) Manner of service. The notice provided for in paragraph (a) of this section shall be accomplished by (1) sending a letter by first class mail, properly stamped and addressed, to the tenant at his address at the project, with a proper return address, and (2) by serving a copy of said notice on any adult person answering the door at the leased dwelling unit, or if no adult responds, by placing said notice under or through the door. Service shall not be deemed effective until both notices provided for herein have been accomplished. * * *"
My review of the notice of termination shows it to be insufficient in one or more regards. First, the notice does not advise plaintiff that if a judicial proceeding for eviction is instituted he may present a defense. Such statement is required by section 450.4(a)(3). Second, while the notice appears to state with sufficient specificity the reasons for defendants' action as required by section 450.4(a)(2), section 450.4(e) indicates that such notice should also state the dollar amount of the balance due on the rent. Third, the notice was apparently served by mailing it to plaintiff without in addition serving a copy on an adult person at the leased premises or placing such notice under the door, as required by section 450.4(b). Thus, I find that the notice herein does not comport with HUD regulations set forth in section 450.4 and that termination pursuant to said notice would be invalid. Inasmuch as plaintiff has demonstrated the *603 possibility of irreparable injury and probable success on the merits, defendants must be enjoined from prosecuting the summary eviction proceedings pending in the City Court which seek to evict plaintiff pursuant to the invalid notice of termination.
NOTES
[1] The full text of paragraph 16 states:
"TENANT further agrees that if he should fail to pay the rent herein stipulated promptly when due, or should fail to comply with any and all other provisions of this Lease, then it shall be lawful for the LANDLORD, at his election or option, to re-enter and take possession of the dwelling unit, the TENANT hereby expressly waiving any and all notices to vacate said dwelling unit, and thereupon this Lease shall terminate, without prejudice, however, of the right of the LANDLORD to recover from the TENANT all rent due up to the time of such re-entry."
[2] 24 C.F.R. § 450.70 requires that "[e]very rental agreement entered into or renewed on or after the date on which this subpart is applicable to such tenant shall contain appropriate provisions implementing this subpart."
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166 F.3d 1205
Bruce Hain, Individually, for Citizens for Sensible Transportationv.New Jersey Transit, Federal Transit Administration
NO. 97-5697
United States Court of Appeals,Third Circuit.
September 28, 1998
1
Appeal From: D.N.J.
2
Vacated.
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374 F.Supp.2d 375 (2005)
Kenneth CARROLL, et al., Plaintiffs,
v.
LEBOEUF, LAMB, GREENE & MACRAE, L.L.P., et al., Defendants.
No. 05 Civ. 0391(LAK).
United States District Court, S.D. New York.
June 28, 2005.
*376 Blair C. Fensterstock, Maureen McGuirl, Robert L. Lash, Fensterstock & Partners LLP, New York City, Attorneys for Plaintiffs.
Aaron R. Marcu, Andrew A. Ruffino, Philip A. Irwin, Jason P. Criss, Covington & Burling, New York City, Brad D. Brian, Richard E. Drooyan, Bruce A. Abbott, Munger & Tolles, Los Angeles, CA, Attorneys for Defendants Sidley Austin Brown & Wood LLP and SABW Holding, L.L.P.
Stewart Edward Abrams, Frankel & Abrams, Attorneys for Defendant R.J. Ruble.
MEMORANDUM OPINION
KAPLAN, District Judge.
Defendants Sidley Austin Brown & Wood LLP and SABW Holding, L.L.P. (collectively "Brown & Wood") and R.J. Ruble move to stay this action as to them pending arbitration. The Court assumes familiarity with the amended complaint and minimizes recounting of the facts.
This is an action against plaintiffs' former lawyers, accountants, and financial advisors to recover losses allegedly incurred as a result of plaintiffs' investment in a tax strategy involving foreign non-performing loans. Plaintiffs claim that defendants Roy Hahn and Chenery[1] developed the tax strategies at issue and that various attorneys (including Brown & Wood), accountants and financial advisors assisted them in their development and marketing. Ruble, a former Brown & Wood partner, allegedly provided a tax opinion on the strategies. The amended complaint seeks recovery under the Racketeer Influenced and Corrupt Organizations Act and on other theories, including fraud.
The amended complaint alleges no communication between plaintiffs and Brown & Wood and Ruble save for the tax opinion. Nevertheless, it seeks to hold movants liable for all of the alleged losses and for the conduct of other defendants on the theories, among others, that they conspired with them and that other defendants, including Hahn and Chenery, acted as their agents.[2]
Among the defendants with whom Brown & Wood and Ruble allegedly conspired and had an agency relationship[3] was myCFO.[4] Plaintiffs contend that they decided to participate in the disputed tax strategy in reliance on representations made by myCFO "on behalf of all of the Promoters,"[5] a term defined to include Brown & Wood and Ruble, among others.[6]
Plaintiffs signed two agreements with myCFO entities, both of which contained broad arbitration clauses.[7] Brown & *377 Wood and Ruble contend that they are entitled to compel plaintiffs to arbitrate their claims against them pursuant to these agreements on the alternative grounds that plaintiffs are (1) bound by their allegations that myCFO acted as their agent, and (2) equitably estopped to refuse to arbitrate. Plaintiffs dispute movants' right to invoke the myCFO arbitration clauses. While the matter has been argued at length, it is necessary to consider only defendants' equitable estoppel argument.
"[U]nder principles of estoppel, a non-signatory to an arbitration agreement may compel a signatory to that agreement to arbitrate a dispute" in this circuit
"where a careful review of `the relationship among the parties, the contracts they signed ... and the issues that had arisen' among them discloses that `the issues the nonsignatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed.'"[8]
Here, plaintiffs allege a close relationship among Brown & Wood, Ruble and myCFO they contend that myCFO acted as the agent of Brown & Wood and Ruble in promoting the tax strategies and conspired with them to plaintiffs' detriment. Indeed, they claim that they and myCFO acted together for years to promote tax strategies.[9] Nor can plaintiffs deny the connectedness of the claims asserted against Brown & Wood and Ruble and those against myCFO's successor, HarrismyCFO. Six of the claims against movants are identical to claims against HarrismyCFO.[10] The fact that the claims against movants do not arise under the myCFO agreements, while relevant, is but one factor to be considered in determining whether the claims are intertwined.[11]
Plaintiffs rely on Stechler v. Sidley, Austin Brown & Wood, L.L.P.,[12] a case involving another alleged tax shelter scheme in which Judge Scheindlin denied a motion by Brown & Wood to stay pending arbitration in superficially analogous circumstances. But Stechler does not warrant a similar result here, partly because the case is distinguishable in material respects and partly because this Court does not agree with an important factor relied upon there.
Taking the second point first, Stechler said that the most important factor warranting denial of Brown & Wood's motion was the lack of any "indication in the record of any willingness on the [plaintiffs'] part to arbitrate their disputes with Brown & Wood."[13] With respect, this Court does not regard such a lack as material to the question whether a plaintiff who has signed an arbitration clause is estopped *378 to prevent a non-signatory from compelling arbitration.
Arbitration, to be sure, is a creature of agreement, and it often is said that "a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit."[14] But this broad proposition is not applied literally.[15] One arguable exception is the well-accepted principle that even claims that merely "touch matters" covered by agreements containing broad arbitration clauses must be arbitrated.[16] The doctrine of equitable estoppel, as invoked by non-signatories to compel arbitration, is an even clearer example. The standard that governs such situations looks to the degree to which the issues sought to be arbitrated are "intertwined with the agreement that the estopped party has signed," not to evidence that the estopped party actually intended or expected that any dispute with the nonsignatory would be subject to arbitration.[17] The doctrine therefore appears to depend upon the broad federal policy favoring arbitration and, at least in circumstances in which the estopped party will be arbitrating with counterparties to the agreement containing the arbitration clause the situation here,[18] considerations of adjudicative economy, not consent.
At least one other aspect of Stechler is inapplicable as well. The Stechler Court opened its discussion by noting that the plaintiffs there had not treated Brown & Wood and the entities with which the plaintiffs had agreed to arbitrate "as though they were interchangeable and as a single unit," distinguishing Smith/Enron.[19] But this case is different. Here, as noted above, plaintiffs specifically and repeatedly allege that myCFO, among others, acted at all relevant times the agent of Ruble and Brown & Wood.[20] Moreover, the amended complaint lumps Brown & Wood, Ruble, myCFO, and others together under the sobriquet "Promoters" and treats them throughout as a unit. Plaintiffs' treatment of defendants here is quite similar to Smith/Enron, where the Second Circuit held that the fact that the party resisting arbitration in a prior lawsuit could not rely for that purpose on the separate corporate existence of a number of Enron affiliates that it had referred to them collectively in a prior complaint as the "Enron Group."[21] Having elected to tar Brown & Wood and Ruble with the very broad brush that they applied to other defendants, plaintiffs' attempt to avoid arbitration by pointing to their distinctness is unpersuasive.
The degree of interrelatedness necessary to allow a non-signatory to compel arbitration is extremely fact dependent. Taking everything into account, this Court concludes that plaintiffs are equitably estopped to resist enforcement of the arbitration clauses by Brown & Wood and *379 Ruble absent some other legal principle requiring a contrary result.
Plaintiffs attempt to avoid equitable estoppel by contending that Brown & Wood and Ruble may not enforce the arbitration clause against plaintiffs because contracts between attorneys and their clients are subject to special rules in both of the potentially relevant states, New York and New Jersey. This argument, however, is undermined by the fact that Brown & Wood and Ruble do not here invoke any contract between them and the plaintiffs. Rather, they maintain that plaintiffs are estopped to refuse arbitration pursuant to their contracts with myCFO. In consequence, even assuming that the ethical rules relating to attorney-client transactions would foreclose enforcement of these arbitration clauses if they were in agreements between plaintiffs and Brown & Wood and Ruble, they have no direct bearing here. Nor does the Court perceive any reason why an attorney may not assert equitable estoppel to compel arbitration by former clients in circumstances in which, as here, the former clients' agreement to the arbitration clauses in their contracts with a third party is not allegedly a product of overreaching by the attorney. Plaintiffs cite no case that suggests otherwise.
Accordingly, the motions of defendants Sidley Austin Brown & Wood LLP and SABW Holding, L.L.P. [docket item 82], and Ruble [docket item 86], to stay this action as against them pending arbitration are granted.
SO ORDERED.
NOTES
[1] "Chenery" refers to defendants Chenery Associates, Inc., Sussex Financial Enterprises, Inc., and Chenery Management, Inc.
[2] See, e.g., Am. Cpt. ¶¶ 45-46, 49, 53, 61(g).
[3] E.g., Am. Cpt. ¶¶ 49, 51, 58.
[4] "myCFO" refers to myCFO, Inc., myCFO Securities, LLC, and myCFO Investment Advisory Services, LLC.
[5] Id. ¶¶ 59, 53-59.
[6] Id. ¶ 45.
[7] Irwin Decl. Ex. B, at KCB 0019, 0025. Specifically, it covers "any dispute between or among any of the parties arising out of, relating to or in connection with this Agreement, the Services provided or the Account." Id.
[8] JLM Indus., Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 177 (2d Cir.2004) (quoting Choctaw Generation Ltd. P'ship v. Am. Home Assurance Co., 271 F.3d 403, 406 (2d Cir.2001)).
[9] Plaintiffs seek to ignore their repeated allegations that myCFO acted in all relevant respects as movants' agent. This effort, however, is of no avail. Id. at 177 ("party attempting to resist arbitration was estopped from doing so because it had treated arguably non-signatory companies `as a single unit' in its complaint in the related lawsuit.") (citing Smith/Enron Cogeneration Ltd. P'ship v. Smith Cogeneration Int'l Inc., 198 F.3d 88, 98 (2d Cir.1999)).
[10] Am. Cpt. counts 1, 5-9.
[11] Plaintiffs' suggestion that JLM Industries requires that the claims against movants arise under the myCFO agreements is quite incorrect.
[12] No. 04 Civ. 5923(SAS), 2005 WL 774264 (S.D.N.Y. Apr. 15, 2005).
[13] Id. at *8.
[14] Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc., 252 F.3d 218, 224 (2d Cir.2001) (internal quotation marks omitted).
[15] See, e.g., Genesco, Inc. v. T. Kakiuchi & Co. Ltd., 815 F.2d 840, 846 (2d Cir.1987) (observing that in determining whether a party agreed to arbitration, the court's focus is "not on whether there was subjective agreement as to each clause in the contract, but on whether there was an objective agreement with respect to the entire contract.").
[16] See, e.g., Paramedics Electromedicina Comercial, Ltda. v. GE Med. Sys. Info. Techs, Inc., 369 F.3d 645, 654 (2d Cir.2004) (quoting Smith/Enron Cogeneration Ltd. P'ship, 198 F.3d at 99).
[17] Choctow Gen. Ltd. P'Ship, 271 F.3d at 406.
[18] Plaintiffs concede that they must arbitrate their claims against myCFO.
[19] Stechler, 2005 WL 774264, at *7.
[20] Am. Cpt. ¶ 46.
[21] Smith/Enron, 198 F.3d at 97-98.
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254 S.E.2d 813 (1979)
CONSOLIDATION COAL COMPANY
v.
J. Donald KRUPICA et al.
No. 14450.
Supreme Court of Appeals of West Virginia.
Submitted February 27, 1979.
Decided May 15, 1979.
*814 Phillips, Marshall, Gardill & Hazlett, John Marshall III, James C. Gardill and Paul T. Boos, Wheeling, for petitioner.
Preiser & Wilson, Stanley E. Preiser and L. Alvin Hunt, Charleston, for respondents.
MILLER, Justice:
This original proceeding in mandamus presents the question of whether, under W.Va.Code, 11-3-24, a taxpayer's objection to a proposed increased real property assessment is timely if he lodges it after the county commission[1] has officially adjourned, but during business hours on the first day of the commission's term as a board of review and equalization. This action arises out of the refusal of the respondent, the County Commission of Marshall County [hereinafter Commission], to entertain the objection of the petitioner, Consolidation Coal Company [hereinafter Consolidation], to an increased assessment made by the County Assessor with respect to certain coal lands owned by Consolidation.[2]
The operative facts are not in dispute. On January 24, 1979, the Assessor notified Consolidation that the assessed value of the coal lands would be $10.00 per acre. On January 30, 1979, the Assessor informed Consolidation that the assessment for such property would be $100 per acre. It is unclear what the assessment had been prior to January, 1979, but it is undisputed that the $100-per-acre value represented an increase.[3]
On February 1, 1979, pursuant to statute, the Commission convened its session as a board of review and equalization.[4] Notice of the session was given all taxpayers by publication in a local newspaper on January 5 and 12.[5] This advertisement provided *815 that advance notice of the taxpayer's objection must be filed:
"Notice is hereby given that the County Commission of Marshall County (In compliance with Chapter II, Article 3, Sec. 24, the Code of West Virginia) will sit as a Board of Review and Equalization for the County of Marshall, State of West Virginia, in the County Commission room of the Marshall County Court House on the following date:
"Thursday, February 1, 1979, 10:00 o'clock A.M., and such times thereafter, as the County Commission may determine. Adjournment thereof, may be made by oral proclamation of the County Commission.
"Notice of appearance and a detailed written statement reflecting the nature of the taxpayer's complaint or objection, should be given on or before January 25, 1979, to Ralph Mikasen, Administrative Assistant, Marshall County Commission, Court House, Moundsville."
Because Consolidation was not notified of the $100-an-acre assessment until January 30, it was impossible for it to furnish the required notice and statement of objection by January 25, and the Commission does not seriously contend otherwise.[6]
On February 1, the first day of its term, the Commission convened at the appointed time of 10:00 a. m., received three taxpayer objections, inquired if there were other objections, and adjourned at 11:45 a. m. At 3:35 p. m. that day the Commission entered an order foreclosing all other objections. At 3:45 p. m., Consolidation appeared to file its objection, but the Commission was not in session. Consequently, Consolidation filed its written objection with the County Clerk. The Commission deemed this objection untimely because it was filed after adjournment and entry of the order foreclosing further objections.
The narrow question before us is whether the foreclosure of the objection was valid under W.Va.Code, 11-3-24, which basically governs the procedure of review and equalization before county commissions.
We begin by recognizing that W.Va.Code, 11-3-24, provides a county commission acting as a board of review and equalization with a term of short duration. The statute fixes February 1 as the latest time when the term may commence, and further states that the county commission "shall not adjourn for longer than three days at a time until this work is completed, and shall not remain in session for a longer period than twenty-eight days."
The purpose of limiting the term to such a brief span was stated in the early case of West Virginia National Bank v. Spencer, 71 W.Va. 678, 682, 77 S.E. 269, 270 (1913):
"The statute in this particular is a wholesome one, meant to so settle and foreclose questions in relation to assessments that, when the books are completed and collection begins, the matters of public revenue will not be interfered with or retarded."
See Annot., 105 A.L.R. 624 (1936).
We have not found nor are we cited any direct holding by this Court on what constitutes a timely filing. In West Virginia National Bank v. Spencer, supra, the taxpayers sought relief in equity against a claimed erroneous assessment of bank stock, but were denied relief on the ground that they had failed to contest the assessment before the county commission. This Court, without any elaboration, cited the forerunner of W.Va.Code, 11-3-24, which contained language almost identical to that contained in the present section:
"`If any person fail to apply for relief at said meeting he shall be deemed to have waived his right to ask for correction in his assessment list . . ..'"
[71 W.Va. at 683, 77 S.E. at 271]
*816 The later case of In re Morgan Hotel Corp., 151 W.Va. 357, 151 S.E.2d 676 (1966), reveals that the taxpayer filed an objection to his assessment on February 25. This Court, again without any discussion of the timeliness of the initial objection, proceeded to rule on the merits of the appeal.
When we consider in its entirety W.Va.Code, 11-3-24, together with its related section, W.Va.Code, 11-3-24a, it appears that the Legislature did not intend to limit the right of the taxpayer to protest to a narrow time period on the first day the county commission meets.
W.Va.Code, 11-3-24, begins with the requirement that "[a]t the first meeting, the assessor shall submit the property books. . .." It goes on to state that "[t]he court [commission] shall proceed to examine and review the property books," and charges the commission with the duty of adding omitted names and property values. The commission is required to correct all errors in names of property owners and in the description and value of their property. The commission is further required to do "whatever else may be necessary to make the valuation comply with the provisions of this chapter."
These are clearly administrative functions which are designed to monitor the accuracy of the assessor's performance. It is apparent that these administrative operations precede the hearing of any objections by taxpayers, and this framework suggests that these operations be carried out in advance of receiving objections.
W.Va.Code, 11-3-24, further empowers the county commission to alter assessments made by the assessor which do not reflect the true and actual value of the property. However, where the county commission increases the assessment, the property owner must be given at least five days' notice in writing of the intention to make the increase. In this situation the taxpayer obviously cannot protest the increase until he has been notified of it.
It is equally apparent that the statutory language which bars objection to an increase, "[i]f any person fails to apply for relief at this meeting . . .." [emphasis supplied], cannot be construed to mean the initial meeting of the county commission. To so hold would produce the absurd result of permitting the county commission to increase an assessment at its first meeting, send the required notice to the taxpayer of the proposed increase, but, when the taxpayer appeared later to object, hold him barred because he did not object at the first meeting.
When we look to W.Va.Code, 11-3-24a, which relates to the contesting of matters regarding the classification and taxability of property, we note that these issues may be raised "[a]t any time after property is returned for taxation and up to and including the time the property books are before the county court for equalization and review. . .." Certainly, these issues parallel questions of valuation in importance. In light of the liberal protest provisions in this section, it would be incongruous to construe W.Va.Code, 11-3-24, as enabling the county commission to set a specific time on its initial meeting day for the taxpayer to file objections or otherwise be forever barred from contesting his increased assessment.
Finally, there is the historic rule that tax statutes are generally to be construed in favor of the taxpayer and against the taxing authority. Wooddell v. Dailey, W.Va., 230 S.E.2d 466 (1976); In re Estate of Evans, 156 W.Va. 425, 194 S.E.2d 379 (1973); Baton Coal Co. v. Battle, 151 W.Va. 519, 153 S.E.2d 522 (1967).
We thus conclude that the phrase "to apply for relief at this meeting" in W.Va. Code, 11-3-24, is ambiguous, but that it does not mean that the county commission can confine the taxpayer's right to protest an assessment to a stated period on the initial day the commission meets to review and equalize assessments.
When we turn to other jurisdictions, we find it generally established that where the governing statute is silent, or ambiguous, as to a time period for filing objections, *817 the taxpayer must be given a reasonable time to file. Schluderberg v. Mayor and City Council, 151 Md. 603, 135 A. 412 (1926); Township of Caledonia v. Rose, 94 Mich. 216, 53 N.W. 927 (1892); Vanadium Corp. v. Board of Assessors, 50 Misc.2d 570, 270 N.Y. S.2d 919 (Sup.Ct.1966); In re Cathedral of the Incarnation, 91 A.D. 543, 86 N.Y.S. 900 (1904).
In Schluderberg, supra, the Maryland court construed a statute that simply provided for "a system for hearings on petitions filed before it, and . . . such rules of proceedings, manner of taking testimony and argument and such regulations in regard to notices of assessment, hearings and appeals as [the state tax commission] may deem proper." The court held that this general scheme necessarily contemplated both reasonable notice to the taxpayer and a reasonable time within which he could file objections:
"It will be seen from the provisions of the statute above quoted, that the state tax commission is given exclusive power and authority to assess the personal property of an ordinary business corporation; also that it has power and authority to adopt such rules and regulations in regard to notices of assessment, hearings, and appeals as it may deem proper; the only limitation being that the notice given to the taxpayer afford him reasonable and proper time to protest the assessment. The time given in this case was ten days, which apparently is the usual time inserted in notices to taxpayers where the assessment has been made by the commission, and which affords the taxpayer ample time to make protest to the state tax commission against the assessment as made." [151 Md. at 610, 135 A. at 414]
Township of Caledonia v. Rose, supra, involved a statute requiring the township board of review to meet on the fourth Monday in May. Instead of meeting on that day, the board met during the week preceding the fourth Monday and then adjourned sine die. The Michigan court held in rather broad language that the board's action deprived the taxpayer of a fair opportunity to be heard:
"[This] board of review is a tribunal provided by law, in which the tax payer may appear to contest an unequal or excessive assessment. Failing to appear there, he is estopped to assail the assessment afterwards. . . .
"Defendant was therefore entitled to his `day in court' before that tribunal. The provision of the statute requiring the board to meet upon the days named is mandatory, and it cannot deprive the tax payer of his hearing there, and thereby force him to a suit at law to obtain redress. Defendant was entitled to assume that the board would remain in session the full length of time provided by the statute . . .." [94 Mich. at 218, 53 N.W. at 928]
In Vanadium Corp. v. Board of Assessors, supra, the court interpreted the "grievance day" provisions of the New York tax assessment statute. Those provisions simply stated that the board shall "meet at the time and place specified in [the] notice" to "hear and determine all complaints in relation to such assessments brought before them, and for that purpose they may adjourn from time to time." [Emphasis in original] [50 Misc.2d at 571, 270 N.Y.S.2d at 920] In holding that the taxpayer filed an untimely complaint, the court emphasized that he did not appear at the appointed place during regular business hours:
"Looking at the facts most beneficial to the [taxpayer], the Court does not view the protest on the 1959 assessment timely or properly filed. The plant manager arrived after what would be considered normal public business hours, found no meeting in session, located one of the officials by phone, presented the protest to him who accepted it with certain limiting remarks. The Board evidently had not adjourned to another specific date nor is there any record of any one formally requesting and obtaining an adjourned date. For all practical purposes the meeting had been concluded." [50 Misc.2d at 572, 270 N.Y.S.2d at 921]
*818 In re Cathedral of the Incarnation, supra, concerned an earlier New York assessment law that was similarly silent, or ambiguous, as to the time for filing a protest. The board of assessors issued a notice fixing August 18 as "the first day upon which objections [to the assessments] would be heard." The taxpayer appeared the next day, August 19, to protest, and the board deemed the protest untimely.
Reversing the board, the court held the complaint timely on two grounds. First, the statute said nothing about the time for filing:
"Section 250 of the Tax Law does not prescribe that the application must be made on the first day named in the notice, or on the third Tuesday of August, or on any specified day. It reads: `Such petition must show that application has been made in due time to the proper officers to correct such assessment.' As August eighteenth was the earliest day when such application could be made (§ 35), it cannot be presumed that an application made on August nineteenth was not made in due time so far as the opportunity for hearing and correction is concerned. . . . By the statute the third Tuesday of August is simply made the day when the assessors will meet `to review their assessments.' (§ 35.) There is no provision of the law that complaints must be made upon that day or be forever barred, while section 36 prescribes that the assessors shall meet at that time and at the place specified in the notice of completion of the assessment roll to hear and determine all complaints, and for that purpose may adjourn from time to time. . . ." [91 A.D. at 545, 86 N.Y.S. at 901-902] [Emphasis in original]
Second, the wording of the board's notice was ambiguous enough to be misleading:
"[I]f the notice fixed August eighteenth as the first day, then the petitioner, aside from any question of statutory assurance, in view of the provisions of section 36 supra, and of the absence of specific day designated by statute, was lulled to sleep by the form of the notice. . . ." [91 A.D. at 547, 86 N.Y.S. at 903] [Emphasis in original]
The reasoning of these cases is analogous to that of the present case. Our statute is at best ambiguous as to the time for filing objections to increased assessments. In the absence of statutory prescription, the Commission's notice had to furnish reasonable time. The notice did not state that objections had to be filed at 10:00 a. m. on Thursday, February 1, but merely provided that the Commission would initially sit at that time and at "such times thereafter as the County Commission may determine.. . ." There was nothing in the notice that indicated when the Commission would adjourn its meeting on the first day. Therefore, it would not have been unreasonable for the taxpayer to have assumed he could appear anytime during the regular business hours of February 1, for the taxpayer cannot be charged with knowledge of a particular adjournment time.
We conclude that a proper interpretation of W.Va.Code, 11-3-24, permits a taxpayer a reasonable time from the opening of the county commission's term as a board of review and equalization to file his objection to his property tax assessment. We base this conclusion not only on the foregoing legal analysis, but on the practical consideration that in this era of rising taxes and inflation there are those small businessmen and homeowners who may wish to contest the correctness of their property assessments. These individuals may not be able to afford legal assistance and should not be unduly hampered by a narrow and constrictive interpretation of a tax statute designed to afford them relief.
In this case, we need not survey the outer boundaries of what would be a reasonable time period for the filing of an objection to a tax assessment. Here, the taxpayer filed during normal business hours on the first day the Commission met. Clearly, such filing was timely.[7]
*819 The remaining issue is whether mandamus is the proper remedy. It is well established that mandamus will lie to require the discharge by administrative agencies of nondiscretionary duties and to control arbitrary action by them. E. g., State ex rel. Anderson v. Board of Education, W.Va., 233 S.E.2d 703 (1977); State ex rel. West Virginia Board of Education v. Miller, 153 W.Va. 414, 168 S.E.2d 820 (1969); State ex rel. Allstate Insurance Co. v. Union Public Service District, 151 W.Va. 207, 151 S.E.2d 102 (1966). Here, the Commission had a nondiscretionary duty to permit Consolidation to file its objection to the increased assessment. Mandamus therefore lies to compel it to perform this duty.
Writ awarded.
NOTES
[1] As a result of the Judicial Reorganization Amendment, Article IX, Section 9 of the West Virginia Constitution, the county courts have been renamed county commissions, and we use this latter designation notwithstanding the references to county courts in W.Va.Code, 11-3-24.
[2] The relevant portion of W.Va.Code, 11-3-24, in regard to the taxpayer's right to protest his assessment, is:
"If any person fails to apply for relief at this meeting, he shall have waived his right to ask for correction in his assessment list for the current year, and shall not thereafter be permitted to question the correctness of his list as finally fixed by the county court, except on appeal to the circuit court. . . ."
[3] By letter from its regional engineer, Consolidation had furnished an opinion that, based upon core samples, its Sewickley coal seam in Marshall County was not mineable, and contended in its objection to the assessment that this property was worth only $5.00 an acre.
[4] "The county court shall annually, not later than the first day of February, meet for the purpose of reviewing and equalizing the assessment made by the assessor. . . ." W.Va. Code, 11-3-24.
[5] "The clerk of the county court shall publish notice of the time, place and general purpose of the meeting as a Class II legal advertisement in compliance with the provisions of article three, chapter fifty-nine of this Code, and the publication area for such publication shall be the county involved. . . ." W.Va.Code, 11-3-24.
[6] Consolidation does not raise any issue as to the County Commission's authority to require advanced filing of objections to the assessment and we, therefore, do not pass on this point.
[7] Obviously legislative clarification would be beneficial in this area, as illustrated by the following cases where the courts dealt with specific statutory periods for filing objections to assessments. Dierks Forests v. Shell, 240 Ark. 966, 403 S.W.2d 83 (1966) (July 1 to third Monday in August); Tift v. Tift County Board of Tax Assessors, 234 Ga. 155, 215 S.E.2d 3 (1975) (twenty day period); Warlick v. Supervisor of Assessments, 272 Md. 540, 325 A.2d 587 (1974) (twenty days); Brock v. North Carolina Property Tax Commission, 290 N.C. 731, 228 S.E.2d 254 (1976) (thirty days). A filing of protest near the end of the statutory term would obviously be untimely, since it would prevent the county commission and assessor from having sufficient time to perform their duties in regard to the contested assessment in an orderly manner. Cf. 700 Shore Road Associates v. Board of Assessment Review, 70 Misc.2d 822, 335 N.Y.S.2d 114 (Sup.Ct.1972).
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Subsets and Splits