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United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 06-3915
___________
United States of America, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* Western District of Missouri.
Shondell E. Ingram, *
*
Appellant. *
___________
Submitted: May 18, 2007
Filed: September 6, 2007
___________
Before MURPHY, HANSEN, and COLLOTON, Circuit Judges.
___________
COLLOTON, Circuit Judge.
Shondell E. Ingram was convicted by a jury of unlawful possession of a firearm
as a previously convicted felon. The district court1 sentenced him to 262 months’
imprisonment. Ingram appeals the conviction and sentence, and we affirm.
1
The Honorable Scott O. Wright, United States District Judge for the Western
District of Missouri.
I.
Ingram’s conviction stems from the events of August 21, 2005, in Grandview,
Missouri. Police reported to the Ridgeview Apartments, where three young women
told them that Ingram had wrapped a handgun in a white t-shirt and put it in the back
of a red Dodge pickup truck. An officer discovered a loaded .32-caliber handgun
wrapped in a large white t-shirt in the truck bed. One of the women identified Ingram,
who was in the area, and officers arrested him. Ingram was prohibited from
possessing a firearm, having been convicted of armed robbery in 1991.
The prosecution presented testimony from several persons who resided at the
Ridgeview Apartments. Angel Young and Christina Young, who are not related, lived
together in one apartment with Christina’s parents and Christina’s younger sister,
Ashley. Jennifer Zimmerman lived in another unit. Another witness, Jesse Dean, was
the boyfriend of Ashley Young. At trial, Zimmerman, Angel, and Christina all
testified that Ingram took the gun from his waistband, and placed it in the bed of the
Dodge truck. Angel and Christina testified that Ingram wrapped the gun in a white
t-shirt. Dean, Angel, and Ashley testified that they saw Ingram in possession of a
handgun earlier in the day.
According to Dean and Ashley, Ingram was angry with Dean because he had
refused to commit a robbery with Ingram. Dean testified that to express his anger,
Ingram lifted his shirt to display a handgun concealed in his waistband, threatened to
shoot through the door of the apartment where Dean was visiting Ashley, and
threatened to kill Dean. When Dean looked outside, he saw Ingram pointing the
weapon at the window.
Angel and Christina testified that later, when they were outside the apartment,
they saw Ingram hiding in the hallway nearby. After that, Angel saw him in the
parking lot near his car, putting bullets in the gun. Ingram called the women over and
-2-
told Angel that he would kill her if she “snitched” on him. The women then ran to
Jennifer Zimmerman’s apartment. Ingram followed them, but was refused entry.
Zimmerman then called the police, setting in motion the events that led to Ingram’s
arrest and prosecution.
II.
Ingram first challenges the sufficiency of evidence to support his conviction.
He contends that the evidence failed to establish that he knowingly possessed the
firearm. When reviewing convictions for the sufficiency of the evidence, “we view
the evidence in the light most favorable to the government, resolving evidentiary
conflicts in favor of the government, and accepting all reasonable inferences drawn
from the evidence that support the jury’s verdict.” United States v. Garnica, 477 F.3d
628, 630 (8th Cir. 2007) (per curiam) (internal quotation omitted). We will reverse
a conviction only if no reasonable jury could have found the defendant guilty beyond
a reasonable doubt. Id.
Ingram’s challenge rests on apparent inconsistencies in the statements of his
accusers. Angel claimed to have seen three guns, Christina recalled only one gun, and
Zimmerman told the 911 operator that there were five guns, based on information the
other two women had given her. Similarly, Ingram points to Zimmerman’s apparently
inaccurate statement of what t-shirt Ingram had been wearing, and inconsistencies as
to whether an additional witness named “Daniel” was present in Zimmerman’s
apartment with the three women. There was also conflicting evidence about whether
Christina Young was present when Ingram was arrested.
Ingram also claims that the reported actions of several of the witnesses were
inconsistent with the gravity of the situation they described, such that their testimony
is inherently incredible. He says that Ashley’s mother – who apparently left her
seventeen-year-old daughter alone at the Ridgeview Apartments – would not have
-3-
done so if, as Ashley claimed, Ashley felt “uncomfortable” with Ingram being in the
area. And Ingram contends that Christina would not have waited outside for the
police with Ingram nearby, if she were really concerned that Ingram had a gun and
was looking for her. Finally, Ingram questions Dean’s credibility, highlighting Dean’s
motivation to avoid a gun charge in the aftermath of a recent conviction for a burglary
offense.
These challenges to credibility do not warrant overturning the jury’s verdict.
“Attacks on the sufficiency of the evidence that call upon this court to scrutinize the
credibility of witnesses are generally not an appropriate ground for reversal.” United
States v. McKay, 431 F.3d 1085, 1094 (8th Cir. 2005), cert. denied, 126 S. Ct. 2345
and 127 S. Ct. 46 (2006). To prove that Ingram knowingly possessed a firearm, the
government produced two women who said they had seen Ingram wrap a handgun in
a large white t-shirt and put it in a truck bed. Two police officers testified that they
found the gun in the truck, wrapped in an extra large t-shirt that was likely to fit
Ingram, who was a six-foot, two-inch, 210-pound man. Dean and Angel testified that
Ingram possessed a handgun earlier in the day, and there was dramatic testimony
about Ingram brandishing the weapon and threatening to kill Dean because he would
not help him commit a robbery. Angel testified that she saw Ingram loading the gun
in the parking lot and that he threatened to kill her if she “snitched.” In short, the jury
heard from four witnesses who claimed to have seen Ingram possess a handgun on
August 21, 2005, and from two police officers who found the gun where the eye-
witnesses said Ingram had concealed it. The jury reasonably could believe that
Ingram did knowingly possess the firearm, despite the inconsistencies in testimony
that Ingram identifies. Ingram’s allegations of factual inconsistencies, illogical
behavior, and motivations to lie may have been useful fodder for cross-examination
and closing argument, but they are not nearly compelling enough to establish that no
reasonable jury could have found him guilty.
-4-
Ingram next argues that he should have been allowed to introduce videotaped
interviews to impeach certain witnesses for the prosecution. We review the district
court’s evidentiary determinations for an abuse of discretion. United States v. Buffalo,
358 F.3d 519, 521 (8th Cir. 2004). The videotapes at issue were made by law
enforcement on the day after Ingram’s arrest. Ingram claims that they are the best
evidence of what the witnesses actually saw, as they record statements made before
the witnesses had an opportunity to “polish” their stories and potentially forget details
of what occurred. Specifically, for example, he points to Zimmerman’s trial
testimony, and argues that she minimized her initial evasiveness when responding to
investigators’ questions regarding the identity of “Daniel.” He contends that the
videotaped interviews should have been admitted as impeachment material under the
residual exception to the rule prohibiting hearsay. See Fed. R. Evid. 807.
We have observed that “Congress intended the residual hearsay exception to be
used very rarely, and only in exceptional circumstances.” United States v. Peneaux,
432 F.3d 882, 893 (8th Cir. 2005) (internal quotation omitted), cert. denied, 127 S. Ct.
42 (2006). As an exception to the prohibition on hearsay, Rule 807 applies only to
evidence that is offered for the truth of the matter asserted. See Fed. R. Evid. 801(c).
Ingram’s contention, however, is that the district court should have admitted “video
clips” as impeachment evidence. Extrinsic evidence of a witness’s prior statement
admitted merely to impeach the credibility of a witness’s in-court testimony is
governed by Federal Rule of Evidence 613, not Rule 807.
In any event, we conclude that the district court was well within its discretion
to exclude the videotapes. Ingram was allowed wide latitude in questioning the
investigator about the videotaped interviews. He successfully brought out
inconsistencies in Angel’s memory of what Ingram had been wearing and what kind
of gun he used, the fact that Angel could not see well at the time because she was not
wearing her glasses, and Zimmerman’s evasiveness on the identity of “Daniel.”
Ingram has failed to identify any evidence from the videotapes that he was unable to
-5-
put before the jury through his examination of the investigator or cross-examination
of the witnesses who had been interviewed on videotape. Given his opportunity to
present the evidence through these avenues, we conclude that the district court did not
otherwise abuse its discretion.
Ingram’s final two contentions relate to his sentence. First, he argues that his
prior conviction for a walkaway escape from a community work center does not
qualify as a “violent felony” under the Armed Career Criminal Act (ACCA), 18
U.S.C. § 924(e). The ACCA mandates a minimum sentence of fifteen years’
imprisonment for a felon in possession of a firearm who has sustained three prior
convictions for a violent felony or a serious drug offense. It is undisputed that Ingram
had sustained at least two. If his walkaway escape qualifies as a third, then he was
properly classified as an armed career criminal.
Our circuit precedent, which is binding on this panel, holds that a walkaway
escape does constitute a violent felony for purposes of the ACCA. United States v.
Abernathy, 277 F.3d 1048, 1051 (8th Cir. 2002). The Supreme Court recently
expounded on the meaning of “violent felony,” declaring that the “proper inquiry is
whether the conduct encompassed by the elements of the offense, in the ordinary case,
presents a serious potential risk of injury to another.” James v. United States, 127 S.
Ct. 1586, 1597 (2007). Others have questioned whether there is adequate grounding
for the assumption in prevailing case law that the “ordinary” escape presents a serious
risk of injury. It has been suggested that more data are required to assess properly
whether most escape convictions are of the “walkaway” or “failure to return to
confinement” variety and, if so, whether the ordinary violation really presents the sort
of risk contemplated by § 924(e). United States v. Chambers, 473 F.3d 724, 726-27
(7th Cir. 2007), petition for cert. filed, No. 06-11206 (U.S. May 8, 2007). As things
stand, however, our case law dictates the conclusion that Ingram had sustained three
prior qualifying convictions, and the district court properly classified him as an armed
career criminal.
-6-
Finally, Ingram disputes the district court’s finding that he possessed the
firearm in connection with another felony offense. This finding resulted in a one-level
adjustment of Ingram’s offense level under the advisory sentencing guidelines, see
USSG § 4B1.4(b)(3)(A); PSR ¶ 24, and an increase in his criminal history category
from V to VI. See USSG § 4B1.4(c)(2); PSR ¶ 33. We review the district court’s
application of the sentencing guidelines de novo and its factual findings for clear error.
United States v. Bell, 411 F.3d 960, 965 (8th Cir.), cert. denied, 546 U.S. 957 (2005).
Missouri law makes it a felony knowingly to “[e]xhibit[], in the presence of one
or more persons, any weapon readily capable of lethal use in an angry or threatening
manner.” Mo. Rev. Stat. § 571.030.1(4). Missouri courts have held that whether a
weapon was exhibited in a “threatening” manner is an objective determination, and
that the statute may be violated even where a firearm is unloaded or where the
exhibition is unaccompanied by an express verbal threat. Bell, 411 F.3d at 965
(collecting cases). In this case, the court heard testimony that Ingram was upset with
Dean over his refusal to participate in a robbery. There was evidence that he
threatened to kill Dean, lifted his shirt exposing his handgun, and shortly thereafter
pointed the gun at Dean’s apartment window. This testimony was sufficient to
support the district court’s conclusion that Ingram exhibited a weapon capable of
lethal use in a threatening manner, and that Ingram thus possessed the firearm in
connection with a violation of section 571.030.1(4), another felony offense.
* * *
For the foregoing reasons, the judgment of the district court is affirmed.
______________________________
-7-
|
723 N.W.2d 450 (2006)
IN RE D.J.
No. 06-0625.
Court of Appeals of Iowa.
June 28, 2006.
Decision without published opinion. Reversed and Remanded.
|
198 F.3d 1 (1st Cir. 1999)
NEW YORK STATE DAIRY FOODS, INC., ET AL., Plaintiffs, Appellants,v.NORTHEAST DAIRY COMPACT COMMISSION, ET AL., Defendants, Appellees.
No. 98-2370.
United States Court of Appeals, for the First Circuit.
Heard Sept. 13, 1999.Decided November 30, 1999.
APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS. Hon. Patti B. Saris, U.S. District Judge.[Copyrighted Material Omitted]
Stuart I. Friedman, with whom Mary H. Dontzin, David O. Lloyd and Friedman, Wittenstein & Hochman, were on brief for Farmland Dairies, Inc., appellant.
Sheldon A. Weiss, for Cumberland Farms, Inc., appellant.
John J. Vetne, for New York State Dairy Foods, Inc., Crowley Foods, Inc., and Elmhurst Dairy, Inc., appellants.
Clifford M. Sloan, with whom Michael A. Rotker, Wiley, Rein & Fielding, and Dixie Henry, General Counsel, Northeast Dairy Compact Commission, were on brief for appellees.
Before Selya, Circuit Judge, Bownes, Senior Circuit Judge, and Lipez, Circuit Judge.
BOWNES, Senior Circuit Judge.
1
Appellants, New York State Dairy Foods, Inc., Crowley Foods, Inc., Cumberland Farms, Inc., Elmhurst Dairy, Inc., Farmland Dairies, Inc., Stewart's Ice Cream, Inc., Stewart's Processing Corp., and Sunnyvale Farms, Inc., appeal from the district court's grant of summary judgment on their challenges to certain regulations promulgated by appellee, Northeast Dairy Compact Commission ("Commission"), with Kenneth M. Becker, executive director of the Commission.1 Appellants argue that the Commission exceeded its regulatory power under the Northeast Interstate Dairy Compact, that it violated the Dormant Commerce Clause, and that it violated their due process rights. For reasons stated below, we affirm.
I. FACTS
2
On this appeal from the grant of summary judgment in favor of appellees, we recite the facts in the light most favorable to the appellants. See Aponte Matos v. Toledo Davila, 135 F.3d 182, 185 (1st Cir. 1998); Acosta-Orozco v. Rodriguez-de-Rivera, 132 F.3d 97, 98 (1st Cir. 1997).
A. The Parties
3
Appellant New York State Dairy Foods, Inc. is a non-profit trade association representing New York milk processors and distributors of fluid milk products. It is joined by five fluid milk processors and distributors that procure raw milk from dairy farms outside of New England and distribute fluid milk in New England, and two New York processors that purchase raw milk from dairy farms outside of New England but do not distribute within New England.
4
Appellee, the Northeast Dairy Compact Commission, administers the Northeast Interstate Dairy Compact (the "Compact"),2 an agreement entered into by the six New England states and approved by the Congress. See 1996 Farm Bill, 7 U.S.C. § 7256 (1996). The Commission's primary purpose is to regulate milk prices in the signatory states.
B. The Compact
5
Under the terms of the Compact, each state must appoint a delegation to the Compact Commission consisting of between three and five members. See Compact § 4. The delegation must include at least one dairy farmer and one consumer representative. See id. At the time this suit began, the Commission included directors of Women, Infants and Children's programs of various states, the Rhode Island Attorney General's Chief of the Consumer Protection Division, and state Agricultural Commissioners. Delegation members may not serve more than three consecutive terms, and no term may be more than four years. They may be removed from the Commission for cause. The delegation members' compensation is determined and paid by the individual states, although the Commission pays their expenses. See Compact § 4.
6
Historically, the dairy industry has been subject to extensive regulation by the federal government. Under the Agricultural Marketing Agreement Act of 1937, 50 Stat. 246, as amended, 7 U.S.C. § 601 et seq. (1933), the Secretary of Agriculture may set minimum prices that milk "handlers" (processors) pay to "producers" (farmers) for raw milk. These "Federal Milk Marketing Orders" vary according to class of milk; the highest prices are charged for "Class I," fluid use milk. See generally West Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 188-89 & n.1 (1994) (describing regulatory scheme). The primary purpose of the Compact is to set "over-order" prices in the Compact states, i.e., minimum prices at some level above those mandated by the federal pricing orders. See Compact §§ 2(8), 9(b).
7
The Commission exercises broad authority, through notice and comment rulemaking, to set minimum prices that processors pay for milk distributed within the Compact region. See Compact §§ 8-10. Each party state has a single vote, see Compact § 4, and price regulations must be approved by two-thirds of all party states. A state that dissents from a price regulation is not bound by it. See Compact § 5.
8
The Commission's over-order pricing power applies to two kinds of Class I milk processors: "pool plants" and "partially regulated plants." "Pool plants" are milk plants physically located within the Compact region.3 "Partially regulated plants" are plants that, while located outside the regulated area, distribute Class I milk within the area, or receive milk from producers in the area. The Commission's powers with respect to minimum prices for pool plants and partially regulated plants are coextensive. See Compact § 9(d) ("The commission is hereby empowered to establish the minimum price for milk to be paid by pool plants, partially regulated plants and all other handlers receiving milk from producers located in a regulated area.").
9
The terms of the Compact allow milk processors to object to the over-order price regulation. See Compact § 16(b). Handlers may file a written petition and request a hearing with the Commission. See id.; see also 7 C.F.R. §§ 1381.1-1381.4(f) (1997). The Chair of the Commission must appoint a hearing panel of one to three Commission members to pass on this petition. The panel must be composed of "Commission members who are not members of the state delegation in which the Handler is incorporated or has its principal place of business, who have no pecuniary interest in the outcome, and who are otherwise fair and impartial." 7 C.F.R. at § 1381.4(a). After considering the petition, the hearing panel issues a proposed decision, and, after considering handlers' objections, issues a ruling. See id. at §§ 1381.4(g)-(h). The Commission itself then reviews this ruling and issues its own decision. See id. The regulations further dictate that:
10
Any commissioner shall (on either the Commissioner's own motion or on motion of the petitioner) disqualify himself or herself from consideration of the Commission's final ruling on the panel's decision if that commissioner's impartiality might reasonably be questioned.
11
See id. at § 1381.4(h)(3).
12
The essence of the Commission's regulatory scheme is its "pooling mechanism." All handlers, whether pool plants or partially regulated ones, pay the same amount per hundredweight (cwt) into the pool, according to the volume of Class I milk purchased.4 See 7 C.F.R. § 1306.1. Thereafter, they receive rebates from the pool. While pool plants receive a rebate based on the volume of all milk sold, whether Class I, II, or III, and whether sold in the Compact region or elsewhere, partially regulated plants receive payment based solely on Class I milk distributed in the Compact region. See 7 C.F.R. §§ 1304.5(c)(1), 1307.4(f). These rebates are not retained by the plants, but rather are returned to the dairy farmers. See New York State Dairy Foods, Inc., 26 F. Supp. 2d at 256-57 ("This money would be collected and commingled in the producer-settlement fund, along with all payment obligations of all other regulated handlers, for distribution to producers. The Commission would disburse from the pool to dairy farmers through the handlers, acting in a conduit capacity.").
13
It is this rebate system that appellants claim disadvantages them. Appellants claim that New York dairy farmers receive a higher payback from, and therefore prefer to conduct business with, New England pool plants.5 This, appellants assert, causes them to suffer competitive harm.
II. PROCEEDINGS BELOW
A. Issuance of the Regulation
14
On May 30, 1997, the Commission adopted an over-order price regulation effective from July 1, 1997, to December 31, 1997. See 7 C.F.R. §§ 1300-08, 1381 (1997). After the requisite notice in the Federal Register and subsequent public hearings, the six member states voted unanimously in favor of the regulation. Similarly, the regulation passed the producer referendum overwhelmingly. See Northeast Dairy Compact Commission, Results of Producer Referendum on Compact Over-Order Price Regulation, 62 Fed. Reg. 29,646, 29,647 (May 30, 1997).
15
The regulation established an over-order price of $16.94 per hundredweight. See Compact Over-order Class I Price and Compact Over-order Obligation, 7 C.F.R. § 1305.1 (1997). At the time of adoption, the federally mandated minimum price was $13.94, resulting in an over-order obligation of $3.00 per hundredweight. As the federal Class I price increased, the over-order obligation decreased in order to keep the net price constant at $16.94 per hundredweight. The Commission applied this over-order price regulation to all Class I fluid milk distributed within the regulated area, including milk produced and processed outside the region by partially regulated plants.
16
The over-order price regulation included an additional assessment of $.032 per hundredweight. The Compact explicitly grants this authority to the Commission to recover its administrative costs. See Compact § 18(a) ("[I]f regulations establishing an over-order price or a compact marketing order are adopted, they may include an assessment for the specific purpose of their administration."). The Commission applied this assessment to all fluid milk products distributed in the regulated area, whether by pool plants or partially regulated plants. See 7 C.F.R. § 1308.1 (1997).
B. The Administrative Petitions
17
On August 15, 1997, a subset of the instant appellants, led by Crowley Foods, Inc., filed administrative petitions (the "Crowley petitions") with the Commission that raised three variegated challenges, all of which are at issue in this appeal. First, they challenged the lawfulness of the pricing regulations. Second, they challenged the inclusion of a producer representative in each state's delegation to the Commission. Third, they challenged the participation on the Hearing Panel by any Commission member who had participated in promulgating the regulations under dispute. Finally, they challenged the imposition of the administrative assessments on out-of-region handlers.
18
In response to these challenges, the Chair of the Commission appointed three Commission members to serve as the hearing panel. The panel was comprised of the Chair, who was also the consumer representative from the Maine delegation, the Chief of the Consumer Protection Division of the Rhode Island Attorney General's Office, and the consumer representative from the New Hampshire delegation. See New York State Dairy Foods, Inc., 26 F. Supp. 2d at 258. As the Commission's regulations require, none of the hearing panel members were from a state in which any petitioner was incorporated or has its principal place of business. See id.
19
The panel issued a Proposed Decision on September 9, 1997, recommending that the Commission deny the claims raised. Ten days later, the petitioners filed written objections. On September 23, the panel issued its Final Proposed Decision. The Commission adopted this final proposed decision by a 6-0 vote. See id. The Commission held that: (1) it has the authority to regulate (by imposing an over-order price and administrative assessment on all pool and partially regulated handlers) all milk distributed in the New England region, regardless of where it is produced; (2) application of the over-order pricing and pooling regulation to partially regulated plants does not constitute an impermissible compensatory payment scheme; and (3) the participation of New England farmers and processors in setting the over-order price does not, absent specific allegations of bias, violate the Due Process Clause. See New York State Dairy Foods, Inc., 26 F. Supp. 2d at 258, citing In re Crowley Foods, Inc., Nos. HEP-97-001, -002, -004 & -005, at 9-20, 24-27.
20
Simultaneously, appellant Elmhurst Dairy, Inc., joined by Byrne Dairy, Inc., filed its own administrative petition (the "Elmhurst petition") raising claims similar to the Crowley petitions. In addition, the Elmhurst petition claimed that the pricing regulations were unlawful as applied to Elmhurst because its distribution within the regulated area was solely through an unaffiliated distributor. The Chair of the Commission appointed the same hearing panel that heard the Crowley petitions to hear the Elmhurst petition. On October 15, 1997, the panel once again issued a proposed decision recommending that the Commission reject all claims. The Elmhurst petitioners failed to file objections, and the proposed decision became final. On December 3, 1997, the Commission, again by a 6-0 vote, adopted the panel's recommendation and rejected all claims. It specifically rejected the claim that Elmhurst was not subject to the regulation because it found that the interposition of a third-party intermediary did not change the fact that Elmhurst "'operates a partially regulated plant that receives milk from producers providing the raw supply' for sales of packaged milk in the region." New York State Dairy Foods, Inc., 26 F. Supp. 2d at 258 (citing In re Elmhurst Dairy, Inc., Nos. HEP-97-007 & -008, at 8-9).
C. The District Court
21
Both the Elmhurst and Crowley petitioners sought review in the district court, under its equity jurisdiction, to determine whether the rulings of the Commission were "in accordance with law." New York State Dairy Foods, Inc., 26 F. Supp. 2d at 259. Section 16(c) of the Compact grants such authority.6
22
The district court granted summary judgment in favor of the Commission, holding that:
23
(1) The Commission did not violate the Commerce Clause because Congress consented to the Commission's actions. See New York State Dairy Foods, Inc., 26 F. Supp. 2d at 262.
24
(2) The Commission's actions did not violate Condition 7 of the congressional consent. See id.
25
(3) The administrative assessment contained in the over-order price regulation was squarely authorized by the Compact. See id. at 263.
26
(4) Neither the composition of the hearing panel nor the composition of the Commission violated due process. See id. at 263-64.
27
(5) The plaintiffs were required to exhaust their administrative remedies on all claims before bringing them to the district court. See id. at 259.7
28
(6) The administrative assessment did not violate the Equal Protection Clause of the United States Constitution. See id. at 263.
29
(7) The Commission had authority to impose prices and assessments on Elmhurst Dairy, Inc., despite the fact that its only connection with the Compact is through an unaffiliated distributor. See id. at 265.
30
The several appellants challenge each of these rulings, save the last two, both of which appear to have been abandoned on appeal.
31
In addition, the district court entered an order approving an escrow account, in which any producer price payment from plaintiff-appellants would be deposited. See New York State Dairy Foods, Inc. v. Northeast Dairy Compact Comm'n, No. 97-11576-PBS (D. Mass. Aug. 14, 1997) (order approving escrow of funds).
III. STANDARD OF REVIEW
32
Our review of the district court's decision is de novo. See Siegal v. American Honda Motor Co., 921 F.2d 15, 17 (1st Cir. 1990). This is equally true of both the due process claims, see Dominique v. Weld, 73 F.3d 1156, 1158 (1st Cir. 1998), and questions of statutory interpretation. See United States v. George Hyman Constr. Co., 131 F.3d 28, 31 (1st Cir. 1997) ("We review de novo questions of statutory interpretation that present pure questions of law.").
IV. COMMERCE CLAUSE
33
Appellants launch a frontal assault on the over-order pricing regime (with its attendant pooling mechanism and administrative assessment) based on the Commerce Clause, or more precisely, on the so-called "Dormant Commerce Clause." See U.S. Const. art. I § 8; South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 97 (1984); United Egg Producers v. Department of Agric., 77 F.3d 567, 569-70 (1st Cir. 1996) ("The Supreme Court has interpreted this affirmative grant of authority to Congress as also establishing what has come to be called the Dormant Commerce Clause - a self-executing limitation on state authority to enact laws imposing substantial burdens on interstate commerce even in the absence of Congressional action.").
34
Appellants' claim is based on the indisputable truism that "[s]tate laws discriminating against interstate commerce are virtually per se invalid." Fulton Corp. v. Faulkner, 516 U.S. 325, 331 (1996) (internal quotation marks omitted). As the Supreme Court wrote in Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 527 (1935):
35
Neither the power to tax nor the police power may be used by the state of destination with the aim and effect of establishing an economic barrier against competition with the products of another state or the labor of its residents. Restrictions so contrived are an unreasonable clog upon the mobility of commerce. They set up what is equivalent to a rampart of customs duties designed to neutralize advantages belonging to the place of origin.
36
Despite this seeming foundation of bedrock, appellants' Commerce Clause challenge is ultimately based on little more than shifting sand. This case, as distinct from Baldwin and the more recent West Lynn Creamery, Inc. v. Healy, 512 U.S. 186 (1994) (striking down state milk pricing scheme as a violation of Commerce Clause), involves an affirmative congressional consent.
37
There can be no dispute in this case that Congress expressly consented to the Compact. See Northeast Interstate Dairy Compact, 7 U.S.C. § 7256 (1996) ("Congress hereby consents to the Northeast Interstate Dairy Compact . . . .") (hereinafter "the consent"). The question at issue is the scope of this consent.
A. Congressional Consent in General
38
Congress undoubtedly has the power to regulate milk prices, see West Lynn Creamery, 512 U.S. at 192 ("The Commerce Clause vests Congress with ample power to enact legislation providing for the regulation of prices paid to farmers for their products"), and can grant that power to the states, see Northeast Bancorp v. Board of Governors, 472 U.S. 159, 174 (1985) ("When Congress so chooses, state actions which it plainly authorizes are invulnerable to constitutional attack under the Commerce Clause."). The relevant initial question, then, is not whether the Compact violates the Commerce Clause. Instead, the starting point of the inquiry is whether Congress consented to the actions of the Commission. We hold that Congress has provided such consent.
39
The standard for finding congressional consent is high. Such consent must be either "expressly stated," Sporhase v. Nebraska ex rel. Douglas, 458 U.S. 941, 960 (1982), or "made unmistakably clear," South-Central, 467 U.S. at 91. See also United Egg Producers, 77 F.3d at 570 (quoting both Sporhase and South-Central). The statute or legislative history relied on as consent must "evince[] a congressional intent to alter the limits of state power otherwise imposed by the Commerce Clause." New England Power Co. v. New Hampshire, 455 U.S. 331, 341 (1982) (internal quotation marks omitted). The burden of showing consent lies with the Commission. See Wyoming v. Oklahoma, 502 U.S. 437, 458 (1992) (imposing burden on discriminating state).
40
We are called, then, to decide whether Congress's consent grants the Commission the power to undertake the regulatory action at issue in this case. Because the consent altering the limits imposed by the Commerce Clause must be clear, our inquiry is limited to determining whether Congress spoke "directly . . . to the precise issue in question." See Chevron U.S.A., Inc. v. National Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984).
41
We have previously held that, in conducting this inquiry, "courts must look primarily to the plain meaning of the statute, drawing its essence from the particular statutory language at issue, as well as the language and design of the statute as a whole." Strickland v. Commissioner, Dep't of Human Servs., 48 F.3d 12, 16 (1st Cir. 1995) (internal quotation marks omitted). With this in mind, we consider appellants' specific claims seriatim.
42
1. Congressional Consent to Regulation of Handlers Outside the Region
43
Appellants first argue that the Compact and its attendant consent allows the Commission to regulate only those handlers who receive milk produced within the Compact region. We do not agree. The Compact specifically authorizes the Commission to regulate the "pricing and pooling of milk handled by partially regulated plants." Compact § 10(7). Under the terms of the Compact, a partially regulated plant is one that is not located within the regulated area but distributes Class I milk within such area, or receives milk from producers within the area. See Compact § 2(7). The Compact further provides that "[t]he Commission is hereby empowered to establish the minimum price for milk to be paid by pool plants, partially regulated plants and all other handlers receiving milk from producers located in a regulated area." Compact § 9(d).
44
Appellants seize on this last provision, arguing that the lack of a serial comma after "partially regulated plants" and before "and all other handlers" suggests that the latter modifies the former. In other words, appellants contend that the Commission may only establish a minimum price for milk handled by a partially regulated plant when it receives milk from producers located within the regulated area. The district court rejected this argument, noting that "[s]uch an interpretation would exempt from regulation those plants that meet the first half of the disjunctive definition of a partially regulated plant in section 2(7) of the Compact." See New York State Dairy Foods, Inc., 26 F. Supp. 2d at 261. The district court found this construction to be contrary to the logic of the Compact, and we agree. Failure to construe the statute in this way would leave a gaping hole in the regulatory regime. See United States v. Carroll, 105 F.3d 740, 744 (1st Cir. 1997) ("Wherever possible, statutes should be construed in a commonsense manner, honoring plain meaning, and avoiding absurd or counter-intuitive results.") (internal citations omitted).
2. Condition 7
45
Appellants' better argument is based on Condition 7 of the congressional consent, which states: "The Compact Commission shall not use compensatory payments under section 10(6) of the Compact as a barrier to the entry of milk into the Compact region or for any other purpose." 7 U.S.C. § 7256(7) (1996). Appellants urge that the pooling mechanism utilized by the Commission in its over-order pricing regulation amounts to a compensatory payment, thus violating the congressional consent. The linchpin of this argument is that because the differential payments paid back to producers (through the handlers) depend on whether the handlers are pool plants, the pooling mechanism is in effect a subsidy and compensatory payment which is a barrier to the entry of milk into the Compact region.8
46
Congress's command that "[t]he Compact Commission shall not use compensatory payments under section 10(6) of the Compact as a barrier to the entry of milk into the Compact region or for any other purpose" is not all Congress had to say on the matter. The next sentence states: "Establishment of a Compact over-order price, in itself, shall not be considered a compensatory payment or a limitation or prohibition in the marketing of milk." 7 U.S.C. § 7256(7). The Commission rightly urges that these two sentences read together mean that the Commission may do virtually anything (within the contemplation of the Compact) with respect to over-order pricing, short of compensatory payments.
47
Both the Commission and the district court distinguished between compensatory payments and pool payments. The former involves a system not unlike the pool method at issue in the instant case, save one crucial factor: under a compensatory payment system, the partially regulated plants would receive no disbursements whatsoever from the pool. See 7 C.F.R. §§ 1304.5(c)(1), 1307.4(f). This distinction is vital, because it eliminates the primary objection to compensatory payments. A compensatory payment system forces handlers outside the pool to pay what amounts to a tariff upon entry into the regulated area. See Lehigh Valley Coop. Farmers, Inc. v. United States, 370 U.S. 76, 83-90 (1962) (striking down a compensatory payment system and describing the above as the primary purpose and effect of a compensatory payment system); see also New York State Dairy Foods, Inc., 26 F. Supp. 2d at 262 n.10 ("This description is consistent with the use of the term 'compensatory payment' in the case law cited by the plaintiffs.")(citing Lehigh Valley Coop. Farmers, Inc., 370 U.S. at 82, and Farmland Dairies v. McGuire, 789 F. Supp. 1243, 1247-48 (S.D.N.Y. 1992)). The pool payment mechanism, on the other hand, does not bar the entry of milk from outside the Compact region. Rather, by allowing for payments back to the out-of-compact producers for Class I milk distributed inside the Compact region, the over-order price could be said to encourage the entry of such milk.
48
Admittedly, pool plants and partially regulated plants are not treated with absolute similitude; while pool plants receive a rebate based on the volume of all milk sold, whether Class I, II, or III, and whether sold in the Compact region or elsewhere, partially regulated plants receive payment based only on Class I milk distributed in the Compact region. See 7 C.F.R. §§ 1304.5(c)(1), 1307.4(f).9
49
Even if there were to be some effect on entry of outside milk or some competitive disadvantage, the fact remains that Congress barred only the peculiar regulatory device of compensatory payments. From the language of the Compact, it appears that Congress distinguished between compensatory payments under § 10(6), which Congress barred, and "pricing and pooling of milk" under § 10(7), which Congress allowed.
50
We are left to conclude that Congress's language on the authority of the Commission to regulate via the pooling mechanism is clear. Admittedly, Congress could have outlined the very regime the Commission implemented and approved it explicitly. Congress's failure to do so, however, does not render its intent ambiguous. Cognizant of its inability to foresee every possible regulatory action, Congress chose to prohibit one action and allow all others.
3. Administrative Assessment
51
Appellants next argue that the Commission exceeded its authority (and therefore the scope of consent) by imposing an administrative assessment on all handlers distributing Class I milk in New England regardless of the point of origin of the milk. See 7 C.F.R. § 1308.1. We also reject this contention. The Compact explicitly gives the Commission the authority to include an administrative assessment as part of an over-order price regulation. See Compact § 18(a) ("[I]f regulations establishing an over-order price or a compact marketing order are adopted, they may include an assessment for the specific purpose of their administration."). Because the Commission's over-order pricing authority extends to partially-regulated plants, its assessment authority does as well.
B. Finding of Consent
52
Because we hold that in all respects the Commission acted pursuant to the terms of the congressional consent, we determine next whether that consent meets the high standard mandated by the Constitution.10 See Sporhase, 458 U.S. at 960 (must be "expressly stated"); South-Central, 467 U.S. at 91 (must be "made unmistakably clear"). The failure of Congress to expressly state that the Commission may take the challenged actions is not fatal. As the Supreme Court stated in South Central:
53
There is no talismanic significance to the phrase "expressly stated," however; it merely states one way of meeting the requirement that for a state regulation to be removed from the reach of the dormant Commerce Clause, congressional intent must be unmistakably clear. The requirement that Congress affirmatively contemplate otherwise invalid state legislation is mandated by the policies underlying dormant Commerce Clause doctrine.
54
South Central, 467 U.S. at 91-92.
55
In the instant case, there is no question that Congress affirmatively contemplated otherwise invalid state legislation. Congress explicitly consented to the Compact, marking in Condition 7 the boundaries of the Commission's power. This demonstrates conclusively that Congress read the Compact, and rejected one possible exercise of power, thereby approving the others contained therein.
56
This Court's decision in United Egg Producers v. Department of Agriculture, 77 F.3d 567 (1st Cir. 1996), is not inconsistent with our holding today. In that case, we considered a regulation by the Commonwealth of Puerto Rico that all eggs imported into Puerto Rico from the mainland United States bear a stamp showing the two-letter postal code of the state of origin. See id. at 569. Puerto Rico argued that Congress had consented to its action by stating: "[N]o State or local jurisdiction other than those in noncontiguous areas of the United States may require labeling to show the State or other geographical area of production or origin." 21 U.S.C. § 1052(b)(2), as quoted in United Egg Producers, 77 F.3d at 569. In considering whether this met the high standard of consent to state regulation of interstate commerce, we reasoned:
57
One can argue that as Congress had before it the whole subject of egg-labeling, its exemption of noncontiguous jurisdictions must be understood to signify, by implication, Congressional approval of any and all egg-labeling requirements in those places regardless whether justified or unjustified by Dormant Commerce Clause considerations. But this seems to us a more extreme reading than either the statutory language or legislative history necessitates. Absent, at least, an affirmatively stated grant of permission to noncontiguous jurisdictions of the United States to require egg-labeling, we are unable to conclude that appellants have met their burden of showing that Congress' intent to allow Puerto Rico to enact protectionist egg-labeling regulations was "unmistakably clear."
58
United Egg Producers, 77 F.3d at 570-71 (footnotes omitted).
59
This case is fundamentally different. This is not a case in which an "affirmatively stated grant of permission" is lacking. Undoubtedly in part due to the peculiar nature of this case as one involving both the Dormant Commerce Clause and the Compacts Clause,11 Congress has provided affirmative consent; Congress read the Compact and approved it.12 See Central Midwest Interstate Low-Level Waste v. Pena, 113 F.3d 1468, 1470 (7th Cir. 1997) (assuming that ratification of an interstate compact by Congress obviated the need for Dormant Commerce Clause scrutiny). Accordingly, United Egg Producers, while instructive, is not precisely apposite.13
V. DUE PROCESS
60
Appellants urge that the composition of both the Commission and the Hearing Panel violates the Due Process Clauses of both the Fifth and Fourteenth Amendments. They argue that the commissioners who are dairy farmers or handlers have a pecuniary interest in ruling and legislating against them.
A. In General
61
The Supreme Court has long held that a "fair trial in a fair tribunal is a basic requirement of due process." In re Murchison, 349 U.S. 133, 136 (1955). This basic requirement applies in the context of administrative agencies. See Gibson v. Berryhill, 411 U.S. 564, 579 (1973).
62
When an adjudicator has a direct, personal, and substantial pecuniary interest in the outcome of a case, due process is abrogated. See Tumey v. Ohio, 273 U.S. 510, 523 (1927). Not every interest, however, is substantial enough to amount to a violation of due process. In one formulation, an interest is substantial if it "would offer a possible temptation to the average . . . judge to . . . lead him not to hold the balance nice, clear and true . . . ." Ward v. Village of Monroeville, 409 U.S. 57, 60 (1972); see also Aetna Life Ins. Co. v. Lavoie, 475 U.S. 813, 822 (1986). Participation of adjudicators who "might conceivably have had a slight pecuniary interest," however, does not offend due process. See Aetna Life Ins. Co., 475 U.S. at 825.
63
The Due Process Clause sets a significantly lower bar for legislative functions. Compare Londoner v. Denver, 210 U.S. 373 (1908), with Bi-Metallic Inv. Co. v. State Bd. of Equalization, 239 U.S. 441 (1915); see also Concerned Citizens of S. Ohio, Inc. v. Pine Creek Conservancy Dist., 429 U.S. 651, 657 (1977) (Rehnquist, J., dissenting) ("As Mr. Justice Holmes recognized, the determination of legislative facts does not necessarily implicate the same considerations as does the determination of adjudicative facts.").
B. Legislative Functions
64
In Friedman v. Rogers, 440 U.S. 1 (1979), the Supreme Court considered a challenge to a statute establishing the Texas Optometry Board. Like the Commission, the Board was comprised of a pre-determined number of industry representatives. Four of the six members were so-called "professional opticians," and the remaining two slots were available to be filled by "commercial opticians." See id. at 6. The plaintiff, a commercial optician, challenged the regulation of his profession by a board whose membership (professional opticians) stood to gain directly by placing onerous restrictions on practice by their competitors. The Court rejected this claim, stating: "Although Rogers has no constitutional right to be regulated by a Board that is sympathetic to the commercial practice of optometry, he does have a constitutional right to a fair and impartial hearing in any disciplinary proceeding conducted against him by the Board." Id. at 18. Finding the latter right not implicated, the Court upheld the statute.
65
Industry representation on regulatory boards is a common and accepted practice. See id. at 18 (upholding such a scheme); Stivers v. Pierce, 71 F.3d 732, 743 (9th Cir. 1995) ("[T]he system of industry representation on governing or licensing bodies is an accepted practice throughout the nation."); Abramson v. Gonzalez, 949 F.2d 1567, 1579 (11th Cir. 1992).
66
Friedman involved a statutory scheme that posed a far greater danger to due process than the one we are faced with here. In that case, a "schism," Friedman, 440 U.S. at 5, had arisen between commercial and professional opticians, and the professional opticians were, under the statutory scheme at issue, given significant power over their occupational rivals, see id. at 3-6. Despite this, the Supreme Court found no violation of the Due Process Clause. Accordingly, we are unable to hold that the composition of the Commission, without more, violates due process by allowing handlers and processors from Compact states to participate in the regulatory process. Not only has the Supreme Court approved a more problematic regulatory regime in Friedman, but we are not convinced that, given the significant attenuation of the commissioners' potential financial gain, their interest rises to the level of substantiality required by Tumey and its progeny.14
C. Adjudicative Functions
67
The Due Process Clause inquiry is slightly more complicated with respect to the Hearing Panel. This is not, in contrast to the issuance of regulations, a mere legislative function. The Hearing Panel sits as a quasi-judicial adjudicative body, and thus must comport with a higher standard of due process.
68
The Hearing Panel meets this standard for four reasons. First, any potential financial interest on the part of individual panel members is highly attenuated. See Aetna Life Ins. Co., 475 U.S. at 825 ("slight pecuniary interest" on the part of the adjudicator does not violate due process). In order to "lead him not to hold the balance nice, clear and true[,]" Ward, 409 U.S. at 60, a panel member would have to be swayed by his own pro rata share in the additional profits (assuming that there are any) of a relatively tiny proportion of the Compact milk receipts. Partially regulated plants actually ship precious little milk into the region. See Compact Over-Order Price Regulation, 62 Fed. Reg. 23,039 (April 28, 1997) ("At present, approximately 98 percent of the fluid milk products consumed in the region are produced by fluid processing plants located in New England."). See also Joint Appendix at 160; In re Petitions of Crowley Foods, Inc. Stewart's Processing Corp., Farmland Dairies, Inc., and Cumberland Farms, Inc., Nos. HEP-97-001, 002, 004, and 005, Final Decision of the Commission at 2, ¶ 5 ("Petitioners, in aggregate, supply approximately three percent of all packaged, Class I, fluid milk sales in the regulated area of the six New England states.").
69
The Ninth Circuit has commented on an arguably analogous situation. The court stated:
70
A lawyer in a one-lawyer town, for example, would probably have a "direct" and "substantial" pecuniary interest in the licensing of a competitor planning to hang a shingle across the street. On the other hand, it is unlikely that any attorney practicing in a city like Los Angeles would have a competitive interest sufficiently strong to require that he be disqualified from considering the licensing of an additional lawyer.
71
Stivers, 71 F.3d at 743. We agree with the Ninth Circuit that at some level of attenuation, as here, the adjudicator's interest becomes too remote to have a constitutionally deficient effect.
72
Second, the Commission's own regulations provide a due process safeguard, placing stringent restrictions on the composition of hearing panels. The regulations state:
73
(a) Appointment of Commission hearing panel. Upon receipt of a petition, the Chair shall appoint from one to three Commission members who shall consider the petition . . . . The Commission panel chosen by the Chair shall consist of Commission members who are not members of the state delegation in which the Handler is incorporated or has its principal place of business, who have no pecuniary interest in the outcome, and who are otherwise fair and impartial.
74
Conduct of Proceedings, 7 C.F.R. § 1381.4(a). Pursuant to this, the Hearing Panel which heard appellants' petitions before the Commission did not include any handlers or farmers. As noted above, the Hearing Panel in this case consisted of the Commission Chair, who was also the consumer representative from the Maine delegation, the Chief of the Consumer Protection Division of the Rhode Island Attorney General's Office, and the consumer representative from the New Hampshire delegation. See New York State Dairy Foods, Inc., 26 F. Supp. 2d at 258. Given the composition of the Hearing Panel in this case, it will take more than bare allegations to give rise to a finding of a deprivation of due process. We recognize that the composition of the hearing panel does not fully answer appellants' complaint about the composition of the Commission as a whole. It is true that handlers and producers sit on the Commission, and as a result both issue initial regulations and pass on the Hearing Panel's proposed decisions. The issuance of regulations, as we have said, involves a lower due process bar. With respect to the final decision on the Hearing Panel's proposed decision, however, we need do little more than note that the full Commission adopted the proposed decision of this (unquestionably, we believe) disinterested panel.
75
Third, the Commission members vote as state delegations, not individual members. We recognize that this alone cannot cure a due process violation. See Cinderella Career & Finishing Sch., Inc. v. FTC, 425 F.2d 583, 592 (D.C. Cir. 1970) (one biased member of even a sizable tribunal violates due process). It is not, however, without relevance. The possibility that the small number of handlers (with their already attenuated interest) on the Commission will influence their peers sufficiently to alter a vote is significantly more remote that it would be in a scheme in which each commissioner voted individually.
76
Fourth, and perhaps most important, the appellants could have moved to disqualify all handlers and farmers from the Commission decision on their petitions. See 7 C.F.R. § 1381.4(h)(3) ("Any commissioner shall (on either the Commissioner's own motion or on motion of the petitioner) disqualify himself or herself from consideration of the Commission's final ruling on the panel's decision if that commissioner's impartiality might reasonably be questioned."). They did not do so.
77
Accordingly, there is no legal or factual basis for finding a due process violation.
VI. CONCLUSION
78
Finding that the Commission violated neither the Commerce Clause nor the Due Process Clauses, we affirm the district court's entry of summary judgment.
Notes:
1
See New York State Dairy Foods,Inc. v. Northeast Dairy Compact Comm'n, 26 F. Supp. 2d 249 (D. Mass. 1998).
2
The Compact is reprinted in S.J. Res. 28, 104th Cong. (1995). We have included the resolution as an addendum to this opinion.
3
The Commission could also establish a regulation covering only a subset of the Compact states; plants within that set would be pool plants. The Compact defines "regulated area" as "any area within the region governed by and defined in regulations establishing a compact over-order price or commission marketing order." See Compact § 2(5).
4
A hundredweight of milk is 100 pounds of milk, or approximately 8.3 gallons.
5
The district court offered an example of this effect that is worth repeating in its entirety:
Plaintiffs gave the following example of the different economic impact, which the Commission does not dispute. For July 1997, the Compact over-order Class I price was $16.94, $3.00/cwt above the federal Class I price. Under Compact rules, a New York and a New England plant each having 10 million pounds (100,000 cwts) of receipts from New York Dairy Farmers, with 80% Class I use (80,000 cwts) and equal distribution of packaged milk to New England (40,000 cwts) and New York (40,000 cwts) during the month of July, would have identical over-order obligations of $120,000 to the Compact pool for packaged milk distributed in New England. . . .
The Commission would disburse from the pool to dairy farmers through the handlers, acting in a conduit capacity. The Commission calculated an "over-order producer price" (i.e., the amount to be paid back to the dairy farmers) of $1.28/cwt for July 1997. Whereas the New England pool plant would receive payment from the pool of $128,000 for redistribution to producers . . . the partially regulated New York plant would receive only $51,200 for redistribution . . . on some milk receipts . . . thus placing the New York handler at a $76,800 competitive disadvantage.
New York State Dairy Foods, Inc., 26 F. Supp. 2d at 256-57 (internal citations and footnotes omitted).
6
In the course of the its grant of summary judgment, the district court found that the Commission was not an "agency" subject to the provisions of the Administrative Procedure Act, 5 U.S.C. § 551(1) (1998). Appellants do not challenge this ruling.
7
Appellants challenge the district court's ruling on this point, arguing that the court erred in declining to accept extra-record evidence of competitive harm. We decline to reach the issue, as we concur with the district court that "none of the extra-record materials concerning the severity of any competitive harm appears [sic] relevant to the legal issues raised." New York State Dairy Foods, Inc., 26 F. Supp. 2d at 259.
8
See supra note 5.
9
To the extent that the appellants claim that the preference for pool plants violates the Equal Protection Clause, the district court deemed this claim inadequately raised. See New York State Dairy Foods, Inc., 26 F. Supp. 2d at 263 n.11. For that reason, we refuse to review it here. See Teamsters, Chauffeurs, Warehousemen and Helpers Union, Local No. 59 v. Superline Transp. Co., 953 F.2d 17, 21 (1st Cir. 1992) ("If any principle is settled in this circuit, it is that, absent the most extraordinary circumstances, legal theories not raised squarely in the lower court cannot be broached for the first time on appeal."). While we recognize that our decision in National Ass'n of Social Workers v. Harwood, 69 F.3d 622, 627-29 (1st Cir. 1995), allows this Court the discretion to hear claims not raised below, we believe that this discretion is best used sparingly. There is simply too little to recommend this case as sufficiently exceptional to justify a departure from our long-standing raise-or-waive rule. See id. at 627 (describing this Court's adherence to the rule as "near-religious fervor").
10
Appellant Farmland Dairies argues that the Commission also violated Condition 2 of the Consent by regulating milk other than Class I milk. See 7 U.S.C. § 7256(2) (1996). Appellant admits that this point was not raised in the motion for summary judgment, but urges consideration of it nonetheless. See Appellant Farmland Dairies' Brief at 42 n.10. We decline to do so. See supra note 9.
11
U.S. Const. art. I § 10, cl. 3 ("No State shall, without the Consent of Congress . . . enter into any Agreement or Compact with another State . . . .").
12
The states of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont, as amici, offer a similar argument. They argue that when an interstate compact becomes federal law under the Compacts Clause, it becomes immune from a Dormant Commerce Clause challenge by its very nature. They argue that the act of Congressional consent essentially transforms the States' agreement into federal law. Because we affirm on other grounds, we need not reach the merits of the Compacts Clause argument.
13
Because we hold herein that Congress provided adequate consent to the Compact, we need not consider whether appellants were required to exhaust their administrative remedies before proceeding in the district court. The district court held that they were, and thus refused to hear evidence not in the administrative record documenting competitive harm to appellants. But as a result of our holding with respect to the Commerce Clause, no showing of harm could revive the Commerce Clause challenge.
14
See infra Part V.C.
ADDENDUM
Calendar No. 25
104TH CONGRESS
1ST SESSION
S. J. RES. 28
To grant consent of Congress to the Northeast Interstate Dairy Compact.
IN THE SENATE OF THE UNITED STATES
MARCH 2 (legislative day, FEBRUARY 22), 1995
Mr. JEFFORDS (for himself, Mr. LEAHY, Ms. SNOWE, Mr. KENNEDY, Mr. COHEN, Mr. GREGG, Mr. DODD, Mr. SMITH, Mr. CHAFEE, Mr. KERRY, Mr. LIEBERMAN, and Mr. PELL) introduced the following joint resolution; which was read the first time
MARCH 6, 1995
Read the second time and placed on the calendar
JOINT RESOLUTION
To grant consent of Congress to the Northeast Interstate
Dairy Compact.
Resolved by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. CONGRESSIONAL CONSENT.
a) CONSENT OF CONGRESS.--Congress hereby consents to the Northeast Interstate Dairy Compact entered into among the States of Vermont, New Hampshire, Maine, Connecticut, Rhode Island, and Massachusetts, subject to the following conditions:
(1) LIMITATION OF MANUFACTURING PRICE REGULATION.--The compact Commission may not regulate Class II, Class III, or Class III-A milk used for manufacturing purposes or any other milk, other than Class I, or fluid milk, as defined by a Federal milk marketing order issued under section 8c of the Agricultural Adjustment Act (7 U.S.C. 608c), reenacted with amendments by the Agricultural Marketing Act of 1937 (referred to in this title as "Federal milk marketing order") unless both Houses of Congress have first consented to and approved such authority by a law enacted after the date of enactment of this joint resolution.
(2) ADDITIONAL STATES--Delaware, New Jersey, New York, Pennsylvania, Maryland, and Virginia are the only additional States that may join the compact, individually or otherwise, if on entry the additional States are contiguous to participating States and only if both Houses of Congress have first consented to and approved the additional States by a law enacted after the date of the enactment of this joint resolution.
(3) OUT-OF-REGION PRODUCERS.--When a compact over-order price is in effect, the compact Commission shall pay producers whose Class I milk is pooled with partially regulated pool plants for sale in the compact region an over-order price equal to the over-order price received by producers whose Class I milk is pooled with pool plants.
(4) REMOVING INCENTIVES FOR OVERPRODUCTION.--The compact Commission shall develop and implement a plan to ensure that the over-order price does not create an incentive for producers to generate additional supplies of milk.
(5) LIMITATION ON COMMISSION PRICING AUTHORITY.--The maximum amount of the compact over-order price identified in section 9(b) of the compact refers to, and shall mean, the combined amount of the applicable, Federal milk marketing order Class I price plus the regulated amount above the Federal milk marketing order Class I price established by the compact Commission.
(6) REGULATION OF COMPACT OVER-ORDER PRICE, ASSESSMENT ON PROCESSORS, AND DISBURSEMENT TO PRODUCERS.--The compact Commission shall administer any compact over-order price by a pooling mechanism. Compensatory payments under section 10(6) of the compact shall be utilized only when the Commission determines, on consultation with the applicable processor, that the use of the pooling mechanism would not be feasible or economical for the processor and the Commission. In making its determination, the Commission shall ensure that the utilization of compensatory payments will not create a competitive disadvantage for any processor or producer.
(7) COMPETITIVE CREDITS.--Competitive credits shall be used only in a manner consistent with their use in the Federal milk marketing orders.
(8) EFFECT ON FEDERAL MARKET ORDER CLASS I PRICE.--A compact over-order price shall have no effect on any applicable Federal milk marketing order Class I price. Any difference between or among the federally established Class I prices for milk subject to a compact over-order price shall remain unaffected by imposition of the over-order price.
(b) COMPACT.--The compact is substantially as follows:
"ARTICLE I. STATEMENT OF PURPOSE, FINDINGS AND DECLARATION OF POLICY
" 1. STATEMENT OF PURPOSE, FINDINGS AND DECLARATION OF POLICY
"The purpose of this compact is to recognize by constitutional prerequisite the interstate character of the northeast dairy industry and to form an interstate commission for the northeast region. The mission of the commission is to take such steps as are necessary to assure the continued viability of dairy farming in the northeast, and to assure consumers of an adequate, local supply of pure and wholesome milk."
The participating states find and declare that the dairy industry is the paramount agricultural activity of the northeast. Dairy farms, and associated suppliers, marketers, processors and retailers, are an integral component of the region's economy. Their ability to provide a stable, local supply of pure, wholesome milk is a matter of great importance to the health and welfare of the region.
"The participating states further find that dairy farms are essential to the region's rural communities and character. The farms preserve open spaces, sculpt the landscape and provide the land base for a diversity of recreational pursuits. In defining the rural character of our communities and landscape, dairy farms also provide a major draw for our tourist industries.
"By entering into this compact, the participating states affirm that their ability to regulate the price which northeast dairy farmers receive for their product is essential to the public interest. Assurance of a fair and equitable price for dairy farmers ensures their ability to provide milk to the market and the vitality of the northeast dairy industry, with all the associated benefits.
"Recent, dramatic price fluctuations, with a pronounced downward trend, threaten the viability and stability of the northeast dairy region. Historically, individual state regulatory action has been an effective emergency remedy available to farmers confronting a distressed market. The federal order system, implemented by the Agricultural Marketing Agreement Act of 1937, establishes only minimum prices for dairy products, without preempting the power of states to regulate milk prices above the minimum levels so established. Based on this authority, each state in the region has individually attempted to implement at least one regulatory program in response to the current dairy industry crisis.
"In today's regional dairy marketplace, cooperative, rather than individual state action may address more effectively the market disarray. Under our constitutional system, properly authorized, states acting cooperatively may exercise more power to regulate interstate commerce than they may assert individually without such authority. For this reason, the participating states invoke their authority to act in common agreement, with the consent of Congress, under the compact clause of the Constitution.
"In establishing their constitutional regulatory authority over the region's fluid milk market by this compact, the participating states declare their purpose that this compact neither displace the federal order system nor encourage the merging of federal orders. Specific provisions of the compact itself set forth this basic principle.
"Designed as a flexible mechanism able to adjust to changes in a regulated marketplace, the compact also contains a contingency provision should the federal order system be discontinued. In that event, the interstate commission is authorized to regulate the marketplace in replacement of the order system. This contingent authority does not anticipate such a change, however, and should not be so construed. It is only provided should developments in the market other than establishment of this compact result in discontinuance of the order system.
"ARTICLE II. DEFINITIONS AND RULES OF CONSTRUCTION
" 2. DEFINITIONS
"For the purposes of this compact, and of any supplemental or concurring legislation enacted pursuant thereto, except as may be otherwise required by the context:
"(1) 'Commission' means the commission established by this compact.
"(2) 'Compact' means this interstate compact.
"(3) 'Region' means the territorial limits of the states which are or become parties to this compact.
"(4) 'Participating state' means a state which has become a party to this compact by the enactment of concurring legislation.
"(5) 'Regulated area' means any area within the region governed by and defined in regulations establishing a compact over-order price or commission marketing order.
"(6) 'Pool plant' means any milk plant located in a regulated area.
"(7) 'Partially regulated plant' means a milk plant not located in a regulated area but having Class I distribution within such area, or receipts from producers located in such area. Commission regulations may exempt plants having such distribution or receipts in amounts less than the limits defined therein.
"(8) 'Compact over-order price' means a minimum price required to be paid to producers for Class I milk established by the commission in regulations adopted pursuant to sections nine and ten of this compact, which is above the price established in federal marketing orders or by state farm price regulation in the regulated area. Such price may apply throughout the region or in any part or parts thereof as defined in the regulations of the commission."
(9) 'Commission marketing order' means regulations adopted by the commission pursuant to sections nine and ten of this compact in place of a terminated federal marketing order or state dairy regulation. Such order may apply throughout the region or in any part or parts thereof as defined in the regulations of the commission. Such order may establish minimum prices for any or all classes of milk.
"(10) 'Milk' means the lacteal secretion of cows and includes all skim, butterfat, or other constituents obtained from separation or any other process. The term is used in its broadest sense and may be further defined by the commission for regulatory purposes.
"(11) 'Class I milk' means milk disposed of in fluid form or as a fluid milk product, subject to further definition in accordance with the principles expressed in subdivision (b) of section three.
"(12) 'State dairy regulation' means any state regulation of dairy prices, and associated assessments, whether by statute, marketing order or otherwise.
" 3. RULES OF CONSTRUCTION
"(a) This compact shall not be construed to displace existing federal milk marketing orders or state dairy regulation in the region but to supplement them. In the event some or all federal orders in the region are discontinued, the compact shall be construed to provide the commission the option to replace them with one or more commission marketing orders pursuant to this compact.
"(b) This compact shall be construed liberally in order to achieve the purposes and intent enunciated in section one. It is the intent of this compact to establish a basic structure by which the commission may achieve those purposes through the application, adaptation and development of the regulatory techniques historically associated with milk marketing and to afford the commission broad flexibility to devise regulatory mechanisms to achieve the purposes of this compact. In accordance with this intent, the technical terms which are associated with market order regulation and which have acquired commonly understood general meanings are not defined herein but the commission may further define the terms used in this compact and develop additional concepts and define additional terms as it may find appropriate to achieve its purposes.
"ARTICLE III. COMMISSION ESTABLISHED
" 4. COMMISSION ESTABLISHED
"There is hereby created a commission to administer the compact, composed of delegations from each state in the region. A delegation shall include not less than three nor more than five persons. Each delegation shall include at least one dairy farmer who is engaged in the production of milk at the time of appointment or reappointment, and one consumer representative. Delegation members shall be residents and voters of, and subject to such confirmation process as is provided for in, the appointing state. Delegation members shall serve no more than three consecutive terms with no single term of more than four years, and be subject to removal for cause. In all other respects, delegation members shall serve in accordance with the laws of the state represented. The compensation, if any, of the members of a state delegation shall be determined and paid by each state, but their expenses shall be paid by the commission. Each state delegation shall be entitled to one vote in the conduct of the commission's affairs.
" 5. VOTING REQUIREMENTS
"All actions taken by the commission, except for the establishment or termination of an over-order price or commission marketing order, and the adoption, amendment or rescission of the commission's bylaws, shall be by majority vote of the delegations present. Establishment or termination of an over-order price or commission marketing order shall require at least a two-thirds vote of the delegations present. The establishment of a regulated area which covers all or part of a participating state shall require also the affirmative vote of that state's delegation. A majority of the delegations from the participating states shall constitute a quorum for the conduct of the commission's business.
"$ 6. ADMINISTRATION AND MANAGEMENT
"(a) The commission shall elect annually from among the members of the participating state delegations a chairperson, a vice-chairperson, and a treasurer. The commission shall appoint an executive director and fix his or her duties and compensation. The executive director shall serve at the pleasure of the commission, and, together with the treasurer, shall be bonded in an amount determined by the commission. The commission may establish through its by-laws an executive committee composed of one member elected by each delegation.
"(b) The commission shall adopt by-laws for the conduct of its business by a two-thirds vote, and shall have the power by the same vote to amend and rescind these by-laws. The commission shall publish its by-laws in convenient form with the appropriate agency or officer in each of the participating states. The by-laws shall provide for appropriate notice to the delegations of all commission meetings and hearings and of the business to be transacted at such meetings or hearings. Notice also shall be given to other agencies or officers of participating states as provided by the laws of those states.
"(c) The commission shall file an annual report with the Secretary of Agriculture of the United States, and with each of the participating states by submitting copies to the governor, both houses of the legislature, and the head of the state department having responsibilities for agriculture.
"(d) In addition to the powers and duties elsewhere prescribed in this compact, the commission shall have the power--
"(1) to sue and be sued in any state or federal court:
"(2) to have a seal and alter the same at pleasure;
"(3) to acquire, hold, and dispose of real and personal property by gift, purchase, lease, license, or other similar manner, for its corporate purposes;
"(4) to borrow money and to issue notes, to provide for the rights of the holders thereof and to pledge the revenue of the commission as security therefor, subject to the provisions of section eighteen of this compact;
"(5) to appoint such officers, agents, and employees as it may deem necessary, prescribe their powers, duties, and qualifications; and
"(6) to create and abolish such offices, employments, and positions as it deems necessary for the purposes of the compact and provide for the removal, term, tenure, compensation, fringe benefits, pension, and retirement rights of its officers and employees. The commission may also retain personal services on a contract basis.
" 7. RULEMAKING POWER
"In addition to the power to promulgate a compact over-order price or commission marketing orders as provided by this compact, the commission is further empowered to make and enforce such additional rules and regula- tions as it deems necessary to implement any provisions of this compact, or to effectuate in any other respect the purposes of this compact.
"ARTICLE IV. POWERS OF THE COMMISSION
" 8. POWERS TO PROMOTE REGULATORY UNIFORMITY, SIMPLICITY, AND INTERSTATE COOPERATION
"The commission is hereby empowered to:
"(1) Investigate or provide for investigations or research projects designed to review the existing laws and regulations of the participating states, to consider their administration and costs, to measure their impact on the production and marketing of milk and their effects on the shipment of milk and milk products within the region.
"(2) Prepare and transmit to the participating states model dairy laws and regulations dealing with the inspection of farms and plants, sanitary codes, labels for dairy products and their imitations, standards for dairy products, license standards, producer security programs, and fair trade laws.
"(3) Study and recommend to the participating states joint or cooperative programs for the administration of the dairy laws and regulations and to prepare estimates of cost savings and benefits of such programs.
"(4) Encourage the harmonious relationships between the various elements in the industry for the solution of their material problems. Conduct symposiums or conferences designed to improve industry relations, or a better understanding of problems.
"(5) Prepare and release periodic reports on activities and results of the commission's efforts to the participating states.
"(6) Review the existing marketing system for milk and milk products and recommend changes in the existing structure for assembly and distribution of milk which may assist, improve, or promote more efficient assembly and distribution of milk.
"(7) Investigate costs and charges for producing. hauling, handling, processing, distributing, selling and for all other services performed with respect to milk.
"(8) Examine current economic forces affecting producers, probable trends in production and consumption, the level of dairy farm prices in relation to costs, the financial conditions of dairy farmers, and the need for an emergency order to relieve critical conditions on dairy farms.
" 9. EQUITABLE FARM PRICES"
(a) The powers granted in this section and section ten shall apply only to the establishment of a compact over-order price, so long as federal milk marketing orders remain in effect in the region. In the event that any or all such orders are terminated, this article shall authorize the commission to establish one or more commission marketing orders, as herein provided, in the region or parts thereof as defined in the order.
(b) A compact over-order price established pursuant to this section shall apply only to Class I milk. Such over-order price shall not exceed one dollar fifty cents, per gallon. Beginning in nineteen hundred ninety, and using that year as a base, the foregoing one dollar fifty cents per gallon maximum shall be adjusted annually by the rate of change in the Consumer Price Index as reported by the Bureau of Labor Statistics of the United States Department of Labor. For purposes of the pooling and equalization of an over-order price, the value of milk used in other use classifications shall be calculated at the appropriate class price established pursuant to the applicable federal order or state dairy regulation and the value of unregulated milk shall be calculated in relation to the nearest prevailing class price in accordance with and subject to such adjustments as the commission may prescribe in regulations."
(c) A commission marketing order shall apply to all classes and uses of milk."
(d) The commission is hereby empowered to establish the minimum price for milk to be paid by pool plants, partially regulated plants and all other handlers receiving milk from producers located in a regulated area. This price shall be established either as a compact over-order price or by one or more commission marketing orders. Whenever such a price has been established by either type of regulation, the legal obligation to pay such price shall be determined solely by the terms and purpose of the regulation without regard to the situs of the transfer of title, possession or any other factors not related to the purposes of the regulation and this compact. Producer-handlers as defined in an applicable federal market order shall not be subject to a compact over-order price. The commission shall provide for similar treatment of producer-handlers under commission marketing orders.
"(e) In determining the price, the commission shall consider the balance between production and consumption of milk and milk products in the regulated area, the costs of production including, but not limited to the price of feed, the cost of labor including the reasonable value of the producer's own labor and management, machinery expense, and interest expense, the prevailing price for milk outside the regulated area, the purchasing power of the public and the price necessary to yield a reasonable return to the producer and distributor.
(f) When establishing a compact over-order price, the commission shall take such action as necessary and feasible to ensure that the over-order price does not create an incentive for producers to generate additional supplies of milk.
"(g) The commission shall whenever possible enter into agreements with state or federal agencies for exchange of information or services for the purpose of reducing regulatory burden and cost of administering the compact. The commission may reimburse other agencies for the reasonable cost of providing these services.
" 10. OPTIONAL PROVISIONS FOR PRICING ORDER
"Regulations establishing a compact over-order price or a commission marketing order may contain, but shall not be limited to, any of the following:
"(1) Provisions classifying milk in accordance with the form in which or purpose for which it is used, or creating a flat pricing program.
"(2) With respect to a commission marketing order only, provisions establishing or providing a method for establishing separate minimum prices for each use classification prescribed by the commission, or a single minimum price for milk purchased from producers or associations of producers.
"(3) With respect to an over-order minimum price, provisions establishing or providing a method for establishing such minimum price for Class I milk.
"(4) Provisions for establishing either an over-order price or a commission marketing order may make use of any reasonable method for establishing such price or prices including flat pricing and formula pricing. Provision may also be made for location adjustments, zone differentials and for competitive credits with respect to regulated handlers who market outside the regulated area.
"(5) Provisions for the payment to all producers and associations of producers delivering milk to all handlers of uniform prices for all milk so delivered, irrespective of the uses made of such milk by the individual handler to whom it is delivered, or for the payment of producers delivering milk to the same handler of uniform prices for all milk delivered by them.
"(A) With respect to regulations establishing a compact over-order price, the commission may establish one equalization pool within the regulated area for the sole purpose of equalizing returns to producers throughout the regulated area.
"(B) With respect to any commission marketing order, as defined in section two, subdivision nine, which replaces one or more terminated federal orders or state dairy regulation, the marketing area of now separate state or federal orders shall not be merged without the affirmative consent of each state, voting through its delegation, which is partly or wholly included within any such new marketing area.
"(6) Provisions requiring persons who bring Class I milk into the regulated area to make compensatory payments with respect to all such milk to the extent necessary to equalize the cost of milk purchased by handlers subject to a compact over-order price or commission marketing order. No such provisions shall discriminate against milk producers outside the regulated area. The provisions for compensatory payments may require payment of the difference between the Class I price required to be paid for such milk in the state of production by a federal milk marketing order or state dairy regulation and the Class I price established by the compact over-order price or commission marketing order.
"(7) Provisions specially governing the pricing and pooling of milk handled by partially regulated plants.
"(8) Provisions requiring that the account of any person regulated under a compact over-order price shall be adjusted for any payments made to or received by such persons with respect to a producer settlement fund of any federal or state milk marketing order or other state dairy regulation within the regulated area.
"(9) Provisions requiring the payment by handlers of an assessment to cover the costs of the administration and enforcement of such order pursuant to Article VII, Section 18(a).
"(10) Provisions for reimbursement to participants of the Women, Infants and Children Special Supplemental Food Program of the United States Child Nutrition Act of 1966.
"(11) Other provisions and requirements as the commission may find are necessary or appropriate to effectuate the purposes of this compact and to provide for the payment of fair and equitable minimum prices to producers.
"ARTICLE V. RULEMAKING PROCEDURE
" 11. RULEMAKING PROCEDURE
"Before promulgation of any regulations establishing a compact over-order price or commission marketing order, including any provision with respect to milk supply under subsection 9(f), or amendment thereof, as provided in Article IV, the commission shall conduct an informal rulemaking proceeding to provide interested persons with an opportunity to present data and views. Such rulemaking proceeding shall be governed by section four of the Federal Administrative Procedure Act, as amended (5 U.S.C. 553). In addition, the commission shall, to the extent practicable, publish notice of rulemaking proceedings in the official register of each participating state. Before the initial adoption of regulations establishing a compact over-order price or a commission marketing order and thereafter before any amendment with regard to prices or assessments, the commission shall hold a public hearing. The commission may commence a rulemaking proceeding on its own initiative or may in its sole discretion act upon the petition of any person including individual milk producers, any organization of milk producers or handlers, general farm organizations, consumer or public interest groups, and local, state or federal officials.
" 12. FINDINGS AND REFERENDUM
"(a) In addition to the concise general statement of basis and purpose required by section 4(b) of the Federal Administrative Procedure Act, as amended (5 U.S.C. 553(c)), the commission shall make findings of fact with respect to:
"(1) Whether the public interest will be served by the establishment of minimum milk prices to dairy farmers under Article IV.
"(2) What level of prices will assure that producers receive a price sufficientto cover their costs of production and will elicit an adequate supply of milk for the inhabitants of the regulated area and for manufacturing purposes.
"(3) Whether the major provisions of the order, other than those fixing minimum milk prices, are in the public interest and are reasonably designed to achieve the purposes of the order.
"(4) Whether the terms of the proposed regional order or amendment are approved by producers as provided in section thirteen.
" 13. PRODUCER REFERENDUM
"(a) For the purpose of ascertaining whether the issuance or amendment of regulations establishing a compact over-order price or a commission marketing order, including any provision with respect to milk supply under subsection 9(f), is approved by producers, the commission shall conduct a referendum among producers. The referendum shall be held in a timely manner, as determined by regulation of the commission. The terms and conditions of the proposed order or amendment shall be described by the commission in the ballot used in the conduct of the referendum, but the nature, content, or extent of such description shall not be a basis for attacking the legality of the order or any action relating thereto.
"(b) An order or amendment shall be deemed approved by producers if the commission determines that it is approved by at least two-thirds of the voting producers who, during a representative period determined by the commission, have been engaged in the production of milk the price of which would be regulated under the proposed order or amendment.
"(c) For purposes of any referendum, the commission shall consider the approval or disapproval by any cooperative association of producers, qualified under the provisions of the Act of Congress of February 18, 1922, as amended, known as the Capper-Volstead Act, bona fide engaged in marketing milk, or in rendering services for or advancing the interests of producers of such commodity, as the approval or disapproval of the producers who are members or stockholders in, or under contract with, such cooperative association of producers, except as provided in subdivision (1) hereof and subject to the provisions of subdivisions (2) through (5) hereof.
"(1) No cooperative which has been formed to act as a common marketing agency for both cooperatives and individual producers shall be qualified to block vote for either.
"(2) Any cooperative which is qualified to block vote shall, before submitting its approval or disapproval in any referendum, give prior written notice to each of its members as to whether and how it intends to cast its vote. The notice shall be given in a timely manner as established, and in the form prescribed, by the commission.
"(3) Any producer may obtain a ballot from the commission in order to register approval or disapproval of the proposed order.
"(4) A producer who is a member of a cooperative which has provided notice of its intent to approve or not to approve a proposed order, and who obtains a ballot and with such ballot expresses his approval or disapproval of the proposed order, shall notify the commission as to the name of the cooperative of which he or she is a member, and the commission shall remove such producer's name from the list certified by such cooperative with its corporate vote.
"(5) In order to insure that all milk producers are informed regarding a proposed order, the commission shall notify all milk producers that an order is being considered and that each producer may register his approval or disapproval with the commission either directly or through his or her cooperative.
" 14. TERMINATION OF OVER-ORDER PRICE OR MARKETING ORDER
"(a) The commission shall terminate any regulations establishing an over-order price or commission marketing order issued under this article whenever it finds that such order or price obstructs or does not tend to effectuate the declared policy of this compact."
(b) The commission shall terminate any regulations establishing an over-order price or a commission marketing order issued under this article whenever it finds that such termination is favored by a majority of the producers who, during a representative period determined by the commission, have been engaged in the production of milk the price of which is regulated by such order; but such termination shall be effective only if announced on or before such date as may be specified in such marketing agreement or order.
(c) The termination or suspension of any order or provision thereof, shall not be considered an order within the meaning of this article and shall require no hearing, but shall comply with the requirements for informal rulemaking prescribed by section four of the Federal Administrative Procedure Act, as amended (5 U.S.C. 553).
"ARTICLE VI. ENFORCEMENT
" 15. RECORDS, REPORTS, ACCESS TO PREMISES
"(a) The commission may by rule and regulation prescribe record keeping and reporting requirements for all regulated persons. For purposes of the administration and enforcement of this compact, the commission is authorized to examine the books and records of any regulated person relating to his or her milk business and for that purpose, the commission's properly designated officers, employees, or agents shall have full access during normal business hours to the premises and records of all regulated persons.
"(b) Information furnished to or acquired by the commission officers, employees, or its agents pursuant to this section shall be confidential and not subject to disclosure except to the extent that the commission deems disclosure to be necessary in any administrative or judicial proceeding involving the administration or enforcement of this compact, an over-order price, a compact marketing order, or other regulations of the commission. The com- mission may promulgate regulations further defining the confidentiality of information pursuant to this section. Nothing in this section shall be deemed to prohibit (i) the issuance of general statements based upon the reports of a number of handlers, which do not identify the information furnished by any person, or (ii) the publication by direction of the commission of the name of any person violating any regulation of the commission, together with a statement of the particular provisions violated by such person.
"(c) No officer, employee, or agent of the commission shall intentionally disclose information, by inference or otherwise, which is made confidential pursuant to this section. Any person violating the provisions of this section shall upon conviction be subject to a fine of not more than $ 1,000 or to imprisonment for not more than one year, or to both, and shall be removed from office. The commission shall refer any allegation of a violation of this section to the appropriate state enforcement authority or United States Attorney.
" 16. SUBPOENA, HEARINGS AND JUDICIAL REVIEW
"(a) The commission is hereby authorized and empowered by its members and its properly designated officers to administer oaths and issue subpoenas throughout all signatory states to compel the attendance of witnesses and the giving of testimony and the production of other evidence.
"(b) Any handler subject to an order may file a written petition with the commission stating that any such order or any provision of any such order or any obligation imposed in connection therewith is not in accordance with law and praying for a modification thereof or to be exempted therefrom. He shall thereupon be given an opportunity for a hearing upon such petition, in accordance with regulations made by the commission. After such hearing, the commission shall make a ruling upon the prayer of such petition which shall be final, if in accordance with law.
"(c) The district courts of the United States in any district in which such handler is an inhabitant, or has his principal place of business, are hereby vested with jurisdiction in equity to review such ruling, provided a bill in equity for that purpose is filed within thirty days from the date of the entry of such ruling. Service of process in such proceedings may be had upon the commission by delivering to it a copy of the bill of complaint. If the court determines that such ruling is not in accordance with law, it shall remand such proceedings to the commission with directions either (1) to make such ruling as the court shall determine to be in accordance with law, or (2) to take such further proceedings as, in its opinion, the law requires. The pendency of proceedings instituted pursuant to this subdivision shall not impede, hinder, or delay the commission from obtaining relief pursuant to section seventeen. Any proceedings brought pursuant to section seventeen (except where brought by way of counterclaim in proceedings instituted pursuant to this section) shall abate whenever a final decree has been rendered in proceedings between the same parties, and covering the same subject matter, instituted pursuant to this section.
" 17. ENFORCEMENT WITH RESPECT TO HANDLERS
(a) Any violation by a handler of the provisions of regulations establishing an over-order price or a commission marketing order, or other regulations adopted pursuant to this compact shall:
"(1) Constitute a violation of the laws of each of the signatory states. Such violation shall render the violator subject to a civil penalty in an amount as may be prescribed by the laws of each of the participating states, recoverable in any state or federal court of competent jurisdiction. Each day such violation continues shall constitute a separate violation.
(2) Constitute grounds for the revocation of license or permit to engage in the milk business under the applicable laws of the participating states.
"(b) With respect to handlers, the commission shall enforce the provisions of this compact, regulations establishing an over-order price, a commission marketing order or other regulations adopted hereunder by:
"(1) Commencing an action for legal or equitable relief brought in the name of the commission in any state or federal court of competent jurisdiction; or
"(2) With the agreement of the appropriate state agency of a participating state, by referral to the state agency for enforcement by judicial or administrative remedy.
"(c) With respect to handlers, the commission may bring an action for injunction to enforce the provisions of this compact or the order or regulations adopted thereunder without being compelled to allege or prove that an adequate remedy of law does not exist.
"ARTICLE VII. FINANCE
" 18. FINANCE OF START-UP AND REGULAR COSTS
"(a) To provide for its start-up costs, the commission may borrow money pursuant to its general power under section six, subdivision (d), paragraph four. In order to finance the costs of administration and enforcement of this compact, including payback of start-up costs, the commission is hereby empowered to collect an assessment from each handler who purchases milk from producers within the region. If imposed, this assessment shall be collected on a monthly basis for up to one year from the date the commission convenes, in an amount not to exceed one-tenth of one percent of the applicable federal market order blend price per hundredweight of milk purchased from producers during the period of the assessment. The initial assessment may apply to the projected purchases of handlers for the two-month period following the date the commission convenes. In addition, if regulations establishing an over-order price or a compact marketing order are adopted, they may include an assessment for the specific purpose of their administration. These regulations shall provide for establishment of a reserve for the commission's ongoing operating expenses."
(b) The commission shall not pledge the credit of any participating state or of the United States. Notes issued by the commission and all other financial obligations incurred by it, shall be its sole responsibility and no participating state or the United States shall be liable therefor.
" 19. AUDIT AND ACCOUNTS
"(a) The commission shall keep accurate accounts of all receipts and disbursements, which shall be subject to the audit and accounting procedures established under its rules. In addition, all receipts and disbursements of funds handled by the commission shall be audited yearly by a qualified public accountant and the report of the audit shall be included in and become part of the annual report of the commission.
"(b) The accounts of the commission shall be open at any reasonable time for inspection by duly constituted officers of the participating states and by any persons authorized by the commission.
"(c) Nothing contained in this article shall be construed to prevent commission compliance with laws relating to audit or inspection of accounts by or on behalf of any participating state or of the United States.
"ARTICLE VIII. ENTRY INTO FORCE; ADDITIONAL MEMBERS AND WITHDRAWAL
" 20. ENTRY INTO FORCE: ADDITIONAL MEMBERS
"The compact shall enter into force effective when enacted into law by any three states of the group of states composed of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey. New York, Pennsylvania, Rhode Island, Vermont, and Virginia, and when the consent of Congress has been obtained. This compact shall also be open to states which are contiguous to any of the named states and open to states which are contiguous to participating states.
" 21. WITHDRAWAL FROM COMPACT
"Any participating state may withdraw from this compact by enacting a statute repealing the same, but no such withdrawal shall take effect until one year after notice in writing of the withdrawal is given to the commission and the governors of all other participating states. No withdrawal shall affect any liability already incurred by or chargeable to a party state prior to the time of such withdrawal.
" 22. SEVERABILITY
"If any part or provision of this compact is adjudged invalid by any court, such judgment shall be confined in its operation to the part or provision directly involved in the controversy in which such judgment shall have been rendered and shall not affect or impair the validity of the remainder of this compact. "Congress reserves the right to amend or rescind this interstate compact at any time."
SEC. 2. RESERVATION OF RIGHTS.
(a) IN GENERAL.--The right to alter, amend, or repeal this Act is expressly reserved.
(b) COMPENSATION REQUIREMENT.--When an over-order price is in effect, the Commission established in this compact shall compensate the Commodity Credit Corporation before the end of the fiscal year for the cost of any increased Commodity Credit Corporation dairy purchases that result from projected increased fluid milk production for that fiscal year within the Compact region in excess of the national average rate of increase.
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|
United States Court of Appeals
For the Eighth Circuit
___________________________
No. 17-2957
___________________________
United States of America
Plaintiff - Appellee
v.
Alexander Castellano-Benitez
Defendant - Appellant
____________
Appeal from United States District Court
for the District of Nebraska - Lincoln
____________
Submitted: June 15, 2018
Filed: August 2, 2018
(Unpublished)
____________
Before LOKEN, GRUENDER, and ERICKSON, Circuit Judges.
____________
PER CURIAM.
Alexander Castellano-Benitez was convicted by a jury of possession with intent
to distribute 500 grams or more of a mixture or substance containing
methamphetamine. He was sentenced to a term of 170 months’ imprisonment and
five years of supervised release. He now appeals the denial of his motion for a new
trial on the grounds of: 1) an alleged Brady violation, and 2) purported “newly
discovered” evidence. We affirm.
I. Background
The evidence at trial suggested that Castellano-Benitez stole a large quantity
of drugs from a dealer in Texas and traveled to Florida in the company of an
accomplice, Yunior Florez-Veliz. He then drove with another accomplice, Yulio
Cervino-Hernandez, to Nebraska to sell some of the stolen drugs.
On September 22, 2015, Castellano-Benitez and Cervino-Hernandez were in
a hotel room in Nebraska when police, acting on a tip, raided the room. When
Castellano-Benitez was asked to produce his identification, he lifted a mattress on one
of the beds, revealing two small bags and another bag consistent with packaged
methamphetamine. Observing this, an officer asked Castellano-Benitez if there was
anything under the bed. Castellano-Benitez replied back, “a little bit.” During the
search, the police discovered a large truck battery and an electronic scale by the bed.
Castellano-Benitez’s fingerprint was found on the scale. Castellano-Benitez was
arrested.
From jail, Castellano-Benitez placed multiple calls to Florez-Veliz (who had
remained in Florida) to come to Nebraska to sell drugs. With the assistance of
cooperating witnesses and confidential informants, the police located and arrested
Florez-Veliz in Nebraska with four pounds of methamphetamine.
While out on bond, Castellano-Benitez placed multiple phone calls to a
confidential informant, vaguely referencing something of value that could be found
in the truck. Armed with this information, the police reexamined the confiscated
truck battery, which had been placed in the lost and found property section in the
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Sheriff’s Office. The search revealed that the battery contained nearly five kilograms
of methamphetamine.
During pretrial preparations, Castellano-Benitez maintained his innocence and
his belief that the cooperating witnesses conspired to frame him. During discovery,
Castellano-Benitez’s attorney asked the government whether Florez-Veliz and
Cervino-Hernandez were ever detained together. The government’s representations
on this issue were, taken as a whole, misleading. The government first produced a
report covering the Saline County Jail’s records. It stated that the two “were never
housed together at any time in the Saline County Jail.” In a later email requesting
stipulations for trial, an AUSA asked if, “since he had gone through so much work
to get the records,” defense counsel would stipulate to the fact that Florez-Veliz and
Cervino-Hernandez “never crossed paths in their custody.”
Contrary to the government’s representations, Florez-Veliz and
Cervino-Hernandez had been housed together. A close examination of the Saline
County Jail report showed that Florez-Veliz and Cervino-Hernandez spent a period
of twenty-one days in a Dawson County, Nebraska, jail. The report did not provide
any further information about the period of confinement in Dawson County. The
email by the AUSA went so far as to represent that the two had never crossed paths
while in custody. In fact, they had been kept in the same large cell at the Dawson
facility for more than twenty days.
At trial, Castellano-Benitez pursued the theory that the coconspirators were
framing him. As part of that strategy, he elicited testimony that separated prisoners
may be able to communicate. That testimony discussed challenging or difficult ways
of communicating, such as by passing notes. Oral testimony from the cooperating
witnesses during trial downplayed their relationship and conspicuously omitted that
they had spent a significant length of time in jail together. Castellano-Benitez was
convicted and sentenced to 170 months in prison.
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Castellano-Benitez later discovered that Florez-Veliz and Cervino-Hernandez
had spent time in jail together. Upon this discovery, he filed a motion for a new trial
under Fed. R. Crim. P. 33, alleging a Brady violation. The district court1 denied the
motion. The court ruled: 1) the evidence was not suppressed because “reasonable
diligence” would have led defense counsel to request the Dawson facility’s records,
and 2) even if the evidence had been suppressed, the evidence was not material in
light of the other evidence in the record.
Castellano-Benitez also contended that he should receive a new trial on the
basis of “new evidence”—two letters obtained by the defense after trial. A letter from
Angel Merida Herrera indicated that Herrera had been housed with Florez-Veliz and
Cervino-Hernandez at the Dawson County facility. Herrera reported that he
overheard the pair discussing how to make sure an unassuming Castellano-Benitez
was convicted. A second letter, purportedly from Cervino-Hernandez, taunted
Castellano-Benitez and said he was only in jail because he had made the mistake of
lifting up the hotel mattress. The district court ruled that the Herrera letter would not
have altered the outcome of the trial, while the Cervino-Hernandez letter was
“completely devoid” of relevant information.
II. Discussion
We review the denial of a motion for new trial based on a Brady violation for
an abuse of discretion. United States v. Reaves, 649 F.3d 862, 867 (8th Cir. 2011)
(citing United States v. Deavault, 190 F.3d 926, 929 (8th Cir. 1999)). We likewise
review a denial of a motion for a new trial based on new evidence for an abuse of
discretion. United States v. Haskell, 468 F.3d 1064, 1076 (8th Cir. 2006) (citing
United States v. Parker, 267 F.3d 839, 846 (8th Cir. 2001)). A district court may
1
The Honorable John M. Gerrard, United States District Judge for the District
of Nebraska.
-4-
grant a motion for new trial if the “interest of justice so requires.” Fed. R. Crim. P.
33(a). The decision is within the discretion of the trial court, but “[u]nless the district
court ultimately determines that a miscarriage of justice will occur, the jury’s verdict
must be allowed to stand.” United States v. Campos, 306 F.3d 577, 579 (8th Cir.
2002).
Brady requires prosecutors to disclose to the defense “all material evidence
favorable to the accused, including impeachment and exculpatory evidence.” United
States v. Robinson, 809 F.3d 991, 996 (8th Cir. 2016). That duty extends to material
evidence which prosecutors are themselves unaware of but which is known to others
acting on the government’s behalf in the case. Id. (citing Kyles v. Whitley, 514 U.S.
419, 432-34 (1995)). To establish a Brady violation, the defendant must show that
1) the prosecution suppressed evidence, 2) the evidence was favorable to the accused,
and 3) the evidence was material to the issue of guilt or punishment. United States
v. Sturdivant, 513 F.3d 795, 803 (8th Cir. 2008). When determining whether
evidence is material, “[t]he 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.” Robinson, 809 F.3d at 996 (citing Strickler v. Greene, 527 U.S. 263,
289-90 (1999)). The evidence must be viewed in the context of all other evidence put
before the jury in the case. See United States v. Wright, 866 F.3d 899, 908-11 (8th
Cir. 2017) (discussing other relevant evidence in the impeachment context).
We find that there was no Brady violation because the evidence was not
material.2 We recognize that the evidence may have affected the credibility of two
of the cooperating witnesses, but other evidence conclusively and overwhelmingly
established Castellano-Benitez’s guilt. See United States v. Pendleton, 832 F.3d 934,
2
Because we decide that the evidence was not material, we need not reach the
question whether the evidence was actually suppressed.
-5-
941 (8th Cir. 2016) (finding no Brady violation where “the testimony of these two
witnesses was not essential to proving [a defendant’s] guilt because the other
evidence of his guilt was overwhelming”). For example, the physical evidence
obtained in the motel room and the contents of Castellano-Benitez’s monitored phone
calls related to the truck battery are independent pieces of evidence sufficient to
establish guilt, such that we can be sure the trial resulted “in a verdict worthy of
confidence.” The district court did not abuse its discretion by concluding that
Brady did not compel a new trial.3
Similarly, the new evidence did not warrant a new trial. To obtain a new trial
on the basis of newly discovered evidence, a defendant must show: 1) the evidence
was unknown or unavailable to the defendant at the time of trial, 2) the defendant was
duly diligent in attempting to uncover the evidence, 3) the newly discovered evidence
is material, and 4) the newly discovered evidence is such that it will probably result
in an acquittal upon retrial. Haskell, 468 F.3d at 1076 (quoting Parker, 267 F.3d at
846). For essentially the same reasons as noted above, a retrial would be unlikely to
result in an acquittal even if the two letters were considered. Both letters relate to the
mindset of one or both coconspirators in offering testimony. The other evidence of
Castellano-Benitez’s guilt is conclusive even absent that testimony. Any implication
contained in the letters that Castellano-Benitez was unaware of the methamphetamine
is contradicted by his own actions and statements during and following the raid. The
district court properly exercised its discretion in denying a new trial.
3
We do not mean to minimize the AUSA’s conduct in this matter. The
representations made were in error, asserted with such confidence so as to be
misleading, and created the potential for a serious problem. Nonetheless, the
overwhelming evidence of Castellano-Benitez’s guilt leaves us free from doubt that
the verdict is worthy of confidence.
-6-
III. Conclusion
We affirm.
______________________________
-7-
|
417 Mass. 516 (1994)
631 N.E.2d 43
ELAINE M. CALLAHAN
vs.
BOARD OF BAR OVERSEERS & others.[1]
Supreme Judicial Court of Massachusetts, Suffolk.
December 7, 1993.
April 12, 1994.
Present: LIACOS, C.J., WILKINS, NOLAN, LYNCH, & GREANEY, JJ.
*517 Elaine M. Callahan, pro se.
Scott Harshbarger, Attorney General, & Eric A. Smith, Assistant Attorney General, for Board of Bar Overseers.
Daniel J. Johnedis for James R. DeGiacomo & another.
Sara Fleschner for Robert Cohen & another.
LIACOS, C.J.
The plaintiff, an attorney proceeding pro se, filed this action in the county court by way of a verified complaint "in the nature of certiorari and errors and mandamus and prohibition and under M.G.L.c. 211, § 3 et al." The plaintiff's complaint sought review of certain actions taken by the Board of Bar Overseers (board) and bar counsel on complaints filed by the plaintiff with the board, regarding alleged misconduct by the individual defendants, and sought review of the board's investigation of a complaint filed with the board against the plaintiff. As with most of the documents drafted by the plaintiff and contained in the record, the complaint contained exaggerated, inflammatory, and generally confusing accusations of violations of the Canons of Ethics and Disciplinary Rules Regulating the Practice of Law, S.J.C. Rule 3:07, as amended, by the individual defendants, and similarly inflammatory and confusing accusations of conspiracy, fraud, and bad faith investigation by bar counsel and the board. During the pendency of this action, the plaintiff moved a single justice of this court to transfer to the county court a case, then pending in the Housing Court, in which the plaintiff was involved and in which certain of the individual defendants were serving as counsel.
The single justice denied the motion for transfer and dismissed the plaintiff's complaint. Later, another single justice of this court denied the plaintiff's motion to reinstate and to transfer the case to the full court for consideration. The plaintiff now appeals, asserting various claims that we discuss below. The individual defendants have moved this court to assess fees and costs against the plaintiff for bringing a frivolous appeal. We affirm the orders of the single justices, and award double costs of this appeal to the individual defendants.
*518 It appears from the record that the plaintiff filed with the board various complaints of professional misconduct against the individual defendants. Complaints against three of them were referred to bar counsel and subsequently were dismissed without issuance of a formal complaint. See S.J.C. Rule 4:01, § 7, as amended, 394 Mass. 1106 (1985). Complaints against DeGiacomo, a member of the board, were investigated by the board according to its procedures for investigating complaints against board members. See id. Ultimately, the board dismissed the complaints against DeGiacomo. DeGiacomo did not participate in the board's proceedings on those complaints.
The record further reveals that an individual, not a party to this suit, had filed a complaint with the board against the plaintiff. After an investigation by bar counsel, that complaint was dismissed without issuance of a formal complaint. A single member of the board reviewed the dismissal of the complaint on the complainant's request. The single member adopted the recommendation of bar counsel to close the matter.
The plaintiff claims that the single justice erred in dismissing the plaintiff's complaint regarding the board's and bar counsel's closing of their respective investigations of the alleged misconduct by the individual defendants. There was no error. An individual who files a complaint with the board does not have standing to appeal from the board's decision to dismiss that complaint. Binns v. Board of Bar Overseers, 369 Mass. 975, 976 (1976). See Slotnick v. Pike, 374 Mass. 822 (1977). The plaintiff cannot proceed under G.L.c. 211, § 3, because the board is not a "court[] of inferior jurisdiction" as described in § 3, but rather is an arm of this court. See Binns, supra at 976. Thus, that section is inapplicable here. So too, neither § 4 (certiorari) nor § 5 (mandamus) of G.L.c. 249, provide grounds on which the plaintiff could proceed before a single justice. See Rules 2.7 (a) (1) and 2.8 (a) of the Rules of the Board of Bar Overseers (1993). The remedies available under G.L.c. 249, §§ 4, 5, are available only to parties lacking other reasonably adequate remedies. Commonwealth *519 v. Langton, 389 Mass. 1001, 1001-1002 (1983), and cases cited (mandamus). Boston Edison Co. v. Selectmen of Concord, 355 Mass. 79, 83 (1968) (certiorari).
The plaintiff claims that the single justice erred in declining to sanction Fleschner for alleged fraud committed before the single justice. While a single justice may impose sanctions on an attorney in a pending matter under Mass. R. Civ. P. 11 (a), 365 Mass. 753 (1974), made applicable to single justice proceedings by Mass. R. Civ. P. 1, 365 Mass. 730 (1974), nothing in the rules requires the single justice to sanction an attorney at the insistence of another party. More importantly, we note that the single justice apparently found no reason to sanction Fleschner. We caution the plaintiff to avoid filing frivolous complaints against other attorneys. Such conduct may subject the plaintiff herself to disciplinary action. See S.J.C. Rule 3:07, DR 1-102 (A) (4)-(6), as appearing in 382 Mass. 769 (1981).
The plaintiff's claim regarding the board's investigation of the plaintiff properly was dismissed by the single justice. The matter was closed by the board without the issuance of a formal complaint. We assume that the board and bar counsel maintained confidentiality as required by our rules. See S.J.C. Rule 4:01, § 20, as appearing in 415 Mass. 1307 (1993). There was no harm or prejudice to the plaintiff. Thus, the plaintiff's claim is moot. See Matter of Sturtz, 410 Mass. 58, 59-60 (1991), and cased cited.
Finally, the plaintiff claims that the single justice erred in declining to transfer the pending Housing Court action to the Supreme Judicial Court, as provided in G.L.c. 211, § 4A. The plaintiff asserts that transfer was warranted as "a matter of judicial economy and to aid in the due administration of justice." Section 4A provides that "[t]he supreme judicial court may also direct any cause or matter to be transferred from a lower court to it ..." (emphasis added). The highlighted language of the statute is clear that such transfer is discretionary with the single justice. The plaintiff's mere assertions of judicial economy and administration of justice as reasons for transfer are not persuasive. The plaintiff has not *520 shown an abuse of discretion by the single justice in declining to transfer the Housing Court action. There was no error.
The individual defendants have requested that we award them costs pursuant to Mass. R.A.P. 25, as appearing in 376 Mass. 949 (1979). The "record" submitted to us by the plaintiff reveals that this appeal is another episode in a protracted family feud between the plaintiff and her father that began after the plaintiff's mother's death. The "record" is rife with irrelevant, confusing, repetitive, and inflammatory memoranda, photographs, letters, and other documents which were haphazardly "organized" and joined by paper clips, staples, and rubber bands. For example, the plaintiff's appendix includes several versions of her resume and copies of photographs of her father performing household chores. Many of these documents in no way are related to the issues in this appeal, except that they helped us to conclude that this appeal is frivolous.
The plaintiff sets forth arguments on which, as our citations in this opinion show, a reasonably competent attorney could not hope to prevail. Her complaint and this appeal both name the individual defendants as parties in addition to the board and bar counsel, but the plaintiff's complaint only challenged certain actions by the board and bar counsel and requests relief only as to the actions of the board and bar counsel.[2] She claims abuse of discretion by the single justice, but fails to argue any basis for us to find an abuse of discretion. Rather, she reargues her version of the "facts" which the single justice, the Housing Court judges, and the board and bar counsel all have rejected. She repeats accusations of ethical violations and criminal and professional misconduct by the individual defendants, all of which the board and bar counsel investigated and dismissed, and which were passed on and dismissed by the single justice. The only substantiation of this alleged misconduct consisted of documents prepared by the plaintiff herself.
*521 We hardly can characterize this appeal as anything but frivolous. See Avery v. Steele, 414 Mass. 450, 451-453 n. 2, 455-457 (1993), and cases cited; Price v. Cole, 31 Mass. App. Ct. 1, 6-7 (1991). Accordingly, we conclude that the individual defendants are entitled to costs of this appeal pursuant to Mass. R.A.P. 25. We further conclude that, given the egregiousness of this case, the award of appellate costs should be doubled. G.L.c. 211, § 10 (1992 ed.). See Avery, supra at 456-457.
The plaintiff has filed motions to strike various portions of the briefs of the opposing parties. These motions are denied. The plaintiff's motion to sanction Fleschner is denied. The orders of the single justices are affirmed. The individual defendants are awarded double costs of this appeal.
So ordered.
NOTES
[1] Bar counsel and four attorneys individually, namely: James DeGiacomo, Judith Wyman, Robert Cohen, and Sarah Fleschner (individual defendants).
[2] The plaintiff's complaint did not request that this court investigate or sanction the individual attorneys' alleged misconduct.
|
121 F.3d 443
38 Fed.R.Serv.3d 925
REDLAND INSURANCE COMPANY, as Assignee of Charlene Harvelland Lonnie Joe Harvell, Appellant,v.SHELTER GENERAL INSURANCE COMPANIES, Robert McAdams, DouglasG. Voyles, Appellees.
No. 96-4003.
United States Court of Appeals,Eighth Circuit.
Submitted May 21, 1997.Decided Aug. 15, 1997.
D.P. Marshall, Jr., Jonesboro, AR, argued (Paul D. Waddell, Jonesboro, AR, and Ira S. Lipsius, New York City, Jeffrey Scott Rogoff, Schindel, Farman and Lipsius, LLP, New York City, on the brief), for appellant.
J.V. Phelps, Jonesboro, AR, argued (G.S. Perkins, Jonesboro, AR, and A. Lorenzo Bryan, New York City, on the brief), for appellee.
Before MURPHY, HEANEY, and MAGILL, Circuit Judges.
HEANEY, Circuit Judge.
1
This is an action brought by an insurance company to collect on an underlying judgment for which its insured was one of three tortfeasors jointly and severally liable. The district court, faced with cross motions for summary judgment, dismissed the complaint for failing to state a claim. Although the court properly concluded that the plaintiff failed to state a claim under its novel assignment theory, an alternative cause of action in the complaint is broad enough to state a claim on which relief could be granted. Therefore, the court should not have dismissed the complaint in its entirety. We reverse in part and remand with instructions for the court to permit the lawsuit to proceed on the plaintiff's alternative contribution theory.
I.
2
A jury awarded Charlene and Lonnie Joe Harvell $500,000 for injuries Charlene Harvell sustained in a collision between the Harvells' car and a tractor-trailer. According to the jury's findings, the judgment totaling $509,895.11 with interest and costs was the joint and several obligation of three tortfeasors: Douglas G. Voyles, the driver of the tractor-trailer; Robert McAdams, the owner of the tractor-trailer; and CDS Transport, Inc. ("CDS"), which had leased both the services of Voyles and the tractor-trailer from McAdams.
3
Redland Insurance Company ("Redland") insured CDS and Shelter General Insurance Company ("Shelter") insured McAdams. Neither policy, however, covered the vehicle involved in the accident. Nonetheless, both Redland and Shelter were conditionally obligated for the judgment as a result of a federally-mandated MCS-90 endorsement each insurance company provided as part of its policy. In the endorsement, the insurance company agreed to pay "any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use" of any of its insured's motor vehicles in interstate commerce. The insured, in turn, agreed to reimburse the insurance company for all sums paid under the endorsement that the company would not have been required to pay absent the endorsement.
4
After judgment was entered for the Harvells, Redland approached Shelter to discuss apportionment of the judgment. Shelter took the position that it had no obligation to contribute toward paying the judgment. Redland entered an agreement with the Harvells in which it paid the Harvells $505,782.21, an amount virtually equal to the entire judgment, in return for a purported assignment of the judgment from the Harvells. According to the agreement, the Harvells released Redland and CDS, but no other party, from any liability as a result of the accident.
5
Redland then initiated this lawsuit in federal district court against Shelter, McAdams, and Voyles. Redland's complaint alleges two causes of action. In the first, Redland broadly asserts:
6
A dispute and actual controversy has arisen and now exists between Plaintiff and Shelter concerning their respective rights, duties, obligations and privileges under the Shelter policy of insurance with regard to the Harvell action. The controversy poses an issue for judicial determination involving the substantial rights of the parties.
7
(Jt.App. Tab 2 at 7 (Pl.'s Compl. at p 18).) In a second cause of action, Redland claims that, as "assignee" of the Harvells, it is entitled to recover the entire $509,895.11 from Shelter for the final judgment rendered against McAdams. (Id. at 8 (Pl.'s Compl. at p 21).)
8
In its answer, Shelter admitted the material facts alleged in Redland's complaint and asserted, among other defenses, that the complaint failed to allege facts on which the court could grant Redland relief. In its subsequent motion for summary judgment, Shelter argues that as an insurance company, not a member of the general public, Redland cannot recover against Shelter under the MCS-90 endorsement in Shelter's policy with McAdams. Moreover, according to Shelter, the money Redland paid to the Harvells fully satisfied the Harvells' judgment against CDS which Redland was obligated to pay under the terms of the MCS-90 endorsement in its policy with CDS. Redland filed a cross-motion for summary judgment, reasserting its theory that, as the Harvells' assignee, it had the right to enforce the judgment against any of the defendants, including McAdams, and that Shelter agreed to satisfy any judgment against McAdams by virtue of its MCS-90 endorsement. In plain language: Each insurance company asserted that the other was responsible for 100% of the $509,895.11 judgment.
9
The district court responded by dismissing the case for failing to state a claim and denying all pending motions, including those for summary judgment, as moot. The court expressed strong concern about Redland's legal maneuvering:
10
[T]he insurance carrier for one joint tortfeasor, by "buying" the judgment from the Harvells, is attempting to collect from the other joint tortfeasors (or their insurance carriers) 100% of the judgment which it has paid.
11
....
12
Redland is attempting to use its "assignment" as a novel means of avoiding the ... contribution statute. Instead of recovering an equitable and proportionate share of the judgment, Redland seeks to place the entire burden on its joint tortfeasors. If the Court were to allow such an end run, the law of contribution would be subsumed. Such a holding would undercut the essential purpose of contribution among joint tortfeasors, which is to provide an equitable means of spreading the loss on the basis of proportionate responsibility.
13
(Redland Ins. Co. v. Shelter Gen. Ins. Cos., No. J-C-95-261, slip op. at 2 (E.D.Ark. Sept. 16, 1996).) The court dismissed the case without prejudice to Redland's right to file an action for contribution.
14
Redland filed a motion for reconsideration and an alternative motion for leave to file an amended complaint. The district court denied Redland's motion for reconsideration reiterating its position that "Redland may file a suit for contribution against the other joint tortfeasors, but it may not 'buy' the debt from the plaintiff in order to collect the full amount of the judgment from the other joint tortfeasors." (Redland Ins. Co. v. Shelter Gen. Ins. Cos., No. J-C-95-261 (E.D.Ark. Oct. 15, 1996).) This appeal follows.
II.
15
Redland asserts that the district court erred in its ruling because its complaint both states a claim for relief based on the Harvells' assignment of their judgment to Redland and states a claim for contribution. With respect to the former, we disagree. Redland offers no authority for its theory that it can step into the shoes of the Harvells to collect 100% of the judgment from the remaining joint tortfeasors in the underlying action thereby avoiding its responsibility as the endorsing insurance carrier for the third joint tortfeasor. We agree with the district court that Redland is attempting to use its "assignment" to avoid paying its equitable share of the loss and that the courts must not allow such an end run on the law of contribution. Therefore, we affirm the district court's dismissal of that portion of the complaint that asserts a cause of action based on the Harvells' assignment of their judgment to Redland.
16
Although it was the focus of neither party's attention nor interest before the district court, Redland's complaint states an alternative cause of action which does not rely on mention of its purported assignment of the judgment. As its first cause of action, Redland asks the court to determine the parties' "respective rights, duties, obligations and privileges under the Shelter policy of insurance with regard to the Harvell action." Although Redland could have been more precise, the complaint sufficiently states a claim for contribution. According to the Federal Rules of Civil Procedure, a pleading setting forth a claim for relief requires only "a short, plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a). Moreover, "[a]ll pleadings shall be so construed so as to do substantial justice." Fed.R.Civ.P. 8(f). Redland alleged facts in its complaint that put the defendants on notice that Redland had paid the Harvells a substantial sum of money related to their judgment against Voyles, McAdams, and CDS and that the company was seeking reimbursement from the other joint tortfeasors. The court should have recognized that Redland's complaint gave the other parties "fair notice of the nature and basis or grounds for a claim, and a general indication of the type of litigation involved." See Oglala Sioux Tribe of Indians v. Andrus, 603 F.2d 707, 714 (8th Cir.1979). That is all the federal rules require.
17
Because Redland's complaint states an alternative claim for contribution, the dismissal of its claim based on its alleged assignment does not defeat the entire complaint. The federal rules provide: "When one or more statements are made in the alternative and one of them if made independently would be sufficient, the pleading is not made insufficient by the insufficiency of one or more of the alternative statements." Fed.R.Civ.P. 8(e)(2). Our decision today should not be construed as any sort of comment on the merits of Redland's action for contribution. We merely hold that the complaint is sufficient to state a cause of action for contribution and that the district court should permit the parties to proceed to the merits of that action.
III.
18
We affirm in part and reverse in part with instructions to the district court to permit the parties to proceed in Redland's action for contribution.
|
640 F.2d 14
MEMPHIS SHERATON CORPORATION, Plaintiff-Appellee, Cross-Appellant,v.Billy J. KIRKLEY and Robert McCullough,Defendants-Appellants, Cross-Appellees.
Nos. 80-1293, 80-1294.
United States Court of Appeals,Sixth Circuit.
Argued Oct. 22, 1980.Decided Jan. 13, 1981.
John W. Slater, Jr., Winchester, Marshall, Huggins, Charlton, Leake, Brown & Slater, Memphis, Tenn., for defendants-appellants.
Charles M. Crump and Robert L. Dinkelspiel, Apperson, Crump, Duzane & Maxwell, Memphis, Tenn., for plaintiff-appellee.
Before ENGEL and KENNEDY, Circuit Judges, and PECK, Senior Circuit Judge.
CORNELIA G. KENNEDY, Circuit Judge.
1
Appellant Memphis Sheraton sued appellees Billy J. Kirkley and Robert McCullough on a guaranty given in connection with the sale of the historic Peabody Hotel in Memphis, Tennessee. Both sides cross-appealed from the judgment of the District Court filed July 5, 1977, which awarded appellant $113,717.00, plus interest and reasonable fees, plus costs and expenses, on summary judgment. This Court held the judgment of the District Court was not final and appealable for failure to specify the amount of interest due on the guaranty. See Memphis Sheraton Corp. v. Kirkley, 614 F.2d 131 (6th Cir. 1980). After remand, the District Court, in an opinion filed March 21, 1980, determined the amount of interest due and reasonable attorneys fees and costs to be awarded. The parties again present their arguments on appeal.
2
Memphis Sheraton sold the historic Peabody Hotel in Memphis, Tennessee to Southern Peabody, Inc. for $1,200,000. Of this, $100,000 was paid in cash and the balance was represented by a promissory note secured by a deed of trust, by a security agreement, and by a guaranty of the first $200,000 of the indebtedness signed by appellees. The note included certain other costs and expenses and totaled $1,148,450. Southern Peabody made principal payments on the note totaling $86,283, then filed a voluntary petition in bankruptcy and was adjudicated a bankrupt March 31, 1975.
3
On July 1, 1975, appellant secretly sold the promissory note with an outstanding principal balance of $1,071,940.87 to Raymond M. Shainberg (private trustee for the actual buyer) for $590,000. Under this contract, it agreed to pay the 1974 real estate taxes and a pro rata share of the 1975 taxes. Memphis Sheraton expressly reserved any rights it had against the guarantors.
4
The bankruptcy court authorized foreclosure proceedings and the Peabody Hotel was sold at auction to Shainberg for $400,000 for the real estate and $140,000 for the personal property.
5
The District Court held that the sale of the note did not release appellees from their liability on the guaranty. It awarded appellant $113,717 plus interest on the balance of the note and on the guaranty and reasonable attorneys fees plus costs and expenses incurred in enforcing the liability under the guaranty. Though appellees guaranteed only the first $200,000, the court held the parties could not have intended that the proceeds of foreclosure proceedings be applied to credit the appellees' guaranty of $200,000. It disallowed appellant's expenses for back taxes, title search, guard service, attorneys fees to foreclose, and other expenses of maintaining the property as the deed of trust provided that these were to be paid from the foreclosure proceeds and appellees had the right to expect that they would not be liable for them.
On appeal, appellees raise three issues:
6
1) does appellant have standing to sue on the guaranty in view of its sale of the note?
7
2) has the guaranty been satisfied by the application of the proceeds of the foreclosure to the indebtedness?
8
3) did the District Court correctly calculate the interest due and the amount of the attorneys fees?
Appellant raises only one issue:
9
1) Does it have the right to collect for back taxes and other expenses incurred maintaining the collateral?
APPELLANT'S STANDING TO SUE
10
The guarantors, jointly and severally, guaranteed
11
"the full and prompt payment to 'Sheraton' when due (whether by virtue of a declaration of acceleration or otherwise) and at all times thereafter, of the first Two Hundred Thousand Dollars ($200,000) of principal of said note, together with all accrued interest on said note and all expenses, legal and/or otherwise (including Court costs and reasonable attorneys fees) incurred by Sheraton in collecting or endeavoring to collect from the Buyer or the Guarantors the amount guaranteed hereby, or any part thereof, in protecting any collateral, or in enforcing this Guaranty."
12
The guaranty further provided that the obligations of the guarantors would automatically terminate at such time as the principal balance of the promissory note was reduced by two hundred thousand dollars ($200,000), all accrued interest had been paid in full, and no terms of the note were in default.
13
The appellees-guarantors agreed that their obligations were absolute and would not be impaired, affected or diminished by any extension or forbearance given to the buyer, any modification or change in the promissory note or deed of trust, or release of the buyer. Sheraton was not required to exhaust remedies under the deed of trust before enforcing the guaranty and the guaranty could be enforced "independently of, and notwithstanding the fact that, Sheraton shall have recourse to, or be pursuing any other security or remedy for payment of the Promissory Note." The guaranty provided that Tennessee law would apply.
14
The purchase agreement for the sale of the promissory note provided that appellant would pay back taxes, a pro rata share of 1975 taxes, and would maintain security, insurance and other risks prior to closing. The buyer agreed to foreclose on the property and to maintain security, insurance, and other risks from date of closing to date of foreclosure. Appellant agreed it would not receive any proceeds from the foreclosure, but "(i)t is understood that Seller (appellant) intends to proceed to enforce its rights, if any, under the terms of Exhibit 2 (the guaranty)." The parties agreed appellant would receive all proceeds recovered under the guaranty.
15
Appellant clearly did not intend to relinquish any rights under the guaranty. Appellees argue, that whatever Memphis Sheraton's intent, it cannot sever the note from the guaranty and, having sold the note, it has no recourse under the guaranty.
16
Under Tennessee law, a guaranty is an independent collateral promise by one to answer for a debt in default of a third. Villines v. Parham-Linsey Grocery Co., 6 Tenn.App. 254 (1927), cert. denied by Tenn.S.Ct. (1928). Thus absent an express provision, a guaranty was not transferable to the buyer of a note as the buyer was not a party to the contract. Turley v. Hodge, 22 Tenn. (3 Humph.) 73 (1842).
17
A guaranty is a liability on the indebtedness, not on the note. The note is mere evidence of the indebtedness. See Villines, supra. Guarantors are not released by a renewal of a note by the seller as acceptance of a new note does not cancel the underlying indebtedness. See First National Bank, Hope, Arkansas v. Foster, 60 Tenn.App. 711, 717-18, 451 S.W.2d 434 (1968), cert. denied by Tenn.S.Ct. (1970); Villines, supra. In one case, guarantors were held liable on their guaranty even though the principal obligor had been reorganized into a new corporation. See Chapman Drug Co. v. Brewer, 390 F.Supp. 264 (E.D.Tenn.1974). Guarantors were also held liable on their guaranty even though the creditor's rights against the principal were extinguished. See Hickory Springs Manufacturing Co., Inc. v. Evans, 541 S.W.2d 97 (Tenn.1976).
18
For the proposition that the sale of a note carries with it the security for the note, defendants cite Clark v. Jones, 93 Tenn. 639, 641, 27 S.W. 1009 (1894), and Cleveland v. Martin, 39 Tenn. (2 Head) 128, 130-31 (1858). However, neither of those cases involved a guaranty. Clark held the assignee of a note enjoyed the benefit of a lien created by the deed of trust even though the security had not been formally transferred. Cleveland held that a note secured by the property the note was used to purchase carried with it the security interest. Appellant's actions are consistent with these cases as it did transfer the deed of trust and the security interest in the property along with the promissory note.
19
Guarantees on a commercial contract are special contracts in Tennessee law. In order to facilitate the extension of credit, Tennessee does not favor guarantors and will construe a guaranty against the guarantor as strongly as the language will permit. See Chapman, supra, 390 F.Supp. at 266; Farmers-Peoples Bank v. Clemmer, 519 S.W.2d 801, 805 (Tenn.1975); Nashville Electric Supply Co. v. Kay Industries, Inc., 533 S.W.2d 306, 310 (Tenn.App.1975); First National Bank, supra, 60 Tenn.App. at 717, 451 S.W.2d 434; W. R. Grace & Co. v. Taylor, 55 Tenn.App. 227, 239, 398 S.W.2d 81 (1966); Hassell-Hughes Lumber Co. v. Jackson, 33 Tenn.App. 477, 486, 232 S.W.2d 325 (1949). Rights under a guaranty may exist even when the principal debt is discharged. In Hickory Springs, supra, the plaintiff sold materials to Star-Line and such indebtedness was guaranteed up to $10,000 by the defendant. Defendant sold his stock in Star-Line to Jarmagian (at that time, he was the sole shareholder). Star-Line owed plaintiff around $35,000. To avoid bankruptcy of Star-Line, plaintiff agreed to accept half that amount in full payment and satisfaction on the debt. Plaintiff then sued defendant on his guaranty. Defendant argued that the release of the principal released him too. The court construed the guaranty as intending that defendant remain liable notwithstanding any settlement or compromise.
20
The instant case is indistinguishable from Hickory Springs. There, the guarantors were liable on the remaining indebtedness even though plaintiff could no longer collect on his note, having accepted part payment as payment in full. Here, appellant cannot collect on the promissory note as it has sold it, but the sale of the promissory note left some indebtedness still owing to appellant as it expressly reserved any rights under the guaranty (presumably this was reflected in the sale price of the note).
21
The District Court's decision that appellant may continue to assert its rights, if any exist under the guaranty, is affirmed.
CONSTRUCTION OF THE GUARANTY
22
Appellees contend they are not liable on the guaranty as they guaranteed only the first $200,000 of indebtedness and the proceeds from foreclosure reduced the indebtedness by more than $200,000. Appellant argues that the foreclosure proceeds should not be used to reduce the principal when determining appellees' liability under the guaranty. Appellees argue that appellant's theory would make them pay the last, not the first, $200,000 of indebtedness. Their guaranty, however, also states that they guarantee the first $200,000 independently of appellant pursuing any action under the deed of trust or the security agreement.
23
The Eastern District of Tennessee was faced with a similar problem in Commercial Credit Development Corp. v. Scottish Inns of America, Inc., 69 F.R.D. 110 (E.D.Tenn.1975). There, the guaranty stated the guarantors would not be liable if the principal was reduced to $1,900,000. The guarantors argued they were released because the foreclosure reduced the principal to $1,700,000. The court held the parties clearly intended the guarantor to guarantee at least $500,000 of the $2,400,000 loan. It the reduction in principal by foreclosure was viewed as completely relieving the guarantor of its obligation, there would have been no guaranty at all.
24
The same is true here. If foreclosure proceeds were to be applied to reduce the liability of the guarantors, the language that the guarantors would be liable despite appellant seeking foreclosure would have been superfluous and there would have been no guaranty at all. Given the strong construction against the guarantor under the law of Tennessee, this Court affirms the District Court holding that appellees are liable for their guaranteed amount of $200,000 less the $86,283 paid on the principal before foreclosure.
INTEREST AND ATTORNEYS FEES
25
The District Court calculated the interest and fees in the following manner:
26
Principal amount ($200,000 guaranteed
less $86,283 already paid) $113,717.00
Stipulated interest from date due until
date note was sold
(February 10, 1975 through July 9,
1975) on outstanding balance on note
of $1,062,167 at 10% as provided for
in the note* $ 43,359.69
Court awarded interest on amount due
on guaranty ($113,717) from date note
was sold until date of second judgment
(July 10, 1975 through March 24, 1980)
at 10% $ 53,470.56
Attorneys fees $ 30,000.00
Costs $ 1,615.81
-----------
$242,163.06
27
The court also awarded interest on the judgment, dated March 24, 1980, at 8%.
28
Appellees argue the District Court erred in calculating the interest due on the guaranty at 10%. They argue that $30,000 should not be awarded in attorneys fees as that sum does not reflect the actual expense of the attorneys to appellants.
29
The guaranty included "all accrued interest on said note" in addition to $200,000 of indebtedness. The note provided for interest at 10% per year. Thus, the guarantors were liable for interest accruing to the guarantee at the rate of 10%. But once the note was sold, interest no longer accrued to the appellant on the note. One must have legal title to a note to sue upon it. See Cardwell v. Tennison, 29 Tenn. (10 Humph.) 446, 447 (1850). Interest may still be accruing on the underlying indebtedness owed by the obligor to the present owner of the note, but a guaranty is a collateral instrument from the note, see Villines, supra, 6 Tenn.App. at 261, and the guarantor's obligation runs only to the guarantee. See Turley, supra. Thus, appellees are not liable to appellant for interest due on the note after the date the note was sold.
30
The District Court held appellees were liable for interest due on the guaranty after that date. The guaranty does not itself state any interest rate for the amount due under the guaranty. Tennessee law, at the time of this transaction, provided that "(a)ll bonds, notes, bills of exchange, and liquidated and settled accounts, signed by the debtor, shall bear interest from the time they become due, unless it is expressed that interest is not to accrue until a specific time therein mentioned." Tenn.Code Annot. § 47-14-107 (1964). A liquidated debt which does not specify a rate of interest bears interest at the legal rate. See Provident Life and Accident Insurance Co. v. Few, 560 S.W.2d 407, 409 (Tenn.1978); Vaughn v. American Heritage Life Insurance Co., 573 S.W.2d 165, 168 (Tenn.App.), cert. denied by Tenn.S.Ct. (1978). The legal rate at the time the guaranty was signed was 6%. See Tenn.Code Annot. § 47-14-104 (1964). Tennessee amended its law in 1979 to provide that pre-judgment interest may be awarded by the District Court at any rate not greater than 10%, see Tenn.Code Annot. § 47-14-123 (1979), and former § 47-14-107 was repealed. However, section 27 of Tenn.Pub.Acts of 1979, ch. 203, provided that this section was to become effective midnight April 30, 1979 and that "transactions entered into before midnight on April 30, 1979, may be completed in accordance with prior law." See Compiler's Notes to Tenn.Code Annot. § 47-14-102 (1979). Thus, the District Court erred in awarding interest on the guaranty at 10% from the date of sale to the date of judgment. Interest should have been awarded on the amount due under the guaranty at the rate of 6% for that time period.
31
The District Court held that appellant was entitled to interest on the judgment at the rate of 8%. Since that was the law before the 1979 amendment, see Tenn. Code Annot. § 47-14-101 (1976); Provident Life, supra, and indeed still is the law, see Tenn.Code Annot. § 47-14-121 (1979), that award must be affirmed. Appellant raises some question about which opinion should be regarded as the date of final judgment the first opinion rendered in July 1977 or the second opinion rendered in March 1980. This Court held the first opinion was not a final and appealable judgment. The district Court correctly used the date of its second judgment, given the prior law of Tennessee. See Montgomery Ward & Co. v. Morris, 273 F.2d 452, 454 (6th Cir. 1960).
32
The guaranty also included "Court costs and reasonable attorney fees." The guaranty did not include "actual attorneys fees." The District Court found that $30,000 was a reasonable fee for all past and future efforts to collect on the guaranty. Findings of fact by the trial court shall not be set aside unless clearly erroneous. See Rule 52(a), Fed.R.Civ.Pro. Since there has been no showing this finding is clearly erroneous, this Court must affirm the award of the attorneys fees.
PAYMENT OF TAXES AND MAINTENANCE EXPENSES
33
The deed of trust in the printed form provides the owner of any part of the indebtedness may pay the taxes, maintain the insurance, and protect the property and such payments shall be treated as expenses of administering the trust. It further provides:
34
"The proceeds of any sale shall be applied as follows: first, to the payment of the expenses of making, maintaining and executing the trust, the protection of the property, including the expense of any litigation and attorneys fees, and the usual commissions to the Trustee; second, to the payment of the indebtedness herein secured ...."
35
The typed Additional Covenants provide that if the buyer fails to pay insurance premiums or taxes, the holder of the indebtedness may pay such amounts and add them to the principal sum due under the deed of trust. In the event of a conflict between the printed deed of trust and the Additional Covenants, the latter should control.
36
Under the clear language of the deed of trust, the expenses for the title search and other maintenance expenses were to be paid out of the proceeds from the foreclosure, and not as expenses guaranteed by the guaranty. However, the payment of real estate taxes, which was the buyer's obligation, could be paid by the seller and added to the principal sum due. Thus, these taxes should increase the principal outstanding. But that does not change the award against appellees as they only guaranteed the first $200,000 of the principal sum due, less the amount by which the principal had been reduced prior to foreclosure. We affirm the District Court's disallowance of back taxes and other expenses incurred maintaining the estate.
37
The judgment of the District Court is modified to award the following:
38
Principal $113,717.00
Stipulated interest on note
(10% of $1,062,167.00 from February
10, 1975 until July 9, 1975) $ 43,359.69
Interest on guaranty
(6% of $113,717.00 from July 10, 1975
until March 24, 1980) $ 32,082.34
Attorneys fees $ 30,000.00
Costs $ 1,615.81
-----------
$220,774.84
39
Interest shall run on the judgment at 8%. In all other respects, the judgment of the District Court is affirmed.**
40
IT IS SO ORDERED.
*
All rates of interest in this opinion are annual rates
**
Note: this Court is using the computations of interest as provided by the parties and the District Court below. If there is a mathematical error, the parties may stipulate to the correct figure using the interest rates and time periods that this Court determined were applicable
|
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 17-6606
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
EMMA LETICIA NAJERA,
Defendant - Appellant.
Appeal from the United States District Court for the Western District of Virginia, at
Roanoke. Glen E. Conrad, Chief District Judge. (7:12-cr-00066-GEC-3; 7:17-cv-81225-
GEC-RSB)
Submitted: July 27, 2017 Decided: August 1, 2017
Before AGEE and FLOYD, Circuit Judges, and HAMILTON, Senior Circuit Judge.
Dismissed by unpublished per curiam opinion.
Emma Leticia Najera, Appellant Pro Se. Ronald Andrew Bassford, Assistant United States
Attorney, Laura Day Rottenborn, OFFICE OF THE UNITED STATES ATTORNEY,
Roanoke, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Emma Leticia Najera seeks to appeal the district court’s order dismissing as
untimely her 28 U.S.C. § 2255 (2012) motion. The order is not appealable unless a circuit
justice or judge issues a certificate of appealability. 28 U.S.C. § 2253(c)(1)(B) (2012). A
certificate of appealability will not issue absent “a substantial showing of the denial of a
constitutional right.” 28 U.S.C. § 2253(c)(2) (2012). When the district court denies relief
on the merits, a prisoner satisfies this standard by demonstrating that reasonable jurists
would find that the district court’s assessment of the constitutional claims is debatable or
wrong. Slack v. McDaniel, 529 U.S. 473, 484 (2000); see Miller-El v. Cockrell, 537 U.S.
322, 336-38 (2003). When the district court denies relief on procedural grounds, the
prisoner must demonstrate both that the dispositive procedural ruling is debatable, and that
the motion states a debatable claim of the denial of a constitutional right. Slack, 529 U.S.
at 484-85.
We have independently reviewed the record and conclude that Najera has not made
the requisite showing. Accordingly, we deny a certificate of appealability and dismiss the
appeal. We dispense with oral argument because the facts and legal contentions are
adequately presented in the materials before this court and argument would not aid the
decisional process.
DISMISSED
2
|
Filed 2/24/15 In re L.H. CA
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 FOUR
In re L.H., A Person Coming Under the
Juvenile Court Law.
B253278
THE PEOPLE, (Los Angeles County
Super. Ct. No. YJ36024)
Plaintiff and Respondent,
v.
L.H.,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los Angeles County,
Wayne C. Denton, Commissioner. Affirmed.
Center for Juvenile Law and Policy, Christopher Hawthorne and Samantha
Buckingham for Defendant and Appellant.
Kamala D. Harris, Attorney General, Lance E. Winters, Senior Assistant
Attorney General, Steven D. Matthews, Analee J. Brodie and Nathan Guttman,
Deputy Attorneys General, for Plaintiff and Respondent.
After sustaining petitions alleging that appellant L.H. engaged in the petty
theft of a cell phone and receipt of stolen property, the juvenile court ordered
appellant placed at home on probation. Appellant contends the order must be
reversed because the court erred in determining that he committed petty theft of a
cell phone. We affirm.
RELEVANT PROCEDURAL BACKGROUND
On September 21, 2011, a petition was filed under Welfare and Institutions
Code section 602 charging appellant, a minor born in 1995, with the misdemeanor
offense of receiving stolen property (Pen. Code, § 496, subd. (a)). Appellant
denied the allegation. Later, on December 5, 2012, a second petition was filed
under Welfare and Institutions Code section 602 charging appellant with petty
theft (Pen. Code, § 484, subd. (a)). Appellant also denied that allegation.
In April 11 and October 11, 2013, the juvenile court conducted adjudication
hearings, respectively, on the second and the first petition. At each hearing, the
court sustained the pertinent petition. On October 24, 2013, at a disposition
hearing encompassing both petitions, the court declared appellant a ward of the
juvenile court, determined his offenses to be misdemeanors, and placed him at
home on probation. This appeal followed.
DISCUSSION
Appellant contends the juvenile court’s comments relating to its
determination that he engaged in petty theft demonstrate the existence of
reversible error. As explained below, we disagree.
2
A. Governing Principles
Generally, we review the juvenile court’s factual determinations for the
existence of substantial evidence. (In re L.K. (2011) 199 Cal.App.4th 1438, 1446
(L.K.).) Under that standard, we must affirm the juvenile court’s findings if they
are supported by any logical inferences grounded in the evidence. (Ibid.)
Moreover, “[t]he testimony of a single witness is sufficient to uphold a judgment
even if it is contradicted by other evidence, inconsistent or false as to other
portions. [Citations.]” (In re Frederick G. (1979) 96 Cal.App.3d 353, 366, fn.
omitted.)
In reviewing the juvenile court’s determination of guilt, our focus is
ordinarily on the ruling itself, not the court’s reasoning. (L.K, supra, 199
Cal.App.4th at p. 1448; In re Jerry R. (1994) 29 Cal.App.4th 1432, 1440.) Under
California law, it is well established that “‘“‘ a ruling or decision, itself correct in
law, will not be disturbed on appeal merely because given for a wrong reason. If
right upon any theory of the law applicable to the case, it must be sustained
regardless of the considerations which may have moved the trial court to its
conclusion.’ [Citation.]” [Citation.]’” (L.K., supra, 199 Cal.App.4th at p. 1448,
quoting People v. Zapien (1993) 4 Cal.4th 929, 976.) Thus, in a criminal bench
trial, when the trial court is not required to provide a statement of decision, the
court’s remarks generally cannot be used to show that it “misapplied the law or
erred in its reasoning.” (People v. Tessman (2014) 223 Cal.App.4th 1293, 1302
(Tessman).) That rule is applicable to an adjudication hearing on a petition under
Welfare and Institutions Code section 602. (Jerry R., supra, 29 Cal.App.4th at
p. 1440.)
The rule is subject to exceptions arising “when the court’s comments
unambiguously disclose that it failed to pass on the merits of the issue [citation],
3
or that its ruling embodied, or rested upon, a misunderstanding of the relevant law
[citation] or an arbitrary or irrational point of view . . . .” (People v. Penoli (1996)
46 Cal.App.4th 298, 305-306 (Penoli).) Thus, when the record affirmatively
shows that the court failed to resolve a factual issue regarding which conflicting
evidence had been presented, the reviewing court may not imply such a finding in
support of the judgment. (People v. Frank (1964) 225 Cal.App.2d 339, 342.)
Furthermore, the reviewing court “may . . . consider a judge’s statement when,
taken as a whole, the judge’s statement discloses an incorrect rather than a correct
concept of the relevant law, ‘embodied not merely in “secondary remarks” but in
[the judge’s] basic ruling.’” (Tessman, supra, 223 Cal.App.4th at p. 1302, quoting
People v. Ortiz (1964) 61 Cal.2d 249, 253.) Similarly, the reviewing court may
consider a judge’s statement that he refuses to apply a law because he disagrees
with the Legislature’s reasons for enacting it. (Penoli, supra, 46 Cal.App.4th at
pp. 303, 306.)
B. Underlying Proceedings
At the adjudication hearing, the prosecution’s principal witnesses were S.G.,
the victim of the theft, and Erin B., who saw the incident. S.G. testified that in
November 2012, she attended Hamilton High School. On November 2, 2012,
while she ate lunch in the high school patio area, an African-American male
wearing a black jacket with a hood grabbed her cell phone and ran away.
Accompanying him was an African-American or Latino male wearing a blue
sweater or sweatshirt. When S.G. chased the pair, the male wearing the black
jacket hopped over the school’s fence, and the other male ran into the high
school’s “lab tech” building. S.G. went to the front of the school, where she
4
reported the theft to a teacher. S.G. testified that she never saw the face of the
person who took her phone, and that she did not recognize appellant as the thief.
Erin testified that she knew appellant prior to the theft because she had
shared a class with him. On the date of the incident, she was walking at lunch
when she saw appellant, who was wearing a black sweatshirt. Accompanying
appellant was a Mexican or Hispanic male. Appellant walked to S.G.’s table,
snatched her phone, and ran past Erin. Erin tried to help S.G. chase appellant, but
he disappeared around a corner. After reporting the theft, Erin told Los Angeles
Police Department Officer Enrique Leon that appellant was the thief, and
identified his “year book” photo. During cross-examination, Erin stated that she
was “not friends” with appellant, and that she did not “really care” for him.
The prosecution also called Officer Leon, the resident officer assigned to
Hamilton High School. According to Leon, after the incident, Erin identified
appellant as the thief when shown a photo directory of all students assigned to the
high school.
Appellant’s sole witness was Mary Bain, a teacher at Hamilton High
School.1 Bain testified that she knew appellant prior to the theft because he often
attended school events she had organized. On the date of the incident, during the
lunch period, Bain left the lab building onto a walkway. She then saw two Latino
boys run past her, followed by a girl. According to Bain, she was “100 percent
certain” that neither boy was appellant. Shortly afterward, while Bain was talking
to the high school’s principal, the girl whom Bain had seen earlier approached
them and reported that someone had taken her phone. Later, Bain told a security
1 Bain testified that at Hamilton High School, she used her premarital name, and
was called “Miss Zink.”
5
guard investigating the incident that one of the boys was Daniel P., a student in her
classes.
Following the presentation of evidence, the prosecutor explained that she
had called Erin as a witness because S.G. was “not able to identify who took her
phone,” and argued that Erin was “very credible.” Defense counsel also noted that
S.G. could not identify the thief, but maintained that Bain was more credible than
Erin.
In sustaining the petition, the juvenile court stated: “I thought . . . all [three]
witnesses were pretty good. But I believe [Erin]. I was more impressed by
[Erin’s] testimony. And one of the things that I look at when witnesses are
testifying is, [‘]Do they have a motive for not telling the truth. [’] [¶] In this case,
you had [S.G.] and [Erin] both running after the person who took the phone. Now,
it would have been very easy for [S.G.] to . . . say, ‘Yes, it was [appellant]. I’ve
seen him around campus. I know what he looks like,’ to buffer [sic] the testimony
of [Erin]. But she didn’t do that. She says, ‘I couldn’t see who did it. All I know is
it was [two] males who took [the] phone.’ [¶] “[It w]ould have been very easy for
her to say: [‘]Oh, yeah. I know what he looks like. [¶] “So you have [two]
people, [Erin] and [S.G.], saying that he’s the one that took it. I was very
impressed about that. [¶] “Basically . . . I’m not calling [Bain] a liar or anything. I
agree that she’s a good witness. But we have a witness that I believe was telling
the truth that actually saw the theft.” (Italics added.)
C. Analysis
Appellant does not dispute there is sufficient evidence to support the
juvenile court’s determination of guilt. He maintains only that the court’s remarks
relating to that determination disclose a “faulty undertaking” of judicial duty
6
mandating reversal of the judgment. His principal contention relies on the court’s
remark, “‘So you have two people . . . saying that [appellant is] the one that took
it. I was very impressed by that.’” Appellant maintains the remark constitutes a
cognizable finding of fact reflecting an erroneous determination, namely, that both
S.G. and Erin identified appellant as the thief. For the reasons discussed below,
we reject that contention.
In order to avoid the application of the rule prohibiting the use of such
remarks to establish reversible error, appellant must demonstrate that the remarks
“unambiguously disclose” an exception to the rule, that is, a failure to resolve an
issue, a critical misunderstanding of law, or “an arbitrary or irrational point of
view . . . .” (Penoli, supra, 46 Cal.App.4th at pp. 305-306.) As explained in
People v. Gorshen (1959) 51 Cal.2d 716, 734-735 (Gorshen), abrogated on other
grounds in People v. Wetmore (1978) 22 Cal.3d 318, 324-325 & fn. 5, and People
v. Lasko (2000) 23 Cal.4th 101, 110, in assessing whether judicial remarks fall
within an exception to the rule, we are obliged to interpret the remarks as
favorable to the judgment, to the extent they are susceptible of such an
interpretation.
In Gorshen, the defendant killed his foreman, and was charged with murder.
(Gorshen, supra, 51 Cal.2d at pp. 719, 720-721.) During a bench trial on the
charge, a psychiatrist testified that the defendant suffered from chronic paranoiac
schizophrenia, resulting in a “disintegration of mind and personality.” (Id. at
p. 722.) In finding the defendant guilty of second degree murder, the trial judge
stated that although the psychiatrist’s theories were “correct” and defendant “had
no particular intent to commit [the] crime,” his “hands [were] tied by the [then-
existing] legal jurisprudence.” (Id. at p. 725.) Although our Supreme Court held
that the psychiatrist’s testimony was admissible to negate the mental states
7
required for murder and manslaughter, it rejected the defendant’s contention that
the judge’s remarks demonstrated error, namely, his failure to give due weight to
the testimony due to a mistake of law. (Id. at pp. 734.) In determining that the
remarks were subject to the rule discussed above, the court found there was a “fair
interpretation” of the remarks that showed no misapprehension of law. (Id. at
pp. 734-735.) The court concluded that notwithstanding the judge’s remark that
his hands were tied, the judge “did in truth finally decide that his fact finding
hands were not tied . . . because he received, considered and gave effect to the
expert’s testimony on the issues to which it was pertinent.” (Id. at p. 735.)
Here, no exception to the rule is shown, as the juvenile court’s remark,
taken in context, cannot reasonably be interpreted to assert that both S.G. and Erin
identified appellant as the thief. The remark was prefaced by the court’s express
statement that S.G. did not so identify appellant, and was followed by its
observation that “a” -- viz., a single -- witness had made that identification.
Moreover, the prosecutor and defense counsel both expressly addressed in their
arguments to the court the fact that S.G. had not identified appellant as the thief.
Viewed in context, the court’s remark was nothing more than a somewhat
misleading summary of its preceding comments, namely, that it had been
impressed by both witnesses offered by the prosecution to show -- or as the court
put it, “‘say[]’” -- that appellant had committed the theft.
Appellant’s reliance on an out-of-state decision, Matter of C.J.
(D.C.App. 1986) 514 A.2d 460, is misplaced. There, a juvenile was charged with
the theft of a bicycle. (Id. at p. 461.) At the juvenile’s bench trial, the victim
testified that he never got a good look at the thief, and did not know him;
moreover, the victim did not testify that he saw the juvenile in possession of the
bicycle after theft. (Id. at pp. 461-462.) In determining that the juvenile was
8
guilty, the trial court made express findings, including the finding that the victim
had seen the juvenile with the bicycle after the theft. (Ibid.) In reversing the
judgment on the ground that it was based on “plainly wrong” factual findings, the
appellate court expressly noted that a local statute rendered the findings subject to
review. (Id. at pp. 463-464.) Here, for the reasons discussed above, the juvenile
court’s remark is not subject to our review as, reasonably construed, it reflects no
mistake regarding the evidence presented at the adjudication hearing.
Appellant also contends that the juvenile court’s remarks manifest improper
burden shifting and witness counting, arguing that “[i]t is inappropriate for the
court to rely on [S.G.’s] testimony that she did not see [appellant] take the phone
as a positive piece of evidence in favor of [his] guilt.” (Italics deleted.) Appellant
maintains that because S.G.’s testimony was, in fact, exculpatory, the court
effectively required appellant to prove his innocence; in addition, he asserts that
the court’s remarks suggest an improper reliance “on counting two witnesses
against one . . . .”
The court’s remarks disclose no such errors. Generally, it is the “‘exclusive
province’” of the juvenile court to “‘determine the credibility of a witness and the
truth or falsity of the facts upon which a determination depends.’” (L.K., supra,
199 Cal.App.4th at p. 1446.) Here, the court manifested no misapprehension
regarding its duties as fact finder or the burden of proof. In commenting on S.G.’s
testimony that she could not identify the thief, the court focused on her credibility,
never suggesting that her testimony was direct evidence of appellant’s guilt.
Furthermore, the court’s interest in S.G.’s credibility was appropriate: although
S.G. did not identify the thief, her testimony, viewed in context, was not
exculpatory, as her account of the theft and description of the thief’s clothing
corroborated Erin’s testimony regarding those matters. The court thus properly
9
evaluated S.G.’s credibility and relied on the testimony from both witnesses in
determining whether appellant was guilty. In sum, appellant has shown no
cognizable error in the court’s comments.
DISPOSITION
The judgment is affirmed.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
MANELLA, J.
We concur:
WILLHITE, Acting P. J.
COLLINS, J.
10
|
702 F.Supp. 524 (1988)
Charles E. MURRAY, Jr., Plaintiff,
v.
Alan K. SILBERSTEIN, et al., Defendants.
Civ. A. No. 86-4730.
United States District Court, E.D. Pennsylvania.
December 14, 1988.
*525 Isadore A. Shrager, Sharon K. Wallis, Philadelphia, Pa., for plaintiff.
Howland W. Abramson, Charles W. Johns, Nancy E. Gilberg, Philadelphia, Pa., for defendants.
MEMORANDUM OF OPINION
McGLYNN, District Judge.
I. BACKGROUND
Plaintiff, Charles E. Murray, Jr., brought this action to prevent Defendant Alan K. Silberstein, President Judge of the Philadelphia Municipal Court, and the Municipal Court Board of Judges ("the Board") from removing him as Bail Commissioner. On August 15, 1986, I issued a preliminary injunction enjoining the Board from terminating Mr. Murray's employment until further notice. Subsequently, Plaintiff filed this motion for Judgment on the Pleadings pursuant to Fed.R.Civ.P. 12(c). In considering Plaintiff's motion, I must view the pleadings in the light most favorable to Defendant, the non-moving party. Dyson v. General Motors Corp., 298 F.Supp. 1064, 1065-1066 (E.D.Pa.1969).
II. FACTS
Most of the underlying facts are undisputed. The office of Bail Commissioner was established in 1984 by 42 Pa.Cons.Stat. Ann. [section] 1123(a)(5) (Purdon 1988) which permits the Municipal Court to appoint six Bail Commissioners for four-year terms. "The method of selection and appointment and removal of bail commissioners and establishing standards of conduct and the rights, responsibilities and authority of bail commissioners and the procedure for appealing from the decisions of the bail commissioners shall be provided by local rules adopted by the municipal court." Id.
Pursuant to this Act, the Municipal Court adopted the Philadelphia Municipal Court Bail Commissioner Rules ("PMCBCR") on November 16, 1988. PMCBCR 101(d)[1] provides *526 for the removal of a Bail Commissioner only for cause ("incompetency, misconduct, neglect of duty, or physical or mental disability") with the concurrence of a majority of the Municipal Court judges. Rule 1.01 also requires that a "full specification of the charges ... [be] furnished to the Bail Commissioner and [that] he ... be accorded an opportunity to be heard by the judges of the Court" before he is removed from his position.
The facts underlying this dispute were first outlined by Judge Silberstein in his letter of July 3, 1986:
I have met with you over the past month and have made my position clear that if your wife continues as the Democratic Ward Leader that would be a breach of the agreement you made before you were selected as a Bail Commissioner and would be considered an act of misconduct under Section 1.01 of the Bail Commissioner Rules of our Court. In addition, her continuance as Democratic Ward Leader while you are a Bail Commissioner of itself, would be an act of misconduct under Section 606(a), Section 700 and Section 704 of the Bail Commissioner Rules. Accordingly, it is my intention to recommend to the Board of Judges your removal as a Bail Commissioner of this Court.
The agreement to which Judge Silberstein referred was made between Mr. Murray and then President Judge Glancey at a time when Murray was being considered for the Bail Commissioner position. According to Judge Glancey, Plaintiff promised to resign his position as leader of the 61st ward if appointed Bail Commissioner. Furthermore, both he and his wife, Bridget A. Murray, agreed that she would not take over that position while her husband served as Bail Commissioner.[2] Judge Glancey, however, had no objection to her serving as *527 committeeperson or to the suggestion that Plaintiff's father himself a former ward leader replace his son as leader of the 61st ward.
On February 19, 1985, Mr. Murray was appointed Bail Commissioner for a four-year term commencing February 22, 1985. On February 20, 1985, he resigned as ward leader; and on March 4, 1985, the Democratic Executive Committee of the 61st ward chose Plaintiff's father Charles E. Murray, Sr. to fill the leadership position vacancy.
Problems began in May 1986 when Mrs. Murray having learned that her father-in-law would not seek reelection announced that she would run for his position. Although Plaintiff allegedly tried to change her mind, Mrs. Murray ran and was elected ward leader on June 9, 1986.
On June 17, 1986, Judge Silberstein, as Acting President Judge of the Philadelphia Municipal Court, Judge Glancey, and Bernard A. Scally, III, the Court Administrator of Philadelphia Municipal Court, met with Plaintiff and advised him that they considered his wife's election to be a violation of his agreement. Judge Silberstein gave Mr. Murray until July 1, 1986 to secure his wife's resignation as ward leader or himself face removal proceedings. The deadline passed and Mr. Murray was charged in a letter dated July 3, 1986 with having violated PMCBCR 1.01, 6.06, 7.00 and 7.04. The letter also notified Plaintiff of a hearing scheduled before the Board of Judges on July 17, 1986 and provided that Plaintiff could "appear with counsel and with any witnesses [he] may wish to present."
At that meeting, the Board heard testimony from both Judge Glancey and Mr. Murray[3] but refused to hear from Mrs. Murray.[4] At the conclusion of the hearing, the Board voted to remove Plaintiff from his position as Bail Commissioner effective August 15, 1986. On August 15, 1986, I issued a temporary injunction enjoining until further notice Judge Silberstein, individually and on behalf of the Board of Judges, from terminating Plaintiff's employment.
III. FIRST AMENDMENT CLAIM
Plaintiff contends that his removal from office as Bail Commissioner pursuant to PMCBCR 1.01(d) violates his first amendment right to freedom of association. Specifically, Murray contends that the state has imposed an unconstitutional condition prohibiting him from exercising his first amendment right of association with his wife.
The first amendment protects the right to associate with others in pursuit of political, social, economic, educational and cultural ends. Roberts v. United States Jaycees, 468 U.S. 609, 622, 104 S.Ct. 3244, 3252, 82 L.Ed.2d 462 (1984). See N.A.A.C. P. v. Claiborne Hardware Co., 458 U.S. 886, 907-909, 102 S.Ct. 3409, 3422-3424, 73 L.Ed.2d 1215, reh'g denied, 459 U.S. 898, 103 S.Ct. 199, 74 L.Ed.2d 160 (1982). It protects an individual's choice "to enter into and maintain certain intimate human relationships," and provides "a fundamental element of personal liberty." Roberts, 468 U.S. at 617-18, 104 S.Ct. at 3249. Although the United States Constitution does not expressly recognize a right to marital and familial association, those interests are protected by the first and fourteenth amendments. Zablocki v. Redhail, 434 U.S. 374, 383-86, 98 S.Ct. 673, 679-681, 54 L.Ed.2d 618 (1978); Moore v. East Cleveland, 431 U.S. 494, 499, 97 S.Ct. 1932, 1935, 52 L.Ed.2d 531 (1977).
The Board of Judges argues that Plaintiff waived his constitutional rights by entering into his agreement with Judge Glancey and thereafter accepting the Bail *528 Commissioner position. Although a state may in some circumstances impose conditions of employment that infringe on first amendment freedoms, only when the state's interest in that condition outweighs the individual's rights will the condition pass constitutional muster. See Fraternal Order of Police, Lodge 5 v. Philadelphia, 812 F.2d 105 (3d Cir.1987) and cases cited therein.
A good example of the balancing process utilized by the courts may be found in Fraternal Order of Police. There, the Court of Appeals struck down portions of a questionnaire promulgated by the Philadelphia Police Department requiring applicants for a Special Investigations Unit ("SIU") "to disclose all organizational offices and directorships held by the applicant, his or her spouse and dependent children." Id., 812 F.2d at 119. The court concluded that the provision unconstitutionally infringed on an applicant's first amendment rights since the question was overbroad and failed to effectuate the City's purposes: "it hardly seems likely that the memberships of a spouse and child would or should be relevant to the applicant's fitness for an SIU position." Id., 812 F.2d at 119-20.
In order to balance the competing state and first amendment interests, however, the court had to dispose of the City's claim that the applicants had waived their constitutional rights by applying for the SIU positions. In addition to concluding that many of the purported waivers were not made voluntarily[5], the court rejected "the suggestion that the government can condition its selection of new employees on the applicants' waiver of their constitutional rights." Id. 812 F.2d at 112.
In the First Amendment context, the Supreme Court has repeatedly stated that generally `a State cannot condition public employment on a basis that infringes the employee's constitutionally protected interest in freedom of expression.' Connick v. Myers, 461 U.S. 138, 142, 103 S.Ct. 1684, 1687, 75 L.Ed.2d 708 (1983). When a condition of employment impinges on First Amendment interests, the Court has undertaken to balance the employee and state interests. Id.; United States Civil Service Comm'n v. National Ass'n of Letter Carriers, 413 U.S. 548, 564, 93 S.Ct. 2880, 2889, 37 L.Ed.2d 796 (1973); Pickering v. Board of Education, 391 U.S. 563, 568, 88 S.Ct. 1731, 1734, 20 L.Ed.2d 811 (1968). Inquiry into potentially unconstitutional conditions cannot be avoided on the ground that the employees waived their constitutional rights by applying for employment because that would eviscerate the court's opinions establishing a balancing standard.
Id., 812 F.2d at 112.
The right to associate, however, is not absolute. A state may infringe on an individual's right to associate if it has a sufficiently compelling interest that "cannot be achieved through means significantly less restrictive of associational freedoms." Roberts, 468 U.S. at 623, 104 S.Ct. at 3252.
Since the Board's decision to remove Mr. Murray for failing to keep his promise infringes on his first amendment rights, it is necessary to examine whether conditioning his employment on such a promise serves a sufficiently compelling state interest that cannot be achieved through less restrictive means.
The state purportedly required the guarantee in order to help insulate the judiciary from partisan political influence. "The presence of political constituents in the household of the Bail Commissioner coupled with presumed familial loyalties, political agendas and the perception that a Bail Commissioner's supervisors are beholden *529 to the Ward Leader creates a confluence improprietous appearances [sic]." Defendant's Motion at 8. Since public confidence in the judicial process is undermined by corruption as well as the appearance of impropriety, the state's interest in preserving the integrity of the judiciary is compelling.
Judge Glancey's commendable efforts to insulate the office of Bail Commissioner from extra-judicial influence is simply a recognition of the realities of political life in Philadelphia. Ward leaders, whose stock in trade is constituent service, are frequently called upon to render assistance to those individuals brought before the court for the purpose of setting bail. At a time when the reputation of the Philadelphia city courts is somewhat less than perfect, it seems only reasonable for the Board to require that its Bail Commissioner appointees be as free as possible from political pressures.
Arguably, certain problems are created by the "marital association" of ward leader and Bail Commissioner. A conflict might exist, for example, whenever Plaintiff sets bail for defendants from the 61st Ward. Because of his former political association with that ward and his current intimate association with its ward leader, Mr. Murray would often find it difficult to remain entirely neutral in discharging his duties. Although recusal might reduce some political pressure, recusal alone in matters affecting Mrs. Murray's constituency is an insufficient check against impropriety, since ward leaders are also amenable to servicing the needs of other ward leaders.
Furthermore, the potential for abuse is exacerbated by the fact that ward leaders wield great power in the selection and retention of judicial candidates. Since Mrs. Murray to some extent controls the level of support to be received by the Municipal Court judges during their retention elections, and since the power to appoint and remove Bail Commissioners is vested in the Municipal Court judges, the opportunity for improper influence or behavior is increased.[6]
In my opinion, no means less restrictive than removal exists to serve the state's compelling interest in judicial integrity. Even if, in carrying out his judicial duties, Plaintiff is neither consciously nor unconsciously affected by ward politics, the appearance of impropriety alone is a significantly important evil that cannot be avoided without his removal.
If a Bail Commissioner was a typical low-level bureaucrat or administrative clerk, the first amendment might offer more protection. See, e.g., Elrod v. Burns, 427 U.S. 347, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976); Branti v. Finkel, 445 U.S. 507, 100 S.Ct. 1287, 63 L.Ed.2d 574 (1980). However, the six Bail Commissioners that serve the city of Philadelphia have independent judicial responsibilities and are appointed by the Board of Judges in a political process.[7]
*530 This is not the first time that governmental anti-nepotism and anti-politicking rules have constitutionally infringed on first amendment freedoms in order to serve a greater good.
[T]hose associational activities that are demonstrably incompatible with the mission of a given public agency or calling may be forbidden not on a theory that public servants lose their constitutional rights when they assume government duty, but on a theory that such rights cannot be defined independent of the contexts in which they are asserted. Thus the Court has held that `[p]artisan political activities by federal employees must be limited if the Government is to operate effectively and fairly, elections are to play their proper part in representative government and employees themselves are to be sufficiently free from improper influences.'[8]
Tribe, Constitutional Law (1988) at 1018.[9]
Plaintiff made a reasonable and, I think, necessary "employment" agreement with Judge Glancey. The Supreme Court has recognized that employment contracts infringing on first amendment rights are not unconstitutional per se. Indeed, the Court suggested in Snepp v. United States, 444 U.S. 507, 100 S.Ct. 763, 62 L.Ed.2d 704 (1980), that where the employment involves a position of trust, a restrictive employment contract might be an appropriate method of ensuring that trust.
In its per curiam opinion, the Supreme Court in Snepp upheld the Court of Appeals determination that the petitioner had violated his employment contract with the CIA when he published a book which, the Government conceded for the purposes of litigation, contained no national security secrets without first submitting the manuscript to the agency for review. The court held Snepp to his agreement even though that agreement arguably infringed upon his first amendment rights.
When Snepp accepted employment with the CIA, he voluntarily signed the agreement that expressly obligated him to submit any proposed publication for prior review. He does not claim that he executed this agreement under duress. Indeed, he voluntarily reaffirmed his obligation when he left the Agency. We agree with the Court of Appeals that Snepp's agreement is an `entirely appropriate' exercise of the CIA Director's statutory mandate to `protec[t] intelligence sources and methods from unauthorized disclosure,' [citation omitted].
Id., 444 U.S. at 511 n. 3, 100 S.Ct. at 765 n. 3. Although the Court often defers to the Executive branch when dealing with issues of national security, the lessons of Snepp are applicable here, too, since the position of Bail Commissioner is also one of trust.
Plaintiff contends that even accepting Defendant's version of the Murray-Glancey discussion,
the removal of Plaintiff from office for violation of this `agreement' is impermissible for two reasons. First, no evidence was presented to establish that Plaintiff engaged in any conduct in violation of the `agreement' with Judge Glancey. The only alleged misconduct was that of Plaintiff's wife, Bridget A. Murray, in running for ward leader and refusing to resign from that position once she was *531 elected. Thus, if anyone breached the `agreement' with Judge Glancey it was not Plaintiff, but his wife, Bridget A. Murray. In the absence of evidence of Plaintiff's instigation of her conduct, and particularly in light of the evidence that he actively pressured her to resign her position as ward leader, Bridget A. Murray's conduct cannot be imputed to her husband.
Memorandum in Support of Motion on the Pleadings at 7-8.
Mr. Murray, however, is not being punished for the conduct of his wife. Rather, he faces the consequences of his own actions. This dispute is about his activities: his explicit promise that his wife would not become leader of the 61st ward while he served as Bail Commissioner; his implicit guarantee that he would not serve as bail commissioner should his wife become ward leader; and his failure to resign after his wife's election.
IV. INTERPRETATION AND APPLICATION OF PMCBCR 1.01
Plaintiff was removed from his position for "misconduct" pursuant to PMCBCR 1.01. He argues that the Board incorrectly interpreted or applied Rule 1.01 by concluding that his failure to resign constitutes misconduct. The constitutional dimension of his argument turns on the purported ad hoc application of the Board's "no-spouse-as-ward-leader" policy. Mr. Murray contends that
the issue is not whether the Philadelphia Municipal Court may enforce a rule or general policy preventing wives or spouses of Bail Commissioners from holding the position of ward leader while their husbands or spouses are Bail Commissioners, but rather whether the Board of Judges may enforce an ad hoc restriction applied to Bridget A. Murray alone, prohibiting her from serving as ward leader while her husband holds office as Bail Commissioner.
Plaintiff's Memorandum in Support of Motion for Judgment on the Pleadings at 8-9.
Mr. Murray ignores the fact that the current six Bail Commissioners are the only individuals ever to have been appointed pursuant to 42 Pa.Cons.Stat.Ann. [section] 1123(a)(5) (Purdon 1988) and that the Board had never before confronted the conflict-of-interest problems presented in the Murrays' case. Faced with the likely possibility that Mrs. Murray would replace her husband as ward leader, Judge Glancey, acting for the Board, reached his agreement with Plaintiff. It was obviously unnecessary, however, to require similar promises from the other candidates who were not themselves ward leaders. Consequently, Mr. Murray cannot complain that he was the only applicant to be affected by the Board's policy unless he can demonstrate that the Board subsequently appointed another ward leader as Bail Commissioner without extracting the same commitment.[10]
V. PROCEDURAL DUE PROCESS
Plaintiff finally contends that the Board's decision to remove him after refusing to hear his wife's testimony deprived him of a property interest without due process of law as guaranteed by the fourteenth amendment of the United States Constitution. Although state law spells out the limits of a constitutionally protected property interest, federal law defines the process that is due before a state can deprive an individual of that interest. Vitek v. Jones, 445 U.S. 480, 491, 100 S.Ct. 1254, 1263, 63 L.Ed.2d 552 (1980); Logan v. Zimmerman Brush Co., 455 U.S. 422, 432, 102 S.Ct. 1148, 1156, 71 L.Ed.2d 265 (1982).
The process due in this case is limited: "The tenured public employee is entitled to oral or written notice of the charges against him, an explanation of the employer's evidence, and an opportunity to present his side of the story." Cleveland *532 Board of Education v. Loudermill, 470 U.S. 532 at 546, 105 S.Ct. 1487 at 1495, 84 L.Ed.2d 494 (1985). Plaintiff was given just that.
Plaintiff, however, objects to the Board's refusal to permit his wife to testify after they heard his own testimony and that of Judge Glancey. Although the judges decided by secret ballot, the reason for their decision can be gleaned from Judge Merriweather's comments:
[W]e have one question, that was asked that is basically germane to the issue before this Board, that was asked by Judge Margiotti and answered by your client, number one, that he knew that he could not hold the office and remain or become a bail commissioner. Number two, that he acknowledges that Judge glancey told Both Mr. Murray and his wife that it was a no no.... We can't help it if he can't control Mrs. Bridget.
Tr. 71-71. The Board apparently believed that Mrs. Murray's testimony was irrelevant.
However, even if the judges refused to permit her testimony "on the theory that her testimony was either not credible, or would merely be repetitive of Plaintiff's testimony, because she is his wife," Plaintiff's Motion for Judgment on the Pleadings at 25, Plaintiff still would have received the process due under the Constitution. "`[S]omething less' than a full evidentiary hearing is sufficient prior to adverse administrative action." Cleveland Board of Education, 470 U.S. at 545, 105 S.Ct. at 1495. Plaintiff received notice of the charges, heard Judge Glancey's testimony, and was given an opportunity to present his side of the story. "To require more than this prior to termination would intrude to an unwarranted extent on the government's interest in quickly removing an unsatisfactory employee." Id., 470 U.S. at 546, 105 S.Ct. at 1495.
VI. CONCLUSION
Since Mr. Murray was afforded constitutionally adequate procedure, this court is neither required, nor permitted, to review any factual determinations explicitly or implicitly made by the Board. In addition, because the interpretation of Rule 1.01 is a matter of state law, and because I have already concluded that removal in the instant case does not violate Mr. Murray's constitutional rights, no other issues remain before this court. Consequently, I will not only deny Plaintiff's Motion for Judgment on the Pleadings, but I will also enter judgment in favor of Defendant pursuant to Fed.R.Civ.P. 12(c). Although Defendants have not moved for Judgment on the Pleadings, such an order is appropriate since I have determined that "there is no material issue of fact presented and that one party is clearly entitled to judgment." Flora v. Home Federal Sav. and Loan Ass'n, 685 F.2d 209 at 211 (7th Cir.1982).
ORDER
AND NOW, this 14th day of December, 1988, judgment having been entered in favor of Defendant in the above-captioned matter, the preliminary injunction in effect since the inception of this action by agreement of the parties is hereby VACATED. The execution of this order shall be stayed for thirty days pending filing of a notice of appeal.
NOTES
[1] "Removal of Bail Commissioner during the terms for which he is appointed shall only be for incompetency, misconduct, neglect of duty, or physical or mental disability, but a Bail Commissioner's office shall be terminated if the court determines that the number of Bail Commissioners shall be reduced or that the services of the Bail Commissioners are no longer needed. Removal shall not occur unless a majority of all the Judges of the Court concurs in the order of removal. Before any order of removal shall be entered, a full specification of the charges shall be furnished to the Bail Commissioner and he shall be accorded an opportunity to be heard by the judges of the Court."
[2] Judge Glancey testified as follows before the Board of Judges:
I went to the real estate office. Charley was there with Bridget ... I told Charley, for the first time, that I was going to favorably submit his name to the Board of Judges for one of those positions. And Charley said it was great. But I said he'll have to give up you can't be the ward leader. He said, `Of course.' And Charley said, `Well, Bridget I can turn it over to Bridget.' And Bridget was sitting there, remember, Charley? And I said, `No.' I said, `No, it wouldn't be proper for Bridget to be the ward leader.' I think Bridget was disappointed, at that time, because he felt she was going to do it. She looked like it. And I gave a couple of reasons. One that I specifically gave was, I said, `Look Charley, you're going to be sitting down at the PAB, setting bail and if you get people in front of you from the 61st Ward, you've got some problems.' And, additionally, I don't know whether I said this or not, to be honest, the other reason was that I felt, as a management method, if we're going to appoint somebody to a position, this Board of Judges and where we can appoint them or remove them, yet we then have to go to his wife to be retained for reelection, it really puts the judges in a very, very improper position. And that was that basis for my saying this to Charley. Charley agreed. Then, you said, `Well, my father can come up from the shore. He'd be the ward leader. He can come up and take over the ward.' I said, `That would be okay with me.' And the question was raised with Bridget being a committee woman. I said, `Fine. Certainly. If she's elected by the people as the committee woman, she can be a committee woman. but she cannot be one of the Democratic ward leaders when you're talking about judges here who are running for election every two years.'
And so it was clear to me that that was the arrangement and I mean, nobody questioned that. I know Bridget was disappointed but they agreed to that.
I went back to the Board of Judges, on the next day or two, and I talked individually to a lot of our judges, and I also talked to the Board of Judges, and when we had our meeting, to see who we're going to approve for bail commissioner, and the question of whether Charley was going to be the ward leader, or his wife was going to be the ward leader, came up many many times, I assured the judges that she was not and he was not. And whether they considered that as part of their vote I can't say. But, at least at least, that was one of the facts that I gave to the judges.
Tr. 17-21.
[3] Plaintiff testified that he understood the agreement to preclude his wife from succeeding him as ward leader, not precluding her from holding that position as long as he was a bail commissioner.
[4] By Judge Silberstein: "Mr. Shrager [Plaintiff's attorney], the Board of Judges have ruled on the question of the relevance of Bridget Murray's testimony. And by majority of the Board, they feel that since your client [Plaintiff] already admitted the contents of the conversation and meeting that took place between Judge Glancey, his wife and himself, that any testimony she would want to present is irrelevant and, therefore, she'll not be permitted to testify." Tr. 73.
[5] "We believe it is illusory to treat all SIU applicants a volunteers. Commissioner Tucker testified that current members of the three divisions being phased out would be required to comply with the SIU application procedures to retain equivalent positions in the SIU. Failure to comply would result in a return to normal duty which could subject some of these officers, for example those who investigated misconduct by other police personnel, to reprisals.... Tests applied as a prerequisite for continued employment are hardly to be considered voluntary." Id., 812 F.2d at 111.
[6] Plaintiff contends that
[i]n the ward organization it is the responsibility of the local committeeperson to provide direct service to their constituents. If a family member is arrested, it would be far more likely that the family would go to their committee person, who is their neighbor, than approach the ward leader directly.... It would be inappropriate for a ward leader to seek to influence a bail decision without personal knowledge of the defendant's community contacts.
Plaintiff's Memorandum in Response to Defendant's Memorandum in Opposition to Plaintiff's Motion for Judgment on the Pleadings at 10-11. This characterization of Philadelphia politics ignores reality: many committeepersons do not know the bail commissioners personally; consequently, the committeepersons often solicit assistance from their ward leaders who are expected to make the necessary contacts.
[7] See Tribe, Constitutional Law (1988) at 1018:
[M]embership in an otherwise protected association, or adherence to an otherwise protected belief, can in certain very limited settings justify denial of a governmental benefit. It is clear, for example, that persons who hate children and speak ill of them something the first amendment protects even if without great enthusiasm have no right to work for a public day care center [footnote omitted]. Just so, Democrats have no right to consideration on equal terms with Republicans when the newly elected Republican governor of a state is choosing a speechwriter or a high-level special assistant. Although there is no similar justification for making party membership decisive in filling the ranks of lower government posts [footnote omitted], the argument for allowing ideological criteria at levels of high policy significance seems sufficiently compelling to withstand first amendment attack [footnote omitted].
[8] "United States Civil Service Commission v. National Association of Letter Carriers, 413 U.S. 548 [93 S.Ct. 2880, 37 L.Ed.2d 796] (1973) (upholding a prohibition of federal employees' taking an `active part in political management or in political campaigns') Broadrick v. Oklahoma, 413 U.S. 601 [93 S.Ct. 2908, 37 L.Ed.2d 830] (1973) (upholding state regulation of political activities by state regulation of political activities by state employees more stringent than federal law). See also United Public Workers of America v. Mitchell, 330 U.S. 75 [67 S.Ct. 556, 91 L.Ed. 754] (1947) (upholding constitutionality of Hatch Act limitations on federal employees' political activities)."
[9] See also, 28 U.S.C. § 458 which provides: "[n]o person shall be appointed to or employed in any office or duty in any court who is related by affinity or consanguinity within the degree of first cousin to any justice or judge of such court."
[10] Although Plaintiff's Motion for Judgment on the Pleadings deals specifically with only purported constitutional violations, the "misinterpretation" argument may attempt to express a pendant state claim for relief. To the extent it does, however, I predict that the Pennsylvania Supreme Court would affirm the administrative determination that Plaintiff's breach of a material condition of his appointment constitutes misconduct.
|
735 F.2d 1357
Readv.Secretary, Health and Human Services
82-1837
United States Court of Appeals,Fourth Circuit.
6/7/84
1
W.D.Va.
VACATED AND REMANDED
|
167 F.2d 735 (1948)
UNITED STATES
v.
GOLDFARB.
No. 274, Docket 20991.
Circuit Court of Appeals, Second Circuit.
April 30, 1948.
Herman L. Falk, of New York City, for appellant.
John F. X. McGohey, U. S. Atty., of New York City (Thomas F. Burchill, Jr. and William M. Regan, both of New York City, of counsel), for appellee.
Before SWAN, CLARK and FRANK, Circuit Judges.
PER CURIAM.
The appellant has been adjudged guilty of wilfully failing to obey a grand jury subpoena duces tecum which required him to appear on March 4, 1948. The subpoena was served upon him personally on March 1st and witness fees were tendered. On the morning of March 4th, an attorney appeared outside the grand jury room and informed an assistant United States Attorney that he represented Goldfarb and that Goldfarb could not appear because of an important business engagement but was willing to appear at a later day. The grand jury promptly voted a presentment that Goldfarb be punished for contempt because of his failure to comply with the subpoena, and thereafter he was arrested, arraigned, and admitted to bail. On March 31, 1948 a hearing was held before a district judge which resulted in the judgment appealed from. At the hearing the only defense raised by Goldfarb was that his failure to respond to the subpoena was not wilful or contumaceous. This issue the district judge evidently decided against him, since a prison sentence was imposed. The appellant argues that the evidence was insufficient to support a finding of wilfulness. We think it was sufficient. The only excuse the appellant offered for dishonoring the subpoena was the existence of a business engagement and the expectation that his attorney could obtain an adjournment for his appearance. As to the engagement Goldfarb did not even testify what the engagement was. The court was not obliged to accept this excuse. Indeed there is testimony from which it may be inferred that the engagement, if there was one, was made after the subpoena was served, for at that time, according to the deposition of special agent Good, Goldfarb said he would obey the subpoena. Moreover, the subpoena which was dishonored was the fourth subpoena which had been issued and Goldfarb's previous conduct had not been such as to indicate readiness to cooperate in making the corporate records available to the grand jury. His attorney had told him how important it was to honor a grand jury subpoena and, although he may have expected the attorney to obtain a continuance he voluntarily took the risk of not obtaining one. Even advice of counsel is not a defense to an act of contempt, although it may be considered in mitigation of punishment. See Eustace v. Lynch, 9 Cir., 80 F.2d 652, 656. Goldfarb did not even act on advice of counsel. *736 Where disobedience of a subpoena is contumaceous the power of the court to punish for contempt is clear. United States v. Goldstein, 2 Cir., 105 F.2d 150, 151.
Judgment affirmed.
|
254 Ind. 156 (1970)
258 N.E.2d 628
MARSHALL
v.
STATE OF INDIANA.
No. 769S156.
Supreme Court of Indiana.
Filed May 27, 1970.
Rehearing denied July 29, 1970.
September 8, 1970.
*157 John M. Lyons, of Valparaiso, for appellant.
Theodore L. Sendak, Attorney General, Aaron T. Jahr, Deputy Attorney General, for appellee.
HUNTER, C.J.
Appellant was charged by affidavit with the crime of rape. Upon a plea of not guilty, trial was had before a jury which returned a verdict of guilty. Thereafter, appellant was sentenced to the custody and control of the Superintendent of the Indiana Reformatory at Pendleton for a period of not less than two (2) nor more than twenty-one (21) years.
Two questions are raised on this appeal by the trial court's overruling of appellant's motion for new trial, the first concerning the constitutional guarantee to a public trial and the second involving the question of newly discovered evidence. We shall deal first with defendant's right to a public trial.
The Indiana Constitution at Art. 1, § 13 provides that:
"In all criminal prosecutions, the accused shall have the right to a public trial, ..."
*158 The federal counterpart to this state guarantee is found in the Sixth Amendment to the United States Constitution. Unlike many of the rights conferred by the first eight amendments to the United States Constitution, it would appear that the Sixth Amendment right to a public trial has not been specifically incorporated under the due process clause of the Fourteenth Amendment. This statement is made notwithstanding the case of Duncan v. Louisiana (1968), 391 U.S. 145, 20 L.Ed.2d 491 which purports to list the rights contained in the first eight amendments which have been held to be protected against state action under the Fourteenth. Although the right to a public trial was included in that listing, the case relied on, Re Oliver (1948), 333 U.S. 257, 92 L.Ed. 682, merely held that a deprivation of the right might be violative of due process; the Sixth Amendment per se was not the basis of the decision nor was there any indication in the opinion that the court intended to specifically incorporate the amendment as it has subsequently done with regard to other rights contained in the first eight amendments.
We make note of this "accidental incorporation" for the purpose of establishing that this court is not, as of yet, bound by the United States Supreme Court's interpretation of the right except insofar as it might be said that there was a deprivation of due process under the Fourteenth Amendment.
The importance of the right and the reasons for its jealous preservation were noted by Justice Black in the case of Re Oliver, supra, wherein it was said:
"The traditional Anglo-American distrust for secret trials has been variously ascribed to the notorious use of this practice by the Spanish Inquisition, to the excesses of the English Court of Star Chamber, and to the French monarchy's abuse of the lettre de cachet. All of these institutions obviously symbolized a menace to liberty. In the hands of despotic groups each of them had become an instrument for the suppression of political and religious heresies in ruthless disregard of the right of an accused to a fair trial. Whatever other benefits the guarantee to an accused that his trial be conducted in public may confer upon our society, the *159 guarantee has always been recognized as a safeguard against any attempt to employ our courts as instruments of persecution. The knowledge that every criminal trial is subject to contemporaneous review in the forum of public opinion is an effective restraint on possible abuse of judicial power. One need not wholly agree with a statement made on the subject by Jeremy Bentham over 120 years ago to appreciate the fear of secret trials felt by him, his predecessors and contemporaries. Bentham said: `... suppose the proceedings to be completely secret, and the court, on the occasion, to consist of no more than a single judge, that judge will be at once indolent and arbitrary: how corrupt soever his inclination may be, it will find no check, at any rate no tolerably efficient check, to oppose it. Without publicity, all other checks are insufficient: in comparison of publicity, all other checks are of small account. Recordation, appeal, whatever other institutions might present themselves in the character of checks, would be found to operate rather as cloaks than checks; as cloaks in reality, as checks only in appearance.'" 333 U.S. at 268-271, 92 L.Ed. at 691-693.
Although opinion is unanimous that the right to a public trial is basic to this country's criminal jurisprudence, there is less agreement as to exactly what constitutes such a "public" trial. Various questions have been raised over the years in regard to the nature of the right and the extent to which it must be preserved in special circumstances. It is generally conceded that portions of the general public may, in certain instances, be excluded but courts normally have demonstrated a reluctance to do so unless it be required for the proper administration of justice. See annotations at 48 A.L.R.2d 1436; 4 L.Ed.2d 2128; also 21 Am.Jur.2d, Criminal Law § 257 et seq. (1965).
In the trial for a sex offense, as is here the case, there has been some disagreement as to the extent the "public" may be excluded. Although it might be said that there is no general rule in this regard, many courts have held that, because of the nature of the offense and the type of evidence which will be elicited, youthful spectators may be excluded. See numerous cases cited at 48 A.L.R.2d 1436, 4 L.Ed.2d *160 2128. Even this approach may be carried too far, however, as noted by the Alabama court in the case of Reynolds v. State (1961), 41 Ala. App. 202, 126 So.2d 497.
In the instant case the judge ordered all members of the "public" except the press excluded. Although there is a substantial question in this court's mind as to whether or not such action constituted a deprivation of the right to a public trial, especially where none of the appellant's relatives or friends were apparently admitted, we deem it unnecessary to decide that question. It is clear from the record that the appellant in this case waived the right. The record shows the following discussion between the trial court and attorneys:
"Comes now the state and makes motion to exclude everyone from the court room and for separation of witnesses, which said oral motion was in the words and figures as follows, to-wit:
MR. CONOVER:
For the record, I did so in chambers, but again I move at this time that the public be excluded from the trial in that the victim, our evidence will show, is 14 years of age and that she will be submitted to imtimidation, (sic) harassment and undue embarrassment if the public is permitted to be in attendance at this hearing. We ask that the press, of course, not be excluded and that this trial be limited in it's (sic) observation to members of the press, the jury, the court officers and the defendant and there will also be a motion for separation of witnesses, not only from this courtroom, but from each other. And, we so move at this time.
MR. LYONS:
May it please the court. My understanding of the Constitution is that a defendant is entitled to a trial which, among other things, is to be public. The defendant would like to ask the court to protect all of his constitutional rights.
THE COURT:
In the light of the age of the prosecuting witness and the possibility of there being untoward results from a public, an open public trial in this case, not excluding the press, the court at this time sustains the motion of the State that all persons other than members of the press, members *161 of the court attendants be excluded from this courtroom during the taking of evidence and during the voir dire. The court also sustains the Motion for Separation of Witnesses not only in the courtroom, but also elsewhere during the time that this trial takes place.
MR. LYONS:
May it please the court, may I ask that the court's ruling not exclude from the courtroom assistants of mine. I have specifically a law clerk who is present who I may require and a detective.
THE COURT:
We will amend the order to permit the persons that Mr. Lyons has mentioned.
MR. CONOVER:
Also the State would make the same motion as regards assistants of its selection.
THE COURT:
Granted.
MR. CONOVER:
Thank you, Your Honor.
MR. LYONS:
Thank you."
Several comments are appropriate in regard to this exchange. First of all, no objection was made to the court's ruling. Immediately following the state's motion, attorney for the appellant indicated that he desired to have all of his client's constitutional rights protected. Following these remarks, the trial judge entered his order as above set out. Defense counsel made no objection to this order, except to request that certain specified individuals be allowed to remain, which request was promptly granted. In view of the fact that appellant made no further comment or objection, it would seem reasonable to conclude that such silence constituted a waiver insofar as the right to the presence of other individuals was concerned. Although we do not deem this factor conclusive, when coupled with the following indicia a waiver is apparent. That the right may *162 be waived has already been established by this court. Irwin v. State (1942), 220 Ind. 228, 41 N.E.2d 809.
Secondly, the tenor of the remarks above set out clearly indicates appellant's satisfaction with the ruling. Coupled with the fact that no objection was made following the court's order is the fact that he requested that the court only except two individuals from the ruling. There is no evidence in the record that appellant had close friends or relatives that he wished to be present. Consequently, with no objection and no request for the presence of other individuals thought vital to appellant's interests, it must be concluded that appellant consented to be tried with only those specifically admitted by court order present.
Finally, we note that appellant here makes no assertion that trial counsel was incompetent. It has long been the law in Indiana that a constitutional right may be waived and where appellant has competent counsel a failure to assert the right constitutes such a waiver. Allman v. State (1968), 253 Ind. 14, 235 N.E.2d 56; Ford v. State (1967), 248 Ind. 438, 229 N.E.2d 634; Capps v. State (1961), 242 Ind. 165, 177 N.E.2d 457; Dowling v. State (1954), 233 Ind. 426, 118 N.E.2d 801; Irwin v. State, supra. Without any allegation to the contrary, we must presume that appellant was adequately represented and that the waiver was willingly made with a full appreciation of its nature. That being so, appellant cannot be heard on this appeal to complain of a deprivation of the right to a public trial.
We next turn to the question of whether a new trial should be ordered because of appellant's allegation of newly discovered evidence. To justify a new trial on such a basis this court has said on numerous occasions that the newly discovered evidence must be material and decisive in character and be such as to raise a strong presumption that it will, in all probability result in an opposite conclusion on another trial. Spears v. State (1970), *163 253 Ind. 364, 254 N.E.2d 196; Fultz v. State (1968), 250 Ind. 43, 233 N.E.2d 243; Ward v. State (1956), 235 Ind. 531, 135 N.E.2d 509; Rector v. State (1934), 211 Ind. 483, 190 N.E. 172; Anderson v. State (1928), 200 Ind. 143, 161 N.E. 625.
To substantiate his claim that a new trial is justified, appellant points to the fact that one Ricky Smith has, since the trial, been charged with a criminal offense arising out of an independent rape of another girl. It is appellant's contention that this fact, coupled with Mr. Smith's apparent sexual proclivities would have, in all probability, affected the verdict of the jury. Appellant, however, at the trial of this offense attempted to show that Smith was the guilty party by showing that he had been with the victim on the evening of the offense and indeed was alone with her for a sufficient period of time to allow for intercourse. Obviously the jury rejected this theory and we fail to see how evidence that Smith was subsequently charged with an offense resulting from the rape of another girl would in any way alter their view of the facts in the present case. The evidence clearly established that appellant was also with the victim on the evening of the offense and she unqualifiedly identified him as her assailant. We see no reason to indulge in speculation at this point.
For all the foregoing reasons, the judgment of the trial court is affirmed.
Judgment affirmed.
Arterburn and Given, JJ., concur; DeBruler, J., dissents with opinion in which Jackson, J., concurs.
DISSENTING OPINION
DEBRULER, J.
I dissent from the majority holding that Appellant waived his Sixth Amendment right to a public trial. The majority opinion infers the waiver from Appellant's failure to object to the trial court order after it was made. The Appellant's objection to the prosecutor's motion was properly *164 made after the prosecutor made his motion, and reads as follows:
"* * * * * * * * * * * * *
MR. LYONS:
May it please the court. My understanding of the Constitution is that a defendant is entitled to a trial which, among other things, is to be public. The defendant would like to ask the court to protect all of his constitutional rights.
* * * * * * * * * * * * *"
This objection was offered to the trial court for its consideration prior to its ruling. That is the normal and most rational procedure. In addition, a party does not have to object or take an exception to a trial court ruling or order in order to preserve the error on appeal. An objection is properly made to opposing counsel's motions, petitions, or questions and that is exactly what Appellant's counsel did here. He could and need not do anything further to preserve that alleged error on appeal once the trial court ruled against him. Thus there was no "silence" from which the majority opinion may infer a waiver.
Even if Appellant had remained silent, I believe it is error to infer a waiver of a fundamental right from mere silence. This proposition has been stated too often to require extensive treatment. Johnson v. Zerbst (1937), 304 U.S. 458, 82 L.Ed. 1461, 58 S.Ct. 1019, 146 A.L.R. 357. Fay v. Noia (1963), 372 U.S. 391, 9 L.Ed.2d 837, 83 S.Ct. 822.
The majority attempts to support its waiver argument by holding that Appellant "consented" to the trial court order by requesting that his law clerk and a detective be excluded from the effect of the trial court ruling. I believe this is also erroneous. It is obvious that Appellant's attorney's request was to permit him to retain two persons in the courtroom whose presence was necessary to the attorney for proper defense of the case. It was in no sense an offer to compromise the trial court ruling on the public trial issue. On that issue, *165 Appellant objected at the proper time and lost the argument when the trial court ruled against him. There was no procedural step he could or needed to take to preserve the error on appeal. What was he to do, refuse to go on with the trial? Appellant's counsel did what any good attorney would have done. He lost on his objection and he proceeded to make the best of that situation by attempting to keep his assistants with him. A defense attorney should be permitted to lose an objection and be free to make the next tactical move available to protect his client's rights. Of course, Appellant makes no assertion that trial counsel was incompetent; in my view, counsel at trial represented his client adequately and I fail to see how his failure to claim otherwise is relevant to this case.
Jackson, J., concurs.
NOTE. Reported in 258 N.E.2d 628.
|
17 So.3d 397 (2009)
STATE ex rel. Mark BALL
v.
STATE of Louisiana.
No. 2009-KH-0918.
Supreme Court of Louisiana.
September 18, 2009.
This application is transferred to the Fifth Circuit Court of Appeal for consideration pursuant to the procedures outlined in that court's en banc resolution of September 9, 2008. See State v. Cordero, 08-1717 (La.10-03-08), 993 So.2d 203.
WEIMER, J., concurs in part and dissents in part for the reasons assigned in State v. Cordero, 08-1717 (La.10-03-08), 993 So.2d 203.
|
703 F.2d 575
Kenneyv.Standard Life Ins. Co. of Indiana
81-5749, 81-5750
UNITED STATES COURT OF APPEALS Ninth Circuit
2/28/83
1
C.D.Cal.
AFFIRMED
|
156 Conn. 401 (1968)
THE DRAZEN LUMBER COMPANY
v.
CLIFFORD W. CASNER ET AL.
Supreme Court of Connecticut.
Argued April 2, 1968.
Decided April 30, 1968.
KING, C. J., ALCORN, HOUSE, THIM and RYAN, JS.
*402 John J. Resnik, with whom, on the brief, was Nathan A. Resnik, for the appellant (plaintiff).
John W. Colleran, for the appellees (defendants).
HOUSE, J.
This action was brought in April of 1957 by a common counts writ alleging that the defendants were indebted to the plaintiff in the sum of $5760.30. No further pleading was filed until November, 1964, when the defendants moved that the plaintiff be nonsuited for failure to file a substituted complaint or bill of particulars. Thereupon, the plaintiff filed a substituted complaint, alleging that *403 on or before December 1, 1957, the defendants were indebted in the sum of $2302.39 for building materials which they had purchased from the plaintiff. The defendants answered by way of a general denial. Meanwhile, during the seven years in which the action lay dormant, the plaintiff's original counsel died and the plaintiff's delivery and charge slips and its ledger cards were lost and not available at the time of trial. The case was tried to the court, which found the issues for the defendants, noting that " [u]pon the basis of all the credible evidence, the court finds that the plaintiff failed to sustain its burden of proof."
The plaintiff has assigned as error the refusal of the court to find facts set out in twenty-one paragraphs of its draft finding. Contrary to the plaintiff's claim, most of these claimed facts were not admitted or undisputed. "A fact is not admitted or undisputed merely because it has not been contradicted. The question of credibility is for the trier." Taylor v. Taylor, 154 Conn. 340, 341, 225 A.2d 196; Jarrett v. Jarrett, 151 Conn. 180, 181, 195 A.2d 430. Furthermore, "[t]o secure an addition on this ground, it is necessary for an appellant to point to some part of the appendix, the pleadings, or an exhibit properly before us, which discloses that the appellee admitted that the fact in question was true or that its truth was conceded to be undisputed. Maltbie, Conn. App. Proc., § 158.... A further requirement for such an addition to the finding is that the particular portion of the appendix, pleadings or exhibit, as the case may be, relied upon as requiring the addition, be pointed out in the appellant's brief. Maltbie, op. cit., § 328." Brown v. Connecticut Light & Power Co., 145 Conn. 290, 293, 141 A.2d 634; Brockett v. Jensen, 154 Conn.
*404 328, 330, 225 A.2d 190. The plaintiff failed to establish any failure on the part of the trial court to include in its finding any paragraphs which were admitted or undisputed. An examination of the appendices also indicates that the challenged material facts found by the court were fully supported by the evidence. We find no error in the court's finding of fact.
The evidence printed in the appendices to the briefs clearly indicates the problem of proof with which the plaintiff was confronted in attempting to prove a stale claim in the absence of its delivery and charge slips and its ledger cards. It was forced to rely upon the recollection of its president, and it does not appear that any evidence whatsoever was offered as to what specific materials were in fact sold to the defendants or when. Its problem was further complicated by the circumstance that at about the same time the plaintiff also sold the defendants building materials in connection with a building operation other than, and in addition to, the project involved in this action. Any amounts due on that job were subsequently settled by a voluntary agreement and release. It also appears that, although the plaintiff's president testified that $2302.39 was the total due from the defendants when suit was instituted in April, 1957, and that no other payments were made after February, 1957, nevertheless he thereafter admitted that a payment of $3061.91 was made on June 26, 1957. We find no error in the conclusion of the trial court that the plaintiff failed to sustain its burden of proof.
The plaintiff has assigned error in one ruling on evidence and in the refusal of the trial court to present in its finding the full circumstances of that ruling. The finding does not fully set out the circumstances *405 of the ruling and, particularly, does not include the claim made by the plaintiff that an exhibit which it offered was admissible as a business entry under General Statutes § 52-180. See Practice Book § 648. The finding is therefore corrected to set out the testimony of the witness Charles E. Drazen relative to the offered exhibit and the claims for its admissibility advanced by the plaintiff, as included in the draft finding. This correction, however, does not materially aid the plaintiff.
As corrected, the record discloses that Drazen, the plaintiff's president, testified that he was familiar with the plaintiff's method of keeping business records, that the plaintiff regularly maintained a journal showing cash receipts or allowances put through on each day's business and that occasionally a balance was entered, although the journal did not show charges or credits. He testified that the plaintiff's journal showed an entry of a receipt from the defendants on February 13, 1957, together with the indication of a balance due on that date. Although the plaintiff claimed that the entry was admissible as a regular business entry, the court sustained the objection of the defendants on the ground of relevancy since the journal did not contain a record of charges and credits as well as receipts. It appears that the journal entry was then marked as an exhibit for identification. It has not, however, been presented to this court as provided by § 672 of the Practice Book and is not available for our examination. No reason for this default has been offered.
The purpose of marking, as an exhibit for identification, a document which has been excluded as a full exhibit is to preserve it as a part of the record on appeal so that this court can examine it to determine *406 whether the trial court made a proper ruling in excluding it as a full exhibit. Duncan v. McTiernan, 151 Conn. 469, 470, 199 A.2d 332. It should not be retained by the party offering it but should remain in the custody of the clerk of the court subject to §§ 320, 321 and 672 of the Practice Book.
In the circumstances of the present appeal, we are presented with a situation somewhat similar to that in State v. Grimes, 154 Conn. 314, 320, 228 A.2d 141. The finding as corrected discloses the fundamental purpose of the proffer of the journal entry sufficiently to enable us, aided by the evidence printed in the appendices to the briefs, to review the ruling and its effect. Drazen testified by reference to the excluded exhibit that it indicated a balance due from the defendants on February 13, 1957. The finding of the court is that he testified that $2302.39 was the total due from the defendants prior to April, 1957, and that no other payments were made after February, 1957. It thus appears that Drazen was permitted to testify directly as to the same information which the exhibit purported to disclose as of February, 1957, and that, contrary to his earlier testimony, the plaintiff did subsequently receive on June 26, 1957, a payment of $3061.91 from the defendants. Accordingly, if in fact the trial court was in error in excluding the now missing exhibit, the witness through whom it was offered in evidence was permitted to testify fully as to the same information which the offered exhibit contained, and the ruling even if erroneous was harmless.
There is no error.
In this opinion the other judges concurred.
|
584 F.2d 979
25 Cont.Cas.Fed. (CCH) 82,699
U. S. for the Use and Benefit of Aurora Pump Co.v.Ranger Construction Co.
No. 77-1991
United States Court of Appeals, Fourth Circuit
9/6/78
1
E.D.Va.
AFFIRMED
|
47 Ill. App.2d 279 (1964)
198 N.E.2d 137
The Salem National Bank, Plaintiff-Appellant,
v.
The City of Salem, Defendant-Appellee.
Gen. No. 64-F-19.
Illinois Appellate Court Fifth District.
April 11, 1964.
*280 Miller & Pfaff, of Salem, and John C. Martin, of Tulsa, Oklahoma, for appellant.
Frederick E. Merritt, of Salem, for appellee.
WRIGHT, JUSTICE.
This is an appeal from an order dismissing a declaratory judgment action whereby the plaintiff, The Salem National Bank, seeks a determination of its rights to install driveways for vehicular traffic to cross public sidewalks adjacent to its property and within the business district of the defendant, The City of Salem.
The Salem National Bank owns and occupies for banking business, a building located on the southwest corner of the intersection of Broadway and Main Streets in the City of Salem, Illinois. Broadway leads north and south and is Illinois State Route No. 37. Main Street leads east and west and is Illinois State Route No. 50. The intersection is one of the main intersections in the City of Salem and is one of the busiest.
The plaintiff has purchased two buildings adjacent to its bank building on the west and south and proposes to remove all or a part of said buildings for the purpose of providing drive-in banking facilities to its customers at its present bank building. It is planned to have vehicles enter the proposed driveway from West Main Street across the sidewalk on the south side of West Main, pass around the present bank building on the west and south and to exit onto South Broadway by passing across the sidewalk on the west side of South Broadway. The sidewalks over which the proposed entrance driveway and the exit driveway would pass are fourteen feet in width.
*281 Prior to the controversy here involved, the City of Salem and the State of Illinois, entered into a joint resolution to resurface certain portions of Broadway and Main Streets in the area adjacent to plaintiff's building, and the city agreed not to allow the curbs to be cut or driveways or entrances made without the approval of the State of Illinois.
The plaintiff applied to the State of Illinois, Department of Public Works and Buildings, Division of Highways, for a permit to cut the curbs at the location of the proposed driveways and received a letter from the chief engineer of the Division of Highways advising that a permit would be issued upon the approval of the City of Salem. Plaintiff presented its application to the City Manager of defendant, for his approval, and upon instructions from the Mayor and the City Council, the City Manager refused to sign or approve the permit.
The plaintiff admits that at no time did it make application for a building permit provided for under City Ordinance No. 24.07 nor did it submit any detailed plans and specifications to the Inspector of Buildings for his approval as provided by this ordinance.
The defendant argues that the trial court properly exercised its discretionary power based upon the evidence in denying the relief prayed and dismissing the complaint for declaratory judgment.
Ordinance No. 7.18 of the defendant, City of Salem, provides:
"No person shall obstruct or endanger, or place, or permit anything to obstruct or endanger, the free passage or proper use of the public of any street, sidewalk, crosswalk, or entrance to any church, theater, hotel, school, or public building, except as may be permitted under this chapter."
The lower court, after hearing testimony of witnesses and examining documentary evidence, dismissed *282 plaintiff's complaint for want of equity and found: (1) That it was the defendant City's duty to keep the sidewalks safe for the public and pedestrian traffic; (2) That plaintiff bank and the proposed driveways were located at an intersection of two main city streets which were also State highway No. 37 and U.S. highway No. 50 and that such intersection was as busy, if not the busiest intersection in town; (3) That it was the duty of the City Council to consider the health, welfare, comfort and safety of the general public; (4) That said Council did not act unreasonably, oppressively or arbitrarily in denying plaintiff's application; (5) That the plaintiff does not have a right per se to construct driveways across public sidewalks without the consent and approval of the Mayor and City Council; (6) That the Mayor and City Council had a right to refuse plaintiff's application under the authority of Ordinance 7.18; (7) That from the evidence in this cause the equities were with the City of Salem and against the plaintiff.
[1-3] There can be no question that under the provisions of the Illinois Municipal Code, the streets and sidewalks of a city are held in trust by the city for the use of the public for purposes of travel and as a means of access to and egress from property abutting thereon. City of Elmhurst v. Buettgen, 394 Ill. 248, 68 NE2d 278. The primary right to the use of the streets and sidewalks of a city for the purposes of travel belongs to the general public and not to the abutting property owners alone. The general public has the paramount right to the use of the streets and sidewalks but the abutting property owner has the right to make all proper and reasonable use of the sidewalks not inconsistent with the paramount right of the public. City of Elmhurst v. Buettgen, supra.
[4] The right of access of a property owner to the public streets adjoining his property is a valuable *283 property right which cannot be taken away without just compensation. R.G. Lydy, Inc. v. City of Chicago, 356 Ill. 230, 190 NE 273; Pure Oil Co. v. City of Northlake, 10 Ill.2d 241, 140 NE2d 289.
Cities created by authority of the legislature derive all of their rights and powers from the source of their creation. People ex rel. Gutknecht v. City of Chicago, 414 Ill. 600, 111 NE2d 626. However, cities also have such implied powers as are necessarily incident to the powers expressly granted. (8 ILP Cities, Villages etc., section 65.)
There is no mention expressly made in the Municipal Code concerning driveway regulations and maintenance, but the legislature has expressly delegated to cities the authority to regulate traffic within the city. Section 11-80-20 of the Municipal Code provides, in part, that: "The corporate authorities of each municipality may regulate traffic and sales upon the streets, sidewalks, ..." And section 11-80-13 grants authority to regulate the use of sidewalks. Cities unquestionably have the implied power to regulate and supervise the construction and maintenance of driveways across its sidewalks, in order to fulfill its responsibility to regulate traffic and thereby protect the health and safety of its citizens. Pure Oil Co. v. City of Northlake, supra.
A property owner does not have an unrestricted and absolute right to construct and maintain driveways across city sidewalks to provide for ingress and egress to and from his property without satisfying reasonable standards and guides which may be established by ordinance to be followed.
The City Council under the powers granted it to regulate traffic and control the use of streets and sidewalks within the city does not have the power to deny in its absolute discretion, permission to construct or maintain any driveway across the sidewalk. The right *284 of a property owner to access to the public streets adjoining his property may be restricted by ordinance in some reasonable manner consistent with the public good. However, such ordinance must spell out reasonable standards for the property owner to meet as a condition precedent to acquiring a driveway permit, and an ordinance which purports to authorize the outright denial of a permit depending upon the will of the City Council is not enforceable. Pure Oil Co. v. City of Northlake, supra.
[5] It, therefore, follows that the trial court erred in finding that the Mayor and City Council of the City of Salem has the right under the authority of Ordinance No. 7.18 of the City of Salem to refuse plaintiff's request to construct the two driveways in question for the reason that there are no guides or standards provided in the ordinance to be met by the property owner.
Unquestionably, the defendant has the expressed authority to regulate and prescribe the manner of constructing buildings within its corporate limits (Ill. Rev Stats 1961, c 24, § 11-30-4) and incidental to that expressed authority has the implied authority to require building permits. It is admitted that defendant in the exercise of those powers has adopted City Ordinance No. 24.07, "Building Permits" and that plaintiff has not made application as required by this ordinance for a building permit and has not submitted plans for the approval of the Inspector of Buildings as required by the ordinance. It is argued by plaintiff that it need not comply with the provisions of City Ordinance No. 24.07 for the reason that it seeks merely a determination of its right to construct two driveways across the public sidewalks of the defendant.
We cannot agree with the contention of plaintiff. The evidence clearly shows the driveways are to serve as an entrance and an exit for drive-in banking facilities to be constructed at plaintiff's place of business.
*285 Although the plans are not complete, it appears from the evidence that plaintiff to provide drive-in facilities proposes to construct two driveways across the sidewalks, wreck or partially wreck two buildings, one on the west and one on the south of its present banking building and to remodel its existing banking house. All of this is a part of one project and requires compliance by the plaintiff with Ordinance No. 24.07. We believe that the plaintiff should have submitted for approval complete plans and drawings as required by said ordinance of the entire project including the driveways.
[6] Since it is conceded by the plaintiff and the evidence discloses that this was not done, the action for a declaratory judgment to determine the right of the plaintiff to construct the driveways was untimely and prematurely commenced.
[7] The granting of declaratory relief is clearly within the discretion of the trial court. The discretion is not one to entertain the action but to enter or decline to enter the judgment or decree. State Farm Automobile Ins. Co. v. Morris, 29 Ill. App.2d 451, 173 NE2d 590; Wolf v. Solem, 26 Ill. App.2d 262, 167 NE2d 820. There is nothing in the record in the instant case to indicate that the dismissal of the complaint for declaratory judgment by the trial court in any respect constituted an abuse of discretion. On the contrary, the evidence introduced at the hearing and in the record before us substantially supports all of the findings made by the trial court in its decree except the finding that the Mayor and City Council had a right to refuse plaintiff's application under the authority of Ordinance No. 7.18. (Emphasis ours.)
Although the trial court was in error in its finding that the Mayor and City Council had authority under Ordinance No. 7.18 of the City of Salem to reject the application of the plaintiff to construct the driveways, we conclude that the other findings contained in the *286 decree are supported by the record and that the court did not err in the exercise of its sound discretion in dismissing the complaint for a declaratory judgment.
Judgment affirmed.
DOVE, P.J. and REYNOLDS, J., concur.
|
862 N.E.2d 333 (2007)
BOWLING
v.
STATE
No. 35A02-0612-CR-1121.
Court of Appeals of Indiana.
March 1, 2007.
VAIDIK, J.
Disposition of case by unpublished memorandum decision. Affirmed.
BAILEY, J., Concurs.
BARNES, J., Concurs.
|
Dismissed and Memorandum Opinion filed October 13, 2011.
In The
Fourteenth Court of Appeals
____________
NO. 14-11-00699-CR
____________
MARIO ROBERTO BONILLA, Appellant
V.
THE STATE OF TEXAS, Appellee
On Appeal from the 337th District Court
Harris County, Texas
Trial Court Cause No. 1287154
MEMORANDUM OPINION
A written request to withdraw the notice of appeal in this case, personally signed by
appellant, has been filed with this Court. See TEX. R. APP. P. 42.2. Because this Court
has not delivered an opinion, we grant appellant=s request.
Accordingly, we order the appeal dismissed. We direct the Clerk of the Court to
issue the mandate of the Court immediately.
PER CURIAM
Panel consists of Justices Brown, Boyce, and McCally.
Do Not Publish C TEX. R. APP. P. 47.2(b)
|
Filed 7/24/15 P. v. Salih CA4/1
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.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
THE PEOPLE, D065924
Plaintiff and Respondent,
v. (Super. Ct. No. SCE323564)
MUAYED SALIH,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of San Diego County, Patricia K.
Cookson, Judge. Affirmed as modified.
Kurt David Hermansen, 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, Senior Assistant Attorney General, Charles C. Ragland and
Scott C. Taylor, Deputy Attorneys General, for Plaintiff and Respondent.
Muayed Salih appeals from a judgment convicting him of three counts of assault
with a deadly weapon. He argues the judgment must be reversed because the trial court
violated his constitutional right to present a complete defense by precluding his counsel
from delineating the elements of the lesser related offense of brandishing during closing
arguments. We reject this contention.
As to sentencing, defendant contends the court erred by adding a five-year
enhancement term based on his prior serious felony conviction to each of the determinate
sentences imposed on the three assault counts. We agree. While this appeal was
pending, the California Supreme Court held that the five-year prior serious felony
enhancement should be added only once to a defendant's aggregate determinate term,
even when the determinate term is derived from the Three Strikes Law. (People v. Sasser
(2015) 61 Cal.4th 1, 6-7, 12-17.) The Sasser holding applies to this case. Accordingly,
we modify the judgment to impose only one five-year enhancement for the serious felony
prior, which reduces defendant's total prison sentence from 22 years to 17 years. As so
modified, the judgment is affirmed.
FACTUAL AND PROCEDURAL BACKGROUND
Defendant and victim Abdul Almaleki were friends for several years. The
friendship ended when defendant became angry at Almaleki based on his belief that
Almaleki had influenced his sister-in-law not to marry defendant. On several occasions
in 2009 and 2010 when defendant encountered Almaleki and members of his family at a
swap meet, defendant yelled and cursed at Almaleki, and on one occasion defendant said
" 'I am going to get a gun and kill you all guys.' " Defendant would frequently talk to his
roommate about Almaleki; he "cussed" about Almaleki and said things like he was going
2
to hit Almaleki when he saw him and he was going to buy a gun and kill Almaleki and
his son.
In September 2011 while at a market, defendant spat on Almaleki, swore at him,
and attacked him, and then followed him in his car as Almaleki was driving his car trying
to get away. Based on this latter incident, in January 2012 defendant was convicted of
assault with a deadly weapon and exhibiting a deadly weapon; he was placed on
probation and ordered to serve one year in jail. Defendant was released from jail on July
25, 2012.
The assault offenses charged in the current case occurred on the afternoon of
September 1, 2012, when defendant again encountered Almaleki, accompanied by his 15-
year-old son (Mohammed), at the market. At trial, defendant's assaultive conduct was
described by Almaleki, Mohammed, and several bystanders, and portions of the assault
were depicted in surveillance videos.
The incident started when defendant threw a large vegetable can at Almaleki,
hitting him in the head. Defendant was running towards Almaleki, cursing and
repeatedly saying, "I will kill you." Almaleki then "felt a stab" in his stomach and saw
that defendant had a knife.1 As Almaleki was fleeing from the store, defendant threw an
electrical object at him, hitting him in the shoulder. Defendant chased Almaleki, holding
the knife in one hand and a meat grinder part that he had grabbed in his other hand.
Defendant was aiming the meat grinder part at Almaleki to throw it at his head.
1 After investigating the case, the authorities assessed that the stabbing object held
by defendant may have been a knife sharpener rather than a knife.
3
As defendant continued to chase him, Almaleki ran in and out of neighboring
businesses and into the street. At some point defendant was no longer holding the knife,
but instead was holding a large metal bar as well as the meat grinder part. Defendant
continued to curse at Almaleki and was repeatedly saying, "I will kill you." A man
working in a neighboring business grabbed defendant and tried to convince him to let go
of the metal objects, but was unsuccessful.
Meanwhile, Almaleki's son, Mohammed, had also run out of the market with his
father as defendant chased after them. When Mohammed stopped in the parking lot,
defendant scratched Mohammed on his arm with the knife as defendant continued to
chase Almaleki. Mohammed heard defendant saying, " 'I am going to kill you or kill
your family today.' " At one point defendant got into his car in the parking lot, but
Mohammed moved his father's truck to block defendant's car because he was afraid
defendant would go to their family's home and kill his mother and sisters. Defendant
resumed chasing Almaleki, and Mohammed attempted to slow defendant by kicking him
from behind so he would trip.
When Officer Roberto Bonilla arrived at the scene, defendant was holding a metal
bar raised above his head, and a metal object by his waist. Bonilla exited his patrol
vehicle, pointed his gun at defendant, and told defendant to drop his weapons. As
defendant continued to advance in an aggressive manner, Bonilla fired several shots.
Defendant fell to the ground and was arrested.
4
In a tape recorded interview, defendant admitted he assaulted Almaleki; claimed
Almaleki also assaulted him; and admitted he acted as if he was going to throw an object
at the police officer who arrived at the scene.
Jury Verdict and Sentence
Defendant was charged with attempted murder of Almaleki (count 1), assault with
a deadly weapon against an officer (count 2), and assault with a deadly weapon against
Almaleki and Mohammed (counts 3 and 4). The jury convicted him of the three assault
counts and deadlocked on the attempted murder count, and the latter charge was
dismissed. Defendant admitted a prior serious felony conviction and prior strike
conviction.
The court sentenced defendant to 22 years in prison. His sentence consisted of (1)
a 10-year term for the count 2 assault on an officer (five-year upper term, doubled based
on the prior strike); (2) a consecutive two-year term for the count 3 assault on Almaleki
(one-third the three-year mid-term, doubled); and (3) two additional five-year terms (one
for count 3 and the other for count 4) based on the prior serious felony enhancement. For
the count 4 assault on Mohammed, the court imposed the same sentence as for count 3
(including the five-year prior serious felony enhancement), but ordered the count 4
sentence to run concurrently.
DISCUSSION
I. Ruling Precluding Defense Counsel from Listing Elements of Brandishing
Defendant argues the trial court interfered with his constitutional rights to
effective assistance of counsel and to present a complete defense when it precluded his
5
counsel from listing the elements of the lesser related offense of brandishing during
closing arguments to the jury.
A. Background
When discussing jury instructions, defense counsel requested that the court
instruct the jury on the lesser offense of brandishing. The court noted that brandishing
was not a lesser included offense of assault with a deadly weapon, and the prosecutor
objected to the instruction. Based on the prosecutor's objection, the court ruled the jury
would not be instructed on brandishing as a lesser related offense. With respect to the
assault charges, the jury was instructed the offense included the requirements that the
defendant commit an act that by its nature would directly and probably result in the
application of force to a person, and that defendant had the present ability to apply force
with a deadly weapon to a person. (See CALCRIM Nos. 860, 875.)
During a recess in the proceedings just before the commencement of defense
counsel's closing arguments, the prosecutor objected to a power point slide that defense
counsel intended to use which referred to the offense of brandishing. The power point
slide cited Penal Code section 417 and listed the elements of brandishing; i.e., (1)
drawing or exhibiting a weapon in someone's presence, and (2) doing so in a rude, angry
or threatening manner. (See CALCRIM No. 983; Pen. Code,2 § 417.)
The prosecutor argued a list of the brandishing elements was not appropriate
because the jury was not considering this offense as a verdict option. Defense counsel
2 Subsequent unspecified statutory references are to the Penal Code.
6
countered the list of elements was proper for purposes of presenting the defense theory
that defendant committed a different crime rather than the charged crimes, and the jury
had a right to know "what brandishing is" and that it is a crime. The court ruled defense
counsel could not cite the Penal Code section and list the elements, reasoning this was
improper argument and there was no need to review the elements because the jury was
not being instructed on brandishing as a lesser offense. However, the court stated that
although defense counsel could not "show the jury the elements," he was free to argue
that defendant "brandished a weapon" and should be found not guilty of the charged
offenses.
Defense Counsel's Closing Arguments
During closing arguments defense counsel argued defendant did not commit an
assault against victims Mohammed and Officer Bonilla, but only committed the crime of
brandishing.
Regarding Mohammed, defense counsel argued that no assault occurred when
defendant held up an object and ran down the aisle because the conduct was not likely to
result in the application of force. To illustrate this claim, defense counsel stated, "I can
stand here with my pen for a year over your head and there is nothing about this that is
going to make it apply any force to you. . . . I am brandishing a weapon in a deadly
manner. A deadly weapon in a threatening and angry way. I have not assaulted you. [¶]
If I pulled the trigger, I've assaulted you. If I pick up this object and throw it to you or
towards you, maybe I've assaulted you, but holding this thing up over your head, how do
you get from that to did 'an act with a deadly weapon that by its nature would directly and
7
probably result in the application of force.' As long as I am holding it up here, it is never
going to result in the application of force. This is a brandishing of a weapon." (Italics
added.)
During this argument, defense counsel told the jurors he was going to read to them
from section 417. The prosecutor objected; the trial court sustained the objection; and
when defense counsel asked if he could "read the elements," the court responded "No."
Defense counsel continued with his argument with respect to victim Mohammed,
stating: "Brandishing a weapon. When you brandish a weapon in an angry or
threatening manner, that is a crime. It's not assault because it hasn't gotten to that point
yet. But it's a brandishing. That is what he did. He brandished a weapon. [¶] . . . [¶]
Does my client throw it at him? Does my client run over and smack him or try to smack
him with it? He has brandished, he has exhibited a deadly weapon in a rude and
threatening and angry manner and in a fight or argument. That is what he has done. [¶]
Has he assaulted that boy yet? No. . . . He threatened him with the weapon. He
brandished that weapon." (Italics added.)
Defense counsel likewise addressed defendant's conduct directed at Officer
Bonilla, stating, "You see him walking quickly towards the officer with the thing raised.
[¶] . . . Did he throw it at the officer and miss? Did he shoot a bullet and miss? This is
brandishing a weapon in a rude and angry manner. It may lead to an assault, but it is, of
itself, not yet an assault. [¶] Now, make no mistake about it, I am not suggesting to you
that any police officer has to wait to be assaulted before he defends himself. . . . As soon
as you brandish a weapon in a rude and threatening and angry manner towards an
8
officer, they are trained to shoot to kill . . . . [¶] . . .The officer was not assaulted, but he
was allowed to defend himself anyway." (Italics added.)
Rebuttal Closing Arguments
In rebuttal closing arguments, the prosecutor responded to defense counsel's claim
that defendant merely committed brandishing, stating: "But to say that the defendant was
not actually assaulting these people, especially the cop, that that was just a brandishing,
that goes beyond ridiculous in this case. [¶] . . . [¶] . . . I have the law right here and read
it. The defendant did an act with a deadly weapon that by its nature would directly and
probably result in the application of force to someone. [¶] When the defendant acted he
had the present ability to apply force with a deadly weapon. You can commit assault by
doing an act that by its nature would probably result in the application of force as long as
you have the ability to apply force. [¶] . . . Of course, he had the present ability to apply
force . . . . Of course he did an act that by its nature would probably result in the
application of force. . . . [¶] He was chasing them holding these instruments. That is an
assault as long as he had that present ability. The cop had every right to shoot him
because he was assaulting him. [¶] If the defendant was merely . . . 40 feet off or 50 feet
off brandishing a weapon, not moving on the officer, the officer wouldn't have the right
to shoot him. Forty or 50 feet away, he wouldn't have the present ability at that point.
[¶] Now, if he started charging, that might change things really quickly and that is what
happened here. . . . That was an assault. And to say anything else is ridiculous.
[¶] . . . [¶] Did the defendant brandish a weapon? Certainly. He did way more than
9
brandish a weapon because he acted, he chased, he yelled, kill you. And he had the
present ability based on the circumstances to actually apply force." (Italics added.)
B. Relevant Legal Principles
A criminal defendant has a constitutional right to present closing argument to the
trier of fact. (Herring v. New York (1975) 422 U.S. 853, 862-865 [invalidating statute
that allowed trial court to completely deny closing summation in criminal bench trial].)
However, a trial court has broad discretion to control the scope of closing argument
provided the defendant is not precluded from making his central point. (See People v.
Marshall (1996) 13 Cal.4th 799, 854-855.) As explained in Herring, the constitutional
right to present closing arguments does not mean "closing arguments in a criminal case
must be uncontrolled or even unrestrained. The presiding judge must be and is given
great latitude in controlling the duration and limiting the scope of closing summations.
He may limit counsel to a reasonable time and may terminate argument when
continuation would be repetitive or redundant. He may ensure that argument does not
stray unduly from the mark, or otherwise impede the fair and orderly conduct of the trial.
In all these respects he must have broad discretion." (Herring, supra, at p. 862, italics
added.)
A defendant also has a constitutional right to " 'a meaningful opportunity to
present a complete defense.' " (Crane v. Kentucky (1986) 476 U.S. 683, 690.) However,
a trial court retains the discretion to prevent presentation to the jury of matters that are
marginally relevant or that pose an undue risk of confusion of the issues. (See id. at pp.
689-690.) Further, of relevance here, there is no constitutional requirement that a trial
10
court give the jury the option of convicting the defendant of an uncharged lesser offense
that is related to, but not necessarily included in, a charged offense. (Hopkins v. Reeves
(1998) 524 U.S. 88, 96-97.) Thus, unless the prosecution agrees to instruction on a lesser
related offense, a defendant has no right to compel presentation of this lesser verdict
option to the jury. (People v. Valentine (2006) 143 Cal.App.4th 1383, 1387.)
Although a defendant has no right to an instruction that allows the jury to convict
of a lesser related offense, this does not preclude a defendant from referring to a lesser
related offense when arguing to the jury that the prosecution has not proven all the
elements of the charged offense beyond a reasonable doubt. (People v. Valentine, supra,
143 Cal.App.4th at p. 1388.) In Valentine, the court rejected the defendant's argument
that he was entitled to an instruction on receiving stolen property (a lesser related offense
of the charged robbery offense) because to decline the instruction "amounted to a failure
to instruct on a defense theory—that he received property he knew to be stolen but that he
did not steal it." (Id. at p. 1387.) Valentine reasoned that receiving stolen property was
not a defense to robbery, but a theory of criminal liability based on a different offense;
the failure to instruct did not impinge on the defendant's right to present a defense to
robbery but simply reflected that the prosecutor chose not to file that different offense;
and defendant was entitled to "argue to the jury that his culpability was as one who was
in possession of stolen property but not one who committed a robbery." (Id. at p. 1388,
italics added.) The California Supreme Court has likewise held that the refusal to instruct
on a lesser related offense did not deprive the defendant of an opportunity to present a
defense given that the defense theory premised on the lesser offense was presented to the
11
jury by other means, including defense counsel's closing argument. (People v. Schmeck
(2005) 37 Cal.4th 240, 291-292.)
C. Analysis
Defendant does not dispute that brandishing is a lesser related, but not a lesser
necessarily included, offense of assault, and hence he had no right to have the jury
instructed on brandishing as a lesser offense verdict option. (See People v. Escarcega
(1974) 43 Cal.App.3d 391, 398.) However, he contends he should have been allowed to
list the elements of the brandishing offense because without this information the jury
would not have understood the meaning of brandishing for purposes of evaluating the
defense theory that he did not commit the charged offense of assault.
The record does not support defendant's claim that a listing of the brandishing
elements was necessary for the jury to understand and evaluate the defense theory
pertaining to this offense. Defense counsel was permitted to argue to the jury that
defendant's conduct consisted merely of holding a weapon over his head; this conduct
amounted to the crime of brandishing a weapon; but the conduct did not constitute assault
because it had not reached the point where it was likely to result in the application of
force. During this argument, defense counsel, without objection, repeatedly described the
type of conduct associated with brandishing, stating "brandishing a weapon . . . in a
threatening and angry way"; "[w]hen you brandish a weapon in an angry or threatening
manner, that is a crime"; "[h]as brandished, he has exhibited a deadly weapon in a rude
and threatening and angry manner"; "[t]his is brandishing a weapon in a rude and angry
manner"; "[a]s soon as you brandish a weapon in a rude and threatening and angry
12
manner." Thus, defense counsel presented the jury with a standard, commonsense
definition of brandishing a weapon. (See Merriam-Webster's Collegiate Dict. (10th ed.
2002) p. 139 [brandishing: "to shake or wave (as a weapon) menancingly" or "to exhibit
in an ostentatious or aggressive manner"].)
The trial court reasonably exercised its discretion to preclude defense counsel
from actually listing or displaying the legal elements of the brandishing offense because
the jury was not tasked with evaluating whether the prosecution proved each of these
elements. Rather, the jury was required to decide whether the prosecution had proven
each of the elements of the assault with a deadly weapon offense. Defense counsel was
permissibly referring to the brandishing offense to urge the jury to reject one of the
elements of assault (i.e., an act likely to result in the application of force), and for
purposes of presenting this argument a commonsense definition of brandishing sufficed
and there was no need for the jury to be provided a list of the legally-defined elements.
The trial court's ruling did not infringe upon defendant's constitutional rights to effective
assistance of counsel and presentation of a complete defense.
Alternatively, even if the trial court should have allowed defense counsel to
formally list the brandishing elements during closing argument, there was no prejudice.
Contrary to defendant's claim, any such error is not reversible per se. (Glebe v. Frost
(2014) __ U.S. __, 135 S.Ct. 429, 430-431 [trial court's erroneous ruling precluding
defense counsel from presenting alternative defense theory to jury in closing argument
was not structural error].) Whether we apply the standard for state law error or the
standard for federal constitutional error, the limitation on defense counsel's closing
13
argument was harmless. (People v. Rogers (2006) 39 Cal.4th 826, 871-872 [harmless
beyond a reasonable doubt standard applies when error deprives defendant of right to
present complete defense]; People v. Boyette (2002) 29 Cal.4th 381, 428-429 [state law
reasonable probability standard of prejudice applies when error did not result in complete
exclusion of defense].) Defense counsel was permitted to argue to the jury that
defendant's conduct consisted of the crime of brandishing a deadly weapon in a
threatening, rude, or angry manner. This presented the jury with the essential elements of
the brandishing offense. (§ 417, subd. (a)(1) [offense committed when person "in the
presence of any other person, draws or exhibits any deadly weapon . . . in a rude, angry,
or threatening manner"]; see CALCRIM No. 983.) There is nothing in the record to
suggest the jury might have been confused or failed to understand the clearly-presented
defense theory that defendant's conduct was merely an angry or threatening exhibit of a
weapon and it did not satisfy the assault element of an act likely to result in the
application of force.
Defendant argues that without a listing of the elements of brandishing, the jurors
would not be able to determine if defense counsel accurately described brandishing, and
they had no way of knowing what distinguished brandishing from assault. In support, he
cites the prosecutor's statement during rebuttal closing argument that the defense
brandishing theory was "ridiculous." It is clear from the context of this argument that the
prosecutor was not challenging defense counsel's definition of brandishing, but rather was
challenging the defense claim that defendant's conduct did not constitute an act that
would likely result in the application of force. Further, the jury knew from the
14
instructions that assault required an act likely to result in the application of force, and it is
apparent from counsel's arguments that all understood that absent proof of this element
defendant's conduct could constitute brandishing but not assault. Because the meaning of
brandishing was undisputed and presented to the jury in a commonsense manner, there
was no prejudice from the trial court's ruling that precluded defense counsel from actually
listing the legal elements of the offense.
II. Five-Year Terms for Prior Serious Felony Conviction
Section 667, subdivision (a)(1) requires that a five-year enhancement term be
imposed for a defendant's serious felony prior conviction. Defendant had one serious
felony prior conviction, and the court imposed the five-year enhancement term three
times, i.e., on counts 2, 3, and 4 (with the five-year enhancement on count 4 to run
concurrently).
While this appeal was pending, the California Supreme Court held that the rule
providing that a prior serious felony enhancement should be added only once to the total
determinate sentence, applies equally to a second-strike defendant who receives multiple
determinate terms that are doubled under the Three Strikes Law. (People v. Sasser,
supra, 61 Cal.4th at pp. 6-7, 12-17.) This rule applies to defendant's determinate
sentence.
Accordingly, we modify the judgment to impose only a single five-year prior
serious felony enhancement. With this modification, defendant's sentence is reduced
from 22 years to 17 years.
15
DISPOSITION
The judgment is modified to impose only one five-year term for the prior serious
felony enhancement, added to defendant's aggregate determinate term. (§ 667, subd.
(a)(1).) Defendant's total determinate sentence is reduced from 22 years to 17 years. As
so modified, the judgment is affirmed. The trial court is directed to prepare an amended
abstract of judgment reflecting this modification, and to forward a copy to the
Department of Corrections and Rehabilitation.
HALLER, J.
WE CONCUR:
NARES, Acting P. J.
AARON, J.
16
|
57 F.3d 1073NOTICE: Seventh Circuit Rule 53(b)(2) states unpublished orders shall not be cited or used as precedent except to support a claim of res judicata, collateral estoppel or law of the case in any federal court within the circuit.
UNITED STATES of America, Plaintiff-Appellee,v.Samuel L. PRINGLE, Defendant-Appellant.
No. 94-3308.
United States Court of Appeals, Seventh Circuit.
Argued April 5, 1995.Decided June 8, 1995.
Before POSNER, Chief Judge, and CUMMINGS and MANION, Circuit Judges.
ORDER
1
At approximately 4:30 p.m. on September 22, 1993, a fire broke out in a building owned by the defendant at 104 Great Western Avenue in Tolono, Illinois. The building, which housed defendant's three auto-related businesses, was filled with used auto parts. When police and fire officials arrived, all entrances to the building were locked. Fire investigators later determined that the fire had been started in at least five different locations within the building. All of the receipts for inventory in the building were consumed at one of the points of origin.
2
Defendant told investigators that he and his wife left the building at approximately 4:30 or 4:35 p.m. and that he was the last to leave. During their conversation, investigators noticed burn marks on defendant's arms. Twelve days before the fire, defendant had the building and its contents insured for $320,000. Because of the short time between the issuance of the policy and the fire, the insurance company was not able to verify the defendant's representations as to the value of the building's contents.
3
Defendant was indicted for destroying by means of fire a building affecting interstate commerce in violation of 18 U.S.C. Sec. 844(i), two counts of mail fraud in violation of 18 U.S.C. Sec. 1341, and one count of using fire to commit a federal felony in violation of 18 U.S.C. 844(h)(1). A jury convicted him on all four counts and the defendant was sentenced to 93 months of incarceration and three years of supervised release.
4
During the trial the court allowed the government to present evidence, under Fed.R.Evid. 404(b), of a fire in the same building in 1980 for which defendant collected more than $350,000 in insurance. The cause of the earlier fire was never officially determined but the arson investigator testified at the current trial that he believed it was suspicious. Defendant was the last person to leave the building before the earlier fire and had removed a coin collection from the building just prior thereto. Defendant had also increased the insurance coverage on the building one month prior to the earlier fire.
5
The trial court excluded as hearsay testimony by a newspaper reporter that an unknown fireman had told him that a burning truck inside the building contained fire arms and ammunition. This testimony could have supported defendant's theory that burglars started the second fire to cover their tracks after they stole a large cache of assault rifles which were stored in the burned truck.
Discussion
6
On appeal, the defendant challenges the above two evidentiary rulings and the government's use of the Rule 404(b) evidence in its closing argument. We apply the abuse of discretion standard with "special deference to the evidentiary rulings of the trial court." United States v. York, 933 F.2d 1343, 1348 (7th Cir.1991).
7
Prior bad act evidence is admissible under Rule 404(b) if (1) it is directed to a matter other than the defendant's propensity to commit the crime; (2) the evidence was sufficient to support a jury finding that the defendant committed the prior act; (3) the other act is similar enough and close enough in time to be relevant to the matter in issue; (4) the probative value is not substantially outweighed by the danger of unfair prejudice. United States v. Emenogha, 1 F.3d 473, 478 (7th Cir.1993), certiorari denied, 114 S.Ct. 901.
8
The evidence of the earlier fire was admitted to establish defendant's intent to commit arson and insurance fraud. If defendant had committed arson and insurance fraud in the past, the theory goes, it is more likely that the second fire was also started intentionally to recover on the insurance and was not an accident. Evidence of past fraud is routinely admitted to prove present intent to defraud. York, 933 F.2d at 1350 (collecting cases). The evidence was thus admitted for a proper purpose.
9
Defendant's real quarrel is over the application of the last three prongs of the Rule 404(b) test. Defendant contends that the evidence was insufficient to establish that he started the previous fire. Defendant faces a heavy burden. He must establish that no reasonable jury considering all the evidence could find by a mere preponderance that he did start the earlier fire. York, at 1352. Following Huddleston v. United States, 485 U.S. 681, the jury can consider the evidence linking defendant to the second fire in determining whether he started the first. Given this rather minimal standard, the evidence that defendant started the first fire--including the testimony by the arson inspector that the cause was suspicious, defendant's removal of the coin collection and the increase in the insurance coverage--coupled with the ample evidence that defendant started the second fire was sufficient to support a jury finding.
10
Since the similarity between the two fires can hardly be disputed, defendant argues that the first fire has little probative value with respect to his intent in relation to the second fire because of the gap of nearly fourteen years. He argues that the passage of time "opens up the possibility of a witness having a clouded recollection of the events which can lead to skewed testimony" (Br. 12). Defendant's argument misses the mark. The jury can and did assess the credibility of witnesses in light of the passage of time, and we have already concluded that the evidence was sufficient to support a finding that defendant committed the earlier act. The issue under the third prong is whether the fourteen-year gap severs any probative connection between the two alleged arsons. It would do so if the only explanation for the arson-free fourteen years was that defendant had turned over a new leaf, but that is clearly not the only explanation. Arson is not always economically advantageous, and the circumstances to make it so may not have coalesced in the intervening fourteen years, particularly if one considers the greater risk of getting caught (evident in the present case) if one repeats oneself. The fourteen-year gap, therefore, does not negate the inference that defendant's intent to commit arson and fraud carried over to the second fire.
11
Finally defendant argues that the danger of unfair prejudice outweighs the probative value of the evidence concerning the earlier fire. We accord great deference to the district judge's decision to admit or exclude evidence under Rule 403. York, 933 F.2d at 1352. The potential unfair prejudice engendered by the evidence of defendant's potential role in the earlier fire is minute compared to that faced by the defendant in York, where this Court upheld the admission of evidence that defendant had previously killed his wife to collect insurance. In the present case Judge Baker carefully balanced the probative value and prejudicial effect of the evidence and gave proper limiting instructions to the jury. He did not abuse his discretion.
12
Defendant objects to the prosecutor's statement in closing argument, "We know he had the intent to defraud at this time because he did it before." The prosecutor had earlier stated, "I submit and you can only use this evidence for his intent to defraud--he did it once before." The "it" in both statements clearly refers to the alleged prior fraud. The prosecutor therefore is not making an improper argument, but merely pressing the inference, allowed under Rule 404(b), that defendant's prior fraud makes it more likely that he had the intent to defraud at the time of the second fire.
13
Defendant claims that the district court abused its discretion in ruling that the hearsay statement from the unknown fireman to the newspaper reporter was inadmissable. Defendant contends that the statement was admissible under Rule 804(b)(5)'s residual hearsay exception. The district court did not abuse its discretion. Defendant has failed to establish "equivalent circumstantial guarantees of trustworthiness" to those offered by various specific hearsay exceptions. Moreover, if the statement is true and the firemen recovered and removed weapons from the burning truck, the defendant could have "procure[d] through reasonable efforts" more probative evidence of that fact than anonymous hearsay. Fed.R.Evid. 804(b)(5)(B).
AFFIRMED
|
573 F.2d 1111
3 Fed. R. Evid. Serv. 776
UNITED STATES of America, Appellee,v.Luis Alvaro HOYOS, Appellant.
No. 77-3236.
United States Court of Appeals,Ninth Circuit.
April 24, 1978.
William J. Redondo (argued), Tucson, Ariz., for appellant.
John G. Hawkins, Asst. U. S. Atty. (argued), Tucson, Ariz., for appellee.
Appeal from the United States District Court for the District of Arizona.
Before ELY and GOODWIN, Circuit Judges, and ENRIGHT,* District Judge.
ELY, Circuit Judge:
1
Hoyos appeals from his convictions of possession with intent to distribute methaqualone tablets, conspiracy to possess with intent to distribute methaqualone tablets, and distribution of methaqualone tablets, violations of 21 U.S.C. §§ 841(a)(1) and 846. We affirm.
FACTS
2
Hoyos' convictions resulted from sales of methaqualone tablets to Drug Enforcement Administration (DEA) undercover agent Bachelier. According to the testimony of one Jimenez, another DEA undercover employee, Jimenez was contacted by a man named Cesar Castro several times and solicited to find customers to whom Castro might sell methaqualone pills. Jimenez, in turn, introduced Castro to a prospective buyer named "Tony," who, in truth, was agent Bachelier of the DEA. After preliminary negotiations, Castro, Jimenez, and Bachelier met together to arrange the details of the proposed sale to "Tony." Later, Castro and Hoyos picked up Jimenez on their way to meet "Tony" and consummate the sale. Upon meeting with "Tony," Castro and Hoyos left Jimenez with agent Bachelier, saying they would return shortly with the pills. Castro later returned in a different car with the pills and was arrested as the sale was made. Hoyos was observed driving by the location of the sale at the time of Castro's arrest, driving the same car he and Castro had used earlier when they picked up Jimenez. After a short chase, Hoyos was also arrested.
3
Hoyos was jointly charged with Castro in a three-count indictment for the offenses of which he was ultimately convicted. Prior to trial, Hoyos moved to sever his case from that of co-defendant Castro, supporting his motion with an affidavit signed by Castro stating that Castro was in possession of information which would tend to exculpate Hoyos. The Government did not oppose the motion, and severance was granted by the trial court. Castro pleaded guilty to the charges on July 15, 1977, and a sentencing date of August 12, 1977 was fixed. On July 18, 1977, Castro was subpoenaed by Hoyos to testify at the latter's trial, then scheduled for July 20, 1977. On July 19, 1977, Hoyos moved for a continuance of his trial date until after Castro had been sentenced because Castro had advised him that he would not testify until he had been sentenced. The Government stipulated to the continuance, and Hoyos' trial was reset for August 12, 1977 at 9:00 a. m., following Castro's scheduled sentencing at 8:15 a. m. that same morning. Castro failed to appear, either for his sentencing or to testify at Hoyos' trial. Hoyos again moved for a continuance to procure Castro's presence. The motion was denied, and the trial proceeded.
4
As part of the defense case, counsel for Hoyos called Castro's wife as a witness and attempted to elicit testimony from her as to a conversation in which she had engaged with her husband after his arrest. Hoyos' later offer of proof made clear that the testimony of Castro's wife was intended to supply the alleged exculpatory material that Castro might have provided. The Government's objection to the testimony, on the ground that it constituted hearsay, was sustained. The defense requested at the end of trial that a so-called informer instruction be submitted to the jury. The trial court refused to give the informer instruction, finding that there was no informer involved in the case. As hitherto stated, Hoyos was found guilty by the jury on all three counts charged. He was sentenced to concurrent one-year terms of imprisonment on each count and a three-year special parole term.
5
In this appeal, Hoyos contends that the trial court erred in refusing his request for a continuance, in excluding the testimony of Castro's wife, and in refusing to submit his proposed instruction relating to informers.
ISSUES
6
* In respect to his first contention, Hoyos argues that the trial court should have granted his request for a ten-day continuance so that Castro's presence could be procured.
7
The decision to grant or deny a requested continuance is within the trial court's discretion and will not be disturbed on appeal absent clear abuse of that discretion. United States v. Hernandez-Berceda, 572 F.2d 680 (9th Cir., 1978); United States v. Thompson, 559 F.2d 552 (9th Cir. 1977); United States v. Lustig, 555 F.2d 737 (9th Cir. 1977); United States v. Brandenfels, 522 F.2d 1259 (9th Cir. 1975). "When a continuance is sought to obtain witnesses, the accused must show who they are, what their testimony will be, that the testimony will be competent and relevant, that the witnesses can probably be obtained if the continuance is granted, and due diligence has been used to obtain their attendance on the day set for trial." Leino v. United States, 338 F.2d 154, 156 (10th Cir. 1964); Dearinger v. United States, 468 F.2d 1032 (9th Cir. 1972); United States v. Harris, 436 F.2d 775 (9th Cir. 1970); McConney v. United States, 421 F.2d 248 (9th Cir. 1969), cert. denied, 400 U.S. 821, 91 S.Ct. 39, 27 L.Ed.2d 49 (1970); Powell v. United States, 420 F.2d 799 (9th Cir. 1969).
8
The motion of Hoyos was defective in two significant respects. First, he did not establish with any precision what Castro's testimony would be or whether, in fact, Castro had unconditionally agreed to testify in Hoyos' defense. See United States v. Gay, 567 F.2d 916 (9th Cir. 1978) (conditional offer to testify for co-defendant as basis for severance). Second, and of more importance, Hoyos could not demonstrate that he could produce Castro as a defense witness if the continuance had been granted. Castro had already failed to appear for his own sentencing that same morning of Hoyos' trial. In view of the fact that Castro was a fugitive at the time of Hoyos' trial, we conclude that the trial court justifiably entertained grave doubt whether Castro could be produced as a witness. In similar circumstances, we have repeatedly upheld, as a proper exercise of discretion, the refusal of trial courts to grant continuances in order to procure absent witnesses. See United States v. Thompson, supra; Dearinger v. United States, supra; McConney v. United States, supra; Powell v. United States, supra. See also Leino v. United States, supra.
9
The trial court here did not abuse its discretion in denying the request for a continuance.
II
10
Hoyos claims that the trial court erroneously excluded the testimony of Castro's wife concerning the alleged conversation she had with Castro after Castro's arrest. Hoyos does not deny the hearsay nature of the offered testimony; he argues that the testimony fell within either or both of the hearsay exceptions set forth in Fed.R.Evid. 804(b)(3) and (b)(5). We examine the applicability of each exception.
11
Fed.R.Evid. 804(b)(3), containing the declaration against penal interest exception which Hoyos urges, provides in pertinent part:(b) Hearsay exceptions. The following are not excluded by the hearsay rule if the declarant is unavailable as a witness:
12
(3) Statement against interest. A statement which was at the time of its making so far contrary to the declarant's pecuniary or proprietary interest, or so far tended to subject him to civil or criminal liability, or to render invalid a claim by him against another, that a reasonable man in his position would not have made the statement unless he believed it to be true. A statement tending to expose the declarant to criminal liability and offered to exculpate the accused is not admissible unless corroborating circumstances clearly indicate the trustworthiness of the statement.
13
(Emphasis supplied).
14
The determination of admissibility under Rule 804(b)(3) is committed to the sound discretion of the trial court. United States v. Satterfield,572 F.2d 687 (9th Cir., 1978); United States v. Oropeza, 564 F.2d 316, 325 (9th Cir. 1977). The test for admissibility is two-pronged: (1) whether the statement so far tended to subject the declarant to criminal liability that a reasonable person in the declarant's position would not have made the statement unless he believed it to be true, and (2) whether the corroborating circumstances clearly indicate the trustworthiness of the statement. Id.
15
We are satisfied that the trial court here properly exercised its discretion in excluding the offered testimony. First, an examination of the offer of testimony reveals it to be comprised largely of matter that is exculpatory of Hoyos but not significantly inculpatory of the declarant Castro. While the reach of Rule 804(b)(3) is not limited to direct confessions of criminal responsibility, United States v. Benveniste, 564 F.2d 335, 341 (9th Cir. 1977), the declarant's statements must, in a real and tangible way, subject him to criminal liability. Consequently, hearsay statements consisting principally of material exculpating a co-defendant are suspect, absent the concurrent presence of solidly inculpatory statements against the penal interest of the declarant. See United States v. Oropeza, supra; United States v. Marquez, 462 F.2d 893 (2d Cir. 1972). Second, we note that in Rule 804(b)(3) "Congress meant to preclude reception of exculpatory hearsay statements against penal interest unless accompanied by circumstances solidly indicating trustworthiness. This requirement goes beyond minimal corroboration." United States v. Barrett, 539 F.2d 244, 253 (1st Cir. 1976); United States v. Satterfield, supra. Our own court has indicated that the factors relevant to trustworthiness in this context include:
16
"(a) the time of the declaration and the party to whom it was made;
17
(b) the existence of corroborating evidence;
18
(c) the extent to which the declaration is really against the declarant's penal interest; and
19
(d) the availability of the declarant as a witness."
20
United States v. Oropeza, supra, at 325.
21
Reviewing these factors here, it appears, first, as in Oropeza, that "clear" corroboration was lacking. The statements attributed to Castro were not spontaneous. They were made only after his arrest. They were made to his wife and therefore could have been suppressed at a subsequent criminal prosecution under a claim of the confidential marital communications privilege. See United States v. Lustig, supra. There was scant evidence of independent corroborating facts. Moreover, the offered testimony was largely exculpatory in nature. In these circumstances, the trial court did not abuse its discretion in refusing to admit the testimony under the declaration against penal interest exception of Rule 804(b)(3).
22
Hoyos also claims that Rule 804(b)(5) provided a basis for the admission of the offered testimony. This portion of Rule 804 provides:
23
(b) Hearsay exceptions. The following are not excluded by the hearsay rule if the declarant is unavailable as a witness:
24
(5) Other exceptions. A statement not specifically covered by any of the foregoing exceptions but having equivalent circumstantial guarantees of trustworthiness, if the court determines that (A) the statement is offered as evidence of a material fact; (B) the statement is more probative on the point for which it is offered than any other evidence which the proponent can procure through reasonable efforts; and (C) the general purposes of these rules and the interests of justice will best be served by admission of the statement into evidence. However, a statement may not be admitted under this exception unless the proponent of it makes known to the adverse party sufficiently in advance of the trial or hearing to provide the adverse party with a fair opportunity to prepare to meet it, his intention to offer the statement and the particulars of it, including the name and address of the declarant.
25
By its plain language, the quoted section requires "equivalent circumstantial guarantees of trustworthiness." For the same reasons that the trial court properly refused the admission of the testimony under Rule 804(b)(3), it also ruled correctly in refusing to admit the testimony under Rule 804(b)(5).
III
26
Hoyos' last argument is that the trial court erred in refusing to give the jury his requested instruction as to the credibility of government informants. The requested instruction read:
27
"The testimony of an informer who provides evidence against a defendant for pay, or for immunity from punishment, or for personal advantage or vindication, must be examined and weighed by the jury with greater care than the testimony of an ordinary witness. The jury must determine whether the informer's testimony has been affected by interest, or by prejudice against the defendant."
28
The trial court refused the instruction, believing that no "informer" was involved in the case.
29
Hoyos argues that Jimenez was an informer. "To be an informer the individual supplying the information generally is either paid for his services, or, having been a participant in the unlawful transaction, is granted immunity in exchange for his testimony." United States v. Miller, 499 F.2d 736, 742 (10th Cir. 1974). According to the testimony, Jimenez was an experienced Mexican police officer working for the DEA at the invitation of the DEA. Jimenez had been employed by the DEA as an undercover agent for two years at a set salary, although that arrangement had ended just prior to the trial. The Government's contention that Jimenez was a special undercover agent for the DEA is supported by the record. He was not a paid informant whose remuneration was tied to the sale of specific information, nor was he a participant in the crime with a promise of immunity.
30
Moreover, even if Jimenez did have attributes similar to the traditional "informer," we can find no prejudice resulting from the trial court's failure to give the requested special instruction. First, defense counsel was allowed extensive cross-examination. Any bias or prejudice entertained by Jimenez could have been presented to the jury for consideration, as it, in fact, was. Second, the trial court did give a general instruction relating to the credibility of witnesses, an instruction which admonished the jurors to examine "whether the witness had any motive for not telling the truth" and "whether the witness has any interest in the outcome of this case." In the circumstances of this case, any conceivable prejudice to Hoyos was thereby eliminated.
31
The judgment of conviction must be, and the same is hereby
32
AFFIRMED.
*
Honorable William B. Enright, United States District Judge for the Southern District of California, sitting by designation
|
NUMBER 13-17-00464-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
BOBBY HARTFIELD, JR.
TDCJ #1119719, Appellant,
v.
WARDEN FURR, ET AL, Appellees.
On appeal from the 36th District Court
of Bee County, Texas.
MEMORANDUM OPINION
Before Justices Contreras, Longoria, and Hinojosa
Memorandum Opinion by Justice Hinojosa
Appellant Bobby Hartfield Jr., an inmate proceeding pro se and in forma pauperis,
appeals from a judgment dismissing with prejudice his suit against Warden C. Furr and
Medical Director K. Long, employees of the Texas Department of Criminal Justice—
Institutional Division. In the only cognizable issue that we find in Hartfield’s brief, 1 he
complains that the trial court abused its discretion under chapter 14 of the Texas Civil
Practice and Remedies Code in dismissing his suit with prejudice. See TEX. CIV. PRAC.
& REM. CODE ANN. § 14.003(a) (West, Westlaw through 2017 1st C.S.) (providing that a
court may dismiss an inmate’s claim, either before or after service of process, if the court
finds any one of three factors). We modify the trial court’s judgment and affirm it as
modified.
I. BACKGROUND
On March 24, 2017, Hartfield, an indigent inmate proceeding without counsel, sued
Furr and Long, in their individual capacities, alleging what we construe to be a premises
defect claim and seeking compensatory damages for injuries allegedly sustained when
his foot got caught in a shower drain. Hartfield attached to his petition his: (1) affidavit
relating to previous filings, which noted no previous filings; (2) unsworn declaration
averring that the facts in his petition were true and correct; (3) Step 2 grievance form,
which appeals the denial of his Step 1 grievance for injuries allegedly sustained by a
shower drain; and (4) application to proceed in forma pauperis and a print out from
Hartfield’s prison trust account. A few days later, Hartfield filed with the trial court his
Step 1 grievance, which alleges that his foot was injured after getting caught in the drain
1 Hartfield’s issues are: did the trial court abuse its discretion in dismissing his suit, when (1) it
presented a cause of action recognized under Texas law; and (2) all requirements of chapter 14 were
followed; (3) did the trial court convert an amicus curiae filed by the Texas Attorney General’s Office into a
summary judgment and resolve disputed facts in the process; and (4) did Hartfield’s factual allegations
raise a material issue under the Eighth Amendment? Construing Hartfield’s briefing liberally, we find that
his first two issues form the only issue that we deem cognizable. The argument accompanying Hartfield’s
third issue references only federal law governing summary judgment procedure. It is, accordingly,
inadequately briefed. See TEX. R. APP. P. 38.1(i).
2
and that prison personnel improperly denied his request to shower in the medical unit.
By written order, the trial court invited the Texas Attorney General’s Office (the
AG’s Office) to file an amicus curiae advisory. The amicus curiae advisory filed by the
AG’s Office posited three grounds for dismissal under chapter 14. First, it alleges that
Hartfield’s suit was untimely because Hartfield’s Step 2 grievance was overruled on
November 8, 2016, and he filed suit outside the thirty-one day period required by chapter
14. See id. 14.005(b) (West, Westlaw through 2017 1st C.S.) (“A court shall dismiss a
claim if the inmate fails to file the claim before the 31st day after the date the inmate
receives the written decision from the grievance system.”). Second, it alleges that
Hartfield’s affidavit relating to previous filings omitted a suit he filed in 2002 in federal
court. The AG’s Office attached a docket sheet from Hartfield’s 2002 federal suit noting
that it had been dismissed for want of prosecution and for failure to comply with one of
the federal court’s orders. Third, it alleges that Hartfield’s affidavit of poverty is false.
Specifically, the AG’s Office alleged that Hartfield “has received money from his aunt and
his aunt’s church” and that his “trust fund account statement shows a six-month deposit
of $75.00, and his balance dropped from $29.35 to $0.09 just two months prior to filing
this suit, showing that Hartfield could pay court costs if he really wanted to.”
The trial court signed a final judgment that dismissed Hartfield’s suit with prejudice
as frivolous and for failure to comply with chapter 14 of the Texas Civil Practice and
Remedies Code.
Within thirty days, Hartfield filed: (1) a “motion to alter of [sic] amend the
judgment,” which alerted the court to the filing of a motion for leave to file an amended
3
complaint and asserted that a “complaint should not be dismissed for failure to state a
claim unless it appears beyond doubt that Plaintiff can [sic] prove [a] set of facts in support
of his claim . . . ”; (2) a “motion to request leave of court to file amended complaint
amending Hartfield’s previous filing and affidavit of poverty,” which asserted that he
received his Step 2 grievance on December 5, 2016 (notwithstanding the notation that it
was signed on November 8, 2016) and that he filed suit within thirty-one days; (3) an
updated affidavit of poverty; and (4) an updated affidavit of previous filings acknowledging
the 2002 federal court suit. In Hartfield’s motion for leave, he pleaded that he “simply
forgot” about the 2002 federal court suit and that he “never denied receiving money from
his aunt and aunt’s church” and that such funds were used for personal hygiene, cleaning
supplies, writing materials, and other miscellaneous items.
The trial court did not sign any further orders, and Hartfield timely perfected an
appeal to this Court.
II. DISCUSSION
In what we construe as Hartfield’s first issue, he complains that the trial court
abused its discretion under chapter 14 of the Texas Civil Practice and Remedies Code in
dismissing his suit with prejudice.
A. Standard of Review
We review a dismissal under chapter 14 of the Texas Civil Practice and Remedies
Code for abuse of discretion. Jackson v. Tex. Dep’t of Crim. Justice–Inst. Div., 28
S.W.3d 811, 813 (Tex. App.—Corpus Christi 2000, pet. denied). A trial court abuses its
discretion if it acts arbitrarily, capriciously, and without reference to any guiding rules or
4
principles. Lentworth v. Trahan, 981 S.W.2d 720, 722 (Tex. App.—Houston [1st Dist.]
1998, no pet.). We will affirm a dismissal if it is proper under any legal theory. Johnson
v. Lynaugh, 796 S.W.2d 705, 706–07 (Tex. 1990).
B. Applicable Law
Chapter 14 of the Texas Civil Practice and Remedies Code governs inmate
litigation. See TEX. CIV. PRAC. & REM. CODE ANN. § 14.002 (West, Westlaw through 2017
1st C.S.); see also id. §§ 14.001–.014 (West, Westlaw through 2017 1st C.S.). A trial
court may dismiss an inmate’s claim, either before or after service of process, on any
number of grounds. See, e.g., id. § 14.003(a); see also id. §§ 14.004–.006; Gross v.
Carroll, 339 S.W.3d 718, 723 (Tex. App.—Houston [1st Dist.] 2011, no pet.); Scott v.
Gallagher, 209 S.W.3d 262, 265 (Tex. App.—Houston [1st Dist.] 2006, no pet.) (“A trial
court may dismiss an inmate’s lawsuit for failing to comply with the procedural
requirements of Chapter 14.”). An appellant must attack all independent bases or
grounds that fully support the complained-of ruling. See Gross, 339 S.W.3d at 723;
Britton v. Tex. Dep’t of Crim. Justice, 95 S.W.3d 676, 681–82 (Tex. App.—Houston [1st
Dist.] 2002, no pet.).
In this case, the trial court dismissed Hartfield’s suit with prejudice. A dismissal
of an inmate’s suit with prejudice constitutes an adjudication on the merits and operates
as if the case had been fully tried and decided. Thomas v. Knight, 52 S.W.3d 292, 295
(Tex. App.—Corpus Christi 2001, pet. denied). As a result, such a dismissal has full res
judicata and collateral estoppel effect which precludes subsequent litigation of the same
causes of action between the parties. Id. A dismissal for failure to comply with the
5
conditions set out in chapter 14 is not a dismissal on the merits. See id. (providing that
a dismissal for failure to satisfy section 14.004, regarding an affidavit or unsworn
declaration of previously filed suits, is not a dismissal on the merits). If the inmate’s error
could be remedied through more specific pleading, then a dismissal with prejudice is
improper. Id. at 296.
C. Analysis
Hartfield argues that the trial court abused its discretion by dismissing his suit
because he complied with chapter 14. We disagree. Two grounds for dismissal
asserted in the amicus curie advisory to the trial court filed by the AG’s Office substantiate
dismissal without prejudice—not dismissal with prejudice. A third ground was simply not
accepted by the trial court.
First, regarding the timeliness of Hartfield’s suit, the record does not contain an
affidavit or unsworn declaration stating the date that the Step 2 grievance was filed and
when it was received by Hartfield. See TEX. CIV. PRAC. & REM. CODE ANN. § 14.005(a).
Hartfield’s failure to satisfy this condition of chapter 14 may have served as a basis for
the trial court to exercise its discretion and dismiss his suit. See Gallagher, 209 S.W.3d
at 265; see also Newby v. Cunningham, No. 13-07-00613-CV, 2009 WL 620583, at *2–3
(Tex. App.—Corpus Christi Mar. 12, 2009, no pet.) (mem. op.) (holding that a trial court
did not abuse its discretion by dismissing an inmate’s suit under chapter 14 where the
inmate failed to include the disposition of two previous suits).
Second, in Hartfield’s “motion to request leave of court,” he acknowledged not
disclosing the 2002 federal suit. This too, may have served as a basis for the trial court
6
to exercise its discretion and dismiss his suit. See Gallagher, 209 S.W.3d at 265; see
also Newby, 2009 WL 620583, at *2–3.
Third, the contention that Hartfield’s affidavit of poverty is false was not accepted
by the trial court. To dismiss a suit with prejudice under section 14.003(a)(3), the trial
court must make a finding that the inmate filed an affidavit or unsworn declaration required
by chapter 14 that the inmate knew was false. See TEX. CIV. PRAC. & REM. CODE ANN. §
14.003(a)(3). The judgment in this case makes no such finding.
Hartfield’s failure to file an affidavit or unsworn declaration regarding the date he
received his Step 2 grievance and his failure to disclose the 2002 federal suit are failures
to comply with the conditions set out in chapter 14, do not support dismissal with
prejudice, and require modification to dismissal without prejudice. See Thomas, 52
S.W.3d at 296; see also Newby, 2009 WL 620583, at *2–3. Hartfield’s only cognizable
issue is sustained in part and overruled in part. 2
III. CONCLUSION
We modify the judgment to reflect that Hartfield’s suit is dismissed “without
prejudice.” We affirm the trial court’s judgment as modified.
LETICIA HINOJOSA
Justice
Delivered and filed the
28th day of June, 2018.
2 Hartfield’s fourth issue, regarding the Eighth Amendment, is necessarily premised on the success
of his first issue. See TEX. CIV. PRAC. & REM. CODE ANN. § 14.002(a) (West, Westlaw through 2017 1st
C.S.) (providing that chapter 14 applies to all inmate suits in which an affidavit or unsworn declaration of
inability to pay costs is filed). Therefore, we need not address it. See TEX. R. APP. P. 47.1
7
|
337 F.Supp.2d 1195 (2004)
ONLINE POLICY GROUP, Nelson Chu Pavlosky, and Luke Thomas Smith, Plaintiffs,
v.
DIEBOLD, INCORPORATED, and Diebold Election Systems, Incorporated, Defendants.
No. C 03-04913 JF.
United States District Court, N.D. California, San Jose Division.
September 30, 2004.
*1196 *1197 Cindy Ann Cohn, San Francisco, CA, Jennifer Stisa Granick, Stanford, CA, for Plaintiffs.
Robert A. Mittelstaedt, Adam Richard Sand, Esq., Matthew P. Vandall, Jones Day, San Francisco, CA, Tharan Gregory Lanier, Jones Day, Menlo Park, CA, for Defendants.
ORDER GRANTING IN PART AND DENYING IN PART CROSS-MOTIONS FOR SUMMARY JUDGMENT
FOGEL, District Judge.
The parties have filed cross-motions for summary judgment seeking a determination as to what constitutes proper use of the internet service provider safe harbor provisions of the Digital Millennium Copyright Act. The Court has read the briefing submitted by the parties and has considered the oral arguments of counsel. For the reasons set forth below, both motions will be granted in part and denied in part.
I. BACKGROUND
Defendants Diebold, Inc. and Diebold Election Systems, Inc. (collectively "Diebold") produce electronic voting machines. The machines have been the subject of critical commentary.[1] Both the reliability and verification procedures of the machines have been called into question, in part because not all of the machines provide a means for verifying whether a voter's choice has been recorded correctly. It is undisputed that internal emails exchanged among Diebold employees (the "email archive") contain evidence that some employees have acknowledged problems associated with the machines. See Plaintiffs' Motion for Summary Judgment, pp. 3-4. According to Diebold, the email archive also contains discussion of "the development of Diebold's proprietary computerized election systems, as well as Diebold trade secret information, and even employees' personal information such as home addresses and cell phone numbers." Defendants' Motion for Summary Judgment, p. 9. At some point early in 2003, the entire email archive was obtained and reproduced on the internet by unknown persons, giving rise to the events pertinent to the present motions.
Plaintiffs Nelson Chu Pavlosky ("Pavlosky") and Luke Thomas Smith ("Smith") are students at Swarthmore College ("Swarthmore"). Using internet access provided by Swarthmore, which for present purposes is considered their internet service provider ("ISP"), Pavlosky and Smith posted the email archive on various websites. See Declaration of Nelson Chu Pavlosky in Support of Plaintiff's [sic] Application for Temporary Restraining Order and for Preliminary Injunction ("Pavlosky *1198 PI Decl."), ¶ 5. An on-line newspaper, IndyMedia, published an article criticizing Diebold's electronic voting machines and containing a hyperlink to the email archive. See Plaintiffs' Motion for Summary Judgment, p. 5. Plaintiff Online Policy Group ("OPG") provides IndyMedia's internet access.[2] OPG, in turn, obtains internet access from an upstream ISP, Hurricane Electric ("Hurricane").
In response to the activities of Pavlosky, Smith, and IndyMedia, and in an alleged effort to prevent further public viewing of the email archive, Diebold sent cease and desist letters to many ISPs, including Swarthmore, OPG, and Hurricane, pursuant to the safe harbor provisions of the Digital Millennium Copyright Act ("DMCA").[3] Swarthmore, OPG, and Hurricane were advised that pursuant to these provisions they would be shielded from a copyright infringement suit by Diebold if they disabled access to or removed the allegedly infringing material. Swarthmore thereafter required Pavlosky and Smith to remove the email archive from their website. At the same time, Hurricane notified OPG that it might be required to terminate OPG's internet access if IndyMedia's hyperlink to the email archive was not removed. Hurricane agreed, however, not to act during the pendency of the present action, and consequently OPG did not disable access to or remove any material.
Diebold has not filed any lawsuits related to publication of the email archive. Plaintiffs Smith, Pavlosky, and OPG nonetheless seek injunctive, declaratory, and monetary relief from this Court, alleging that Diebold's claim of copyright infringement was based on knowing material misrepresentation and that Diebold interfered with Plaintiffs' contractual relations with their respective ISPs.[4] Plaintiffs seek a judicial declaration that publication of the email archive, hosting or providing colocation services to websites that link to allegedly infringing material, and providing internet services to others who host websites that link to allegedly infringing material are lawful activities. They request an injunction to prevent Defendants from threatening or bringing any lawsuit for copyright infringement with respect to the email archive arising from the publication, linking, or hosting services described in *1199 the complaint and a judgment barring Defendants from enforcing any copyright in the email archive unless and until Defendants' alleged copyright misuse has ceased. They also seek $5,185.50 in damages[5] and attorneys' fees pursuant to 17 U.S.C. § 512(f) for Diebold's alleged misrepresentation or as otherwise allowed by law, as well as costs and disbursements.
II. APPLICABLE LAW
A. Summary Judgment
A motion for summary judgment should be granted if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Material facts are those that may affect the outcome of the case. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. There is a genuine dispute if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id. Summary judgment thus is not appropriate if the nonmoving party presents evidence from which a reasonable jury could resolve the material issue in his or her favor. Barlow v. Ground, 943 F.2d 1132, 1136 (9th Cir.1991). However, the more implausible the claim or defense asserted by the nonmoving party, the more persuasive its evidence must be to avoid summary judgment. Jackson v. Bank of Hawaii, 902 F.2d 1385, 1389 (9th Cir.1990).
The moving party bears the initial burden of informing the Court of the basis for the motion, and identifying portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party meets its initial burden, the burden shifts to the nonmoving party to present specific facts showing that there is a genuine issue of material fact for trial. FED. R. CIV. P. 56(e); Celotex Corp., 477 U.S. at 324, 106 S.Ct. 2548. The evidence and all reasonable inferences therefrom must be viewed in the light most favorable to the nonmoving party. T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630-31 (9th Cir.1987).
B. Copyright Law
Copyright laws are enacted pursuant to Article 1, Section 8 of the Constitution, which provides that "[t]he Congress shall have Power ... to Promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." The elements of a copyright infringement claim are: (1) ownership of a valid copyright and (2) copying[6] of expression protected by that copyright. See 17 U.S.C. § 106(1); Triad Sys. Corp. v. Southeastern Express Co., 64 F.3d 1330, 1335 (9th Cir.1995). To be liable for direct infringement, one must "actively engage in" and "directly cause" the copying. See Religious Tech. Ctr. v. Netcom On-Line Communication Services, Inc., 907 F.Supp. 1361 (N.D.Cal.1995).
There is no statutory rule of liability for contributory infringement. However, courts recognize such liability when the defendant "with knowledge of the infringing *1200 activity, induces, causes or materially contributes to the infringing conduct of another." Gershwin Pub. Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2nd Cir.1971). "Such participation must be substantial." Religious Tech. Ctr., 907 F.Supp. at 1361. The party alleging contributory infringement must show "(1) direct infringement by a primary infringer, (2) knowledge of the infringement, and (3) material contribution to the infringement." Metro-Goldwyn-Mayer Studios, Inc. v. Grokster Ltd., 380 F.3d 1154, 1160 (9th Cir.2004). A defendant may be liable under a vicarious liability theory if the plaintiff demonstrates "(1) direct infringement by a primary party, (2) a direct financial benefit to the defendant, and the right and ability to supervise the infringers." Id. at 1164.
Copyright protection sometimes appears to conflict with First Amendment protections. This conflict is ameliorated in part by various copyright doctrines. For example, consistent with the "idea-expression" dichotomy, expression, but not an idea, is copyrightable. See 17 U.S.C. § 102(b); Eldred v. Ashcroft, 537 U.S. 186, 219, 123 S.Ct. 769, 154 L.Ed.2d 683 (2003); Baker v. Selden, 101 U.S. 99, 11 Otto 99, 25 L.Ed. 841 (1879). Similarly, copyright law protects only creative works, not facts. See, e.g., Feist Publ'ns, Inc. v. Rural Tel. Service Co., Inc., 499 U.S. 340, 349, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991). Finally, fair use is not infringement of a copyright. See 17 U.S.C. § 107; Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994); Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985). Section 107 provides:
Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
(4) the effect of the use upon the potential market for or value of the copyrighted work.
The Supreme Court has clarified that copyright laws should be designed to promote creativity by protecting only creative work and, then, only for a limited time. A
limited grant is a means by which an important public purpose may be achieved. It is intended to motivate the creative activity of authors and inventors by the provision of a special reward, and to allow the public access to the products of their genius after the limited period of exclusive control has expired.
Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 429, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984); see also Eldred, 537 U.S. 186, 123 S.Ct. 769, 154 L.Ed.2d 683.
C. Internet Service Provider Safe Harbor Provisions
Section 202 of the DMCA contains various nonexclusive[7] safe harbors designed *1201 to limit the liability of ISPs[8] for incidental acts of copyright infringement. It provides immunity to ISPs that satisfy the conditions of eligibility, see 17 U.S.C. § 512(i),[9] "from copyright infringement liability for `passive,' `automatic' actions in which [an ISP's] system engages through a technological process initiated by another without the knowledge of the" ISP. ALS Scan, Inc. v. RemarQ Communities, Inc., 239 F.3d 619, 625 (4th Cir.2001). Once the ISP has actual knowledge of the infringing material, it loses the safe harbor protections unless it complies with the DMCA.
17 U.S.C. § 512(a) the "conduit" safe harbor does not require notice and takedown of any content. Instead, an ISP is not liable for "transmitting, routing, or providing connections, for material through a system or network controlled or operated by or for the service provider" if the ISP did not (1) initiate the transmission, (2) select the material in a nonautomatic way, (3) select the recipients in a nonautomatic way, (4) retain a copy for longer than necessary to transmit it, and (5) modify the material. 17 U.S.C. § 512(a). In contrast, section 512(c) the "storage" safe harbor does require notice and takedown of allegedly infringing material. This provision
gives Internet service providers a safe harbor from liability for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider as long as the service provider can show that: (1) it has neither actual knowledge that its system contains infringing materials nor an awareness of facts or circumstances from which infringement is apparent, or it has expeditiously removed or disabled access to infringing material upon obtaining actual knowledge of infringement; (2) it receives no financial benefit directly attributable to infringing activity; and (3) it responded expeditiously to remove or disable access to material claimed to be infringing after receiving from the copyright holder a notification conforming with requirements of § 512(c)(3).
ALS Scan, Inc., 239 F.3d at 623 (internal citation omitted). 17 U.S.C. § 512(d) provides a similar safe harbor from liability for copyright infringement resulting from use of "information location tools," which include "hypertext links" ("hyperlinks"). Section 512(g) provides for replacement of the removed material upon counter-notice by the alleged infringer. Upon counter-notice of noninfringement by an ISP subscriber, the ISP may reestablish access to the content without fear of liability. Such replacement generally must be performed *1202 within approximately fourteen days. See 17 U.S.C. § 512(g)(2)(C).[10]
17 U.S.C. § 512(f) provides as follows:
Misrepresentations. Any person who knowingly materially misrepresents under this section
(1) that material or activity is infringing, or
(2) that material or activity was removed or disabled by mistake or misidentification,
shall be liable for any damages, including costs and attorneys' fees, incurred by the alleged infringer, by any copyright owner or copyright owner's authorized licensee, or by a service provider, who is injured by such misrepresentation, as the result of the service provider relying upon such misrepresentation in removing or disabling access to the material or activity claimed to be infringing, or in replacing the removed material or ceasing to disable access to it.
Thus, any person who sends a cease and desist letter with knowledge that claims of infringement are false may be liable for damages.
III. DISCUSSION
A. Mootness
Diebold has represented to the Court that it has withdrawn and in the future will not send a cease and desist letter pursuant to the DMCA to any ISP concerning the email archive. See Response to Plaintiffs' Post-Hearing Letter and Supplemental Ng Declaration, dated November 24, 2003, p. 1; Transcript of Law & Motion Hearing, February 9, 2004, pp. 3:24-4:3. Because no actual controversy remains[11] with respect to prevention of publication of the email archive, see 28 U.S.C. § 2201; Aetna Life Ins. Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 57 S.Ct. 461, 81 L.Ed. 617 (1937), Plaintiffs' claims for an injunction and declaratory relief are moot.[12] However, Plaintiffs' claims for damages, attorneys' fees, and costs relating to Diebold's past use of the DMCA's safe harbor provisions still require adjudication.
*1203 B. Misrepresentation of Copyright Infringement: 17 U.S.C. § 512(f)
1. Publication of some of the contents in the email archive is lawful.
At the hearing on Plaintiffs' motion for preliminary injunction, Diebold's counsel asserted that portions of the email archive contain material that is copyrighted and has no "public interest" value. Transcript of Law and Motion Hearing, November 17, 2003, p. 8:7-12. However, Diebold did not identify and has never identified specific emails that contain copyrighted content, and thus it has not provided evidence to support its counsel's assertion. See, e.g., id. at 10. At the same time, Diebold appears to have acknowledged that at least some of the emails are subject to the fair use doctrine. See, e.g., id. at 12:8-9 & 14-16.
The purpose, character, nature of the use, and the effect of the use upon the potential market for or value of the copyrighted work all indicate that at least part of the email archive is not protected by copyright law. The email archive was posted or hyperlinked to for the purpose of informing the public about the problems associated with Diebold's electronic voting machines. It is hard to imagine a subject the discussion of which could be more in the public interest. If Diebold's machines in fact do tabulate voters' preferences incorrectly, the very legitimacy of elections would be suspect. Moreover, Diebold has identified no specific commercial purpose or interest affected by publication of the email archive, and there is no evidence that such publication actually had or may have any affect on the putative market value, if any, of Diebold's allegedly copyrighted material. Even if it is true that portions of the email archive have commercial value, there is no evidence that Plaintiffs have attempted or intended to sell copies of the email archive for profit. Publishing or hyperlinking to the email archive did not prevent Diebold from making a profit from the content of the archive because there is no evidence that Diebold itself intended to or could profit from such content. At most, Plaintiffs' activity might have reduced Diebold's profits because it helped inform potential customers of problems with the machines. However, copyright law is not designed to prevent such an outcome. See, e.g., Acuff-Rose, 510 U.S. at 591-92, 114 S.Ct. 1164. Rather, the goal of copyright law is to protect creative works in order to promote their creation. To the extent that Diebold argues that publication of the entire email archive diminished the value of some of its proprietary software or systems information, it must be noted that there is no evidence that Plaintiffs published or linked to the archive in order to profit.[13] Finally, Plaintiffs' and IndyMedia's use was transformative: they used the email archive to support criticism that is in the public interest, not to develop electronic voting technology. Accordingly, there is no genuine issue of material fact that Diebold, through its use of the DMCA, sought to and did in fact suppress publication of content that is not subject to copyright protection.[14]
*1204 2. Diebold violated section 512(f).
Plaintiffs argue that Diebold "knowingly materially misrepresented" that publication of the email archive constituted copyright infringement and thus is liable for damages pursuant to 17 U.S.C. § 512(f). The parties dispute the meaning of the phrase "knowingly materially misrepresents." Plaintiffs argue that a type of preliminary injunction standard should be applied. That is, the Court should conclude that Diebold violated section 512(f) if it did not have a "likelihood of success" on the merits of a copyright infringement claim when it sent the DMCA letters. Diebold contends that the Court should apply a type of Federal Rule of Civil Procedure 11 ("Rule 11") standard and thus conclude that Diebold did not violate section 512(f) unless sending the DMCA letters was "frivolous." Because the DMCA is of relatively recent vintage, the issue appears to be one of first impression.
The Court concludes that neither standard is appropriate. A requirement that a party have an objectively measured "likelihood of success on the merits" in order to assert claims of copyright infringement would impermissibly chill the rights of copyright owners. At the same time, in requiring a showing of "knowing material misrepresentation," Congress explicitly adopted a standard different from that embodied in Rule 11, which contains a variety of other requirements that are not necessarily coextensive with those set forth in section 512(f). The Court concludes that the statutory language is sufficiently clear on its face and does not require importation of standards from other legal contexts. A party is liable if it "knowingly" and "materially" misrepresents that copyright infringement has occurred. "Knowingly" means that a party actually knew, should have known if it acted with reasonable care or diligence, or would have had no substantial doubt had it been acting in good faith, that it was making misrepresentations. See BLACK'S LAW DICTIONARY (8th ed.2004) (definitions of "knowledge," in particular, "actual" and "constructive" knowledge). "Material" means that the misrepresentation affected the ISP's response to a DMCA letter. See id.
Applying this standard and in light of the evidence in the record, the Court concludes as a matter of law that Diebold knowingly materially misrepresented that Plaintiffs infringed Diebold's copyright interest, at least with respect to the portions of the email archive clearly subject to the fair use exception. No reasonable copyright holder could have believed that the portions of the email archive discussing possible technical problems with Diebold's voting machines were protected by copyright, and there is no genuine issue of fact that Diebold knew and indeed that it specifically intended[15] that its letters to OPG and Swarthmore would result in prevention of publication of that content. The misrepresentations were material in that they resulted in removal of the content from websites and the initiation of the present lawsuit. The fact that Diebold never actually brought suit against any alleged infringer suggests strongly that Diebold sought to use *1205 the DMCA's safe harbor provisions which were designed to protect ISPs, not copyright holders as a sword to suppress publication of embarrassing content rather than as a shield to protect its intellectual property.
C. Tortious Interference with Contractual Relations
Plaintiffs also claim that, through its inappropriate use of the DMCA, Diebold interfered with their contractual relations with their respective ISPs. Under California law, the elements of intentional interference with contractual relations are: (1) a valid contract between the plaintiff and a third party; (2) the defendant's knowledge of this contract; (3) intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the relationship; and (5) resulting damage. See Quelimane Co. v. Stewart Title Guar. Co., 19 Cal.4th 26, 77 Cal.Rptr.2d 709, 960 P.2d 513 (1998). As an affirmative defense to a charge of tortious interference with contract, a defendant may show that its actions were justified. See A. F. Arnold & Co. v. Pacific Prof'l Ins., Inc., 27 Cal.App.3d 710, 104 Cal.Rptr. 96, 99 (1972).
One who, by asserting in good faith a legally protected interest of his own or threatening in good faith to protect the interest by appropriate means, intentionally causes a third person not to perform an existing contract or enter into a prospective contractual relation with another does not interfere improperly with the other's relation if the actor believes that his interest may otherwise be impaired or destroyed by the performance of the contract or transaction.
Restatement (Second) of Torts § 773.
The test of whether there is justification for conduct which induces a breach of contract turns on a balancing of the social and private importance of the objective advanced by the interference against the importance of the interest interfered with, considering all the circumstances including the nature of the actor's conduct and the relationship between the parties.
Richardson v. La Rancherita La Jolla, 98 Cal.App.3d 73, 81, 159 Cal.Rptr. 285 (1979).
Diebold argues that Plaintiffs cannot prevail on their interference with contract claim because: (1) Pavlosky and Smith have not shown that they had a contract with Swarthmore; (2) Swarthmore's compliance with the DMCA does not constitute breach of contract; (3) OPG has not demonstrated that there has been any breach or disruption of its contract with Hurricane; (4) Hurricane's contract with OPG permits it to comply with the DMCA; (5) seeking to protect one's copyright does not constitute interference with a contract; and (6) the state law is preempted if it is applied in such a manner as to prevent a party from complying with the DMCA.
The Court agrees with Diebold that on the facts of this case the claim is preempted. Preemption occurs "when compliance with both state and federal [laws] is a physical impossibility or when state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Hillsborough County Fla. v. Automated Med. Labs. Inc., 471 U.S. 707, 713, 105 S.Ct. 2371, 85 L.Ed.2d 714 (1985) (internal citations omitted); see also In re Cybernetic Services, Inc., 252 F.3d 1039, 1045 (9th Cir.2001) (internal citation omitted).
Even if a copyright holder does not intend to cause anything other than the removal of allegedly infringing material, compliance with the DMCA's procedures nonetheless may result in disruption of a contractual relationship: by sending a letter, the copyright holder can effectuate the *1206 disruption of ISP service to clients. If adherence to the DMCA's provisions simultaneously subjects the copyright holder to state tort law liability, there is an irreconcilable conflict between state and federal law. To the extent that Plaintiffs argue that there is no conflict because Diebold's use of the DMCA in this case was based on misrepresentation of Diebold's rights, their argument is undercut by the provisions of the statute itself. In section 512(f), Congress provides an express remedy for misuse of the DMCA's safe harbor provisions. It appears that Congress carefully balanced the competing interests of copyright holders, ISPs, and the public, by providing immunity subject to relief for any misuse of the statute. Accordingly, Diebold's motion will be granted as to Plaintiffs' state law claim.
IV. ORDER
Good cause therefore appearing, IT IS HEREBY ORDERED that:
(1) Plaintiffs' causes of action for injunctive and declaratory relief and for copyright misuse are deemed moot;
(2) Plaintiffs' motion is GRANTED with respect to their claim pursuant to 17 U.S.C. § 512(f) and otherwise is DENIED;
(3) Diebold's motion is GRANTED as to Plaintiffs' state law claim for tortious interference with contractual relations and otherwise is DENIED; and
(4) Within ten (10) days of the date that this Order is filed, Plaintiffs shall submit a brief addressing the monetary relief, including attorneys' fees and costs, to which they belief they are entitled pursuant to 17 U.S.C. § 512(f). Diebold may file an opposition brief within ten (10) days after service of Plaintiffs' brief. Plaintiffs may file a reply brief within five (5) days after service of Diebold's opposition brief. The matter thereafter shall stand submitted.
NOTES
[1] See, e.g., "Voting Machines: Good Intentions, Bad Technology," THE ECONOMIST, Jan. 24, 2004, pp. 30-31; "Securing Electronic Voting: California Takes Steps to Safeguard System," SAN JOSE MERCURY NEWS, Feb. 6, 2004; Tom Zeller, Jr., "Ready or Not, Electronic Voting Goes National," NEW YORK TIMES, Sept. 19, 2004, http://www.nytimes.com/2004/ 09/19/politics/campaign/19vot e.html?ex=XXXXXXXXXX & ei=1 & en=c490a5e466b682e3. See also American Ass'n of People with Disabilities v. Shelley, 324 F.Supp.2d 1120, 1128 (C.D.Cal.2004) (upholding the decision of the Secretary of State of California to decertify and withdraw approval of some Diebold electronic voting machines on the ground that the machines were not yet "stable, reliable and secure enough to use in the absence of an accessible; voter-verified, paper audit trail"); Stuart Pfeifer, "State Joins Suit over Voting Machines," LOS ANGELES TIMES, Sept. 8, 2004, http://www.latimes.com/news/ local/la-me-machines8sep08,1,384118.story.
[2] OPG asserts that the "IndyMedia website resides on a webserver co-located with OPG. `Colocation' means that the San Francisco IndyMedia server is not owned or controlled by OPG; it simply resides in physical premises leased from OPG alongside OPG's own servers and utilizes OPG's Internet connection." Complaint, p. 3:24-27. OPG further asserts that, because it did not control the IndyMedia server, "instead only providing Internet connectivity to that computer through colocation, OPG could not comply by merely disabling or removing the hyperlink and related information demanded by Diebold. OPG's only option to comply with the demand was to cut off IndyMedia's Internet connectivity entirely." Id. at 5:1-5. OPG also asserts the same reasoning with respect to its relationship with Hurricane. Id. at 5:25-28. The parties do not dispute that OPG and Hurricane could have utilized the DMCA's safe harbors had they disabled IndyMedia's and OPG's internet connectivity, respectively. Accordingly, for the purposes of the present litigation, the Court will assume without deciding that OPG is IndyMedia's ISP and Hurricane is OPG's ISP. The technical distinction does serve to illustrate the ramifications for free speech of Diebold's demands.
[3] PUB. L. No. 105-304, 112 Stat. 2860 (1998); 17 U.S.C. § 512; Section 202 of the DMCA.
[4] The complaint also includes a claim for alleged copyright misuse. Diebold argues that copyright misuse may be asserted solely an affirmative defense to a claim of copyright infringement. Plaintiffs cite no legal authority, and the Court is aware of none, that allows an affirmative claim for damages for copyright misuse. Plaintiffs appear to have withdrawn this cause of action. See Transcript of Law & Motion Hearing, February 9, 2004, p. 7:2-5.
[5] See Plaintiffs' Motion for Summary Judgment, p. 25.
[6] Distribution, preparation of derivative works, performance, and public display also may constitute copyright infringement. See 17 U.S.C. § 106. The modes of infringement listed in 17 U.S.C. § 106 may "overlap" in the cyberspace context. See Mark A. Lemley, Dealing with Overlapping Copyrights on the Internet, 22 U. DAYTON L. REV. 547 (1997).
[7] Nothing in the DMCA suggests that Congress intended this statute to constitute the exclusive legal basis for protecting a copyright or defending against allegations of infringement. In fact, 17 U.S.C. § 512(1) provides that "failure to ... qualify for limitation of liability under this section shall not bear adversely upon the consideration of ... any other defense."
[8] The DMCA provides two definitions of "service provider." The first, which applies to section 512(a), is "an entity offering the transmission, routing, or providing connections for digital online communications, between or among points specified by a user, of material of the user's choosing, without modification to the content of the material as sent or received." 17 U.S.C. § 512(k)(1)(A). The second, which applies to the rest of section 512, is "a provider of online services or network access, or the operator of facilities therefor, and includes an entity described in [17 U.S.C. § 512(k)(1)(A)]." 17 U.S.C. § 512(k)(1)(B). "Service provider" thus is defined more narrowly with respect to the "conduit" safe harbor provision.
[9] The parties do not dispute that Hurricane, OPG, and Swarthmore had valid section 512(i) policies. See, e.g., Complaint, p. 5:20-23 & Ex. D (email from Ralph E. Jocke), although there is no evidence in the record as to this point with respect to OPG and Swarthmore. The Court will assume without deciding that all parties had valid section 512(i) policies.
[10] Although section 512(g) refers to section 512(c), it does not refer expressly to section 512(d). Courts nonetheless have held that the replacement procedure of section 512(g) applies to takedown pursuant to section 512(d). See, e.g., Perfect 10, Inc. v. Cybernet Ventures, Inc., 213 F.Supp.2d 1146, 1179 (C.D.Cal.2002).
[11] Plaintiffs appear to have conceded at oral argument that their claims for injunctive and declaratory relief are moot and that a decision on their claims for damages will be a sufficient adjudication of their rights. See Transcript of Law & Motion Hearing, February 9, 2004, pp. 5:21-23, 6:22-24, 7:6-12, 10:4-9.
[12] The Court also notes that in view of Grokster, a general declaration that hyperlinking to infringing material does not amount to contributory infringement or subject one to vicarious liability would be improper. Although hyperlinking per se does not constitute direct copyright infringement because there is no copying, see, e.g., Ticketmaster Corp. v. Tickets.Com, Inc., 2000 WL 525390 (C.D.Cal., March 27, 2000), in some instances there may be a tenable claim of contributory infringement or vicarious liability. See, e.g., Grokster, 380 F.3d 1154, 1163 (9th Cir. 2004) (If an alleged contributory infringer is a "true access provider[ ], failure to disable... access after acquiring specific knowledge of a user's infringement might be material contribution."); Religious Tech. Ctr., 907 F.Supp. at 1361; A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1021-22 (9th Cir.2001). In this context, it is notable that the DMCA provides ISPs a safe harbor (17 U.S.C. § 512(d)) from liability for copyright infringement resulting from "information location tools."
[13] The fact that Diebold had not published the email archive is not dispositive. The "first publication right" permits the creator to control the final expression of the published work. There is no such interest here, in the context of an archive of fact-based or proprietary emails. Because Diebold clearly has indicated that it never intended to publish the emails, the fact that the email archive was unpublished does not obviate application of the fair use doctrine.
[14] Even if Diebold is correct that some individual emails may contain only proprietary software code or information concerning Diebold's voting systems and thus is subject to copyright protection, there nonetheless is no genuine issue of material fact that publication of some of the email archive does not amount to copyright infringement. Plaintiffs additionally have argued that they were required to post the entire email archive because Diebold has accused Plaintiffs and others of taking individual emails out of context. See Plaintiffs' Motion for Summary Judgment, p. 12. Significantly, Diebold does not identify which of the more than thirteen thousand emails support its argument.
[15] Indeed, Diebold's counsel stated that "the DMCA provides the rapid response, the rapid remedies that Congress had in mind." Law & Motion Hearing, November 17, 2003, p. 30:6-8.
|
16 F.3d 1214
Vauthrinv.Prudential Insurance
NO. 92-02877
United States Court of Appeals,Fifth Circuit.
Feb 07, 1994
1
Appeal From: S.D.Tex.
2
AFFIRMED.
|
374 F.Supp.2d 263 (2004)
JANSSEN PHARMACEUTICAL N.V. et al, Plaintiffs,
v.
EON LABS MANUFACTURING, INC., Defendant.
No. 01-CV-2322 (NG)(MDG).
United States District Court, E.D. New York.
July 28, 2004.
*264 *265 George F. Pappas, Venable, LLP, Washington, DC, Jeffrey I.D. Lewis, Patterson, Belknap, Webb & Tyler LLP, New York City, Lisa M. Kattan, Venable, LLP, Robert L. Wilkins, Venable, LLP, Washington, DC, Ryan M. Walsh, Venerable, Baetjer & Howard, LLP, Baltimore, MD, Vicki Margolis, Venable, LLP, Washington, DC, Mary Ellen Himes, Venable LLP, Baltimore, MD, for Janssen Pharmaceutica N.V., Janssen Pharmaceutica Products, L.P., Plaintiffs.
David W. Aldrich, St. Onge, Steward Johnston & Reens, Stamford, CT, James P. Jeffry, Jones, Day, Reavis & Pogue, New York City, Michael W. Krenicky, Carter DeLuca Farrell & Schmidt, LLP, Melville, Stanley H. Lieberstein, St. Onge Steward Johnson & Reens, LLC, Stephen P. McNamara, St. Onge Steward Johnston Reems, Stamford, CT, Mary Ellen Himes, Venable LLP, Baltimore, MD, for Eon Labs Manufacturing, Inc., Defendant.
OPINION AND ORDER
GERSHON, District Judge.
Plaintiffs Janssen Pharmeceutica, N.V. and Janssen Pharmaceutica Products, L.P. (collectively "Janssen") bring this action for patent infringement against Eon Labs Manufacturing Corporation, Inc. ("Eon") pursuant to 35 U.S.C. § 271(e)(2). Janssen is the holder of a composition patent entitled "Beads Having a Core Coated with an Antifungal and a Polymer," U.S. Patent No. 5,633,015 ("the '015 patent"). Janssen markets this composition in a capsule under the name SPORANOX®. Eon, a generic drug manufacturer, filed an Abbreviated New Drug Application ("ANDA") pursuant to Section 505(j) of the federal Food, Drug and Cosmetic Act, 21 U.S.C. § 355(j), seeking Federal Food and Drug Administration ("FDA") approval to make and sell a generic version of the SPORANOX® capsule. The ANDA procedure for drug approval, created by the Drug Price Competition and Patent Term Restoration Act of 1984, Pub.L.No.98-417, 98 Stat. 1585 (1984) (codified in sections of titles 21, 35 and 42 U.S.C.) ("the Hatch-Waxman Act"), allows a generic manufacturer to avoid the costly and time-consuming safety and efficacy studies that were required of the brand name drug, so long as the generic drug is the bioequivalent of the FDA-approved drug. In its ANDA, Eon certified, pursuant to 21 U.S.C. § 355(j)(2)(A)(iv), that the '015 patent was "invalid or will not be infringed by the manufacture, use or sale of the generic drug for which the ANDA is being submitted." After Eon notified Janssen of its ANDA filing, Janssen filed this suit for patent infringement on April 13, 2001, and a 30-month automatic stay of FDA approval *266 for Eon's ANDA was imposed pursuant to 21 U.S.C. § 355(j)(5)(B)(iii).
On March 7, 2004, the extended stay of FDA approval expired.[1] On March 16, 2004, I granted a temporary restraining order ("TRO") to prevent Eon from marketing its generic product, should it receive FDA approval to do so, pending determination of Janssen's motion for a preliminary injunction.
In an order dated April 6, 2004, I construed the only independent claim in the '015 patent, Claim 1, and denied Eon's motion for partial summary judgment. On April 8, 2004, Magistrate Judge Marilyn D. Go issued a report recommending that Janssen's motion for summary judgment rejecting the affirmative defenses of invalidity and unenforceability be granted and that Eon's motion for summary judgment based on the defense of invalidity be denied. Since the filing of objections and responses to Judge Go's report was not completed until shortly before the trial, decision was withheld and the parties permitted to further develop facts at trial.
The '015 patent
The patent in suit concerns "a novel composition of antifungal agents which have low solubility in aqueous media, a process for preparing said composition and pharmaceutical dosage forms for oral administration comprising the novel composition." '015 Patent, col. 1, lines 10-15. This composition and the pharmaceutical dosage forms allow poorly soluble itraconazole molecules to be delivered to a patient in an oral dosage form to treat fungal infections.
Claim 1 of the patent, the only independent claim, reads:
1. A bead comprising:
a. a central, rounded or spherical core;
b. a coating film of a hydrophilic polymer and an antifungal agent selected from the group consisting of itraconazole and saperconazole, and
c. a seal-coating polymer layer, characterized in that the core has a diameter of from about 600 to about 700 ¢m (25-30 mesh).
'015 Patent, col. 6, lines 16-24. The specification states:
The particular size of the cores is of considerable importance. On the one hand, if the co[res] are too large, there is less surface area available for applying the drug coating layer, which results in thicker coating layers. This raises problems in the manufacturing process as an intensive drying step is needed to reduce residual solvent levels in the coating layer. The intensive drying conditions may adversely affect drug dissolution from the beads and should therefore be controlled extremely well during the manufacturing process. On the other hand, small cores have a larger total surface available for coating resulting in thinner coating layers. Consequently a far less intensive drying step can be used to decrease residual solvent levels. Co[res] which are too small, e.g. 30-35 mesh cores, however, have the disadvantage of showing considerable tendency to agglomerate during the coating process. Therefore, 25-30 mesh co[res] represent the optimum size where neither agglomeration nor an intensive drying step unduly constrain the manufacturing process.
'015 Patent, col. 1-2, lines 58-8.
In the April 6, 2004 Order I construed "a bead" to mean one or more beads, and found "characterized in that the core has a diameter of from about 600 to about 700 *267 ¢m (25-30 mesh)" to mean that a core with a diameter of 600 to 700 microns was claimed. I rejected Eon's assertion that the parenthetical "(25-30 mesh)" superceded the micron diameter as defining the size core claimed and concluded that "(25-30 mesh)" simply explained to one of ordinary skill in the art where cores of the size claimed are likely to be found. I also concluded that the term "about" did not expand the range of core diameter sizes claimed beyond 600 to 700 microns.
THE TRIAL
A combined hearing on the preliminary injunction motion and bench trial was held from May 17, 2004 through May 20, 2004, in accordance with Fed. R. Civ. Pro. 65(a)(2). Set forth below are the findings of fact and conclusions of law required by Fed. R. Civ. Pro. 52(a). Janssen presented testimony from two of the inventors of the '015 patent, Roger P. Vandecruys and Paul Gilis; experts Dr. Saul J.B. Tendler and Dr. Roland Bodmeier; and Dr. Bruce L. Moskowitz, former Director of Clinical Research for Infectious Diseases at Janssen and currently its Executive Director of Medical Affairs. Eon presented testimony of its expert, Dr. Harry Brittain; Dr. Siyawosh Moghaddam, Eon Director of Analytical Research and Development; Sadie M. Ciganeck, Eon Vice-president of Regulatory Affairs; and Dr. Bernard Hampl, Eon CEO and President. The credible evidence at trial established the following:
The Development of the Patented Composition and the Generic Product
Janssen patented the drug itraconazole, a broad spectrum antifungal, in 1981, U.S. Pat. No. 4,267,179 ("the '179 patent"). Itraconazole is used to treat serious systemic fungal infections that can cause serious lung, brain or other organ damage and, if left untreated, even death. In 1984, Janssen scientists in Belgium began experimenting with formulations to make an oral dosage form of the drug. This posed difficulties because itraconazole is nearly insoluble. The first attempt, which employed a tablet as a delivery method for the drug, was unsuccessful. Janssen scientists then experimented with applying the drug, mixed with a hydrophilic polymer and a solvent, over many microscopic sugar spheres, and then filling a capsule with the coated spheres. This research led to the development in 1987 of the F5 formulation: a hard gelatin capsule filled with beads comprised of 18-20 mesh sugar spheres as cores; a drug coating layer of itraconazole and hydroxypropyl methylcellulose ("HPMC") mixed with a methylene chloride/ethanol solvent; and a seal coating layer of polyethylene glycol ("PEG"), also mixed with a solvent. Each capsule contained approximately 100mg of itraconazole.
The March-April 1988 issue of the Pharmacopeial Forum, the journal containing revision proposals for the United States Pharmacopeia-National Formulary standards, proposed limits on residual organic volatile impurities, such as the methylene chloride solvent used in the F5 formulation. In September of 1989, in anticipation of these limits being adopted, Janssen conducted experimental studies on coated beads using different drying conditions and different sugar core sizes to determine if those differences would affect residual solvent levels. Janssen found that using a smaller core size, of 25-30 mesh, reduced the residual solvent levels, as did increased drying. November 1989 experiments showed that changing the solvent/ethanol ratio also had a significant effect on initial solvent levels, before drying. Nevertheless, Janssen did not change the F5 formulation that used 18-20 mesh cores for its clinical tests.
Janssen began clinical trials of the F5 formulation in 1987 and added a compassionate use protocol to its Investigational *268 Drug Number for these clinical studies. Under the compassionate use protocol, a doctor requested permission from Janssen to use SPORANOX®, which had not yet received FDA approval, on a patient who had failed therapy with approved medications or was intolerant to them. The doctor explained the patient's condition to Janssen and requested permission to use SPORANOX® under a strict protocol, at no cost to the doctor or the patient. The protocol informed the doctor of how he or she was to make the diagnosis, how to administer the drug, at what dosage, and what information to track on an ongoing basis to determine whether the drug was safe to use in the patient. That information was returned to Janssen. The doctor was provided a form on which to keep records and to provide ongoing information to Janssen to confirm that the patient should be sent additional drugs. Providing this information was a condition for receiving the drug. All drugs shipped under the protocol were for use only on the designated patient and all unused drugs were required to be returned. The doctor was not informed of the formula for SPORANOX®, other than the fact it contained itraconazole. The label on the boxes of capsules shipped under the tests indicated that the drug was for compassionate clearance use restricted to a certain patient, usually identified by initials. The labels also stated that the drug was limited by federal law to investigational use. Typically, the clinical tests took place in a hospital setting. The patient was required to sign an informed consent form, which advised the patient that the patient was using an investigational drug and that the patient's name would be kept confidential. The patient was not under any express obligation of confidentiality to the doctor or to Janssen.
On April 16, 1990, Janssen applied for trademark registration for the name SPORANOX® for the itraconazole capsules. The trademark was published on December 4, 1990. On May 30, 1990 Janssen filed a New Drug Application ("NDA") with the FDA seeking approval to market the F5 formulation. In November 1990, the FDA advised Janssen of its concern over the limit that Janssen had set for residual methylene chloride levels for the capsules. In January through March 1991 Janssen confirmed, by large scale tests, the effect of bead size reduction and solvent ratio change on residual solvent levels in the capsules. Janssen experimented with 25-30 mesh and 30-35 mesh sugar cores in the formulation and found that the "optimal" size was 25-30 mesh. The biggest problem with the smaller 30-35 mesh cores was the tendency towards agglomeration. The result of these experiments was the F12 formulation, that contained 25-30 mesh cores and used a 60/40 solvent to ethanol ratio. In March and April of 1991 Janssen discussed revising its proposed limits for residual methylene chloride with the FDA, and, on April 26, 1991, Janssen withdrew its NDA on the F5 formulation.
Studies conducted from June through August 1991 showed that the F12 formulation is bioequivalent to the F5 formulation, so that whatever test results had been generated on safety and efficacy with the F5 formulation were transferrable to the information on the F12. On October 10, 1991, Janssen filed an NDA for SPORANOX® capsules containing 25-30 mesh cores, the F12 formulation. From November 1991 through March 1992 Janssen worked with the FDA on production and test methods for the F12 formulation, and in March the formal process validation studies commenced.
The European priority patent for the F12 formulation was filed on September 3, 1992. In drafting the European patent application for what was to become *269 the '015 patent, the words that follow "characterized in that" were considered the novelty, the inventive step. The international regulations at the time the European patent application was filed required that claims of an invention be defined in metric measurements, such as microns, and 25-30 mesh is not an accepted metric measurement.
On September 11, 1992, Janssen received FDA approval to market the F12 formulation of SPORANOX® in the United States. The Patent Cooperation Treaty ("PCT") application was filed on August 27, 1993. Janssen failed to file the U.S. patent application within the required three-year time period of the PCT filing, but was granted permission to extend the time to file. The '015 patent was issued on May 27, 1997.[2]
Eon Labs began development of a generic version of SPORANOX® in 1996, when it noted that the '179 patent on itraconazole was expiring in 2000. Attempts to create a bioequivalent capsule using 25-30 mesh sugar cores were unsuccessful. After learning of the '015 patent in 1997, and Janssen's use of 25-30 mesh cores, Eon began experimenting with 30-35 mesh cores and 20-25 mesh cores in its formulation. Bioequivalency tests on the formulation with the 20-25 mesh cores were eventually successful.
In both SPORANOX® and Eon's generic product, microparticle sugar spheres, the "cores" characterized in Claim 1 of the patent, are the carriers of the itraconazole. The process that both Eon and Janssen use to coat the particles is generally the same. The cores are placed in a cylindrically shaped fluidized bed granulator, which keeps the particles in circulation in the cylinder with air pressure. A spray insert atomizes the drug coating solution into the cylinder where it coats the cores. Much of the solvent added to the drug coating solution is dried out of the solution before it hits the particle; thus the coating is not a "wet" solution, but a "solid" one. More of the residual solvents are removed while the cores are circulating in the fluidized bed granulator. The particles are then placed in vacuum dryers to cause further evaporation of the residual methylene chloride solvent. After this drying step, a sealing layer of polymer is added, and the particles are dried in the fluidized bed granulator.
There are many possible process variables, including drying temperature, air volume, the composition of the spray material, the equipment used, and the thickness of the coating on the core, that affect the amount of vacuum drying needed to reduce residual solvent levels before the sealing layer is applied. Eon uses less methylene chloride in its drug coating solution than the amounts that Janssen suggests are acceptable in its example, but the residual solvent levels in Eon's ANDA, *270 although within the FDA limit set for SPORANOX®, are higher than the actual levels in the SPORANOX® capsules.
This is so because the 20-25 mesh cores used by Eon require a thicker drug coating layer than the 25-30 mesh cores claimed in the '015 patent. As described in the '015 specification, when larger cores are used, the drug layer must be thicker, since it is spread over fewer cores, and the residual solvent levels are higher. The active drying time specified in Eon's ANDA is within the time given in the '015 patent example, but is based on drying smaller batches, around 6.7 kg per sub-batch dried, than Janssen's specification example, 41.74 kg. See '015 Patent, col. 5, line 18. Eon does not use methylene chloride in its seal coating layer, which Janssen does.
The Diameter of a Core
According to Webster's Third New International Dictionary (1993), a "diameter" is the length of a straight line through the center of an object, or its thickness. If an object is perfectly round, it has only one diameter measurement. That is not the case with sugar spheres. The sugar spheres that are used as the cores in the invention are not true spheres, but tiny multi-sided particles. Since sugar cores have various shapes, there are multiple ways to define particle size and to measure the diameter of a single core.
Because cores used in pharmaceutical compositions are very small, the industry has created a system of using metallic filters or wire screens, referred to as "mesh" sieves, to separate and classify different size sugar spheres or other microparticles. The "mesh number" of a particular sieve corresponds to the number of square openings per linear inch, which, in turn, refers to the length of the side of the individual square openings in the sieve, as measured in microns[3] or millimeters.
The actual dimensions of the openings of a given size sieve vary within certain tolerances. United States Pharmacopeia ("USP") in conjunction with the National Formulary ("NF") requires that sieves used for particle classification conform to the standards of the American Society for Testing and Materials ("ASTM"). The ASTM sets the standard or nominal opening of the apertures in a 20 mesh sieve at 850 microns, a 25 mesh sieve at 710 microns, and a 30 mesh sieve at 600 microns. For example, a 20 mesh sieve contains 20 square openings per inch, each opening being approximately 850 microns in length as measured along the side of the opening. A 25 mesh sieve contains 25 openings per inch, each opening being approximately 710 microns long. Thus, the higher the mesh number, the more openings there are on a given sieve, and the smaller those openings are. A group of particles that falls through a 25 mesh sieve, but stays on top of a 30 mesh sieve, will be labeled "25-30 mesh" or "600 710 ¢m." Similarly, a group of particles that falls through a 20 mesh sieve, but that stays on top of a 25 mesh sieve, will be labeled "20-25 mesh" or "710 850 ¢m." At the time of manufacture and packaging for pharmaceutical use, 100% of the cores in a labeled product have fallen through the sieve with the larger openings and remained on top of the sieve with the smaller openings noted on the label.
To determine whether the particle distribution in the labeled product meets USP specifications, analytical sieving, that is, using test sieves to verify the particle size range, can be performed. This is done by placing a group of particles on a "nest" or stack of sieves with graduated size openings, with the size that is larger than the *271 named size of the material on top, the next smaller size underneath, and the smallest named size opening underneath that. The nest is agitated for a period of time and the distribution of the particles on the sieves is noted. To be within ASTM standards, the distribution of particles in a given lot may contain up to 10% cores larger than the largest named sieve and up to 10% cores smaller than the smallest named sieve.
The micron range and the mesh range are used interchangeably in the art; in fact, the ASTM tables refer to the "standard" sieve designation in microns and the "alternative" designation in inches or mesh number. The "alternative designation" mesh number is also referred to as the "U.S. No." According to ASTM specifications for sieves for testing purposes, it is preferred that sieves with openings smaller than ¼ inch, or 6.3mm, be identified by the standard designation in millimeters or microns, rather than the mesh number.
Since the particles used as cores are multi-sided, each core has many possible diameter measurements, a "spectrum of diameters" according to Janssen's expert, Dr. Bodmeier; that is, there is no single diameter measurement. At the very least, each core, when measured in two dimensions, has a minimum and maximum diameter which may differ by as much as 300 microns. In other words, it is possible that a particle could have one diameter that is between 600 and 700 microns, and one diameter that is not.
Furthermore, there is uncertainty in the measuring process itself. An actual micron measurement of any of the diameters of a single core necessarily requires an approximation through one of various types of microscopy including optical and scanning electron microscopy. The minimum diameter measurement as measured by microscopy is also called the "effective sieve diameter" because it is the shortest distance across the particle, as viewed in a two dimensional aspect, and it is considered to be the diameter that will allow the particle to pass through a particular size sieve opening. It is not possible to say conclusively whether the diameter of the third dimension is the same as the others.
The "true sieve diameter" is the three dimensional diameter that allows the particle to pass through a sieve of a certain size. Neither Dr. Tendler, Janssen's expert, nor Dr. Brittain, Eon's expert, could measure the true sieve diameter by microscope, because neither one could measure in the third dimension. Thus, the microscopic measurements the experts made are not necessarily indicative of whether a particle passed through a certain size sieve.
There is also a diameter that is defined at the time when all the sugar particles are separated by sieves and classified for sale based on a "mesh cut," that is, the time at which the particles are obtained by a drug manufacturer. As described above, a mesh cut defines the range of particle sizes within the labeled product by noting the sieve through which all of the particles passed and the next smaller sieve through which none of the particles passed. Drug manufacturers select cores by mesh cut for pharmaceutical use. No manufacturer measures the size of individual cores. For quality control, a manufacturer performs analytical sieving on a sample of the cores it intends to use to make sure the sieves have produced a product which conforms to the allowable specifications.
The core size which was used during the development of the F12 formulation was selected by, and supplied to, the inventors by mesh cut. None of the Janssen inventors measured any individual sugar core in the F12 formulation to determine its size. Indeed, there is no evidence that any person at Janssen ever measured an individual *272 core used in the F12 formulation either prior to filing the patent application or after.
The experts, Dr. Tendler for Janssen and Dr. Brittain for Eon, testified that, even when they were selecting cores to measure by microscope to determine whether an individual core diameter was between 600 and 700 microns, they first sieved the cores through a 710 micron (25 mesh) sieve to collect sub-samples that would have at least one diameter smaller than 710 microns.
According to Eon's ANDA, upon analytical sieving, between 5.4 and 6.8 percent of Eon's ANDA batch (20-25 mesh) cores fell through a 25 mesh sieve. This is within NF tolerances, as described above, that allow up to 10% of particles in a labeled range to be smaller than the smallest named sieve and larger than the largest named sieve on analytical sieving. Dr. Tendler's tests on a sample of the cores provided in Eon's ANDA batch showed that approximately 1.8% passed through a 710 ¢ m sieve and were retained on a 600 Sm sieve, and about half of those measured between 600 ¢ m and 700 ¢m under an electron microscope. Dr. Tendler was of the opinion that between .9% and 1.8% of Eon's ANDA cores had a diameter that measured between 600 and 700 ¢m.
DISCUSSION
In the claim construction of April 6, 2004, I concluded that the '015 patent claimed a bead comprised of a core with a diameter between 600 and 700 microns. That the evidence at trial showed that there are many possible diameters of a core, and that a diameter may be measured by different methods and at different times, makes it necessary to look not only at the ordinary definition of diameter, but also to the intrinsic and extrinsic evidence produced at trial and then to explain how the diameter size claimed is to be determined. See Texas Digital Systems, Inc. v. Telegenix, Inc., 308 F.3d 1193 (Fed.Cir.2002).
As noted above, the core size used during the development of the F12 formulation was selected by, and supplied to, the inventors by mesh cut. Even the trial experts, highly skilled in the art, when selecting cores for microscopic measurement, selected their samples by sieving. The specification mentions the word "diameter" only once, when it recites the exact language that is used in Claim 1. '015 Patent, col. 1, line 51. The core size is referred to as "25-30 mesh." without including any reference to micron range, six times. There is also one reference in the example to "25-30 mesh (600-700 ¢ m) sugar spheres." '015 Patent, col. 5, line 18. The cores are also defined as suitable if they have "appropriate dimensions (about 25-30 mesh)." '015 Patent, col. 2, lines 11-12.
Considering all of the facts, I conclude that one of ordinary skill in the art would understand that the patent teaches a composition of one or more beads containing a core with a diameter between 600 and 700 microns as determined at the time the core is classified for use. At that time, there is a labeled range that identifies the diameter as classified by the sieve opening to which it corresponds. In Claim 1, the parenthetical "(25-30 mesh)" notes the mesh number known in the industry to include the 600 to 700 diameter cores. It is not necessary that the cores be selected from a 25-30 mesh process, because there may be a time in the future when particles are classified and sold by a different process. But, whatever that process may be, it is the diameter size as determined at the time the cores are acceptable for use in the industry that will determine whether or not they are claimed in the '015 patent. Thus, a diameter of 600 to 700 microns *273 refers to the diameter as measured at the time the cores are separated by sieves, classified, and made available for sale to the drug manufacturer. This is so even though, on later analytical sieving, another smaller diameter of the core may allow it to pass through the screen upon which it was previously retained.
Put another way, Janssen cannot be claiming something that Janssen itself never measured. It can only be understood as claiming cores that are viewed in the industry as 600 to 700 microns at the time they are classified and obtained for use, even though some of such cores, within the NF standards, prove, on analytical sieving, to have at least one diameter that is smaller than 600 microns or larger than 700 microns.
In sum. I adhere to my ruling that the core size is critical to the invention and that the number range of 600 to 700 microns defines the diameter of the core size claimed. However, I clarify my construction, as to how the size diameter claimed is determined, to mean the diameter as determined at time of manufacture, that is, the time at which people practicing the patent would obtain the sugar spheres, and the time at which the particles are classified and labeled. To the extent that this clarification conflicts with the earlier construction, the earlier construction is amended.
INFRINGEMENT
Literal Infringement
Janssen claims that Eon's ANDA literally infringes claims 1, 2, 5 and 6 of the '015 patent.[4] To find literal infringement, every limitation in those claims in the '015 patent must be present in Eon's ANDA. The properly construed claim must read on the accused device exactly. Amhil Enters., Ltd. v. Wawa 81 F.3d 1554, 1562 (Fed.Cir.1996).
Eon's ANDA product will be made using cores from a 20-25 mesh cut. These cores are defined as having a diameter between 710 and 850 microns at the time they are classified for use and obtained. All of the 20-25 mesh cores were retained on a 710 micron sieve: none of the particles fell through the 710 micron sieve. By contrast, Janssen's patented composition claims cores defined as having a diameter between 600 and 700 microns at the time they are obtained: all of the particles would have fallen through a 710 micron sieve. Thus, since none of the diameters of Eon's cores are literally between 600 and 700 microns, Eon's ANDA does not read on Claim I and does not literally infringe the '015 patent. That later analytical sieving, in which cores were placed on a nest of sieves and agitated so that a smaller diameter of a certain number of cores allowed these cores to pass through the smaller apertures of a 25 mesh sieve, or that microscopy showed that some of the diameters of Eon's cores selected from a 20-25 mesh cut are in the 600 to 700 micron range, does not change this conclusion.
Doctrine of Equivalents
Janssen claims that, even if there is no literal infringement of claims 1, 2, 5 and 6, those claims and claims 7, 8, 11, 12, 13, 14, 17, and 18 are infringed under the doctrine of equivalents. Infringement under the doctrine of equivalents requires that the "accused product or process contain elements identical or equivalent to each claimed element of the patented invention." Warner-Jenkinson Co. v. Hilton Davis Chemical Co. 520 U.S. 17, 40, 117 *274 S.Ct. 1040, 137 L.Ed.2d 146 (1997). A doctrine of equivalents analysis must be applied to the individual claim limitations, not to the invention as a whole. Id. at 29, 117 S.Ct. 1040. The doctrine of equivalents prevents an accused infringer from avoiding infringement by changing only minor or insubstantial details of a claimed invention while retaining the essential functionality of the details. However, the doctrine is limited so as not to conflict with the importance of the claims in determining the scope of a patentee's exclusive rights. The application of the doctrine requires resolving the conflict between preventing "fraud on a patent" and the primacy of the claims in defining the scope of a patentee's exclusive rights. See Sage Products, Inc. v. Devon Industries, Inc. 126 F.3d 1420, 1424-25 (Fed.Cir.1997).
Eon makes several arguments as to why its ANDA does not infringe under the doctrine of equivalents. First, it argues that, under Sage, the use of 20-25 mesh cores was foreseeable to the person who drafted the claims in the '015 patent and, since that size was not claimed, Janssen cannot expand the scope of the claim to cover what was foreseeable at the time. Alternatively, it argues that the difference in core size is not insubstantial. Finally, it argues that the 20-25 mesh core does not perform substantially the same function in substantially the same way with substantially the same result as the 25-30 mesh core in the '015 patent. See Graver Tank & Mfg. Co. v. Linde Air Prods. Co., 339 U.S. 605, 608-10, 70 S.Ct. 854, 94 L.Ed. 1097 (1950).
The foreseeability analysis under Sage depends upon whether a skilled patent drafter would foresee the limiting potential of the words "characterized in that the bead has a core of from about 600-700 ¢ m (25-30 mesh)." See Sage, 126 F.3d at 1425. "For a patentee who has claimed an invention narrowly, there may not be infringement under the doctrine of equivalents in many cases, even though the patentee might have been able to claim more broadly. If it were otherwise, then claims would be reduced to functional abstracts, devoid of meaningful structural limitations on which the public could rely." Id. at 1424.
Although I have held that the prosecution history did not estop Janssen from asserting infringement under the doctrine of equivalents, see Order of April 6, 2004 at 9, the evidence at trial established that other size cores were known to, and even tried and rejected by, Janssen. As early as 1989 Janssen knew that the problem of high residual solvent levels could be addressed by using cores smaller than those obtained from an 18-20 mesh product as was used in the F5 formulation, and it tested 25-30 mesh and 30-35 mesh cores.
If Janssen desired broad patent protection for any size core that performed a similar function, it could have claimed a larger size range of core diameters than 600-700 ¢ m (25-30 mesh). Had it done so, the novelty of the larger range could have been scrutinized by the Patent and Trademark Office. However, rather than claiming a broader range of core sizes, or even suggesting that a broader range was claimed, Janssen explained in the specification that the size of the core was of particular importance and that cores that are "too small" or "too large" were not "optimal." There was a specific reason that the core size of 600-700 ¢ m was claimed: it allowed the bead to be manufactured so that problems of agglomeration and high residual solvent levels were avoided. Furthermore, Janssen specifically disclosed cores of 30-35 mesh, the next smaller standard mesh size, that contains cores from 500 to 600 ¢ m, and stated that these were "too small." '015 Patent, col. 2, line 4. Although it did not give an example by *275 micron number or mesh cut of cores that were "too large," it did disclose cores said to be "too large."
The next larger standard mesh size is 20-25 mesh, which contains cores from 710 to 850 ¢ m in diameter. That Janssen did not_specifically disclose 20-25 mesh cores does not allow Janssen to claim that size now. If Janssen desired patent protection for the 20-25 mesh cores, and meant to exclude only 18-20 mesh cores that proved unsuitable in the F5 formulation as "too large," it could have characterized the core size claimed with a broader range. "As between the patentee who had a clear opportunity to negotiate broader claims but did not do so, and the public at large, it is the patentee who must bear the cost of its failure to seek protection for this foreseeable alteration of its claimed structure." Sage, 126 F.3d at 1425.
Similarly, in light of its emphasis on the importance of the particular core size in solving residual solvent problems and its characterizing the bead by its core size, Janssen cannot now claim that the difference in core size between the '015 patent and Eon's ANDA is insubstantial. See Tanabe Seiyaku Co., Ltd. v. United States International Trade Commission, 109 F.3d 726, 732-33 (Fed.Cir.1997). Dr. Bodmeier's testimony that a core up to 100 microns smaller (30-35 mesh) is substantially different from a 25-30 mesh core, but that a core up to 140 microns larger (20-25 mesh) is not, is unpersuasive. To conclude that the difference in core size is insubstantial would read out the very characterization of the bead that Janssen sought to claim. See Novartis Pharmaceuticals Corp. v. Eon Labs, 363 F.3d 1306, 1312 (Fed.Cir.2004).
One of ordinary skill in the art, reading the '015 patent, would not think that a 20-25 mesh core was interchangeable with the "optimal" size core nor that it was equivalent. One of ordinary skill in the art would conclude that the only size core taught, and claimed, by the '015 patent was a core of 600-700 ¢m (25-30 mesh) and that smaller or larger mesh cut cores were not claimed. See Tanabe, 109 F.3d at 732.
Janssen waited to patent its invention until it found a formulation that reached acceptable residual solvent levels for FDA approval. That it chose to wait until it found the precise core size for the formulation that resulted in FDA approval further supports that Janssen dedicated all smaller and larger core sizes to the public. Having found that the difference in core size is not insubstantial and that the cores claimed in the '015 patent and Eon's ANDA cores are not equivalent, I need not address function/way/result analysis. See Warner-Jenkinson, 520 U.S. at 39-40, 117 S.Ct. 1040.
In sum, Eon's ANDA does not infringe any of the claims of the '015 patent either literally or under the doctrine of equivalents. Since all of the claims that are alleged to be infringed are dependent upon Claim 1, and I find that Claim 1 is not infringed either literally or under the doctrine of equivalents, I need not address every other claim individually. None of the claims are infringed.
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS
Prior to trial, Eon and Janssen each moved for summary judgment on Eon's affirmative defense of invalidity, and Janssen moved for summary judgment on Eon's defense that the '015 patent was unenforceable because of inequitable conduct before the Patent and Trademark Office and because Janssen filed this lawsuit as an anti-competitive act with no basis to believe that Eon's ANDA infringed the '015 patent.
*276 Unenforceability
Magistrate Judge Marilyn D. Go recommended that Janssen's motion based on unenforceability be granted. Eon did not file any objections to that recommendation, nor did it present any evidence at trial to show that the patent was unenforceable on the grounds alleged. Therefore, Eon's affirmative defenses and counterclaims based upon unenforceability are dismissed.
Public Use
Judge Go also recommended that I grant summary judgment to Janssen on Eon's claim of invalidity based upon public use. As noted earlier, because of the preliminary injunction motion and the expedited timing of the trial, the responses to Judge Go's report were held for consideration until after the court allowed counsel to develop additional facts at trial. The evidence at trial confirmed the correctness of Judge Go's conclusion.
Eon claims that the '015 patent is invalid because it was in public use, or on sale, prior to the "critical date" under 35 U.S.C. § 102(b), which is the date one year prior to the date of the United States patent application. "Whether a patent is invalid due to public use under § 102(b) is a question of law based upon underlying questions of fact." Smithkline Beecham Corporation v. Apotex Corp., 365 F.3d 1306, 1316 (Fed.Cir.2004). "Public use under 35 U.S.C. § 102(b) includes any use of the claimed invention by a person other than the inventor who is under no limitation, restriction or obligation of secrecy to the inventor." Netscape Communications Corp. v. Konrad, 295 F.3d 1315, 1321 (Fed.Cir.2002).
As a preliminary matter, the court notes that the compassionate clearance tests, which Eon claims were a public use, were performed on the F5 formulation, which, since it used cores of 18-20 mesh, is not the patented composition. For that reason alone, the public use defense as to the compassionate clearance tests fails.
In any event, the evidence introduced at trial established that all of Janssen's compassionate clearance tests that were performed on the F5 formulation, as well as the clinical trials conducted from June to August 1991 with the F12 formulation, were confidential and controlled by Janssen. As to the compassionate clearance tests on the F5 formulation, the evidence shows that the doctors were under a strict protocol, controlled by Janssen; that they had to follow the protocol or the drug would not be shipped to them; that they were under a confidential arrangement with Janssen; that they were not informed of the formula for SPORANOX®; and that the labels on the boxes of SPORANOX® stated that it was an investigational drug not for commercial use. That the patient, who did not know any information about the drug other than its name and that it was an investigational antifungal, was not under a confidentiality agreement with Janssen, does not negate the confidential and controlled use of the F5 formulation.
As to the clinical tests performed on the F12 formulation between June and August 1991, a confidentiality statement in the protocol for those studies states that the information in the document contains trade secrets and commercial data that are privileged or confidential and may not be disclosed unless required by law. The evidence supports Janssen's position that the use was confidential and controlled by Janssen. Thus, Eon has not shown by clear and convincing evidence that any of the uses of the F5 or F12 formulations of SPORANOX® capsules prior to the critical date were public uses.
On Sale Bar
"Patents are presumed to be valid and an accused infringer challenging *277 the validity of a patent under the on-sale bar must demonstrate by clear and convincing evidence that there was a definite sale or offer to sell more than one year prior to the application for the subject patent, and that the subject matter of the sale or offer to sell fully anticipated the claimed invention or rendered it obvious." Elan Corp. v. Andrx Pharms., Inc. 366 F.3d 1336, 1340 (Fed.Cir.2004). (Internal citations omitted.) "Only an offer which rises to the level of a commercial offer for sale, one which the other party could make into a contract by simple acceptance ..., constitutes an offer for sale under § 102(b)." Id. at 1341.
During discovery, the parties accepted Judge Go's adoption of Janssen's proposed applicable critical date of September 3, 1991, one year prior to the European Patent application priority date noted on the '015 patent. Judge Go also relied on that date in her report and recommendation on the parties' motions for summary judgment on the public use affirmative defense. Neither party objected to the use of that date in the report and recommendation. On the eve of trial, Eon filed a Memorandum asserting, for the first time, that the correct critical date is August 27, 1992, one year prior to the Patent Cooperation Treaty filing date. Relying on that date as the critical date. Eon raised an "on-sale" bar invalidity defense at trial, claiming that an August 17, 1992 letter purportedly announcing the upcoming availability of SPORANOX® capsules constituted an offer for sale prior to the critical date.
This attempt to change the applicable critical date the day before trial began was untimely. Janssen had no opportunity, given the lateness of the claim and Eon's previous representations that it would not raise an on-sale defense, to offer any witnesses to explain the purpose and meaning of the letter. It now seeks to reopen the trial to present witnesses on its behalf if the court accepts the letter. In fairness, were I to consider the letter offered by Eon sufficient to establish that it is an offer for sale, I would allow Janssen to reopen the trial to rebut. However, since it is Eon's burden to prove that the invention was offered for sale by clear and convincing evidence, and since Eon failed to do so, there is no need to reopen the trial.
The letter, dated August 17, 1992, appears to be signed by the Director of Trade Relations at Janssen and is addressed to a senior pharmaceutical buyer at a wholesale company announcing the launch of SPORANOX® antifungal capsules. The letter states that Janssen expects final FDA market approval in the near future and that the product will be sold in cases containing 24 boxes of capsules; it also states the list price per box and per case, and the size and weight of the case. According to the letter, a recommended opening order, based upon the wholesaler's sales of a competitive antifungal product, has been attached and all orders received through October 30, 1992 will receive an extra 8 1/3% discount, plus an additional 60 days dating. Finally, the letter states that "your cooperation with this recommended opening order is greatly appreciated, and we ask that you forward the order by September 4, 1992 to our distribution center. This will help ensure a rapid launch of this new product." The attached sheet lists a certain number of cases for five distribution centers and a dollar figure that represents the amount of sales of the competitor's product in that location.
It is far from clear that the only thing that any recipient of this letter had to do to form a binding contract was to "accept" the recommended order quantity. The letter is clear that the product is not yet *278 available and is phrased in terms of what will occur at some point in the near future. Eon has not provided any evidence that shows whether or not the letter was ever sent to, or received by, any person, and no evidence of what the custom or practice in the industry was in regard to a letter of this type. Thus, even if I were to accept Eon's proposal to change the critical date to August 27, 1992, the letter, standing alone, does not show by clear and convincing evidence that Janssen made a commercial offer for sale of the invention prior to that date.
In sum, I find that the '015 patent is not invalid based upon public use or because it was the subject of an offer for sale.
CONCLUSION
For the reasons discussed above, I find that claims 1, 2, 5 and 6 of U.S. Patent 5,633,015 are not infringed literally or under the doctrine of equivalents. I also find that claims 7, 8, 11, 12, 13, 14, 17 and 18 are not infringed under the doctrine of equivalents.
The temporary restraining order is hereby lifted and the preliminary injunction motion is denied. The Clerk of Court is directed to enter judgment for Eon that its ANDA does not infringe the '015 patent. The Clerk of Court is also directed to enter judgment for Janssen dismissing Eon's claims of unenforceability and invalidity.
SO ORDERED.
NOTES
[1] The stay was set to expire on September 7, 2003. Because of Eon's delay of the litigation, by order dated January 22, 2004, the court extended the stay six months, until March 7, 2004. (Docket entry # 206)
[2] On December 16, 2003, Janssen was granted U.S. patent No. 6,663,901 B1 ("the '901 patent") entitled "Pellets Having a Core Coated with An Antifungal and a Polymer," for a process for preparing pellets comprised of a core having a diameter from about 710 to about 1180 ¢m (16-25 mesh), a coating film of a water soluble polymer, and a seal coating polymer layer where the residual concentration of dichloromethane is less than 600 parts per million. This process claims a drying step that uses microwave or radio frequency to dry the cores after the first coating. On April 29, 2004, a continuation of the application for the '901 patent, U.S.2004/0081696 A1, was published for a composition of a pellet as described in the '901 patent. Among the dependent claims on that size pellet, Claim 3, particularly claimed a 20-25 mesh core, a polymer of HPMC and itraconazole. Despite Eon's delay in relying on these patents obtained by Janssen after the '015 patent, I allowed Eon to put them into evidence. I note them here, although I find that they are not necessary to the determination of the issues presented in this case.
[3] A micron is a unit of length equal to one thousandth of a millimeter.
[4] Janssen does not claim that claims 3, 4, 9, 10, 15 or 16 are infringed either literally or under the doctrine of equivalents.
|
290 S.E.2d 244 (1980)
Clarence WEAVER
v.
Gus SHAFFER, Chairman, Boone County Deputy Sheriff's Civil Service Commission, et al.
No. 14415.
Supreme Court of Appeals of West Virginia.
December 19, 1980.
Concurring Opinion January 14, 1981.
Dissenting Opinion April 2, 1982.
*245 Boettner, Campbell & Crane and John Boettner, Jr., Charleston, for appellant.
Peter A. Hendricks, Asst. Pros. Atty., Boone County, Madison, Chauncey H. Browning, Jr., Atty. Gen., Marianne Kapinos Hoover, Asst. Atty. Gen., Charleston, for appellees.
NEELY, Chief Justice:
The appellant, Clarence Weaver, challenges a provision of the West Virginia Civil Service for Deputy Sheriffs Act which prohibits political activity on the grounds that the statute is vague and overbroad. The Circuit Court of Kanawha County found that the appellant had engaged in proscribed political activities while a member of the classified civil service and concluded that the challenged statute is not so vague or broad as to be constitutionally infirm. We affirm.[1]
In 1971 our Legislature enacted W.Va. Code, 7-14-1 [1971] et seq. establishing civil service for deputy sheriffs. The act bars dismissal or reduction in rank for political reasons except that Code, 7-14-15(a) [1971] provides in pertinent part that:
On and after the effective date of this article [July 1, 1971], no deputy sheriff covered by the provisions of this article shall engage in any political activity of any kind, character or nature whatsoever, except to cast his vote at any election or shall act as an election official in any municipal, county or state election. Any deputy sheriff violating the provisions of this section shall have his appointment vacated and shall be removed, in accordance with the pertinent provisions of this section.
The Act provides two methods for removing a deputy sheriff. Code, 7-14-13 [1971] allows private citizens to petition the county civil service commission for removal and Code, 7-14-17 [1971] provides for removal by the sheriff.
On 1 January 1973, the then recently elected sheriff of Boone County, John Protan, discharged the appellant pursuant to Section 17 for unlawful political activity. Mr. Weaver initially demanded a hearing before the Boone County Civil Service Commission, but later decided to abandon the hearing and seek a writ of mandamus in this Court. This Court denied the writ in Hall v. Protan, 156 W.Va. 562, 195 S.E.2d 380 (1973), on the grounds that the facts surrounding the discharge were in dispute and Mr. Weaver had not exhausted his administrative remedies.
A citizens' petition for the appellant's removal was filed on 6 July 1973, again alleging unlawful political activity as the grounds for removal. Hearings were held before the Civil Service Commission from June 1973 through April 1974. On 16 April 1974, the Commission ordered Mr. Weaver dismissed from his position as deputy sheriff finding that the appellant had regularly been present in the campaign headquarters *246 of sheriff candidate Albert Gore during the primary election in the spring of 1972; that he attended at least one political dinner during the campaign; and, that appellant transported and/or distributed campaign literature during the same campaign in support of some candidates who were not definitely identified. Appellant sought review in the Circuit Court of Boone County from which the case was transferred to the Circuit Court of Kanawha County where the findings of the Commission dismissing Mr. Weaver were affirmed. This appeal followed.
I
At the outset, the appellant contends that the findings of the Civil Service Commission are clearly wrong and not supported by the evidence. This assignment is without merit. Ample evidence taken at several hearings supports the Commission's conclusion that Mr. Weaver engaged in political activity by being present in the campaign headquarters of sheriff candidate Gore, attending one political dinner and transporting and/or distributing campaign literature. This Court has held that "`[a] final order of a police civil service commission based upon a finding of fact will not be reversed by a circuit court upon appeal unless it is clearly wrong or is based upon a mistake of law. Point 1, Syllabus, Appeal of Prezkop, 154 W.Va. 759, 179 S.E.2d 331 (1971).' Syl. pt. 1, City of Logan v. Dingess, W.Va., 242 S.E.2d 473 (1978)." Scott v. Ernest, W.Va., 264 S.E.2d 635 (1980).
II
The essence of the appellant's other assignments is that W.Va.Code, 7-14-15(a) [1971], denies his constitutional right to free political expression because it is both vague and impermissibly broad in its scope. During the 1960s and 1970s the United States Supreme Court wrestled with the doctrine of overbreadth. Certainly the cases on this subject are not consistent, but there does appear to be a context specific withdrawal from the Rhadamanthine application of the doctrine in civil service cases. The point of entry to the resolution of the challenge at hand, therefore, is the recognition that there is a legitimate governmental interest in restricting political activities of classified employees. United States Civil Service Commission v. National Ass'n of Letter Carriers, 413 U.S. 548, 93 S.Ct. 2880, 37 L.Ed.2d 796 (1973); Broadrick v. Oklahoma, 413 U.S. 601, 93 S.Ct. 2908, 37 L.Ed.2d 830 (1973); Pickering v. Board of Education, 391 U.S. 563, 88 S.Ct. 1731, 20 L.Ed.2d 811 (1968); United Public Workers of America v. Mitchell, 330 U.S. 75, 67 S.Ct. 556, 91 L.Ed. 754 (1947). Such restrictions are designed to insure advancement based on merit in the governmental service and to protect employees from improper political influence. Mitchell, supra. The government, therefore, has an interest in regulating the conduct and speech of its employees that differs significantly from the interest it possesses in regulating conduct and speech of the citizenry in general. Pickering v. Board of Education, supra.
Historically the problem which statutes such as W.Va.Code, 7-14-15(a) [1971] present is that they are so broadly written that they appear to proscribe activity which is protected by the First Amendment to the Constitution of the United States and which, under any set of facts, the government cannot be considered as having a legitimate interest in proscribing. In this regard we do find that W.Va.Code, 7-14-15(a) [1971] is overly broad since it would appear to proscribe activities which the Supreme Court of the United States has indicated are protected by the First Amendment even with respect to employees of a classified civil service.[2]
*247 III
We must now turn to the remedy which is enjoined upon us by the United States Supreme Court with regard to curing a statute of this type; the issue is whether this statute can be cured by judicial construction or must be struck down in its entirety.
In analyzing Supreme Court authority it is necessary to establish an historical perspective which will lead us to appreciate that in the First Amendment area many holdings are quite context specific. It must be remembered that in the 1960s there was still broad-based, state government supported, militant resistance to Fourteenth Amendment racial equality. Racial equality was indeed inextricably intertwined with problems inherent in wealth discrimination and this led to a confluence of the issue of racial equality with certain issues of social equality (not necessarily related to race) in the area of both civil rights and civil liberties. While the cases which require the strict application of the overbreadth doctrine are not necessarily directly related to efforts towards either racial or social equality, nonetheless, an absolutist interpretation of the First Amendment emerged ineluctably from the judicial mind set of the time.
No effort of judicial imagination is capable of intelligently reconciling the inconsistent precedent generated by the United States Supreme Court in the last twenty years with regard to the overbreadth doctrine. The only reasonable conclusion is that once the Supreme Court began striking broad statutes in highly context specific situations while attempting to sustain their conclusions with general principles, the principles were per force applied to other contexts for which they were not originally conceived, which ultimately required a retreat from the principles themselves.[3] This, probably more than anything else, explains the dramatic retreat from overbreadth in Young v. American Mini Theatres, 427 U.S. 50, 96 S.Ct. 2440, 49 L.Ed.2d 310 (1976) since that case is entirely at odds with Erznoznik v. City of Jacksonville, 422 U.S. 205, 216, 95 S.Ct. 2268, 2276, 45 L.Ed.2d 125 (1975).[4] For example we find in Dombrowski v. Pfister, 380 U.S. 479, 85 S.Ct. 1116, 14 L.Ed.2d 22 (1965)[5] that persons have standing to attack overly broad statutes even *248 when their own conduct would be properly proscribed under a constitutionally narrow statute; yet, in Young v. American Mini Theatres, supra, the Court said, "[i]f the statute's deterrent effect on legitimate expression is not `both real and substantial,' and if the statute is `readily subject to a narrowing construction by the state courts,' the litigant is not permitted to assert the rights of third parties."
The United States Supreme Court has been increasingly reluctant to apply the overbreadth doctrine since Broadrick v. Oklahoma, 413 U.S. 601, 613, 93 S.Ct. 2908, 2916, 37 L.Ed.2d 830 (1973) when the Court stated: "[a]pplication of the overbreadth doctrine in this manner is manifestly strong medicine. It has been employed by the Court sparingly and only as a last resort. Facial overbreadth has not been invoked when a limiting construction has been or could be placed as the challenged statute. [citations omitted]." In the cases after Young v. American Mini Theatres, supra, when the Court virtually reversed its prior holdings based on overbreadth analysis, we can find only one instance when the Court used overbreadth to void a statute, Village of Shaumberg v. Citizens, Etc., 444 U.S. 620, 100 S.Ct. 826, 63 L.Ed.2d 73 (1980),[6] although the Court addressed overbreadth arguments on numerous occasions. In light of the diminished application of overbreadth analysis, we do not feel compelled to apply the doctrine in the case before us.
Instead we are guided by Letter Carriers, Mitchell, and Broadrick which upheld limitations on political campaigning and management, for as the United States Supreme Court stated in Elrod v. Burns, 427 U.S. 347, 371, 96 S.Ct. 2673, 2688, 49 L.Ed.2d 547 (1976), "subordination of these activities was permissible to safeguard the core interests of individual belief and association." In Elrod, the Court held that a non-policy making government employee could not be discharged on the basis of his beliefs, because in the opinion of the Court delivered by Justice Brennan and concurred in by Justices White and Marshall "if the First Amendment did not place individual belief and association above political campaigning and management, at least in the setting of public employment, the restraints on these latter activities could not have been judged permissible in Mitchell and Letter Carriers." Thus, in the Elrod opinion written by Justice Brennan, a leader in the Warren Court era of overbreadth analysis, the Court validated restrictions upon the political activities of public employees once again.
In the final analysis the decision concerning the federal question in the case before us must be based upon the most mechanical application of stare decisis: in Letter Carriers, supra and Broadrick, supra, the two cases exactly on "all fours" factually with the one before us, the Supreme Court has held that civil service statutes may be cured by authoritative, narrowing interpretations. Thus in the case before us, we find that the statute's deterrent effect on legitimate expression is neither real nor substantial and that after today's decision there will be an adequately narrow, authoritative interpretation proscribing only those activities which the Supreme Court has indicated may constitutionally be proscribed in Letter Carriers, supra. "As we see it, our task is not to destroy the Act if we can, but to constue it ... so as to comport with constitutional limitations." Letter Carriers, supra 413 U.S. at 571, 93 S.Ct. at 2893.
IV
Having disposed of the appellant's federal grounds we must now turn to his claim under W.Va.Const., art. III, § 7, that the statute is defective on State grounds. We have consistently held that the West Virginia Constitution is at least as solicitous of individual rights as its federal counterpart, State ex rel. Daily Mail Publishing Co. v. Smith, W.Va., 248 S.E.2d 269 (1978), aff'd, 443 U.S. 97 (1979), and we accept the *249 appellant's argument that W.Va.Code, 7-14-15(a) [1971] is both vague and overbroad under the West Virginia Constitution. In circumstances such as those before us, however, in the last several years this Court has consistently adhered to the "doctrine of the least intrusive remedy,"[7] an easily understood principle which permits a statute which is unconstitutional on its face to be saved from total destruction by judicial construction. We prefer this approach to a manipulation of procedural rules such as standing. Most appellate courts have recognized in one way or another the problems which can be created for society by striking down for a technical defect a statute which, in general, achieves a worthwhile public goal when there is absolutely no assurance that the Legislature will again pass a similar statute.
Law is a practical scheme designed by practical men to provide a more or less rational and just system of government. That is hardly either a new or a startling conclusion, yet it should be recalled from time to time in order to put a little flesh on the theoretical skeleton of government. The Deputy Sheriffs' Civil Service Act before us consists of numerous provisions, each of which reflects a delicate political compromise in the legislative process. W.Va.Code, 7-14-21 [1971], however is the "clinker," since it provides severability. That section says:
If any provision of this article or its application to any person or circumstance is held unconstitutional or invalid, such unconstitutionality or invalidity shall not affect other provisions or applications of this article, and to this end the provisions of this article are hereby declared to be severable.
Now it should not come as any great surprise to the average person that the reasonable proscription of factional or partisan political activity is a quid pro quo of civil service protection; otherwise, the statute would have the direct opposite effect of that intended. Were we to strike the proscription on political activity while leaving intact civil service protection, we would then have a classified civil service which is entirely free to participate in the most robust manner in the political process and, through that process, achieve increases in salary, lavish perquisites, and opulent working conditions through political extortion. Furthermore, all this could be accomplished without the control which forthright spoils system politics exacts by making everyone's job dependent on the successful management of the senior elected officer, in this case the sheriff. Since by the plain language of Code, 7-14-21, [1971] severability is mandated in the event that any provision of the article is found unconstitutional, we are enjoined either to save the section proscribing political activity or strike it alone, leaving the job security provisions of the article still in force and effect.
It is here that there is a practical divergence between the theory of democratic government and the mechanics of the legislative process. In theory, upon striking the section proscribing political activity the Legislature should, indeed, rush to re-enact that section in such language that it will sustain constitutional scrutiny. In practice, however, there would be almost no pressure by any organized power group to re-enact the political proscription section; in fact, all of the organized pressure would come from the deputy sheriffs who would grind the legislative process to a purposeful halt in their efforts to preserve their rights to political extortion. This is particularly easy since a legislature is an inherently negative institution designed with the primary purpose in mind of prevention of the passage of bad legislation. While the structure of the institution is highly serviceable in this regard, that same structure presents problems *250 when there is a need to re-enact a statute of the type before us.
Originally the medieval parliaments which were the direct ancestors of our modern legislatures were established not to initiate policy but rather to give or withhold assent from policy made by the King. The purpose of parliament was to restrain other institutions of societyKing, powerful nobles, judges, and royal officersfrom interfering with the complex matrix of interlocking privileges which were usually referred to as "the traditional rights of the subject." In former times people were more willing than they are today to identify with the forces of conservatism; it is unlikely that any modern political party would echo Simon de Montford's Thirteenth Century political slogan nolumus leges Anglicae mutare, traditionally translated, "the laws of England will never change."
Yet people want security in the continuance of their privileged positions as much today as they did in the Middle Ages at the dawn of parliamentary development. The institutional system which gives security in everyone's vested interests, namely the Legislature, also gives everyone else security in his vested interests, and it is for that reason that legislatures have organized themselves in such a way that the most powerful force in the institution is inertia. Furthermore, this observation is not intended in any pejorative sense; in fact, it is a monument to the ingenuity of men and women of government that the design of a legislature is quite successful in frustrating the efforts of most powerful predators of the political jungle to subvert the force of government to their own selfish greed.
It is a purposeful inertia which is the primary mechanism for achieving social protection from powerful predators. Such an engine has as its outstanding virtue that to overcome the inertia requires an act of Herculean human will, and this is seldom achieved by either accident or inattention, but rather only through a legitimate blending of political interests in such a way that new legislation receives general approval. It is through inertia that legislators survive intense political pressure from predators without either losing their jobs or destroying the public weal. The unorganized consumer or taxpayer is usually the beneficiary of the inertia machine since organized predators are seldom balanced in the political process by an equally powerful organization of victims. Inertia is designed to protect victimstaxpayers, consumers, and small businesses.
At the time the Deputy Sheriffs' Civil Service Act was passed there was a unity of interests among the deputy sheriffs themselves, the citizenry seeking a professional, well-trained, continuing law enforcement agency in each county, and the sheriffs, who at the time, could not succeed themselves and wished to provide job security for their appointed employees. The result of the political interaction of all of these forces was a civil service plan which gave each group something important which it wanted while at the same time exacting onerous conditions before conferring the desired benefits. The initiating and lobbying force in the passage of the original statute was the Deputy Sheriffs' Association which provided the pressure to overcome the inherent inertia of the legislative process. If, however, we were to strike the provision proscribing political activity, what comparable political force would organize itself to re-enact a section proscribing political activities? Certainly not the deputy sheriffs, sheriffs eligible for re-election, and political factions affiliated with the incumbent sheriffs and deputy sheriffs who would all be militantly against such re-enactment. The class of persons who will be injured by political participation by deputies is as yet unknown, unknowable, and certainly unorganized. This, in fact, is almost the direct opposite of the factual pattern in the cases during the 1960s where the Supreme Court struck down overbroad statutes circumscribing First Amendment rights.[8] In those *251 cases the victims of evil statutes were unorganized and politically impotent while the proponents were organized; here if the statute falls, the victims of the fallen statute are the organized public, while the recipients of the unintentional political bonanza are sufficiently well organized to maintain it in an inherently negative legislative process. In circumstances such as these, sound public policy demands the application of the doctrine of the least intrusive remedy to further the intention of the Legislature and maintain the original political balance.
V
Accordingly, we interpret W.Va. Code, 7-14-15(a) [1971] as proscribing only those political activities which the Supreme Court has decided in Letter Carriers, supra may constitutionally be proscribed. These include: (1) holding a party office; (2) working at the polls; (3) acting as a party paymaster for other party workers; (4) organizing a political party or club; (5) actively participating in fund-raising activities for a partisan candidate or political party; (6) becoming a partisan candidate for, or campaigning for, an elective public office; (7) actively managing the campaign of a partisan candidate for public office; (8) initiating or circulating a partisan nominating petition or soliciting votes (i.e., campaigning) for a partisan candidate for public office; and (9) serving as a delegate, alternate or a proxy to a political party convention. Since the United States Supreme Court has specifically allowed that in circumstances such as the one before us a narrowing interpretation of a broad statute may permit the statute to be saved, and since we find that under the West Virginia Constitution this is a fit occasion for the application of our doctrine of the least intrusive remedy, we give the statute the appropriate narrow interpretation and, accordingly, the judgment of the Circuit Court of Kanawha County is affirmed.
Affirmed.
CAPLAN, Justice, dissenting:
I respectfully dissent from the majority opinion in this case. W.Va.Code, 1931, 7-14-15(a), as amended, prohibiting deputy sheriffs from engaging in any political activity of any kind, character, or nature whatsoever except voting is unconstitutionally overbroad and vague and should therefore be voided in its entirety.
The governmental interest in restricting political activities of classified employees has been well recognized. United States Civil Service Commission v. National Ass'n. of Letter Carriers, 413 U.S. 548, 93 S.Ct. 2880, 37 L.Ed.2d 796 (1973); Broadrick v. Oklahoma, 413 U.S. 601, 93 S.Ct. 2908, 37 L.Ed.2d 830 (1973); Pickering v. Board of Education, 391 U.S. 563, 88 S.Ct. 1731, 20 L.Ed.2d 811 (1968); United Public Workers of America v. Mitchell, 330 U.S. 75, 67 S.Ct. 556, 91 L.Ed. 754 (1947). Such restrictions are designed to insure meritorious performance of government service and to protect employees from improper political influence. Mitchell, supra. However permissible such restrictions may be, they must give adequate warning of what activity is proscribed, set forth specific standards for those who must apply it, e.g.: Lanzetta v. New Jersey, 306 U.S. 451, 59 S.Ct. 618, 83 L.Ed. 888 (1939); Connally v. General Construction Co., 269 U.S. 385, 46 S.Ct. 126, 70 L.Ed. 322 (1926), and must not be so vague that "men of common intelligence must necessarily guess at [their] meaning." Grayned v. City of Rockford, 408 U.S. 104, 92 S.Ct. 2294, 33 L.Ed.2d 222 (1972). It is undisputed that legislation must fall if its promotion of valid governmental interests is outweighed by its damage to expressive and associational interests. Statutes attempting *252 to restrict the exercise of First Amendment rights must be narrowly drawn, representing a considered legislative judgment that particular expression must give way to other compelling needs of society. Shelton v. Tucker, 364 U.S. 479, 81 S.Ct. 247, 5 L.Ed.2d 231 (1960); Herndon v. Lowry, 301 U.S. 242, 57 S.Ct. 732, 81 L.Ed. 1066 (1937); Grayned v. City of Rockford, supra. Legislative prohibitions may not be too broad in their sweep and must distinguish between conduct that may be proscribed and conduct that must be permitted. Overbreadth and vagueness in the First Amendment area must be strictly curtailed because ambiguity and the broad sweep of a statute may inhibit citizens from exercising their fundamental constitutional rights. When a statute or regulation impinges on the rights covered by the First Amendment, a greater degree of specificity is demanded. Smith v. Goguen, 415 U.S. 566, 94 S.Ct. 1242, 39 L.Ed.2d 605 (1974).
To guard against the "chilling effect" overbroad legislation may have upon freedom of expression and association, the United States Supreme Court has developed certain standards that are exclusively or primarily applicable in First Amendment litigation. Generally, a person to whom a statute may constitutionally be applied will not have standing to challenge the statute on grounds of unconstitutional application to others in situations not before the court. See e.g. United States v. Raines, 362 U.S. 17, 80 S.Ct. 519, 4 L.Ed.2d 524 (1960). United States v. Wurzbach, 280 U.S. 396, 50 S.Ct. 167, 74 L.Ed. 508 (1930). The "as applied" method involves a judgment as to the constitutionality of a challenged statute based on the harm caused to the litigating party. It vindicates a claimant whose conduct is within the First Amendment but invalidates the challenged statute only to the extent of the impermissible application. But in the area of First Amendment rights, the court has altered its traditional rules of standing to permit "attacks on overly broad statutes with no requirement that the person making the attack demonstrate that his own conduct could not be regulated by a statute drawn with the requisite narrow specificity. [cites omitted]." Dombrowski v. Pfister, 380 U.S. 479, at 486, 85 S.Ct. 1116, at 1121, 14 L.Ed.2d 22, at 28 (1965). This departure from the traditional method of judging the constitutionality of statutes is justified by the favored status of right to expression and association. The statutes very existence may cause others not before the court to refrain from constitutionally protected speech or expression. The doctrine emphasizes the need to eliminate an overbroad law's "chilling effect" by insisting on legislative judgment precisely drafted to express a definite policy thought sufficient to override expressive interests. Note, the First Amendment Overbreadth Doctrine, 83 Harv.L.Rev. 844 (1970). Thus, "facial" overbreadth analysis proceeds without regard to the constitutional status of the litigant's conduct. Under this approach, a statute prohibiting substantial activity protected by the First Amendment is voided entirely. The United States Supreme Court has noted its reluctance to apply the facial overbreadth test. The test set forth in Broadrick, supra, 413 U.S. at 615, 93 S.Ct. at 2917, is "... where conduct and not merely speech is involved, we believe that the overbreadth of a statute must not only be real, but substantial as well, judged in relation to the statute's plainly legitimate sweep." Likewise, in Young v. American Mini Theatres, 427 U.S. 50, 96 S.Ct. 2440, 49 L.Ed.2d 310 (1976) there was an apparent narrowing of standing to assert vagueness when one is clearly within a valid proscription, the law's deterrent effect on legitimate expression is not "both real and substantial", and the law is "readily subject to narrowing construction by the state courts."
It is noted in Broadrick, supra, 413 U.S. at 613, 93 S.Ct. at 2916, that:
Facial overbreadth has not been invoked when a limiting construction has been or could be placed on the challenged statute. See Dombrowski v. Pfister, 380 U.S., at 491 [85 S.Ct. at 1123]; Cox v. New Hampshire, 312 U.S. 569 [61 S.Ct. 762, 85 L.Ed. 1049] (1941); United States v. Thirty-seven Photographs, 402 U.S. 363 [91 S.Ct. *253 1400, 28 L.Ed.2d 822] (1971); eg. Breard v. Alexandria, 341 U.S. 622 [71 S.Ct. 920, 95 L.Ed. 1233] (1951).
The Court here is not merely involved in interpreting or construing the statute. The majority clearly has undertaken the task of judicial legislating.
In Broadrick and Letter Carriers, the statutes proscribing certain political activity were much more narrowly drawn than the statute before this Court. In determining that the political activity proscriptions were not impermissibly broad, the court, in those cases, looked not only to the specific language of the acts, but also to authoritative administrative pronouncements. Broadrick and Letter Carriers herald only narrow, carefully drawn exceptions. W.Va. Code, 1931, 7-14-15(a), as amended, is not drawn with such narrow specificity. We recognize a significant government interest in regulating political activity of deputy sheriffs to promote efficiency, foster loyalty to superior officers, maintain morale, and instill public confidence in the law enforcement institution. To achieve these ends, regulations may be promulgated, but their restrictive effect may extend only as far as is necessary to accomplish a legitimate government interest. The narrowest means consistent with the furtherance of that interest must be employed. W.Va.Code, 1931, 7-14-15(a), as amended, regulates political activity in a much broader sweep and with less specificity than the Acts construed in Broadrick and Letter Carriers. If the Supreme Court can characterize the Broadrick statute, § 818 as "slightly overbroad," then Code 7-14-15(a) is clearly substantially overbroad. It prohibits the universe of a deputy sheriff's conceivable political activities except voting. None of the factors mentioned in Broadrick or Letter Carriers providing limitations or guidelines are found here. There are no limiting regulations; there is no body of doctrine; there is no office for interpretive guidance; and, most importantly, no judicial construction of the section can eliminate its overbreadth and also provide the requisite degree of clarity without transgressing into the legislative function. For these reasons, contrary to the expression of the majority, the section is unconstitutionally overbroad and vague and cannot be saved by judicial construction. See Davis v. Williams, 598 F.2d 916 (5th Cir., 1979); Phillips v. City of Flint, 57 Mich.App. 394, 225 N.W.2d 780 (1975); and Alderman v. Philadelphia Housing Authority, 496 F.2d 164 (3rd Cir. 1974).
It is very clear that the legislature intended to strictly regulate the political activities of deputy sheriffs. Mitchell makes it clear that this is a valid exercise of legislative authority. The legislature, not this Court, is entrusted with the duty of balancing the extent of the guarantees of freedom against the need for orderly management, integrity and competency of classified employees. A wholesale ban on all political activity does not meet the standards of precision necessary in drafting restrictions on First Amendment rights. There is no apparent attempt by the legislature to balance a deputy sheriff's right to participate in political expression against the government's interest in maintaining non-political law enforcement. The proper inquiry is a balancing of government needs and private rights. A rewriting of W.Va.Code, 1931, 7-14-15(a), as amended, must be based on a detailed determination of what dangers the State seeks to control and of what rights it must guarantee. Such task is a valid exercise of legislative, not judicial, authority.
W.Va.Code, 1931, 7-14-15(a), as amended, prohibiting deputy sheriffs from engaging in any political activity of any kind, character, or nature whatsoever except voting is unconstitutionally overbroad and vague and should therefore be voided in its entirety.
MILLER, Justice, concurring:
While I concur with the result reached in this case, I disagree with the approach engendered by the doctrine of the least obtrusive remedy.
The doctrine of the least obtrusive (or intrusive) remedy has been applied by this Court on four previous occasions in order to provide relief on constitutional grounds in a *254 manner that would not require invalidating a statutory provision in its entirety. In none of these instances, however, has the "doctrine" been employed by this Court to justify a statutory construction by which the Court inserts into the statute a detailed definition of a key statutory phrase and then applies the enumerated details, retrospectively, to the case before the Court.
In State ex rel. Alsop v. McCartney, W.Va., 228 S.E.2d 278 (1976), the Court considered a challenge to a particular ballot provision which unconstitutionally discriminated against independent candidates. Rather than strike the statute, the Court, in establishing the doctrine of the least obtrusive remedy, announced that it would simply require ballot access in the appropriate case.
In State ex rel. Harris v. Calendine, W.Va., 233 S.E.2d 318 (1977), we applied the doctrine to the West Virginia juvenile commitment provisions which unconstitutionally failed to distinguish between status offenders and criminal offenders. Instead of invalidating the statute, the Court set forth the constitutional principles under which the application of the statute must be limited.
Similarly, in Waite v. Civil Service Commission, W.Va., 241 S.E.2d 164 (1977), the Court upheld a temporary suspension provision so long as its application included minimal due process protections.
Finally, in State ex rel. Whitman v. Fox, W.Va., 236 S.E.2d 565 (1977), the Court applied the doctrine to support the proposition that, where possible, the Court would strike only the unconstitutional portion of a statute rather than invalidating an unconstitutional statute as a whole.
The doctrine of the least obtrusive remedy, expressed as such, does not appear to be discussed by other state courts or by the federal courts. The doctrine, however, may be little more than a corollary of the familiar and widespread principle that statutes should be construed whenever possible so as to avoid a ruling of unconstitutionality. Curtis v. Loether, 415 U.S. 189, 94 S.Ct. 1005, 39 L.Ed.2d 260 (1974); Civil Service Commission v. Letter Carriers, 413 U.S. 548, 93 S.Ct. 2880, 37 L.Ed.2d 796 (1973); United States v. Vuitch, 402 U.S. 62, 91 S.Ct. 1294, 28 L.Ed.2d 601 (1971). This principle was expressed by this Court in Syllabus Point 1 of State ex rel. Kanawha County Bldg. Commission v. Paterno, W.Va., 233 S.E.2d 332 (1977):
"`When the constitutionality of a statute is challenged, every reasonable construction must be resorted to by the courts to sustain its validity and any reasonable doubt must be resolved in favor of the constitutionality of the legislative act in question.' Syllabus point 1, State ex rel. West Virginia Housing Development Fund v. Waterhouse, W.Va., 212 S.E.2d 724 (1974)."
See also State v. Flinn, W.Va., 208 S.E.2d 538 (1974); State ex rel. City of Charleston v. Coghill, 156 W.Va. 877, 207 S.E.2d 113 (1973); State ex rel. Hughes v. Board of Education, 154 W.Va. 107, 174 S.E.2d 711 (1970), cert. denied, 403 U.S. 944, 91 S.Ct. 2274, 29 L.Ed.2d 854 (1971).
The difficulty with the majority's solution in the present case is that it is not merely resolving an ambiguity in favor of a constitutional result, or applying a constitutional principle to limit a statute's scope, but is instead inserting into a statutory framework definitional detail that does not exist. Although this detail is approved by the United States Supreme Court in Civil Service Commission v. Letter Carriers, 413 U.S. 548, 37 L.Ed.2d 796, 93 S.Ct. 2880 (1973), it is important to note that in Letter Carriers, the Court was not supplying statutory detail, but was approving the enumerated list of political activities that the statutory framework already contained.[1]
*255 This distinction is significant for several reasons. First, in Letter Carriers, unlike the present case, the Supreme Court was not drafting statutory details in a manner more properly exercised by a legislature or regulatory commission, but was utilizing the pre-existing regulations to supplement the statutory language. It found that the statute, as complemented by the regulations, provided a constitutionally sufficient framework whereby an employee could ascertain a definitive standard and conform his conduct so as to avoid participating in prohibited activity. Moreover, it is clear from Letter Carriers that the statute and its regulations were complementary and contemporaneously existing. The involved employee, therefore, had prospective guidelines to govern his conduct.
In the present case, however, the delineation of proscribed activity has been established on appeal, and applied retroactively to an employee who could not, at the time, have envisaged the future details of the act he is charged with violating. The problem of retroactive application of these details is particularly acute in the present case where the deputy's activity was not so extreme that formulations differing in detail would not produce different results.
In Broadrick v. Oklahoma, 413 U.S. 601, 93 S.Ct. 2908, 37 L.Ed.2d 830 (1973), a companion case to Letter Carriers, the United States Supreme Court upheld Oklahoma's prohibition of political activity among state civil service employees against a challenge that the statutory prohibition was unconstitutionally vague and broad.[2] In support of the constitutionality of the prohibition, the Court noted that the Rules of the State Personnel Board and opinions of the State Attorney General helped provide the definitional detail that spared the provision from unconstitutional vagueness and overbreadth.
I would resolve this case on the basis of Broadrick and Letter Carriers, since there are longstanding opinions of the West Virginia Attorney General detailing proscribed political activity for civil servants. Although there are no Attorney General opinions directly relating to the deputy sheriff statute, its statutory language restraining political activity is identical, in its relevant parts, to the statutory language restraining political activity for both fire department employees and city police who are under civil service.[3]
Under the police provision, W.Va.Code, 8-14-19, and the fire department provision, W.Va.Code, 8-15-24, the Attorney General has set forth, in a 1966 opinion, an itemization of the political activity prohibited by these provisions:
"We have concluded the following activities to be prohibited as `political activity' on the part of a police officer or a *256 member of a fire department of any municipality governed by civil service rules: Serving as an election officer; serving on any political party committee; serving as a poll watcher, challenger or checker; soliciting support for a candidate; soliciting campaign contributions; circulating leaflets, circulars, and other advertising material; organizing political meetings; transporting voters to register on behalf of a political party; transporting voters to the polls on behalf of candidates seeking election; expressing political views at caucuses, conventions or other political gatherings; participating in political parades; canvassing for signatures on party nominating committees serving as delegates to conventions; placing in nomination a candidate at a convention; and serving as an officer at a convention or on convention committees.
"But there are certain things which we believe that a municipal police officer or a fireman may properly do ... such as casting a ballot at the primary or general elections; attending, as a spectator, political rallies, dinners, etc., without any active participation therein; expressing private political views, but not at political gatherings or for the purpose of soliciting support or funds for the aid of any candidate or political party. We are of the view that civil service covered municipal policemen and firemen may also vote as individuals for nominees in a political convention." 51 Op. Att'y Gen. 780, 782-83 (1966).
Further Attorney General opinions regarding the political activity of civil servants include Op. Att'y Gen., Jan. 23, 1976 (permitting lobbying); Op. Att'y Gen., Dec. 18, 1975 (excluding chief deputy from coverage); 52 Op. Att'y Gen. 571 (1968) (disallowing leave of absence in order to engage in otherwise prohibited political activity).
Because of the substantial identity of the provisions disallowing political activity for deputy sheriffs, city police, and fire department employees, the Attorney General's opinions provide appropriate guidance for determining the scope of prohibited political activity for deputy sheriffs. These Attorney General guidelines provide the type of detail that the United States Supreme Court, under Broadrick v. Oklahoma, would permit to save the general statutory prohibition from vagueness and overbreadth.
Since the detailed itemization in 51 Op. Att'y Gen. 780 was set forth in 1966, this list provides the guidelines that were in effect at the time of the alleged violations in the present case. It is this list of political prohibitions that should be applied to the deputy's activity, rather than imposing, retroactively, the judicially created detail in the majority opinion.
I am authorized to state that Justice HARSHBARGER joins me in this concurrence.
McGRAW, Justice, dissenting:
For the reasons stated in the ultimate paragraph of Justice Caplan's dissenting opinion, I also dissent.
NOTES
[1] This case was originally assigned to another justice but after several attempts at its resolution in a series of decision conferences it was reassigned to this writer in October 1980.
[2] The preeminent statement on this subject is found in Civil Service Commission v. Letter Carriers, supra, 413 U.S. at 556, 93 S.Ct. at 2886 where the United States Supreme Court indicates that a government may proscribe "[O]rganizing a political party or club; actively participating in fund-raising activities for a partisan candidate or political party; becoming a partisan candidate for, or campaigning for, an elective public office; actively managing the campaign of a partisan candidate for public office; initiating or circulating a partisan nominating petition or soliciting votes for a partisan candidate for public office; or serving as a delegate, alternate or proxy to a political party convention...." Obviously our statute could be erroneously construed to proscribe more than that allowed.
[3] Justice White relied on the differing levels of overbreadth scrutiny in certain contexts for his analysis in Broadrick v. Oklahoma, 413 U.S. 601, 616, 93 S.Ct. 2908, 2918, 37 L.Ed.2d 830 (1973) where he observed that statutes seeking to regulate political activity in an even-handed manner, "have in the past been subject to a less exacting scrutiny." Similarly in Arnett v. Kennedy, 416 U.S. 134, 94 S.Ct. 1633, 40 L.Ed.2d 15 (1974), the Court rejected an overbreadth challenge to the Lloyd-LaFollette Act providing for the discharge of federal civil service employees for "such cause as will promote the efficiency of the service." The Court sustained a statute with comparably broad language in Parker v. Levy, 417 U.S. 733, 94 S.Ct. 2547, 41 L.Ed.2d 439 (1974) when the Court upheld the Uniform Military Code of Justice provisions which proscribed "conduct unbecoming an officer and a gentleman," and a provision prohibiting "all disorders and neglects to the prejudice of good order and discipline in the armed forces."
[4] In Erznoznik v. City of Jacksonville, 422 U.S. 205, 95 S.Ct. 2268, 45 L.Ed.2d 125 (1975) the Court held a city ordinance overbroad which prohibited the exhibition of films containing nudity by drive-in movie theatres when the screen is visible from a public street or place. The next term, in Young v. American Mini Theatres, 427 U.S. 50, 96 S.Ct. 2440, 49 L.Ed.2d 310 (1976) the Court sustained against an overbreadth attack, an ordinance prohibiting operation of any "adult" movie theatre or similar establishment within 1000 feet of any other such establishment. To our eyes one of the few distinctions between these cases is that one covers drive-in theatres while the other covers sitdown theatres. As Justice Stewart noted in his dissent "[i]n short, Erznoznik is almost on `all fours' with this case." Id. at 88, 96 S.Ct. at 2461.
[5] In Dombrowski, supra, the Court invalidated on overbreadth grounds Louisiana's subversive activities and Communist Control Law and Communist Propaganda Control Law. The Court found the statutory definition of a "subversive organization" so broad that constitutionally protected speech was inhibited.
[6] In Schaumberg, supra, the Court invalidated a village ordinance prohibiting door-to-door solicitations of contributions by charitable organizations not using at least 75% of their receipts for "charitable purposes."
[7] We originally articulated this doctrine as "least obtrusive remedy" in State ex rel. Harris v. Calendine, W.Va., 233 S.E.2d 318 (1977); Waite v. Civil Service Commission, W.Va., 241 S.E.2d 164 (1977); State ex rel. Whitman v. Fox, W.Va., 236 S.E.2d 565 (1977); and, State ex rel. Alsop v. McCartney, W.Va., 228 S.E.2d 278 (1977); however, upon closer examination of the linguistics it appears that the word "intrusive" is a more accurate reflection of what our Court means notwithstanding the use of "obtrusive" in prior cases.
[8] Gooding v. Wilson, 405 U.S. 518, 92 S.Ct. 1103, 31 L.Ed.2d 408 (1972) (statute prohibiting opprobrious words or abusive language); Keyishian v. Board of Regents, 385 U.S. 589, 87 S.Ct. 675, 17 L.Ed.2d 629 (1967) (which prevented employment of "subversives" in state employment); United States v. Robel, 389 U.S. 258, 88 S.Ct. 419, 19 L.Ed.2d 508 (1967) (federal law restricting employment of subversives); NAACP v. Button, 371 U.S. 415, 83 S.Ct. 328, 9 L.Ed.2d 405 (1963) (barratry statute held void); and, Shelton v. Tucker, 364 U.S. 479, 81 S.Ct. 247, 5 L.Ed.2d 231 (1960) (statute requiring teachers to reveal all their associational affiliations).
[1] The statute in question, 5 U.S.C. § 7324, proscribed federal civil service employees from taking "an active part in political management or in political campaigns." The statute incorporated the then existing rules and regulations of the Civil Service Commission to provide the specifics of what constitutes proscribed activities. The Civil Service regulations which were in effect at the time of Letter Carriers and were approved by that decision contained some thirteen prohibited activities. 5 C.F.R. § 733.122(b).
[2] The Oklahoma statute in its material part stated:
"No employee in the classified service shall be a member of any national, state or local committee of a political party, or an officer or member of a committee of a partisan political club, or a candidate for nomination or election to any paid public office, or shall take part in the management or affairs of any political party or in any political campaign, except to exercise his right as a citizen privately to express his opinion and to cast his vote." Okla.Stat.Ann. tit. 74, § 818.
[3] W.Va.Code, 7-14-15(a), relating to deputy sheriffs:
"[N]o deputy sheriff covered by the provisions of this article shall engage in any political activity of any kind, character or nature whatsoever, except to cast his vote at any election or shall act as an election official in any municipal, county or state election." W.Va.Code, 8-15-24, relating to fire department employees:
"No member of any paid fire department shall engage in any political activity of any kind, character or nature whatsoever, except to cast his vote at any election, or shall act as an election official in any election, municipal, county or state."
W.Va.Code, 8-14-19(a), relating to city police:
"No member of any paid police department of a Class I or Class II city shall engage in any political activity of any kind, character or nature whatsoever, except to cast his vote at any election, or shall act as an election official in any election, municipal, county or state."
|
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 18, 2009
No. 08-41071
Conference Calendar Charles R. Fulbruge III
Clerk
UNITED STATES OF AMERICA,
Plaintiff-Appellee
v.
CELESTINO RIVERA-CASTANEDA,
Defendant-Appellant
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 5:08-CR-383-ALL
Before HIGGINBOTHAM, DAVIS, and CLEMENT, Circuit Judges.
PER CURIAM:*
Celestino Rivera-Castaneda (Rivera) appeals the 70-month sentence
imposed following his guilty plea to illegal reentry following a previous
deportation. He contends that the district court reversibly erred in applying the
U.S.S.G. § 2L1.2 enhancement to his sentence based upon his prior Texas
conviction for indecency with a child-contact, a violation of Texas Penal Code
§ 21.11(a)(1). He asserts that a violation of § 21.11(a)(1) does not constitute the
*
Pursuant to 5 TH C IR. 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 5 TH C IR. R. 47.5.4.
No. 08-41071
enumerated offense of sexual abuse of a minor for purposes of the § 2L1.2
enhancement.
As Rivera acknowledges, this court has already addressed the issue of
whether a prior Texas conviction for indecency with a child, a violation of
§ 21.11(a)(1), constitutes sexual abuse of a minor for purposes of
§ 2L1.2(b)(1)(A)(ii). See United States v. Ayala, 542 F.3d 494, 495 (5th Cir.
2008), cert. denied, 129 S. Ct. 1388 (2009); United States v. Najera-Najera, 519
F.3d 509, 511-12 (5th Cir.), cert. denied, 129 S. Ct. 139 (2008); United States v.
Zavala-Sustaita, 214 F.3d 601, 604 (5th Cir. 2000). Because Rivera’s only
argument on appeal is foreclosed by this court’s precedent, the judgment of the
district court is AFFIRMED.
2
|
15-3552-ag
Singh v. Sessions
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE
OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY
ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL
APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY
CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY
COUNSEL.
At a stated term of the United States Court of Appeals for the Second
Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley
Square, in the City of New York, on the 14th day of April, two thousand
seventeen.
PRESENT:
PETER W. HALL,
DENNY CHIN,
Circuit Judges.
LASHANN DEARCY HALL,
District Judge.*
_____________________________________
JAGJEET SINGH,
Petitioner,
v. 15-3552-ag
JEFFERSON B. SESSIONS III, UNITED
STATES ATTORNEY GENERAL,
Respondent.
_____________________________________
For Petitioner: GURPATWANT SINGH PANNUN, Jackson
Heights, N.Y.
For Respondent: BRENDAN P. HOGAN, Trial Attorney;
Benjamin C. Mizer, Principal Deputy
* Judge LaShann DeArcy Hall, United States District Judge for the
Eastern District of New York, sitting by designation.
Assistant Attorney General; Song Park,
Senior Litigation Counsel; Office of
Immigration Litigation, United States
Department of Justice, Washington, D.C.
UPON DUE CONSIDERATION of this petition for review of a Board
of Immigration Appeals (“BIA”) decision, it is hereby ORDERED,
ADJUDGED, AND DECREED that the petition for review is GRANTED.
Petitioner Jagjeet Singh, a native and citizen of India, seeks review of an
October 16, 2015, decision of the BIA affirming a December 9, 2013, decision of
an Immigration Judge (“IJ”) denying Singh’s application for asylum,
withholding of removal, and relief under the Convention Against Torture
(“CAT”). In re Jagjeet Singh, No. A205 427 652 (B.I.A. Oct. 16, 2015), aff’g
No. A205 427 652 (Immig. Ct. N.Y. City Dec. 9, 2013). We assume the parties’
familiarity with the underlying facts and procedural history in this case.
Under the circumstances of this case, we have considered both the IJ’s
and the BIA’s opinions “for the sake of completeness.” Wangchuck v. Dep’t of
Homeland Sec., 448 F.3d 524, 528 (2d Cir. 2006). The applicable standards of
review are well established. See 8 U.S.C. § 1252(b)(4)(B); Xiu Xia Lin v.
Mukasey, 534 F.3d 162, 165–66 (2d Cir. 2008); Pierre v. Gonzales, 502 F.3d
109, 113 (2d Cir. 2007).
A. Asylum
Our jurisdiction to review the agency’s finding that an asylum
application is untimely is limited to constitutional claims and questions of law.
2
8 U.S.C. §§ 1158(a)(3), 1252(a)(2)(D). The agency erred as a matter of law in
pretermitting Singh’s asylum application as untimely filed.
An asylum applicant must “demonstrate[] by clear and convincing
evidence that the application has been filed within 1 year after the date of the
alien’s arrival in the United States.” 8 U.S.C. § 1158(a)(2)(B). Here,
however, the agency required Singh to definitively establish his arrival date,
and ignored evidence that Singh lived in India during the year preceding his
filing, which was material to whether he filed his application within one year
of his arrival in the United States. Accordingly, the agency erred as a matter
of law by applying an incorrect burden and ignoring material evidence as to
the timeliness of Singh’s application and remand is required. See 8 U.S.C.
§ 1158(a)(2)(B); see also Xiao Ji Chen v. U.S. Dep’t of Justice, 471 F.3d 315, 329
(2d Cir. 2006) (explaining that application of “legally erroneous standard” or
“fact-finding which is flawed by error of law” are reviewable issues).
B. Withholding of Removal and CAT Relief
“Considering the totality of the circumstances, and all relevant factors, a
trier of fact may base a credibility determination on the . . . consistency
between the applicant’s . . . written and oral statements (whenever made and
whether or not under oath, and considering the circumstances under which
the statements were made), . . . without regard to whether an inconsistency,
inaccuracy, or falsehood goes to the heart of the applicant’s claim.” 8 U.S.C.
§ 1158(b)(1)(B)(iii); Xiu Xia Lin, 534 F.3d at 163–64. The agency’s adverse
3
credibility determination is not supported by the totality of the circumstances.
The agency found Singh not credible as to his claim that he was detained
and beaten on two occasions in India because he omitted certain details of
those beatings from his asylum application. The agency may, in certain
circumstances, rely on omissions from an application in rendering an adverse
credibility determination. 8 U.S.C. § 1158(b)(1)(B)(iii); Xiu Xia Lin, 534 F.3d
at 166–67 & n.3. However, an asylum applicant is not required to provide
every detail of his claim in the application. See Secaida-Rosales v. INS, 331
F.3d 297, 308 (2d Cir. 2003) (“Although the application invites the applicant to
attach additional pages, we think the small space on the form itself would
hardly indicate to an applicant that the failure to include every detail
regarding the basis for asylum could later lead to an adverse credibility
finding when the applicant elaborates on [those dates] in the course of a
deportation hearing.”), superseded by statute on other grounds as recognized in
Xiu Xia Lin, 534 F.3d at 167. Given that Singh’s testimony and application
were virtually identical with only one or two descriptive details missing from
his initial written statement, the IJ erred in characterizing the statements as
inconsistencies or omissions when viewed in light of the totality of the
circumstances. See id.; see also 8 U.S.C. § 1158(b)(1)(B)(iii).
Without an adequate basis for questioning Singh’s credibility, the
agency was not permitted to rely solely on a failure to corroborate to find him
not credible. See Diallo v. INS, 232 F.3d 279, 287 (2d Cir. 2000); Chuilu Liu
4
v. Holder, 575 F.3d 193, 198 n.5 (2d Cir. 2009). Because we cannot
confidently predict that the agency would have made the same decision absent
the identified errors, remand is required. See Xiao Ji Chen, 471 F.3d at 339.
Finally, we note that insofar as the BIA affirmed the IJ’s alternative
finding that Singh could relocate within India to avoid persecution, that
finding was erroneous because the IJ improperly placed the burden of proof on
Singh when his alleged persecutor was the Indian government. See 8 C.F.R.
§ 1208.16(b)(3)(ii) (“In cases in which the persecutor is a government or is
government-sponsored, or the applicant has established persecution in the
past, it shall be presumed that internal relocation would not be reasonable,
unless the Service establishes by a preponderance of the evidence that under
all circumstances it would be reasonable for the applicant to relocate.”).
For the foregoing reasons, the petition for review is GRANTED, and the
case is REMANDED for further proceedings consistent with this order.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
5
|
WEAVER V. SNB
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
ON REMAND
NO. 3-88-242-CV
OWEN G. WEAVER AND JOHNNIE N. WEAVER,
APPELLANTS
vs.
SOUTHWEST NATIONAL BANK,
FEDERAL DEPOSIT INSURANCE CORPORATION,
AS RECEIVER OF SOUTHWEST NATIONAL BANK, ACTING
IN ITS CORPORATE CAPACITY, AND TEXAS BANK-SOUTHWEST,
APPELLEES
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT
NO. 406,504, HONORABLE JON N. WISSER, JUDGE PRESIDING
Southwest National Bank (SNB), appellee, (1) brought suit against Owen G. and
Johnnie N. Weaver (collectively, the "Weavers"), appellants, to recover a deficiency judgment
on two promissory notes following the non-judicial foreclosure sale of two fourplexes pursuant
to deeds of trust executed by the Weavers. The case was tried to a jury, which found damages
of $113,526.46 in favor of SNB. The trial court rendered judgment for SNB. The Weavers
perfected this appeal. We will affirm.
On appeal the Weavers assert five points of error. In a previous unpublished, per
curiam opinion, this Court overruled one of the points of error and declined to address the
remaining four points on procedural grounds. The Texas Supreme Court reversed our judgment
and remanded the cause to this Court for consideration of the remaining four points of error.
Weaver v. Southwest Nat'l Bank, 813 S.W.2d 481 (Tex. 1991).
In their other four points, the Weavers argue that the trial court erred (1) in
granting judgment for SNB because the jury found that SNB materially breached its obligations
under the loan documents; (2) in granting judgment for SNB because the jury found that SNB did
not act in good faith in its dealings with the Weavers; (3) in denying a new trial on the Weavers'
counterclaim because there was a conflict between the jury's answers to certain questions; and (4)
in disregarding certain jury findings that were supported by probative evidence.
STATEMENT OF FACTS
SNB loaned the Weavers $208,000 in November 1984 and loaned an additional
$180,000 to Owen G. Weaver in June 1985. These loans, secured by deeds of trust on two lots,
represented construction financing for two fourplexes constructed by the Weavers. The Weavers
eventually defaulted on the loans, whereupon SNB instituted non-judicial foreclosure proceedings
pursuant to the deeds of trust. At the foreclosure sale, SNB bid $170,000 for each lot and paid
a total of $340,000 for both properties. SNB's bid reflected what it thought the fair market value
of the property was as of the date of foreclosure.
After applying the proceeds of the sale against the amounts remaining due on each
of the notes, SNB brought suit against the Weavers for the deficiency. The Weavers
counterclaimed, alleging that SNB had committed breach of contract, fraud, negligence, breach
of fiduciary duty, and violations of the Deceptive Trade Practices Act (DTPA), Tex. Bus. & Com.
Code Ann. §§ 17.41-.63 (1987 & Supp. 1991). The jury found that, at the time of trial, the
Weavers still owed SNB $73,530.68 on the $208,000 note, and that Owen G. Weaver still owed
SNB $39,995.78 on the $180,000 note.
The jury also found that SNB had materially breached its obligations under the
notes, renewals, and deeds of trust; that SNB failed to act in good faith; and that SNB's failure
to act in good faith was the proximate cause of damages to the Weavers. However, the jury found
that the Weavers had suffered no monetary damages as a result of SNB's conduct. The trial court
disregarded the adverse jury findings and rendered judgment in favor of SNB.
BREACH OF CONTRACT
In their first and fifth points of error, the Weavers argue that the trial court erred
in granting judgment for SNB by disregarding the jury's finding that SNB materially breached its
obligations under the loan documents. A trial court may disregard any jury finding on a question
that has no support in the evidence or a question that is immaterial. Tex. R. Civ. P. 301; Eubanks
v. Winn, 420 S.W.2d 698, 701 (Tex. 1967); C & R Transp., Inc. v. Campbell, 406 S.W.2d 191,
194 (Tex. 1966); Brown v. Armstrong, 713 S.W.2d 725, 728-29 (Tex. App. 1986, writ ref'd
n.r.e.). The Weavers point to five instances in the record that allegedly support the jury's finding
of material breach by SNB: (1) SNB bid substantially less than fair market value for the property
at the foreclosure sale; (2) SNB failed to advertise the foreclosure sale as required by the deeds
of trust; (3) SNB conducted a void foreclosure sale through an improperly appointed substitute
trustee; (4) SNB took possession of the mortgaged property prior to foreclosure; and (5) SNB
failed to give the Weavers credit for $17,000 of the foreclosure sale proceeds. Because the jury
question, as worded, did not identify any particular "material breach" by SNB, we will address
each of the circumstances asserted by the Weavers.
1. Failure to Advertise
The deeds of trust in issue contained the following clause:
[A]nd after advertising the time, place and terms of the sale of the above described
and conveyed property, then subject to the lien hereof, and mailing and filing
notices as required by section 51.002, Texas Property Code, as then amended
(successor to article 3810, Texas Revised Civil Statutes), and otherwise complying
with that statute, the Trustee shall sell the above described property
. . . .
(Emphasis added.) The Weavers do not argue that SNB failed to comply with the provisions of
section 51.002; rather, they assert that SNB's posting of a notice at the county courthouse
announcing the time, place, and terms of the upcoming public auction of the mortgaged property
was insufficient to satisfy the requirement in the deeds of trust that the sales be "advertised." The
Weavers argue that the phrase "after advertising the time, place and terms of the sale" required
SNB to advertise the sale in a newspaper or the like. We disagree.
If the language of a contract is unambiguous, then a court will construe the
contractual language as a matter of law. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983).
Whether the language of a contract is ambiguous is itself a question of law for the court to decide
by looking at the contract as a whole in light of the circumstances present when the contract was
made. Id. at 394. The Texas Supreme Court has adopted the following definition of "advertise"
from Black's Law Dictionary (5th ed. 1979):
To advise, announce, apprise, command, give notice of, inform,
make known, publish. On call to the public attention by any means whatsoever.
Any oral, written, or graphic statement made by the seller in any manner in
connection with the solicitation of business and includes, without limitation because
of enumeration, statements and representations made in a newspaper or other
publication or on radio or television or contained in any notice, handbill, sign,
catalog, or letter. . . .
Smith v. Baldwin, 611 S.W.2d 611, 614-15 (Tex. 1980). Although the term "advertise" is very
broad, the Weavers have failed to convince this Court that it is ambiguous. Nothing in the
language of the deeds of trust or the record indicates that at the time the parties executed the deeds
of trust they intended the term to be read in a narrow sense. There is no evidence, for example,
that SNB was obligated to engage in one type of advertising over another. The Weavers' bare
assertion that a newspaper advertisement was required is not supported by the record. The intent
of the parties must be taken from the agreement itself, not from the parties' present interpretation.
First City Nat'l Bank v. Concord Oil Co., 808 S.W.2d 133, 137 (Tex. App. 1991, no writ).
Therefore, we conclude as a matter of law that the term "advertise" is not
ambiguous and should be construed broadly. Under such a construction, which we believe
comports as well with common sense, the term "advertise" clearly includes the posting of notices
in public places. Thus, SNB complied with the "advertisement" requirements of the deeds of trust
by posting notices of the upcoming sale at the county courthouse.
2. Taking Possession of Property
As another basis for the jury's material-breach finding, the Weavers point to
evidence that prior to foreclosure, SNB collected rents from tenants on the mortgaged properties,
entered into leases for the mortgaged properties, and had the properties mowed. This evidence,
however, provides no support for the jury finding, because these actions by SNB were expressly
permitted by the deeds of trust:
That in the event Grantors [the Weavers] shall fail to keep the
improvements on the property hereby conveyed in good repair and condition, . .
. then Beneficiary [SNB] may, at his option, . . . make such repairs . . . on said
property . . . .
. . . .
[I]n the event of any default in the payment of said note or
hereunder, Beneficiary, his agent or representative, is hereby authorized, at his
option, to collect said rents, or if such property is vacant to rent the same and
collect the rents . . . .
It is undisputed that the Weavers defaulted on their payments before SNB entered into leases,
collected rents, or had the property mowed. Thus, we conclude as a matter of law that these
actions by SNB did not constitute material violations of the deeds of trust.
3. Failure to Give Credit
The Weavers also assert that SNB breached the loan documents by failing to give
them credit on their indebtedness for $17,000 of the proceeds from the foreclosure sale. This
assertion also lacks merit. A reading of the pleadings on which SNB went to trial and the damage
amounts found by the jury shows that proper credit was given for the $17,000.
4. Appointment of Substitute Trustee and Inadequate Consideration
The Weavers also argue that SNB breached its contractual obligations by bidding
substantially less than fair market value for the properties at the foreclosure sale. The rule is well
established, however, that mere inadequacy of consideration is not grounds for setting aside a
trustee's sale if the sale was legally and fairly made. See American Sav. & Loan Ass'n v. Musick,
531 S.W.2d 581, 587 (Tex. 1975); Nautical Landings Marina, Inc. v. First Nat'l Bank, 791
S.W.2d 293, 298-99 (Tex. App. 1990, writ denied). There must be evidence of irregularity,
though slight, which must have caused or contributed to cause the property to be sold for a grossly
inadequate price. Musick, 531 S.W.2d at 587; Pentad Joint Venture v. First Nat'l Bank, 797
S.W.2d 92, 95-96 (Tex. App. 1990, writ denied). As evidence of irregularity, the Weavers point
to evidence that SNB improperly appointed the substitute trustee who conducted the foreclosure
sale: the substitute trustee was not formally appointed until a few days after the notices of
foreclosure sale were sent.
Even if we assume, however, that the foreclosure sale conducted by the substitute
trustee was invalid, we conclude that SNB was not precluded from suing the Weavers for a
deficiency judgment. First, there is no evidence that the allegedly improper appointment of the
substitute trustee caused the property to be sold at a grossly inadequate price. Further, in Tarrant
Savings Association v. Lucky Homes, Inc., 390 S.W.2d 473, 475 (Tex. 1965), the Texas Supreme
Court rejected the contention that a prerequisite to the recovery of a deficiency judgment is the
establishment of the deficiency by a valid foreclosure sale:
The basic error committed by the Court of Civil Appeals lies in the
premise upon which it constructed its opinion. That court accepted as sound the
rule that "[a] prerequisite to the recovery of a deficiency judgment is the
establishment of the deficiency by a valid foreclosure sale", citing Casa Monte Co.
v. Ward, Tex. Civ. App., 342 S.W.2d 812, no writ hist., and Sullivan v. Hardin,
Tex. Civ. App., 102 S.W.2d 1110, no writ hist. This premise from which the
Court of Civil Appeals reasoned is clearly erroneous. Under Maupin v. Cheney,
139 Tex. 426, 163 S.W.2d 380, if the sale is valid the mortgagee is entitled to
judgment for the amount of the note, interest and attorney's fees, less the amount
received at the trustee sale and other legitimate credits. If the sale is invalid and
title to the property has passed to a third person or the property has been
appropriated to the use and benefit of the mortgagee, the mortgagor is entitled to
have the reasonable market value of the property credited on the note.
Therefore, even if we assume for the sake of argument that the foreclosure sale in
the present case was invalid, based on Lucky Homes we reject the Weavers argument that SNB
is precluded from recovering a deficiency judgment. In such an event the Weavers would only
be entitled to have the reasonable market value of the property at the time of foreclosure credited
on the note. See Crow v. Heath, 516 S.W.2d 225, 228-29 (Tex. Civ. App. 1974, writ ref'd
n.r.e.) (holding that lack of requisite notice of intention to accelerate the indebtedness, coupled
with the inadequacy of consideration, was sufficient to set the foreclosure sale aside; therefore,
debtor entitled to a credit on the note in the amount of the reasonable market value of the
property).
In the present case, however, that argument fails as well. SNB established its case
for a deficiency judgment by introducing the promissory notes executed by the Weavers and
showing a proper credit of the proceeds received from the sale of the property securing the notes.
The burden then shifted to the Weavers to show some reason for denying the recovery sought by
SNB. See Lucky Homes, 390 S.W.2d at 474. Even if we assume that the Weavers were entitled
to a credit for the reasonable market value of the property, the Weavers failed to obtain a jury
finding as to the reasonable market value of the property at the time of foreclosure and have,
therefore, waived that defense. Tex. R. Civ. P. 279.
Moreover, even if it could be said that one or more elements of an "invalid
foreclosure sale" defense had been submitted to and found by the jury, the omitted element
(reasonable market value of the property) would be deemed found to support the judgment if there
is factually sufficient evidence to support such a finding. See Tex. R. Civ. P. 279. The Weavers
did not challenge the sufficiency of the evidence to support such a deemed finding, and so have
waived any such complaint. In any event, there was conflicting evidence as to the reasonable
market value of the property at the time of foreclosure; after reviewing the record, we conclude
that there was factually sufficient evidence to support a deemed finding that SNB's bid represented
the reasonable market value of the property. This conclusion is further support by the jury's
finding that the Weavers suffered no monetary damages as a result of SNB's conduct.
Therefore, based on the foregoing discussion, we conclude that there was no
evidence that SNB breached its obligations under the loan documents by failing to advertise the
foreclosure sale; by failing to give proper credit for the foreclosure-sale proceeds; or by taking
possession of the property prior to foreclosure. Further, even if we assume that SNB breached
its obligations by improperly appointing a substitute trustee, we conclude that such a finding was
immaterial because: (1) the Weavers failed to obtain a jury finding that the reasonable market
value of the property was more than the amount bid by SNB at the foreclosure sale, thereby
waiving that defense; (2) the Weavers failed to challenge the sufficiency of the evidence to support
a deemed finding that the reasonable market value was the amount bid by SNB, thereby waiving
that complaint; and (3) such a deemed finding is supported by factually sufficient evidence.
DUTY OF GOOD FAITH
In their second and fifth points of error, the Weavers assert that the trial court erred
in granting judgment for SNB by disregarding the jury's finding that SNB failed to act in good
faith in its dealings with the Weavers. In support of their argument, the Weavers rely on both a
common law duty of good faith and fair dealing and the requirement of good faith found in Tex.
Bus. & Com. Code Ann. §§ 1.203 & 1.201(19) (1968).
Generally, a duty of good faith and fair dealing does not exist in Texas unless
created by either express contractual language or unless a special relationship exists marked by
shared trust or an imbalance in bargaining power. Federal Deposit Ins. Corp. v. Coleman, 795
S.W.2d 706, 708-09 (Tex. 1990); Arnold v. National County Mut. Fire Ins. Co., 725 S.W.2d
165, 167 (Tex. 1987); Herndon v. First Nat'l Bank, 802 S.W.2d 396, 399 (Tex. App. 1991, writ
denied); Nautical Landings Marina, 791 S.W.2d at 299. In the present case, there is no evidence
of express contractual language creating a duty of good faith; nor is there any evidence of a
special relationship between the Weavers and SNB. Indeed, the relationship of mortgagor and
mortgagee ordinarily does not involve a duty of good faith. Coleman, 795 S.W.2d at 709;
Nautical Landings Marina, 791 S.W.2d at 299. Therefore, we conclude that SNB did not owe
a common law duty of good faith and fair dealing to the Weavers.
The Weavers also rely on section 1.203 of the Texas Uniform Commercial Code
(the "Code"), which states: "Every contract or duty within this title imposes an obligation of good
faith in its performance or enforcement." Tex. Bus. & Com. Code Ann. § 1.203 (1968). A
critical question, therefore, is whether the transaction between the Weavers and SNB was
governed by the Code. The Weavers argue that the loan documents in this case include
instruments governed by chapters 3 and 4 of the Code.
After examining chapter 4 of the Code, we conclude that it is inapplicable to the
present case. As for chapter 3, it applies only to "instruments" that are "negotiable." See Tex.
Bus. & Com. Code Ann. § 3.104 (1968). But see § 3.805. In order to be negotiable, the written
instrument must contain a promise to "pay a sum certain in money." See Code § 3.104(a)(2).
An amount payable is a "sum certain" even if it is to be paid with stated interest. See § 3.106.
A note with a variable interest rate, however, has been held not to be a promise to pay a "sum
certain" and, therefore, not to be a "negotiable instrument" within the meaning of chapter 3 of the
Code. See Brazos River Auth. v. Carr, 405 S.W.2d 689, 694-95 (Tex. 1966); Dillard v. NCNB
Tex. Nat'l Bank, 815 S.W.2d 356, 360 (Tex. App. 1991, no writ); Lexington Ins. Co. v. Gray,
775 S.W.2d 679, 682 (Tex. App. 1989, writ denied); see also Federal Sav. & Loan Ins. Corp.
v. Griffin, 935 F.2d 691, 697 n.3 (5th Cir. 1991); In re Gas Reclamation, Inc. Securities
Litigation, 741 F.Supp. 1094, 1102-03 (S.D.N.Y. 1990), appeal dismissed, 924 F.2d 448 (2d Cir.
1991) (applying Texas law).
The loan documents in the present case provide for a variable interest rate:
[E]qual to the Prime Rate (as defined by First City National Bank of Austin,
Texas) from time to time announced or posted by First City National Bank of
Austin, Texas plus Two Percent (2%) per annum, but not to exceed the greater of:
(1) the quarterly ceiling from time to time in effect under Article 5069-1.04,
Vernon's Annotated Texas Statutes, as published by the Office of the Consumer
Credit Commissioner, or (2) the maximum rate from time to time allowed under
federal law. The applicable interest rate shall be adjusted as of the date of each
change in such Prime Rate during the term of this loan . . . .
Accordingly, chapter 3 of the Code does not apply to the loan documents in the present case.
Therefore, we conclude that the transaction between the Weavers and SNB was governed neither
by the Code as a whole nor by the good-faith provision contained in section 1.203. Having
determined, as a matter of law, that SNB owed no duty of good faith and fair dealing, we
conclude that the trial court properly disregarded the jury's findings that SNB breached such a
duty and that such breach was the proximate cause of damages to the Weavers.
CONCLUSION
Based on our foregoing discussion, we overrule the Weaver's first, second, and
fifth points of error. Further, based on our holding that SNB did not owe a duty of good faith to
the Weavers, we also overrule their third point of error based on allegedly irreconcilable jury
findings. Finally, because we overruled the Weaver's fourth point of error in our previous
opinion, we affirm the judgment of the trial court.
J. Woodfin Jones, Justice
[Before Justices Powers, Jones and B. A. Smith]
Affirmed on Remand
Filed: January 8, 1992
[Do Not Publish]
1. Also present as appellees in this appeal are two intervenors: (1) the FDIC, as Receiver
for SNB, which was declared insolvent after this appeal was perfected; and (2) Texas Bank-Southwest, to which the FDIC conveyed various assets of SNB, including the promissory
notes in question.
|
384 S.W.2d 492 (1964)
AMERICAN HOMESTEAD INSURANCE COMPANY, Appellant,
v.
Mrs. Pearl DENNY, Appellee.
No. 5-3379.
Supreme Court of Arkansas.
December 7, 1964.
*493 W. B. Brady, Spitzberg, Bonner, Mitchell & Hays, by Beresford L. Church, Jr., Little Rock, for appellant.
McMath, Leatherman, Woods & Youngdahl, Little Rock, for appellee.
HARRIS, Chief Justice.
This litigation involves the construction of the language of the "air travel" clause in an insurance policy issued on the life of Ralph L. Denny. The policy is entirely an accident policy, and the company agrees to pay benefits up to $10,000.00 for loss of life or certain bodily injuries sustained by the insured. As to AIR TRAVEL, the company is liable for:
"Injury sustained in consequence of riding as a passenger, and not as an operator or crew member, in or on, boarding or alighting from, or being struck by any aircraft having a current and valid airworthiness certificate or any transport type aircraft operated by the Military Air Transport Service (MATS) of the United States or by the similar air transport service of any duly constituted governmental authority of any recognized country."
While on temporary duty at Goose Bay Air Base, Labrador, Denny, an Airman Second Class in the United States Air Force, was struck and killed by a propellor of a KC-97G (Stratofreighter). Mrs. Pearl Denny, mother of Ralph, the beneficiary under the policy, made claim to the insurer, American Homestead Insurance Company, appellant herein. The company denied her claim on the ground that Denny was a crew member of the plane, and also on the ground that the plane was of a type excluded under the provisions of the policy. Suit was thereafter instituted, and the court, sitting as a jury, found for Mrs. Denny, holding that "Airman Ralph Denny was not a crew member of the particular plane that caused his death. Denny was not struck by an `aircraft having a current and valid airworthiness certificate or any transport type aircraft operated by the Military Air Transport Service (MATS) of the United States,' but that he was fatally injured when struck by an aircraft operated `by the similar air transport service of any duly constituted governmental authority of any recognized country.'" The judgment was thereupon entered in the principal amount of $10,000.00, together with the sum of $1,200.00 as penalty, and attorneys fees in the amount of $1,000.00. From such judgment appellant has appealed.
For reversal, appellant asserts that Denny was not covered under the policy because (1) he was a crew member of the aircraft which caused his death, and (2) Denny was struck by an aircraft of a type excluded from coverage under the policy.
Inasmuch as we think appellant must prevail under the second contention, we see no necessity to discuss the question of whether he was a crew member of the aircraft which caused his death.
Let it first be said that it is agreed that the term, "airworthiness certificate" has no application to the facts in this case, since this certificate is only issued to civil aircraft. Likewise, it is admitted by appellee that the KC-97G plane is not a MATS aircraft (and, in fact, the court so found).[1]
At the outset, it might be well to discuss some of the functions of MATS (Military Air Transport Service). Air Force regulations relate that the overall *494 mission of this branch of the Air Force "is to maintain, in a constant state of readiness, the military airlift system necessary to perform all airlift tasks under emergency conditions assigned by the Joint Chiefs of Staff in approved war plans and appropriate JCS and Air Force guidance documents. MATS will supervise and operate the Air Weather Service, the Air Photographic and Charting Service, the Air Rescue Service, a domestic aeromedical evacuation system, and the 1254th Air Transport Wing, Special Missions." Additional functions mentioned, and covering several pages, include individual air transport service for the President of the United States and other government officials and foreign dignitaries, and maintaining liaison with the civil air industry. There are numerous other functions performed by MATS, which, however, are not pertinent to this litigation.
The KC-97G plane (a propeller of which struck Denny) is a part of SAC (Strategic Air Command), and the function of SAC is to bomb foreign targets in time of war. The KC-97G is a tanker plane, and is used to refuel bombers while in flight. Actually, it may be said that it serves as an airborne gasoline tank truck. Of course, there is the similarity that both a MATS plane and the KC-97G are aircraft belonging to the United States Air Force, but we see no other similarity that would bring this type of plane under coverage in the accident policy. A passenger automobile and a gasoline truck are also similar in that both are operated by gasoline engines, both have four wheels, and both have headlights and taillights, but it could not seriously be argued that these two types of vehicles render the same service.
It will be noted that the air travel clause provides that coverage is afforded where one is injured while being transported (also boarding, alighting from, or struck) by an aircraft operated "by the Military Air Transport Service of the United States or by the similar air transport service of any duly constituted governmental authority of any recognized country." This last, to us, plainly means that one is covered when he is being transported in, or struck by, a plane of a foreign country, which is a part of the air branch of that nation, the duties of which correspond to those of MATS in this country.[2] However, the "similar [to MATS] air transport service" referred to includes only the transport service provided by a "recognized country." In other words, there would be no coverage if a person were riding in a transport plane belonging to Red China, even though the plane was a part of the Chinese air arm that corresponded with MATS.
Appellee argues that this last portion of the clause does not refer to a foreign country. She seems to contend that the words, "recognized country," refer to the United States, and that SAC is a governmental authority operating planes for a purpose similar to MATS. In St. Paul Fire & Marine Ins. Co. v. Kell, 231 Ark. 193, 328 S.W.2d 510, this court, quoting from an earlier case, said:
"It is the duty of the Courts to construe the language used by the parties *495 and such construction is performed by considering the sense and meaning of the terms which the parties have used as they are taken and understood in their plain ordinary and popular sense."
We think appellee's argument is erroneous under the plain and ordinary interpretation of the words used, and we find no substantial evidence to support the judgment of the trial court.
Reversed and dismissed.
ROBINSON and JOHNSON, JJ., dissent.
NOTES
[1] In a letter by Colonel Paul P. Douglas, Jr., (admitted by stipulation) it is pointed out that the Stratofreighter was not assigned to, or connected with, the Military Air Transport Service, and it was not transporting gasoline, parts or materiel to be used by the air transport service. Captain Richard F. Leisman stated (in a letter admitted by stipulation) that Denny was assigned to the 384th Organizational Maintenance Squadron, 384th Bombardment Wing, Little Rock Air Force Base, Strategic Air Command, and the plane involved was also assigned to the same unit.
[2] As a matter of interest, it might be pointed out that the policy involved is not one which, to use a comparison, provides coverage only when a person is injured "riding a one-eyed red mule on a muddy road." Actually, the policy affords rather broad coverage for the amount of annual premium paid ($10.00). Coverage is provided for any injury sustained in consequence of driving, riding in, or being struck by an automobile, and further coverage is afforded for injury sustained while riding as a passenger, boarding or alighting from, or being struck by any aircraft holding a valid airworthiness certificate, as well as coverage under the clause quoted in this opinion. The policy provides double indemnity benefits if the injury is sustained while one is riding as a fare-paying passenger on any public conveyance owned and operated by a common carrier, which would, of course, include commercial planes, trains, and buses.
|
46 F.3d 1145
NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.UNITED STATES of America, Plaintiff-Appellee,v.Julio ACOSTA-LOPEZ, Defendant-Appellant.
No. 94-10172.
United States Court of Appeals, Ninth Circuit.
Submitted: Jan. 11, 1995.*Decided: Jan. 20, 1995.
Before: WALLACE, Chief Judge, HALL and KLEINFELD, Circuit Judges.
1
MEMORANDUM**
2
Julio Acosta-Lopez appeals his conviction following a guilty plea to reentry of a deported alien in violation of 8 U.S.C. Sec. 1326(b)(2). Acosta-Lopez contends that (1) his guilty plea was rendered invalid by his attorney's ineffective assistance and (2) the district court abused its discretion in denying his motion to withdraw his guilty plea. We have jurisdiction under 28 U.S.C. Sec. 1291 and affirm.
I. Ineffective Assistance of Counsel
3
Acosta-Lopez contends that his guilty plea was invalid because his counsel gave him erroneous advice on his potential sentence. His contention lacks merit.
4
A claim of ineffective assistance of counsel is generally not reviewable on direct appeal unless "the record is sufficiently complete to allow us to decide the issue." United States v. Swanson, 943 F.2d 1070, 1072 (9th Cir. 1991) (quotations omitted). Here, the record is sufficient for us to review the claim because the district court held an evidential hearing on Acosta-Lopez's motion to withdraw his guilty plea and both Acosta-Lopez and his attorney testified at the hearing. See id.
5
A claim of ineffective assistance of counsel is a mixed question of law and fact reviewed de novo. United States v. Angelone, 894 F.2d 1129, 1130 (9th Cir. 1990).
6
An ineffective assistance of counsel claim provides a basis to attack the validity of a guilty plea. United States v. Keller, 902 F.2d 1391, 1394 (9th Cir. 1990). To establish ineffective assistance of counsel, the defendant must show that (1) the specific acts or omissions of counsel fell below a standard of professional competence and (2) the alleged acts or omissions have prejudiced the defendant. Strickland v. Washington, 466 U.S. 668, 687 (1984). Prejudice is shown if there is a "reasonable probability that, but for counsel's errors, [the defendant] would not have pleaded guilty and would have insisted on going to trial." Hill v. Lockhart, 474 U.S. 52, 59 (1985); see also Keller, 902 F.2d at 1394-95 (insufficient to show defendant's insistence on trial when he never denied his acts or suggested that a different parole calculation would have changed his plea); cf. Iaea v. Sunn, 800 F.2d 861, 865 (9th Cir. 1986) (possible prejudice where the record was "replete with evidence that defendant was very reluctant to plead guilty" and there was "a great deal of trouble convincing him to do so"). No prejudice results if, prior to the entry of a guilty plea, the district court "explained that the discretion as to what the sentence would be remained entirely with the court." Doganiere v. United States, 914 F.2d 165, 168 (9th Cir. 1990), cert. denied, 499 U.S. 940 (1991); see also United States v. Turner, 881 F.2d 684, 687 (9th Cir.) (no prejudice where court informed defendant that counsel's sentencing prediction might be wrong and defendant received a sentence well below the statutory maximum), cert. denied, 493 U.S. 871 (1989); United States v. Rubalcaba, 811 F.2d 491, 494 (9th Cir.) (defendant not prejudiced because the plea agreement included the correct sentencing information), cert. denied, 484 U.S. 832 (1987).
7
Acosta-Lopez contends that his counsel failed to consider the special offense characteristics applicable to his case and thus misadvised him of his potential sentence. Even assuming counsel's performance was deficient, we conclude that Acosta-Lopez has failed to show that he was prejudiced. At the change of plea hearing, the district court ensured that Acosta-Lopez understood the maximum possible sentence of 15 years carried by his offense, the court's authority as to the final determination of his sentence, and the possible mistaken estimate by his attorney as to his potential sentence. See Doganiere, 914 F.2d at 168; Turner, 881 F.2d at 687.1 Although Acosta-Lopez did not receive the 6-month sentence as allegedly advised by his attorney, his sentence of 57 months was well below the statutory maximum of 15 years as advised by the district court. See Turner, 881 F.2d at 687. Additionally, the plea agreement which was read to Acosta-Lopez word-for-word, line-by-line in Spanish and signed by him included a provision of the maximum possible penalties. See Rubalcaba, 811 F.2d at 494.
8
Acosta-Lopez argues that, but for counsel's erroneous calculation of his sentence, he would not have pled guilty. However, apart from Acosta-Lopez's testimony that he "entered a guilty plea because of what [he] believed the sentence would be," the record does not evidence Acosta-Lopez's denial of the charge and his insistence on going to trial. See Keller, 902 F.2d at 1394-95; Iaea, 800 F.2d at 861.2 Rather, the record suggests that Acosta-Lopez might have pled guilty because of his attorney's advice that he might get an early release by entering a plea. Therefore, Acosta-Lopez suffered no prejudice by his attorney's erroneous advice. See Hill, 474 U.S. at 59.
9
II. The District Court's Denial of Motion to Withdraw Plea
10
"We review a district court's denial of a motion to withdraw a guilty plea for abuse of discretion." United States v. Myers, 993 F.2d 713, 714 (9th Cir. 1993).
11
A district court "may permit withdrawal of the plea upon a showing by the defendant of any fair and just reason." Fed. R. Crim. P. 32(d). Defense counsel's erroneous sentencing calculation does not provide the defendant with a fair and just reason to withdraw his guilty plea. See United States v. Oliveros-Orosco, 942 F.2d 644, 646 (9th Cir. 1991); United States v. Garcia, 909 F.2d 1346, 1348 (9th Cir. 1990); cf. Iaea, 800 F.2d at 864-65 (when information given by counsel to his client is clearly erroneous under the existing law, defendant may be entitled to withdraw his plea). The fact that the district court ensures that the defendant fully understood "the sentencing court was not bound by any sentencing agreement" further shows lack of abuse of the court's discretion. Garcia, 909 F.2d 1346, 1348-49 (9th Cir. 1990); see also Oliveros-Orosco, 942 F.2d at 646.
12
Acosta-Lopez contends that counsel misadvised him of the potential sentence he might face because counsel failed to consider the specific offense characteristics applicable to his case. However, the counsel's mistaken advice on the potential sentence alone does not warrant Acosta-Lopez to withdraw his guilty plea. See Oliveros-Orosco, 942 F.2d at 646; cf. Iaea, 800 F.2d at 864-65. Further, the district court informed Acosta-Lopez of the maximum possible penalties, ensured that he had discussed the Sentencing Guidelines with his attorney, and explained that the court would make the ultimate sentencing decision. See Oliveros-Orosco, 942 F.2d at 646; Garcia, 909 F.2d at 1348-49. The district court emphasized that Acosta-Lopez could not withdraw his guilty plea even if the court's final sentence differed from his attorney's prediction or Acosta-Lopez disagreed with the court's determination. Accordingly, the district court did not abuse its discretion in denying Acosta-Lopez's motion to withdraw his guilty plea. See Oliveros-Orosco, 942 F.2d at 646; Garcia, 909 F.2d at 1348-49.
13
AFFIRMED.
*
The panel unanimously finds this case suitable for decision without oral argument. Fed. R. App. P. 34(a); 9th Cir. R. 34-4
**
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir. R. 36-3
1
Acosta-Lopez claims that he did not understand what the district court meant on certain occasions during the plea hearing and was forced to answer affirmatively by his attorney. However, the transcript of the hearing indicates that Acosta-Lopez asked the court to clarify certain questions and then answered them
2
At sentencing, Acosta-Lopez's new attorney suggested that Acosta-Lopez "could have gone on trial" on the issue of whether Acosta-Lopez had previously been deported or departed voluntarily. However, as the district court commented, "[t]he fact of the deportation is clear."
|
206 F.2d 400
BLAKE & KENDALL COMPANY, Petitioner for Review,v.COMMISSIONER OF INTERNAL REVENUE.
No. 3438.
Circuit Court of Appeals, First Circuit.
January 23, 1940.
Order of Court.
1
The decree of this court of June 13, 1939, 104 F.2d 679, is hereby vacated.
|
54 F.3d 774NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.
UNITED STATES of America, Plaintiff-Appellee,v.Luther GREGORY, Jr., Defendant-Appellant.
No. 94-7496.
United States Court of Appeals, Fourth Circuit.
Submitted: April 20, 1995.Decided: May 19, 1995.
Luther Gregory, Jr., Appellant Pro Se. David Calhoun Stephens, Assistant United States Attorney, Greenville, SC, for Appellee.
D.S.C.
AFFIRMED.
Before WIDENER, WILKINSON, and KILKINS, Circuit Judges.
PER CURIAM:
1
Appellant appeals from the district court's order denying his 28 U.S.C. Sec. 2255 (1988) motion. 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.* United States v. Gregory, Nos. CR-93-274, CA-94-1536-6-20-A (D.S.C. Nov. 16, 1994). 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
*
As Appellant did not properly raise in the district court or preserve for appeal the ineffective counsel claim he sets out in his papers to this Court, we do not address it
|
185 N.W.2d 759 (1971)
The STATE of Iowa, Appellee,
v.
John Leslie KLINGER, Appellant.
No. 54327.
Supreme Court of Iowa.
April 9, 1971.
*760 Louie F. Beisser, Fort Dodge, for appellant.
Richard C. Turner, Atty. Gen., G. Douglas Essay, Asst. Atty. Gen., and David A. Opheim, Webster County Atty., for appellee.
STUART, Justice.
John Leslie Klinger was charged by a county attorney's information with the crime of assault with intent to do great bodily harm in violation of section 694.6, 1966 Code. He pleaded not guilty claiming intoxication as a defense. A Webster County jury convicted him of the crime charged. He appealed from the court's judgment sentencing him to one year in the Men's Reformatory at Anamosa and has assigned three grounds for reversal.
Defendant admitted striking Clyde Mericle on the head with a beer bottle as Mericle was dancing with Patricia Krantz in a Fort Dodge tavern. Her face was severely lacerated by fragments of the broken bottle. Defendant claimed Mericle shoved him as he was crossing the dance floor and he reacted by hitting Mericle with the bottle. He also claimed he was too intoxicated to be able to form the necessary specific intent. There was evidence defendant who weighed 122 pounds consumed 13 bottles of four per cent beer during a four and one-half hour period.
I. Defendant claims the court erred in excluding the opinion testimony of Dr. Sybers on the question of his intoxication. Dr. Sybers, pathologist for Mercy and Lutheran Hospitals in Fort Dodge, performs the blood and urine tests to determine the level of alcohol in the blood for the law enforcement officers in seven counties. His qualifications are not challenged. He testified a person would become under the influence of alcohol when the alcohol level of the blood reached approximately 150 milligrams. He stated he could determine the alcoholic condition of a person's system if he knew his weight and the amount and alcoholic content of beer consumed over a given period of time. He was then asked the following hypothetical question. "Now, based upon this hypothetical situation, assuming that individual weighed 122 pounds, and assuming that the alcohol content of the beer was four per cent, and that the number of beers that were drank were thirteen and that the time lapse was four and a half hours, do you have an opinion as to what the alcoholic condition of the hypothetical person would be?"
The trial court was apparently of the opinion that, as no blood test had been made, this was not an appropriate subject for expert testimony and sustained state's objection to the question.
During the question and answer offer of proof the doctor testified if defendant weighed 122 pounds and drank 13 bottles of four per cent beer in four and one-half hours his blood would contain 250 milligrams of alcohol. If defendant were an alcoholic he might have a higher level of alcohol in his blood. Judgment is one of the first areas affected. He would have a dulling of the sensations. He may do things while under the influence of alcohol that he would otherwise not do. There is a loss of muscle coordination and slurring of speech. Alcoholics may not appear to be intoxicated as far as motor functions and muscle coordination but their judgment would be affected. An individual with this level of intoxication would probably *761 not do the same things sober. The trial court rejected all of the proffered testimony.
It is true, as the state argues, that the receipt of opinion evidence rests largely in the trial court's discretion and we are loath to interfere with the exercise thereof unless it has been manifestly abused to the prejudice of the complaining party. State v. Mayhew (Iowa, 1969), 170 N.W.2d 608, 619, and citations, but we are of the opinion that the trial court abused its discretion here.
Defendant did not deny the incident. His whole defense was predicated on his intoxicated condition. The opinion of the expert based on the hypothetical question would have been a valuable addition to his testimony. It should be pointed out that there was no lay testimony that he appeared intoxicated.
The state contends there was no necessity for an expert opinion as the jury was as capable as an expert in determining whether the consumption of 13 bottles of beer in four and one-half hours would produce intoxication in a 122 pound man. There is a difference between the necessity for expert testimony and its admissibility. There was enough evidence to submit the intoxication question to the jury, without the expert, but this does not mean his opinion was inadmissible. The state frequently introduces blood tests when there is other evidence of intoxication. Defendant has a similar right.
One of the tests for the admission of expert testimony is whether the subject matter is such, and the witness is so qualified as to aid the jury in the proper determination of a question before them. Bernal v. Bernhardt (Iowa, 1970), 180 N.W.2d 437, 438; Grismore v. Consolidated Products Co. (1942), 232 Iowa 328, 342, 5 N.W.2d 646, 654.
The witnesses' qualifications were not challenged nor did the state call the trial court's attention to any deficiency in the foundation facts. We do not believe it is reasonable to conclude that the doctor's proffered testimony would not aid the jury. The testimony went beyond a statement that the amount of beer consumed would have made defendant intoxicated. He stated the degree of intoxication, explained the effect on defendant's judgment and offered an explanation as to why defendant might not have appeared intoxicated.
The exclusion of the proffered testimony was highly prejudicial to defendant's case. It should have been admitted and its exclusion was an abuse of the trial court's discretion constituting reversible error.
II. Mrs. Krantz was a witness for the state. On cross-examination she was asked if she had secured an attorney to represent her in a personal injury suit to recover damages for the injuries she received when the bottle broke. The trial court sustained an objection that this question was irrelevant. An offer of proof was subsequently made that Mrs. Krantz would have answered in the affirmative.
It is always proper to test a witness's credibility and possible undue interest in the outcome of the case by this type of question. State v. Sampson (1956), 248 Iowa 458, 461, 79 N.W.2d 210, 212. The court was in error in not permitting it in this instance. We need not decide whether under this record it constituted reversible error or was error without prejudice as the case has been reversed on the first ground. The question should not now arise on retrial.
III. Appellant's final allegation of error is that the trial court made certain remarks that deprived him of a fair and impartial trial. We need not decide this issue as the case has been reversed on other grounds and the trial court is not likely to repeat these remarks on retrial.
For the reasons stated in division I, this case is reversed and remanded for retrial.
Reversed and remanded.
All Justices concur.
|
373 F.2d 712
Robert W. MUIR, Sr., Appellant,v.UNITED STATES of America, Appellee.
No. 22210.
United States Court of Appeals Fifth Circuit.
Feb. 28, 1967.
Robert L. Gibson, Jr., Woolfolk, Myers, Curtis, Newman & Craig, Lake Wales, Fla., for appellant.
Mahlon M. Frandhauser, Sp. Asst. U.S. Atty., Washington, D.C., William A. Meadows, Jr., U.S. Atty., Lloyd G Bates, Jr., Asst. U.S. Atty., Miami Fla., David B. Bliss, Sp. Counsel, P. Dennis Belman, Atty., Div. of Trading and Markets, S.E.C., Washington, D.C., of counsel, for appellee.
Before TUTTLE, Chief Judge, and BELL and GOLDBERG, Circuit Judges.
TUTTLE, Chief Judge:
1
This is a companion case to the appeal of Gradsky v. United States, 5 Cir., 373 F.2d 711, decided this day. Unlike Gradsky, Muir was initially involved in the Inter-City Acceptance Corporation, the company organized by Zane and Gilmore and Leon Gradsky. He became an officer of Inter-City in February, 1959. He later became an officer in Franklin Fidelity and Franklin Acceptance Corporation, and the jury could believe that he was actually a managing officer of these two companies through the last relevant date named in the indictment dealing with the alleged scheme to defraud and the alleged conspiracy.
2
Muir's only objections on this appeal are that the trial court admitted into evidence some damaging documentary evidence received by numerous of the 'investors' which did not bear Muir's signature and some of which did not bear any hand-written signature.
3
It is clear that in each case in which the disputed evidence was received by the trial court, the documents tendered and introduced in evidence were part of a series of correspondence or negotiations between an individual investor and one of the companies which the jury found to have been involved in a fraudulent scheme. Since there was ample evidence from which the jury could find that Muir was responsible for all of the acts engaged in by Inter-City, and Franklin Finance and Franklin Acceptance Company, it is unimportant that he personally did not sign the documents in issue. The jury could consider the evidence of this kind, even though it bore no signature, but had been entirely in printed form, once it was established that the investor received the document as a part of a series of correspondence with the companies which they had made their ill-advised investments.
4
Moreover, there was much additional documentary evidence of a similar type introduced as against Muir dealing with his own participation in the activities of the three companies, and, indeed, some of these questioned documents were enclosed in letters actually signed by Muir. These documents were cumulative. If there was any error in the admission of these documents, this error was harmless. United States v. Castelona, 2nd Cir., 349 F.2d 264, cert. denied 383 U.S. 928, 86 S.Ct. 935, 15 L.Ed.2d 847. The fact that two of the questioned documents were admitted in connection with testimony of the witness who testified as to the facts in Count Nine, on which the jury found Muir guilty, does not add to the materiality or the prejudicial effect of the alleged error, because Muir was also convicted on two other counts, each of which is free of the alleged taint and each of his three sentences was for one year, and they were to run concurrently. This court, in Mishan v. United States, 5 Cir., 345 F.2d 790 at 791, stated the well-settled rule that it is unnecessary to consider alleged errors as to one count, when there are other good counts on which the defendant was given a concurrent sentence.
5
Appellant does not complain of the argument of counsel dealing with the vouching by the Government for the witnesses Zane and Gilmore, which was the basis of this court's reversal of Gradsky's conviction. Their testimony played no part in Muir's conviction, since his conviction was based upon testimony dealing with his own actions in the companies of which he and Bennett were the operating parties.
6
There was ample evidence to warrant submission of Muir's case to the jury. Apparently the trial court in sentencing Muir to three concurrent oneyear sentences, took into consideration the fact that Muir was only an employee who apparently received nothing but his salary in return for his fraudulent conduct, thus distinguishing him from others who received longer terms because the jury could find in their cases that they participated in dividing up the spoils of the fraud in a more substantial manner.
7
The judgment is affirmed.
|
51 F.3d 1043
Poullardv.Edwards**
NO. 94-30620
United States Court of Appeals,Fifth Circuit.
Mar 22, 1995
Appeal From: M.D.La., No. CA-94-2504-A
1
DISMISSED.
**
Conference Calendar
|
696 F.2d 989
Duncanv.Garrison
82-6802
UNITED STATES COURT OF APPEALS Fourth Circuit
12/10/82
1
W.D.N.C.
VACATED AND REMANDED
|
61 F.3d 900
NOTICE: Fourth Circuit Local Rule 36(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 Fourth Circuit.PREMIUM SERVICE CORPORATION OF COLUMBIA, Plaintiff--Appellant,v.Employers Reinsurance Corporation, Defendant--Appellee.Employers Reinsurance Corporation, Plaintiff--Appellee,v.Walker, Dehon & Smith Insurance Services, Incorporated,Defendant--Appellant.
Nos. 94-2422, 94-2434.
United States Court of Appeals,Fourth Circuit.
Argued July 12, 1995.Decided July 31, 1995
ARGUED: William Pearce Davis, BAKER, BARWICK, RAVENEL & BENDER, L.L.P., Columbia, SC, for Appellants. William Howell Morrison, HOLMES & THOMPSON, L.L.P., Charleston, SC, for Appellee. ON BRIEF: Trudy Y. Hartzog, HOLMES & THOMPSON, L.L.P., Charleston, SC, for Appellee.
Before RUSSELL and WIDENER, Circuit Judges, and SPROUSE, Senior Circuit Judge.
PER CURIAM:
1
Employers Reinsurance Corporation (ERC), a commercial insurance organization, issued a professional liability insurance policy to Walker, Dehon & Smith Insurance Services, Inc. (Walker), an insurance agency. It brought this declaratory judgment action to determine whether it was obligated to provide coverage for damages caused by Walker's negligent dissipation of loan proceeds that were intended to pay an insurance premium on behalf of one of Walker's customers. The sole issue on this appeal is whether an exclusionary clause in the ERC/Walker policy bars coverage. The district court found that the exclusionary clause applied and granted summary judgment to ERC. We affirm.
2
DL Enterprises (DL), a customer of Walker, needed workers' compensation coverage. Walker, on DL's behalf, applied to the National Council on Compensation Insurance (NCCI) for a workers' compensation policy. The yearly premium would have amounted to $143,903. Walker arranged for DL to borrow $79,150 of this amount from Premium Services Corporation (PSC), a company existing solely to lend insurance premium monies. Through a pre-existing agreement, PSC had authorized Walker to issue checks drawn upon a PSC account when initiating loans to Walker's customers. Accordingly, Walker issued a check for $79,150 from PSC's account, payable to Walker, which it deposited in its operating account. Walker then submitted a check for $143,903, representing the full amount of the premium, to NCCI, together with DL's application for a workers' compensation policy.*
3
For reasons not clear from the record, NCCI declined to issue the workers' compensation policy to DL and returned the premium check to Walker. The funds against which the check had been drawn remained in Walker's operating account until they were mistakenly spent to pay Walker's operating expenses. Walker admits that it should have returned $79,150 of these funds to PSC.
4
PSC sued Walker in state court, alleging that Walker had negligently breached its duty to return the loan proceeds to PSC after NCCI rejected DL's insurance application and that Walker had converted PSC's funds to its own use. The state court granted PSC's motion for summary judgment on its negligence cause of action. In the meantime, ERC, upon being notified of PSC's suit, denied coverage, contending the claim was barred by exclusion (f) of its policy, which precludes coverage of "claims for ... the failure to collect, pay, or return premiums." Apparently unable to pay the judgment, Walker assigned its rights against its insurer, ERC, to PSC, which subsequently filed a breach of contract and first party bad faith action against ERC in state court.
5
ERC then brought this declaratory judgment action against Walker in federal district court and removed PSC's action to the federal court. After considering the parties' cross-motions for summary judgment, the district court concluded that exclusion (f) applied because the funds that Walker had failed to return constituted a premium. PSC and Walker appealed to this court and stipulated to a consolidation of their appeals.
6
The parties appear to agree that there was no evidence of fraud or other intentional diversion of funds on Walker's part, but Walker concedes that it was negligent in spending the loan proceeds reposing in its operating account. In any event, it is now unable to repay the misspent money. ERC, which issued the professional liability policy to Walker, acknowledges that it would be liable under the policy in such circumstances were it not for exclusion (f), which excludes liability for "claims for ... the failure to collect, pay, or return premiums."
7
In the court below, PSC, the lender, contended that the claim it pursued was not for the return of a premium but for the return of loan proceeds. The district court, however, agreed with ERC, the insurer, that PSC's claim against Walker was based on the latter's failure to return a premium. It, therefore, granted summary judgment to ERC on its declaratory judgment action. We affirm.
8
The policy language is unambiguous in excluding coverage for a claim based on the failure to return a premium. A premium is defined in Black's Law Dictionary as "[t]he sum paid or agreed to be paid by an insured to the underwriter (insurer) as the consideration for the insurance." Id. at 1181 (6th ed.1990). We are of the view that PSC's action against Walker was clearly a "claim" for the return of a "premium." It was a premium that Walker forwarded (on behalf of DL), and it was the same premium that NCCI returned after declining coverage. The premium did not metamorphose into something else when PSC requested its return.
9
We are persuaded that Walker's behavior, involving negligent failure to properly distribute returned premiums, is exactly the type of conduct contemplated by exclusion (f) as barring coverage. The same rationale applies even though DL chose to borrow some of the money to pay the premium. PSC's attempt to create an exception for premiums procured through borrowed funds is simply unavailing.
10
In view of the above, the judgment of the district court is affirmed.
AFFIRMED
*
The record does not show whether DL paid the remaining amount ($64,753) to Walker or whether Walker fronted the money on behalf of DL. In any event, only the $79,150 lent by PSC is at issue in this appeal
|
54 So.2d 85 (1951)
MASSENGALE
v.
STATE.
5 Div. 325.
Court of Appeals of Alabama.
August 25, 1951.
Teel & Teel, Rockford, for appellant.
Si Garrett, Atty. Gen., and Thos. F. Parker, Asst. Atty. Gen., for the State.
PER CURIAM.
The accused stood indicted for man slaughter in the first degree. The trial judge gave the general affirmative charge at defendant's request as to the higher degree of homicide and submitted the cause to the jury on the lesser. The trial resulted in a verdict of guilty of manslaughter in the second degree and the imposition of twelve months hard labor as punishment.
The indictment alleged that the defendant killed Sock Jones by running over or against him with a truck.
The defendant is a young Negro man and the deceased was a white man.
The brief of the assistant attorney general is devoted entirely to the insistence that we should consider only the record proper because the certificate of the official court reporter appears in the record as transcribed by the clerk of the court with the name of the reporter inserted by means of a typewriter.
*86 This identical position was taken in the recent case of Thomas v. State, Ala., 53 So.2d 340. Justice Brown, writing for the court, held that there was no merit in the contention.
The facts appear in the record with only slight contradictions.
At about eight o'clock at night Mr. Jones was walking along the paved highway between the cities of Sylacauga and Rockford. The State's evidence tended strongly to establish that the appellant, while driving down the highway, ran against the decedent and injured him in such manner that death ensued forthwith.
A Negro girl was riding on the seat of the truck with the defendant. She was called as a witness for the State and testified that she was asleep with her head resting on the shoulder of the appellant. The impact awakened her, and she saw an object fall off the right front fender of the truck. After the defendant stopped the truck, she observed the body of the deceased lying about the middle of the highway.
The girl gave no evidence relating to the speed of the vehicle or its position on the road at the time of the collision.
The defendant did not testify in his own behalf. The other witnesses gave no account of observing the truck as it proceeded down the highway. Neither did they see it at the time it struck the pedestrian.
In the main the description of the locale was directed to what the officers and others saw when they visited the scene the next morning.
It appears that the deceased was carrying a small paper bag containing some food scraps for his dogs. The truck was traveling in a southerly direction. The paper bag was found the next morning off the east edge of the highway. Some flakes of paint were observed on the same side. The evidence supports the conclusion that these flakes came from the right front fender of the truck.
A rather large area of bloodstain was near the center of the road. The body of the deceased was moved from this point the night before.
The right front fender of the truck was bent. A comb was also found on the east edge of the highway, but the evidence furnishes no information that this object was ever in the possession of the deceased.
From the nature of the development of the evidence, we conclude that the prosecution was pressed on the theory that the appellant was violating the rule of the road by proceeding on the wrong side of the highway. Does the evidence sufficiently support this theory?
The indentations on the right fender of the truck afford no substantial and reliable proof that the truck was on the wrong side. For aught appearing the deceased may have been walking or standing on the extreme west side of the highway.
The location of the paper bag and the paint flakes to like effect is without evidential potency on the matter of instant concern. These light objects could have been moved from place to place by the wind or passing vehicles during the interval of about twelve hours, or the bag could have been thrown the width of the highway by the deceased when he was struck.
Clearly the position of the body on the highway gives no substantial indication of the place the deceased was when he was first struck.
The witnesses were unable to determine the course of the truck by any discernible tracks or skid marks.
"Manslaughter in the second degree is defined as the unlawful killing of another human being, without malice and without the intent to kill or to inflict the injury resulting in death, but accidentally committed by the accused while he was doing an unlawful act amounting to a misdemeanor, or accidentally committed by the accused while he was doing a lawful act, but in a grossly negligent or improper manner." Jones v. State, 21 Ala.App. 234, 109 So. 189, 191. See also, Wilson v. State, 32 Ala.App. 591, 28 So.2d 646; Lightfoot v. State, 33 Ala.App. 409, 34 So.2d 614.
We have carefully considered the evidence in this case, sitting en banc, and *87 we are forced to the conclusion that the proof, or fair inferences therefrom, fails to meet the burden imposed by law upon the State to sustain a conviction for the offense charged in the indictment.
To cite authorities to support our view would only lead to the pronouncement of the familiar doctrine applicable in all criminal prosecutions. That is to say, there must be substantial evidence tending to prove all elements of the charged offense, a mere scintilla of evidence, in view of the presumption of innocence, being insufficient.
It is also well established that a conviction in a criminal case cannot rest on surmise or conjecture.
The defendant was due the general affirmative charge. For its refusal, error must be predicated.
The other presented questions, of course, need not be considered.
The judgment of the court below is ordered reversed and the cause remanded.
Reversed and remanded.
|
Filed 7/23/13 P. v. Almira CA2/7
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 SEVEN
THE PEOPLE, B242511
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BA393453)
v.
RONY GARCIA ALMIRA,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Los Angeles County,
Renee F. Korn, Judge. Affirmed.
David Reis Mishook, under appointment by the Court of Appeal, for
Defendant and Appellant.
No appearance for Plaintiff and Respondent.
___________________________________
Rony Garcia Almira was charged in an information with two counts of inflicting
corporal injury on Sorayda Rodriguez, the mother of his child (Pen. Code, § 273.5, subd.
(a)). Represented by appointed counsel, Almira pleaded not guilty to the charges.
On the morning of trial, the court denied as untimely Almira’s motion to continue
the trial so he could retain private counsel. According to the evidence at trial on January
29, 2012, Almira punched Rodriguez in the face, giving her a black eye. On or about
December 23, 2011, Almira had repeatedly kicked Rodriguez, bruising her legs. Almira
testified in his own behalf that Rodriguez had been the aggressor and he had acted in self-
defense on both occasions.
The jury found Almira guilty of inflicting corporal injury on Rodriguez on January
29, 2012 as charged in count 1, but acquitted him of having committed the offense in
December 2011, as charged in count 2.
At sentencing, the trial court suspended imposition of sentence and placed Almira
on three years of formal probation on condition he serve 365 days in county jail with
credit for 26 days served, complete domestic violence counseling and stay away from
Rodriguez. The court ordered Almira to pay a $40 court security fee, a $30 criminal
conviction assessment, a $400 domestic violence fund assessment and a $240 restitution
fine. The court imposed and suspended a probation revocation fine pursuant to Penal
Code section 1202.44.
We appointed counsel to represent Almira on appeal. After an examination of the
record, counsel filed an opening brief in which no issues were raised. On April 17, 2013,
we advised Almira he had 30 days in which to personally submit any contentions or
issues he wished us to consider. No response has been received to date.
We have examined the record and are satisfied Almira’s attorney has fully
complied with the responsibilities of counsel and no arguable issue exists. (Smith v.
Robbins (2000) 528 U.S. 259, 277-284 [120 S.Ct. 746, 145 L.Ed.2d 756]; People v. Kelly
(2006) 40 Cal.4th 106, 112-113; People v. Wende (1979) 25 Cal.3d 436, 441.)
2
The judgment is affirmed.
WOODS, J.
We concur:
PERLUSS, P. J.
ZELON, J.
3
|
510 U.S. 845
Allenv.United States Court of Appeals for the Ninth Circuit.
No. 92-9011.
Supreme Court of United States.
October 4, 1993.
1
Appeal from the C. A. 9th Cir.
2
Certiorari denied.
|
182 Cal.App.3d 203 (1986)
227 Cal. Rptr. 70
In re the Marriage of JUDITH C. and ERIC NEAL MILSE.
JUDITH C. MILSE, Appellant,
v.
ERIC NEAL MILSE, Appellant.
Docket No. 68540.
Court of Appeals of California, Second District, Division Five.
June 10, 1986.
*205 COUNSEL
Singer & Singer and Leona R. Singer for Appellant Wife.
A. William Bartz, Jr., William A. Pachal and Arline A. Grotz for Appellant Husband.
OPINION
ASHBY, J.
This is an appeal of a judgment dividing property in a marriage dissolution.[1] The principal issue is sufficiency of the evidence to justify the trial court's ruling that the home of the parties, held of record in joint tenancy, is actually separate property of the wife. The finding was based on the wife's assertion of an oral understanding to that effect with her husband before their voyage on the sea of matrimony hit the rocks. Also at issue is the effect of the subsequent enactment of Civil Code section 4800.1, which by its terms applies to all dissolution proceedings in which the division of property is not yet final as of January 1, 1984. That situation is present here by virtue of the husband's appeal.
*206 The undisputed evidence in the case establishes that the wife owned a home before her marriage to Mr. Milse. She sold that home and at the same time opened an escrow for purchase of another home. Originally, the escrow instructions called for delivery of title to the new residence in the name of Judith Alderson (wife's name before marriage) as an unmarried woman. Later, however, there was an amendment providing for the deed to be in the names of Eric Milse and Judith C. Milse, husband and wife, as joint tenants. This change was ordered about the time the parties were married. A deed was issued and recorded accordingly at close of escrow when the parties were, in fact, husband and wife. A total of $18,890 was applied to the down payment on the new house. These funds originated from the sale of wife's previous home and were admittedly her separate property. The monthly installments payable on the balance of the purchase price for the marital residence were paid with community property earnings of the parties while they were living together. Husband also contributed $4,143 from his separate property funds to the cost of capital improvements for the home. None of the foregoing facts are disputed.
At the time the trial court rendered judgment in this case (in 1981) it was long-established law that the parties to a marriage could change the character of their marital property by expressions of mutual consent, either written or oral, regardless of the title form shown in the deed of conveyance. (See Tomaier v. Tomaier (1944) 23 Cal.2d 754, 757-758 [146 P.2d 905], and cases cited therein.) Thus, the courts permitted proof of an oral understanding that property held of record in joint tenancy was actually the separate property of one spouse. (See In re Marriage of Mahone (1981) 123 Cal. App.3d 17, 23 [176 Cal. Rptr. 274].) In fact, this was the basis for the trial court's decision in the present case. During trial wife testified to several conversations with her husband and his understanding to the effect that the house was really hers; that in the event of her death the husband could continue to live there if he obtained custody of wife's children from a previous marriage; if not, he was to sell the house and put the proceeds into a trust account for the children. The husband denied any such understanding in his testimony, but the trial judge in rendering his tentative decision said he had no doubt that the conversation took place. He then found that the house was the wife's separate property, subject to the husband's right to reimbursement for his separate fund contributions and his share of community fund payments on the mortgage installments. The wife's testimony, as accepted by the judge, constituted substantial evidence of an oral agreement between the parties that the home was in fact the wife's separate property. Such an agreement effectively overcomes the statutory presumption (upon dissolution) that a joint tenancy residence acquired during marriage is community property. (See In re Marriage of Lucas (1980) 27 Cal.3d 808, 813-815 [166 Cal. Rptr. 853, 614 P.2d 285].)
*207 In 1983 while this appeal was pending, the Legislature enacted section 4800.1 of the Civil Code. In effect, that section extends the statute of frauds to spouses as to property acquired during marriage and held in joint tenancy form. It continues the statutory presumption that such property is community, but allows rebuttal of that presumption only by a clear statement to the contrary in the written evidence of title or by a separate written agreement. The new legislation also provides that it applies to all proceedings in which the division of property has not become final by January 1, 1984. (Stats. 1983, ch. 342, § 4.) (1a) Husband therefore contends that the new section controls the present case, since the filing of his appeal has suspended finality of the division ordered by the court. We disagree with this contention, holding that the retroactive application of section 4800.1 to the circumstances of the case before us would be an unconstitutional deprivation of a vested property right without due process of law, under In re Marriage of Buol (1985) 39 Cal.3d 751 [218 Cal. Rptr. 31, 705 P.2d 354].
The separate property status of the Milse residence, as found by the trial court, was based on an oral understanding between the parties during marriage. Wife's rights in the property became vested at the time of that agreement. No written evidence of the agreement was required at that time, nor at any subsequent time up to and including the date of the trial court's judgment. The injustice of changing the "rules of the game" after the opportunity to meet those requirements has passed is too obvious to require discussion.
On its face, section 4800.1 purports to enact a change in the law of evidence establishing a rebuttable presumption as to the status of joint tenancy property acquired during marriage. "There is no vested right in existing remedies and rules of procedure and evidence. Hence, generally speaking, the Legislature may change such rules and make the changes apply retroactively to causes of action or rights which accrued prior to the change." (5 Witkin, Summary of Cal. Law (8th ed. 1974) Constitutional Law, § 285, pp. 3574-3575.) When applied to the facts of the present case, however, the code section makes the presumption conclusive, and would effectively overrule even the most clearly expressed oral agreement of husband and wife, made at a time when such agreements were accorded full recognition. Wife had no warning that the understanding with her husband, as found by the trial court, would subsequently be held worthless by virtue of legislation enacted after her trial had been completed. (2) Even validly enacted legislation pertaining to procedural matters will not be applied retroactively when the effect is to cut off the legal remedy immediately. (See Coleman v. Superior Court (1933) 135 Cal. App. 74, 76 [26 P.2d 673].) (1b) Yet that would be the result in the case before us. Such attempted abrogation of previously vested property rights is the clearest sort of due *208 process denial. We accordingly hold that the retroactive application of section 4800.1 under the circumstances of this case would be unconstitutional; therefore, the section does not apply. (In re Marriage of Buol, supra, 39 Cal.3d at p. 757.)
We are aware that our ruling conflicts with In re Marriage of Martinez (1984) 156 Cal. App.3d 20 [202 Cal. Rptr. 646], a decision of the First Appellate District. There, in a similar fact situation the court considered the due process issue and declared: "We find in section 4800.1 no interference with vested rights; rather, it merely alters the evidentiary burden of proof where a husband and wife take property by a joint tenancy deed." (Id., p. 30.) For the reasons we have stated, however, we do not agree with that holding when applied to the facts of the case before us.[2]
(3) Husband claims error in the trial court's refusal to allow reopening of trial on the issue of the residential property status after the matter had been submitted. We have reviewed the offer of proof stated at the time the motion to reopen was made. The evidence sought to be presented would not have changed the trial court's opinion, even if believed by the court. It was of doubtful significance in any event. There was no abuse of discretion.
(4) Husband appeals the court's finding that an antique telescope and an antique brass lantern (total value $175) are community property, awarded to the wife. He claims that the evidence is undisputed that these objects were gifts to him from the wife's parents and are therefore his separate property as a matter of law. (Civ. Code, § 5108.) Although the husband testified that the items were gifts to him, the wife testified that they were "really a family gift, but they were handed to him." This created a conflict in the testimony which the judge decided in the wife's favor. There was no error.
(5) Wife filed a cross-appeal, contending that the court should have awarded her attorney's fees. The husband argues that attorney's fees could not be awarded because the wife failed to request them, either in her dissolution petition or by an amendment. However, fees were requested in the trial brief filed with the court, just as in the case of In re Marriage of Denney (1981) 115 Cal. App.3d 543 [171 Cal. Rptr. 440]. In Denney this procedure was held to be an informal amendment; we so construe the trial brief in this case.
*209 The trial court denied fees after ordering the property division, indicating that the relative incomes and property of the parties made it appropriate for each party to be responsible for payment of that person's own attorney fees. (6) It is, of course, well established that an award of attorney's fees in a dissolution proceeding is a matter for the trial court's discretion and its determination will not be disturbed in absence of demonstrated abuse. (In re Marriage of Rosan (1972) 24 Cal. App.3d 885, 899 [101 Cal. Rptr. 295].) In the present case both parties had relatively equal income potential. The legal services rendered were extensive, but presumably this resulted in approximately equal obligations of the parties to their respective counsel. There was no abuse of discretion in the court's refusal to make an award to the wife.
Both parties on appeal seek attorney's fees on the ground that the respective appeals are frivolous. Our review of the record and the issues involved, however, satisfies us that there is no merit in this claim as to either of the parties.
The judgment is affirmed. Costs on appeal are awarded to the wife.
Feinerman, P.J., and Hastings, J., concurred.
NOTES
[1] This matter was remanded with directions to refile an opinion with appropriate references to In re Marriage of Buol (1985) 39 Cal.3d 751 [218 Cal. Rptr. 31, 705 P.2d 354], which was decided subsequent to our opinion but before it became final. We have complied with the mandate of the Supreme Court and reissue our opinion adding citations to In re Marriage of Buol. Our original opinion was authored by Jones, J., assigned by the Chairperson of the Judicial Council.
[2] Other appellate decisions which appear to present the same due process question have retroactively applied the provisions of section 4800.1 without addressing the issue. (See In re Marriage of Neal (1984) 153 Cal. App.3d 117 [200 Cal. Rptr. 341]; In re Marriage of Anderson (1984) 154 Cal. App.3d 572 [201 Cal. Rptr. 498], both are First Appellate District cases.) These cases and In re Marriage of Martinez, supra, were disapproved by the Supreme Court in In re Marriage of Buol, supra, 39 Cal.3d at page 763, footnote 10.
|
891 F.Supp. 446 (1995)
STANDARD BANK & TRUST COMPANY, not individually but as Trustee under Trust Agreement dated July 25, 1974, and known as Trust No. 4098; and Hartz Construction Company, an Illinois corporation, Plaintiffs,
v.
VILLAGE OF ORLAND HILLS, an Illinois municipal corporation; Kyle Hastings, individually and as President of the Village of Orland Hills; Chris Andrews, Don Bigos, John Corich, Michael Puckett, Fran Aldous, and Steven Chairito, individually and as Trustees of the Village of Orland Hills; Velga DrillisElzis, individually; John Daly, as Administrator of the Village of Orland Hills; Bradley E. Brink, individually; and Earl Hermansen, individually and as Building Commissioner of the Village of Orland Hills, Defendants.
No. 94 C 7582.
United States District Court, N.D. Illinois, Eastern Division.
June 14, 1995.
*447 Jack M. Siegel, Altheimer & Gray, Chicago, IL, for Standard Bank & Trust Co.
Jack M. Siegel, Altheimer & Gray, Chicago, IL, William K. Bass, Jon Jeffrey Patton, Phelan, Cahill, Devine & Quinlan, LTD., Chicago, IL, for Harte Const. Co.
David Lincoln Ader, Ancel, Glink, Diamond, Cope & Bush, Chicago, IL, Mathias William Delort, Keri-Lyn Joy Krafthefer, Michael Ray Gibson, Mark H. Sterk, Odelson & Sterk, Ltd., Evergreen Park, IL, for defendants.
Jeffrey T. Kubes, David M. Jenkins, Hinshaw & Culbertson, Chicago, IL, David Lincoln Ader, Ancel, Glink, Diamond, Cope & Bush, Chicago, IL, for Bradley E. Brink.
Richard T. Wimmer, Dennis G. Walsh, James Vincent Ferolo, Michael T. Jurusik, Klein, Thorpe & Jenkins, Ltd., Chicago, IL, *448 David Lincoln Ader, Ancel, Glink, Diamond, Cope & Bush, Chicago, IL, Mathias William Delort, Keri-Lyn Joy Krafthefer, Michael Ray Gibson, Mark H. Sterk, Odelson & Sterk, Ltd., Evergreen Park, IL, for Earl Hermansen.
OPINION AND ORDER
NORGLE, District Judge:
Before the court are Defendant Bradley E. Brink's motion to dismiss for failure to state a claim upon which relief can be granted and the motion of the remaining Defendants for an abstention stay. For the following reasons, the former motion is granted. The court will reserve ruling on the latter motion.
I. BACKGROUND[1]
This action is brought by the legal and beneficial owners of certain real estate located in the Defendant Village of Orland Hills, Standard Bank & Trust Company, and by Hartz Construction Company, the principal builder and developer in Orland Hills. The Complaint contains six counts. Count I is brought pursuant to 42 U.S.C. § 1983 and contains allegations that the Defendants, the City of Orland Hills and various city officials, deprived Plaintiffs of property rights without due process of law, and denied Plaintiffs equal protection of the laws. Count II alleges that the Defendants intentionally interfered with Plaintiffs' rights to construct and sell single family attached and detached homes in the Orland Hills. Count III contains allegations that Defendants intentionally interfered with Plaintiffs' contract with Orland Hills and similarly interfered with the Plaintiffs' business expectations that a prior Settlement Agreement would be carried out in accordance with its terms. Plaintiffs allege in Count IV that the Defendants named in their individual capacity conspired to "destroy the plaintiffs' business in the Village of Orland Hills by continual harassment, delays and unlawful acts intended to, and resulting in preventing them from constructing and selling homes." (Count IV, ¶ 1.) Plaintiffs claim in Count V that Defendants, especially Hermansen and Hastings, made defamatory statements that Hartz built substandard and unsafe homes in Orland Hills and deliberately failed to meet building codes. The final count, Count VI, involves allegations that Defendants breached a valid and enforceable contract, the Settlement Agreement. All counts with the exception of Count I, are state supplemental claims.
The aforementioned Settlement Agreement was entered into by Hartz, a predecessor entity of Standard Bank, and Orland Hills. The Settlement Agreement resolved a previous action brought by Plaintiffs against Orland Hills in a related case in the Circuit Court of Cook County, Illinois. In the state case, Plaintiffs sought injunctive relief and damages against Orland Hills and the named Defendants with regard to the village's refusal to issue to lift stop work orders and building permits with regard to the Ridgegate subdivision to be constructed and developed by Hartz. The Settlement Agreement addressed development issues relating to the Ridgegate project which related to the prior state cause of action, and also incorporated planned unit agreements for two additional projects, Pepperwood and Timberline. Subsequent to the resolution of the state law case, Orland Hills enacted Ordinance No. 93-16 which adopted the planned unit developments for the Timberline and Pepperwood subdivisions projects. In turn, Hartz secured zoning approval for both projects.
In July 1993, Hartz applied for building permits for the construction of single family homes in the Pepperwood and Timberline projects. Orland Hills, through its President and Board of Trustees, approved the preliminary engineering plans for the Pepperwood subdivision, but neither approved nor denied the plans for Timberline.
According to the Complaint, Bradley E. Brink ("Brink") was the "duly authorized engineering consultant" to Orland Hills. Orland Hills retained Brink on August 5, 1993. The following day, Orland Hills issued a stop work order to Hartz relating to a project called Timberline. On December 28, 1993, *449 Hartz submitted final engineering plans for the Pepperwood project. On May 6, 1994, Brink made a partial review of the plans, and then issued a report to Orland Hills requesting additional information and questioning certain aspects of the plan. Brink did not approve nor deny the plans. On August 26, 1994, Hartz submitted revised final engineering plans to Orland Hills for further review. On October 7, 1994, Brink completed a second partial review of the engineering plans and issued another report, again asking for additional information and questioning certain aspects of the plans. However, according to the Complaint, Brink failed and refused to review all necessary items and aspects of the plans and did not issue a definitive list of required changes to the building plans.
II. DISCUSSION
In deciding a motion to dismiss, the court accepts all well-pleaded factual allegations as true, as well as the reasonable inferences that may be drawn from those allegations. Mid America Title Co. v. Kirk, 991 F.2d 417, 419 (7th Cir.1993). The complaint need not specify the correct legal theory nor point to the correct statute. Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir.1992). Because federal courts simply require "notice pleading," this court must construe pleadings liberally. Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, ___ U.S. ____, ____, 113 S.Ct. 1160, 1163, 122 L.Ed.2d 517 (1993). In construing reasonable inferences, however, the court need not stretch allegations beyond their sensible and reasonable implications. Chan v. City of Chicago, 777 F.Supp. 1437, 1440 (N.D.Ill.1991).
A. COUNT ICIVIL RIGHTS
Plaintiffs allege a claim for violation of civil rights against Defendant Brink under 42 U.S.C. § 1983. Plaintiffs allege that Brink, Orland Hills, and other named village officials, acted in an arbitrary and capricious manner by denying them the right to develop the Pepperwood and Timberline projects without sufficient substantive and procedural due process and further denied them of the equal protection of the laws. Brink contends that the allegations in Count I fail to state a claim under 42 U.S.C. § 1983. The court agrees.
1. Substantive Due Process
The law is clear:
Federal courts are not boards of zoning appeals. This message, oft-repeated, has not penetrated the consciousness of property owners who believe that federal judges are more hospitable to their claims than are state judges. Why they should believe this we haven't a clue; none has ever prevailed in this circuit, but state courts often afford relief on facts that do not support a federal claim. Is it that they have omitted the steps necessary to obtain review in state court and hope for the best in a second-chance forum? Well, we are not cooperating. Litigants who neglect or disdain their state remedies are out of court, period.
River Park, Inc. v. City of Highland Park, 23 F.3d 164, 165 (7th Cir.1994).
To properly plead a substantive due process claim, plaintiffs must first allege a separate constitutional violation or the inadequacy of state law remedies. Polenz v. Parrott, 883 F.2d 551, 558-59 (7th Cir.1989). In addition, plaintiffs must allege that the defendants acted in an "invidious or irrational" manner. Coniston v. Village of Hoffman Estates, 844 F.2d 461, 467 (7th Cir.1988). In the case sub judice, plaintiffs fail to allege that state law remedies are inadequate. Plaintiffs also fail to allege a constitutional violation separate than the fourteenth amendment.[2] These failures demand dismissal. Yet, even if plaintiffs met one of the above alternative elements, the plaintiffs did not sufficiently allege that Defendants acted either invidiously or irrationally.
*450 In determining whether the Defendants' actions amount to invidious or irrational conduct, the court notes that "much governmental action is protectionist or anticompetitive; and nothing is more common in zoning disputes than selfish opposition to zoning changes. The Constitution does not forbid government to yield to such opposition; it does not outlaw the characteristic operations of democratic (perhaps of any) government, operations which are permeated by pressure from special interest." Coniston 844 F.2d at 467. As in Coniston, plaintiffs in the instant case argue that Orland Hills had no authority under state ordinances and the Settlement Agreement of the state case to reject the building plans. Plaintiffs also allege that Brink and the other named Defendants delayed proceedings, "deliberately or negligently lost or mislaid" plans and other documents, and created procedures deliberately designed to impede approval of Hartz's final engineering plans. Thus, according to the plaintiffs, this "irrational" behavior unconstitutionally deprived them of their property, even assuming there were no procedural irregularities.
This argument is unpersuasive and, in itself, irrational. Delaying tactics may be violations of state or local zoning rules, yet are not tantamount to a constitutional violation. River Park, 23 F.3d at 166. As Chief Judge Posner wrote:
[I]f the plaintiffs can get us to review the merits of the [village's] decision under state law, we cannot imagine what zoning dispute could not be shoehorned into federal court in this way, there to displace or postpone consideration of some worthier object of federal judicial solicitude. Something more is necessary than dissatisfaction with the rejection of a site plan to turn a zoning case into a federal case; and it should go without saying that the something more cannot be merely a violation of state (or local) law. A violation of state law is not a denial of due process of law.
Id. (citing Hebert v. Louisiana, 272 U.S. 312, 316, 47 S.Ct. 103, 104, 71 L.Ed. 270 (1926)). Simply put, unless the zoning decision was based on considerations that violate specific constitutional guaranties, such as on race or color, the decision can be said to deny substantive due process only if it is irrational. Id. However, there is nothing in the Complaint to support the mere allegation that the plaintiffs acted arbitrarily, capriciously, invidiously or irrationally.
Much like Coniston, the instant case "presents a garden-variety zoning dispute dressed up in the trappings of constitutional lawa sure sign of masquerading being that the plaintiffs' do not challenge the constitutionality of the zoning ordinances ... but argue that the [defendants] had no authority under those ordinances to reject their [building] plan[s]...." Coniston, 844 F.2d at 467. Plaintiffs argue that this case is distinguishable from Coniston and River Park since Orland Hills had "previously granted Hartz the approved zoning before the [alleged] constitutional violation occurred." However, this circuit has already rejected and disposed of this argument in Hartland Sportsman's Club v. Town of Delafield, 35 F.3d 1198, 1202-03 (7th Cir.1994). Much like Hartland, "we are confronted with the [defendants'] decision to deprive [plaintiffs] of a[n already] vested right to use its property in a particular manner." Id. at 1202. "We, however, have limited substantive due process challenges to government land-related decisions in this context as well." Id. Defendants may have acted unprofessionally and even contrary to state and local laws and ordinances, but no constitutional infringement has been properly pleaded.
2. Procedural Due Process
"No [s]tate [may] deprive any person of life, liberty, or property, without due process of law." U.S. Const. amend. XIV. It is clear that plaintiffs had a vested right in the "property" referred to as the Pepperwood and Timberline subdivision projects. Therefore, the plaintiffs are entitled to due process of law. However, the question of what procedures are "due" the plaintiffs is a much more complicated matter.
"We know ... that the procedures `due' in zoning cases are minimal." River Park, 23 F.3d at 166. "[S]o far as the Constitution is concerned, state and local governments are not required to respect property *451 owners' rights, and there is therefore no obligation to provide hearings to ascertain a protected core. State and local governments may ... even take property; they must pay for what they take but are free to use the land as they please." Id. at 167. Municipalities may make zoning decisions by utilizing the political process"making a political decision in a political fashion," even "employing procedural maneuvers" that prevent the question from ever being resolved by the local government. Id. Even if a local government or municipal official violates state or local law, the Constitution is not necessarily "called into play." Olim v. Wakinekona, 461 U.S. 238, 248-51, 103 S.Ct. 1741, 1747-48, 75 L.Ed.2d 813 (1983); Archie v. Racine, 847 F.2d 1211, 1215-18 (7th Cir.1988) (en banc). "Failure to implement state law violates that state law, not the Constitution; the remedy lies in state court." River Park, 23 F.3d at 166-67. In fact, the due process clause does not permit federal courts to enforce state laws and regulations. Mid-American Waste Sys., Inc. v. City of Gary, 49 F.3d 286 (7th Cir.1995).
Plaintiffs allege that Defendants failed to conduct a full review of all items and aspects of the building plans as submitted. Plaintiffs also allege that Brink, Orland Hills and its officials failed to include a definitive list of required changes in order for the building plans to be approved. In effect, Plaintiffs thus argue that the Defendants failed to give a statement of reasons in support of its decision not to approve the plans as they then existed. These failures, according to the plaintiffs, amount to a procedural due process violation.
However, a village's decisions to approve or disapprove building plans and permits are legislative rather than adjudicative in nature. Id. at 468. "The Constitution does not require legislatures to use adjudicative-type procedures, to give reasons for their enactments, or to act `reasonably' in the sense in which courts are required to do; as already noted, legislatures can base their actions on considerationssuch as the desire of a special-interest group for redistributive legislation in its favorthat would be thought improper in judicial decision-making." Id. The defendants were not required to submit their findings and conclusions in memorandum form. While judicial considerations must include "a wide-open search for the result that is just in light of all possible considerations of distributive and corrective justice," the named defendants were free to take into consideration ethical and political issues when deciding whether the accept the proposed business plans. Of course, the defendants denied the request; yet, since a state court remedy exists, the zoning decision does not violate the due process clause of the Constitution. Id. at 165. Plaintiffs had the opportunity to seek review in an Illinois court under Illinois common law, yet chose to pursue a Constitutional claim. This choice is fatal in federal court.
3. Equal Protection
Plaintiffs include an allegation that Defendants violated their right to the equal protection of laws because Orland Hills and the named Defendants "selectively enforced provisions of the building code which had never been enforced by the Village for other developers or builders within the Village." This mere allegation is insufficient to properly plead an equal protection claim. "To assert an equal protection claim, a plaintiff must allege intentional discrimination based on membership in a particular group." Magulski v. County of Racine, 879 F.Supp. 83, 85 (N.D.Ill.1995) (citing Herro v. City of Milwaukee, 44 F.3d 550, 552 (7th Cir.1995)). "[D]iscriminatory treatment requires differential treatment of similarly situated individuals." Connor v. Foster, 833 F.Supp. 727, 732 (N.D.Ill.1993). Plaintiffs do not allege intentional discrimination; instead, Plaintiffs complain that Orland Hills is enforcing laws which have never in the past been enforced against other developers or builders within the village. The Complaint makes no mention that these ordinances are only being enforced against plaintiffs at this time. Rather, the allegations state that Orland Hills has now begun to enforce its ordinances, and plaintiffs are the first against which these provisions of the building code are enforced. This court refuses to interfere with the local municipality's decision to enforce ordinances that it has lawfully constructed *452 and have the power to enforce. "The plaintiffs in this action have failed to allege intentional discrimination based on membership in a particular class, and therefore, have failed to establish a prima facie equal protection violation." Id.
B. EXISTING SUPPLEMENTAL STATE CLAIMS
Plaintiffs include five supplemental state claims based on Illinois common law in the instant Complaint. Subject matter jurisdiction over these supplemental claims is dependent upon the discretion of the court. United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966). Since plaintiffs' single federal civil rights claim is dismissed, the court refuses to exercise supplemental jurisdiction over Counts II through IV as requested by Brink. 28 U.S.C. § 1367(c)(3). The court, sua sponte, elects not to retain jurisdiction over the remaining counts, Counts V and VI. Accordingly, all supplemental state law claims are dismissed without prejudice.
III. CONCLUSION
As in River Park, the plaintiffs insist that the Orland Hills Ordinance No. 93-16 and the state Settlement Agreement requires Orland Hills to approve the building plans. Accepting these allegations as true, state litigation surely can protect plaintiff's rights. "Instead of asking for relief from the state courts, [plaintiffs] went along with the political process until it was too late. [They] lost the political fight. Federal litigation is not a repechage round for losers of earlier contests, or for those who overslept and missed the starters' gun." River Park, 23 F.3d at 167. Both Coniston and River Park stand for the proposition that the correct remedies in a zoning dispute exist in the state courts. Accordingly, the court dismisses Count I against Brink. Further, the court chooses not to retain jurisdiction over the state law claims and, with regard to Brink, dismisses Counts II through IV without prejudice. The court, sua sponte, further dismisses Counts V and VI against Brink. This is not to say that no wrong occurred. Simply, if one did, the proper forum is in state court and the proper remedy exists under Illinois law.
The motion to dismiss is brought only by Defendant Brink. Other Defendants similarly situated have failed to join in or adopt Brink's motion. The court will exercise restraint and consider additional motions when and if filed. Accordingly, the court will reserve ruling on the remaining Defendants' motion for abstention.
IT IS SO ORDERED.
NOTES
[1] The following Background is based upon Plaintiff's original Complaint filed on November 21, 1994.
[2] The court takes note that in a footnote in its Response to Brink's Motion to Dismiss, Hartz does assert that its allegations could support a claim under the Contracts Clause of the Constitution, specifically Art. I, Section 10, cl. 1. However, the court disregards this argument. "[A]rguments raised in passing in a footnote are waived." United States Dept. of Navy v. Federal Labor Relations Auth., 975 F.2d 348, 352 n. 1 (7th Cir.1992).
|
******************************************************
The ‘‘officially released’’ date that appears near the
beginning of each opinion is the date the opinion will
be published in the Connecticut Law Journal or the
date it was released as a slip opinion. The operative
date for the beginning of all time periods for filing
postopinion motions and petitions for certification is
the ‘‘officially released’’ date appearing in the opinion.
In no event will any such motions be accepted before
the ‘‘officially released’’ date.
All opinions are subject to modification and technical
correction prior to official publication in the Connecti-
cut Reports and Connecticut Appellate Reports. In the
event of discrepancies between the electronic version
of an opinion and the print version appearing in the
Connecticut Law Journal and subsequently in the Con-
necticut Reports or Connecticut Appellate Reports, the
latest print version is to be considered authoritative.
The syllabus and procedural history accompanying
the opinion as it appears on the Commission on Official
Legal Publications Electronic Bulletin Board Service
and in the Connecticut Law Journal and bound volumes
of official reports are copyrighted by the Secretary of
the State, State of Connecticut, and may not be repro-
duced and distributed without the express written per-
mission of the Commission on Official Legal
Publications, Judicial Branch, State of Connecticut.
******************************************************
CHARLES D. MIERZEJEWSKI v. CRARY BROWNELL
(AC 35747)
Alvord, Mullins and Flynn, Js.
Argued May 13—officially released August 5, 2014
(Appeal from Superior Court, judicial district of
Middlesex, Aurigemma, J.)
William J. O’Sullivan, with whom was Michelle M.
Seery, for the appellant (plaintiff).
Scott W. Jezek, for the appellee (defendant).
Opinion
ALVORD, J. The plaintiff, Charles D. Mierzejewski,
appeals from the summary judgment rendered by the
trial court in favor of the defendant, Crary Brownell, and
from the court’s denial of the plaintiff’s cross motion for
summary judgment. On appeal, the plaintiff claims that
the court improperly (1) concluded that the judgment
in the first action between the parties conclusively
determined that the defendant’s right-of-way was
twenty feet in width, (2) failed to give preclusive effect
to certain findings of the trial court in the second action
between the parties, and (3) stated that the plaintiff’s
continued prosecution of his claims in the present third
action ‘‘is vexatious.’’ We affirm the judgment of the
trial court.
The following facts and procedural history are rele-
vant to this appeal. The plaintiff and the defendant each
own adjoining parcels of land that abut Lake Bashan
in East Haddam. The plaintiff’s parcel is improved with
a dwelling, and he and his wife reside there. The defen-
dant’s parcel, which is located behind the plaintiff’s
parcel, is unimproved and would be landlocked except
for a deeded right-of-way over the plaintiff’s parcel.
Both parcels were once part of a larger tract of land
consisting of 13.2 acres. On October 8, 1958, Constance
Sauer Cuthbertson conveyed the 13.2 acre tract to
Arthur Foreman and Lillian Foreman. That same day,
the Foremans conveyed 3.1 acres of the 13.2 acre tract
to the defendant’s predecessor in title. Because the
defendant’s parcel had no direct access to a public
street, the deed from the Foremans conveyed the parcel
‘‘[t]ogether with a right of way over an old highway1 that
runs along land of William B. Robinson and continues
through other land of the Grantors to a point opposite
the boundary described as 72.1 feet of the granted prem-
ises where the right of way turns Southerly from said
old highway and enters upon the granted premises. Said
right of way shall be 20 feet in width over its entire
distance and shall be for any and all purposes in connec-
tion with the granted premises.’’ In 1997, the defendant
took title to the parcel with the right-of-way.
The Foremans further subdivided their remaining
property into additional parcels. They conveyed a por-
tion to Norbert Pomeranz, the plaintiff’s predecessor
in title, on August 8, 1986. Pomeranz made improve-
ments to the property, including the construction of
a new septic system without obtaining the necessary
permits, and installed the septic tank under a portion
of the deeded right-of-way. The plaintiff purchased the
Pomeranz parcel in 1994, and the warranty deed specifi-
cally provided that the property was being conveyed
subject to the right-of-way described in the 1958 deed
from the Foremans to the defendant’s predecessor in
title.
In 2003, the defendant informed the plaintiff that he
intended to clear the right-of-way. The plaintiff
responded by filing the first action, claiming that the
plaintiff acquired title to the defendant’s right-of-way
by adverse possession, or, in the alternative, by pre-
scriptive easement. The plaintiff requested a judgment
determining the rights of the parties and settling the
title to the right-of-way. The defendant filed an answer,
five special defenses and a five count counterclaim.
After a bench trial, the court, Aurigemma, J., issued a
memorandum of decision in which it concluded that
the plaintiff failed to prove the extinguishment of the
defendant’s right-of-way. In that decision, Judge Auri-
gemma further determined: ‘‘The language in the Fore-
man deed granting the right-of-way at issue here was
quite clear as to the size of the right-of-way. The right-
of-way runs along the northern property line of the
[plaintiff’s] property and is 20 feet in width, with the
entire right-of-way being located on that property.’’
Mierzejewski v. Brownell, Superior Court, judicial dis-
trict of Middlesex, Docket No. CV-03-0100645-S (Sep-
tember 15, 2005). The plaintiff appealed from that
decision.
In Mierzejewski v. Brownell, 102 Conn. App. 413, 925
A.2d 1126, cert. denied, 284 Conn. 917, 931 A.2d 936
(2007), this court affirmed the trial court’s judgment in
the first action between the parties. In his appeal of
the first action, the plaintiff had claimed, inter alia, that
the trial court improperly found that he had not proven
the extinguishment of the right-of-way by adverse pos-
session or prescriptive easement. Id., 414. That claim
was found to be without merit by this court. Addition-
ally, on appeal, the plaintiff had presented several issues
in connection with his argument that the trial court
improperly determined the precise location of the right-
of-way. In response to that argument, this court stated:
‘‘A reading of the court’s memorandum of decision . . .
reveals that the court did not determine the exact loca-
tion of the right-of-way. More specifically, the court did
not decide whether the northern boundary of the right-
of-way was a stone wall or was the center line of the
old highway. Rather, the court merely concluded that
the entire twenty-foot right-of-way, which ‘runs along
the northern property line of [the plaintiff’s property],’
was located on the plaintiff’s property. This finding,
however, is not inconsistent with its conclusion that
the plaintiff had failed to extinguish the right-of-way
by prescription.
‘‘The court’s conclusion that the plaintiff had not
extinguished the right-of-way by prescription was not
dependent on a determination of the exact location of
the right-of-way. . . . [T]he court’s disposition of the
extinguishment claim would be the same, regardless of
the exact location of the northern boundary.’’ (Empha-
sis added.) Id., 417 n.6. For those reasons, this court
concluded that the plaintiff’s claim lacked merit and
declined to address it further. Id.
Mierzejewski v. Brownell, supra, 102 Conn. App. 413,
was officially released on July 17, 2007. Three months
later on October 15, 2007, the plaintiff commenced a
second action against the defendant. In addition to the
defendant, the plaintiff named Robert J. Laneri and
Janice M. Laneri as defendants in the second action. The
Laneris owned an abutting parcel of land that shares a
boundary on the north side of the plaintiff’s parcel.2
The defendant’s right-of-way runs along the northern
property line of the plaintiff’s property, parallel to the
Laneris’ property. In the second action, the plaintiff
claimed that the boundary line between his property
and the Laneris’ property was a stone wall on the north
side of the abandoned highway. The Laneris and the
defendant claimed that the disputed boundary line was
the center line of the abandoned highway. The plaintiff’s
complaint in the second action alleged that the location
of the boundary line between the properties of the plain-
tiff and the Laneris ‘‘implicates the location of [the
defendant’s] right of way across Plaintiff’s property.’’
The plaintiff sought ‘‘a judgment determining the rights
of the parties in and to the property interests described
in this complaint and settling the title thereto.’’
Following a bench trial in the second action, the
court, Bear, J., issued a forty-six page memorandum
of decision. Mierzejewski v. Laneri, Superior Court,
judicial district of Middlesex, Docket No. CV-07-
5003402-S (February 23, 2010). Judge Bear concluded
that the plaintiff and the Laneris each owned in fee to
the stone wall between their properties.3 With respect
to the defendant’s right-of-way, Judge Bear determined
that it ran in the bed of the old highway and that it was
twenty feet in width within the old highway bed. Id. The
court rendered judgment accordingly, and the Laneris
appealed from the judgment in the second action to
this court.
On appeal of the second action, the Laneris claimed
that the trial court improperly determined that the com-
mon boundary between their property and the plaintiff’s
property was the stone wall. Mierzejewski v. Laneri,
130 Conn. App. 306, 308, 23 A.3d 82, cert. denied, 302
Conn. 932, 28 A.3d 344 (2011). The defendant did not
participate in this appeal. This court concluded ‘‘as a
matter of law, that the intent expressed in the deeds
in both the plaintiff’s and the [Laneris’] chains of title
was that the southerly boundary line of the [Laneris’]
land is the center of the old abandoned highway, not
a stone wall.’’ Id. The judgment in the second action
was therefore reversed, and this court remanded the
case to the trial court with the following rescript: ‘‘In
the exercise of our plenary review, we reverse the judg-
ment of the trial court quieting and settling title in the
plaintiff and conclude, as a matter of law, that the intent
expressed in the deeds in the [Laneris’] chain of title
describing the homestead parcel was that the [Laneris’]
southerly boundary line is the center line of the old
abandoned highway. The matter is remanded to the
trial court to render judgment accordingly.’’ Id., 319.
The plaintiff’s petition for certification to appeal was
denied by the Supreme Court on September 20, 2011.
On February 2, 2012, the plaintiff commenced the
present third action against the defendant. In his com-
plaint, the plaintiff alleged that the defendant was
bound by Judge Bear’s determinations in the second
action because he had not participated in the appeal
taken by the Laneris that resulted in the reversal of that
judgment. In his third action, the plaintiff sought ‘‘[a]
judgment determining the rights of the parties in, and
settling title to, the right-of-way pursuant to [General
Statutes §] 47-31 . . . including a determination of the
res judicata and/or collateral estoppel effect of the judg-
ment in the 2007 [second] [a]ction . . . .’’ The defen-
dant filed an answer with five special defenses, alleging,
inter alia, that the plaintiff’s claims were actually liti-
gated or could have been litigated in the two prior
actions between the parties. On December 14, 2012,
the defendant filed a motion for summary judgment,
claiming that the plaintiff’s third action was barred by
the doctrines of res judicata or collateral estoppel. On
December 17, 2012, the plaintiff filed a cross motion
for summary judgment, claiming that he was entitled
to judgment as a matter of law under the ‘‘principles
of res judicata/collateral estoppel . . . .’’
A hearing on the parties’ cross motions for summary
judgment in the third action was held before the court,
Aurigemma, J., on January 28, 2013. On May 28, 2013,
Judge Aurigemma, the same judge who had rendered
judgment in the first action between the plaintiff and
the defendant, issued a memorandum of decision. In
that decision, Judge Aurigemma made the following
factual findings and determinations: (1) the present
action is the third action commenced by the plaintiff
against the defendant since 2002, and all three actions
have included the same prayer for relief, i.e., to quiet
title to the property subject to the dispute; (2) in the
first action, the plaintiff challenged the validity of the
defendant’s right-of-way and raised issues pertaining to
its width and location; (3) the defendant prevailed in
the first action, with the trial court concluding that the
right-of-way ran along the northern property line of the
plaintiff’s property and that the right-of-way was twenty
feet in width; (4) the plaintiff brought the second action,
claiming that the location of the right-of-way had not
been determined in the first action and was uncertain;
(5) the trial court in the second action determined that
the property line between the properties of the plaintiff
and the Laneris was a stone wall on the north side of
the abandoned highway; (6) the Laneris successfully
appealed from the judgment in the second action, and
the Appellate Court held that the Laneris’ southerly
boundary line was the center line of the abandoned
highway; (7) the defendant claims that both the validity
and the width of the right-of-way were determined in
the first action, and that any remaining issues with
respect to the location of the right-of-way were deter-
mined in the second action; (8) the plaintiff claims that
some of the trial court’s findings in the second action
retain validity, most specifically, Judge Bear’s statement
that a portion of the defendant’s right-of-way would be
only ten feet in width if the Laneris’ southern boundary
is the center line of the abandoned highway rather than
the stone wall; (9) the width of the defendant’s right-
of-way was conclusively determined in the first action
by Judge Aurigemma; (10) based upon a review of the
trial court and Appellate Court decisions in the first
and second actions, and the affidavits submitted by the
parties, the first action determined the legality and the
twenty foot width of the defendant’s right-of-way, and
the second action determined the location of the right-
of-way as being the center line of the old highway; (11)
the plaintiff’s argument that selected findings of the
trial court in the second action remain valid despite the
Appellate Court’s reversal of the judgment in that action
has no merit; (12) all claims that the plaintiff seeks to
litigate in the present third action against the defendant
either were or could have been litigated in the prior two
actions; and (13) the plaintiff’s continued prosecution of
this action is vexatious. For those reasons, the court
granted the defendant’s motion for summary judgment
and denied the plaintiff’s cross motion for summary
judgment. This appeal of the court’s judgment in the
third action followed.
‘‘Practice Book [§ 17-49] provides that summary judg-
ment shall be rendered forthwith if the pleadings, affida-
vits and any other proof submitted 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.
. . . In deciding a motion for summary judgment, the
trial court must view the evidence in the light most
favorable to the nonmoving party. . . . The party seek-
ing summary judgment has the burden of showing the
absence of any genuine issue [of] material facts which,
under applicable principles of substantive law, entitle
him to a judgment as a matter of law . . . and the party
opposing such a motion must provide an evidentiary
foundation to demonstrate the existence of a genuine
issue of material fact. . . . [T]he scope of our review
of the trial court’s decision to grant the [defendant’s]
motion for summary judgment is plenary.’’ (Internal
quotation marks omitted.) Doran v. First Connecticut
Capital, LLC, 143 Conn. App. 318, 320–21, 70 A.3d 1081,
cert. denied, 310 Conn. 917, 76 A.3d 632 (2013). ‘‘Addi-
tionally, the applicability of res judicata . . . presents a
question of law over which we employ plenary review.’’
(Internal quotation marks omitted.) Nipmuc Proper-
ties, LLC v. Meriden, 130 Conn. App. 806, 812, 25 A.3d
714, cert. denied, 302 Conn. 939, 28 A.3d 989 (2011),
cert. denied, U.S. , 132 S. Ct. 1718, 182 L. Ed. 2d 253
(2012). ‘‘Similarly, [t]he applicability of the [doctrine] of
. . . collateral estoppel presents a question of law, over
which our review is plenary.’’ (Internal quotation marks
omitted.) Marques v. Allstate Ins. Co., 140 Conn. App.
335, 339, 58 A.3d 393 (2013).
We begin by setting out the doctrines of res judicata
and collateral estoppel. ‘‘Claim preclusion (res judicata)
and issue preclusion (collateral estoppel) have been
described as related ideas on a continuum. . . . [W]e
have observed that whether to apply either doctrine
in any particular case should be made based upon a
consideration of the doctrine’s underlying policies,
namely, the interests of the defendant and of the courts
in bringing litigation to a close . . . and the competing
interest of the plaintiff in the vindication of a just claim.
. . . The judicial doctrines of res judicata and collateral
estoppel are based on the public policy that a party
should not be able to relitigate a matter which it already
has had an opportunity to litigate. . . .
‘‘The doctrine of res judicata holds that an existing
final judgment rendered upon the merits without fraud
or collusion, by a court of competent jurisdiction, is
conclusive of causes of action and of facts or issues
thereby litigated as to the parties and their privies in
all other actions in the same or any other judicial tribu-
nal of concurrent jurisdiction. . . . If the same cause
of action is again sued on, the judgment is a bar with
respect to any claims relating to the cause of action
which were actually made or which might have been
made. . . . Res judicata bars not only subsequent relit-
igation of a claim previously asserted, but subsequent
relitigation of any claims relating to the same cause of
action . . . which might have been made. . . .
‘‘Collateral estoppel, or issue preclusion, is that
aspect of res judicata which prohibits the relitigation
of an issue when that issue was actually litigated and
necessarily determined in a prior action between the
same parties upon a different claim. . . . Collateral
estoppel means simply that when an issue of ultimate
fact has once been determined by a valid and final
judgment, that issue cannot be litigated between the
same parties in any future lawsuit. . . . Issue preclu-
sion arises when an issue is actually litigated and deter-
mined by a valid and final judgment, and that
determination is essential to the judgment.’’ (Citations
omitted; internal quotation marks omitted.) Massey v.
Branford, 119 Conn. App. 453, 464–65, 988 A.2d 370,
cert. denied, 295 Conn. 921, 991 A.2d 565 (2010).
I
The plaintiff’s first claim is that the court improperly
granted the defendant’s motion for summary judgment
through the ‘‘faulty application of the principles of col-
lateral estoppel and res judicata . . . .’’ More specifi-
cally, the plaintiff argues that the court ‘‘erred in
concluding’’ that the judgment in the first action
between the parties ‘‘ ‘conclusively determined’ that the
width of the right-of-way was twenty feet.’’ The plaintiff
maintains that (1) the only issue he raised in the first
action was whether the defendant’s right-of-way had
been extinguished and (2) footnote 6 in Mierzejewski
v. Brownell, supra, 102 Conn. App. 413, confirmed that
the judgment against the plaintiff on his extinguishment
claim was not dependent on Judge Aurigemma’s deter-
mination regarding the twenty foot width of the right-
of-way.
The same judge who presided over the trial in the
first action, and rendered a judgment in favor of the
defendant, subsequently rendered summary judgment
in favor of the defendant in this third action on the
grounds of res judicata and/or collateral estoppel. Judge
Aurigemma expressly stated in the memorandum of
decision in the third action that the validity and the
width of the defendant’s right-of-way was conclusively
determined in the first action. This determination is
verified by a review of Judge Aurigemma’s memoran-
dum of decision in the first action, in which she stated:
‘‘The language in the Foreman deed granting the right-
of-way at issue here was quite clear as to the size of the
right-of-way. The right-of-way runs along the northern
property line of the [plaintiff’s] property and is 20 feet
in width,4 with the entire right-of-way being located on
that property.’’ Mierzejewski v. Brownell, supra, Supe-
rior Court, Docket No. CV-03-0100645-S.
The plaintiff claims that the width of the right-of-way
was not an issue in the first action. Judge Aurigemma,
in the written decisions issued in the first and third
actions, has expressly stated otherwise. The plaintiff
has provided no evidence to show that the court’s state-
ments are erroneous. Although the record in this appeal
includes copies of pleadings, transcripts, and other doc-
umentation related to the second action, it does not
contain pleadings, transcripts, or other documentation
related to the first action. We will not presume that
Judge Aurigemma’s determinations are erroneous or
that she failed to apply the proper legal analysis in
the absence of any evidence to the contrary. See, e.g.,
Kaczynski v. Kaczynski, 294 Conn. 121, 129–30, 981
A.2d 1068 (2009); Shamitz v. Taffler, 145 Conn. App.
132, 142, 75 A.3d 62 (2013); Farrell v. Farrell, 36 Conn.
App. 305, 313, 650 A.2d 608 (1994).
Moreover, footnote 6 in Mierzejewski v. Brownell,
supra, 102 Conn. App. 413, does not compel a different
conclusion. Footnote 6 explicitly provides that the
‘‘exact location’’ of the right-of-way had not been deter-
mined in the plaintiff’s first action. Id., 417 n.6. The
footnote does not address the width of the right-of-way.
Because the exact location had not been determined in
the first action, the plaintiff commenced the second
action against the Laneris to determine the boundary
line, and, hence, the exact location of the defendant’s
right-of way. All issues, therefore, concerning the width
and location of the defendant’s right-of-way have been
determined in the first and second actions between
the parties. Accordingly, the court in this third action
properly concluded that the plaintiff’s claims in this
action were precluded because they ‘‘either were or
could have been litigated in the prior two cases.’’ The
trial court therefore properly rendered summary judg-
ment in favor of the defendant.
II
The plaintiff’s next claim is that the court improperly
denied his cross motion for summary judgment because
it failed to give preclusive effect to Judge Bear’s obser-
vation in the second action that the defendant’s right-
of-way would be only ten feet in width along the Laneris’
property if the southerly boundary was the center line
of the old highway rather than the stone wall.5 Because
we have concluded that the width of the right-of-way
already had been determined in the first action, it is
not necessary to address the plaintiff’s second claim.6
III
The plaintiff’s final claim is that the court, in its mem-
orandum of decision, improperly stated that his ‘‘contin-
ued prosecution of this action is vexatious.’’ This claim
merits little discussion. The defendant did not raise a
claim of vexatious litigation in his special defenses, nor
did he file a counterclaim alleging vexatious litigation.
Simply put, it was not an issue to be resolved by the
court, nor was such a determination necessary for the
resolution of the issues in the third action. As such,
it was mere dicta and has no precedential value. See
Farmington Valley Recreational Park, Inc. v. Farm-
ington Show Grounds, LLC, 146 Conn. App. 580, 589,
79 A.3d 95 (2013); Porto v. Sullivan, 119 Conn. App.
360, 366 n.4, 987 A.2d 1092 (2010).
The judgment is affirmed.
In this opinion the other judges concurred.
1
The ‘‘old highway’’ was discontinued as a public highway in 1866.
2
The Laneris’ property, also known as the ‘‘Homestead’’ parcel, was not
part of the 13.2 acre tract of land owned by the Foremans in 1958.
3
At page six of the decision, Judge Bear noted that the defendant agreed
with the Laneris that the common boundary was the center line of the
abandoned highway rather than the stone wall. Judge Bear observed: ‘‘[The
defendant] is supporting the position of the Laneris that the southern bound-
ary of their easterly parcel, the ‘Homestead’ parcel, is the center line of
such old highway. If [the Laneris’] position were correct, [the defendant’s]
deeded right-of-way that traverses to the south of the Laneri ‘Homestead’
parcel is ten feet and not twenty feet wide since it is limited to the bed of
such ‘old highway’ and the Laneri ‘Homestead’ parcel had not previously
been owned by [the Foremans]. Thus, [the defendant] does not have a claim
based on his deeded right-of-way to traverse the northerly ten feet of the
old highway bed if it is owned by the Laneris. This seemingly counterintuitive
and self-defeating approach, while evidence of the depth of [the defendant’s]
probably justified negative attitude toward [the plaintiff], calls into question
his credibility in this case.’’ Mierzejewski v. Laneri, supra, Superior Court,
Docket No. CV-07-5003402-S.
4
The language in the 1958 deed, in which the Foremans conveyed 3.1
acres of their 13.2 acre tract to the defendant’s predecessor in title, supports
the trial court’s determination that the defendant’s right-of-way is twenty
feet in width. At the time the Foremans conveyed the 3.1 acre parcel, they
still retained the parcel now owned by the plaintiff. Although Judge Bear
determined in the second action that the right-of-way was confined to the
bed of the old highway, the clear language in the 1958 Foreman deed belies
that interpretation. The right-of-way, as conveyed, ran along Robinson’s
land, now the Laneris’ land, ‘‘and continue[d] through other land of the
[Foremans] . . . . Said right of way shall be 20 feet in width over its entire
distance and shall be for any and all purposes in connection with the granted
premises.’’ (Emphasis added.)
Although Judge Bear was correct that the right-of-way could not have
extended into the Laneris’ parcel because the Foremans had never owned
it, the Foremans did own the plaintiff’s parcel when they conveyed the right-
of-way and the express language in the deed specifies that the width was
to be twenty feet for the entire distance of the right-of-way.
5
The plaintiff places great importance on the fact that the defendant did
not appeal from Judge Bear’s judgment in the second action. Although
Connecticut recognizes the general rule that a nonappealing party is bound
by the decision of the lower court, we also have recognized that there are
times when a nonappealing party can benefit from an appellate court’s
determination even though that party did not participate in the appeal. This
exception to the general rule is applicable in the present case. ‘‘[W]hen the
rights of all the parties are interwoven or when the erroneous legal decision
of the lower court forms the basis for all of the parties’ rights, the nonappeal-
ing party is entitled to the benefit of the appellate court determination.’’
(Internal quotation marks omitted.) Gino’s Pizza of East Hartford, Inc. v.
Kaplan, 193 Conn. 135, 143 n.7, 475 A.2d 305 (1984).
6
We also note that Judge Bear’s statement, found on page six of a forty-
six page decision, was addressed primarily to the issue of the defendant’s
credibility.
|
COURT OF APPEALS
SECOND
DISTRICT OF TEXAS
FORT
WORTH
NO.
2-05-328-CV
WESTERN
RESERVE LIFE APPELLANTS
ASSURANCE
COMPANY OF OHIO,
INTERSECURITIES,
INC., AND
TIMOTHY HUTTON
V.
DAVID
GRABEN AND APPELLEES
FRANK STRICKLER
------------
FROM
THE 271ST DISTRICT COURT OF WISE COUNTY
------------
OPINION
------------
I. INTRODUCTION
In three issues, Appellants
Western Reserve Life Assurance Company of Ohio (AWRL@),
Intersecurities, Inc. (AISI@), and Timothy Hutton (together, Athe Brokers@),[1]
assert (1) that the trial court made errors of law when awarding damages, (2)
that the evidence is neither legally nor factually sufficient to support the
jury=s findings of liability and damages-enhancing conduct, and (3) that
the trial court committed procedural and evidentiary errors in charging the
jury. We affirm in part, reverse and
render in part, and reverse and remand in part.
II. FACTUAL AND PROCEDURAL BACKGROUND
This is the case of the
spiritual advisor turned investment advisor.
ISI is a financial investment company that has 2,400 registered
representatives nationwide, including Hutton, an ISI agent. Appellees David Graben and Frank Strickler were
two of Hutton=s clients.
A. Timothy Hutton
Hutton had previously been a
pastor. When he turned forty, he decided
that he wanted a career change; he wanted to do something that would allow him
to Abless people.@ Hutton claimed the financial investment
business provided him Athe
opportunity to be a blessing to others.@ Even after he became a
financial advisor, he remained a part-time preacher and retained the Aprivilege . . . [of performing] marriage ceremonies and funerals for
some of my clients.@ Hutton had no college degree and no formal
education in financial management; none of Hutton=s seventy college hours related to financial management.
B. David Graben
David Graben flew for American
Airlines for almost thirty-four years until March 1997, when he retired from
American Airlines at the age of sixty.
Graben elected to receive his American Airlines retirement in the form
of a cash settlement, which he then placed into an IRA that was managed by his
financial advisor at the time, Joe Marshall.
In 1999, Graben became dissatisfied with Marshall and approached Hutton
about moving his investments to Hutton=s firm.
Prior to becoming a client of
Hutton, Graben met twice with Hutton and told Hutton that he wanted to preserve
his principal. Hutton assured Graben
that the principal would be protected.
Graben testified, A[a]nd I told
him, I want to make the maximum amount of money you can safely make, but don=t ever lose the principal, and they laughed. And they said, oh, lose the principal, of
course not. We would not lose your
principal.@ Graben also told Hutton that he wanted his
investment to provide a monthly income off which he would live. Graben
indicated that his long-range plans included leaving his investments to his
grandchildren.
During their meetings, they
further discussed Graben=s financial
goals and options for Graben=s assets of approximately $2.5 million. Graben wished to maximize his return and
minimize his risk. Although Graben
testified that preserving his principal was important to him, he also
understood that investing in the market carried a risk, that he could lose
money, and that Hutton had no crystal ball that would allow Graben to be in the
market on upswings and out of it in downturns.
Hutton responded to this information by telling Graben that he should
move his investment to Hutton so that Hutton could move Graben back Atowards the more safe side.@ Graben specifically testified
that he relied on what Hutton and Hutton=s partner, Al Demicell, had told him.
In his investment application
form, Graben ranked his investment objectives with Along-term growth@ first, Aincome@ second, and
Ashort-term growth@ third. Although Asafety of principal@ was a choice, he did not place it among his top three goals. Based on Graben=s criteria, Hutton recommended a WRL variable annuity, in which the
assets are invested in a group of subaccounts that function like mutual
funds. Hutton asserted that one of the
unique features of a variable annuity was its ability, through its death
benefit, to marry Graben=s goal of
receiving potential market growth with protection against market
downturns. This benefit purported to
lock in the highest value reached by the account on an anniversary of the policy
issuance, less withdrawals. Thus, the
death benefit guaranteed that Graben=s family would receive the highest value the account reached,
including net gains, even if the value had declined at the time of his death. This was supposed to mean that the principal
initially invested, less the insured=s withdrawals of principal, was preserved for his estate, along with
investment gains in the account.
Although Hutton was a Acommissioned broker@Cwhich meant that Hutton=s compensation was based on an initial commission paid by the insurance
companyCwhen he sold Graben the variable annuity, he also undertook to monitor
Graben=s investments and give financial advice. These services are not required of a
commissioned broker, but Hutton assumed the role of Graben=s Afinancial
advisor,@ even though he did not ask to be paid a fee for his services as is
customary with a fee-based financial advisor.
Hutton testified, AI said as a
commissioned broker from a technical standpoint, I do not have that
responsibility. But I also said that as
a decent individual, and as an honorable person, I have gone beyond that, and I
have provided investment advice to them, and acted as a financial advisor.@
Hutton described how he
monitored the investments= subaccounts
by referring to leading independent sources such as Morningstar ratings,
reviewing the quarterly statements, insisting on only the highest-rated funds,
advising Graben to make allocation changes as needed, and consulting with
Graben. In selecting funds, Hutton
looked at several criteria, including the experience level of the fund
managers, the volatility or risk level of the funds, and the funds= performances. Financial documents,
telephone logs, and the testimony of Hutton=s partner, Demicell, confirmed that Hutton took the above steps before
selecting funds.
From 1999 to early 2000, the
stock market and Graben=s
investments did well, and Graben was happy with Hutton. In March 2000, however, Graben=s investments began declining with the market. In addition to the market decline, Graben
also made withdrawals from his investments account. Hutton and Graben spoke
about the decline, and Graben suggested moving his money into cash. Hutton counseled against such a move, as it
would Alock in the losses,@ and advised Graben to ride out the rough period. Hutton had explained to Graben how the market
was cyclical and had a chart in his office tracking the history of the market,
which he used with clients to illustrate the market trends. Graben could have directed Hutton to move his
investments out of the market, but instead he took Hutton=s advice and remained in the market.
On October 21, 2001, Hutton
sent Graben a letter stating that he had invested in a new computer system Ato help me do a better job of what you ultimately pay me to do: Monitor your investments and keep you posted
on any changes or recommendations to your financial plan.@ Graben presented this letter
at trial to support his complaint of misrepresentation.
Following the September 11
terrorist attacks, Graben=s
investments continued to slide with the market.
Graben=s
investments, though losing money, actually performed better than the market
benchmarks, the S&P 500, and the NASDAQ Fund and also performed better over
this period than if he had remained in his prior investments with
Marshall. By 2003, the stock market
began rebounding. In September 2003,
Graben moved his investments to another financial advisor, Michelle Brennan
Hall, but by the time of trialCover a year and a half laterCHall had not made substantive changes to Hutton=s allocation of Graben=s investments. As of December
2004, Graben=s
investments had regained their losses and showed a net gain of $143,317. Based
on a $2.5 million original investment, this gain represented a 5.7% return over
five years, or about 1% per year.
Although Graben was not happy
that his retirement investments lost considerable value while he was a client
of Hutton and had questioned Hutton whether there was a way to Astop the loss,@ he
understood that AMr. Hutton
did not have anything to do with the downturn of the economy.@ He also did not believe that
Hutton was dishonest.
C. Frank Strickler
Frank Strickler was also an
American Airlines pilot, retiring in September 1997 when he turned sixty. Strickler also elected to take a lump sum
settlement at the time of retirement and then placed his American Airlines
retirement funds into an IRA managed by Marshall, whom Strickler found to be very difficult to
access because Marshall had many clients and was very busy. Graben thereafter referred Hutton to
Strickler. Hutton and Demicell contacted
Strickler and then met with him to discuss how they could help him manage his
IRA. Hutton and Demicell informed
Strickler that their firm, Demicell & Hutton, was small, that the firm
hand-picked its clients, and that they provided extraordinary personal
attention and personal advice for those hand-picked clients. Strickler specifically informed Hutton that
Strickler=s goal was
to preserve the principal of his retirement benefits, to have the principal
earn income to support his modest lifestyle, and to be able to leave his
principal to his wife. After Hutton and
Demicell met with Strickler in March 2000, Strickler decided to invest through
Hutton. Strickler already had three
variable annuities with other companies, all of which he transferred to Hutton. He also purchased a WRL variable annuity from
Hutton, for which Hutton received a commission. When he began using Hutton,
Strickler=s
investments totaled approximately $2.5 million.
Strickler testified that preservation of principal was his primary
objective but, like Graben, his application form listed Agrowth,@ Aaggressive growth,@ and Aincome@ as his top priorities. Hutton
explained to Strickler that the death benefit aspect of the variable annuity
was a good fit for Strickler as well because it enabled him to guarantee gifts
to support his interests after his death.
As with Graben, Hutton
continued to monitor Strickler=s investments after his initial investment, checking their Morningstar
ratings and risk factors, looking for any change in fund management, and
conferring with Strickler. At one point,
Strickler suggested that Hutton move his non-WRL annuities into his WRL
annuity, but Hutton advised against such a move. According to Hutton, although he would have
earned more commissions by making the change, he advised against it because Strickler would
incur penalties in the process. Scott
Lenhart, ISI=s Chief
Compliance Officer, testified that Hutton did not take this opportunity to earn
additional commissions upon assuming Graben=s and Strickler=s accounts,
as many brokers would, which was a mark of his integrity.
Like Graben, Strickler
understood that there was a possibility he would lose money in the stock market
and that Hutton had no crystal ball.
When the market began declining, Strickler, like Graben, asked Hutton
about moving money into cash positions, but Hutton counseled against locking in
his losses and advised Strickler to ride out the bad market.
Strickler informed Hutton
that Strickler did not have education, background, experience, or
sophistication concerning investments and that he was totally dependent upon
Hutton=s counsel and advice. Hutton=s phone logs show that in May 2002, Strickler informed Hutton that he
wanted to simplify his investment.
Strickler specifically inquired whether his current allocations were the
best or whether changes needed to be made.
When Strickler suggested to Hutton that he should go ahead and change
his investments (and incur any attendant penalties) so that he would not
continue to lose so dramatically, Hutton simply advised against it, as he had
with Graben, and the market continued to decline.
During the downturn,
Strickler never ordered Hutton to move his investments out of their equity
positions, nor did he opt to move his investments on his own. Hutton took over Strickler=s accounts in early 2000 just as the market was peaking and
immediately prior to the market=s beginning its slide, and he held Strickler as a client during the
entire market decline. Concerning this
decline, Strickler acknowledged that Hutton had Ainherited thisCthis
downturn in the market.@ By July 2003, Strickler had met with Hutton
and informed him that something had to be done because Strickler could not
continue to sustain the continuing losses.
At this meeting, Hutton told Strickler that he had a new computer
program and a new investment strategy that was totally, diametrically, and
dramatically different than the one he had been using. Strickler testified that when he and his wife
left the meeting, he realized something was wrong. In September 2003, Strickler moved his
investments to Hall, who did not change the allocation strategy set by
Hutton. By December 2004, Strickler=s investments had regained most of their losses, with a total net loss
of $132,739. Based on a $2.5 million
investment, this loss represented a 5.2% decline over a three-and-a-half year
period, or about a 1.5% decline per year.
In sum, both Strickler and
Graben, collectively the AClients,@ told Hutton from the very beginning that they were dependent on
Hutton for his counsel, experience, and advice, and Hutton admitted that he
knew the Clients were not sophisticated investors. Hutton also knew that the Clients wanted to
preserve their principal so that they could pass this money along to their
families and acknowledged that the Clients told him that their goal was to Apreserve as much of the principal as they could for posterity.@ Finally, Hutton admitted that
he had a responsibility to determine the appropriate suitability of the Clients= investments.
When soliciting the Clients,
Hutton repeatedly represented himself as a Afinancial advisor.@ However, Hutton did not tell
the Clients that by placing their money into variable annuities, Hutton was
putting the Clients into what was later alleged to be a high-risk, aggressive
investment that was unsuitable for the Clients but that did produce a sizable
$80,000 commission for Hutton. Hutton also purportedly failed to tell the
Clients that by his placing their investment in a variable annuity, Hutton did so
as a Acommissioned broker@ and that a commissioned broker had no further obligation to provide
financial advice to the client after the sale.
According to the Clients, and
unbeknownst to them at the time, Hutton and ISI committed other allegedly
wrongful acts leading to this lawsuit, including the following:
(1) Hutton misrepresented that he was being paid to monitor Graben=s and
Strickler=s
accounts.
(2) Hutton misrepresented that he was not just monitoring, but was
also Amanaging,@
Graben=s and
Strickler=s
accounts.
(3) In the context of (1) and (2) above, ISI internal documents
revealed that advertising and representing yourself as a financial advisor,
like Hutton did to Graben and Strickler, can be confusing and misleading. Hutton knew this. Hutton=s representation to Graben
and Strickler that he was a financial advisor was a violation of ISI=s
rules. ISI knew Hutton was representing
himself as a financial advisor even though they knew he was a commissioned
broker.
(4) When soliciting Strickler=s investments, Hutton took
Strickler to the offices of a professional fund/portfolio management company,
which Hutton represented would provide expert management. This advertising/sales representation by
Hutton directly violated ISI rules.
(5) Hutton admitted that he knew it was critical to Graben and
Strickler that their principal be preserved.
Yet, on Graben=s and
Strickler=s new
account forms, which Hutton sent to ISI, Hutton did not check the available box
requesting Asafety
of principal.@
The Clients filed suit
together on August 29, 2003, alleging that Hutton made misrepresentations, violated
the insurance code, committed negligent acts, and breached a fiduciary
duty. They also sued ISI for its own
acts and, along with WRL, for vicarious liability for Hutton=s acts. Asserting that there
was no legal or factual basis for the Clients to join their two separate
lawsuits into one, except as a tactic to prejudice the jury, the Brokers moved
to sever the claims. The Brokers
contended that the Clients= claims had nothing in common except the same defendants and the same
lawyers. The trial court refused to
sever and tried the claims jointly.
D. Trial and Damages
At trial, both sides
presented expert testimony on damages.
The Clients= expert, Dr.
Scott Hakala, Adisapproved
of@ the advice of all three of the
Clients= advisorsCMarshall, Hutton, and Hall. Dr.
Hakala testified that Hutton had placed their money in funds that were too
aggressive and too heavily invested in equities, which was a Arecipe for disaster.@ Dr. Hakala used a damage model
that was based on the performance of two funds that had outperformed the market
from March 2000 until August 2003; he concluded that if Hutton had placed the
Clients in these investments, picked in hindsight according to the Brokers,
Graben should have earned $418,000, and Strickler should have earned $860,600,
including his non-WRL accounts. However,
Dr. Hakala also testified that he would not have recommended his own damage
model if he were allocating the Clients= funds. In concluding that
Hutton=s allocations were too aggressive, Dr. Hakala did not research the
actual holdings in the subaccounts of each fund but concluded they were Aaggressive@ by looking
at the names of the funds. Dr. Hakala
also testified that by placing the Clients in the aggressive-type investments,
Hutton violated the standard of care owed by financial advisors. The Brokers= experts purportedly looked beneath the fund titles to the subaccounts
and the funds= investment
objectives. When the Brokers pointed out
to Dr. Hakala that Hall, whom the Clients retained in September 2003, had made
virtually no changes to the investments, Dr. Hakala asserted that Hutton had
waited until the summer of 2003 to move the Clients into a more Amoderate@ position
that Hall then followed, a claim he later admitted was in error.[2]
The Brokers= expert, Karyl Misrack, showed that the Clients= Amoderate@ investment allocation as of summer 2003 had actually been in place
for up to two years under Hutton=s direction. Misrack further
took issue with Dr. Hakala=s findings, noting that an examination of the actual subaccounts
showed that the funds were more balanced than Dr. Hakala stated because the
fund managers themselves had been relocating the various funds into more
conservative positions as the market fell.
She opined that the losses were caused entirely by the market decline,
not by Hutton=s and ISI=s actions.
The Brokers also presented
the expert testimony of Bernard Young, a former district director of the
National Association of Securities Dealers (NASD) who had experience in
investigating customer complaints against securities brokers. He described the NASD=s rule on suitability and testified that Hutton=s investment recommendations for the Clients were suitable. He also stated that Hutton=s recommendation to stay in the market during a downturn was a widely
accepted strategy, and he described and approved of the manner in which Hutton
monitored the investments. He explained
how the Morningstar Abeta@ ratings of the Clients= subaccounts indicated that they were far from an Aextremely aggressive@ position. Like Misrack, he
attributed the decline in the Clients= investments entirely to market forces over which Hutton had no
control.
E. The Verdict and Judgment
The jury returned a verdict
for the Clients on all claimsCinsurance code violations, negligence,[3]
and breach of fiduciary duty. The trial
court=s judgment awarded the same amount of actual damages for each of the
insurance code and breach of fiduciary duty causes of action ($104,500 to
Graben and $215,300 to Strickler), as well as disgorgement of commissions for
breach of fiduciary duty ($66,000 to Graben and $14,000 to Strickler) and
prejudgment interest on these amounts.[4] The judgment also awarded additional damages
for knowing violations of the insurance code in the amount of $75,000 for each
Client against Hutton; exemplary damages in the amount of $2 million to each
Client against ISI, as Hutton=s principal, based on the jury=s finding of fraud; and attorney=s fees in the amount of $219,000 to the Clients jointly. The trial court also granted the Clients a directed
verdict against WRL and ISI on their respondeat superior claims Afor the acts, omissions, and conduct of Timothy Hutton.@ The trial court denied the
Brokers= post-trial motions, and this appeal followed.
III. SUFFICIENCY OF THE EVIDENCE
The Clients= three causes of action for which the jury awarded them damages were
their insurance code claims, breach of fiduciary duty claims, and negligence
claims. Because the Clients did not
elect to recover on the jury=s negligence
findings, the trial court=s final judgment awarded damages for the
Clients= insurance code
claims and breach of fiduciary duty causes of action only. In their
second issue, the Brokers assert that there is neither legally nor factually
sufficient evidence to support the jury=s findings of liability and damages-enhancing conduct on the part of
Hutton or ISI.
A. Standards of Review
A legal sufficiency challenge may only be sustained when
(1) the record discloses a complete absence of evidence of a vital fact, (2)
the court is barred by rules of law or of evidence from giving weight to the
only evidence offered to prove a vital fact, (3) the evidence offered to prove
a vital fact is no more than a mere scintilla, or (4) the evidence establishes
conclusively the opposite of a vital fact.
Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex.
1998), cert. denied, 526 U.S. 1040 (1999);
Robert W. Calvert, ANo Evidence@ and AInsufficient
Evidence@ Points of
Error, 38 TEX. L. REV. 361, 362-63 (1960). In
determining whether there is legally sufficient evidence to support the finding
under review, we must consider evidence favorable to the finding if a
reasonable fact-finder could, and disregard evidence contrary to the finding
unless a reasonable fact-finder could not.
City of Keller v. Wilson, 168 S.W.3d
802, 827
(Tex. 2005).
An assertion that the
evidence is factually insufficient to support a fact finding means that the
evidence supporting the finding is so weak or the evidence to the contrary is
so overwhelming that the answer should be set aside and a new trial
ordered. Garza v. Alviar, 395
S.W.2d 821, 823 (Tex. 1965). We are
required to consider all of the evidence in the case in making this
determination, not just the evidence that supports the finding. Mar. Overseas Corp. v. Ellis, 971
S.W.2d 402, 406-07 (Tex.), cert. denied, 525 U.S. 1017 (1998).
B. Materiality and Causation
of the Clients= Insurance
Code Claims
In their petition, the
Clients alleged that the Brokers= actions relating to the sale and management of their investments
violated the Texas Insurance Code because the Brokers engaged in unfair and
deceptive acts by making false representations to them. See Act of April 25, 1957, 55th Leg.,
R.S., ch. 198, ' 1, secs.
3-4, 1957 Tex. Gen. Laws 401, 401-03 (repealed 2003) (current version at Tex. Ins. Code Ann. '' 541.003, .051-.061 (Vernon Supp. 2006)). They further alleged that they were entitled
to recover for these violations because they had sustained actual damages that
were caused by these misrepresentations.
On appeal, the Brokers claim
that the Clients failed to prove that any allegedly wrongful actions or
representations caused the Clients damage because (1) whether Hutton was a
commissioned broker or a financial advisor was immaterial and did not cause the
Clients damage, (2) an October 23, 2001 letter relied on by the Clients during
trial was also immaterial and did not cause damage, and (3) Hutton performed as
he promised he wouldChe monitored
the Clients= investments
and gave the Clients advice, which they accepted. Hence, according to the Brokers, the Clients
did not prove that Hutton caused them any damages.
The Clients respond by
pointing out that Hutton represented to the financially unsophisticated Clients
that he would monitor and manage their accounts;[5]
that he assumed the role of, and acted as, their financial advisor; and that he
failed to comply with ISI=s own
recommendations regarding financial investing by placing them in a virtually
100% stock portfolio that was not diversified into bonds or other
investments. Further, Hutton admitted
that he was aware of information important to the Clients, such as their
desires to preserve their principal investments and leave inheritances for
their children and grandchildren, when they came to him. However, evidence relating to the suitability
of investments or any failure on Hutton=s part to meet the Clients= investment requirements is not evidence of and cannot support any
insurance code violation that was submitted because it does not relate to the
types of unfair or deceptive acts that are prohibited by the insurance
code.
The insurance code violations
were submitted by Jury Question numbers 1 and 2, which inquired as to any Afalse, misleading, or deceptive@ acts or practices defined as (1) misrepresenting the rights or
remedies conferred by an agreement; (2) making, publishing, or disseminating
before the public any advertisement, announcement, or other statement with
respect to the business of insurance that was untrue, deceptive, or misleading;
(3) making an untrue statement of material fact; (4) failing to state a
material fact necessary to make other statements made not misleading; or (5)
making a statement in such a manner as to lead a reasonably prudent person into
a false conclusion of material fact.
The gravamen of each of the
Clients= claims for insurance code violations was that Hutton and ISI made
misrepresentations. In contrast, the
allegedly unsuitable recommendations, placement, and handling of the
investments were separate claims covered by separate theories of breach of
fiduciary duty, negligence, and negligent misrepresentation, which were
submitted by separate jury questions.
Accordingly, we conclude that when the evidence regarding the alleged
violations of the insurance code is properly considered in light of the actual
jury questions and definitions submitted, there is no evidence of any insurance
code violation that caused the Clients any damages. See Osterberg v. Peca, 12 S.W.3d 31,
55 (Tex. 2000) (holding that sufficiency of evidence must be reviewed in light
of jury charge actually submitted).
The record is undisputed that
Hutton held licenses as both a commissioned broker and an investment advisor
representative and that he was also authorized to act as a fee-based financial
advisor.[6] The evidence was, again, undisputed that he
did exactly what he said he would do: he
monitored the Clients=
investments, provided ongoing investment advice, managed their accounts,
reviewed the accounts, and advised the Clients periodically.
Hutton admitted that he told
Graben and Strickler he would continue to provide advice and monitor their
accounts. And the evidence is
overwhelming that he did that. Graben
and Strickler testified that they relied on Hutton=s advice, and Strickler recalled that they had good rapport. Hutton testified that he provided ongoing
advice; he understood he had an ongoing responsibility; he held a Asacred trust@; and he
monitored their accounts as an investment advisor.
Hutton monitored the
investments= subaccounts
by reference to sources such as the Morningstar ratings and review of quarterly
statements. He made recommendations for
the highest-rated funds and advised the Clients of needed allocation changes in
their accounts. He utilized several
criteria in choosing funds, including the experience level of the fund managers,
the volatility of the stocks, and the performance level of the funds. Thus, Hutton=s representations that he was monitoring the accounts were true, not
false statements of any material fact.
Graben and Strickler also
complained that Hutton misrepresented to them that they would never lose their
principal. But both Clients acknowledged
that they knew they could lose money in the market. They acknowledged in writing that they knew
they could lose money. When both Clients
voiced concerns regarding the falling market, Hutton advised them that it would
rise againCas it didCand that they were better off to stay in rather than to Alock in their losses@ at the bottom of the downturn.
These statements were not misrepresentations of existing fact, nor even
promises of future performance but, at most, merely constituted financial
advice that the Clients accepted. They
acknowledged that Hutton had no magic wand or crystal ball and could not
predict the market=s
future. Moreover, the significant
feature of the variable annuity vehicle for their investments was shown to be
the death benefit guaranteeing that the Clients= families would receive the highest value reached by the investments
on an anniversary of the annuity, less withdrawals, even if the actual value
had declined by the time of death.
The only representation
Hutton made that was shown to be false was his statement in the letter of
October 2001 that he was monitoring the Clients= accounts for a Afee,@ when he was, in fact, not charging them for that ongoing service. The Clients made much noise about this
misrepresentation. But it was a
nonissue. Graben and Strickler had no
complaint about not being charged a fee.
Graben actually admitted that Hutton had told him he would continue to
monitor his accounts Afor free@ and testified that did not cause him any concern. Graben also admitted that he did not even
know the difference between a broker and a financial advisor until trial and that
he did not know the technicalities of the compensation. His concerns were that Hutton should have
placed him in something that was Arock solid@ at his age
and time of life and that Hutton did not do anything to stop the decline in his
investments in the downturn of the market.
Strickler likewise testified that his grievance was that Hutton did not
do anything when the losses became Adramatic.@
Graben and Strickler did not
contend that any of the claimed misrepresentations by Hutton, nor the approval
of some statements by ISI, caused their damages, and there is no evidence that
they did. Their real complaint was that
Hutton failed to place or allocate their funds in investments that provided a
suitable allocation of risk for their circumstances. Their expert, Dr. Hakala, provided no
opinions as to causation of any damages resulting from misrepresentations but
addressed only the issue of the amount of damages that, in his opinion, were
caused by breach of the fiduciary duty Hutton owed as a financial advisor or as
a broker to provide proper financial advice and to place the Clients in
diversified, balanced portfolios with equal proportions of bonds and equities.
We hold that the evidence is
legally insufficient to support the findings in Jury Question numbers 1 and 2
of violations of the insurance code and that the Clients are not entitled to
recover under this theory for their damages.
This holding dictates that the Clients also are not entitled to recover
additional damages for Aknowing@ violations of the insurance code, attorney=s fees, or prejudgment interest for their insurance code claims.
C. Fiduciary Relationship
Having concluded that the
evidence is insufficient to support the jury=s verdict on the Clients= insurance code claims, we now turn to the Brokers= argument that there was insufficient evidence that a fiduciary
relationship existed between Hutton and the Clients, or that if one did exist,
there was insufficient evidence that it was breached.
1. Existence of a
Fiduciary Duty
Hutton maintains that there
was no relationship of trust and confidence between himself and the Clients,
that he did not owe them a duty beyond placing orders as instructed and not
making unauthorized trades, and that there was insufficient evidence that even
if a duty did exist, that it was breached by him. The Clients argue that both a formal and
informal fiduciary relationship existed between Hutton and the Clients. Specifically, the Clients alleged that Hutton
owed a fiduciary duty based on the formal relationship of principal and agent,
as well as based on an informal relationship of trust and confidence.
As evidence of this fiduciary
relationship, the Clients assert that Hutton himself testified that the
relationship he had with the Clients was a Avery sacred trust@ and that he treated them Abetter than I would treat myself@; that the Brokers= own expert, Bernard Young, testified that Asomeone who represents themself as an investor advisor has a
heightened responsibility to review the account and act as a fiduciary@; that Hutton also owed the Clients a fiduciary duty based on the
formal relationship of principal and agent; and that brokers and financial
advisors owe fiduciary duties. See
Romano v. Merrill Lynch, Pierce, Fenner & Smith, 834 F.2d 523, 530 (5th
Cir. 1987), cert. denied, 487 U.S. 1205 (1988); Hand v. Dean Witter
Reynolds, Inc., 889 S.W.2d 483, 492 n.5 (Tex. App.CHouston [14th Dist.] 1994, writ denied) (stating that the relationship
between an agent and a principal is a fiduciary one); Robinson v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 337 F. Supp. 107, 111 (N.D. Ala. 1971), aff=d, 453 F.2d 417 (5th Cir. 1972) (stating
that broker/dealer who also acts as an investment advisor occupies a fiduciary
relationship). Further, the Clients
assert, and we agree, that the foregoing admissions by Hutton and Young, as
well as ample other evidence, support the jury=s finding that a relationship of trust and confidence existed between
Hutton and the Clients.
The Brokers rely on Meyer v. Cathey, 167 S.W.3d 327,
331 (Tex. 2005), and Schlumberger Technology Corp. v. Swanson,
959 S.W.2d 171, 176-77 (Tex. 1997), to
argue that for a court to impose a fiduciary or confidential relationship in a
business transaction, the relationship must exist prior to, and apart from, the
agreement made the basis of the lawsuit.
First, it should be noted that the Brokers did not tender to the trial
court an alternative written instruction containing an instruction to the jury
that a prior and separate relationship is required. Accordingly, the Brokers failed to preserve
their argument that there must be evidence of a prior and separate
relationship. See Tex. R. Civ. P.
278.
Second, and more importantly,
the holdings in Schlumberger and Meyer are distinguishable. Schlumberger and Meyer stand
for the proposition that in a true arms=-length business transaction, where one party is denying that it owes
a fiduciary relationship, the court will exercise caution before imposing a
confidential/fiduciary relationship on the parties. Meyer, 167 S.W.3d at 330-31;
Schlumberger, 959 S.W.2d at 176-77.
The Texas Supreme Court noted in those cases that A[i]n order to give full force to contracts, we [courts] do not create
such a relationship lightly.@ Meyer, 167 S.W.3d at
331; Schlumberger, 959 S.W.2d at 177.
Obviously, when a person such as Hutton is acting as a financial
advisor, that role extends well beyond a simple arms=-length business transaction.
An unsophisticated investor is necessarily entrusting his funds to one
who is representing that he will place the funds in a suitable investment and
manage the funds appropriately for the benefit of his investor/entrustor. The relationship goes well beyond a
traditional arms=-length
business transaction that provides Amutual benefit@ for both
parties. In Meyer, the Supreme
Court noted that arms=-length
transactions entered into for the parties= Amutual
benefit@ did not necessarily establish a basis for a fiduciary
relationship. Meyer, 167 S.W.3d
at 331.
By Hutton=s own admission, his relationship with the Clients went well beyond
mere Amutual benefit.@ Hutton specifically testified that he told
his clients that he treats them Abetter than [he] would treat [himself].@ Simply put, when Hutton
assumed the role to act as a financial advisor to the Clients and to monitor
and manage their investments, any arms=-length business transaction that may have existed between the parties
was elevated into a fiduciary relationship by the very nature of Hutton=s actions. See Schlumberger,
959 S.W.2d at 176 (AAn informal
relationship may give rise to a fiduciary duty where one person trusts in and
relies on another, whether the relation is a moral, social, domestic, or purely
personal one.@). The Brokers= own expert witness agreed, stating that Hutton, as a financial
advisor, had a heightened responsibility to review the Clients= accounts and to act as a fiduciary. Therefore, we reject the Brokers= argument that in this case a fiduciary relationship must exist prior
to, and apart from, the agreement made the basis of this lawsuit. We hold that the evidence demonstrates the
existence of a fiduciary relationship between Hutton and the Clients.
2. Breach of the Fiduciary
Duty
Next, the Brokers argue that
even if Hutton did owe a fiduciary duty to the Clients, he did not breach that
duty because his only duty was to execute the trade orders that the Clients
authorized. See Hand, 889 S.W.2d
at 492 n.5 (stating that the fiduciary duty owed by a stock broker to a
customer is confined to executing the orders that he or she has accepted from
the customer and is Avery narrowCprimarily not to make unauthorized trades@). Here, though, Hutton was
much more than a mere order-taker to the ClientsChe acted as a financial advisor whom the Clients trusted to monitor
the performance of their investments and recommend appropriate financial plans
to them. Accordingly, the duty that
Hutton owed the Clients went well beyond the Anarrow@ duty of
executing trade orders.
The Brokers further argue
that the evidence failed to establish a breach of Hutton=s fiduciary duty because there was no evidence that Hutton failed to
put the Clients= interests
above his own or treated the Clients unfairly. However, the jury was charged
that it could also find that Hutton breached his fiduciary duty if he failed to
show that he made reasonable use of the confidence that the Clients placed in
him, that he acted in the utmost good faith and exercised the most scrupulous
honesty toward the Clients, or that he fully and fairly disclosed all important
information to the Clients concerning the transaction. See Comm.
on Pattern Jury Charges, State Bar of Tex., Texas Pattern Jury Charges:
Fiduciary Duty PJC ' 104.2 (2003).
The testimony of Dr. Hakala,
the Clients= expert
witness, provided evidence that Hutton did not make reasonable use of the
confidence placed in him by the Clients.
Dr. Hakala testified that the investments that Hutton selected for the
Clients were not appropriate or reasonable because they were too aggressive for
the Clients= needs. He explained that because the Clients were at
retirement age and needed current income from their investments, almost all
financial advisors would have recommended the Clients= money to be invested more in the bond market rather than in equity
funds due to the reduced risk of loss that bond funds provided. Instead, Hutton put almost all of the Clients= money into equity stocks and recommended leaving it there even when
the market tumbled, which Dr. Hakala termed Aa recipe for disaster.@
The Brokers contend that
Hutton=s investment recommendations were not unsuitable because the Clients= new broker, Hall, kept essentially the same allocation strategy that
Hutton recommended after the Clients moved their accounts to Hall in 2003. But Dr. Hakala testified that the investments
were unsuitable from the outset, in 1999 and 2000, when Hutton first
recommended the equity-based variable annuities; thus, even if the new broker
did keep the same allocation strategy in 2003, this action does not necessarily
speak to the suitability of the same allocation strategy under the conditions
of the market three to four years earlier.
The Brokers also complain
about the Clients= failure to
list Asafety of principal@ as one of their priorities and Strickler=s client profile stating his risk tolerance level as Ahigh@ and
defining his objectives as Agrowth,@ Aaggressive growth,@ and Aincome.@ However, Hutton himself
testified that he knew that the Clients wanted to preserve as much of their
principal as possible for posterity and that it was important to the Clients to
preserve the retirement funds for their families.
Anything more than a scintilla of evidence is legally
sufficient to support the jury=s finding that
Hutton breached his fiduciary duty to the Clients. See Cont=l Coffee Prods.
Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex. 1996); Leitch v. Hornsby,
935 S.W.2d 114, 118 (Tex. 1996). We
conclude that more than a scintilla of evidence exists because the evidence
discussed above furnishes some reasonable basis for differing conclusions by
reasonable minds about the existence of Hutton=s breach of fiduciary
duty. See Rocor Int=l, Inc. v. Nat=l Union Fire Ins.
Co.,
77 S.W.3d 253, 262 (Tex. 2002).
Accordingly, we hold that there was legally sufficient evidence to
support the jury=s verdict.
Furthermore, because the evidence supporting the jury=s finding that
Hutton breached his fiduciary duty is not so weak and
the evidence to the contrary is not so overwhelming that the finding should be
set aside, we also hold that there was factually sufficient evidence to support
the jury=s verdict. See Garza,
395 S.W.2d at 823.
D. Fraud
Having concluded that the
evidence is legally and factually sufficient to support the jury=s verdict on the Clients= breach of fiduciary duty claims, we now examine the jury=s finding that Hutton committed fraud while breaching his fiduciary
duty because this fraud finding was the basis of the jury=s $2 million punitive damages award for the Clients. The Brokers argue that there is not clear and
convincing evidence to support the jury=s finding that Hutton committed fraud.
The jury was charged with the following definition of Afraud@:
Fraud
occurs when a party makes a material misrepresentation, the misrepresentation
is made with knowledge of its falsity or made recklessly without any knowledge
of the truth and as a positive assertion, the misrepresentation is made with
the intention that it should be acted on by the other party, and the other
party acts in reliance on the misrepresentation and thereby suffers
injury.
Misrepresentation
means a false statement of fact, or a promise of future performance made with
an intent, at the time the promise was made, not to perform as promised, or a
statement of opinion that the maker knows to be false, or an expression of
opinion that is false, made by one claiming or implying to have special
knowledge of the subject matter of the opinion.
The gist of fraud is successfully using cunning,
deception, or artifice to cheat another to the other=s injury. McEwin v. Allstate
Tex. Lloyds, 118 S.W.3d 811, 816 (Tex. App.CAmarillo 2003, no pet.). In
reviewing the jury=s finding of
fraud by clear and convincing evidence, we must apply a heightened standard of
review and determine whether a reasonable juror could form a firm belief or
conviction that the finding of fraud was true.
Sw. Bell Tel. Co. v. Garza, 164 S.W.3d 607, 627 (Tex. 2004).
Here, there was no evidence
that Hutton used cunning, deception, or artifice to cheat the Clients. Furthermore, while the Clients allude to the
fact that Hutton received a large up-front commission by placing the Clients= money in variable annuities, the Clients failed to show that Hutton
had nefarious motives for investing their money as he did. Hutton had no financial motive to ignore the
Clients= wishes. He even gave up the
opportunity to make more commissions by declining to move an investment as
Strickler had suggested because Hutton felt that it was not in Strickler=s best interest. In sum, the
Clients never articulate why Hutton would have been motivated to place them in
unsuitable investments, much less prove that he acted fraudulently in doing
so. Accordingly, we hold that there was
legally and factually insufficient evidence of Hutton=s fraud.
Consequently, because the
evidence is insufficient to support the jury=s fraud finding, the punitive damage awards cannot be upheld. Therefore, the Clients are not entitled to
recover punitive damages from the Brokers for Hutton=s breach of fiduciary duty.
E. Sufficiency Holdings
In summary, we hold that
there was legally insufficient evidence of causation to support the Clients= insurance code claims, so we sustain the Brokers= second issue as to the insurance code claims. We further hold that while there was legally
and factually sufficient evidence of the existence and breach of a fiduciary
duty owed by Hutton to the Clients, there was not clear and convincing evidence
of any fraud committed by Hutton.
Therefore, we overrule the Brokers= second issue as to the breach of fiduciary duty claims, but we
sustain it as to the punitive damages award.
IV. DAMAGE AWARDS
Because we have held that the
jury=s verdict in favor of the Clients on their claims of insurance code
violations and punitive damages is not supported by the evidence, the Clients= only remaining possible recoveries are their breach of fiduciary duty
claims and their negligence claims.
Assuming, without deciding, that there was sufficient evidence to
support the jury=s verdict
for the Clients on their negligence claims, we now address the Brokers= first issue, in which they assert that the trial court made errors of
law when awarding damages and attorney=s fees, and examine whether the Clients may properly recover on both
their negligence and breach of fiduciary duty causes of action.
A. One Satisfaction Rule
The one satisfaction rule
provides that a plaintiff may recover only for the damages suffered as a result
of a particular injury. Utts v. Short,
81 S.W.3d 822, 833 (Tex. 2002); Foley v. Parlier, 68 S.W.3d 870, 882
(Tex. App.CFort Worth
2002, no pet.). Here, the Clients
alleged that they suffered only one injury: loss of value to their annuity
contracts. The jury awarded identical
economic damages for each of the Clients= three theories (insurance code violations, breach of fiduciary duty,
and negligence): $104,500 for Graben and $215,300 for Strickler. Even though the jury found the Brokers to
have been negligent, the court did not award the Clients anything for their
negligence causes of action in the final judgment.
Under the one satisfaction
rule, a plaintiff must elect a remedy in order to prevent him from obtaining
more than one recovery for the same injury.
Waite Hill Servs., Inc. v. World Class Metal Works, Inc., 959
S.W.2d 182, 184 (Tex. 1998). To allow
the Clients to recover under both their breach of fiduciary duty claims and
under their negligence claims would permit an impermissible double
recovery. Therefore, we hold that the
Clients may recover either under their breach of fiduciary duty claims or under
their negligence claims, but not both.
Accordingly, we now turn to the Clients= two remaining causes of actionCbreach of fiduciary duty and negligenceCto determine which of these remaining claims presents them with the
greatest possible recovery.
The jury awarded Graben
$104,500 in economic damages for his negligence claim. Graben was also awarded a total of $170,500
($104,500 in economic damages and $66,000 in profit disgorgement) for his
breach of fiduciary duty claim.
Therefore, Graben=s greatest
possible recovery lies with his breach of fiduciary duty claim. As for Strickler, the jury awarded him
$215,300 in economic damages for his negligence claim. Strickler was also awarded a total of
$229,300 ($215,300 in economic damages and $14,000 in profit disgorgement) for
his breach of fiduciary duty claim.
Thus, Strickler=s greatest
possible recovery also lies with his breach of fiduciary duty claim.
Accordingly, because the one
satisfaction rule prohibits double recovery, and because the Clients= breach of fiduciary duty causes of action provide the greatest
possible recovery to both Graben and Strickler, we hold that the trial court=s judgment in favor of the Clients on their breach of fiduciary duty
causes of action is proper but that neither Client is entitled to recover on
his negligence claim.[7]
B. Award of Attorney=s Fees for Breach of Fiduciary Duty
Having determined that the
Clients may recover only on their breach of fiduciary duty causes of action, we
now turn to the Brokers= complaint
that trial court erred by awarding the Clients attorney=s fees for their breach of fiduciary duty claims. We agree.
Attorney=s fees are
not available for a breach of fiduciary duty claim. Hooks v. Hooks, No. 02-03-00263-CV,
2004 WL 1635838, at *2 (Tex. App.CFort Worth July 22, 2004, no pet.) (mem. op.) (citing Musquiz v.
Marroquin, 124 S.W.3d 906, 913 (Tex. App.CCorpus Christi 2004, pet. denied)).
Therefore, the trial court erred by awarding the Clients attorney=s fees for their breach of fiduciary duty claims, and we sustain that
portion of the Brokers= first
issue.[8]
V. ASSERTED PROCEDURAL, EVIDENTIARY, AND CHARGE
ERRORS
In their third issue, the
Brokers contend that the trial court committed various procedural and
evidentiary errors and errors in charging the jury, causing the course of trial
to be improperly biased against the Brokers.
We disagree.
A. Trial Court=s Refusal to Sever Graben=s and Strickler=s Claims
The Brokers first assert that
the trial court erred by failing to sever the claims of Graben from those of
Strickler because each client made separate, individual investments that had
nothing to do with the other client=s investment. The trial court
has broad discretion in the matter of severance and consolidation of causes. Guar. Fed. Sav. Bank v. Horseshoe Operating
Co., 793 S.W.2d 652, 658 (Tex. 1990); Urdiales v. Concorde Techs. Del.,
Inc., 120 S.W.3d 400, 408 (Tex. App.CHouston [14th Dist.] 2003, pet. denied). To determine whether a trial court abused its
discretion, we must decide whether the trial court acted without reference to
any guiding rules or principles; in other words, we must decide whether the act
was arbitrary or unreasonable. Downer
v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985), cert.
denied, 476 U.S. 1159 (1986). The
controlling reasons for a severance are to do justice, avoid prejudice, and
further convenience. Guar. Fed.,
793 S.W.2d at 658.
According to the Brokers, the
only common factors shared by Graben=s and Strickler=s lawsuits
were their attorney and their complaints against Hutton. Trying the claims together, the Brokers
argue, effectively turned the trial into a Aclass action for two,@ resulting in the admission of harmful evidence that would never have
been heard in separate trials. However,
the Brokers never identify what this Aharmful evidence@ is, nor do
they state any legal basis for how this Aharmful evidence@ would have
been excluded in separate trials. We
hold that under these circumstances, the trial court did not abuse its
discretion by denying the request for severance. See id.
B. Trial Court=s
Refusal to Sever Negligent Supervision Claim Against ISI
The Brokers next assert error
on the part of the trial court by failing to sever the Clients= negligent supervision claim against ISI because it allowed into
evidence the otherwise irrelevant facts that Hutton was a defendant in three
lawsuits and the subject of four other complaints, along with a March 2004 letter
from the NASD to ISI indicating that Hutton had a number of Areported sales practice disclosure [complaints].@ Even though ISI=s witness explained that these complaints were logged by the NASD
regardless of merit and that the NASD had not determined that Hutton had
committed any violations, the Brokers argued that this evidence was so
prejudicial to Hutton=s defense
that severance was required under rule 404 of the Texas Rules of Evidence,
which prohibits the introduction of evidence related to a person=s character and bad acts.
At trial, however, when
evidence of other complaints against Hutton was offered, the Brokers never
objected to the evidence on the basis of Texas Rule of Evidence 404 regarding Aother crimes, wrongs or acts.@ Tex. R. Evid. 404(b).
Further, witnesses testified without objection from the Brokers about a
number of other complaints filed against Hutton. When plaintiffs= exhibit 16 (a complaint against Hutton) was offered, the Brokers did
not object on the basis of rule 404.
Rather, the Brokers= counsel simply stated that the evidence was Ainadmissible, incomplete, and not consistent with counsel=s representations.@ Finally, when the Clients
offered plaintiff=s exhibit
25, the NASD warning letter regarding Hutton, the Brokers= counsel did not make a rule 404 objection; rather, they simply stated
that the document was Anot relevant
and not probative.@
The complaint on appeal must be the same as that presented
in the trial court. See Banda
v. Garcia, 955 S.W.2d 270, 272 (Tex. 1997). Here, the Brokers= rule 404 complaint on appeal was not raised at trial. Consequently, they have failed to preserve
this alleged error for our review. See
In re Y.M.A., 111 S.W.3d 790, 792 (Tex. App.CFort Worth 2003, no pet.) (stating rule that legal basis for a
complaint on appeal must be the same as the legal basis upon which the
objection was made at trial). Moreover,
the Brokers have shown no harmful error even if the evidence were inadmissible.
See Tex. R. App. P. 44.1.
Second, the evidence of
Hutton=s alleged other wrongful acts was admissible because it was clearly
relevant to the factors that the jury was instructed to consider in question
number 21, the punitive damage assessment question. The Brokers never requested that the issue of
punitive damages be bifurcated from the liability and actual damages issues at
trial.
Finally, because evidence of
Hutton=s alleged other wrongful acts was relevant to the punitive damage
issues, and even assuming that this were inadmissible under rule 404, the
Brokers were required under Texas Rule of Evidence 105 to obtain a limiting
instruction. See Tex. R. Evid. 105, 404. The Brokers did not make such a request. Consequently, we hold that the trial court
did not abuse its discretion by failing to sever the negligent supervision
claim.
C. Trial Court=s Charge Regarding Fiduciary Duty
The Brokers next assert error
on the part of the trial court by arguing that the trial court=s charge regarding fiduciary duty was tantamount to a directed
verdict. The standard of review for
alleged jury charge error is abuse of discretion. Steak & Ale of Tex., Inc. v. Borneman,
62 S.W.3d 898, 905 (Tex. App.CFort Worth 2001, no pet.). The
trial court instructed the jury that Aa relationship of trust and confidence exists between a financial or
investment advisor and his client.@ Here, the Brokers again cite Schlumberger
to argue that the relationship of trust and confidence must exist prior to,
and apart from, the agreement made the basis of the lawsuit. Schlumberger, 959 S.W.2d at 171. We have previously rejected this argument,
and we hold that the trial court did not abuse its discretion by providing this
instruction to the jury. See Steak
& Ale, 62 S.W.3d at 898.
D. Trial Court=s Failure to Charge Jury on Proportionate Responsibility
Finally, the Brokers argue
that the trial court erred by failing to charge the jury on proportionate
responsibility as among the Brokers and the Clients because the Clients could
have directed Hutton to change their investments but did not. Presumably, this is some type of negligence
argument. However, there was no
negligence or other liability cause of action jury question proffered by the
Brokers. The statutory scheme for determining
the percentage of responsibilityCthat is, the proportionate responsibility findingCcontemplates that before the percentage responsibility question is
submitted, a cause of action liability finding has been made by the jury. See Tex.
Civ. Prac. & Rem. Code Ann. ' 33.003(a) (Vernon Supp. 2006); see also Romero v. KPH
Consolidation, Inc., 166 S.W.3d 212, 225 (Tex. 2005). Therefore, the trial court did not fail to
submit a percentage of responsibility question to the jury when the Brokers did
not request that a liability issue be submitted contemporaneously. We overrule the Brokers= third issue in its entirety.
VI. CONCLUSION
Because we have held that legally and factually sufficient evidence
exists to support the jury=s verdict in favor of the
Clients on their breach of fiduciary duty claims, we affirm that portion of the
trial court=s
judgment awarding $170,500 to Graben and $229,300 to Strickler in damages and
disgorgement of commissions for their breach of fiduciary duty causes of
action. We reverse the remainder of the
trial court=s
judgment and render judgment that the Clients take nothing on their insurance
code, negligence and negligent misrepresentation, and attorney=s
fees causes of action, including their demands for Aknowing@
damages under the insurance code, punitive damages, and attorney=s
fees. We remand this cause to the trial
court for recalculation of prejudgment interest on the Clients=
breach of fiduciary duty damages award only.
BOB MCCOY
JUSTICE
PANEL B: DAUPHINOT, GARDNER, and MCCOY, JJ.
DELIVERED:
June 28, 2007
[1]This identification is not meant to
be an implication that these parties are Abrokers@ in the literal financial investment community sense but
rather is used for identification purposes only.
[2]However, before Strickler moved his
investments, Hutton himself was proposing a change to Strickler=s investment strategy. Hutton claimed to have a new computer program
in which the investment strategy was Atotally, diametrically, and dramatically different@ than the one Hutton had been
using.
[3]Although the Clients had two
negligence causes of action, negligence and negligent misrepresentation, the
jury awarded only one set of damages for the two causes of action. For the sake of clarity we will refer
generally to these claims as the Clients= Anegligence@ claims.
[4]In their brief, the Clients state
that the judgment does not contain an award for the jury=s verdict on their negligence
claims because they did not elect to recover on these claims.
[5]Hutton signed a letter to the
Clients as an Ainvestment advisor representative,@ which in part stated that AI have it [a new computer system]
programmed to help me do a better job of what you ultimately pay me to do,
monitor your investments and keep you posted on any changes or recommendations
to your financial plan.@
[6]Hutton held series
6, 7, and 65 licenses from NASD.
[7]The
Brokers argue under their second issue that the Clients=
insurance code and negligence claims are barred under the applicable two-year
statutes of limitation. Tex. Ins. Code Ann. '
541.162 (Vernon Supp. 2006); Tex. Civ.
Prac. & Rem. Code Ann. ' 16.003(a) (Vernon Supp.
2006). Because we have held that there
was legally insufficient evidence to uphold the insurance code claims and that
the Clients=
negligence claims do not present their greatest possible recovery, we need not
address this argument. See Tex. R. App. P. 47.1.
[8]The remainder of the Brokers= first issue challenges the
propriety of the trial court=s punitive damages award, double recovery to the Clients on
their insurance code and breach of fiduciary duty claims, and award for Aknowing@ violations of the insurance
code. Because we have held that the
evidence is insufficient to support the trial court=s judgment on the Clients= insurance code and punitive
damages claims, we need not address these remaining arguments. See Tex.
R. App. P. 47.1.
|
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
Oct. 6, 2009
No. 09-11218 THOMAS K. KAHN
Non-Argument Calendar CLERK
________________________
D. C. Docket No. 08-60206-CR-KAM
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
JOHN HANS THOMAS,
a.k.a. Jules Lucien,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(October 6, 2009)
Before BLACK, BARKETT and KRAVITCH, Circuit Judges.
PER CURIAM:
Defendant-appellant John Hans Thomas appeals his conviction for
possession of a firearm by a convicted felon, in violation of 18 U.S.C. § 922(g). At
issue in this case is whether the district court properly denied the motion to
suppress evidence seized from Thomas’s home.1 Thomas contends that, in denying
his motion to suppress, the district court erred in finding (1) the government
witnesses more credible; (2) that probable cause and exigent circumstances
justified the officers’ warrantless entry into his home; and (3) that the consent
forms signed by Thomas and his girlfriend were signed voluntarily. After a
thorough review of the record and the briefs, we affirm.
“A district court’s ruling on a motion to suppress presents mixed questions
of law and fact.” United States v. Ramirez-Chilel, 289 F.3d 744, 748-49 (11th Cir.
2002). We review “findings of fact for clear error and the application of the law to
those facts de novo.” United States v. Martinelli, 454 F.3d 1300, 1306 (11th Cir.
2006). In reviewing the district court’s ruling, we must construe the facts in the
light most favorable to the prevailing party below. United States v. Smith, 459
F.3d 1276, 1290 (11th Cir. 2006).
Credibility determinations are within the province of the fact finder “because
the fact finder personally observes the testimony and is thus in a better position
1
Thomas entered a conditional plea and reserved the right to appeal the denial of his
motion to suppress. He was sentenced to 18 months’ imprisonment. He was released from
incarceration on July 31, 2009 and is currently serving his two-year term of supervised release.
2
than a reviewing court to assess the credibility of witnesses.” Ramirez-Chilel, 289
F.3d at 749. Furthermore, if testimony presented by opposing witnesses at the
hearing are in “direct conflict,” the district court’s decision to lend credence to one
party’s version should be “conclusive” and warrants reversal only if the court
credits “exceedingly improbable” or even “unbelievable” testimony. Id.
(quotations omitted). Likewise, we “must accept the [district court’s interpretation
of the] evidence unless it is contrary to the laws of nature, or is so inconsistent or
improbable on its face that no reasonable factfinder could accept it.” Id. (quotation
omitted).
Thomas’s first challenge on appeal is to the district court’s credibility
determination.
According to the testimony at the suppression hearing, Detective Osvaldo
Tianga and Detective Samuel Wagers were on patrol when they observed a known
drug user named Greg Saunders on a bicycle. They followed Saunders to
Thomas’s residence, where Saunders knocked on the door, spoke with Thomas,
and exchanged money for a “small item.” The detectives arrested Saunders a few
blocks from the house and, after the detectives found a “baggy” of cocaine on
Saunders, Saunders admitted that he had obtained the cocaine from Thomas for
$20 at Thomas’s residence.
3
Tianga initiated surveillance on Thomas’s residence, contacted the state
attorney’s office, and prepared an application for a search warrant. Wagers
continued the surveillance and Tianga left to e-mail the application to the state
attorney’s office and print out a warrant to be signed by a judge. Tianga was
scheduled to meet with the judge later that day.
Before Tianga could obtain the warrant, a female, later identified as
Thomas’s girlfriend Angela McRae, arrived at the residence, entered through the
backdoor, came out several times, and then walked to the sidewalk and looked
directly at Wagers’ vehicle. Wagers radioed Tianga that McRae had compromised
the undercover surveillance. In order to avoid the destruction of evidence, and
because Tiago believed he had probable cause for an arrest, Tianga decided to
“seize” Thomas. Tianga obtained a house key from Thomas’s landlord and arrived
at the house within five minutes of the radio call from Wagers. Tianga noticed that
the backdoor was not completely shut and was “kind of” propped open. Tianga
entered the house and saw McRae, who shouted something to the effect of “the
police are here.” Tianga then observed Thomas exiting the bathroom. Tianga did
not know whether there were others in the house or if anyone was armed.
Tianga and Wagers placed Thomas under arrest and handcuffed him. They
then escorted Thomas, McRae, and two small children out of the residence and
4
conducted a security sweep inside with their guns drawn. They did not conduct a
detailed search at that time. After the security sweep, the officers read Thomas his
Miranda2 rights, which Thomas agreed to waive. As Tianga was preparing to
leave, he informed the other officers on the scene that he still had to meet with the
judge to obtain a search warrant. Thomas and McRae overheard the conversation
and questioned Tianga about the search warrant. Tianga explained that he believed
there were narcotics inside the house, to which Thomas replied that “[t]here’s
nothing inside the house, only a couple bags of weed.” Thomas inquired about his
girlfriend and children, and Tianga informed him that Thomas was the only suspect
at the moment, but that if, after obtaining the search warrant, officers discovered
evidence inside the house implicating McRae, she would be “taken to jail” and
their children could possibly be “going to protective services.” Tianga testified,
however, that despite this statement he did not believe “in [his] gut” that McRae
was involved.
At this point, Thomas confirmed that McRae was not involved and offered
to walk Tianga into the house to retrieve the marijuana. Thomas stated that he had
a gun inside as well. Tianga informed Thomas that he needed both Thomas and
McRae to sign a consent form and he read the forms out loud to Thomas and
2
Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966).
5
McRae. The forms advised Thomas and McRae that they had the right to refuse
consent and that they could require police to obtain a warrant. After a private
discussion, Thomas and McRae signed the forms. Thomas then walked Tianga
into the house and produced two bags of marijuana in the bedroom, a gun inside
the closet, and $720 in “drug money” in a shirt pocket in the closet. Tianga
conducted a more detailed search afterward and discovered cocaine in the
bathroom.
McRae testified that she arrived home and started to prepare dinner. Once
she got home, she stayed inside the house and did not go outside again. She
admitted that she looked out the window and noticed someone was parked across
the street, but claimed that she did not realize it was the police. While she was in
the kitchen, Tianga used a key to enter the house through the backdoor, ordered
everybody outside, and told her that if she did not sign a consent form, she would
be arrested and her children would go to “HRS.” She signed the consent form
because of the threats and because Tianga said he was going to get a warrant any
way. She denied any knowledge of the drugs.
The government recalled Tianga, who testified that McRae had informed
him on the day of the incident that the drugs in the house belonged to Thomas and
that she had nothing to do with it. Tianga also stated that McRae lied about not
6
noticing police surveillance because she also had revealed to him that Thomas had
spotted the police first and she went outside to investigate further.
Based on this testimony, the district court found that the officers were more
credible than McRae. We conclude that this finding was not erroneous. The
district court observed the demeanor of each witness and was in the best position to
review credibility. On this basis, we accept the district court’s credibility
determination.
We next turn to the issue of whether the police properly entered the home
based on probable cause and exigent circumstances.
The Fourth Amendment protects the right of persons to be free from
unreasonable searches and seizures. U.S. Const. amend. IV. A “warrantless entry
into a suspect’s home to search the premises is presumed to be unreasonable.”
Ramirez-Chilel, 289 F.3d at 751. Nevertheless, there are exceptions to this general
rule, such as where the combination of probable cause and exigent circumstances
justifies a warrantless home intrusion. United States v. Tobin, 923 F.2d 1506,
1510 (11th Cir. 1991) (en banc). Probable cause exists when, under the totality of
the circumstances, there is a fair probability that contraband or evidence of a crime
will be discovered in a particular place. Id. Exigent circumstances exist when the
situation demands an immediate response from police officers. United States v.
7
Holloway, 290 F.3d 1331, 1334 (11th Cir. 2002). A warrantless search under
exigent circumstances must be “strictly circumscribed by the exigencies which
justified its initiation.” Mincey v. Arizona, 437 U.S. 385, 392-93, 98 S.Ct. 2408,
2413, 57 L.Ed.2d 290 (1978) (quotation omitted). Likewise, an exigency only
excuses a “limited” intrusion and, once inside the residence, the officers may only
seize evidence “found within plain view.” Holloway, 290 F.3d at 1334.
Exigent circumstances can occur where the risk of removal or destruction of
narcotics exists. Tobin, 923 F.2d at 1510. We have held that narcotics cases can
present a “particularly compelling” need for the exigent circumstances doctrine
because “contraband and records can be easily and quickly destroyed while a
search is progressing.” United States v. Young, 909 F.2d 442, 446 (11th Cir.
1990). In determining whether agents reasonably feared imminent destruction of
evidence, the appropriate inquiry is whether a reasonable, experienced agent would
believe that, at the moment of entry, evidence might be destroyed before a warrant
could be secured. Id.
Here, the district court properly concluded that probable cause and exigent
circumstances justified the warrantless intrusion into Thomas’s residence. The
officers reasonably believed that narcotics were present and might be destroyed
before a warrant could be secured, and their intrusion was limited and directly
8
proportional to the exigency of this case. Accordingly, we conclude that probable
cause and exigent circumstances permitted the officers to enter the house.
Finally, we turn to the issue of whether Thomas’s and McRae’s consents to
the subsequent search were voluntary. Thomas argues that both he and his
girlfriend only consented based on explicit threats to arrest his girlfriend and send
their children to social services if they did not cooperate.
A person can consent to a search, but in order for a consensual search to be
constitutional, it must be voluntary. United States v. Acosta, 363 F.3d 1141, 1151
(11th Cir. 2004). Consent to a warrantless search is voluntary if it is “the product
of an essentially free and unconstrained choice.” United States v. Garcia, 890 F.2d
355, 360 (11th Cir. 1989). Voluntariness is a question of fact based on the totality
of the circumstances. Acosta, 363 F.3d at 1151. In evaluating voluntariness of
consent, a court “should look at several indicators, including the presence of
coercive police procedures, the extent of the defendant’s cooperation with the
officer, the defendant’s awareness of his right to refuse consent, the defendant’s
education and intelligence, and the defendant’s belief that no incriminating
evidence will be found.” United States v. Simms, 385 F.3d 1347, 1355 (11th Cir.
2004).
The facts of this case are similar to those of United States v. Delancy, 502
9
F.3d 1297 (11th Cir. 2007). In that case, police sought to question Delancy as a
material witness. After being unable to find Delancy, they went to the home of his
girlfriend, LaSandra Godfrey. They approached the house with weapons drawn
and observed the door open and quickly close. When Delancy exited the house a
short time later, police handcuffed him and took him into custody. Police then
entered the house to conduct a protective sweep and found Godfrey and her
children inside. After speaking with police, Godfrey gave oral and written consent
to search the house. Delancy subsequently gave his consent. During the search
that followed, police found drugs and a firearm. 502 F.3d at 1301-04. Delancy
challenged the search and the consent given by both Godfrey and himself, claiming
that the police requested consent while their guns were drawn and after threatening
to take Godfrey’s children to protective services. Id. at 1302-03. The district court
found the testimony of the officers was more credible than that of Delancy and
Godfrey and therefore concluded the consent was voluntary. On appeal, this court
focused on Godfrey’s consent and concluded it was voluntary in light of the
officers’ credible testimony. Id. at 1308.
We are persuaded by the court’s reasoning in Delancy to conclude the
consents given by Thomas and McRae were voluntary. The district court found the
testimony of the officers involved was more credible. Thus, we reject, as the
10
district court did, Thomas’s and McRae’s claims of coercion.
The remaining facts of the case do not establish that the consent was
involuntary. First, although Thomas was handcuffed and under arrest, McRae was
not. See Delancy, 502 F.3d at 1307. Additionally, Thomas initiated the
conversation with police; he was not subject to any questioning or coercion.
Moreover, the consent form advised Thomas and McRae of their right to refuse
consent. Simms, 385 F.3d at 1355. Under these facts, we conclude the consents
given by Thomas and McRae were voluntary.
For the foregoing reasons, we affirm Thomas’s conviction.
AFFIRMED.
11
|
United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 97-3004MN
___________
UNITED STATES OF AMERICA, *
*
*
Appellee, * Appeal from the United States
* District Court for the Western
* District of Minnesota
PAUL JOHN KORN, *
*
*
Appellant. *
___________
Submitted: February 10, 1998
Filed: March 13, 1998
___________
Before FAGG and MURPHY, Circuit Judges, and SMITH,1 District Judge.
___________
SMITH, District Judge.
Paul John Korn was convicted after trial of one count of aiding and abetting
possession with intent to distribute methamphetamine, in violation of 21 U.S.C. §
841(a)(1) and 18 U.S.C. § 2, and sentenced to 324 months imprisonment.2 On appeal
Korn challenges the district court's refusal to suppress his incriminating statements and
1
The Honorable Ortrie D. Smith, United States District Judge for the Western
District of Missouri, sitting by designation.
2
The Honorable Michael J. Davis, United States District Judge for the District
of Minnesota.
its imposition of a sentence enhancement for possession of a firearm under U.S.S.G.
§ 2D1.1(b)(1). We reject his arguments and affirm.
Korn argues that the district court erred when it denied his motion to suppress
his confessions. He argues that he did not knowingly, intelligently and voluntarily
waive his Miranda rights because he was under the influence of drugs and was
exhausted when he made the statements. His argument is without merit. The review
of whether a waiver of Miranda rights was knowing and voluntary is de novo. United
States v. Byrne, 83 F.3d 984, 988 (8th Cir. 1996) (citations omitted). The Eighth Circuit
has already stated that neither exhaustion nor intoxication will necessarily invalidate
a Miranda waiver. United States v. Byrne, 83 F.3d 984 (8th Cir. 1996); United States
v. Casal, 915 F.2d 1225, 1229 (8th Cir. 1990), cert. denied, 499 U.S. 941, 111 S. Ct.
1400 (1991). The Court has considered the totality of the circumstances in order to
determine whether the Appellant's will was overborne. Id. We hold the district court
did not err in admitting Korn's statements.
Korn also argues that the district court erred when it imposed a two-level
enhancement on his sentence without giving him notice. A district court's factual
findings are reviewed under a clearly erroneous standard. United States v. Willis, 997
F.2d 407, 417 (8th Cir. 1993), cert. denied, 510 U.S. 1050, 114 S. Ct. 704 (1994).
"[H]owever, the district court's interpretation of the guidelines and the application of
that interpretation to the case's particular facts" is reviewed de novo. Id. (citations
omitted). Appellant argues that due process requires that he receive some notice that
the court is considering imposing an enhancement. He relies on Burns v. United States,
501 U.S. 129 (1991), which held that the district court cannot depart upward from the
sentencing range established by the Sentencing Guidelines without first notifying the
parties.
The Appellant also urges this Court to consider the Seventh Circuit's decision of
United States v. Jackson, 32 F.3d 1101 (7th Cir. 1994). The Seventh Circuit held
2–
that the defendant has a right to advance notice either through the presentencing report
("PSR"), the prosecutor's recommendation, or the court, that a specific sentencing
enhancement is being considered. Jackson, 32 F.3d at 1108. The defendant should
have advance notice of a sentencing change and should be able to present evidence and
argue the application of the sentencing enhancement. Id.
The controlling law in the Eighth Circuit disagrees with the holding in Jackson.
See United States v. Rodamaker, 56 F.3d 898, 903 (8th Cir. 1995) (declining to
recommend to the full court that it reconsider, en banc, Willis and United States v.
Adipietro, 983 F.2d 1458 (8th Cir. 1993)). Two Eighth Circuit cases have held that the
district court can sua sponte impose an adjustment or enhancement to a defendant's
sentence. See United States v. Willis, 997 F.2d 407 (8th Cir. 1993) (holding that the
guidelines themselves, the trial testimony, and the argument at the sentencing hearing
were sufficient notice); United States v. Adipietro, 983 F.2d 1458 (8th Cir. 1993)
(holding that trial testimony and the evidence at the sentencing hearing were sufficient
notice for an adjustment). Adipietro distinguishes between upward departures and
adjustments or enhancements and holds that "While Burns mandates that both parties
be given adequate notice before a court departs from the applicable guideline range
. . . Burns does not mandate that adequate notice must be given before a district court
addresses an adjustment or enhancement." 983 F.2d at 1473.
Additionally, both Willis and Adipietro involve a defendant who (1) was tried,
which placed the facts into evidence for the enhancement, and (2) received notice and
an opportunity to speak at the sentencing hearing after the government raised the issue
of enhancement. Jackson involved a defendant who plead guilty, received notice at the
sentencing hearing of an adjustment at the court's request and was denied a continuance
or opportunity to prepare an argument. In this case, the court provided written reasons
to the parties before the sentencing hearing that did not include the grounds for
enhancement for possession of a firearm. However, the government suggested an
adjustment at the sentencing hearing and the court provided the Appellant
3–
with an opportunity to object. The Appellant did not ask for a recess or a continuance
to prepare a response. It may have been appropriate for the district judge to have, sua
sponte, granted a recess, but since the Appellant never raised this issue on appeal, we
decline to reach this point. Therefore, since the Appellant had notice of the evidence
of the firearm admitted at trial, did not ask for a continuance or time to respond to the
enhancement, and the enhancement is contained within the Guidelines, the district
court's ruling is affirmed.
A true copy.
ATTEST:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
4–
|
82 B.R. 724 (1988)
In re Philip D. TIGUE, Debtor.
Philip D. TIGUE, Plaintiff,
v.
Eugene A. STEGER, Jr., Defendant.
Bankruptcy No. 80-00566K, Adv. No. 86-0974S.
United States Bankruptcy Court, E.D. Pennsylvania.
February 12, 1988.
As Amended February 16, 1988.
*725 James J. O'Connell, Philadelphia, Pa., Trustee.
*726 Michael B. Kean, West Chester, Pa., for debtor/plaintiff in Adv. No. 86-0974S only.
Christopher G. Kuhn, Philadelphia, Pa., for defendant.
William E. Howell, Jr., Kennett Square, Pa., for debtor in main case.
Philip D. Tigue, West Chester, Pa., debtor.
OPINION
DAVID A. SCHOLL, Bankruptcy Judge.
A. INTRODUCTION AND PROCEDURAL HISTORY
The instant adversary proceeding, before us for disposition after trial, is deeply troubling to us on several levels. First, it presents the most unseemly situation in which the Defendant, a former attorney presently disbarred for matters apparently unrelated to this case, obtained title to the home of a mentally-impaired client, the Debtor herein. This was accomplished through the medium of a court-approved assignment "consented to" in part by the Debtor on the basis of factual misrepresentations by the Defendant, and of which the court approval was obtained without notice to the Debtor. Secondly, the Debtor proceeded pro se until the latter stages of the case, and he undoubtedly presented a difficult case to conceptualize and was obviously a difficult client with whom to work. Hence, the record and briefs presented on his behalf lack focus, especially contrasted to the presentation and arguments by competent defense counsel.
In the final analysis, the combination of the strict principles relating to dealings of counsel with their clients, the unethical conduct on the part of the Defendant, and violation of statutory and constitutional requirements concerning procedures for disposition of the property of debtor's estates require us to provide certain relief to the Debtor. We reject the Defendant's argument that we should concentrate not on what the Defendant gained by his conduct, which we believe to have been a windfall of $31,000.00, but on what the Debtor lost thereby, and we therefore award the Debtor damages of $31,000.00.
This bankruptcy case began as a joint Chapter 13 case filed by the Debtor, PHILIP D. TIGUE (hereinafter referred to as "the Debtor"), and his then-wife, NINA ELIZABETH TIGUE, from whom he is now divorced (referred to hereinafter as "Nina"), on March 19, 1980. We shall discuss the relevant portions of the bizarre factual and procedural twists and turns of this case in our Findings of Fact.
The Complaint in the adversary proceeding was filed pro se on August 18, 1986, and never has been amended. After the Debtor made several unsuccessful attempts at effecting service, counsel for the Defendant, who was apparently finally served, appeared and filed a Motion to Dismiss on the Defendant's behalf on December 12, 1986. After a colloquy with the Debtor and defense counsel on December 17, 1986, we entered an Order of the following date directing the Defendant to file an Answer by January 20, 1987, and scheduling the trial on March 17, 1987. On March 10, 1987, newly-acquired counsel for the Debtor and counsel for the Defendant entered into the first of a series of five agreements to continue the trial, which we granted with increasing reluctance until the case was finally tried on July 30, 1987. After the trial, we entered an Order of August 4, 1987, requesting the parties to file Proposed Findings of Fact and Conclusions of Law and Briefs after completion of the transcript. All of the submissions were not received by us until January 4, 1988. We are presenting this Opinion in the format of Findings of Fact, Conclusions of Law, and a Discussion, as required by Bankruptcy Rule 7052 and Federal Rule of Civil Procedure 52(a).
B. FINDINGS OF FACT
1. At the time of the filing of the underlying bankruptcy case, the Debtor and Nina both were represented by Spencer Ervin, Esquire.
2. On March 4, 1981, John A. Wetzel, Esquire, entered his appearance on behalf *727 of the Debtor, with Mr. Ervin continuing to represent Nina.
3. On January 7, 1982, the law firm of Steger and Howell, of which the Defendant, EUGENE A. STEGER (hereinafter referred to as "the Defendant"), formerly was a principal, entered its appearance on behalf of the Debtor in this case, at which time that firm was also retained to represent the Debtor in his divorce action and custody dispute with Nina.
4. At the time of the filing of this case, the Debtor and Nina owned, by the entireties, real property located at R.D. # 1, Woodview Road, Avondale, Chester County, Pennsylvania (hereinafter referred to as "the Property"). The Property consists of seventeen acres of land, a 24-room farmhouse dating from 1804, and several outbuildings, but is located only ten or fifteen minutes from several population centers.
5. According to the Debtor's Schedules, the value of the Property at the time of filing was $125,000.00, and it was subject to a first and third mortgage held by Southeast National Bank (hereinafter referred to as "Southeast") totalling $65,748.00; a second mortgage held by First National Bank of West Chester (hereinafter referred to as "1st Nat'l") of $11,000.00; and a judgment lien in favor of Mary Rose Tigue, the Debtor's sister (hereinafter referred to as "Mary Rose"), in the amount of $13,000.00, totalling $89,748.00. Unsecured debts totalling $6,474.73 were also listed on the Schedules.
6. At the time of the bankruptcy filing, the Debtor and Nina were in default under their obligations to both Southeast and 1st Nat'l, and Southeast had obtained a foreclosure judgment and had scheduled a sheriff's sale of the Property to execute upon same.
7. On August 13, 1980, Southeast filed a Motion to convert the matter to a case under Chapter 7, which was granted on September 12, 1980, and James J. O'Connell, Esquire, was ultimately appointed as Trustee.
8. On October 30, 1980, an Order was entered by this Court in Adv. No. 80-0195K, whereby the automatic stay provided by Section 362 of the Bankruptcy Code was terminated as to Southeast.
9. On December 11, 1980, the Trustee obtained court authorization to offer the property at public sale. Thereafter, Southeast, the Trustee, and Counsel for the Debtor entered into a Stipulation approved by this Court on February 13, 1981, which, inter alia, allowed the Trustee to employ an auctioneer to sell the property free and clear of liens and encumbrances.
10. On March 4, 1981, the Debtor moved to convert the case to a Chapter 11 proceeding, which was denied on May 5, 1981. Thereafter, a Motion to reconsider this Order was denied, and an appeal was taken.
11. On February 9, 1982, shortly after his entry into the case, the Defendant filed a new Application to convert this case to Chapter 11 on behalf of the Debtor. While all of these attempts to re-convert the case to Chapter 11 were ultimately unsuccessful, they delayed disposition of the Property by the Trustee.
12. On December 24, 1981, Southeast commenced an action objecting to the Debtor's discharge, at Adv. No. 81-1978K, which resulted in an Order of March 11, 1982, denying the Debtor's discharge on the basis of 11 U.S.C. § 727(a)(6)(A), due to the failure of the Debtor to cooperate with the prior Orders pertaining to the sale of the Property.
13. On October 29, 1982, after a successful bid was made to purchase the Property by one John Royer Lloyd at a bankruptcy court auction, the Court ordered that the Trustee take all steps necessary to remove the Debtor from the Property.
14. When the sale to Mr. Lloyd was not consummated due to a problem in obtaining title insurance, Southeast, on or about November 30, 1982, filed a Confession of Judgment in Ejectment against the Debtor in the Court of Common Pleas of Chester County, Pennsylvania, to remove him from the Property.
15. By this time, the Defendant's firm claimed that they were owed a bill in excess *728 of $13,000.00 by the Debtor for services rendered which was unpaid.
16. As a result of the Debtor's failure to pay this bill, the Defendant attempted to withdraw his and his firm's representation of Tigue by filing a "Praecipe to Withdraw" as his counsel with this Court on December 9, 1982. However, upon objection to same by Southeast, these attempts to withdraw as counsel were denied on February 9, 1983.
17. After the Debtor was removed from the Property, he continued to return thereto, and was arrested for trespass on a number of occasions and brought before a local District Justice of the Peace, the fourth arrest for which occurred on December 13, 1982.
18. On December 14, 1982, the Debtor went to the home of the District Justice with a gun and held the District Justice and his wife hostage for a number of hours until certain of his demands were met, including a stay of eviction proceedings against the Debtor.
19. The Defendant was contacted by police and became involved in the negotiations with the Debtor concerning the release of the hostages, which occurred after an Order so providing was entered by District Judge Clarence C. Newcomer, which was later vacated by that Court on its own motion.
20. Thereafter, the Debtor surrendered and was arrested and charged with kidnapping the District Justice and his wife.
21. As a result of his arrest on criminal charges arising from this incident, the Debtor remained in custody at various institutions from December 14, 1982, until April 15, 1986.
22. When initially imprisoned, the Debtor was unable to eat, sleep, or function. Therefore, from December, 1982, until May, 1983, the Debtor was removed to confinement in Norristown State Hospital, a mental institution, where he continued to suffer from disorientation, premonition of death, and inability to eat.
23. Although the Debtor was represented by the Public Defender's Office in reference to his criminal charges, the Defendant, on Saturday, February 26, 1983, obtained access to visit the Debtor at Norristown State Hospital, apparently by misrepresenting his status as the Debtor's criminal lawyer.
24. The purpose of the Defendant's visit was to obtain the Debtor's consent to acquisition of the Property by the Defendant and his fiancée by means of the Defendant's purchasing assignments of the interests of the lien creditors. Thus, the Defendant planned to acquire and utilize the Property as a residence for himself and his fiancée, whom he later married.
25. The Defendant promised the Debtor that, if he consented to the assignment of the Property to him, the Defendant would successfully represent him in his criminal proceeding and his marital and child custody disputes with Nina, forgive his present bill for fees, allow him to retain a five-acre portion of his property, and obtain employment for him upon his release.
26. The Debtor testified that he would have given anything for assistance in his affairs at that time and, in reliance upon the Defendant's representations, especially given his impaired mental state, the Debtor orally agreed to consent to the transaction.
27. On the next Saturday, March 5, 1983, the Defendant returned to visit the Debtor at Norristown State Hospital with a prepared written consent to the assignment of the mortgage of Southeast only to the Defendant, which the Debtor signed in reliance of the aforesaid representations.
28. The Defendant testified that he observed the mental state of the Debtor as "keen" on both above occasions. When asked how his mental state at that time compared to that at present, the Defendant stated that it was "relatively the same" as of the time of the trial.
29. The Court observed that the Debtor presented himself emotionally flat and hence obviously mentally impaired to a significant degree during the trial. Further, shortly after the Debtor signed the consent, he was examined at Norristown State Hospital and recommitted for an additional *729 three months, suggesting that his condition was considerably worse at that time than at the time of the trial.
30. The Defendant never visited the Debtor again during the remainder of his commitment to Norristown State Hospital nor at any time thereafter. He did send letters to the Debtor in April, 1983, discussing the criminal matter, and in May, 1983, advising of his negotiations with Nina and Mary Rose, the tone and content of which suggested the Defendant's continued assurances of future assistance and good will to the Debtor.
31. The Defendant testified that he made no efforts to ascertain the mental state of the Debtor prior to obtaining his consent to the assignment, and stated that he was unaware of his impaired mental state.
32. Also, the Defendant admittedly never advised the Debtor to obtain independent advice from other counsel as to the consent to the assignment or about this matter generally.
33. On March 16, 1983, the Defendant entered into an agreement to purchase the interest of 1st Nat'l, then owed in excess of $13,000,00, for $8,000.00.
34. On March 17, 1983, the Defendant entered into an agreement to purchase the interest of Southeast, then owed the sum of about $100,000.00, for $70,000.00.
35. Both agreements included a clause providing that the agreement "is expressly conditioned upon the approval" of the agreement by this Court, "after notice to all interested parties."
36. On June 10, 1983, Mary Rose assigned her judgment, in excess of $16,500.00, to the Defendant in return for payment of $10,000.00.
37. In addition to the foregoing sums, the Defendant paid $6,000.00 to Nina for assignment of her interest in the Property, thus making the total paid by him $94,000.00.[1]
38. On June 9, 1983, the Defendant filed an Application for Approval of Assignment with the Bankruptcy Court, which sought Bankruptcy Court approval of the assignments of the interests in the Property described in paragraphs 33, 34, 36, and 37 supra, to himself. The Application stated, inter alia, that the Defendant represented the Debtor in the bankruptcy, and that the Debtor consented to the "assignment" (the consent only related to the Southeast assignment). A notice was prepared to be sent to all interested parties on which the Defendant was designated as the Debtor's counsel.
39. The notice stated that an answer or objection to court approval of the assignment request could be filed within twenty (20) days.
40. However, on or just prior to June 15, 1983, the Defendant filed a motion seeking expedited consideration of the matter, which contained a certification that notice of the filing of that motion had been given telephonically to the Debtor, therein listed as appearing "pro se," with an address of Norristown State Hospital.
41. On June 15, 1983, this Court granted the motion for expedited consideration, and entered an Order scheduling a hearing on the matter at 11:00 A.M. that same day. Later that same day an Order was entered approving all of the assignments to the Defendant and further ordering that the automatic stay was terminated as to the Defendant.
42. The Defendant testified at trial that he did not actually send nor otherwise provide the Debtor with notice of the June 15, 1983, hearing at which court approval of the assignments was sought and obtained, nor did he believe that any other party had provided such notice. The Debtor confirmed *730 that he had received no notice of the hearing or the entry of the Order.
43. Southeast had scheduled a sheriff's sale of the Property on June 17, 1983. The Defendant, as assignee of Southeast's judgment, purchased the Property at that sale for a bid of one ($1.00) dollar.
44. After acquiring the Property, the Defendant had little communication with the Debtor and performed no perceptible services on his behalf. He advised the Debtor in letters of August and September, 1983, that he could not represent him in the criminal proceedings because he was a witness to some of the events and therefore had a conflict and provided him with basically only a status report of his custody and visitation proceedings.
45. The Defendant testified at trial that he would not give the five-acre plot to the Debtor, claiming that he had only ever agreed to give him an option to purchase it, contrary to the Debtor's claim that he agreed to give it back to the Debtor, and that, because of chagrin due to the Debtor's present suit against him, he was not willing to give him anything at this time.
46. The letters and testimony support the Debtor's testimony that the Defendant did indeed promise to represent him in the criminal proceeding and in his domestic relations matters and to give him certain rights in the five-acre plot, but that the Defendant reneged on these promises after the Property was safely in his name. We therefore credit the testimony of the Debtor that the promises recited in paragraph 25, page 9 supra, were in fact made by the Defendant.
47. The Debtor testified that he purchased the Property at an auction in October, 1974, for $86,300.00, and that it was worth $240,000.00 to $250,000.00 as of June 17, 1983.
48. As support for his valuation, the Debtor stated that he had performed all facets of construction work since 1948, had successfully rehabilitated several urban shells, and had put this experience to use in rehabilitating the Property. Specifically, he stated that he had completed a small apartment which he rented to one Robert Sigafoos and a three-bedroom apartment in which he had resided with his children.
49. The Defendant called James A. Gallo, Jr., who appraised the property at the request of Elmwood Federal Savings & Loan, from whom the Defendant had unsuccessfully applied for a mortgage in March, 1983, as an expert witness. Mr. Gallo testified that, at the time of his appraisal, the Property had a market value of $110,000.00 and a "quick sale value" of $95,000.00, although Mr. Gallo further stated that "the value will be greatly increased" by renovation.
50. Mr. Gallo's numerical results were reached by "comparative market data" with three properties which were not described to any degree, and the proximity of which to the favorable location of the Property was not described. Mr. Gallo's testimony revealed no real recollection of the Property, indicating an unawareness of Mr. Sigafoos, whose presence the Defendant's testimony confirmed. Also, we note that an appraisal report of Mr. Gallo, offered into evidence, which he stated was a subsequent copy and summary of the report actually prepared in March, 1983, had described the condition of all aspects of the Property except the windows, which he described as "poor," as either "fair" or "good."
51. The Defendant claimed that the Property was only worth $90,000.00 to $100,000.00 as of June 17, 1983. However, although admitting the presence of Mr. Sigafoos, the Defendant described the condition of the Property as uninhabitable, and significantly worse than indicated by Mr. Gallo in his appraisal.
52. Weighing all of the foregoing testimony, we determine that the fair market value of the premises, as of June 17, 1983, was $125,000.00.
53. The Defendant testified that he and his wife and family moved into the Property about one and a half years after they purchased it, and that they had invested approximately $200,000.00 in repairing it.
54. The Defendant testified that he "resigned or consented to disbarment" from *731 the practice of law in February, 1985, for a period of five years, apparently as a result of incidents not related to the subject matter of this proceeding.
55. The only activity in the Debtor's main bankruptcy case since 1983 was the Trustee's conducting a § 341 meeting on July 15, 1987, which only the Debtor attended, and an Order of August 25, 1987, dismissed the bankruptcy petition as to Nina only for her failure to attend the § 341 meeting.
56. The Debtor also filed a "praecipe" to convert this case to a Chapter 12 case shortly before the hearing, which we indicated was barred by its earlier conversion from Chapter 13. See 11 U.S.C. § 706(a).
C. CONCLUSIONS OF LAW
1. As counsel for the Debtor at the time he acquired the Property, the Defendant was barred from making any profit from his acquisition of the Property and is accountable to the Debtor for any gains which he realized therefrom.
2. The Defendant's conduct of self-dealing with, and purchasing of, his own client's property at a foreclosure sale, was violative of the Canons of Professional Ethics and independent substantive law.
3. The Defendant's failure to assure that the Debtor received notice of the hearing at which he obtained court approval of the assignments, which approval was a necessary condition of those assignments, also taints the Defendant's acquisition of the property.
4. Given the long period of time between the acquisition of the Property by the Defendant and the institution of this proceeding, and the unrebutted testimony that the Defendant has made considerable improvements to the Property in the interim, it would be unjust to invalidate the Defendant's acquisition of the Property.
5. The appropriate remedy is monetary damages to the Debtor in the amount of the Defendant's profit from his acquisition of the Property, i.e., the difference between the value of the Property at the date of acquisition ($125,000.00) and the amount actually paid by the Defendant ($94,000.00) or $31,000.00.
D. DISCUSSION
1. AN ATTORNEY IS PROHIBITED FROM OBTAINING FINANCIAL GAIN THROUGH ACQUISITION OF HIS CLIENT'S PROPERTY
The guiding principles of this case are set forth by the Supreme Court of Pennsylvania in Meara v. Hewitt, 455 Pa. 132, 135-36, 314 A.2d 263, 265 (1974), where the court quotes from its earlier decisions as follows:
In Kribbs v. Jackson, 387 Pa. 611, 129 A.2d 490 (1957), we laid out the standard of conduct that must prevail between an attorney and client regarding business transactions between the two. We stated: "That relation [attorney and client] is so confidential in its nature that it calls for the exercise of the most perfect good faith. In transactions between counsel and client, no shadow of anything like deception or unfair dealing upon part of an attorney can be countenanced. In every case in which complaint is made, the courts will scrutinize the transaction with jealous care to see that there is no relaxation of the rule. Owing to confidence bestowed upon him, the attorney is presumed to be able to strongly influence his client; hence, the law often declares transactions between them void which between other persons would be unobjectionable. Unless the transaction is fair and conscionable, it is deemed a constructive fraud." At pages 621-22.
In Points v. Gibboney, 340 Pa. 522, 17 A.2d 365 (1941), we stated: "The burden is upon him, as attorney, to show that he did not gain a personal advantage by misrepresenting the legal situation ro by failing to make it plain to those whom it was his duty to advise and protect." At page 527.
Accord, e.g., Ruth v. Crane, 392 F.Supp. 724, 729-30 (E.D.Pa.1975); 7 AM.JUR.2d 242-45 (1980).
It is therefore well settled that an attorney cannot acquire the interest of his client in any foreclosure proceeding. See, e.g., *732 Casari v. Victoria Amustment Enterprises, 327 Pa. 382, 387-89, 194 A. 503, 506-07 (1937); Elliott v. Tyler, 3 Sadler (Pa.) 584, 6 A. 917, 918 (1886); Henry v. Raiman, 25 Pa. 354, 358-59 (1855); Annot., Duties, Rights and Remedies Between Attorney and Client Where Attorney Purchases Property of Client at or Through Tax, Execution, or Judicial Sale, 20 A.L.R.2d 1280, 1282-84 (1951); and 7 AM.JUR.2d, supra, at 243-44.
The Defendant here was clearly representing the Debtor at the time of the acquisition of the Property in issue in this very bankruptcy case. As of February 9, 1983, just four months before its acquisition by the Defendant, this Court had expressly denied the Defendant's request to withdraw as the Debtor's counsel. Moreover, even a subsequent withdrawal would be unlikely to have affected the applicability of this principle. See Casari, supra, 327 Pa. at 385-86, 194 A. at 505-06; and Henry, supra, 25 Pa. at 358-59.
The Defendant's counsel attempts to minimize the nature of the interest of the Debtor in the Property as of the date of the June 17, 1983, sale. However, the conclusion is nevertheless inescapable that the Defendant-attorney was the purchaser of the Debtor-client's Property at a sheriff's sale executing upon a judgment against the Debtor-client on June 17, 1983. It was by that sale that the Debtor lost his title to the Property and the Defendant acquired his title. Thus, the Defendant directly committed the forbidden act of acquiring his client's property at a foreclosure sale.
We do not believe that the Defendant's actions can be viewed in a better light even if we conclude that the transactions more significant than the sale itself were the assignments of the creditors' respective interests to the Defendant. These transactions did not directly involve the Debtor, and thus, as the Defendant argues in effect, the sale was itself an unnecessary formality for which the Defendant opted merely to place the transaction into the light of day.
The assignments from the two mortgagees, including Southeast, the judgment creditor which had scheduled the foreclosure sale, to the Defendant were expressly conditioned upon court approval after notice to all interested parties. Putting aside the notice issue, which creates additional problems for the Defendant, the Debtor's executed consent was pivotal to the court approval, and most likely as well to the willingness of the mortgagees to execute the assignments. The consent is besmirched, however, by (1) Its reference to only the assignment of Southeast's claim to the Defendant, not the other assignments to him; (2) The Defendant's misrepresentations to the Debtor, reliance upon which we believe were the only reason that the Debtor in fact did sign the consent; and (3) The Debtor's questionable mental competency at the time of executing the consent which, despite the Defendant's transparent protestations at the hearing, must have been obvious to the Defendant and were preyed upon by him. Given the Defendant's fiduciary duty of undivided loyalty to the Debtor arising out of the attorney-client relationship, e.g., In re Greater Pottstown Community Church of the Evangelical Congregational Church, 80 B.R. 706, 710-11, 712 (Bankr.E.D.Pa. 1987); Kribbs, supra, 387 Pa. at 621-22, 129 A.2d at 495-46; and Henry, supra, 25 Pa. at 358-59, the Defendant's misrepresentations to his mentally-impaired client as a means of obtaining his approval to the assignments at a time when the Debtor's resistance was obviously weakened is nothing short of odious. Therefore, focus on the assignments instead of the sheriff's sale does not cause the Defendant to fare better in the reaching of our conclusion that the Defendant breached his fiduciary duties to the Debtor in consummating this transaction.
2. SUCH ACTIONS ALSO VIOLATE THE CODE OF PROFESSIONAL RESPONSIBILITY
Any action taken by an attorney "with a view . . . of obtaining some advantage for himself to the prejudice of his client, justifies disbarment." Annot., Attorney & Client: Disciplinary Proceeding *733 Based upon Attorney's Direct or Indirect Purchase of Client's Property, 35 A.L.R.3d 674, 676 (1971). Acting "in a fraudulent or overreaching manner to advance his own interests to the possible detriment of his client" therefore may justify an attorney's disbarment, irrespective of injury to the client. Id. at 676-77.
These considerations are reflected in Disciplinary Rules (hereinafter referred to as "DR") 5-103(A) and 5-104 (A) of the American Bar Association's Code of Professional Responsibility, adopted by the Supreme Court of Pennsylvania on February 27, 1974, which read as follows:
DR 5-103. Avoiding Acquisition of Interest in Litigation
(A) A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation he is conducting for a client, except that he may:
(1) Acquire a lien granted by law to secure his fee or expenses.
(2) Contract with a client for a reasonable contingent fee in a civil case. . . .
DR 5-104. Limiting Business Relations with a Client.
(A) A lawyer shall not enter into a business transaction with a client if they have differing interests therein and if the client expects the lawyer to exercise his professional judgment therein for the protection of the client, unless the client has consented after full disclosure. . . .
Similar considerations are also addressed in Rule 1.8(a) of the American Bar Association's Rules of Professional Conduct, which will, by Order of the Pennsylvania Supreme Court of October 16, 1987, replace the Code of Professional Responsibility in Pennsylvania, effective April 1, 1988, which reads as follows:
RULE 1.8 Conflict of Interest: Prohibited Transactions
(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:
(1) the transaction and terms on which the lawyer acquires the interest are fully disclosed and transmitted in writing to the client in a manner which can be reasonably understood by the client;
(2) the client is advised and is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and
(3) the client consents in writing thereto.
The Defendant argues that he did not violate either of these ethical precepts, specifically alleging that he satisfied the conditions of Rule 1.8(a) because the terms of the transaction were fair to the Debtor, the Debtor was made aware of them, and the Defendant "structured the transaction" so as to render them conditional upon the Debtor's approval, thus indicating his sensitivity to the fact that he was dealing with his client.
We disagree that no violation of these ethical precepts occurred. The transaction was not fair, because the Debtor did not receive what he bargained for. He did not receive representation from the Defendant in either his criminal case nor in his domestic relations matters, nor did he receive the five-acre tract. In fact, he received largely empty promises and possibly the Defendant's forebearance from trying to collect his probably uncollectible legal fee bill.
The terms of any agreement between the parties were never set forth in writing. The consent form, the only writing, makes reference only to the assignment from Southeast to the Defendant. The Debtor signed the consent form only because of his expectation that the Defendant's performances were forthcoming. These expectations were, however, never realized.
There is no evidence as to who "structured" the transactions to require court approval of the assignments after notice. It may well have been the mortgagees, not the Defendant. In any event, the notices to all interested parties required by the terms of the Southeast and 1st Nat'l assignments were not given, and thus the *734 transaction, as further indicated below, failed to conform to its designed structure.
We believe that the Defendant clearly did acquire a proprietary interest in the Debtor's cause of action in violation of DR 5-103(A), and that the Defendant entered into a business transaction with the Debtor of which the latter was not accorded full disclosure, in violation of DR 5-104(A). Clearly, the full terms of the transaction were not disclosed in writing and the Debtor was given no advice of his opportunity to seek independent counsel, in violation of Rule 1.8(a).
We acknowledge the holding of the Pennsylvania Supreme Court in In re Estate of Pedrick, 505 Pa. 530, 535, 482 A.2d 215, 217 (1984), that the Code of Professional Responsibility does not have the force of establishing independent substantive law. However, these violations of the Canons and Rules governing professional conduct are clearly properly subject of consideration by the Disciplinary Board of the Supreme Court of Pennsylvania, and therefore we are submitting a copy of this Opinion to that body.
We recognize the irony of making such a report in light of the fact that the Defendant was already disbarred from the practice of law in 1985. It is hardly comforting to know that the Defendant may have engaged in other conduct comparable to that in issue here, which resulted in his disbarment. However, it may be that such a report will have a bearing upon any application by the Defendant for reinstatement or readmission to the bar of this Commonwealth.
Finally, we note the statement of Judge Fox in In re Mushroom Transportation Co., 70 B.R. 416, 418 n. 4 (Bankr.E.D.Pa. 1987), that violations of disciplinary rules which are consistent with independent substantial law may serve as the basis for substantive legal conclusions. Clearly, there is ample independent substantive law barring attorneys from dealing unfairly with their clients in property transactions. See pages 731-732 supra. Therefore, we believe that the Defendant's violation of disciplinary rules of the legal profession are also relevant to our disposition.
3. PERTINENT BANKRUPTCY LAW DECISIONS FURTHER ESTABLISH THE IMPROPRIETY OF SUCH ACTIONS
The case which we find most closely analogous to the instant case is In re Exennium, Inc., 23 B.R. 782, 786-88 (9th Cir. Bankr.App.1982), rev'd on other grounds, 715 F.2d 1401 (9th Cir.1983). There, an attorney who had previously represented the Debtor and whose firm had successfully withdrawn as its counsel, purchased the assets of the Debtor at a trustee's sale subsequent to the firm's withdrawal. The Court, holding that previous counsel was absolutely disqualified as a buyer, held that the purchase, being in conflict with the client's interest and contrary to public policy, was void. See also Donovan & Schuenke v. Sampsell, 226 F.2d 804 (9th Cir.1955) (party assisting trustee in management of estate cannot purchase at trustee's sale); and In re Frazin & Oppenheim, 181 F. 307 (2d Cir.1910) (appraiser of estate, as well as any agents of parties involved in a bankruptcy sale, including attorneys, cannot purchase at sale).
Here, the facts that the Defendant was attorney of record for the Debtor at the same time that he purchased the Property at the sale, and the added elements of (1) his failure to provide notice of the court hearing where the assignments were approved to the Debtor, (2) his misrepresentations as to what he intended to do for him, and (3) his taking advantage of the Debtor's impaired mental state, render the factual setting here more aggravated than that in Exennium, supra. The instant transaction thus cannot be allowed to pass by the eye of the court without adverse consequences for the Defendant.
4. FAILURE TO PROVIDE NOTICE TO THE DEBTOR OF THE COURT HEARING TO APPROVE ASSIGNMENTS FURTHER TAINTS THIS TRANSACTION
All of the foregoing considerations are heightened by the further defect in the sale *735 process arising from the absence of notice to the Debtor of the hearing to consider approval of the assignment to the Defendant, which might itself be a sufficient basis for setting aside this court's Order of June 15, 1983, and, consequently, the assignments.
As has already been pointed out in our discussion at page 732 supra, court approval of the assignments was not a mere technicality to further solidify the legality of a transaction otherwise beyond reproach, but was a contractual precondition of the assignments of Southeast and 1st Nat'l to the Defendant. Especially given the sensitivity of dealing with property with which his client, to the point of grossly antisocial violence, was unwilling to part, it was particularly important for the Defendant to be punctilious in obtaining court approval of the assignment.
As it developed, the motion was filed on June 9, 1983, and a notice of the hearing to consider approval of the assignments was prepared. Listed as counsel for the Debtor thereon was the Defendant, belying his contention at trial that he no longer believed that he was representing the Debtor as of that date, and assuring that whether or not the Debtor received actual notice would be in the sole hands of the Defendant.
Although the notice stated that an answer or objection could be filed within twenty (20) days thereafter, the Defendant cut short that process by moving for an expedited hearing. Accompanying the motion for expedited consideration was a certification that notice of the filing of that motion had been given telephonically to the Debtor, therein listed as appearing "pro se," with an address of Norristown State Hospital. As the Defendant admitted at the hearing, no notice of either the substantive motion or the motion for expedited treatment was in fact given to the Debtor, either telephonically or in writing. Thus, the Defendant's Certification of such notice was false.
The Court, obviously concluding that notice had been provided to all parties and presented with the consent form (obtained by means of misrepresentations) signed by the Debtor, apparently further concluded that all interested parties, including the Debtor, joined in the motion. The hearing was set by Order of June 15, 1983, at 11:00 A.M. that same day and approved at that time or shortly thereafter, as the Order is dated June 15, 1983.
Improper notice of a sale to interested parties renders the sale voidable by the parties who were entitled to receive such notice, but who in fact failed to receive same. See M.R.R. Traders, Inc. v. Cave Atlantique, Inc., 788 F.2d 816 (1st Cir. 1986); and In re Fernwood Markets, 73 B.R. 616 (Bankr.E.D.Pa.1987). As the Fernwood Markets case points out, due process rights of constitutional dimension are implicated if a sale takes place without adequate notice to interested parties. Id. at 620. See also Ray v. Norseworthy, 90 U.S. (23 Wall) 128, 23 L.Ed. 116 (1874). The bankruptcy court Order could not ratify a transaction of which notice was defectively provided. See In re Gem de Puerto Rico, Inc., 79 B.R. 142 (D.P.R.1987). Hence, the numerous irregularities in the notice of the hearing on whether to approve the assignments, resulting in the failure of the most interested party to receive any notice of the proceedings, render their validity questionable. Therefore, this basis, independent from, but aggravated by, the Defendant's self-dealing with the property of his client, provides the Debtor with another basis upon which to attack the transaction in issue.
We therefore conclude that the Defendant, in several aspects, illegally acquired the Property. Another difficult question arises, however, in ascertaining the remedy to which the Debtor is entitled.
5. DAMAGES
The classic remedies of a client whose property has been sold to his attorney is the imposition of a constructive trust impressed upon the property in the hands of the attorney and a setting aside of the sale in issue. See 7 AM.JUR.2d, supra; Annot., supra, 20 A.L.R.2d at 1306-09. However, the passage of time and the dramatic *736 enhancement of the Property by the Defendant in the interim cause us to conclude that, in this instance, setting aside the sale or imposing a constructive trust against the Defendant would be inequitable. There is, moreover, some force in the Defendant's argument that the Debtor did not have a very valuable interest in the property as of June 15, 1983. Had it not been for the Defendant's intervention, albeit, we believe, for scarcely altruistic motives, it appears that the Debtor would have had all of his rights to the property wiped out in a sheriff's sale conducted by Southeast two days later on June 17, 1983.
Therefore, we choose to allow the sale to stand and to require the Defendant to disgorge the financial benefit which he personally gained from the transaction to the Debtor as the Debtor's sole remedy. This financial benefit, we believe, is measured by the difference between the fair market value of the Property on June 17, 1983, the date of the sale to the Defendant, and the amount paid by the Defendant to acquire it.
We reject the Defendant's suggestion that we should measure the damages by ascertaining what the Debtor lost rather than by ascertaining what the Defendant gained in the transaction. Thus, in Henry, supra, the court holds that the attorney's purchase "enures [sic] to the benefit of his client." 25 Pa. at 359. Further, in Kribbs, supra, where the defendant-attorney conspired with a realtor to remit only the previous rental to the plaintiff-landowner and pocket increased rentals, the court rejected the attorney's plea that the plaintiff suffered no losses and hence no damages should be awarded to him against the attorney. Rather than focusing upon the plaintiff's losses, the court held that the parties' fiduciary relationship required the attorney to pay over any gains on his part to the client.
We believe that here, where the Defendant's breaches of his fiduciary duties were nothing short of egregious, the same principles should apply. The victimized Debtor should be the recipient of the profit realized by the Defendant in the transaction. As indicated, this figure should be the difference between the value of the Property and what the Defendant paid for it at the crucial time of the sheriff's sale.[2]
Valuations of real property are always difficult to make but are frequently required of us, and thus we have developed our own body of law relevant to this topic. While the testimony of the owner of the property is always entitled to some weight, e.g., In re Corbett, 80 B.R. 32, 36 (Bankr.E. D.Pa.1987); and In re Blakey, 76 B.R. 465, 469 (Bankr.E.D.Pa.1987), modified on other grounds, 78 B.R. 435 (Bank.E.D.Pa. 1987), here we have two "owners" whose ranges of value differ by no less than $150,000.00, i.e., the Debtor's valuation of $240,000.00 to $250,000.00, as compared to the Defendant's valuation of $90,000.00 to $100,000.00.
We also have the "expert" testimony of Mr. Gallo. However, as we pointed out in In re Chandler, 77 B.R. 513, 517 (Bankr.E. D.Pa.1987); and Blakey, supra, 76 B.R. at 471-72, valuations by professional appraisers which are based principally on comparable sales data are worth very little when the appraiser fails to indicate direct familiarity *737 with either the properties used as comparable or the subject property to which the property is compared. Here, Mr. Gallo's appraisal suffers from both deficiencies. His description of the Property was at variance from that of both owners. He overlooked the tenant living in the premises. His written report was consistent with the Debtor's testimony that the major systems in the home were functional, but his oral presentation was more consistent with the Defendant's contention that the premises was uninhabitable. Further, his comparable were not described in any detail, and were, in at least one instance, so distant from the subject premises as to be totally irrelevant. We therefore decline to attach much significance to Mr. Gallo's testimony or report, although we believe that it pegged the Debtor's estimate as more likely to be skewed than that of the Defendant.
Ultimately, we chose a medium ground of $125,000.00 as the figure which we believe was the fair market value of the Property as of June 17, 1983. We note that this is coincidentally the same value placed upon the premises by the Debtor and Nina in their bankruptcy schedules. Hence, as in In re Cole, Cole v. Sovran Mortgage Corp., 81 B.R. 326, 327-29 (Bankr.E.D.Pa.1988); and Blakey, supra, 76 B.R. at 422, it is a figure given by one of the parties at a time when that particular party had no apparent bias.
The Defendant's expenditures to acquire the Property are difficult to measure with exact precision. We know that the sum of what he paid Southeast, 1st Nat'l, Mary Rose, and Nina was $94,000.00, and nothing else is certain. See page 729 & n. 1 supra. Having no other figure of record, we are compelled to accept the $94,000.00 figure as the Defendant's expenditures and to measure the Defendant's benefit at $125,000.00 less $94,000.00, or at $31,000.00. This is the sum which we shall order him to pay to the Debtor as damages.[3]
*738 6. CONCLUSION
Finally, the odd status of the main bankruptcy case presents a problem as to whom the sum awarded should be paid. The bankruptcy case is still open, but the Debtor has been denied a discharge. It is unclear to us whether, given this state of affairs, this recovery should be considered property of the Debtor's bankruptcy estate, pursuant to 11 U.S.C. §§ 541(a)(1) or (a)(7), or not.
Near the close of the proceedings on July 30, 1987, the Debtor stated that he "never wanted his bills dismissed" in the bankruptcy. Presumably, then, the Debtor would not object to the first distribution of the proceeds of recovery herein to his unsecured creditors existing at the time of the conversion, i.e., as of October 20, 1980. We shall therefore order that the sum paid be remitted to the Trustee and that the Trustee shall file a report of the proposed distribution, with opportunity to interested parties to object thereto, similar to the procedure utilized by us in In re Chapman, 77 B.R. 1, 7-8 (Bankr.E.D.Pa.1987).
Finally, we believe that the administration of this case, now one of the oldest on our docket, must be brought to a rapid conclusion now that its only raison d'etre, this adversary proceeding, is decided. A timetable for doing so is attached hereto. We remind William E. Howell, Jr., Esquire, the Defendant's ex-partner, that, somewhat ironically, he remains as counsel of record for the Debtor in the main case.
NOTES
[1] At one point in the hearing, the Defendant suggested that he anticipated needing a loan to pay real estate taxes of $7,553.00 and sheriff's costs of about $1,800.00. However, there is no direct testimony that any such sums were paid. In his proposed Findings of Fact, his counsel, without any explanation of his basis for calculation of same, stated that the Defendant's expenditures totalled "approximately $97,400.00 to acquire clear title to the property." The record thus provides no direct basis for concluding that the Defendant paid more than $94,000.00 to acquire the Property.
[2] We consider this means of measuring damages as akin to enforcing a trust as to real property. We believe that this remedy, as well as the underlying action, is therefore so closely related to be within the scope of 42 Pa.C.S. § 5531(1), and thus not be subject to any statute of limitations. In any event, this action was commenced within four years of its accrual on June 17, 1983, and we therefore reject the Defendant's contention that the action is barred by limitations or laches. The only other applicable statute of limitations is arguably the five-year limitation of 42 Pa.C.S. § 5526(3) or the six-year period of 42 Pa.C.S. § 5527(6). We are unwilling to hold that an action brought within an applicable limitation period is barred by laches, as the limitation period is the frame of reference for ascertaining same. See, e.g., Metropolitan Wire Corp. v. Falcon Products, Inc., 528 F.Supp. 897, 902-03 (E.D.Pa.1981). We also note that the Debtor was and apparently still is suffering under a mental impairment, and that he commenced the action shortly after his release from custody. Considering these circumstances also causes us to conclude that the action is barred either by limitations or by laches. Cf. Eubanks v. Clarke, 434 F.Supp. 1022, 1032-33 (E.D.Pa.1977).
[3] We believe that we could and would award the Debtor approximately the same damages even if we approached the issue from the vantage point of the Debtor's losses, as opposed to the Defendant's benefits from the transaction, and thereupon determined his compensatory damages to be much less, because we believe this to be a case in which, had damages been nominal, we would have imposed punitive damages. As the RESTATEMENT (SECOND) OF TORTS, § 908, comment c, at 465 (1979), points out, punitive damages are awarded "where there is substantial harm and when there is none," and even where only nominal damages are awarded to the plaintiff. The keynote of the amount awarded is "the motives of the wrongdoer, the relation between the parties and the provocation or want of provocation for the act." Id., comment e, at 466.
The foregoing principles of the Restatement have been expressly approved by the Pennsylvania federal courts, e.g., Chuy v. Philadelphia Eagles Football Team, 595 F.2d 1265, 1277 (3d Cir.1979), and state courts, e.g., Feld v. Mirriam, 314 Pa.Super. 414, 434, 461 A.2d 225, 235 (1983); and Rhoads v. Heberling, 306 Pa.Super. 35, 39-42, 451 A.2d 1378, 1380-81 (1982). The principles established therein have been followed by these and other courts. In particular, substantial damages have been awarded even where compensatory damages were non-existent or were relatively small. See, Chuy, supra ($60,000.00 punitive damages awarded as opposed to $10,000.00 compensatory damages); Bemer Aviation, Inc. v. Hughes Helicopter, Inc., 621 F.Supp. 290, 299-301 (E.D.Pa.1985) (punitive damages of about $1,000.00 awarded as opposed to only about $11,500.00 compensatory damages); Marcone v. Penthouse International, Inc., 577 F.Supp. 318, 322, 35-36 (E.D.Pa.1983) (punitive damages of $200,000.00 awarded as opposed to only $30,000.00 compensatory damages); In re Wagner, 74 B.R. 898, 905-06 (Bankr.E.D.Pa.1987) (punitive damages of $500.00 awarded, although slight degree of harm justified compensatory damages of only $100.00); Feld, supra, 314 Pa.Super. at 437-38, 461 A.2d at 237 (punitive damages of $1.5 million and $.75 million awarded, as opposed to compensatory damages of $2 million and $1 million, to respective plaintiffs); and Rhoads, supra, 306 Pa.Super. at 37, 47, 451 A.2d at 1379, 1383-84 (punitive damages ranging from $600.00 to $750.00 awarded, although compensatory damages ranged from nothing to $446.47).
Following these cases, we could clearly award $31,000.00 in punitive punitive damages, even if we found no comparable compensatory damages, to the Debtor. The violation of his rights at the hands of the Defendant would entitle the Debtor to at least nominal damages. See Carey v. Piphus, 435 U.S. 247, 266-67, 98 S.Ct. 1042, 1054, 55 L.Ed.2d 252 (1978).
The element which would set off punitive damages here is the abuse of the fiduciary relationship between the parties. The motives of the Defendant appeared solely to "use" the Debtor's circumstances to obtain his "consent" to obtain his property. Having obtained same, the Defendant readily discarded his obligations to the Debtor. There is no element of provocation by the Debtor towards the Defendant causing the Debtor to deserve such victimization.
Therefore, punitive damages of $31,000.00 would be warranted were it not for our judgment that this sum of compensatory damages would be appropriate. We recognize that we have the discretion to award punitive damages in addition to compensatory damages. However, due to the fact that our compensatory damages were measured by the Defendant's benefit from the transaction rather than the Debtor's losses therein, and recognizing that those losses were minimal because the Debtor would almost certainly have lost the property anyway at Southeast's sheriff's sale of June 17, 1983, we shall not enhance the $31,000.00 awarded. We present this analysis strictly as an alternative basis for reaching the same result.
|
176 F.3d 492
U.S.v.Guzman-Cintas*
NO. 97-5206
United States Court of Appeals,Eleventh Circuit.
March 11, 1999
Appeal From: S.D.Fla. , No.96-06078-CR-JM
1
Affirmed.
*
Fed.R.App.P. 34(a); 11th Cir.R. 34-3
|
213 F.Supp.2d 718 (2002)
UNITED STATES of America,
v.
Raul RENDON-RODRIGUEZ.
No. CRIM. L-01-754.
United States District Court, S.D. Texas, Laredo Division.
January 30, 2002.
*719 Raul Rendon-Rodriguez, pro se.
Federal Public Defender, Laredo, TX, for Raul Rendon-Rodriguez.
Pretrial Services LA, U.S. Probation, Laredo, TX, Financial Litigation, U.S. Attorney's Office, Southern District of Texas, Houston, TX, James Mack Noble, IV, U.S. Attorney's Office, Laredo, TX, for U.S.
MEMORANDUM AND ORDER
KAZEN, Chief Judge.
On August 10, 2001, Defendant pled guilty to violating 8 U.S.C. §§ 1326(a) and (b)(2). Defendant was scheduled to be sentenced on November 16, 2001. However, the Court continued the proceeding for sixty (60) days to allow Defendant to research whether the Supreme Court's decision in INS v. St. Cyr, 533 U.S. 289, 121 S.Ct. 2271, 150 L.Ed.2d 347 (2001), might have an effect on his case. (Docket No. 10). On January 17, 2002, Defendant filed a Motion to Withdraw Plea of Guilty and Motion to Dismiss the Indictment. (Docket No. 11).
I. Motion to Dismiss Indictment
Defendant argues that the Court should dismiss his indictment because his 1999 removal proceedings, upon which the present indictment is based, violated due process. (Docket No. 11). In a criminal proceeding under § 1326, an alien may not collaterally attack the validity of the underlying deportation order unless he demonstrates that "(1) [he] exhausted any administrative remedies that may have been available to seek relief against the order; (2) the deportation proceedings at which the order was issued improperly deprived [him] of the opportunity or judicial review; and (3) the entry of the order was fundamentally unfair." See 8 U.S.C.A § 1326(d) (West 1999).[1] Failure to demonstrate any one of these factors would mean that Defendant's 1999 removal order may serve as a basis for his conviction under § 1326. *720 See United States v. Lopez-Vasquez, 227 F.3d 476, 485 (5th Cir.2000). Defendant has demonstrated none of the factors.
A. Exhaustion of Administrative Remedies
After his removal proceeding in 1999, Defendant filed a Notice of Appeal, but later withdrew it. (Docket No. 11, at 5, Exh. E). Thus, Defendant voluntarily abandoned the normal administrative appeals process. Moreover, as noted above, this Court gave Defendant sixty (60) days to take whatever steps he deemed appropriate under the St. Cyr decision to challenge his prior deportation order before an immigration court. Defendant now simply states that an unnamed "immigration lawyer" reports that "immigration courts are not allowing a re-opening of a prior deportation order, in cases where as here, the Defendant returns after a deportation order has been issued." He does not claim to have challenged this practice before the Board of Immigration Appeals. Indeed, he apparently did not even bother to file anything in an immigration court. This conduct does not amount to exhaustion of administrative remedies.
B. Improper Deprivation of Judicial Review
Defendant's withdrawal of his Notice of Appeal effectively deprived Defendant of the opportunity for judicial review. However, this deprivation was not "improper," as required by the statute. Although Defendant alleges that his decision to withdraw his appeal resulted from the immigration judge's "representations that he would have no relief on appeal," the transcript of Defendant's removal proceeding contains no such representations by the judge. To the contrary, Immigration Judge John T. Zastrow informed Defendant both at the beginning and the end of the removal proceeding that Defendant had the right to appeal his order. (Docket No. 11, Exh. B, at 1, 5). Because Defendant would not answer Judge Zastrow's questions, Judge Zastrow then, in effect, entered a notice of appeal for him. (Docket No. 11, Exh. B, at 5).
C. Fairness of Defendant's Removal Order
Defendant does not clearly state why he believes the issuance of his 1999 removal order was unfair. As far as the Court can decipher from his motion, Defendant complains that: 1) he was denied a continuance to obtain legal representation; 2) the immigration judge improperly represented to Defendant that he "would have no relief on appeal," causing Defendant to abandon the appeal process; and 3) the immigration judge failed to advise Defendant of his right to apply for discretionary relief from deportation.
With regard to the first complaint, Defendant was informed on numerous occasions of his right to legal representation at his hearing, and was even provided with a list of organizations and attorneys who provide free legal services. (Docket No. 11, Certificate of Service for Notice to Appear). Moreover, the record of the removal proceeding reflects that Defendant was granted a continuance to obtain legal representation, but failed to do so. (Docket No. 11, Exh. B. at 1). When Defendant made a motion for a second continuance on the day of his removal proceeding, Judge Zastrow denied it, explaining that Defendant had had sufficient time to obtain counsel. See id. With regard to the second complaint, as explained above, Judge Zastrow never attempted to discourage Defendant from pursuing an appeal, nor did he make any representations about the merits of an appeal.
The basis for Defendant's third complaint is that his prior robbery conviction occurred in 1992, before the repeal of former § 212(c) of the INA by the AEDPA *721 and IIRIRA in 1996. Defendant claims that under the reasoning of St. Cyr, he was entitled to apply for discretionary relief from deportation pursuant to § 212(c). By failing to advise him of that right, he argues, the immigration judge deprived him of due process. Aliens who have entered the United States illegally are entitled to due process. See United States v. Benitez-Villafuerte, 186 F.3d 651, 656 (5th Cir. 1999); Nose v. Attorney General of the United States, 993 F.2d 75, 78 (5th Cir. 1993). Due process in this context requires "only that an alien be provided notice of the charges against him, a hearing before an executive or administrative tribunal, and a fair opportunity to be heard." Benitez-Villafuerte, 186 F.3d at 657. The INS gave Defendant a Notice to Appear form when he was apprehended attempting to enter the United States in 1999. (Docket No. 11, unlabeled Exh.). That document explained the reasons for Defendant's ineligibility for admission to this country, and advised him that a hearing would be scheduled before an immigration judge, that he had a right to legal representation at the hearing, and that he had a right to appeal. See id. Defendant acknowledged receipt of this Notice to Appear by signing the certificate of service. See id. A hearing was held before Immigration Judge Zastrow on March 3, 1999. (Docket No. 11, Exh. B). Defendant was informed by Judge Zastrow that he had the right to present evidence on his own behalf, see id. at 1-2, but Defendant had no evidence to present. At the conclusion of the hearing, Judge Zastrow ordered that Defendant be removed to Mexico. See id. at 4. Defendant filed a Notice of Appeal, but later withdrew it. Consequently, Defendant was provided with due process and may not complain that his removal order was fundamentally unfair. While Judge Zastrow apparently did not discuss any entitlement to seek discretionary relief, that advice is not a component of the due process requirement.
Even if Defendant's due process argument had merit, the record of Defendant's 1999 immigration proceedings demonstrates that he has waived any argument based on St. Cyr. In his Notice of Appeal to the Board of Immigration Appeals, Defendant argued that his case should be determined under pre-AEDPA standards because his offense was committed prior to 1996. (Docket No. 11, Exh. E). Furthermore, Defendant expressly stated that he wished to seek relief under § 212(c) of the INA. See id. Thus, Defendant was then aware of the potential viability of the argument he now asserts. Defendant nevertheless chose to withdraw his appeal. By failing to pursue an appeal on an argument known to him at that time, Defendant waived his right to assert that same argument now.
Because Defendant has failed to demonstrate any of the three statutory prerequisites to bringing a collateral attack on his 1999 removal order, he is precluded from challenging the validity of that order in his § 1326 prosecution.
II. Withdrawal of Guilty Plea
The district court may permit a defendant to withdraw his plea of guilty before sentencing for any "fair and just reason." See FED. R. CRIM. P. 32(e); United States v. Brewster, 137 F.3d 853, 857-58 (5th Cir.1998). The burden for establishing a fair and just reason rests with the defendant. See Brewster, 137 F.3d at 858. Two of the factors to be considered in determining whether the defendant has made such a showing are whether he has asserted his innocence and whether the withdrawal would waste judicial resources. See id. at 857. Defendant seeks to withdraw his guilty plea so that he may collaterally attack the validity of his 1999 removal *722 order, and thereby invalidate the indictment in the instant case. According to Defendant, if his order of removal was improper, the indictment should be dismissed because an essential element of the crime of illegal entry after deportation has been eviscerated. This is essentially an assertion of innocence. As explained above, however, Defendant has failed to demonstrate that he is entitled to collaterally attack his 1999 removal order. Even if he were, he waived his St. Cyr argument by failing to pursue it on appeal. He also made no effort to re-open his case after being given time to do so. Defendant offers no other justification for withdrawal of his guilty plea. Thus, allowing him to withdraw his plea and pursue his current arguments would waste judicial resources.
CONCLUSION
For the foregoing reasons, Defendant's Motion to Withdraw Plea of Guilty and Motion to Dismiss Indictment are DENIED.
NOTES
[1] These factors are a codification of the Supreme Court's decision in United States v. Mendoza-Lopez, 481 U.S. 828, 107 S.Ct. 2148, 95 L.Ed.2d 772 (1987). See United States v. Lopez-Vasquez, 227 F.3d 476, 483 n. 13 (5th Cir.2000). The Fifth Circuit has articulated its own three-factor test, which is essentially identical to that contained in § 1326(d). See id. at 483 (stating that the alien "must establish that (1) the prior hearing was `fundamentally unfair'; (2) the hearing effectively eliminated the right of the alien to challenge the hearing by means of judicial review of the order; and (3) the procedural deficiencies caused the alien actual prejudice."); United States v. Benitez-Villafuerte, 186 F.3d 651, 658 (5th Cir.1999).
|
54 F.3d 782
Bradley W. Armstrongv.U.S.
NO. 94-3958
United States Court of Appeals,Eighth Circuit.
Jan 31, 1995
Appeal From: D.Neb., No. C-90-201
1
AFFIRMED.
|
493 F.2d 818
AJAX REALTY CORPORATION, Appellant,v.J. F. ZOOK, INC., et al., Appellees.
No. 71-2145.
United States Court of Appeals, Fourth Circuit.
Argued Oct. 2, 1972.Decided Dec. 12, 1972.
J. Cameron Mann, Norfolk, Va. (Maurice Steingold and Steingold, Steingold & Friedman, Norfolk, Va., on brief), for appellant.
E. Preston Grissom, Norfolk, Va. (Allan S. Reynolds and White, Reynolds, Smith & Winters, Norfolk, Va., on brief), for appellees.
Before WINTER, BUTZNER, and RUSSELL, Circuit Judges.
WINTER, Circuit Judge:
1
Plaintiff, Ajax Realty Corporation (Ajax), appeals from the district court's decision granting the motion of defendant, Durell Products, Inc. (Durell), to dismiss and to quash service of process. The appeal raises questions concerning the interpretation and constitutionality of Virginia's Long Arm Statute.1 Va. Code Ann. 8-81.2 (1964).2
2
Durell, a corporation of the State of Washington, manufactured unglazed window frames which C & S Sales Company, a Colorado corporation, purchased and sold to Ajax, a Virginia corporation. Ajax installed the frames in its apartment complex in Virginia. The frames leaked, occasioning property damage to the apartments. Ajax sued Durell and others alleging both breach of warranty and tort liability. Jurisdiction of the subject matter was based on diversity of citizenship. 28 U.S.C.A. 1332.
3
With regard to the jurisdictional issue, the district court found the following facts: Durell transacts nearly all its business in the Pacific Northwest. It has never been domesticated in Virginia. Durell has never maintained any manufacturing, sales, storage, or other business facility in Virginia. It has never advertised, solicited, or contracted for any sales in Virginia. It has never directly distributed its products in Virginia. It has never maintained a distributor, jobber, agent, or other representative in Virginia.
4
Durell manufactured the frames in issue in Washington. It sold the frames to C & S Sales in Denver, Colorado for $37,000. C & S Sales then sold the frames to Ajax in Virginia. Durell was not involved in the sale by C & S to Ajax. C & S is not Durell's agent. At the request of C & S, Durell shipped a sample frame to Chicago to facilitate preparations for glazing. Again at the request of C & S, Durell shipped the manufactured, but unglazed, frames directly to Ajax in Virginia. After the frames leaked, Durell sent a representative to Virginia to examine them in an attempt to alleviate the problem.
I.
5
Ajax invokes several sections of the long arm statute. We shall discuss only 8-81.2(a)(1) and 8-81.2(a)(5).3
6
1. Sec. 8-81.2(a)(1) provides that a court may exercise personal jurisdiction if the claim arises from a corporation's 'transacting any business in this State.' At issue is whether 8-81.2(a)(1) should be construed to embrace Durell's sole act of shipping the frames to Virginia. In Haynes v. James H. Carr, 4 Cir., 427 F.2d 700, 704, cert. den. 400 U.S. 942, 91 S.Ct. 238, 27 L.Ed.2d 245 (1970), we held that (a)(1) was not a single act statute. In other words, a foreign corporation must conduct more than a single business transaction in Virginia to be subject to jurisdiction under the provisions of that statute.
7
However, in John G. Kolbe v. Chromodern Chair Co., 211 Va. 736, 180 S.E.2d 664, 668 (1971), the Supreme Court of Virginia, stressing the word 'any,' construed (a)(1) as 'a single act statute requiring only one transaction in Virginia to confer jurisdiction.' The Court reasoned that: (1) 'the purpose of Virginia's long arm statute is to assert jurisdiction over non-residents who engage in some purposeful activity in this State to the extent permissible under the due process clause'; (2) since it would not offend traditional due process notions of fair play and substantial justice to subject a foreign corporation to Virginia jurisdiction where its one business transaction 'invoked the benefits and protection of the laws of' Virginia, (a)(1) should be construed to reach such a case.
8
Chromodern is technically distinguishable from the instant case. The foreign corporation there had significantly stronger contacts with Virginia than did Durell: the foreign corporation there maintained a manufacturer's representative for Virginia and neighboring states, it maintained a non-stocking dealer in Virginia, it had contracted for other sales through these agents in Virginia, and the contract in question was with the Virginia non-stocking dealer. Thus, Chromodern does not compel a similar conclusion here. Moreover, the Court's construction of (a)(1) as a single act statute must properly be termed dictum. Nevertheless, mindful of our obligation under Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and its progeny to follow state interpretation of state law, we adopt the Virginia Supreme Court's construction of (a)(1) as a single act statute. Haynes, supra, insofar as it is inconsistent, is superseded by state decisional law and should no longer be followed.
9
Even under the state construction of (a)(1), however, Durell cannot be said to have transacted any business in Virginia. Durell's sole contact with Virginia was its shipment of the frames to Virginia, FOB Washington State. Durell shipped the frames to Virginia either as an accommodation to C & S or as C & S's agent for the purpose of shipment. C & S prepaid the cost of shipment. As the district court found, Durell sold the frames to C & S, a Colorado firm. It had no initial involvement in C & S's resale to Ajax in Virginia. There is no evidence that Durell knew at the time of its sale to C & S that C & S would resell the frames to a Virginia concern, or that C & S would request Durell to ship them directly to Virginia. On the other hand, since C & S's business apparently involved the resale of manufactured frames-- that is, C & S did not purchase frames for installation in its own facilities-- it is not unreasonable to assume that Durell knew that C & S would resell them somewhere.
10
If Durell had, as originally planned, simply shipped the frames to C & S in Colorado, Virginia could not assert jurisdiction even under a single act statute. To rule otherwise would be to hold that a manufacturer transacts business in every state in which each of its independent distributors deals. Therefore, if Virginia can assert jurisdiction here under (a)(1), the rule of the case would be that where a non-resident manufacturer ships its products directly to the ultimate purchaser, rather than to a non-resident independent distributor, either as an accommodation to the distributor or as its agent for purposes of shipment, then it has transacted business in Virginia. The Virginia Supreme Court has not gone so far in construing (a)(1), see Chromodern, supra, and therefore we choose not to, especially since there is another basis for asserting jurisdiction.4
11
2. Sec. 8-81.2(a)(5) provides that a court may exercise personal jurisdiction if the claim arises from the corporation's 'causing injury in this State to any person by breach of warranty expressly or impliedly made in the sale of goods outside this State, when he might reasonably have expected such person to use, consume, or be affected by the goods in this State, provided that he also regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this State.' After C & S requested Durell to ship the frames to Virginia, Durell possessed a firm expectation that the frames would be used in Virginia. Although Durell did not regularly do or solicit business, or pursue a persistent course of conduct, in Virginia, we consider that the $37,000 which it derived from Ajax's use of the frames in Virginia constitutes 'substantial revenue.' See Jackson v. National Linen Service, 248 F.Supp. 962 (W.D.Va.1965).
12
Durell stresses that the $37,000 contract price represents only one-half of one percent of its total sales. Although percentage of total sales may be a factor to be considered, it cannot be dispositive, for a small percentage of the sales of a corporation giant may indeed prove substantial in an absolute sense.5 On the other hand, it is difficult to identify an absolute amount which ipso facto must be deemed 'substantial.' In Jackson, supra, the court held that a foreign corporation which had $25,000 in direct sales in Virginia, and an undetermined sum in indirect sales, derived 'substantial revenue' for purposes of (a)(5). Id. at 964-965. Johnson v. Equitable Life Assur. Soc'y, 22 A.D.2d 138, 140, 254 N.Y.S.2d 258, 260 (1st Dep't. 1964) (dictum), is further indicative of a trend toward liberal construction of 'substantial revenue' provisions.6 In Johnson, the sale of a $1,798.20 component part by one non-resident to another for ultimate use in a New York skyscraper was said to satisfy the 'substantial revenue' test of New York's equivalent of 8-81.2(a)(4). Without purporting to draw a hard and fast line, we hold that Durell's $37,000 contract price constitutes sufficiently substantial revenue to subject it to Virginia's jurisdiction under (a)(5).
13
This conclusion is bolstered by our further conclusion, infra, that this assertion of jurisdiction does not offend the due process clause of the fourteenth amendment. This reasoning does not put the cart before the horse, since Virginia has held that its long arm statute exercises the full extent of jurisdictional power permitted by the due process clause. Chromodern, supra at 667 of 180 S.E.2d Carmichael v. Snyder, 209 Va. 451, 456, 164 S.E.2d 703, 707 (1968). In other words, in Virginia, if the exercise of jurisdiction is constitutional, the long arm statute contemplates it
II.
14
Since we hold that Virginia may exercise jurisdiction over Durell, we must consider the constitutionality of that exercise. Due process requires only that the foreign corporation 'have certain minimum contacts with (the State) . . . such that the maintenance of the suit does not ofend 'traditional notions of fair play and substantial justice." International Shoe Co. v. State of Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1965). McGee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957). Although the sum which Durell derived was substantial, it arose out of a rather solitary and fleeting contact with Virginia-- its shipment to Virginia of frames sold to a Colorado firm.7 Moreover, it is problematical whether Durell realistically is in a position to invoke the benefit of the laws of Virginia. Cf. Chromodern, supra. But the day is long past when the 'minimal contact' necessary to satisfy due process is to be equated with the traditional concept of doing business. Accordingly, we conclude that Durell enjoyed a sufficient financial benefit from the use of its frames in Virginia so that it would not be unreasonable to hold that it must account in Virginia for alleged defects, at least in a case like this where the statute requires, and Durell ultimately had, a reasonable expectation that the frames would be used in Virginia. See Jackson, supra. Virginia is the most logical and convenient locus to try the case. See McGee, supra, at 223 of 355 U.S. 78 S.Ct. 199. Cf. Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). As the Supreme Court explained in McGee, supra, at 222-223 of 355 U.S., at 201 of 78 S.Ct.:
15
(A) trend is clearly discernible toward expanding the permissible scope of state jurisdiction over foreign corporation . . .. In part this is attributable to the fundamental transformation of our national economy over the years. Today many commercial transactions touch two or more States and may involve parties separated by the full continent . . .. At the same time modern transportation and communication have made it much less burdensome for a party sued to defend himself in a State where he engages in economic activity.
16
We therefore hold that the application of (a)(5) to Durell on these facts does not violate the due process clause of the fourteenth amendment.8
17
The order of the district court dismissing Durell and quashing service of process as to it is reversed, and the cause is remanded to the district court for further proceedings not inconsistent with this opinion.
18
Reversed and remanded.
1
The district court applied the Virginia statute in determining whether it had acquired in personam jurisdiction. F.R.Civ.P. 4(e)
2
8-81.2 When personal jurisdiction over person may be exercised.--
(a) A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action arising from the person's
(1) Transacting any business in this State;
(2) Contracting to supply services or things in this State;
(3) Causing tortious injury by an act or omission in this State;
(4) Causing tortious injury in this State by an act or omission outside this State if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consemed or services rendered, in this State;
(5) Causing injury in this State to any person by breach of warranty expressly or impliedly made in the sale of goods outside this State when he might reasonably have expected such person to use, consume, or be affected by the goods in this State, provided that he also regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this States; - - -.
See Generally Note, The Virginia 'Long Arm Statute,' 51 Va.L.Rev. 719 (1965).
3
Sec. 8-81.2(a)(5) addresses injury arising from a breach of warranty in the sale of goods outside Virginia. Sec. 8-81.2(a)(4) addresses tortious injury arising from an act or omission outside Virginia. There is a certain ambivalence in plaintiff's position as to whether it is asserting a tort claim or a warranty claim. We shall treat it as the latter
4
'The cases seem unanimous in holding, whether as a matter of statutory interpretation or of due process, that the shipment of goods into a state, without more, does not constitute transaction of any business. Nor was the shipment of goods plus merely 'incidental activity' such as billing or negotiating thereafter in the state concerning defects in the goods held to be transaction of business in one case.'
51
Va.L.Rev., supra at 737. See Erlanger Mills v. Cohoes Fibre Mills, 239 F.2d 502 (4 Cir. 1956)
5
Conversely, a relatively small absolute amount might be deemed 'substantial' where it constitutes a significant percentage of a small corporation's total sales
6
See 51 Va.L.Rev. at 749
7
We are aware of authority in this Circuit indicating that under some circumstances a State cannot constitutionally assert jurisdiction over a foreign corporation where that corporation's sole contact with the State is the shipment of its goods into the State. See n. 4, supra; Golden Belt Manufacturing Co. v. Janler Plastic Mold Co., 281 F.Supp. 368, 370-371 (M.D.N.C.1967), aff'd 391 F.2d 266 (4 Cir. 1968). These cases did not address the issue in the context of a 'substantial revenue' statute, although, of course, the parameters of due process remain, regardless of the terms of the statutory authority
8
Durell does not contend that the method of service of process, as distinguished from the basis for it, violates the due process clause. Durell had adequate notice of the suit and sufficient time to prepare its defenses
|
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-93-238-CV
CITY OF ROUND ROCK,
APPELLANT
VS.
LONNIE JOSEPH LAZRINE,
APPELLEE
FROM THE DISTRICT COURT OF WILLIAMSON COUNTY, 26TH JUDICIAL
DISTRICT
NO. 92-029-C26, HONORABLE JOHN R. CARTER, JUDGE PRESIDING
This is a personal injury case. William Lee Brown, an employee of the City of
Round Rock, was involved in an automobile collision in which his vehicle struck from behind the
vehicle driven by appellee, Lonnie Joseph Lazrine. Lazrine sustained a back injury as a result
and brought suit against appellant, the City of Round Rock ("the City"), for his injury. The City
admitted negligence on behalf of Brown. The only issues in dispute at trial were the various
damages caused by the collision. At trial, all jury findings were favorable to Lazrine. On appeal,
the City raises four points of error challenging evidentiary rulings, denial of a jury instruction,
and the factual and legal sufficiency of evidence supporting the jury's award of future medical
expenses and loss of past earning capacity. We will affirm the judgment of the trial court.
THE CONTROVERSY
This case arose from an automobile collision in which the vehicle driven by Brown,
the City's employee, struck the rear of Lazrine's car while Lazrine was stopped at a crosswalk.
Lazrine brought suit to recover damages for injuries he sustained in the collision. It is undisputed
that Brown was acting within the scope of his employment with the City at the time the collision
occurred.
Prior to trial, the City admitted the following: (1) Lazrine was not negligent; (2)
Brown was negligent; (3) Brown was acting within the course and scope of his employment with
the City at the time of the collision; (4) Lazrine suffered an injury as a proximate result of
Brown's negligence; (5) medical expenses in the amount of $9,841.35 that Lazrine incurred for
treatment of his injury prior to trial were reasonable and necessary to treat such injury; and (6)
those medical expenses, as well as $5,060.00 in lost wages, were the proximate result of Brown's
negligence. Due to the City's admissions, the only issues left for the jury to consider were past
and future physical pain and mental anguish, past and future loss of earning capacity, past and
future physical impairment, and future medical expenses.
At trial, Lazrine offered expert medical testimony from his treating physician, Dr.
Michael E. Putney. Dr. Putney testified that Lazrine suffered from a pre-existing arthritic
condition in his back called "stenosis" which was present prior to the collision, but that the
collision aggravated this condition to the point that Lazrine experienced pain in his lower back and
hip and numbness in his foot and toes. Dr. Putney operated on Lazrine on September 6, 1991,
to relieve the pressure on Lazrine's spinal nerve roots. During the surgery, Dr. Putney
discovered that Lazrine had a cracked lamina. Based on the surgery, Dr. Putney determined that
Lazrine had suffered a minimum thirteen percent permanent whole-body disability.
Dr. Putney testified further that it was probable that Lazrine's injury would require
medical treatment in the future, although he could not predict the exact amount of care that
Lazrine would require. Lazrine was unable to return to work until December 1991, at which time
he could perform only light duty, and since then has not been able to work at the same capacity
as he had prior to the collision.
The City attempted to introduce at trial evidence relating to the force of impact in
the collision and the amount of damage caused to Lazrine's vehicle on the ground that such
evidence was probative of Lazrine's physical pain and mental anguish. The City argued that
because the impact was slight and the damage to the vehicle minimal, Lazrine's pain and suffering
were due to his pre-existing arthritic condition and not a result of the collision. Lazrine objected
on the ground that because of the City's admissions, such evidence was no longer relevant. The
trial court sustained Lazrine's objection. In its first point of error, the City challenges the trial
court's evidentiary rulings excluding evidence of the force of impact in the collision and evidence
of the amount of damage caused to Lazrine's vehicle.
Second, the City requested the following specific jury instruction: "You should
not consider medical evidence that is not based on a reasonable medical probability." The trial
court denied the City's proffered instruction. The City moved for a new trial based on this ruling;
the trial court denied the motion. In its second point of error, the City challenges the trial court's
denial of the City's proffered jury instruction relating to Dr. Putney's medical testimony.
In its third and fourth points of error, the City challenges the factual and legal
sufficiency of the evidence supporting the jury's award for medical care in the future and its award
for loss of past earning capacity. The jury found in Lazrine's favor on all issues and awarded a
total of $74,518.00 in damages, which included $7,000.00 for medical care in the future and
$12,900.00 for loss of past earning capacity.
EXCLUSION OF EVIDENCE
In its first point of error, the City contends that the trial court erred in excluding
evidence of the force of impact and the amount of damage to Lazrine's vehicle. To obtain a
reversal of a judgment based upon an error of the trial court in admission or exclusion of
evidence, the City must show that: (1) the trial court did in fact commit error; and (2) the error
was reasonably calculated to cause and probably did cause rendition of an improper judgment.
Gee v. Liberty Mut. Fire Ins. Co., 765 S.W.2d 394, 396 (Tex. 1989); Bridges v. City of
Richardson, 354 S.W.2d 366, 368 (Tex. 1962); see also Tex. R. App. P. 81(b).
Admission or exclusion of evidence during trial is reviewed on appeal under an
abuse of discretion standard. Ethicon, Inc. v. Martinez, 835 S.W.2d 826, 831 (Tex. App.--Austin
1992, writ denied). A trial court abuses its discretion when it acts in an unreasonable and
arbitrary manner or without reference to any guiding principles. Beaumont Bank, N.A. v. Buller,
806 S.W.2d 223, 226 (Tex. 1992); Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238,
241-42 (Tex. 1985). With this standard of review in mind, we consider the City's first point of
error.
The City sought to introduce the testimony of three fact witnesses, Charles
Vaclavik, Joyce Koncak, and Helen Iselt, which is included in the record by bill of exception.
Vaclavik, who was part-owner of the vehicle driven by Lazrine in the collision, testified that there
was a crease in the bumper of the vehicle, but that the vehicle remained fully operable. Koncak,
Lazrine's employer, testified that there was very little damage to the vehicle and that she had a
hard time understanding how Lazrine could be seriously injured due to the minimal damage to his
vehicle. Iselt, Lazrine's co-worker, testified that there were hardly any visible signs of damage
to the vehicle and that she could not believe that anything so minor could cause such a serious
injury.
The testimony from Koncak and Iselt concerning their opinion that the collision and
resulting damage to Lazrine's vehicle was not severe enough to cause a serious injury is improper
lay witness opinion testimony. As a general rule, the testimony of a fact witness must be limited
to the facts of which the witness has personal knowledge. Duncan v. Horning, 587 S.W.2d 471
(Tex. Civ. App.--Dallas 1979, no writ). A lay witness must not give an opinion or conclusion
based on those facts. Kelso v. Hawkins, 293 S.W.2d 807 (Tex. Civ. App.--Austin 1956, writ ref'd
n.r.e.). A lay witness is precluded from giving an opinion on the amount of the damages suffered
as the result of an event or occurrence, King v. Roberts, 84 S.W.2d 718 (Tex. 1935), therefore,
Koncak and Iselt were precluded from giving their opinions as to the extent of the injury Lazrine
sustained as a result of the collision, and exclusion of such evidence by the trial court was proper.
Additionally, the City sought to use the above testimony to prove that Lazrine's
pain and suffering resulted not from the collision, but from his pre-existing arthritic condition.
The district court excluded the evidence, sustaining Lazrine's objection that the evidence was not
relevant to the issue of pain and suffering, because the City had admitted that Lazrine's medical
treatment was both reasonable and necessary.
Evidence of vehicular damage and force of impact generally is relevant in
determining the issue of severity of the injury in a personal injury suit arising from an automobile
collision. Wright v. Alms. 368 S.W.2d 34, 36 (Tex. Civ. App.--Waco 1963, writ ref'd n.r.e.).
Furthermore, when a plaintiff in a personal injury suit suffers from an infirmity not caused by the
accident that is the basis of the suit, and when the pre-existing infirmity and the injury flowing
from the negligence of the defendant are closely connected and intermingled, the plaintiff is
entitled to recover only to the extent that the defendant's negligence aggravated the plaintiff's pre-existing infirmity. Dallas Ry. & Terminal Co. v. Ector, 116 S.W.2d 683, 684 (Tex. 1938);
Armellini Express Lines of Fla., Inc. v. Ansley, 605 S.W.2d 297, 307-08 (Tex. Civ. App.--Corpus
Christi 1980, writ ref'd n.r.e); Dellinger v. McMillon, 461 S.W.2d 471, 475 (Tex. Civ.
App.--Corpus Christi 1970, writ ref'd n.r.e.).
The City contends that the evidence of slight impact and minimal vehicular damage
tends to show that Lazrine's pain and suffering were the result of his pre-existing condition.
However, the City admitted not only that its employee was negligent and his negligence caused
Lazrine's injury, but also that the medical expenses and treatment Lazrine received were
reasonable and necessary. Had the City not made this last admission, it might have been entitled
to introduce evidence that would tend to show Lazrine's pain and suffering were the result of his
pre-existing condition, not the result of the collision. However, by making the admission that
Lazrine's medical expenses were reasonable and necessary, the City tacitly admitted that the
collision aggravated Lazrine's pre-existing condition. Therefore, the trial court did not err by
excluding the evidence on the ground that the City's admissions rendered the evidence irrelevant.
Point of error one is overruled.
JURY INSTRUCTION
In its second point of error, the City contends that the trial court erred in sustaining
Lazrine's objection to the City's proffered jury instruction that stated: "You should not consider
medical evidence that is not based on a reasonable medical probability." The City requested the
instruction because it regarded certain portions of Dr. Putney's testimony as based on conjecture
and speculation. The City argues that it was entitled to its proffered jury instruction under Otis
Elevator Co. v. Wood, 436 S.W.2d 324, 331 (Tex. 1968). (1) In Otis, the parties disputed whether
the plaintiff had suffered a heart attack as the result of an injury on an escalator manufactured by
the defendant. The defendant objected to the admission of testimony from the plaintiff's treating
physician regarding the plaintiff's alleged heart condition on the ground that the testimony was
not based upon reasonable medical probability. The trial court overruled the objection and
allowed the jury to hear the testimony. On appeal, the defendant contended that the trial court
erred in admitting the doctor's testimony concerning the heart condition. The Texas Supreme
Court held it was not error for the trial court to admit such evidence. The supreme court noted
that the defendant failed to request a special instruction to exclude the evidence at the time the
charge was given to the jury. The court suggested that the proper way to object to such evidence
was to request a special instruction telling the jury not to consider the heart attack in the
assessment of damages. Id. at 332.
In applying the Otis decision to this case, we distinguish between the jury
instruction suggested in Otis and the jury instruction proffered by the City. Otis clearly states that
the determination of whether a finding of fact rests upon reasonable medical probability is a
decision for the trial court alone to make. This is reflected in the supreme court's suggested
instruction. However, the City's proffered instruction, "You should not consider medical
evidence that is not based on a reasonable medical probability," improperly places the role of
making this determination upon the jury. If the City's instruction had been submitted, the jury
would have been asked to apply a legal standard to determine the sufficiency of the evidence, a
judicial function exclusively delegated to the courts. Therefore, the trial court was correct in
denying submission of the City's proffered jury instruction. Point of error two is overruled.
FUTURE MEDICAL EXPENSES AND LOSS OF
EARNING CAPACITY IN THE PAST
In its third and fourth points of error, the City contends that there was insufficient
evidence to support the jury's findings of $7,000.00 for future medical expenses and $12,900.00
for loss of past earning capacity. The City challenges both the legal and factual sufficiency of the
evidence in support of these two damage awards.
In deciding a legal sufficiency point of error, we must consider only the evidence
and inferences tending to support the finding of the trier of fact and disregard all evidence and
inferences to the contrary. Alm v. Aluminum Co. of Am., 717 S.W.2d 588, 593 (Tex. 1986), cert.
denied, 498 U.S. 847 (1990); Garza v. Alviar, 395 S.W.2d 821, 823 (Tex. 1965); see generally
William Powers, Jr. & Jack Ratliff, Another Look at "No Evidence" and "Insufficient Evidence,"
69 Tex. L. Rev. 515 (1991); Michol O'Connor, Appealing Jury Findings, 12 Hous. L. Rev. 65
(1974). In deciding a factual sufficiency point of error, we must consider and weigh all the
evidence and should set aside the judgment only if it is so contrary to the overwhelming weight
of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.
1986); In re King's Estate, 244 S.W.2d 660, 661 (Tex. 1951); see also Pool v. Ford Motor Co.,
715 S.W.2d 629 (Tex. 1986); see generally Powers & Ratliff, supra. Based upon this standard
of review, we will examine the damages issues in question.
In its third point of error, the City contends that the evidence in support of the
jury's award of $7,000.00 for future medical expenses was both legally and factually insufficient.
Texas follows the "reasonable probability" rule for future medical damages for personal injury.
Fisher v. Coastal Transp. Co., 230 S.W.2d 522, 525 (Tex. 1950); City of San Antonio v. Vela,
762 S.W. 2d 314, 320 (Tex. App.--San Antonio 1988, writ denied). Under this rule, a plaintiff
must show by a reasonable probability that medical expenses will be necessary in the future.
Fisher, 230 S.W.2d at 523; Keller Indus., Inc. v. Reeves, 656 S.W.2d 221, 227 (Tex.
App.--Austin 1983, writ ref'd n.r.e.). A plaintiff may recover only future damages that will
"probably" occur, not those that will "possibly" occur; a plaintiff may recover only the latter.
Id.
The award of future medical expenses is a matter that does not require precise
evidence. Ansley, 605 S.W.2d at 311; Moore, 389 S.W.2d at 550; Edens-Birch Lumber v. Wood,
139 S.W.2d 881 (Tex. Civ. App.--Beaumont 1940, writ dism'd). The jury can take into account:
(1) the nature of the injury, (2) the amount of necessary and reasonable medical expenses incurred
before trial, and (3) the plaintiff's physical condition at the time of trial. Hughett v. Dwyre, 624
S.W.2d 401, 407 (Tex. App.--Amarillo 1981, writ ref'd n.r.e.); Edens-Birch Lumber, 139 S.W.2d
at 887; Ansley, 605 S.W.2d at 311. The jury can then estimate the necessity of the future medical
care and the reasonableness of the associated expenses. Edens-Birch Lumber, 139 S.W.2d at 887.
Future medical expenses need not be established by expert medical testimony based upon
"reasonable medical probability." City of San Antonio, 762 S.W.2d at 320 (citing Hughett, 624
S.W.2d at 405). Most courts require the expert doctor to estimate the amount of future medical
expenses, and the jury can award an amount greater than the doctor's estimate so long as the
estimate is reasonable. Id. at 407; see also Browning v. Paiz, 586 S.W.2d 670 (Tex. Civ.
App.--Corpus Christi 1979, writ ref'd n.r.e.).
The record indicates that Lazrine suffered a minimum thirteen percent permanent
whole-body disability. The record also indicates that it is probable that Lazrine will require
medical care in the future as a result of his injury and will suffer a minimum of one "flare-up"
annually. Dr. Putney estimated that the expenses for future medical treatment would be roughly
$500.00 per year, including doctor visits, physical therapy, and medication.
Furthermore, the City admitted liability for Lazrine's past medical expenses in the
amount of $9,481.35. The admission of liability for those expenses and the admission that the
expenses were reasonable and necessary had the effect of admitting that the collision aggravated
Lazrine's pre-existing arthritic condition. Therefore, the City's argument that the evidence is
insufficient to support the causal connection between Lazrine's injury and his future medical
expenses must fail.
Considering Lazrine's permanent bodily injury from the collision, the probability
that he will require future medical treatment costing approximately $500.00 per year, and the
City's admissions of liability regarding over $9,000.00 in past medical expenses, there is
sufficient evidence from which the jury could award $7,000.00 for future medical expenses.
Therefore, the trial court did not err in overruling the City's motion for a new trial because the
evidence supporting the jury's award was legally and factually sufficient. Point of error three is
overruled.
In its fourth point of error, the City contends that the evidence in support of the
jury's award of $12,900.00 for loss of earning capacity in the past was legally and factually
insufficient. At trial, the City stipulated that Lazrine incurred damages in the amount of
$5,060.00 for lost wages. Prior to the collision on May 23, 1991, Lazrine worked at Sweetie
Pies, a food establishment, forty hours per week at a pay rate of $5.00 per hour. Prior to working
at Sweetie Pies, he had worked as a butcher. Lazrine continued to work after the collision until
September 5, 1991. Evidence in the record indicates that Lazrine was experiencing physical pain
in his back and legs during this period, but continued to work out of economic necessity. Lazrine
underwent back surgery on September 6, 1991, and returned to work in December. He left his
employment at Sweetie Pies on September 10, 1992. At the time of trial, Lazrine was only able
to work sixteen hours per week as a butcher, for $7.00 an hour.
The City stipulated that Lazrine had suffered a loss in wages in the amount of
$5,060.00 for the time period between the collision and September 5, 1991, but the City argued
that this was the maximum amount of past lost wages to which Lazrine was entitled. The City's
complaint essentially is that the jury award exceeded the amount of Lazrine's lost wages.
However, the proper measure of damages is loss of earning capacity, not loss of wages. Dallas
Ry. & Terminal Co. v. Guthrie, 210 S.W.2d 550, 551 (Tex. 1948); T.J. Allen Distrib. Co. v.
Leatherwood, 648 S.W.2d 773, 774 (Tex. App.--Beaumont 1983, writ ref'd. n.r.e.). Guthrie
holds that although lost wages may be relevant in assessing the proper amount of damages, the
proper measure is diminished earning capacity. Guthrie, 210 S.W.2d at 551. The City contends,
however, that Lazrine's earning capacity was not diminished because he continued to work as he
had prior to the accident. However, the record indicates that Lazrine was in physical pain during
the period he worked after the accident and that he was not able to work forty hours per week as
he had in the past.
In order for Lazrine to obtain damages for loss of earning capacity, he had to prove
that his earning capacity had been harmed, and he had to prove the amount of damages with the
degree of certainty to which it is susceptible. Bonney v. San Antonio Transit Co., 325 S.W.2d
117, 121 (Tex. 1959); Ingleside v. Kneuper, 768 S.W.2d 451, 459 (Tex. App.--Austin 1989, writ
denied); Tri-State Motor Transit Co. v. Nicar, 765 S.W.2d 486 (Tex. App.--Houston [14th Dist.]
1989, no writ). A plaintiff must introduce evidence from which the jury may reasonably measure
in monetary terms his earning capacity prior to the injury. Bonney, 325 S.W.2d at 121. This
Court has held that loss of earning capacity cannot be inferred merely from the fact that an injury
occurs; there also must be proof of the extent and amount of lost earning capacity. Paschall v.
Peevey, 813 S.W.2d 710, 715 (Tex. App.--Austin 1991, writ denied). Damages for loss of earning
capacity do not have to be based on any specific degree of physical impairment, but can be based
on a composite of all factors affecting earning capacity. Exxon Corp. v. Shuttlesworth, 800
S.W.2d 902, 906 (Tex. App.--Houston [14th Dist.] 1990, no writ). Stamina, efficiency, ability
to work with pain, and the weakness and degenerative changes that naturally result from an injury
are among the factors relevant to determining whether a person has experienced an impairment
in future earning capacity. Springer v. Baggs, 500 S.W.2d 541, 544 (Tex. Civ. App.--Texarkana
1971, writ ref'd n.r.e.). Courts have consistently upheld judgments for reduced earning capacity
even though the plaintiff was making as much or even more money after the injury than before,
when it was shown that pain, weakness, diminished functional ability, or the like indicated that
the plaintiff's capacity for duration, consistency, or efficiency of work was impaired. Id. at 544-45. Evidence that Lazrine was suffering physical pain, was unable to work for the same duration
as he was prior to the accident, and was no longer physically able to do the manual aspects of his
job at Sweetie Pies indicates that Lazrine's earning capacity was diminished. Therefore, there is
both legally and factually sufficient evidence to support the jury's finding. Point of error four is
overruled.
CONCLUSION
Finding no error, we overrule the City of Round Rock's points of error and affirm
the judgment of the trial court.
Mack Kidd, Justice
Before Chief Justice Carroll, Justices Kidd and B. A. Smith
Affirmed
Filed: June 22, 1994
Do Not Publish
1. In addition to Otis, the City cites numerous cases in support of its second point of error
that explain the "reasonable probability standard" but do not address the issue of whether the
proffered jury instruction should have been submitted. See Insurance Co. of N. Am. v. Myers,
411 S.W.2d 710 (Tex. 1966); Hughett v. Dwyre, 624 S.W.2d 401 (Tex. App.--Amarillo 1981,
writ ref'd n.r.e.); American Sur. Co. v. Semmons, 413 S.W.2d 732 (Tex. Civ. App.--Tyler
1967, writ ref'd n.r.e.).
|
NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with Fed. R. App. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted August 18, 2016*
Decided August 18, 2016
Before
RICHARD A. POSNER, Circuit Judge
FRANK H. EASTERBROOK, Circuit Judge
DIANE S. SYKES, Circuit Judge
No. 15‐1936
LAZERRICK COFFEE, Appeal from the United States District
Plaintiff‐Appellant, Court for the Central District of Illinois.
v. No. 12‐C‐1416
EDWARD D. LEWIS, et al., James E. Shadid,
Defendants‐Appellees. Chief Judge.
O R D E R
Lazerrick Coffee, an Illinois inmate, sued several correctional officers under
42 U.S.C. § 1983, claiming that they violated the Eighth Amendment during a cell
extraction. The district court granted summary judgment to one defendant and after
Coffee presented his case‐in‐chief to a jury, granted judgment as a matter of law to the
remaining defendants. See FED. R. CIV. P. 50(a).
* After examining the briefs and record, we have concluded that oral argument is
unnecessary. Thus the appeal is submitted on the briefs and record. See FED. R. APP.
P. 34(a)(2)(C).
No. 15‐1936 Page 2
Coffee appeals only the grant of judgment as a matter of law. But to properly
assess this argument, we would need to review the evidence Coffee presented at trial.
See FED. R. CIV. P. 50(a)(1) (explaining that the district court may grant judgment as a
matter of law if the evidence presented at trial does not provide “legally sufficient
evidentiary basis to find for the party”). Coffee, however, failed to submit the trial
transcript to this court. See FED. R. APP. P. 10(b)(2) (“If the appellant intends to urge on
appeal that a finding or conclusion is unsupported by the evidence or is contrary to the
evidence, the appellant must include in the record a transcript of all evidence relevant to
that finding or conclusion.”). He did request the transcript from the district court, but the
court denied that request, and Coffee did not renew his request in this court or obtain the
transcript using other means. Moreover, the appellees’ response brief warned Coffee of
the potential consequences of failing to provide a transcript. Thus, we decline to exercise
our authority to order Coffee to supplement the record on appeal. See FED. R. APP.
P. 10(e)(2)(C); Morisch v. United States, 653 F.3d 522, 530 (7th Cir. 2011); Learning Curve
Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 731 n.10 (7th Cir. 2003).
Because the absence of a transcript precludes our review, Coffee’s appeal is
DISMISSED.
|
IN THE SUPREME COURT OF PENNSYLVANIA
EASTERN DISTRICT
COMMONWEALTH OF PENNSYLVANIA, : No. 29 EAL 2019
:
Respondent :
: Petition for Allowance of Appeal from
: the Order of the Superior Court
v. :
:
:
LLOYD L. BUTLER, :
:
Petitioner :
ORDER
PER CURIAM
AND NOW, this 5th day of June, 2019, the Petition for Allowance of Appeal is
DENIED.
|
778 F.Supp.2d 983 (2011)
COMMUNITY FINANCE GROUP, INC. and Andrew Vilenchik, Plaintiffs,
v.
REPUBLIC OF KENYA, Kenya Revenue Authority, Kenya Department of Customs, and Kenya Central Bank, Defendants.
Civil No. 10-838 (DSD/JJG).
United States District Court, D. Minnesota.
March 15, 2011.
*984 Boris Parker, Esq., Nicholas M. Wenner, Esq. and Parker & Wenner, PA, Minneapolis, MN, for plaintiffs.
Clifford M. Greene, Esq., Monte Mills, Esq. and Greene Espel, PLLP, Minneapolis, MN, Clara E. Brillembourg, Esq., Paul S. Reichler, Esq., Tafadzwa Pasipanodya, Esq. and Foley Hoag LLP, Washington, D.C., for defendants.
ORDER
DAVID S. DOTY, District Judge.
This matter is before the court upon the motion to dismiss by Republic of Kenya, *985 Kenya Central Bank, Kenya Revenue Authority and Kenya Department of Customs (collectively, defendants). After a review of the file, record and proceedings herein, and for the following reasons, the court grants the motion.
BACKGROUND
This case arises out of an attempt by Community Finance Group, Inc. (CFG) and Andrew Vilenchik (collectively, plaintiffs) to purchase gold in Kenya. In February 2009, John Saina, a United States citizen and former Kenyan national, approached Vilenchik, general manager of CFG, and informed him of an opportunity to purchase gold in Kenya. Am. Compl. ¶ 11. CFG agreed to purchase the gold and, on May 29, 2009, Saina traveled to Kenya to facilitate the transaction. Id. ¶¶ 13, 16. On June 1, 2009 in Nairobi, Kenya, the gold was delivered to Saina in a vehicle owned by the president of the Bay Forex Bureau, a licensed foreign exchange bureau. Id. ¶¶ 16-17. Saina inspected the gold in the presence of an officer from the Kenya Department of Customs, four security guards and Kenyan administrative police. Id. ¶¶ 17-18.
On June 11, 2009, Vilenchik flew to Kenya, where he met with Saina and others to verify the gold. Id. ¶¶ 22-23. An officer from the Kenya Department of Customs was present at this meeting. Id. ¶ 23. CFG wired $350,000 to the seller's bank account to cover various taxes and fees associated with transferring the gold from Kenya to the United States. Id. ¶¶ 21, 25. The transaction was verified by the Kenya Central Bank, and on June 16, 2009, the money was transferred. Id. ¶ 28. On June 17 and 18, 2009, CFG was informed that there would be delays before the gold could be released, and CFG became suspicious. Id. ¶¶ 29-32. On June 22, 2009, CFG filed a formal written complaint with the Kenya Central Bank Fraud Investigation Department (CBFID). Id. ¶ 34. An officer of CBFID informed CFG that it was filing charges against the sellers. Id. ¶ 38. The matter remains unresolved.
On March 17, 2010,[1] plaintiffs filed this action alleging breach of duty, improper taking, conversion, conspiracy to commit a tort, aiding and abetting and unjust enrichment. On September 14, 2010, defendants moved to dismiss for lack of subject-matter jurisdiction and improper venue pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(3). The court now considers the motion.
DISCUSSION
I. Standard of Review
A court must dismiss an action over which it lacks subject-matter jurisdiction. Fed.R.Civ.P. 12(h)(3). In a facial challenge under Rule 12(b)(1), the court accepts the factual allegations in the pleadings as true and views the facts in the light most favorable to the nonmoving party. See Hastings v. Wilson, 516 F.3d 1055, 1058 (8th Cir.2008); see also Osborn v. United States, 918 F.2d 724, 729 n. 6 (8th Cir.1990) ("The nonmoving party receives the same protections [for facial attacks under Rule 12(b)(1)] as it would defending against a motion brought under Rule 12(b)(6)."). The court limits its inquiry to the pleadings. Osborn, 918 F.2d at 729, n. 6. The pleadings, however, include matters of public record. Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999).
II. Foreign Sovereign Immunities Act
A foreign sovereign is presumptively immune from suit in federal court under the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. §§ 1602-1611. Unless an enumerated exception applies, federal *986 courts lack subject-matter jurisdiction over claims against a foreign sovereign.[2]See id. § 1604; Argentine Repub. v. Amerada Hess Shipping Corp., 488 U.S. 428, 434-35, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). Once a foreign state makes a prima facie showing of immunity, the plaintiff seeking to litigate in the United States has the burden of showing that an exception applies. See Gen. Elec. Capital Corp. v. Grossman, 991 F.2d 1376, 1382 (8th Cir. 1993). Plaintiffs argue that the commercial activity, expropriation and tort exceptions of the FSIA apply to this action. See 28 U.S.C. §§ 1605(a)(2), 1605(a)(3), 1605(a)(5).
A. Commercial Activity Exception
A foreign state is not immune from federal jurisdiction when the action is based "upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States." 28 U.S.C. §§ 1605(a)(2). "A `commercial activity' means either a regular course of commercial conduct or a particular commercial transaction or act. The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose." 28 U.S.C. § 1603(d). When a foreign state acts, "not as regulator of a market, but in the manner of a private player within it, the foreign sovereign's actions are `commercial' within the meaning of [the FSIA]." Gen. Elec. Capital Corp., 991 F.2d at 1382 (quoting Repub. of Argentina v. Weltover, Inc., 504 U.S. 607, 614, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992)); see also Saudi Arabia v. Nelson, 507 U.S. 349, 360, 113 S.Ct. 1471, 123 L.Ed.2d 47 (1993) (foreign state engages in commercial activity only when it acts as private player in the market).
Plaintiffs allege that defendants failed to: (1) investigate the underlying commercial transaction to ensure it was legitimate, (2) secure the gold stored by Customs and place a hold on funds transferred by plaintiffs until the transaction could be verified, (3) investigate the criminal activity of alleged wrongdoers, and (4) turn over as restitution funds seized from alleged wrongdoers. Am. Compl. ¶¶ 54-57. These are not commercial activities. Investigation and regulation of commercial transactions are exercises of sovereign power, not acts of private players in the marketplace. See, e.g., Tucker v. Whitaker Travel, Ltd., 620 F.Supp. 578, 584 (D.C.Pa. 1985) (investigatory and regulatory functions of sovereign state not commercial activities under the FSIA). Criminal investigations are also purely governmental activities. See Saudi Arabia, 507 U.S. at 361, 113 S.Ct. 1471 (exercise of police power is "peculiarly sovereign in nature"). Regulation of imports and exports by the Kenya Department of Customs is an exclusively governmental activity. See, e.g., MOL, Inc. v. Peoples Repub. of Bangladesh, 736 F.2d 1326, 1329 (9th Cir.1984) ("Bangladesh's right to regulate imports and exports [is] a sovereign prerogative."). Lastly, the Central Bank of Kenya is a government agency that licenses Kenyan banks and other financial institutions and controls foreign exchange. Abuga Aff. ¶ 6. Its ability to place holds on international wire transfers is a governmental function. See, e.g., de Sanchez v. Banco Central De Nicaragua, 770 F.2d 1385, 1392-93 (5th Cir.1985) (regulation and supervision of foreign exchange is sovereign activity and issuance of check falls within that category). *987 Therefore, the commercial activities exception does not apply.[3]
B. Expropriation Exception
A foreign state is not immune from jurisdiction in any case
in which rights in property taken in violation of international law are in issue and that property or any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state; or that property or any property exchanged for such property is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States.
28 U.S.C. § 1605(a)(3).
Plaintiffs argue that this exception applies because defendants improperly retained money and gold belonging to plaintiffs. Am. Compl. ¶¶ 60-63. This claim fails for several reasons. First, plaintiffs fail to show that defendants took the money or gold at issue, and plaintiffs' complaint contains no factual allegations that defendants received or retained these funds. Instead, plaintiffs voluntarily wired $350,000 to a bank account. Am. Compl. ¶¶ 24-25. Moreover, plaintiffs fail to allege that the expropriated property is present in the United States in connection with a commercial activity carried on in the United States by defendants. See 28 U.S.C. § 1605(a)(3). Further, plaintiffs do not allege that the expropriated property is "owned or operated by an agency or instrumentality of Kenya" and that agency or instrumentality is engaged in a commercial activity in the United States. Id. Therefore, the expropriation exception does not apply.
C. Tort Exception
A foreign state is not immune from jurisdiction in any case "in which money damages are sought against a foreign state for . . . damage to or loss of property, occurring in the United States and caused by the tortious act or omission of that foreign state." Id. § 1605(a)(5); see Argentine Repub., 488 U.S. at 441, 109 S.Ct. 683 (exception covers only torts occurring within territorial jurisdiction of United States). Plaintiffs accuse defendants of conversion, conspiracy to commit a tort, aiding and abetting and unjust enrichment. See Am. Compl. ¶¶ 64-80. All of the alleged conduct giving rise to these claims occurred in Kenya.[4] Therefore, the tort exception does not apply, and dismissal for lack of subject-matter jurisdiction is warranted.
CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that defendants' motion to dismiss [ECF No. 24] is granted. LET JUDGMENT BE ENTERED ACCORDINGLY.
NOTES
[1] On July 16, 2010, Plaintiffs filed an amended complaint.
[2] Immunity applies equally to a foreign state's political subdivisions, agencies, and instrumentalities, see 28 U.S.C. § 1603, and plaintiffs do not dispute that the FSIA applies to all defendants in this action.
[3] Even if the alleged conduct was a commercial activity, the exception does not apply because plaintiffs failed to show that the conduct caused "a direct effect in the United States." 28 U.S.C. § 1605(a)(2); see Gen. Elec. Capital Corp., 991 F.2d at 1385-86 (direct effect in United States satisfied when United States is "place of performance" for obligations); United World Trade, Inc. v. Mangyshlakneft Oil Prod. Ass'n, 33 F.3d 1232, 1239 (10th Cir.1994) (financial loss by plaintiff does not constitute direct effect in United States).
[4] The court rejects plaintiffs' argument that defendants participated in a conspiracy that originated in the United States, as the amended complaint contains no factual allegations to support this argument.
|
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 99-30684
_____________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
KENNETH LEE DERUISE, also known as T T;
FREDERICK D. STEMLEY,
Defendants-Appellants.
_________________________________________________________________
Appeals from the United States District Court for the
Eastern District of Louisiana
USDC No. 98-CR-225
_________________________________________________________________
December 6, 2001
Before JOLLY, SMITH, and WIENER, Circuit Judges.
PER CURIAM:1
Kenneth Deruise and Frederick Stemley were convicted of one
count of conspiring to possess marijuana with intent to distribute,
in violation of 21 U.S.C. §§ 841(a)(1) and 846. The district court
denied their motions for judgment of acquittal and for a new trial.
Deruise was sentenced to three years’ probation and a $2000 fine.
Stemley was sentenced to sixty-three months’ imprisonment, five
years’ supervised release, and a $3000 fine. We affirm both
1
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.
convictions, but vacate Stemley’s sentence and remand for
resentencing.
I
On appeal, the defendants contend that the district court
erred in failing to grant their Rule 29 motions for acquittal based
on insufficient evidence, and that there was a material variance
between the indictment and the evidence at trial. They also argue
that the district court erred in admitting into evidence 103 pounds
of marijuana that FBI agents seized on September 8, 1998, after the
conspiracy charged in the indictment had ended2 and after the
indictment was returned.3
Deruise claims that the district court allowed improper
impeachment of him. On cross-examination, Deruise testified that
he had used marijuana only once. The district court allowed the
prosecutor to elicit rebuttal testimony from New Orleans policemen
who said that they had arrested Deruise twice for possession of
marijuana in August 1998, although neither arrest resulted in a
conviction. Further, Stemley argues that the district court erred
under Apprendi v. New Jersey, 530 U.S. 466 (2000), in imposing a
sentence above the statutory maximum in the absence of a jury
finding as to the quantity of marijuana involved, and that the
2
The indictment charged a conspiracy between the dates of
“about May 1998, and continuing through July 1998.”
3
The indictment was returned on September 4, 1998.
2
district court sentenced him for more marijuana than he is
accountable for under the sentencing guidelines.
II
A
We begin with the Rule 29 motions for acquittal. We review
the denial of a Rule 29 motion de novo. United States v. Restrepo,
994 F.2d 173, 182 (5th Cir. 1993).
To prove a conspiracy under 21 U.S.C. § 846 in this case, the
government must show: (1) the existence of an agreement between
two or more persons to possess and distribute drugs in violation of
federal narcotics laws; (2) that the defendant knew of the
agreement; and (3) that the defendant voluntarily participated in
the agreement. United States v. Gallo, 927 F.2d 815, 820 (5th Cir.
1991) (citations omitted). These elements may be proved by
circumstantial evidence, and “[c]ircumstances altogether
inconclusive, if separately considered, may, by their number and
joint operation . . . be sufficient to constitute conclusive
proof.” United States v. Roberts, 913 F.2d 211, 218 (5th Cir.
1990) (quotation marks and citations omitted).
In sum, the government’s principal evidence against Deruise,
that is, the evidence to prove that he was part of a conspiracy to
possess and distribute marijuana, consisted of: testimony from an
FBI agent and a co-conspirator that the word “t-shirt” as used in
the recorded conversations was one of the code words for cocaine or
3
marijuana; that Deruise called Norman Scott and asked for “t-
shirts” or otherwise sought drugs through code words; and that
Deruise arranged to purchase one pound of marijuana and requested
an additional three pounds. Deruise insists that he asked for t-
shirts because he really wanted t-shirts.
The jury heard all the evidence and could reasonably conclude
that Deruise was knowingly involved in a conspiracy to possess and
distribute marijuana. A co-conspirator “need not know all the
details of the unlawful enterprise, or know the exact number and
identity of all the co-conspirators, so long as in some fashion he
or she knowingly participates in the larger conspiratorial
objectives.” United States v. Greenwood, 974 F.2d 1449, 1456 (5th
Cir. 1992). We have held that the common goal of deriving personal
gain from the illicit business of buying and selling cocaine
constitutes a single conspiracy. See United States v. Morris, 46
F.3d 410, 415 (5th Cir. 1995). There was sufficient evidence to
show that Deruise shared such a common goal, and that he
voluntarily agreed with Scott to possess and distribute marijuana.
We therefore affirm his conviction.
B
Stemley also filed a Rule 29 motion for acquittal, which the
district court denied. The evidence against Stemley is strong.
The government presented evidence that (1) Stemley placed eleven
phone calls to Scott, one of which related to purchasing
4
“chickens,” a code word for marijuana, and others relating to
leaving drug money for Scott to pick up or paying drug money to
Scott directly; (2) Stemley purchased two pounds of marijuana from
Scott on July 5, 1998; (3) Stemley purchased five pounds of
marijuana from Scott on July 22; (4) Stemley arranged to leave drug
profits at Scott’s home for another person to pick up; and (5)
three co-conspirators testified that they had seen Stemley and
Scott together.
The evidence is clearly sufficient to permit a rational jury
to find him guilty as a participant in a conspiracy to possess and
distribute drugs in violation of federal narcotics law. We
therefore find no error in the district court’s denial of Stemley’s
Rule 29 motion.
III
Deruise also argues that the district court allowed improper
impeachment testimony of him relating to alleged previous
possession of marijuana. Although we have doubts as to the
admissibility of this testimony under Federal Rules of Evidence 403
and 404, we hold that it was harmless given the other evidence
against Deruise.
IV
Deruise and Stemley further contend that the district court
abused its discretion in admitting into evidence the 103 pounds of
marijuana seized on September 8, 1998. They argue this was not
5
relevant evidence under Federal Rule of Evidence (“FRE”) 401, and
that it was unduly prejudicial evidence of other bad acts under
Federal Rules of Evidence 403 and 404(b) and United States v.
Beechum, 582 F.2d 898 (5th Cir. 1978) (en banc). The defendants
objected to the admission of this evidence at trial, and we review
the district court’s evidentiary ruling on this matter for an abuse
of discretion. United States v. Navarro, 169 F.3d 228, 232 (5th
Cir. 1999), cert. denied, 528 U.S. 845 (1999).
“‘Other act’ evidence is ‘intrinsic’ when the evidence of the
other act and evidence of the crime charged are ‘inextricably
intertwined’ or both acts are part of a ‘single criminal episode’
or the other acts were ‘necessary preliminaries’ to the crime
charged.” United States v. Williams, 900 F.2d 823, 825 (5th Cir.
1990). Such evidence is admissible to complete the story of a
crime by proving the immediate context of events in time and place.
United States v. Kloock, 652 F.2d 492, 494-95 (5th Cir. 1981).
Intrinsic evidence does not implicate Rule 404(b), and
“consideration of its admissibility pursuant to Rule 404(b) is
unnecessary.” United States v. Garcia, 27 F.3d 1009, 1014 (5th
Cir.), cert. denied, 513 U.S. 1009 (1994). We believe this
evidence was intrinsic, in that it was part of the single
conspiracy to possess and distribute marijuana charged by the
government, i.e., part of a “single criminal episode.” Although
the indictment charged a conspiracy from May through July 1998,
6
evidence seized after these dates can be probative of that
conspiracy. Thus there is no need to consider FRE 404(b).
Further, although the evidence here was seized after the return of
the indictment, we have previously upheld the admission of evidence
seized after the alleged conspiracy had ended and the indictment
had been returned. See United States v. Navarro, 169 F.3d 228,
231-33 (5th Cir. 1999). Thus it was not an abuse of discretion to
admit the marijuana simply because it was seized after the return
of the indictment.
We must also consider whether the admission of the marijuana
into evidence was unduly prejudicial under FRE 403. The parties
point to United States v. Torres, 685 F.2d 921 (5th Cir. 1982) and
to Navarro. In Torres, the district court admitted evidence of
“sample transactions” that occurred prior to the dates alleged in
the indictment, because the evidence of the sample transactions and
the evidence of the charged conspiracy were “inextricably
intertwined” and formed a “natural and integral” part of the
surrounding circumstances. 685 F.2d at 924. In Navarro, the
district court admitted evidence of drugs seized in January 1997,
even though the alleged conspiracy ended in September 1996. The
court concluded that the 1997 evidence “demonstrated the structure
of the drug organization, as well as the continuing contact
between” the defendants. 169 F.3d at 233.
7
The evidence here was part of the single conspiracy alleged,
and demonstrated its nature and scope. It was probative, and given
its intrinsic nature was not unduly prejudicial. We hold that the
district court did not abuse its discretion in admitting this
evidence.
V
The defendants also assert that there was a material variance
between the indictment and the evidence presented at trial, and
that they were prejudiced by this. The second superseding
indictment alleged that the defendants conspired “with each other
and with other persons known and unknown to the Grand Jury . . . .”
The defendants claim that at most the government proved individual
two-person conspiracies, and not the umbrella conspiracy alleged in
the indictment. The defendants raised this objection at trial.
“To prevail on a material variance claim, these defendants must
prove (1) a variance between the indictment and the proof at trial,
and (2) that the variance affected their substantial rights.”
United States v. Morgan, 117 F.3d 849, 858 (5th Cir.), cert.
denied, 522 U.S. 987 (1997).
“With variance, our concern is whether the indictment,
assuming it has otherwise alleged the elements of the offense, has
so informed a defendant that he can prepare his defense without
surprise and has protected him against a second prosecution for the
same offenses.” United States v. Cochran, 697 F.2d 600, 604 (5th
8
Cir. 1983) (citation omitted). The indictment in this case
informed the defendants of the charge of conspiracy to possess and
distribute marijuana, the dates of the conspiracy and the identity
of the other named defendants. We are convinced that the
defendants in this case were sufficiently informed of the nature of
the case and were protected against a second prosecution.
Additionally, whether the evidence shows one or multiple
conspiracies is a question of fact for the jury. Morgan, 117 F.3d
at 858. The evidence and analysis in Part II of the opinion
demonstrate that the jury could reasonably find one conspiracy. We
therefore hold that there was no material variance between the
indictment and the proof at trial.
VI
Stemley also contends that the district court erred in
sentencing him, and raises three sentencing issues. “We review
factual findings made by a district court for sentencing purposes
under the clearly erroneous standard, and review the district
court's legal application of the United States Sentencing
Guidelines [] de novo.” United States v. Franklin, 148 F.3d 451,
459 (5th Cir. 1998). However, Stemley failed to object to the
Presentence Investigation Report’s (“PSR”) or the district court’s
marijuana calculations at the sentencing hearing. When a defendant
raises a sentencing issue for the first time on appeal, we review
9
for plain error only. United States v. Vasquez-Zamora, 253 F.3d
211, 213 (5th Cir. 2001).
A
Stemley first contends that the district court miscalculated
the quantity of marijuana delivered to Scott. The district court
accepted the PSR’s finding that Alexander Cruz delivered 375 pounds
of marijuana to Scott. However, at trial Cruz only testified to
delivering between 290 and 310 pounds of marijuana, and Eugene
Haynes testified to delivering four pounds of marijuana to Scott.
Even if this is an error, it is harmless. Under the United States
Sentencing Guidelines, 375 pounds of marijuana and 314 pounds of
marijuana (or 170.1 kilograms and 142.4 kilograms, respectively)
fall under the same sentencing level. See U.S.S.G. § 2D1.1(c)
(Drug Quantity Table) (offenses involving between 100 kilograms and
400 kilograms of marijuana fall under Level 26).
B
Stemley also contends that the district court erred in holding
him accountable for the total quantity of drugs attributable to the
conspiracy. However, when sentencing a defendant involved in a
drug trafficking conspiracy, the quantity to be considered for
sentencing purposes includes both the drugs with which the
defendant was directly involved and the drugs that can be
attributed to him through the conspiracy. United States v. Brito,
136 F.3d 397, 415 (5th Cir.), cert. denied, 523 U.S. 1128, 524 U.S.
10
962, 525 U.S. 867 (1998). Additionally, “involvement in a
conspiracy is presumed to continue and will not be terminated until
the co-conspirator acts ‘affirmatively to defeat or disavow the
purpose of the conspiracy.’” United States v. Pofahl, 990 F.2d
1456, 1484 (5th Cir.), cert. denied, 510 U.S. 898, 996 (1993).
There is no evidence that Stemley acted to withdraw from the
conspiracy. We hold that the district court did not err in holding
Stemley accountable for the total quantity of marijuana
attributable to the conspiracy.
C
The government concedes that Stemley’s sentence must be
modified in the light of Apprendi v. New Jersey, 530 U.S. 466
(2000). “If the government seeks enhanced penalties based on the
amount of drugs . . . , the quantity must be stated in the
indictment and submitted to a jury for a finding of proof beyond a
reasonable doubt . . . .” United States v. Doggett, 230 F.3d 160,
164-65 (5th Cir. 2000) (applying Apprendi). This Court has
clarified that “[t]he decision in Apprendi was specifically limited
to facts which increase the penalty beyond the statutory maximum .
. . .” Id. at 166. The government’s position at trial was that
the conspiracy involved approximately 1000 pounds (or 453.6
kilograms) of marijuana, which would have resulted in a prison term
of at least five but not more than forty years. See 21 U.S.C. §
841(b)(1)(B)(vii) (“In the case of a violation . . . involving . .
11
. 100 kilograms or more of . . . marijuana . . . such person shall
be sentenced to a term of imprisonment which may not be less than
5 years and not more than 40 years.”).
Because this drug quantity was not alleged in the indictment,
the government concludes that the maximum term of imprisonment
would be sixty months followed by at least two years of supervised
release, consistent with an unspecified quantity of marijuana in
the indictment. See 21 U.S.C. § 841(b)(1)(D) (“In the case of less
than 50 kilograms of marihuana, . . . such person shall . . . be
sentenced to a term of imprisonment of not more than 5 years.”).
Because Stemley was sentenced to sixty-three months’ imprisonment
and five years’ supervised release, the government agrees that
Stemley’s sentence is the result of plain error and must be
modified accordingly.
IV
We AFFIRM Deruise’s and Stemley’s convictions, but VACATE
Stemley’s sentence and REMAND for resentencing consistent with this
opinion.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED IN PART
12
|
996 F.2d 1214
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.The CAIN PARTNERSHIP, LTD., Plaintiff-Appellant,v.The FIRST NATIONAL BANK OF LOUISVILLE, Defendant-Appellee.
No. 92-5809.
United States Court of Appeals, Sixth Circuit.
July 1, 1993.
Before: KENNEDY, NORRIS, and SUHRHEINRICH, Circuit Judges.
ALAN E. NORRIS, Circuit Judge.
1
Plaintiff, The Cain Partnership, Ltd., appeals the district court's grant of summary judgment to defendant, The First National Bank of Louisville ("the bank"), in plaintiff's action for declaratory relief. The dispute which led to the lawsuit centered around the parties' differing views of the terms and effect of a document they signed on June 27, 1984.
2
Fully comprehending the positions taken by the parties requires some knowledge of events that preceded the dispute. In 1973, plaintiff leased real property located in Knox County, Tennessee, for a term of ninety-nine years, from the Lillie Mae Cain Testamentary Trust. In 1974, plaintiff in turn subleased the property to Colonial Enterprises, Inc. That lease permitted Colonial to assign its interest in the lease, so long as it remained liable to plaintiff. In 1984, Colonial decided to sell its interest to Premier Investment Properties, Inc. ("PIP"), which intended to obtain a loan from defendant bank in order to develop the property. The bank was willing to make the loan, with PIP's interest in the lease as security, if it could be assured that the lease was in good standing at the time of its assignment to PIP, and that the bank would be permitted to cure any subsequent default by PIP.
3
Plaintiff agreed to provide this by entering into an agreement with the bank entitled Landlord's Estoppel Certificate. That document is the focus of this lawsuit. In it, plaintiff represented to the bank that payments on the lease were up-to-date and that there was no other default in its terms, and granted to the bank the right to cure any default by PIP within thirty days of the receipt of notice from plaintiff of a default. It is the notice language of the certificate that spawned the dispute:
4
Landlord [plaintiff] acknowledges ... (e) that notice of any default by PIP under the Lease will be given by certified or registered mail.... Lender [the bank] will notify the Landlord ... of any default by PIP in its obligation to Lender. Lender will have the right, but not the obligation, to cure any default by PIP within thirty days of the receipt of any such notice of default from Landlord.
5
The lease was assigned yet again on April 13, 1987 by PIP to its parent company, Pioneer Investment Services Company ("Pioneer"). Three days later, plaintiff and Pioneer executed a document entitled Lease Assumption and Attornment Agreement. In that agreement, Pioneer agreed to assume the obligations of PIP and to attorn1 to plaintiff "as if Pioneer were the original Tenant under the Lease," while plaintiff agreed to recognize Pioneer as the new tenant. The parties acknowledged that PIP remained liable under the lease. According to the district court, the bank consented to this assignment, without releasing PIP from its obligation on the loan.
6
In April 1989, Pioneer filed for protection under Chapter 11 of the Bankruptcy Code. On May 25, plaintiff sought to terminate the automatic stay imposed by 11 U.S.C. § 362 so that it might take possession of the real property. Plaintiff claimed that Pioneer had failed to pay real estate taxes prior to its bankruptcy filing, and that this failure resulted in automatic termination of the lease. On that same day, plaintiff sent a letter to the bank, which said it was designed to satisfy any contention that plaintiff might be obligated to provide notice to the bank under the terms of the estoppel certificate. The letter stated plaintiff's position that no notice was required, and went on to include this language:
7
This letter puts you on notice that ... the Lease is terminated....
8
... [W]hatever rights, if any, you might have with respect to cure of the Lease, those rights do not provide any ability to cure the termination of the Lease. Therefore, the Partnership will oppose any attempt by you to cure the termination of the Lease.
9
The bankruptcy court denied plaintiff's motion to terminate the stay, and that ruling was affirmed in turn by the district court, and by a panel of this court. In re Pioneer Investment Servs. Co. v. The Cain Partnership, Ltd., 946 F.2d 445 (6th Cir.1991), cert. denied, 112 S.Ct. 2304 (1992). In this court's opinion, we noted that, while Pioneer had paid the amount required for real estate taxes into an escrow account, the escrow agent had failed to pay over that amount to satisfy the real estate taxes; that plaintiff had never given notice to Pioneer of the escrow agent's failure in this regard; and that plaintiff had not taken any actions that indicated that the lease was terminated. Accordingly, the lease was not terminated prior to the filing of the petition in bankruptcy. Id. at 447, 450.
10
After its failure to terminate the lease in bankruptcy court, plaintiff, on November 12, 1991, filed this action for declaratory relief in a Tennessee chancery court. It was subsequently removed to the district court, pursuant to its diversity jurisdiction.
11
The essence of the action was plaintiff's request for an interpretation of the effect of the estoppel certificate on its ability to terminate the lease free of any claims of the bank. The district court responded to the questions posed by the complaint in an order dated April 15, 1992:
12
1) Did the Landlord's estoppel certificate in question terminate when PIP assigned all of its rights in the leasehold to Pioneer?
13
No. The certificate contemplates future assignments and continues as if Pioneer were substituted for PIP in the certificate's language.
14
2) If the Bank breached ... the estoppel certificate by failing to give [plaintiff] notice of each of Pioneer's defaults, did this terminate the certificate?
15
No. While the certificate includes mutual promises by the parties to notify each other if PIP/Pioneer defaulted on any of its obligations, a breach of this agreement would not terminate the certificate.
16
3) Does the estoppel certificate entitle the Bank to "reverse" a termination of the lease agreement?
17
No. The estoppel certificate does not permit or prohibit [plaintiff] from terminating its lease agreement. It simply protects the Bank from arbitrary termination by allowing it thirty days in which to cure any defaults which might threaten its security interest. In other words, before [plaintiff] can take steps to terminate its lease, it must advise the Bank of its intention to terminate and allow the Bank a thirty-day opportunity to protect its investment by curing any breach or default by the lessee.
18
4) If the Bank fails to cure a default by the lessee within thirty days after notice from [plaintiff], is [plaintiff] free to initiate termination proceedings?
19
Yes.
20
5) Is [plaintiff's] letter of May 25, 1989, sufficient notice to the Bank to satisfy its obligation under § 9(e) of the estoppel certificate?
21
No. That letter put the Bank on notice that the lease was already terminated and that the Bank was not being given an opportunity to protect its interest by curing the default. If the estoppel certificate, which is not a model of clarity, is to have any value at all, it functions to estop the landlord from terminating the leasehold without prior notice to the Bank.
22
On appeal, plaintiff argues that the district court erred in ruling that the bank's failure to notify plaintiff of Pioneer's default in the payment of the loan did not terminate the obligations of the parties under the estoppel certificate, and in concluding that the assignment of the lease by PIP to Pioneer did not terminate those obligations. Plaintiff also complains that the district court erred in declining to rule on whether the bank had, by its conduct, waived any right to cure post-petition breaches of the lease by Pioneer.
23
Plaintiff argues that the assignment of the lease from PIP to Pioneer relieved it of any obligation to notify the bank of a default by Pioneer, since only PIP is mentioned in the estoppel certificate. While plaintiff would therefore like to be forgiven of its responsibility to notify the bank of any default by Pioneer, it nevertheless argues that the bank still was required to notify it if Pioneer did not make payments on the loan.2 Since the act of assigning the lease did not release PIP from its obligations under either the lease or the loan, failure by Pioneer to make payments called for by the lease or the loan amounted to default by PIP. That is the default referred to in the certificate. Accordingly, the district court correctly concluded that failure by Pioneer to make lease or loan payments triggered the notice provisions of the certificate.
24
Under the terms of the certificate, while plaintiff was entitled to notice by the bank of a loan default, it was not then entitled to invoke a specified remedy, such as the right to cure. Therefore, the district court did not err in concluding that the bank's failure to notify plaintiff of a loan default would not be a breach so material as to warrant termination of the agreements found in the certificate.
25
As mentioned earlier, plaintiff was required by the estoppel certificate to notify the bank if the lease was in default, even after PIP assigned its interest in the lease to Pioneer. Plaintiff consented to the assignment by the attornment agreement, which also recognized that PIP remained liable on the lease. The bank consented to the assignment from PIP to Pioneer, but did not release PIP from its obligation on the loan. Accordingly, default by Pioneer in payments under the lease was tantamount to default by PIP, and notice was required. The certificate provided that upon notice from plaintiff of "any default" under the terms of the lease, the bank would have the right to cure that default. This contemplates notice sufficient to enable the bank to cure, which, of course, means that the bank would have to be advised with some specificity of the nature of the default including, for example, any amounts claimed to be due.
26
Clearly, the letter of May 25, 1989 did not provide the required specificity. In addition, as pointed out by the district court, that letter purported to put the bank on notice that the lease was already terminated and that the bank would not be given the opportunity to protect its interest by curing any default. Furthermore, we reject plaintiff's contention that it demonstrated to the district court other instances when notice was conveyed to the bank in a manner sufficient to comply with the requirements of the certificate. Under the circumstances, then, the district court correctly concluded that the bank had not received the notice that would start running the thirty-day period during which it had the right to cure.
27
For these reasons, then, the judgment of the district court is affirmed.
1
Attorn means to agree to recognize a new owner of a property or estate and become the new owner's tenant. Black's Law Dictionary 129 (6th ed. 1990)
2
This is not the only instance of inconsistency in plaintiff's position in this regard. On page five of its opening brief, plaintiff refers to a "breach by [the bank] when it failed to give notice to [plaintiff] of a default by Pioneer of the loan agreement." On the other hand, at page 23 of its reply brief, plaintiff advises us that "it continues to be the best judgment of [plaintiff] that, in the same way that [plaintiff] had no obligation to notify [the bank] anything about Pioneer, [the bank] had no obligation to notify [plaintiff] anything about Pioneer." (Emphasis in original.)
|
Cite as: 565 U. S. ____ (2011) 1
Statement of ALITO, J.
SUPREME COURT OF THE UNITED STATES
DUANE EDWARD BUCK v. RICK THALER, DIRECTOR,
TEXAS DEPARTMENT OF CRIMINAL JUSTICE,
CORRECTIONAL INSTITUTIONS DIVISION
ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED
STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
No. 11–6391. Decided November 7, 2011
The petition for a writ of certiorari is denied.
Statement of JUSTICE ALITO, with whom JUSTICE
SCALIA and JUSTICE BREYER join, respecting the denial of
certiorari.
One morning in July 1995, petitioner Duane E. Buck
went to his ex-girlfriend’s house with a rifle and a shot-
gun. After killing one person and wounding another, Buck
chased his ex-girlfriend outside. Her children followed
and witnessed Buck shoot and kill their mother as she
attempted to flee. An arresting officer testified that Buck
was laughing when he was arrested and said “[t]he bitch
deserved what she got.” 28 Tr. 51 (May 6, 1997).
Buck was tried for capital murder, and a jury convicted.
He was sentenced to death based on the jury’s finding
that the State had proved Buck’s future dangerousness to
society.
The petition in this case concerns bizarre and objection-
able testimony given by a “defense expert” at the penalty
phase of Buck’s capital trial. The witness, Dr. Walter
Quijano, testified that petitioner, if given a noncapital
sentence, would not present a danger to society. But Dr.
Quijano added that members of petitioner’s race (he is
African-American) are statistically more likely than the
average person to engage in crime.
Dr. Quijano’s testimony would provide a basis for rever-
sal of petitioner’s sentence if the prosecution were respon-
sible for presenting that testimony to the jury. But Dr.
2 BUCK v. THALER
Statement of ALITO, J.
Quijano was a defense witness, and it was petitioner’s
attorney, not the prosecutor, who first elicited Dr. Qui-
jano’s view regarding the correlation between race and
future dangerousness. Retained by the defense, Dr. Qui-
jano prepared a report in which he opined on this subject.
His report stated:
“Future Dangerousness, Whether there is probabil-
ity that the defendant would commit criminal acts of
violence that would constitute a continuing threat to
society? The following factors were considered in an-
swer to the question of future dangerousness: statisti-
cal, environmental, and clinical judgment.
“I. STATISTICAL FACTORS
“1. Past crimes. . . .
“2. Age. . . .
“3. Sex. . . .
“4. Race. Black: Increased probability. There is
an over-representation of Blacks among the violent
offenders.
“5. Socioeconomics. . . .
“6. Employment stability. . . .
“7. Substance abuse. . . .” Defense Exh. No. 1 in
No. 699684 (208th Jud. Dist., Harris Cty., Tex.), p. 7.
The defense then called Dr. Quijano to the stand, and
elicited his testimony on this point. Defense counsel asked
Dr. Quijano, “[i]f we have an inmate such as Mr. Buck who
is sentenced to life in prison, what are some of the factors,
statistical factors or environmental factors that you’ve
looked at in regard to this case?” 28 Tr. 110 (May 6, 1997).
As he had done in his report, Dr. Quijano identified past
crimes, age, sex, race, socioeconomic status, and substance
Cite as: 565 U. S. ____ (2011) 3
Statement of ALITO, J.
abuse as statistical factors predictive of “whether a person
will or will not constitute a continuing danger.” Id., at
111; see also id., at 110 (identifying the “statistical factors
we know to predict future dangerousness”). With respect
to race, he elaborated further that “[i]t’s a sad commen-
tary that minorities, Hispanics and black people, are over
represented in the Criminal Justice System.” Id., at 111.
Not only did the defense present this testimony to the jury
but Dr. Quijano’s report was also admitted into evidence—
over the prosecution’s objection—and was thus available
for the jury to consider. See id., at 233–234.
It is true that the prosecutor briefly went over this
same ground on cross-examination. The prosecutor asked
a single question regarding whether race increased
the probability that Buck would pose a future danger to
society:
“Q. You have determined that the sex factor, that a
male is more violent than a female because that’s just
the way it is, and that the race factor, black, increases
the future dangerousness for various complicated rea-
sons; is that correct?
“A. Yes.” Id., at 160.
But this colloquy did not go beyond what defense coun-
sel had already elicited on direct examination, and by this
point, Dr. Quijano’s views on the correlation between race
and future dangerousness had already been brought to the
jury’s attention. Moreover, the prosecutor did not revisit
the race-related testimony in closing or ask the jury to find
future dangerousness based on Buck’s race.
The dissent makes much of the fact that the State at
various points in federal habeas proceedings was inaccu-
rate in its attempts to explain why the present case is
different from the others in which, as a result of similar
testimony by Dr. Quijano, the State did not assert proce-
4 BUCK v. THALER
Statement of ALITO, J.
dural default and new sentencing proceedings were held.
But the fact remains that the present case is different
from all the rest. In four of the six other cases, see, e.g.,
Saldano v. Texas, 530 U. S. 1212 (2000), the prosecution
called Dr. Quijano and elicited the objectionable testimony
on direct examination. In the remaining two cases, see
Alba v. Johnson, 232 F. 3d 208 (CA5 2000) (Table); Blue v.
Johnson, Civ. Action No. 99–0350 (SD Tex., Sept. 29,
2000), while the defense called Dr. Quijano, the objection-
able testimony was not elicited until the prosecution ques-
tioned Dr. Quijano on cross-examination. See Record,
Doc. 511601677, at 44–49; id., Doc. 511601676, at 39–44.
And, on redirect, defense counsel mentioned race only to
mitigate the effect on the jury of Dr. Quijano’s prior identi-
fication of race as an immutable factor increasing a de-
fendant’s likelihood of future dangerousness.* Only in
——————
* On redirect in Alba, defense counsel tried to downplay the signifi-
cance of Dr. Quijano’s testimony with respect to the statistical factors:
“Q. [The prosecutor] asked you about statistical factors in predicting
future dangerousness. When we’re talking about statistics, are we
talking about correlation or causation?
“A. Oh. These statistics are strictly correlation. There’s a big
distinction, and we must keep that in mind. Correlation simply says
that two events happened—coincidentally happened at the same time.
It does not mean that one causes the other.
“Q. So when we’re talking about these statistical factors—that more
men re-offend than women, Hispanics offend more than blacks or
whites, people from the low socioeconomic groups offend more than
people from the higher socioeconomic groups, people who have opiate
addiction or alcohol abuse offend more often than those who don’t,
people who have less education offend more often than those who
have—do all those things cause people to offend?
“A. No. They are simply contributing factors. They are not causal
factors. One cannot control one’s gender or one’s color. And obviously
there are many, many Hispanics, many whites, many Orientals who
don’t commit crimes. But the frequence [sic] among those who commit
crimes, these are the characteristics. They don’t cause each other; they
just happen to be coincidental to each other.” Record, Doc. 511601677,
Cite as: 565 U. S. ____ (2011) 5
Statement of ALITO, J.
Buck’s case did defense counsel elicit the race-related
testimony on direct examination. Thus, this is the only
case in which it can be said that the responsibility for
eliciting the offensive testimony lay squarely with the
defense.
Although the dissent suggests that the District Court
may have been misled by the State’s inaccurate state-
ments, the District Court, in denying petitioner’s motion
under Rule 60 of the Federal Rules of Civil Procedure, was
fully aware of what had occurred in all of these cases. It is
for these reasons that I conclude that certiorari should be
denied.
——————
at 104–105 (one paragraph break omitted). See also id., Doc.
511601676, at 82–84 (seeking to show that incarceration could
decrease a defendant’s likelihood of future dangerousness, notwith-
standing the immutable factors, such as race); id., at 82–83 (“If the
person is put in a prison many of these factors will not be operative
anymore because the prison restriction will not allow those factors to be
present, and so the more of those factors are controlled by the prison
structure, the less the danger—the less dangerous the person is in the
prison”).
|
946 S.W.2d 166 (1997)
Timothy SCOTT, Appellant,
v.
The STATE of Texas, Appellee.
No. 03-95-00345-CR.
Court of Appeals of Texas, Austin.
May 22, 1997.
*167 James B. Matthews, Austin, for appellant.
Ronald Earle, District Attorney, C. Bryan Case, Jr., Assistant District Attorney, Austin, for appellee.
Before CARROLL, C.J., and B.A. SMITH and DALLY, JJ.[*]
DALLY, Justice (Retired).
Appellant Timothy Scott appeals from his conviction for the offense of aggravated robbery with a deadly weapon. See Tex. Penal Code Ann. § 29.03 (West 1994). Appellant's punishment was assessed by the trial court at imprisonment for twenty years. In his first point, appellant asserts that the evidence does not support the jury's verdict. We agree and will reverse the judgment of the trial court.
Appellant and three codefendants were charged with the offenses of attempted capital murder and aggravated robbery. All were tried together before the same jury. The charge of attempted capital murder was abandoned and the jury was charged only on the offense of aggravated robbery. The jury acquitted Christopher Whitman and convicted Cornell Loving, Andre Webb, and appellant of the offense of aggravated robbery. The evidence shows appellant drove the car in which the defendants left the scene of the crime. The State acknowledges that appellant could be convicted of the offense of aggravated robbery only as a party. The trial court instructed the jury on the law of parties. Then, with the State's acquiescence, the court instructed the jury that before it could find the appellant guilty it must find beyond a reasonable doubt that appellant entered into an agreement and a conspiracy with the codefendants to commit the offense of robbery, that one or more of the codefendants committed the robbery, and after the codefendants committed the robbery, appellant pursuant to the prior agreement "aided as a party by driving the getaway car ... and that such offense was committed in the furtherance of the unlawful purpose to commit robbery." The sufficiency of the evidence to convict must be measured against the jury charge. Jackson v. State, 898 S.W.2d 896, 898 (Tex.Crim.App.1995); see Fisher v. State, 887 S.W.2d 49 (Tex.Crim. App.1994).
In reviewing the legal sufficiency of the evidence, the standard is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979); Staley v. State, 887 S.W.2d 885, 888 (Tex.Crim.App. 1994). The standard of review is the same for both direct and circumstantial evidence. Geesa v. State, 820 S.W.2d 154, 162 (Tex. Crim.App.1991); Mack v. State, 859 S.W.2d 526, 527 (Tex.App.Houston [1st Dist.] 1993, no pet.). A person is criminally responsible for an offense committed by the conduct of another if acting with intent to promote or *168 assist the commission of the offense, he solicits, encourages, directs, aids, or attempts to aid the other person to commit the offense. Tex. Penal Code Ann. § 7.02(a)(2) (West 1994).
In determining whether an accused is a party to an offense and bears criminal responsibility, the court may look to events before, during, and after the commission of the offense. Beardsley v. State, 738 S.W.2d 681, 684 (Tex.Crim.App.1987). Participation in an enterprise may be inferred from circumstances and need not be shown by direct evidence. Id. Circumstantial evidence may be sufficient to show that one is a party to the offense. Id.; Ex parte Prior, 540 S.W.2d 723, 728 (Tex.Crim.App.1976). If the evidence shows the mere presence of an accused at the scene of an offense, or even his flight from the scene, without more, then it is insufficient to sustain a conviction as a party to the offense. Valdez v. State, 623 S.W.2d 317, 321 (Tex.Crim.App.1979). Standing alone, proof that an accused assisted the primary actor in making his getaway is likewise insufficienteven though the accused's conduct may constitute the independent offense of hindering apprehension or prosecution. See Tex. Penal Code Ann. § 38.05 (West 1994); Guillory v. State, 877 S.W.2d 71, 74 (Tex.App.Houston [1st Dist.] 1994, pet. ref'd). The jurors are the exclusive judges of the facts, the credibility of the witnesses, and the weight to be accorded their testimony. Esquivel v. State, 506 S.W.2d 613, 615 (Tex.Crim.App.1974); Davis v. State, 831 S.W.2d 426, 434 (Tex.App. Austin 1992, pet. ref'd). The jury is free to reject any or all evidence presented at trial. Id.; see Russeau v. State, 785 S.W.2d 387, 391 (Tex.Crim.App.1990).
The State asserts that "appellant and several of his buddies were riding around in appellant's `big car' when they decided to `jack' some Mexicans .... appellant and his buddies decided that appellant should wait in the car in order to provide a quick escape after the robbery." However, we are unable to find, and the State has failed to designate, where in the record evidence admitted before the jury supports the assertions other than that appellant and his buddies were riding around in appellant's car.
None of the four defendants testified or offered other evidence before the jury. Appellant's two written statements and codefendant Loving's written statement were admitted in evidence before the jury. The names of all codefendants and some other matters were redacted from the statements before they were admitted in evidence. The jury was instructed that a defendant's written statement could be considered only against the defendant making the statement. However, appellant's attorney, while cross-examining the officer who obtained Loving's statement, asked the officer, in the presence of the jury, to reinsert appellant's name in Loving's statement where it had been deleted. In these circumstances, the jury could consider Loving's statement along with appellant's statements and any other evidence in the record for the purpose of determining appellant's guilt.
In pertinent part appellant's first statement reads as follows:
On 8/6/94 I was at the house, with *.[[1]] We drive to the club, Chesters. I saw a Black male I know as *. I met him earlier this year. * asked * if we could drop him off at his house. * got in the car and we went down to Dove Springs. * wanted to get dropped off out there. Before we got near the store * told me to pull over near a house, I thought thats where he stayed but instead * and * got out the car. I saw this ... who was talking to * and *, I saw ... them walk over to the store, I pulled the car to the store but * told me to park at the apartments behind the store. * pulled out ... from I think one of his pockets and thats when I saw a gun. I knew * carried a .32 revolver and it looked like the same gun. Its chrome colored. I then drove the car behind it and parked at some apartments. I backed the car up in the parking lot of the apartment complex. I stayed in the car. I turned the car off but had the windows rolled up and was listening to music. * and * ran to the car and got in. They *169 told me to go, I asked them where they wanted to go and * told me to go the back way out of Dove Springs to Springdale. We ended up on Riverside and then I dropped off * .... While we were in the car and before I dropped them off * said that he had shot the Mexican that was sitting on the truck. * had hit one that was one standing. * must have already put up the gun because I didn't see it anymore. * and I went back home and thats when he told me that they had gotten about a thousand. He gave me one hundred dollars.
In pertinent part codefendant Loving's statement reads as follows:
We were all outside talking and thats when I saw Timothy Scott and * .[[2]] Tim was driving a blue Cadiallac and * was sitting in the front passenger seat.... Tim told me they were going that way so they would give me a ride home.... I know Tim to smoke some weed, marijuana, I've known Tim for about two weeks and Ive known * for a couple of years. I got in the car with * and Tim and we drove toward Dove Springs. They were telling me that they were putting in some work. They told me they were . * asked me if I knew anyone they could get some weed from. I told them they could probably ask Monster, his real name is Mario Johnson. Tim was going to pull onto Merritt Circle but I told Tim it was "hot" there so I told him to pull into the store, Metro Mart. At the store me and * got out of the car, * told Tim to pull the car behind the store. * told Tim that he would be right back, he was going to go get some weed. I told them I was going to walk home, right across the street 5002 Merritt. There were a bunch of people at the store, we walked behind the store and * was talking to some dudes and I was talking to this guy named * . Hes black, but light skin, 5'9", 130 lbs., he always wears a hat with * on it. I don't his real name. I think he might be related to * because he was talking to * like he really knew him. I was talking to this guy name "Big Black" I don't know his real name, I was telling him that I new that they had been acting real bad, they had been fighting some Mexicans in the circle, Merritt Circle. He said they were take care of business and had gotten into a big fight with the Mexicans. *, *, Big Black and I were standing out by Michael Johnsons fourplex, when Big Black was talking about how they were taking care of business out there and when he mentioned that the Mexicans always have a bunch of money thats when * said, "thats all I need to know." * and * walk off toward where the shooting happened. I stayed talking to Big Black, Big Black then told me that * and * were over there jacking some people. * had knocked one of the Mexicans and the Mexican was up underneath the car. I saw another Mexican on the roof of a truck. * was pointing at the Mexican on the roof and telling him to get down. * was on the side of the truck, he was also yelling at the Mexican to get down. The Mexican jumped down and * started chasing him. I think * shot the Mexican, I know * always carries a gun, he usually carries a.38 pistol. I heard at least one gun shot. I saw the Mexican laying on the ground, he had one hand extended out. * got the wallet from the the Mexican, the wallet is black and folds in two, its a big wallet. * told me to hurry up and follow him and * . We got to the car, got in and * to told Tim to hurry up and leave. Tim drove the car away. * was sitting in the front passenger seat and me and * were in the back seat. * was talking about how he was * and was getting his stripes, he said he shot at he Mexican guy but didn't know if he hit him. * had a gun in the waistband of his pants, the gun was silver and was automatic. I told him ... my grandmother lives right across the street. Tim was driving and he ended up on Riverside Dr. I told Tim to drop me off there and I called a taxi to take me to my brothers place. * also got out on Riverside Dr. * gave me some money for the taxi. I think he gave me about $50.00.
Combined, these statements show that appellant (1) drove Loving and another codefendant *170 to the place where the robbery occurred, (2) waited for the codefendants in his car, (3) drove codefendants from the scene of the robbery, and (4) after leaving the scene, the codefendants told appellant they had committed robbery and gave appellant one hundred dollars.
We now consider appellant's second statement admitted in evidence. Appellant made his first statement on August 31, 1994. On November 16, 1994, while he was in jail, appellant told the officers he wanted to make another statement. In that statement appellant said:
On the case in question Cornell Loving was not involved. I Timothy Scott did the offense. I regret involving Cornell Loving in the investigation. He was not involved. I did the act knowily. The act of Attempted Capal Muder. I feel I was wrong for doing it and am ready to take my consequences like a man. I did it close to one of his relatives house and I know he spent time out there so I tried to throw the investigation off by adding people.
Although the jury was free to believe appellant's second statement, there is no indication it did. It convicted Loving. Moreover, the officer who took appellant's first statement and Loving's statement testified she did not believe appellant's second statement. Appellant's second statement was incompatible with all of the other evidence. On the face of that statement appellant confessed to an offense of attempted capital murder for the purpose of absolving Loving of blame for that offense. The abandonment of the charge of attempted capital murder after jeopardy had attached was tantamount to an acquittal for that offense. We conclude a rational trier of fact could not find probative value in appellant's second statement to prove his guilt of the offense of aggravated robbery as a party by driving the getaway car as required by the courts jury instructions. Appellant's second statement adds nothing to show appellant's guilt of the offense of which he was convicted.
The State has not pointed out, and we cannot find, any evidence in the record other than Loving's and appellant's statements tending to support the jury's verdict finding the appellant guilty as a party to the offense of aggravated robbery. Although a jury may accept or reject any or all evidence adduced, a jury may not reach a verdict based on speculation. Johnson v. State, 673 S.W.2d 190, 196 (Tex.Crim.App.1984). A jury's verdict must be supported by evidence proving beyond a reasonable doubt every element of the offense of which a defendant is convicted.
We conclude the evidence, considered in the light most favorable to the jury's verdict, is not sufficient for a rational trier of fact to find beyond a reasonable doubt that before the codefendants committed the offense of robbery, appellant entered into a conspiracy and agreed to become a party to aid in the robbery by driving the getaway car. Therefore, the evidence, direct and circumstantial, is insufficient to support a necessary element of the offense of which appellant was convicted.
We reverse the judgment of conviction and render a judgment of acquittal.
Reversed and Rendered
NOTES
[*] Before Carl E.F. Dally, Judge (retired), Court of Criminal Appeals, sitting by assignment. See Tex. Gov't Code Ann. § 74.003(b) (West 1988).
[1] Names were deleted from the statement admitted in evidence before the jury.
[2] Names were deleted from the statement admitted in evidence before the jury.
|
510 U.S. 1050
Gutierrezv.Texas.
No. 93-6325.
Supreme Court of United States.
January 10, 1994.
1
Appeal from the Ct. Crim. App. Tex.
2
Certiorari denied.
|
124 F.3d 211
NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.Robert A. FICALORA, Plaintiff-Appellant,v.INTERNATIONAL BUSINESS MACHINES CORPORATION, a Delawarecorporation licensed to conduct business in Washington;J.J. Sinnott, IBM Plan Administrator; InternationalBusiness Machines, Inc. Medical Disability Income Plan;Chase Manhattan Bank, Trustee of MDIP; Michael A. Tarre,MDIP Administrator; Arnold J. Kaminer; Charles D. Grose,M.D.; Steve Redmond, M.D.; W.R. Matson; D.A. Peguero;T.L. Richards; D.B. Robbins, M.D., Defendants-Appellees.
No. 96-35229.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted June 5, 1997.Decided Sept. 15, 1997.
Appeal from the United States District Court for the Western District of Washington. Robert J. Bryan, District Judge, Presiding.
Before WRIGHT, PREGERSON and THOMPSON, Circuit Judges.
1
MEMORANDUM*
2
In 1980, International Business Machines (IBM) employed Robert A. Ficalora. In 1988, Ficalora began experiencing vision loss, fatigue, and numbness. After his doctor diagnosed him with multiple sclerosis (MS), Ficalora applied for benefits under IBM's Medical Disability Income Plan (MDIP or the Plan). The Plan Administrator denied Ficalora's request for benefits because Ficalora did not demonstrate that MS prevented him from being gainfully employed, as required by the Plan.
3
Ficalora then sued IBM in federal district court to enforce his right to benefits under the Plan, pursuant to Section 1132(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (ERISA). The district court granted summary judgment in IBM's favor, and Ficalora appeals. We have jurisdiction under 28 U.S.C. S 1291, and we affirm.
4
* STANDARD OF REVIEW
5
A denial of benefits under ERISA should be "reviewed under a de novo standard unless the benefit plan gives the administrator ... discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). If an ERISA plan vests a plan administrator with such discretionary authority, however, "a district court may review the administrator's determination only for an abuse of discretion." Winters v. Costco Wholesale Corp., 49 F.3d 550, 552 (9th Cir.), cert. denied, 116 S.Ct. 276 (1995).
In the present case, the Plan provides:
6
The Plan Administrator shall have full power and au-thority to determine all matters arising in the administration, interpretation and application of the Plan, not inconsistent with the provisions of applicable law, and its interpretation and decisions with respect thereto shall be final and conclusive
7
Ficalora argues that the district court erred when it applied an abuse of discretion standard of review because: (1) the Plan did not give the Plan Administrator the discretion to make benefits decisions, and (2) the Plan Administrator's decision to deny benefits was influenced by a conflict of interest.
8
We disagree with both of Ficalora's arguments. We have repeatedly held that language similar to the language in IBM's Plan gives plan administrators the discretionary authority to determine eligibility for benefits. See, e.g., Canseco v. Construction Laborers Pension Trust for Southern California, 93 F.3d 600, 605 (9th Cir.1996), cert. denied, 117 S.Ct. 1250 (1997) (trustee of plan "shall have the power to administer" the plan, including the power "to construe the provisions of the Plan" and "any such construction adopted in ... good faith shall be binding"); Patterson v. Hughes Aircraft Co., 11 F.3d 948, 949 n. 1 (9th Cir.1993) (the plan administrator will issue a "written decision of approval or denial" including, in the event of denial a "clear reference to the Plan provisions upon which the denial is based."); Jones v. Laborers Health & Welfare Trust Fund, 906 F.2d 480, 481 (9th Cir.1990) (trustees shall have power "to construe the provisions of this Trust Agreement and the Plan, and any such construction adopted by the [trustees] in good faith shall be binding"); Madden v. ITT Long Term Disability Plan for Salaried Employees, 914 F.2d 1279, 1284 (9th Cir.1990) (the Administration Committee "shall have the exclusive right ... to interpret the Plan and to decide any and all matters arising hereunder, including the right to remedy possible ambiguities, equities, inconsistencies, or omissions ... [and] all interpretations and decisions of the ... Administration Committee ... with respect to any matter hereunder shall be final, conclusive and binding on all parties affected thereby.").
9
Under our precedent, the Plan Administrator's decision to deny Ficalora benefits is not subject to de novo review because it was not influenced by a conflict of interest. The parties do not dispute that a conflict of interest exists: IBM both employs the Plan Administrator and pays, either directly or through a fund, any benefits administered pursuant to the Plan.
10
To determine if a Plan Administrator's decision is entitled to a less deferential standard of review because of such a conflict, we employ a two-stage inquiry. Atwood v. Newmont Gold Co., 45 F.3d 1317, 1323 (9th Cir.1995). In the first stage, we "must determine whether the affected beneficiary has provided material, probative evidence, beyond the mere fact of the apparent conflict, tending to show that the fiduciary's self-interest caused a breach of the administrator's fiduciary obligations to the beneficiary." Id. Assuming that the beneficiary successfully satisfies this burden, in the second stage, "the plan bears the burden of producing evidence to show that the conflict of interest did not affect the decision to deny benefits." Id. If the plan does not carry that burden, we must review de novo the plan administrator's denial of benefits. Id.
11
Ficalora satisfied his burden in the first stage of this inquiry by pointing to a statement made by James J. Sinnott while he was the Plan Administrator considering Ficalora's request for benefits. According to Ficalora, Sinnott stated: "we are not going to pay you for the rest of your life."
12
Nevertheless, the district court was correct in applying an abuse of discretion standard of review, because IBM satisfied its burden, in the second stage, of "producing evidence to show that the conflict of interest did not affect the decision to deny benefits." Atwood, 45 F.3d at 1323. The plan administrator ultimately responsible for denying Ficalora benefits was Michael A. Tarre, not Sinnott. And, nothing in the record indicates that Tarre was influenced by a conflict of interest.
13
We conclude that the district court properly applied an abuse of discretion standard of review.
II
DENIAL OF BENEFITS
14
An ERISA plan administrator such as Tarre abuses his discretion if he "relies on clearly erroneous findings of fact in making benefits determinations." Taft v. Equitable Life Assur. Soc., 9 F.3d 1469, 1473 (9th Cir.1993); see also Atwood, 45 F.3d at 1323-24. Ficalora argues that Tarre relied on a clearly erroneous finding of fact in making the benefits denial decision--tarre's finding that Ficalora did not prove that MS prevented him from "the taking of any employment for pay or profit."1
15
IBM concedes that Ficalora adequately demonstrated he suffered from MS. Based on the evidence available to him at the time he made his decision, however, Plan Administrator Tarre did not clearly err in finding that Ficalora did not demonstrate that MS precluded Ficalora from engaging in any gainful employment. Dr. Swanson, the IBM physician who examined Ficalora, stated that Ficalora had "no clear physical Limitation" that would prevent him from working, and nothing in the record establishes that Ficalora was completely disabled from working. Given this state of the record, Tarre did not clearly err in finding that Ficalora failed to prove he was incapable of performing any work for pay or profit.
III
EXTENT OF THE ADMINISTRATIVE RECORD
16
After Tarre completed his final review of Ficalora's application, he offered to perform an additional review to consider additional evidence, provided that Ficalora satisfied several conditions. When Ficalora failed to satisfy those conditions, Tarre refused to perform the additional review. Ficalora contends that his administrative record closed on February 14, 1994, the date when Tarre informed him that he would not be performing the additional review. See Taft, 9 F.3d at 1472 (holding that, to determine whether the Plan Administrator abused its discretion, a court of appeals may only review the evidence that was presented to the Plan Administrator as part of Ficalora's administrative record). In contrast, IBM argues that the administrative record closed on January 21, 1993, the date when Tarre issued his final denial of Ficalora's benefits request. Because the facts are not in dispute, only the contentions, we may resolve as a matter of law the issue of when the administrative record closed.
17
In our view, even assuming Tarre had the authority to offer to conduct an additional review, Tarre was only required to perform the review if he and Ficalora reached an agreement. Both the Plan and ERISA are silent as to how to interpret an offer of additional review by a Plan Administrator. However, "[i]t is well settled that when ERISA is silent on an issue, [a court] may turn to state law to fashion the appropriate federal common-law rule." Hotel Employees & Restaurant Employees International Union Welfare Fund, 5( F.3d 719, 721 (1995); see also Saltarelli v. Bob Baker Group Medical Trust, 35 F.3d 382, 386 (9th Cir.1994). To determine whether the correspondence between Ficalora and Tarre ultimately resulted in an agreement that required Tarre to conduct an additional review, we therefore turn to traditional principles of contract law.
18
On August 20, 1993, Tarre offered to conduct an additional review, provided that Ficalora agreed to certain conditions. Ficalore accepted the offer on September 17, but conditioned his acceptance on several matters. Under settled principles of contract law, Ficalora's September 17 letter was a counteroffer, not an acceptance, because it imposed additional conditions. See Rorvig v. Douglas, 123 Wash.2d 854, 858 (1994) ("It is a basic rule of contract formation that in expression of assent that changes the terms of the offer in any material respect may be operative as a counteroffer; but it is not an acceptance and consummates no contract."); Strassburg v. Ricotta, 480 N.Y.S.2d 649, 650 (1984) ("under ordinary principles of contract law, a purchaser who has not yet subscribed [to] an agreement rejects it by the naking of either a conditional acceptance or a counter offer."); Ardente v. Horan, 117 R.I. 254, 259-60 (1976) ("An acceptance which is equivocal or upon condition or with a limitation is a counteroffer and requires acceptance by the original offeror before a contractual relationship can exist."); Landberg v. Landberg, 24 Cal.App.3d 742, 750 (1972) ("qualified acceptance constitutes a rejection terminating the offer; it is a new proposal or counteroffer which must be accepted by the former offeror now turned offeree before a binding contract results.").
19
In response to Ficalora's counteroffer, Tarre wrote a letter dated November 15, 1993, in which he stated that IBM would be unable to meet one of Ficalora's conditions. Tarre also reworded Ficalora's other conditions, and asked whether Ficalora would still accept. For the same reason that Ficalora's September 17 letter was a counteroffer (it modified the terms of the offer by imposing additional conditions), Tarre's November 15 letter was a counteroffer as well.
20
In a letter dated November 19, 1993, Ficalora responded to Tarre's counteroffer with another counteroffer. In his letter of February 14, 1994, Tarre expressly rejected Ficalora's final counteroffer. Thus, Tarre and Ficalora never reached an agreement requiring Tarre to conduct an additional review. We conclude, therefore, that the administrative record closed on January 21, 1993, the date IBM finally rejected Ficalora's application for benefits.
21
AFFIRMED.
PREGERSON, Circuit Judge, dissenting:
22
I dissent. The majority fails adequately to consider the critical issue facing us in this case: Was there "satisfactory proof to IBM that a disability from any cause prevented [Ficalora from] the taking of any employment for pay or profit?"1 It is undisputed that Ficalora suffered from a severe case of multiple sclerosis ("MS"), a devastating physical illness.2 It is also undisputed that the Social Security Administration considered Ficalora disabled and awarded him disability benefits and that several medical doctors documented the severe effects that MS had on Ficalora's health. I submit that the Plan Administrator abused his discretion in failing to conclude that Ficalora presented "satisfactory proof" that his chronic MS prevents him from taking any employment for pay or profit.
23
* Before describing the evidence before the Plan Administrator, it is important to understand how IBM employees might qualify for disability benefits under the IBM Medical Disability Income Plan
24
("Disability Plan"). An employee is deemed medically disabled when he or she can meet the following test: "An employee will be considered disabled by giving satisfactory Proof to IBM that a disability from any cause prevents the taking of any employment for pay or profit."
25
To apply for benefits under the Disability Plan, an applicant must submit an application to the IBM medical department. Two IBM officials, the Area Managing Physician and the Area Personnel Manager, prepare the applicant's application for disability benefits. Sometimes the Area Managing Physician arranges for the applicant to be evaluated by medical consultants selected by IBM. After taking all these steps, the Area Managing Physician assembles the administrative record3 that will be considered in deciding whether to grant the applicant's request for disability benefits.
26
The administrative record is forwarded to an IBM official called the Medical Director, who could approve the application or forward the administrative record to the Disability Plan Panel. The Disability Plan panel then makes a recommendation to the Plan Administrator whether to grant disability benefits under the Plan to the applicant. The Plan Administrator is ultimately responsible for issuing a benefits decision.
27
An employee may request review of a benefits denial by the Plan Administrator. The Plan Administrator is then required to issue a notice describing the result of his review within 60 days of the request for review.
II
28
In March 1980, IBM employed Ficalora as a supply room clerk. Over the course of several years, Ficalora was promoted to increasingly more responsible positions until he became an Accounts Systems Engineer. In December 1988, while still employed by IBM, Ficalora experienced pain and loss of vision in his right eye. Ficalora consulted an optometrist, who referred him to a neurologist because of the possibility that Ficalora might suffer from MS.
29
Over the next few years, Ficalora's vision improved. By May, 1991, however, Ficalora developed other symptoms:
30
[Ficalora] developed a band of numbness around his body at the level of the umbilicus which spread to the genitalia and legs and feet. Then shortly after he was nauseated, developed urgency and frequency, fatiguability and problems with his memory.
31
In June 1991, Ficalora went to see Dr. Roy L. Swank of the Swank Multiple Sclerosis Clinic of Oregon Health Sciences University, who diagnosed him with MS. Dr. Swank "recommended to [Ficalora] that he apply for retirement."
32
Ficalora began to miss work frequently. On June 18, 1991, Ficalora wrote to Austin Blood, an IBM Branch Manager, to request Disability Plan Benefits. In response to Ficalora's request for benefits under the Disability Plan, on June 26, 1991, Dr. Charles Grose, IBM's Western Area Medical Director, wrote a letter asking Dr. Swank for a "summary of [his] evaluation of [Ficalora], including [his] diagnosis, the extent of [Ficalora's] disability, recommended treatment, and prognosis." On July 9, 1991, after examining Ficalora, Dr. Swank wrote:
33
[Ficalora] is very sensitive to stress, as are all M.S. patients, and in his case, memory and clarity of thought are inclined to suffer. Considering the type of work [he] does, I do not believe he will be able to continue to do satisfactory work. However, he might be able to carry on at half-time, and that would perhaps be better for [him] as a first step towards retirement.
34
Starting in August, 1991, Ficalora tried to work half days, three days a week, and was reassigned by his manager to a position that involved less customer interaction. However, Ficalora's new job proved to be very stressful, and he began to experience exacerbated fatigue, burning in his feet, dizziness, nausea, and head and leg aches.
35
On October 4, 1991, Ficalora was examined by Dr. Philip Swanson an IBM-selected neurologist at the University of Washington Medical Center.4 In his report, dated October 23, 1991, Dr. Swanson stated:
36
[W]e do not have firm, solic evidence that MS is the diagnosis, though I have no reason to doubt that in view of the other sensory symptoms that he has had, from time to time. I, therefore, think it is more probable than not that MS is, indeed the correct diagnosis. Meanwhile, because of Ficalora's fatigue, he continued to be unable to perform his job. Ficalora's supervisor informed him that he should discontinue work pending review of his eligibility for benefits under the Disability Plan.
37
In a phone conversation between Dr. Swank and an IBM doctor, Dr. Swank stated that Ficalora could only work a few hours per day, and expressed the opinion that Ficalora was "disabled now [and] in the foreseeable future."
38
IBA then selected another doctor, a psychiatrist named Dr. Jason McLurg, to examine Ficalora IBM did not ask Dr. McLurg to evaluate whether Ficalora could take any employment for pay or profit, the standard under the Disability Plan. Rather, IBM requested that Dr. McLurg's report contain an evaluation of whether there was a psychiatric component to Ficalora's fatigue, as well as any recommendations for treatment. After examining Ficalora, Dr. McLurg stated that Ficalora had a "probable diagnosis of a devastating physical disorder, multiple sclerosis," and observed that Ficalora was not taklng the diagnosis of MS "laying down," but rather, "was trying to get the most out of his life and to treat his body in the best way possible to minimize the effects of the disease." Dr. McLurg recommended an MRI scan to confirm the diagnosis of MS, and a trial of Prozac "to see if Ficalora's energy or endurance could be improved."
39
In March 1992, Dr. Grose and Dr. Steven Redmond (IBM's Western Area Medical Director and Western Region Managing Physician, respectively) forwarded Ficalora's application to IBM's United States Medical Director, Dr. Arnold J. Kaminer. Drs. Grose and Redmond did not examine Ficalora. Rather, upon reviewing his medical records the doctors recommended that Ficalora's application for benefits be denied, primarily because there was not "sufficient objective evidence that [Ficalora] is disabled." The United States Medical Director also recommended that Ficalora's request be denied. These recommendations and the administrative record were forwarded to the Disability Plan panel.
40
On May 20, 1992, the Disability Plan panel rejected Ficalora's application because "the medical evidence does not support a disabling condition." Sometime later, the Plan Administrator decided to deny Ficalora benefits.
41
Meanwhile, on May 17, 1992, the Social Security Administration advised Ficalora that he was considered disabled by MS as off June 1, 1991, and awarded him disability benefits. The Social Security Administration disability examiner found Ficalora "incapable of performing any past relevant work," and "restricted by his residual functional capacity to less than sedentary work."
42
On June 12, 1992, Ficalora received IBM's formal letter denying him benefits. The letter stated the following two reasons for the denial, among others:
43
The evidence in your case was insufficient to prove disabllity and a cause of disability to the satisfaction of IBM because:
44
(a) it did not include objective medical evidence sufficient to definitively establish the presence of a specific disease entity of a type which can be totally disabling.
45
* * *
46
(b) it did not include objective medical evidence of impairment sufficiently severe as to make you incapable of taking any employment for pay or profit....(We note in passing that, even if you do have multiple sclerosis, this does not necessarily make you unable to work, as in some cases multiple sclerosis takes a relatively mild course.)
47
* * *
48
You have complained of symptoms such as fatigue, head pains, nausea, joint aches, intermittent numbness, and frequency of urination. However, IBM does not consider symptom reports to be satisfactory evidence of disability unless accompanied by objective medical evidence of an underlying medical condition that would account for the reported symptoms to be disabling in degree. The sufficient objective medical evidence presented thus far in your case was not sufficient to support the claimed symptoms and a disabling degree of severity.
49
On June 19, 1992, Ficalora decided to undergo a Magnetic Resonance Imaging (MRI) scan.5 The scan revealed "extensive bilateral demyelinating plaque disease."
50
On August 3, 1992, Ficalora underwent an examination by Dr. Richard Blanck, a neurologist. Dr. Blanck diagnosed Ficalora with MS, and observed the following:
51
His symptoms and signs include burning paresthesias in his feet, lower extremity spasticity, walking difficulty secondary to generalized weakness and easy fatigability and visual difficulty. MS is a chronic, progressive neurologic disorder. His prognosis is guarded and the patient's physical limitations are permanent from a medical standpoint.
52
On August 7, 1992, Ficalora requested the Plan Administrator to review the denial of his claim for disability benefits. Ficalora sent new evidence in support of his request for review, including his MRI and Dr. Blanck's August 3, 1992, report. Ficalora also sent to the Plan Administrator an August 18, 1992, report authored by Dr. Blanck, that confirmed Ficalora's problems of "generalized weakness and easy fatigueability, walking difficulty because of lower extremity weakness, burning in his feet and spasms that occur intermittently involving the left leg."
53
In response, the Plan Adminstrator asked Ficalora on August 28, 1992, to authorize the release of medical records from Dr. Blanck and the Social Security Administration. Ficalora complied with with request.
54
In the August 28, 1992, letter, the Plan Administrator also asked Ficalora to "undergo a complete neurological assessment by a consultant chosen by IBM, which may include formal testing of cognitive function." Ficalora's attorney refused this request and gave the following reason:
55
[S]uch an examination is unnecessary given the ample medical evidence already in the file establishing disability. Mr. Ficalora has previously been examined by two (2) IBM chosen and paid medical consultants with respect to this claim.
56
* * *
57
In addition to these two (2) reports by IBM paid medical consultants, you also have reports in your file from Drs. Swank, Blanck, Kornmesser, Stanfield, and Almarez. All of these reports support either Mr. Ficalora's symptomology, diagnosis of Multiple Sclerosis or prognosis and degree of disability.
58
On November 18, 1992, the Disability Plan panel again reviewed Ficalora's file and recommended that benefits be denied. The notice of denial stated the following to Ficalora: "In your case, although you have a medical condition, you have not complied with our repeated requests for complete medical information sufficient to enable us to resolve the issues posed in [the June 12, 1992 notice]."
59
The Plan Administrator reviewed Ficalora's file and the recommendation of the Disability Plan panel, and decided to deny Ficalora benefits because Ficalora's "records contained insufficient objective medical evidence of [Ficalora's] inability to work."
60
Before the Plan Administrator could issue a notice to Ficalora, records from the Socia] Security Administration arrived at IBM, along with an updated letter from Dr. Blanck dated November 3, 1992. Dr. Blanck's letter stated that Ficalora's symptoms "have been chronic and slowly progressive." The Disability Plan panel met again on December 18, 1992, reconsidered Ficalora's file with this additional evidence, and yet again recommended a denial of benefits. The Plan Administrator again agreed with the Disability Plan panel. On January 21, 1993, the Plan Administrator issued a final denial of benefits letter, which stated that Ficalora did not present "satisfactory proof ... that a disability ... prevents the taking of any employment for pay or profit."
III
61
The majority states that the Plan Administrator did not clearly err in finding that Ficalora did not prove that multiple sclerosis prevented him from "the taking of any employment for pay or profit." In support of this assertion, the majority points to a single handwritten note by an IBM physician, Dr. Swanson, that Ficalora has "no clear physical limitation." Dr. Swanson based this opinion on his October 4, 1991, evaluation of Ficalora.
62
Dr. Swanson's handwritten note does not necessarily indicate that Ficalora had the ability to take any employment for pay or profit. It only states that Ficalora has no "clear" limitation. Thus, Dr. Swanson left open the possibility that a condition that was difficult to diagnose might account for Ficalora's claimed inability to take employment for pay or profit. In the present case, the medical doctors did not conclusively establish that Ficalora had MS until well after Swanson's October 4, 1991, examination of Ficalora.
63
Even assuming that Dr. Swanson's handwritten note does evidence his conclusion that Ficalora could take employment for pay or profit, that conclusion is contradicted by significant evidence that existed on October 4, 1991. For instance, Dr. Swank recommended in June 1991, "that [Ficalora] apply for retirement." Dr. Swank also stated the following on July 9, 1991: "Considering the type of work [Ficalora] does, I do not believe he will be able to continue to do satisfactory work. However, he might be able to carry on at half-time, and that would perhaps be better for [him] as a first step towards retirement." Ficalora's attempt to work in a low-stress job for half-days, three days a week, however, ended in failure because exacerbated fatigue, burning in his feet, dizziness, nausea, and head and leg aches, prevented Ficalora from working.
64
Furthermore, it is undisputed that Ficalora suffered from a chronic form of MS that worsened over time.6 If Ficalora's MS did not render him unable to take employment for pay or profit in October 4, 1991, it may have made him unable to take employment for pay or profit by early 1993, where Ficalora's application for benefits was considered. Thus, the important question before the Disability Panel and Plan Administrator was whether Ficalora presented satisfactory proof of eligibility under the Disability Plan in early 1993.
65
Ficalora presented substantial evidence that he could not take employment for pay or profit in early 1993. First, the Social Security Administration decided on May 17, 1992, to consider Ficalora disabled by MS as of June 1, 1991, and to award him disability benefits. Second, the Social Security disability examiner found that Ficalora was "incapable of performing any past relevant work," and was "restricted by his residual functional capacity to less than sedentary work." Third, Ficalora's MRI revealed "extensive bilateral demyeliniating plaque disease." Fourth, Dr. Blanck stated in a November 3, 1992, letter the following: "[Ficalora's] symptoms have been chronic and slowly progressive. The course of MS is inpossible to predict but the chronic progressive course speaks for a poor prognosis."
66
In my view, Dr. Swanson's brief, handwritten comment is not sufficient to support the Plan Adiministrator's decision to deny disability benefits to Ficalora. Nor do I see any other evidence that would support the Plan AdmiIistrator's decision. If this is the only evidence in support of the position of the Plan Administrator, I submit that he abused his discretion by denying Ficalora benefits under the Disability Plan.
67
I also believe that the majority places too onerous a burden of proof on Ficalora. He is not required to rebut every scintilla of evidence that might suggest he could do some small amount of work for a short period of time. The Plan Administrator abused his discretion because under any view of the evidence, Ficalora presented satisfactory proof to IBM that his MS prevented him from taking any employment for pay or profit.7 I would reverse the district court's opinion affirming the Plan Administrator's decision.8
IV
68
It is undisputed that the Social Security Administration considers Ficalora disabled and entitled to benefits because he is unable to do even sedentary work. Several doctors have told Ficalora that he should retire. One of IBM's doctors concluded that Ficalora is "totally disabled for any type of gainful employment," although this last bit of evidence may have arrived late in the day. Even without that last bit of evidence, it is clear that Ficalora presented more than "satisfactory proof" that he could not take any employment for pay or profit due to his chronic, worsening MS.
69
In ny view, this case is an example of a corporate bureaucracy disregarding the pain and suffering of its disabled employees. One might also conclude that Ficalora fell victim to an uncaring review scheme that places the "bottom line" above the interests of loyal, disabled employees. Ficalora is just such an employee, suffering the ravages of a chronic form of MS, who is denied the means to live his life with dignity. Regardless of how one views this case, it represents the shameful mistreatment of an employee forced to simultaneously battle MS and IBM.
70
Accordingly, I would reverse the district court and find that the Plan Administrator abused his discretion.
*
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3
1
The Plan provides:
An employee will be considered disabled by giving satisfactory proof to IBM that a disability from any cause prevents the taking of any employment for pay or profit.
1
This is the standard Ficalora had to meet to be eligible for benefits under the IBM Medical Disability Income Plan
2
Multiple sclerosis is a disorder of the nervous system for which there is no known cure. Hughes v. Boston Mutual Life Ins. Co., 26 F.3d 264, 266 (1st Cir.1994). Symptoms include weakness, fatigue, loss of coordination, depression, and stiffness or weakness in the lower extremities. Id. Fatigue "commonly occurs as the principal presenting symptom of the disease and is a frequent cause for unemployment in MS patients." Weinshenker, et al., A Double-Blind, Randomized Crossover Trial of Pemoline in Fatigue Associated with Multiple Sclerosis, 1648 Neurology 42, August 1992
3
The administrative record consists of the application; the IBM medical file; the Area Managing Physician's written summary of the application, recommendation, and supporting medical documentation; reports from the applicant's physicians; reports from IBM consultants; the applicant's last three performance appraisals; the applicant's work history and profile; and any other relevant documents
4
Dr Swanson also reviewed Ficalora's medical record, and the evaluations of Drs. Almaraz and Swank
5
MRI scans are the "most valuable investigative tool in diagnosing MS." David H. Miller, M.D., Magnetic Resonance Imaging in the Diagnosis of Multiple Sclerosis In an MRI scan of a person with MS, white matter lesions or plaques are present in parts of the brain
6
A report by the U.S. Department of Health and Human Services about MS identifies two kinds of the disease: (1) exacerbating-remitting disease, characterized by "[p]eriods of deteriorating ability ... followed by periods of recovery;" and (2) chronic progressive disease, which has a "steady downhill course." Multiple Sclerosis--Medicine for the Public, (United States Department of Health and Human Services, Public Health Service, national Institutes of Health, and Warren Grant Magnuson Clinical Center), Aug. 1990, at section entitled "Symptoms."
7
In hindsight, it is clear that Ficalora is eligible for benefits under the Disability Plan. On March 5, 1993, Ficalora voluntarily went to Dr. Swanson, the IBM neurologist, for another examination. This time, Dr. Swanson recommended that Ficalora seek retirement from his job at IBM. In May 1993, Dr. Swank reexamined Ficalora, and stated that Ficalora was "at present totally disabled for any type of gainful employment."
8
Because I come to this conclusion, it is unneccesary to address the two issues that the majority chooses to resolve it its disposition: (1) whether the language of the Disability Plan places discretion in the hands of the Plan Administrator, meaning that the panel can only review the Plan Administrator's decision for an abuse of discretion; and (2) whether the Plan Administrator was required to consider evidence that Ficalora submitted for consideration after the Plan Administrator denied Ficalora disability benefits upon reconsideration
|
ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of -- )
)
John C. Grimberg Co., Inc. ) ASBCA No. 60142
)
Under Contract No. N40080-10-D-0492 )
APPEARANCE FOR THE APPELLANT: Joseph H. Kasimer, Esq.
Kasimer Pierce & Schaecher PC
Tysons Comer, VA
APPEARANCES FOR THE GOVERNMENT: Ronald J. Borro, Esq.
Navy Chief Trial Attorney
Matthew D. Bordelon, Esq.
Trial Attorney
DISMISSAL OF APPEAL WITH PREJUDICE
Appellant has moved to dismiss this appeal, with prejudice, due to a settlement
that it reached with the government. This is consistent with a 30 September 2016 filing
with the Board explaining that the matter had settled and that a motion to dismiss would
be filed shortly. Accordingly, this appeal is dismissed with prejudice.
Dated: 18 October 2016
J. REID PROUTY
Administrative Judge
Armed Services Board
of Contract Appeals
I certify that the foregoing is a true copy of the Order of Dismissal of the Armed
Services Board of Contract Appeals in ASBCA No. 60142, Appeal of John C. Grimberg
Co., Inc., rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Arm~d Services
Board of Contract Appeals
|
208 F.3d 633 (7th Cir. 2000)
UNITED STATES OF AMERICA, Plaintiff-Appellee,v.ANGELA L. JACKSON, Defendant-Appellant.
No. 99-2223
In the United States Court of Appeals For the Seventh Circuit
Argued January 19, 2000Decided April 3, 2000
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.
No. 97 CR 643--Charles R. Norgle, Sr., Judge.
Before BAUER, CUDAHY, and EVANS, Circuit Judges.
EVANS, Circuit Judge.
1
This case is about a tragic waste of talent. Angela Jackson probably would be sitting in a comfortable law firm today- -instead of doing time in a federal penitentiary- -if she had devoted as much energy to her legal studies as she did trying to rip off the United Parcel Service in a bizarre and elaborate scheme that included sending hate mail to a number of prominent African-Americans. Her activities led to a bevy of federal charges, and a jury found her guilty on every count in the indictment. Today, her appeal is up for consideration.
2
In 1996-1997 Jackson (a young African-American woman) was enrolled at the William Mitchell College of Law in St. Paul, Minnesota. She previously lived in Chicago for several years while working and attending the Chicago-Kent law school. In the fall of 1996 Jackson and a friend incorporated a business that planned to sell prints and paintings depicting African-American culture. She purchased several prints from Chicago artist Bayo Iribhogbe for a total of $2,000. She then sent Iribhogbe four United Parcel Service mailers preaddressed to her St. Paul address and on which she had written in bold letters "Kwanzaa," an African-American holiday. Iribhogbe packed his artwork in the mailers and sent them off.
3
UPS delivered the packages to Jackson's St. Paul apartment building on December 4, 1996. The UPS driver, the apartment building's receptionist, and the apartment building's concierge who handed the packages directly to Jackson all testified that there were four packages and that none were damaged or defaced. Jackson, however, reported to UPS that she had received only three packages and that all were damaged and contained racial epithets. Though she had paid only $2,000 for the artwork, though her company had received no orders for the art, and though Iribhogbe never previously sold a single print for more than $15, Jackson filed a $572,000 claim with UPS. When UPS balked, Jackson faxed letters to various African-American officials, claiming that "racist elements" within UPS were responsible for defacing her packages and for refusing to compensate her.
4
That evidence alone might well have been enough to convict Jackson of the fraud charges that were ultimately filed against her, but there was much more. Much more. On December 3, 1996, a search of federal cases and statutes for the words "united," "parcel," "service," "damaged," and "packages" in the same paragraph was done on the LEXIS-NEXIS research service on Jackson's computer under the LEXIS password of Jacqueline Whittmon. Whittmon testified that when she worked in the Chicago-Kent law library she gave Jackson her password, that she never used her LEXIS password after leaving her position at Chicago- Kent in the spring of 1996, that Jackson called her from Minnesota in the fall of that year to ask if her LEXIS password still was activated, and that she never gave her password to anyone else. Also gleaned from Jackson's computer was evidence that it was used in November of 1996 to search the Internet for "white supremacy" organizations and to visit the web sites for the "Euro-American Student Union" and the "Storm Front," two such groups.
5
On November 25, 1996, seven letter packs were placed in a UPS mailing box in Chicago that were addressed to three African-American members of Congress, two African-American newspapers in Washington, D.C., the NAACP, and the Rainbow Coalition. The Euro-American Student Union's address was listed as the return address. The packages never were delivered because the UPS driver noticed racial slurs on the outside of the items and turned them over to his supervisor. UPS opened the packages and inside found racially offensive materials under the UPS logo. On that day, Jackson made a withdrawal from an ATM machine located next to the UPS drop box. A piece of paper with the UPS billing identification number for these packages later was found in Jackson's apartment and Jackson initially gave that number when she called UPS in December to complain about her allegedly defaced packages.
6
On December 22, 1996, letter packs were dropped in a UPS mailing box in Chicago addressed to 14 African-American individuals, including the Reverend Al Sharpton, NAACP president Kweisi Mfume, the Reverend Jesse Jackson, Representative Jesse Jackson, Jr., Representative Bobby Rush, other members of Congress, former Department of Justice Civil Rights Division head Deval Patrick, New York state comptroller H. Carl McCall, and the defendant herself. These packages also contained racial epithets under the UPS logo. Seven of the packages listed Storm Front as the sender. Jackson had flown into Chicago that day and had rented a car during a layover at the airport. Although Jackson did not receive her package until January 6, 1997, she called Rush's office on December 30, 1996, to report that she had received hate mail from Storm Front.
7
On January 3, 1997, McCall received another package--sent under the same UPS account number as the December 22 mailings--that contained racial slurs and prompted McCall's wife to summon the New York Police Department bomb squad. On March 31, 1997, seven more packages with racially offensive materials under the UPS logo were dropped at a Chicago UPS drop box and were sent to the artist Iribhogbe, two government offices, and four African-American members of the House of Representatives.
8
Records and testimony at trial also indicated that Jackson enrolled a UPS employee in the National Rifle Association, sent Confederate flags to a UPS employee, and placed telephone calls, telegrams, and ordered merchandise that attempted to connect UPS employees to white hate groups.
9
In June 1998 the government filed a motion alleging that Jackson had created false email correspondence on May 20, 1998, that attempted to frame David Stennett, the head of the Euro- American Student Union, for the hate mail. Evidence at the trial showed that Jackson subsequently tried to create an alibi by altering and falsifying records to make it appear that she was being treated at Meharry Medical Clinic in Tennessee on May 20, 1998, when she actually was treated there on other dates.
10
Before any of these events, Jackson was arrested for battery in June 1996 by Chicago Police Sergeant Bernadette Heelan. After the arrest and before her court date, Jackson used her credit card to order bottles of wine, Playgirl magazine, and sex toys that were delivered to Heelan's home. Jackson then filed a complaint with the Internal Affairs Division of the Chicago Police Department accusing Heelan of stealing her credit card number during the arrest and using it to make these unauthorized purchases. A piece of paper found in Jackson's apartment contained Heelan's name and address, the telephone numbers of the wine companies, and the words "Sex Devices."
11
The guilty verdicts against Jackson were returned on five counts of mail fraud, four counts of wire fraud, and one count of obstruction of justice. The presiding judge, Charles R. Norgle, Sr., sentenced her to 60 months in prison on the fraud charges and concurrently to 65 months in prison on the obstruction of justice charge. Jackson appeals her conviction on the eight fraud counts involving UPS on the grounds that Judge Norgle excluded admissible evidence, and she appeals her conviction on the one fraud count involving the Chicago police sergeant on the grounds that it was improperly joined with the rest of the case. Curiously, she does not attack the obstruction of justice charge, for which she received the stiffest sentence.
12
Jackson's defense is that she didn't do it--in other words, the original four packages sent to her actually were damaged and defaced by UPS and the hate mail really was sent by white supremacists. She says her defense was stymied, however, by Judge Norgle's refusal to allow Stennett to testify and the judge's refusal to admit postings from the web sites of the white supremacy groups. We review the exclusion of evidence for abuse of discretion. United States v. Wiman, 77 F.3d 981, 985 (7th Cir. 1996).
13
Before trial the government represented that Stennett knew nothing about these crimes and moved to preclude Jackson from calling him as a witness absent a preliminary good-faith showing as to the substance of his testimony. The defense failed to set forth the substance of Stennett's anticipated testimony, saying only that Stennett would be questioned about the UPS packages and the email sent in his name. Because Stennett's denial of any involvement would not have aided Jackson's defense, the only conceivable purpose in calling him would be to air his odious views before the jury. However, a witness may not be called simply to bring in evidence through impeachment that would be otherwise inadmissible. See United States v. Kane, 944 F.2d 1406, 1411 (7th Cir. 1991); United States v. Medley, 913 F.2d 1248, 1257 (7th Cir. 1990). In fact, because Jackson never made known the substance of the evidence Stennett would have provided, the exclusion of this evidence cannot have been error. See Federal Rule of Evidence 103(a)(2).
14
Jackson's brief makes casual mention of the court denying costs for "certain key out-of-town witnesses," and at oral argument Jackson's counsel briefly referred to Sharon Nault, who allegedly saw Jackson receive hate mail. This argument would not succeed even if it were sufficiently developed for us to consider. Such testimony would hardly have turned the tide against the flood of evidence against Jackson, and so its absence can only be chalked up as harmless error, if it was error at all.
15
Jackson also wanted to bring in web site postings from the Euro-American Student Union and Storm Front. Jackson's appeal is imprecise about exactly what evidence she wanted to introduce, but she apparently means web site postings in which the white supremacist groups gloat about the Jackson case, take credit for the racist UPS mailings, discuss the McCall bomb scare, report that a group member traveled to Chicago to mail the November 25 packages, and note that the November 25 packages were confiscated. The government says the evidence was properly kept out because it was prejudicial, irrelevant, hearsay, and lacked foundation.
16
The vile and inflammatory nature of these racist rants might have distracted a jury. On the other hand, the government already had touched upon the supremacists' loathsome views while presenting the evidence that Jackson had visited their web sites, and those additional details might not have been all that prejudicial. Whether any probative value of the web postings would have been substantially outweighed by the danger of unfair prejudice under Federal Rule of Evidence 403 is a close call and, given the standard of review, one on which we are not inclined to second-guess the trial judge on the front line.
17
The government contends that this evidence is irrelevant because it is not true, arguing that Jackson concocted these documents and posted them on the supremacists' web sites in an attempt to cover up her crimes. Under this novel theory of relevance, defense evidence should be excluded whenever the prosecution pronounces it phony. Sorting truth from fiction, of course, is for the jury. "[A] judge in our system does not have the right to prevent evidence from getting to the jury merely because he does not think it deserves to be given much weight." Western Indus., Inc. v. Newcor Canada Ltd., 739 F.2d 1198, 1202 (7th Cir. 1984). The government makes more headway in pointing out that the fraud charges stem not from the hate mail, but from Jackson's claim of damaged packages. Evidence that Jackson was sending fake hate mail under the UPS logo to make the company appear racist was relevant to proving the falsity of her claim that UPS defaced her packages with racial slurs. But if someone else actually sent the fake hate mail under the UPS logo, that would have little relevance to the veracity of Jackson's claim that someone at UPS defiled her packages.
18
The web postings were not statements made by declarants testifying at trial, and they were being offered to prove the truth of the matter asserted. That means they were hearsay. Fed. R. Evid. 801. Jackson tries to fit the web postings in as a hearsay exception under Federal Rule of Evidence 803(6) as business records of the supremacy groups' Internet service providers. Internet service providers, however, are merely conduits. The Internet service providers did not themselves post what was on Storm Front and the Euro-American Student Union's web sites. Jackson presented no evidence that the Internet service providers even monitored the contents of those web sites. The fact that the Internet service providers may be able to retrieve information that its customers posted or email that its customers sent does not turn that material into a business record of the Internet service provider. "[A]ny evidence procured off the Internet is adequate for almost nothing, even under the most liberal interpretations of the hearsay exception rules." St. Clair v. Johnny's Oyster & Shrimp, Inc., 76 F. Supp.2d 773, 775 (S.D. Texas 1999).
19
Even if we are wrong about the web postings being unfairly prejudicial, irrelevant, and hearsay, Judge Norgle still was justified in excluding the evidence because it lacked authentication. See Fed. R. Evid. 901. Jackson needed to show that the web postings in which the white supremacist groups took responsibility for the racist mailings actually were posted by the groups, as opposed to being slipped onto the groups' web sites by Jackson herself, who was a skilled computer user. "[C]omputer data compilations are admissible as business records under Fed. R. Evid. 803(6) if a proper foundation as to the reliability of the records is established." United States v. Briscoe, 896 F.2d 1476, 1494 (7th Cir. 1990). Even if these web postings did qualify for the business records hearsay exception, "the business records are inadmissible if the source of information or the method or circumstances of preparation indicate a lack of trustworthiness." United States v. Croft, 750 F.2d 1354, 1367 (7th Cir. 1984). Jackson was unable to show that these postings were authentic.
20
In addition to her evidentiary complaints, Jackson says the one fraud count concerning Heelan, the Chicago police sergeant, was improperly joined with the eight counts of fraud and the one count of obstruction of justice concerning UPS. Whether joinder is proper is reviewed de novo. United States v. Jamal, 87 F.3d 913, 914 (7th Cir. 1996). Federal Rule of Criminal Procedure 8(a) allows the joinder of offenses that "are of the same or similar character." Judicial efficiency motivates a strong policy preference in favor of joinder and offenses should be compared for categorical, not evidentiary, similarities. United States v. Alexander, 135 F.3d 470, 476 (7th Cir.), cert. denied, 119 S. Ct. 136 (1998). Because the charge against Jackson pertaining to Heelan, attempted fraud in violation of 18 U.S.C. sec. 1341, is identical to the charge against Jackson pertaining to UPS, joinder was proper. See Jamal, 87 F.3d at 914.
21
Jackson did not contend that the Heelan count should have been severed, the usual twin argument to a misjoinder claim, but such an argument would have been to no avail. Fed. R. Crim. P. 14 provides for severance if the defendant would be prejudiced by the joinder of offenses. There always is some danger of cumulative prejudice when offenses start getting stacked up against a defendant, but the real hazards of multiple charges are jury confusion or jury bias if it hears evidence about crime B that it would not have heard if it only were considering crime A. The jury would have had no trouble keeping straight Jackson's attempt to discredit Heelan from her attempts to smear UPS. Because Jackson took the stand to deny the UPS ploy, the evidence about her efforts to set up Heelan would have been admissible on cross-examination under Federal Rule of Evidence 608(b) anyway. Even if Jackson had not testified, her modus operandi was so unusual that the Heelan evidence would have been admissible in a trial on the UPS charges under Federal Rule of Evidence 404(b).
22
For these reasons, the judgment of conviction of Jackson is AFFIRMED
|
77 Wn.2d 499 (1969)
463 P.2d 132
In the Matter of the Petition of the CITY OF KENT.
THE CITY OF KENT, Respondent,
v.
MILDRED IRENE PADUA et al., Appellants.[*]
No. 40751.
The Supreme Court of Washington, En Banc.
December 31, 1969.
Franklin & Watkins, H. Joel Watkins, and Thomas A. Clark, for appellants.
Shellan, Pain, Stone & Swanson, John K. Pain, Jr., and Stanley E. Stone, for respondent.
HALE, J.
In 1967, the legislature provided for the limited payment of attorney's fees and costs in eminent domain proceedings if the condemnee agreed to give immediate possession. Laws of 1967, Ex. Ses., ch. 137, § 3, p. 2208; RCW 8.25.070. The Paduas, owners of property under condemnation by the City of Kent did not tender possession, but nevertheless seek their attorney's fees as a matter of fair and equal protection of the laws.
The City of Kent brought this petition in eminent domain *500 for the purpose of improving South 212th Street. It seeks to condemn and acquire outright some of the Paduas' real property and to establish drainage slope and easement rights on other of their parcels. More than 30 days before the date of trial, the city offered to pay to the Paduas the sum of $9,250 in just compensation for the taking and damaging. The Paduas refused this offer and, employing counsel, went to trial on the issue of the amount of just compensation. The jury returned a verdict of $15,000, far more than the 10 per cent above the state's highest offer, thus meeting one condition of the statute for attorney's fees and costs. At no time, however, did the Paduas ever tender possession of the property under condemnation to the City of Kent. On motion for allowance of attorney's fees, the trial court found the sum of $750 to be a reasonable amount, but denied allowance of the attorney's fees. The condemnees appeal the denial of attorney's fees and costs prescribed by the statute. RCW 8.25.070.
Appellant condemnees seek their attorney's fees and reasonable expert witness fees under Laws of 1967, Ex. Ses., ch. 137, § 3, p. 2208, RCW 8.25.070, which reads, so far as pertinent here:
If a trial is held for the fixing of the amount of compensation to be awarded to the owner or party having an interest in the property being condemned and if the condemnee has offered to stipulate to an order of immediate possession of the property being condemned, the court may award the condemnee reasonable attorney's fees and reasonable expert witness fees actually incurred in the event of any of the following:
(1) If condemnor fails to make any written offer in settlement to condemnee at least thirty court days prior to commencement of said trial; or
(2) If the judgment awarded as a result of the trial exceeds by ten percent or more the highest written offer in settlement submitted to those condemnees appearing in the action by condemnor at least thirty days prior to commencement of said trial...
Two of the conditions required by the pertinent provisions of RCW Title 8 were met and one was not: (1) The *501 condemnor made a written offer in settlement to the condemnee more than 30 days prior to the commencement of trial; (2) the judgment awarded on the verdict exceeded the city's highest written offer by more than 10 per cent, i.e., $15,000 awarded against $9,250 offered; but (3) the condemnee, however, did not offer "to stipulate to an order of immediate possession of the property being condemned."
[1] Appellant condemnees contend, inter alia, that the statute which authorizes to a limited degree allowance for attorney's fees and costs is unconstitutional because it denies them equal protection of the law, constitutes class legislation, deprives them of due process of law, and penalizes them for asserting a constitutional right to have the value of the taking determined by a jury. We are unable to follow these contentions or to square them with any presently acceptable standards of constitutional law, and appellant has been unable to show us any authority to support these assertions of unconstitutionality. So far as we can see, all the statute does is provide for an award of a reasonable attorney's fee and some of the costs of suit actually incurred under prescribed conditions where the law previously allowed no such recovery. It gives the state or city power to enable the condemnee to make a choice where in the past he had no such choice.
Frequently, in the course of acquiring ownership or rights or interests in, or damaging property for the public use, necessity and convenience, the condemnor finds it in the public interest to acquire early possession without imposing any correlative or additional damage to the owners. All the statute does is permit the public agency to offer a substantial and valid inducement to the owners to do something which the state or its agencies could not compel them otherwise to do, and cannot under this statute now compel them to do surrender possession prior to judgment and let the work proceed.
[2] From the condemnee's point of view, we see no denial of any rights or equal protection or even an invidious classification. The owner is entitled to just compensation under our constitution before he must surrender possession. *502 State ex rel. Eastvold v. Yelle, 46 Wn.2d 166, 279 P.2d 645 (1955). Just compensation means fair market value at the time of the taking. Medina v. Cook, 69 Wn.2d 574, 418 P.2d 1020 (1966). In arriving at fair market value, incidential expenses incurred in connection with the ownership of the land, but which do not affect its value, are not to be included. For example, a landowner's expenditures for architectural and engineering services made prior to any construction on land taken in eminent domain, were held to be a noncompensable, consequential loss to the owners and not includable in the fair market value. Greenwood v. Seattle, 73 Wn.2d 741, 440 P.2d 437 (1968). Reasonable attorney's fees actually incurred and expert witness fees incurred in litigating the issue of value would similarly, in the absence of statute, not be deemed a part of and included in the value.
The owners cannot be compelled to surrender possession prior to judgment. But if in their judgment they will incur a benefit or avoid a harm through an early relinquishment, the statute gives them the option of doing so and at the same time litigating in extenso the issue of damages. At all times, the condemnee is free to exercise this choice. Since the condemnor, as an agency of government, in nearly all cases acts for the people, there is nothing unconstitutional, we think, in permitting it to act with both dispatch and economy provided it acts fairly.
This latter idea of fairness, however, raises an issue which emerged on oral argument. How could this statute be fairly applied in circumstances where the condemnee, electing to surrender possession early but intending to litigate the amount of the offer, is awarded by the jury a lesser amount than the offer? Is the court in such a case obliged to enter judgment on the lesser verdict? Can it grant judgment in accordance with the condemnor's highest offer if made according to the statute for the purpose of obtaining early possession in case of a verdict lower than the offer?
A fair and reasonable application of the statute, we think, warrants but one answer. If the condemnee has met *503 all of the conditions of the statute (RCW 8.25.070) including an offer to stipulate to an order of immediate possession of the property under condemnation, and the condemnee has drawn down the offer, and the trier of the facts finds just compensation is less than the amount offered in settlement by the condemnor under RCW 8.25.070, then we think that the court would be bound to enter judgment for the amount of the condemnor's offer. Thus applied, the statute, we think, meets all constitutional tests proposed.
Affirmed.
ALL CONCUR.
February 10, 1970. Petition for rehearing denied.
NOTES
[*] Reported in 463 P.2d 132.
|
NO. 07-01-0285-CV
IN THE COURT OF APPEALS
FOR THE SEVENTH DISTRICT OF TEXAS
AT AMARILLO
PANEL A
JUNE 12, 2002
______________________________
IN THE INTEREST OF D.R.P.
AND T.W .P., CHILDREN
_________________________________
FROM THE 69 T H DISTRICT COURT OF DALLAM COUNTY;
NO. 9593; HONORABLE RON ENNS, JUDGE
_______________________________
BEFORE BOYD, C.J., and REAVIS and JOHNSON, JJ.
Appellant Sharon Parson appeals from a judgment rendered based upon a jury verdict
involuntarily terminating her parental rights to her two children, D.R.P. and T.W .P. Presenting
four issues, Parson contends (1) the trial court erred in denying her motion for new trial and
in failing to grant an evidentiary hearing with a court reporter to consider her motion, (2) there
was insufficient evidence to support a finding that termination of the parent-child relationship
was in the children’s best interest, (3) there was insufficient evidence to support a finding that
Parson knowingly placed or knowingly allowed the children to remain in conditions or
surroundings which endangered the physical or emotional well-being of the children, and (4)
there was insufficient evidence to support a finding that Parson engaged in conduct or
knowingly placed the children with persons who engaged in conduct which endangered the
physical or emotional well-being of the children.1 Based upon the rationale expressed herein,
we affirm.
Parson gave birth to D.P. in June 1995, and T.P. was born three years later. When
Parson became addicted to cocaine in the summer of 1999, she was charged with a
misdemeanor and reports of child neglect were made to authorities, including the Texas
Department of Protective and Regulatory Services (the Department), who validated several
allegations of parental neglect. In October 1999, the Department discovered that Parson’s
plumbing was not working, the toilet was broken and waste was being disposed of on the floor
in a small bucket, the heat was not working, and found Parson’s home to be hazardous to the
health and safety of her children. Parson also acknowledged that on various occasions, she
left the children home alone.
The Department filed its original petition for termination in October 1999, and in
December 1999, filed a Family Service Plan which, among other things, set goals that Parson
should (1) stop criminal acts and stay out of jail, (2) participate in supervised visitation every
1
By supplemental brief, Parson elaborates on her arguments in support of issues one
and three.
2
Monday, (3) seek employment to support her children, (4) participate in an eleven week
parenting class, (5) obtain a psychological evaluation, (6) locate and maintain appropriate
housing, and (7) participate in random urine analysis. One month following receipt of the
plan, Parson was charged with forgery of a check and the children remained in foster care.
In May 2000, Parson agreed to enter a Restitution Center in Beaumont. When Parson was
released from the center in December 2000, she returned to Dalhart for a short time.
However, in January 2001, she went back to Beaumont. Except for telephone conversations,
until the time of trial in April 2001, Parson did not initiate contact with the children while they
remained in foster care.
After the Department filed its fourth amended petition, the trial court signed
interlocutory orders terminating the parent-child relationship between the children and their
father, Dennis Love, and another individual named Alfred Vigil, Jr. Jury trial commenced on
April 23, 2001, as to Parson’s parental rights. Upon conclusion of the evidence, without any
objections to the charge, the trial court submitted appropriate and separate questions to the
jury as to whether
• Parson knowingly placed or knowingly allowed D.P. or T.P. to remain in
conditions or surroundings which endangered their physical or emotional
well-being;
• Parson had engaged in conduct or knowingly placed D.P. and T.P. with
persons who engaged in conduct which endangered their physical or
emotional well-being;
• Parson constructively abandoned D.P. and T.P., with appropriate
instructions; or
3
• Parson failed to comply with the provisions of a court order that
specifically established the actions necessary for her to obtain the
return of her children.
By its charge, the trial court also instructed the jury that the evidence must also demonstrate
by clear and convincing evidence that termination of the parent-child relationship would be
in the best interest of the children, and provided the jury with nine factors they could consider
in addition to other factors. Based upon the jury’s answer that the parent-child relationship
between Parson and her children should be terminated, the trial court signed its order
terminating Parson’s parental rights on April 27, 2001.
By her first issue, Parson contends the trial court erred in denying her motion for new
trial and by failing to grant an evidentiary hearing with a court reporter present to consider the
newly discovered evidence presented in her motion for new trial. We disagree. To prevail
on this issue, Parson was required to demonstrate by affidavit:
(1) that the evidence had come to her knowledge since the time of trial or so
late in the trial that it was impossible to present the evidence be fore the trial
closed;
(2) that it was not because of a lack of due diligence that the evidence did not
come sooner;
(3) that the evidence is not cumulative or impeaching; and
(4) that the evidence is so material that it would probably produce a different
result in a new trial.
See Jackson v. Van Winkle, 660 S.W.2d 807, 809 (Tex. 1983); see also In Re Thoma, 873
S.W .2d 477, 512 (Tex.Rev.Trib. 1994).
4
Parson’s motion for new trial was based on the affidavit of her attorney and an affiant
named Jennifer King. According to the affidavit of the attorney, he was not present when the
alleged newly discovered evidence was obtained, but otherwise swore that the facts in the
motion for new trial were correct. As relevant here, the affidavit of Jennifer King states in
part:
On April 27, 2001, I spoke with Jolie Trujillo, a juror in the above-referenced
cause regarding the jury deliberations, facts and evidence presented at said
case. Also present at that time was Mary Olivarez, a teacher for the Head
Start Program at the Dalhart Elementary School. In the course of my
conversation with Jolie Trujillo and Mary Olivarez, Ms. Olivarez stated that
Stacey Przilas, a witness at this trial, had misrepresented that facts regarding
[D.P.]. Ms. Olivarez also stated that Ms. Przilas not only placed [D.P.] in the
“time out” room when he would become angry and unmanageable, but also
closed the door and shut out the lights, leaving [D.P.] alone in a pitch black
room.
Jennifer King’s affidavit is insufficient to support a motion for new trial because the alleged
statement of Ms. Olivarez referenced therein is nothing more than a report of an unsworn
statement made by Ms. Olivarez and does not state that the statements were true and within
the affiant’s personal knowledge. See Humphreys v. Caldwell, 888 S.W .2d 469, 470 (Tex.
1994). Also, the alleged “strong basis for impeachment” argument presented in the motion
is not controlling because the third element discussed in Thoma, 873 S.W .2d at 512, prohibits
consideration of newly discovered evidence for purposes of impeachment. Moreover,
because the conduct of Ms. P rzilas, who was a witness at trial, was not an issue to be
determined by the jury, the fourth element of materiality in Thoma is not met. Finally, we also
5
notice that the alleged newly discovered evidence of placing D.P. in the “time out room”
applied to him only and not to his brother T.P. Accordingly, issue one is overruled.
Before considering Parson’s remaining issues, we first review the applicable law and
standard of review. The natural right existing between parents and their children is one of
constitutional dimension. Holick v. Smith, 685 S.W .2d 18, 20 (Tex. 1985). Consequently,
termination proceedings must be strictly scrutinized. In Interest of G.M., 596 S.W.2d 846,
846 (Tex. 1980). A termination decree is complete, final, irrevocable, and divests for all time
that natural right as well as all legal rights, privileges, duties, and powers with respect to each
other except for the child’s right to inherit. Holick, 685 S.W .2d at 20. In proceedings to
terminate the parent-child relationship brought under section 161.001 of the Family Code, the
petitioner must establish one or more acts or omissions enumerated under subsection (1) of
the statute, and must additionally prove under subsection (2) that termination of the
parent-child relationship is in the best interest of the child. Tex. Fam. Code Ann. § 161.001
(Vernon Pamph. Supp. 2002). Both elements must be established, and proof of one element
does not relieve the petitioner of the burden of proving the other. See Holley v. Adams, 544
S.W .2d 367, 370 (Tex. 1976). (Emphasis in original).
Termination of parental rights is of such weight and gravity; thus, due process requires
the petitioner to justify termination by clear and convincing evidence. Tex. Fam. Code Ann.
§ 161.001 (Vernon Pamph. Supp. 2002); In Interest of G.M., 596 S.W .2d at 847. This
standard is defined as that measure or degree of proof which will produce in the mind of the
6
trier of fact a firm belief or conviction as to the truth or the allegations sought to be
established. In Interest of G.M., 596 S.W.2d at 847. Although the clear and convincing
burden of proof required at the trial level is well settled, appellate courts have struggled to
reconcile this burden of proof with the standard for appellate review of the sufficiency of
evidence. As this Court has previously noted, the clear and convincing standard does not
alter the rules generally applicable when appellate courts review factual findings. In Interest
of R.D.S., 902 S.W .2d 714, 716 (Tex.App.--Amarillo 1995, no writ). Further, as the trier of
fact, it was the function of the jury to weigh the evidence, draw inferences from the facts, and
choose between conflicting inferences. Ramo, Inc. v. English, 500 S.W .2d 461, 467 (Tex.
1973). In reviewing a challenge to the factual sufficiency of the evidence, we must consider,
weigh, and examine all of the evidence of record. Plas-Tex, Inc. v. U.S. Steel Corp., 772
S.W .2d 442, 445 (Tex. 1989). An appellate court should only set aside a finding if the
evidence which supports the finding is so weak as to be clearly wrong and manifestly unjust.
Cain v. Bain, 709 S.W .2d 175, 176 (Tex. 1986).
By her second issue, Parson contends the evidence was insufficient to support a
finding that termination of the parent-child relationship was in the best interest of the children.
W e disagree. Although the term “best interest of the child” is not defined in section161.001,
in connection with that question, the trial court instructed the jury that among other factors,
they could consider (1) the desire of the children; (2) the emotional and physical needs of the
children now and in the future; (3) the emotional and physical danger to the children now and
in the future; (4) the parenting ability of the individuals seeking custody; (5) the programs
7
available to assist those individuals to promote the best interest of the children; (6) the plans
for the children of those individuals or by the agency seeking custody; (7) the stability of the
home or proposed placement; (8) the acts or omissions of the parent that may indicate that
the existing parent-child relationship is not a proper one; and (9) any excuse for the acts or
omissions of the parent. See Holley, 544 S.W.2d at 371-72. Questions that inquire about
a parent’s actions, omissions, or conduct are generally demonstrated by direct or objective
evidence. Although a determination of the “best interest” may also be based on direct or
objective evidence, i.e., physical abuse, beatings, starvation, and the like, the “best interest”
factors are not always subject to being shown by direct evidence. Instead, a “best interest”
determination may also be based on circumstantial evidence, subjective factors, and the
totality of the evidence as a whole. In Interest of S.H.A., 728 S.W .2d 73, 86
(Tex.App.–Dallas 1987, writ ref’d n.r.e.).
By her argument, Parson focuses on the absence of psychological or medical
testimony directed to the “best interest” question. However, she overlooks her addiction to
cocaine and that she acknowledged leaving the children home alone on numerous occasions.
She testified that she used drugs in the home and on occasion, left the children with persons
whom she knew used drugs. Further, she testified that she had failed to keep the children’s
immunizations current, and by her fact statement, she acknowledged that the Department
validated several allegations of parental neglect against her. Considering the record as a
whole, we conclude the evidence which supports the jury finding is not so weak as to be
clearly wrong and manifestly unjust, and is sufficient to support a finding that termination of
8
the parent-child relationship between Parson and her children, D.P. and T.P., is in the best
interest of the children. Issue two is overruled.
By her third and fourth issues, Parson challenges the factual sufficiency of the
evidence to support the jury’s finding that she knowingly placed or allowed the children to
remain in conditions or surroundings which endangered their physical or emotional well-being,
or to support a finding that she engaged in conduct or knowingly placed the children with
persons who engaged in conduct which endangered their physical or emotional well-being.
However, because Parson does not challenge the sufficiency of the evidence to establish the
remaining two grounds submitted in the charge, i.e., constructive abandonment of the children
or her failure to comply with the provisions of a court order that specifically established the
actions necessary for her to obtain the return of her children, see §161.001 (1)(N) or (O), the
jury’s answer to the broad form question submitted without objection will be upheld if any of
the grounds for termination support it. In Interest of D.L.N., 958 S.W .2d 934, 937 (Tex.App.--
W aco 1997, pet. denied). Having overruled issue two on the basis that termination of the
parent-child relationship was in the best interest of the children, our consideration of issues
three and four is pretermitted.
Accordingly, the judgment of the trial court is affirmed.
Don H. Reavis
Justice
Do not publish.
9
10
|
324 B.R. 85 (2005)
In re Michael Wayne MANUS.
No. 5:05 BK 70196.
United States Bankruptcy Court, W.D. Arkansas, Fayetteville Division.
May 12, 2005.
*86 John M. Blair, Rogers, AR, for the debtor.
Michael J. Ptak, Pender, McCastlain & Ptak, A Professional Association, Little Rock, AR, for U.S. Bank.
Joyce B. Babin, chapter 13 trustee.
MEMORANDUM OPINION AND ORDER
RICHARD D. TAYLOR, Bankruptcy Judge.
On January 11, 2005, the debtor filed a voluntary chapter 13 petition and plan of reorganization. On February 10, 2005, U.S. Bank, N.A. [U.S. Bank] filed a timely objection to the debtor's proposed plan. The Court has jurisdiction over this matter under 28 U.S.C. § 1334 and 28 U.S.C. § 157, and it is a core proceeding under 28 U.S.C. § 157(b)(2)(L). U.S. Bank's objection relates to the inclusion of language in the debtor's plan that imposes an affirmative duty on U.S. Bank to disclose its post-petition fees. For the reasons stated below, the objection is sustained.
On April 20, 2005, the debtor filed a Motion for Summary Judgment, which alleges that no issue of material fact needs to be tried in relation to U.S. Bank's objection. According to the debtor, the only issue before the Court is whether the language contained in his Narrative Statement of Plan is permissible. On April 30, 2005, U.S. Bank filed its Response to Debtor's Motion for Summary Judgment. Its response addresses the language imposing an affirmative disclosure duty on U.S. Bank. U.S. Bank also suggests the plan language constitutes an impermissible modification of its mortgage. Although U.S. Bank alleges it holds a secured claim constituting a first lien on the debtor's property, the Court cannot make such a finding without evidence in support of that allegation.[1] Accordingly, the Court will not address U.S. Bank's argument that the proposed plan language impermissibly modifies the rights of a claim secured only *87 by a security interest in the debtor's principal residence.
U.S. Bank objects to language in the debtor's plan that forbids all holders of claims secured by mortgages or deeds of trusts from imposing legal fees incurred post-petition without notice to the debtor's counsel and filing a post-petition claim. Specifically, the language states that confirmation of the debtors' plan
shall impose an affirmative duty on the holders of all claims secured by mortgages or deeds of trust on real property of this estate to: (d) refrain from the imposition of any legal fees incurred post-petition without notice to debtor's counsel and filing of a post-petition claim. Confirmation of this plan shall impose an affirmative duty on each secured party to comply with these provisions and upon failure to so comply, after twenty days notice to cure has been mailed to said creditor and his attorney, debtor may seek damages in the maximum amount allowable by the court for each and every breach thereof plus reasonable legal fees and in appropriate cases to special damages and punitive damages.
Although the above plan language and underlying facts are not identical, this Court's previous ruling in In re Alanis, 316 B.R. 323 (Bankr.W.D.Ark.2004), is dispositive. The bankruptcy code defines "claim" as a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured." 11 U.S.C. § 101(5). If a fee or expense claimed by a creditor is based on the creditor's right to collect the fees under the respective pre-petition mortgage or deed of trust, the right to payment would be part of a pre-petition claim, even though the fees and charges were not incurred until after the debtor filed his respective bankruptcy petition. Alanis, 316 B.R. at 325 (citing In re Byrd, 192 B.R. 917, 919 (Bankr.E.D.Tenn.1996)).
There is no requirement in the bankruptcy code or rules that a creditor refrain from imposing such post-petition fees in a proof of claim without giving notice to a debtor and filing a post-petition claim. Because of this, the Court sustains U.S. Bank's objection to confirmation of the debtor's plan to the extent the debtor is requiring notice and a post-petition claim before U.S. Bank can claim fees and expenses under a pre-petition mortgage or deed of trust. The debtor shall have 20 days from the entry of this order to amend his plan.
As stated in Alanis, and equally valid here, this holding should not be construed to suggest conclusively that an ambiguous but uncontroverted claim permits the creditor to later, perhaps after the bankruptcy or at the time a release deed is requested, assess bankruptcy related fees and costs not fully addressed in its proof of claim. Nor does this holding suggest that post-petition attorney fees and costs incurred outside the scope of its pre-petition contract, or pre-petition fees and costs not included or addressed in its proof of claim, would later be allowed in contravention of the bankruptcy code or rules.
IT IS SO ORDERED.
NOTES
[1] Neither party submitted a statement of the material facts to which it contends there is no issue to be tried, as required by Rule 56.1 of the United States District Court for the Western District of Arkansas.
|
724 F.2d 974
Moorev.Heckler*d
NO. 83-4536
United States Court of Appeals,fifth Circuit.
JAN 17, 1984
1
Appeal From: S.D.Miss.
2
AFFIRMED.
*
Fed.R.App.P. 34(a); 5th Cir.R. 34.2
d
Local Rule 47.6 case
|
FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT May 26, 2017
_________________________________
Elisabeth A. Shumaker
Clerk of Court
ARNOLD ISELIN,
Plaintiff - Appellant,
v. No. 16-5132
(D.C. No. 4:15-CV-00566-JED-TLW)
THE BAMA COMPANIES, INC., (N.D. Okla.)
Defendant - Appellee.
------------------------------
EQUAL EMPLOYMENT
OPPORTUNITY COMMISSION,
Amici Curiae.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before BRISCOE, HOLMES, and PHILLIPS, Circuit Judges.
_________________________________
In this employment-discrimination case based on disability, Arnold Iselin appeals
from a district court order that dismissed his amended complaint against The Bama
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Companies, Inc. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm in part,
reverse in part, and remand for further proceedings.
BACKGROUND
Iselin worked for Prime Industrial Recruiters, Inc., a temporary employment
agency. On January 7, 2015, Prime assigned Iselin to work for Bama “as a general
production worker.” Aplt. App. at 31. Prime paid Iselin’s salary, but Bama determined
his work assignments, pay rate, work hours, and job duties.
Both Prime and Bama allegedly knew when they hired Iselin that he was disabled,
either due to a torn rotator cuff, an unspecified back problem, or both. In April 2015,
Bama moved Iselin to a different work location because the work he had been doing “was
too hard on his back.” Id. Iselin continued working in the general production job until
either June 11 or June 16—the complaint provides both dates.
On June 16, Bama offered to make Iselin a permanent employee and give him a
raise, provided he pass a “Physical Demand Assessment” (PDA). Id. Iselin underwent
the PDA on June 18. He alleges that despite performing all of the required tasks, Bama
advised him the next day that he had not passed the PDA and that his employment was
therefore terminated.
Iselin obtained a right-to-sue letter from the Equal Employment Opportunity
Commission and then sued Bama under the Americans with Disabilities Act (ADA) of
1990, 42 U.S.C. § 12112, as amended by the ADA Amendments Act of 2008. In an
amended complaint, he claimed (1) discriminatory termination, (2) discriminatory failure
to hire, (3) failure to accommodate, and (4) misuse of employment testing. Throughout
2
the complaint, Iselin alleged that he “was qualified and able to perform the essential
functions of his position as a general production worker for [Bama], and he did perform
these essential functions” with “occasion[al] . . . reasonable accommodation” until June
2015. Aplt. App. at 32, 33.
On Bama’s motion, the district court dismissed the complaint for failure to state a
claim. The court concluded that Iselin’s first three claims failed because he did not pass
the PDA, which showed “he could not perform the essential functions of [his] job,” id. at
69, and he did not allege an “accommodation that [Bama] could have made,” id. at 70.
The court found that Iselin’s fourth claim—misuse of employment testing—failed
because the ADA allows an employer to condition new employment on a medical exam,
and Bama was offering Iselin a new job.
As explained below, we reverse the dismissal of Iselin’s first three claims and
affirm the dismissal of his fourth claim.
DISCUSSION
I. Standard of Review
We review a Rule 12(b)(6) dismissal de novo. Childs v. Miller, 713 F.3d 1262,
1264 (10th Cir. 2013). In doing so, “we accept as true the well pleaded factual
allegations and then determine if the plaintiff has provided enough facts to state a claim
to relief that is plausible on its face.” Hogan v. Winder, 762 F.3d 1096, 1104 (10th Cir.
2014) (internal quotation marks omitted). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.” Id. (internal quotation marks
3
omitted). “The 12(b)(6) standard does not require that [the] Plaintiff establish a prima
facie case in [the] complaint, but rather requires only that the Plaintiff allege enough
factual allegations in the complaint to set forth a plausible claim.” Pueblo of Jemez v.
United States, 790 F.3d 1143, 1172 (10th Cir. 2015) (internal quotation marks omitted).
II. Disability Discrimination
A. Essential Job Functions
The ADA “prohibits employers from discriminating against employees on the
basis of disability and requires employers to make ‘reasonable accommodations’ to
‘qualified individuals,’ unless the accommodations impose an undue hardship on the
employer.” EEOC v. TriCore Reference Labs., 849 F.3d 929, 933 (10th Cir. 2017)
(brackets omitted) (quoting 42 U.S.C. §§ 12112(a), (b)(5)(A)). “The term ‘qualified
individual’ means an individual who, with or without reasonable accommodation, can
perform the essential functions of the employment position that such individual holds or
desires.” 42 U.S.C. § 12111(8).
A job function may be considered essential for a variety of reasons, including (1)
“the reason the position exists is to perform that function”; (2) “there are a limited
number of employees available among whom the performance of that job function can be
distributed”; and/or (3) “the incumbent in the position is hired for his or her expertise or
ability to perform” a highly specialized function. 29 C.F.R. § 1630.2(n)(2). Evidence
showing that a particular function is essential may include:
(i) The employer’s judgment as to which functions are essential;
(ii) Written job descriptions prepared before advertising or interviewing
applicants for the job;
(iii) The amount of time spent on the job performing the function;
4
(iv) The consequences of not requiring the incumbent to perform the
function;
(v) The terms of a collective bargaining agreement;
(vi) The work experience of past incumbents in the job; and/or
(vii) The current work experience of incumbents in similar jobs.
Id. § 1630.2(n)(3).
As noted above, the district court determined that Iselin’s failure to pass the PDA
shows he could not perform the essential functions of a general production worker. There
are two problems with this determination.
First, Iselin alleged that he “was able to perform all of the tasks he was asked to
perform during his [PDA]” and that Bama did not request any “medical information . . .
or examinations” during the first five months he worked as a general production worker.
Aplt. App. at 31 (emphasis added). Consequently, Bama’s “advise[ment] . . . [that] he
had not passed [the PDA],” id., does not necessarily mean that Iselin could not perform
essential job functions. There may be other reasons that Bama advised Iselin he did not
pass that are unrelated to the essential job functions. It is inappropriate at the motion-to-
dismiss stage to resolve this factual discrepancy, as the district court evidently did, in
Bama’s favor. See Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009)
(explaining that resolving a Rule 12(b)(6) motion requires a court to “view [well-plead
factual] allegations in the light most favorable to the plaintiff”). Though we “weigh
heavily the employer’s judgment regarding whether a job function is essential,” the
employer’s judgment is not dispositive. See Hennagir v. Utah Dep’t of Corr., 587 F.3d
1255, 1262 (10th Cir. 2009) (analyzing multiple factors to determine whether a
certification was an essential job function). Rather, the employer’s judgment is just one
5
factor that we consider, albeit an important one. Id.; 29 C.F.R. § 1630.2(n)(3)(i). By
concluding that Iselin’s failure to pass the PDA meant he could not perform the essential
functions, the district court made an impermissible inference in Bama’s favor.
Second, the complaint’s allegations support an inference that Iselin had performed
the essential functions of a general production worker throughout his tenure with Bama.
An employee’s ability to perform the essential functions of a job in the past indicates an
ability to perform that job in the present. See, e.g., Chalfant v. Titan Distrib., Inc.,
475 F.3d 982, 990 (8th Cir. 2007) (despite employer’s assertion that employee had failed
a physical examination, employee established he could perform the essential functions of
his desired job by showing he had performed the job in the past); D’Angelo v. ConAgra
Foods, Inc., 422 F.3d 1220, 1234 n.6 (11th Cir. 2005) (stating that employee’s “prior job
performance [working around moving equipment] create[d] a genuine issue of material
fact as to whether [employee] was able to perform the essential function of working
around moving equipment”); Rizzo v. Children’s World Learning Ctrs., Inc., 173 F.3d
254, 260 (5th Cir. 1999) (rejecting employer’s argument that hearing-impaired employee
was not qualified to safely drive a school van, given the lack of evidence that the
employee “ever had any problems [in the past] driving the van”). By neglecting Iselin’s
temporary-work experience at Bama, the district court ignored several factors that we
consider for the essential-job-function inquiry, namely, “[t]he current work experience of
incumbents in similar jobs” and “[t]he work experience of past incumbents in the job.” 29
C.F.R. § 1630.2(n)(3). But let us be clear—although we will infer from the pleadings
6
that Iselin could perform the essential job functions, we are not foreclosing the possibility
that discovery evidence may show otherwise.
Still, Bama suggests that we must defer to its business judgment that Iselin could
not perform essential job functions. Granted, “[t]here is no doubt in this circuit that it is
an employer’s province to define the job and the functions required to perform it.”
Hawkins v. Schwan’s Home Serv., Inc., 778 F.3d 877, 890 (10th Cir.) (emphasis added;
brackets and internal quotations omitted), cert. denied, 136 S.Ct. 690 (2015). But it is the
court’s province to determine whether a plaintiff has plausibly alleged an element of his
ADA claim, such as whether he can perform the essential functions of the job. See
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (“Determining whether a complaint states a
plausible claim for relief will[ ] . . . be a context-specific task that requires the reviewing
court to draw on its judicial experience and common sense.”). Iselin’s complaint alleges
that he can perform the essential functions and that he had indeed performed them for
over five months. Although there are no allegations as to what those functions might
actually be, he is not “require[d] . . . to set forth a prima facie case for each element.”
George v. Urban Settlement Servs., 833 F.3d 1242, 1247 (10th Cir. 2016) (internal
quotation marks omitted). Rather, he must simply provide enough factual allegations to
“permit the court to infer more than the mere possibility of misconduct” so “that [he] is
entitled to relief.” Iqbal, 556 U.S. at 679 (internal quotation marks omitted).1
1
We express no opinion as to whether Iselin could establish a prima facie case
if called to do so in summary-judgment proceedings. See Koessel v. Sublette Cty.
Sheriff’s Dep’t, 717 F.3d 736, 742 (10th Cir. 2013) (“To establish a prima facie case
of discrimination under the ADA, [Iselin] must show (1) he is disabled (or perceived
7
Bama further contends that Iselin’s ability to do the general-production-worker job
in the past is irrelevant to whether he could perform that job going forward. Bama
explains that “the two positions are different” because Iselin initially performed the job
for “a temporary time period,” Aplee. Br. at 10 (emphasis omitted), for a different
employer (Prime), and for a lesser wage, id. at 11-12. But these distinguishing features
say very little, if anything, about the essential functions of the general-production-worker
job as Iselin initially performed them or as he would have performed them going forward.
While factual discrepancies may become relevant at a later phase of this case, there is
nothing in Iselin’s complaint distinguishing his job as initially performed from the job he
would have performed but for Bama’s assertion that he had not passed the PDA.
Finally, Bama argues “Iselin failed to plead any facts whatsoever that suggest
Bama could have accommodated” him. Aplee. Br. at 13. But Iselin sufficiently pleaded
that a reasonable accommodation was available for his disability by alleging that he
successfully performed the essential functions of the job for five months, “on occasion
with a reasonable accommodation being made for him.” Aplt. App. at 33. At this stage
in the litigation, this factual allegation is enough to infer that Bama could reasonably
accommodate Iselin’s disability.
Thus, the district court erred in dismissing Iselin’s first three claims for relief.
as disabled) as defined by the ADA, (2) he is qualified to perform the essential
functions of his job with or without reasonable accommodation, and (3) he suffered
discrimination as a result of his disability.”).
8
B. Medical Examinations
The ADA generally prohibits an employer from using a medical exam to
determine the existence, nature, or severity of a disability. See 42 U.S.C.
§§ 12112(d)(2)(A), (4)(A). The limited circumstances under which medical exams are
permitted vary for job applicants and current employees. In the case of a job applicant,
an exam may be required “after an offer of employment has been made . . . and prior to
the commencement of the employment duties of such applicant,” so long as “all entering
employees are subjected to such an examination regardless of disability.” Id.
§ 12112(d)(3)(A). In the case of a current employee, an exam may be required if it is
“job-related and consistent with business necessity.” Id. § 12112(d)(4)(A).
Iselin claims that Bama violated the ADA by requiring him to undergo a PDA. He
alleges that he was a Bama “employee”; that he performed the essential functions of his
job for nearly six months; and that he “was not required to take a [PDA] prior to
beginning his employment on January 7, 2015.” Aplt. App. at 34.
The district court characterized Iselin as a job applicant, reasoning that he “was
applying for a different position,” id. at 71, given that the job he performed for nearly six
months differed from the job he sought in terms of employer, wage, and job permanency,
id. at 72. Because Iselin had not commenced his duties in this “different position” at the
time of the PDA, the district court concluded that Bama had lawfully required the PDA.
Consequently, the district court dismissed Iselin’s misuse-of-employment-testing claim.
We agree with the district court’s result, but not its reasoning. Iselin alleges
repeatedly throughout the complaint that he was a Bama “employee.” Id. at 32, 33, 34.
9
But in his misuse-of-employment-testing claim, he quotes the ADA’s medical-exam
provision governing job applicants. Further, his complaint lacks allegations that would
support a misuse claim under either characterization of his relationship with Bama. For
instance, if he was merely a job applicant in June 2015, he does not mention whether “all
entering employees are subjected to such an examination regardless of disability,”
42 U.S.C. § 12112(d)(3)(A). And if he was a Bama employee, he does not mention
whether the PDA was “job-related and consistent with business necessity,” id.
§ 12112(d)(4)(A).
A complaint must provide the defendant “not only fair notice of the nature of the
claim, but also grounds on which the claim rests.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 n.3 (2007) (internal quotation marks omitted). Because Iselin’s misuse claim is
both internally inconsistent and devoid of necessary factual allegations, it fails “to raise a
right to relief above the speculative level,” id. at 555, and it was properly dismissed.2
CONCLUSION
We affirm the district court’s dismissal of Iselin’s fourth claim for relief (misuse
of employment testing). We reverse the district court’s dismissal of Iselin’s other claims,
2
Iselin argues that the district court should have granted him leave to amend
his complaint. But he never asked the district court for that opportunity. Thus, there
was no error. See Garman v. Campbell Cty. Sch. Dist. No. 1, 630 F.3d 977, 986
(10th Cir. 2010) (requiring a written motion in the district court for leave to amend).
10
and we remand this case for further proceedings.
Entered for the Court
Gregory A. Phillips
Circuit Judge
11
|
252 F.Supp.2d 215 (2003)
APPLIED SIGNAL & IMAGE TECHNOLOGY, INC.
v.
HARLEYSVILLE MUTUAL INSURANCE CO.
No. CIV.CCB-02-1944.
United States District Court, D. Maryland.
March 14, 2003.
Peter H. Gunst, Donna M.D. Thomas and Ahn, Astrachan Gunst and Thomas PC, Baltimore, MD, Jonathan F. Monheit, Jonathan F. Monheit PA, Towson, MD, for Plaintiff.
William Carlos Parler, Jr., Parler and Wobber LLP, Towson, MD, for Defendant.
MEMORANDUM
BLAKE, District Judge.
Plaintiff Applied Signal and Image Technology, Inc. ("ASIT") has sued Harleysville Mutual Insurance Co. ("Harleysville") for attorneys' fees and costs incurred in defending against a suit filed by Joseph Hejl, a shareholder and former corporate officer of ASIT. ASIT moves for partial summary judgment on the liability of Harleysville for such fees and costs. Harleysville has filed a cross-motion for summary judgment. This matter has been fully briefed and no hearing is necessary. See Local Rule 105.6. For the reasons that follow, the court will grant ASIT's motion and deny Harleysville's motion.
I.
ASIT, a company engaged in the business of signal and image processing technology for government and commercial contracts, was incorporated in 1994 by Dr. Joseph Harsanyi and Hejl, who were then each fifty percent shareholders and directors of the company. In 1996, John *216 Schveibinz was added as a director and shareholder.
In January 2001, Hejl took a leave of absence from ASIT due to illness. He returned to work part-time in April 2001. In May 2001, he requested that ASIT redeem his stock; and, on June 8, 2001, he resigned as Vice-President/Treasurer of ASIT. Hejl, however, remained a shareholder, director, and part-time employee of ASIT. On June 25, 2001, Hejl was terminated.
Hejl brought suit against ASIT, Harsanyi, and Schveibinz in the Circuit Court for Anne Arundel County on July 5, 2001. In his complaint, which was amended on August 4, 2001, Hejl alleged that Harsanyi and Schveibinz engaged in illegal activities, including unauthorized investments and waste of corporate assets, unauthorized payment of bonuses to themselves, and unauthorized payments of overtime. (See Verified Compl. Exs. 1, 2.) Hejl sought injunctive relief dissolving the corporation and enjoining Harsanyi and Schveibinz from continuing their alleged illegal activity. Hejl also brought claims for breach of fiduciary duty, wrongful discharge, conversion, and, of most relevance to the present case, a claim for "false light."[1]
ASIT was insured by Harleysville from September 10, 2000 until September 10, 2001 through policy number B03E3519 (the "policy"). The policy provided: "[Harleysville] will pay those sums that the insured becomes legally obligated to pay as damages because of ... `personal injury' ... to which this insurance applies." (Def.'s Ex. 4 § II.A.1.) Moreover, the "insurance applies [t]o `personal injury' caused by an offense: (a) Committed in the `coverage territory during the policy period; and (b) Arising out of the conduct of [the insured's] business, excluding advertising, publishing, broadcasting or telecasting done by or for [the insured]." (Id. § II.A.l.a.(2).) The policy further stated that " `personal injury,' means injury other than `bodily injury,' arising out of one or more of the following offenses: ... Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; or ... Oral or written publication of material that violates a person's right of privacy...." (Id. § II.F.10.)
On August 14, 2001, Applied Signal's counsel forwarded a copy of Hejl's complaint to Harleysville and requested coverage under the policy and that Harleysville provide a legal defense to ASIT. (See Verified Compl. Ex. 4.)[2] Under the policy, Harleysville had "the right and duty to defend any `suit' seeking ... damages [covered by the policy]." (Def.'s Ex. 4 § II.A.1.b.) "Suit" was defined in the policy as "a civil proceeding in which damages because of ... `personal injury' to which this insurance applies are alleged." (Id. § II.F.13.) The policy, however, contained an "Employment-Related Practices Exclusion," which stated:
This insurance does not apply to "bodily injury" or "personal injury" arising out of any:
a. Refusal to employ;
b. Termination of employment;
*217 c. Coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination or other employment-related practices, policies, acts or omissions; or
d. Consequential "bodily injury" or "personal injury" as a result of a. through c. above.
This exclusion applies whether the insured may be held liable as an employer or in any other capacity and to any obligation to share damages with or to repay someone else who must pay damages because of the injury.
(Def.'s Ex. 4, BO-7233).
On October 19, 2001, Harleysville Litigation Specialist Lori Rowland stated in a letter to ASIT: "We have been in contact with your personal attorney, Kathryn Miller Goldman and have agreed that she will continue to represent you in this matter and defend your interests in this lawsuit." (Verified Compl. Ex. 5 at 3.) The letter further stated that Harleysville "reserve[d] the right to set up any and all defenses including but not limited to a denial of coverage under [the policy]" and "also reserve[d] its right to withdraw its defense of [the] law suit if it is determined that Harleysville has no duty to defend you." (Id. at 1, 3 (emphasis added).) Harleysville also stated that it was not "waiving any of [its] rights or admitting any obligations under said policy." (Id at 1.)
On November 15, 2001, ASIT reached a settlement agreement with Hejl, to which Harleysville contributed $25,000.00. At no time prior to November 15, 2001 had Harleysville attempted to withdraw its defense of ASIT. Subsequently, on December 18, 2001 and January 10, 2002, ASIT forwarded copies of invoices for legal fees and costs totaling $88,093.66 to Harleysville. (Verified Compl. Exs. 7A, 7B.) Harleysville declined to pay most of the legal fees incurred by ASIT. While admitting in its letter dated January 25, 2002 that: "[t]he allegation of (False Light) Count IV triggered coverage under the Business Owners policy requiring Harleysville to provide a defense for all claims," Harleysville nonetheless suggested that defense costs should be apportioned between Count IV and the other "noncovered" claims and offered only $5840.01 (7%) toward the payment of defense costs. (Verified Compl. Ex. 8.) Accordingly, ASIT brought this suit.
II.
Rule 56(c) of the Federal Rules of Civil Procedure provides that:
[Summary judgment] shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
A genuine issue of material fact exists if there is sufficient evidence for a reasonable jury to return a verdict in favor of the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.1994). In making this determination, the evidence of the party opposing summary judgment is to be believed and all justifiable inferences drawn in her favor. Halperin v. Abacus Tech. Corp., 128 F.3d 191, 196 (4th Cir.1997) (citing Anderson, 477 U.S. at 255, 106 S.Ct. 2505). The non-moving party may not rest upon mere allegations or denials in her pleading, however, but must set forth specific facts showing that there is a genuine issue for trial. Anderson, 477 U.S. at 248, 106 S.Ct. 2505; Allstate Fin. Corp. v. Financorp, Inc., 934 F.2d 55, 58 (4th Cir.1991). The "mere existence of a *218 scintilla of evidence in support of the plaintiffs position" is not enough to defeat a defendant's summary judgment motion. Anderson, All U.S. at 252, 106 S.Ct. 2505.
III.
It is not disputed that Harleysville undertook to provide a defense for ASIT against the suit brought by Hejl. The only issue in this case is whether Harleysville, after initiating such a defense, is entitled to withdraw its agreement to pay the fees incurred by ASIT. Harleysville argues that it should not have to pay defense fees because the policy did not in fact cover the Hejl complaint.[3] This argument fails, however, because it does not differentiate between Harleysville's duty to indemnify and its duty to defend ASIT.
In Maryland, the duty of an insurer to defend an insured and the duty to indemnify are two distinct requirements. Maryland courts follow the "potentiality rule" in determining whether an insurer has a duty to defend. Under this rule, an insurer has a duty to defend when there exists a "potentiality that the claim could be covered by the policy." Brohawn v. Transamerica Ins. Co., 276 Md. 396, 347 A.2d 842, 850 (1975) (emphasis added). "The promise to defend the insured, as well as the promise to indemnify, is the consideration received by the insured for payment of the policy premiums. Although the type of policy here considered is most often referred to as liability insurance, it is `litigation insurance' as well, protecting the insured from the expense of defending suits brought against him." Id. at 851. Thus, under Maryland law, "[t]he duty to defend is broader than the duty to indemnify." Litz v. State Farm Fire & Cas. Co., 346 Md. 217, 695 A.2d 566, 569 (1997). In Litz, the Court of Appeals cited favorably a commentator's statement that: "[t]he defense obligation extends even to those claims filed in bad faith for the sole purpose of raising a potentiality of coverage." Id. at 570.
Harleysville did not expressly reserve its right to seek reimbursement of defense fees if it was later determined that there was no duty to indemnify.[4] Therefore, Harleysville cannot now withdraw its agreement to pay the defense fees incurred by ASIT. See First Financial Ins. Co. v. GLM, Inc., 88 F.Supp.2d 425, 431 (D.Md.2000) ("[The insurer] voluntarily chose to provide counsel to defend [the insured] in the Underlying Litigation. As such, it is not now entitled to the recovery of attorneys' fees and costs incurred in the state court suit."); cf. Harford Mutual Ins. Co. v. Jacobson, 73 Md.App. 670, 536 A.2d 120, 124 (1988), cert, denied, 312 Md. 601, 541 A.2d 964 (1988) ("In the case sub judice, [the insurer] unilaterally determined that it had no duty to defend [the insured] and withdrew from the case. This was not appropriate and [the insurer] must expect to be held accountable for its actions.").
This position is consistent with the potentiality rule because the potentiality rule does not make the duty to defend contingent on the duty to indemnify. As the Third Circuit explained:
Faced with uncertainty as to its duty to indemnify, an insurer offers a defense under reservation of rights to avoid the risks that an inept or lackadaisical defense of the underlying action may expose *219 it to if it turns out there is a duty to indemnify. At the same time, the insurer wishes to preserve its right to contest the duty to indemnify if the defense is unsuccessful. Thus, such an offer is made at least as much for the insurer's own benefit as for the insured's. If the insurer could recover defense costs, the insured would be required to pay for the insurer's action in protecting itself against the estoppel to deny coverage that would be implied if it undertook the defense without reservation. Accordingly, a declaration that there was no duty to defend will not entitle [the insured] to recover any costs it has expended.
Terra Nova Ins. Co. v. 900 Bar, Inc., 887 F.2d 1213, 1219-20 (3d Cir.1989) (footnote and internal citation omitted).
Moreover, if Harleysville had determined that it had no duty to indemnify ASIT while the Hejl suit was pending, Harleysville had a right to seek a declaratory action stating that it no longer had a duty to defend or to indemnify. See Harford Mutual, 536 A.2d at 124 (citing Brohawn, 347 A.2d at 845). It failed to do so. Harleysville is not now entitled to unilaterally withdraw its defense by refusing to pay ASIT's defense fees.[5] Accordingly, ASIT's motion will be granted.[6]
A separate order follows.
ORDER
For the reasons stated in the accompanying Memorandum, it is hereby ORDERED that.
1. Plaintiffs motion for partial summary judgment is Granted;
2. Defendants' motion for summary judgment is Denied;
5. The parties shall submit supplemental memoranda or status reports regarding the amount of attorneys' fees and costs in dispute by April 14, 2003; and
6. The Clerk shall send copies of this Order and the accompanying Memorandum to counsel of record.
NOTES
[1] More specifically, Hejl alleged that the defendants distributed information to employees falsely attributing the instability of ASIT to Hejl and claiming that Hejl was "crippling the company," thereby causing damage to Hejl's reputation. (Hejl Amended Compl., Verified Compl. Ex. 2 ¶¶ 83-85.)
[2] In ASIT's original request to Harleysville for coverage, ASIT asserted that coverage was required due to Hejl's false light claim under § II.F.10 of the policy. (See August 14, 2001 letter to Harleysville, Verified Compl. Ex. 4 at 3-4.)
[3] Harleysville specifically argues that the "Employment-Related Practices Exclusion" applies to Hejl's claims and that Harleysville, therefore, had no duty to defend or to indemnify.
[4] Harleysville did reserve the right to withdraw its defense of ASIT. Such withdrawal, however, did not occur.
[5] Harleysville's argument that it cannot create coverage by waiver is inapposite. That argument may be relevant to the duty to indemnify, but is not relevant to the duty to defend. Unlike the policy at issue in Provident Bank of Maryland v. Travelers Prop. Cas. Corp., 236 F.3d 138, 145 (4th Cir.2000), there is no dispute that the Harleysville policy includes a duty to defend.
[6] Under Maryland law, an insured who succeeds in litigation against a liability insurer that denies coverage or the duty to defend is entitled to counsel fees in that litigation. See Mesmer v. Maryland Auto. Ins. Fund, 353 Md. 241, 725 A.2d 1053, 1064 (1999) ("Instead, the damages for breach of the contractual duty to defend are limited to the insured's expenses, including attorney fees, in defending the underlying tort action, as well as the insured's expenses and attorney fees in a separate contract or declaratory judgment action if such action is filed to establish that there exists a duty to defend."); Not v. United States Fid. & Guar. Co., 329 Md. 52, 617 A.2d 578, 584 (1993). Accordingly, the Court will also award ASIT reasonable attorneys' fees and costs associated with litigating this suit.
|
930 S.W.2d 88 (1996)
The STATE of Texas, Appellant,
v.
George Leslie ADAMS, & John P. Chambers, Appellees.
No. 1177-93.
Court of Criminal Appeals of Texas, En Banc.
April 24, 1996.
Rehearing Denied October 2, 1996.
Opinion Dissenting from Denial of Rehearing October 2, 1996.
Jack B. Zimmermann, Jim E. Lavine, Edward A. Mallett, Houston, for appellant.
Calvin A. Hartmann, Asst. Dist. Atty., Houston, Robert A. Huttash, Matthew Paul, State's Atty., Austin, for State.
Before the court en banc.
Opinion Dissenting from Denial of Rehearing by Judge Clinton October 2, 1996.
OPINION ON STATE'S PETITION FOR DISCRETIONARY REVIEW
WHITE, Judge.
A jury convicted appellees of engaging in organized criminal activity on February 20, *89 1991. See TEX.PENAL CODE ANN. § 71.02(a)(1). On April 5 and May 16, 1991, the trial court assessed punishment for appellees Adams and Chambers, respectively, at ten years confinement in the Texas Department of Criminal Justice, Institutional Division, probated.[1]
The State brings this petition for discretionary review before this Court. In its first two grounds for review,[2] the State asks us to decide whether the Houston Court of Appeals [1st District] erred when it refused to address the merits of the State's argument on direct appeal that the trial court lacked jurisdiction to hear appellees' untimely motions for new trial under an abatement and remand order from the Texarkana Court of Appeals. We conclude the Court of Appeals erred. Disposition of these grounds for review requires a detailed summary of the appellate history of the instant cause.
On April 5 and May 16, 1991, appellees Adams and Chambers, respectively, filed motions for new trial. On June 18, 1991, the trial court denied both motions for new trial. Appellees filed written notices of appeal on June 18, 1991. The appeal was transferred from the Houston Court of Appeals, First District, to the Texarkana Court of Appeals on June 24, 1991.
While that appeal was pending before the Texarkana Court of Appeals, appellees Adams and Chambers filed amended motions for new trial on December 17 and December 19, respectively, 1991. The trial court convened a hearing on the motions for new trial on December 20, 1991. The State objected that the trial court did not have jurisdiction to hear appellees' motions for new trial. On January 6, 1992, the trial court granted both motions for new trial. On January 13, 1992, the State filed a motion for leave to file a petition for writ of mandamus with the Texarkana Court of Appeals to compel the trial court to vacate its January 6th order.
The Texarkana Court of Appeals held the trial court lacked jurisdiction "to grant a motion for new trial in December of 1991, where the appellant [sic] had been sentenced in April, 1991 and where jurisdiction of the cases had vested in this Court in June, 1991." The Texarkana Court of Appeals ruled the trial court's orders granting the motions for new trial to be void, and ordered the trial court to vacate both orders. State ex rel Holmes v. Shaver, 824 S.W.2d 285, at 289 (Tex.App.Texarkana 1992).
However, the Texarkana Court of Appeals decided that it could, under its authority, order the trial court to consider appellees' motions for new trial:
"By separate orders, we will abate the appeals in cause numbers 6-91-061-CR and 6-91-082-CR and remand the causes to the trial court, thereby restoring its jurisdiction, with direction to conduct a rehearing on the out-of-time motions of new trial filed by Adams and Chambers. See Tex.R.App.P. 2(b) and 80(c)."
State ex rel Holmes, 824 S.W.2d, at 289. Pursuant to its opinion, the Texarkana Court of Appeals issued an order to the trial court which stated "we now suspend the requirement of TEX.R.APP.P 31 that all motions for new trial be filed within thirty days of imposition of sentence in open court." This Court denied without a written order the State's motion for leave to file petition for writ of mandamus on February 24, 1992. In the State's petition they argued that the ruling ran afoul of TEX.R.APP.P. 2(a) and therefore *90 the trial court had no jurisdiction to hear an out-of-time motion for new trial.
On February 26, 1992, the trial court convened a hearing on appellees' motions for new trial in compliance with the order of the Texarkana Court of Appeals. Before the trial court began to receive evidence on appellees' motions, the State objected to the proceedings.
The State, relying on TEX.R.APP.P. 2(a) and 2(b)[3], complained that the Texarkana Court of Appeals had no authority to order the abatement and remand for the new trial hearings. The State argued the contemporaneous objection rule would be emasculated if appellees were permitted to file their amended motions for new trial which raised issues not timely presented in their original motions. The State took the position "that the Court of Appeals could not order this abatement." The State objected "to the jurisdiction of the Court at this time."
The trial court overruled the State's objection, and granted the State "a continuing objection along those lines for the entire proceeding." The trial court proceeded to hear evidence on appellees' motions for new trial. On February 26, 1992, the trial court granted the motions.[4] The State gave notice of appeal. The State's appeal was heard by the Houston [First District] Court of Appeals.[5]
The State argued before the Houston Court of Appeals the trial court lacked "jurisdiction to conduct a hearing on appellees' motions for new trial, since said motions were untimely, and the court of appeals was without authority to invest jurisdiction back in the trial court." In its brief, the State explained,
"It is appellant's contention that Judge Shaver did not have the jurisdiction to conduct the hearing on February 26, 1992, herein, notwithstanding the dictates of the remand order of the 6th Court of Appeals on January 28, 1992."
The State argued that Rule 2(b) must be read in conjunction with Rule 2(a). The *91 State acknowledged that the Texarkana Court of Appeals had authority under Rule 2(b) to suspend rules which affected its disposition of the appeal because this would in no way "expand or limit its jurisdiction." However, the State maintained that Rule 2(b) could not "be construed to mean that the court of appeals had the authority to suspend rules which would grant, extend, limit, or restrict the jurisdiction which it would otherwise have if the rule had not been suspended." The State concluded that Rules 2(a) and 2(b) barred the Texarkana Court of Appeals from issuing an order that limited its own jurisdiction so that it could extend the trial court's jurisdiction to hear the untimely motions for new trial in which appellees sought to raise a completely new claim of newly available evidence. Therefore, the State contended the trial court never had jurisdiction to convene the hearing on the motions for new trial.
The Houston Court of Appeals overruled the State's argument without deciding the issue of whether the trial court had jurisdiction. State v. Adams, 860 S.W.2d 737 (Tex. App.Houston [1st Dist.] 1993). Instead, the Houston Court of Appeals decided it lacked the authority to interfere with the abatement order of the Texarkana Court of Appeals.
"Only the Court of Criminal Appeals has authority to review the decisions of the courts of appeals in criminal matters. TEX. CONST. art. V, § 5; TEX.CODE CRIM.P.ANN. art. 4.04 (Vernon Supp. 1993). A court of appeals cannot review a case confided to another court of appeals of equal jurisdiction. Long v. State, 820 S.W.2d 888, 890 (Tex.App.Houston [1st Dist.] 1991, pet. ref'd). As a sister court of the Texarkana Court of Appeals in Texarkana, we cannot pass on the propriety of its holding."
State v. Adams, 860 S.W.2d, at 739. Consequently, the Houston Court of Appeals did not answer the question of whether the trial court had jurisdiction to hear appellees' motions for new trial. The State sought discretionary review from this holding.
The State contends, first, the Houston Court of Appeals erred when it refused to "address on the merits whether a court of appeals could abate an appeal, and invest jurisdiction back in the trial court to consider an out-of-time motion for new trial, thereby unconstitutionally extending the trial court's jurisdiction while simultaneously limiting its own." In its second ground for review the State argues, in the alternative, the Houston Court of Appeals erred "by tacitly holding that a court of appeals could unconstitutionally extend the trial court's jurisdiction while simultaneously limiting its own."
After reviewing the appellate record of the instant cause, including the record of the February 26th hearing, it appears the State consistently argued before every court that the trial court lacked jurisdiction to hear appellees' motions for new trial. Under the facts of the instant cause, the State contended that the Texarkana Court of Appeals never had authority to order the abatement and remand. The State concluded that because this order was invalid, the trial court lacked jurisdiction. Except on their motion for leave to file a petition for writ of mandamus to this Court, the State has not requested that any court reverse the decision of the Texarkana Court of Appeals.
We conclude the Houston Court of Appeals was not asked to review the Texarkana Court of Appeals' decision to abate the appeals and remand. Instead, the State asked the Houston Court of Appeals to decide whether the trial court had lawful jurisdiction to convene a hearing on the out-of-time motions for new trial. In making its argument, the State contended the abatement and remand order to be invalid because it was an unconstitutional extension of the trial court's jurisdiction at the cost of an unconstitutional limitation of the Texarkana Court of Appeals jurisdiction. The State's attack on the jurisdiction of the trial court to hold its hearing necessitated an attack on the order that initiated that hearing. This was a question the Houston Court of Appeals had authority to answer. We conclude the Houston Court of Appeals erred when it did not answer this question. Accordingly, we sustain the State's first ground for review.
The State's second ground for review calls for us to consider whether the Houston *92 Court of Appeals erred by tacitly conceding the trial court had jurisdiction to hear and rule on appellee's out-of-time motions for new trial. This is a question for the Houston Court of Appeals to resolve on remand.
The dissent contends that this decision violates the principle of comity between the state's courts of appeals. As the above discussion points out, the First Court of Appeals is only being asked to determine whether the trial court had lawful jurisdiction over the out-of-time motions for new trial.
Accordingly, we reverse the decision of the Houston Court of Appeals and remand this cause for them to reconsider the State's first point of error in the State's appeal to that court.[6]
CLINTON and MALONEY, JJ., dissent.
BAIRD, Judge, dissenting on State's petition for discretionary review.
The State began its oral argument in the instant case by stating:
With the greatest respect to the Court, and particularly Judge White, I'm going to observe that this is a, quite candidly, another mess from Harris County....
No truer words were ever spoken.
I.
THE FACTS
Because an understanding of the issues presented by this case arises from a complex and confusing factual situation, I will set forth the history of the case.
This case began as a prosecution of four co-defendants for engaging in organized criminal activity. A trial of appellees and one co-defendant resulted in the co-defendant's acquittal and appellees' conviction.[1] After timely motions for new trial were denied, appellees appealed to the First Court of Appeals (Houston), but the case was transferred to the Sixth Court of Appeals (Texarkana). While these appeals were pending, the fourth co-defendant was acquitted. Appellees then filed "out-of-time" amended motions for new trial in the trial court contending new evidence was now available in the form of the co-defendant's testimony. Appellees' amended motions for new trial were granted.
The State filed a motion for leave to file a petition for writ of mandamus in the Sixth Court of Appeals asking the Court to set aside the trial judge's order granting appellees' new trials. The Court of Appeals agreed, holding the trial judge "was without jurisdiction" to grant the out-of-time amended motions for new trial. State ex rel. Holmes v. Shaver, 824 S.W.2d 285, 289 (Tex. App.Texarkana 1992). The Court of Appeals directed the trial judge to vacate his orders granting appellees a new trial. Id. Thus, the State received the relief it requested.
Yet the saga did not end. In its mandamus order, and in a separate order, the Sixth Court of Appeals, pursuant to Tex.R.App. P. *93 2(b) and 80(c), abated appellees' appeals, suspended the requirements and provisions of Tex.R.App. P. 31(a)(1) and remanded the causes to the trial court "with direction to conduct a rehearing on [appellees'] out-of-time motions for new trial...." Id.[2] The State, unhappy with the abatement order, filed a Motion for Leave to File Petition for Writ of Mandamus with this Court, seeking a writ of mandamus directing the Sixth Court of Appeals to withdraw its abatement and remand order. The State contended it had no adequate remedy at law because it could not file a petition for discretionary review, and that, if we did not grant a writ of mandamus, it would "be placed in the unenviable posture of complaining of an appellate court forcing [the State] to take an appeal to that same appellate court because of an earlier order which [the State] contends that the appellate court had no authority to enter." State's motion, pg. 10. We denied the State's leave to file.
The trial judge conducted a hearing on appellees' out-of-time motions for new trial and granted the motions. The State appealed this order to the First Court of Appeals, contending, inter alia, "the [Sixth] Court of Appeals was without authority to vest jurisdiction back to the trial court." State v. Adams, 860 S.W.2d 737, 739 (Tex.App. Houston [1st Dist.] 1993). Appellees filed a "Suggestion for Transfer to the Sixth Court of Appeals," contending the State's appeal arose from the same case which was transferred to the Sixth Court of Appeals. The State objected to such a transfer, arguing that its appeal, "if history may be the guide, effectively will be emasculated if this case is again returned to Texarkana." State's Response, pg. 5. The First Court of Appeals denied appellees' motion.[3]
II.
THE COURT OF APPEALS
In affirming the trial judge's order granting appellees a new trial, the First Court of Appeals declined to address the State's challenge to the trial court's jurisdiction to enter such an order because "[w]hen it conducted the ... [hearing], the trial court was acting pursuant to the [Sixth] Court of Appeals' order to conduct a rehearing on [appellees'] out-of-time motions for new trial." Adams, 860 S.W.2d at 739. Citing Long v. State, 820 S.W.2d 888 (Tex.App.Houston [1st Dist.] 1991), the Court of Appeals held it may not review a case "confided to another court of appeals of equal jurisdiction." Adams, 860 S.W.2d at 739. See also, Long, 820 S.W.2d at 890. Because the Sixth Court of Appeals "concluded it had the authority under Tex. R.App. P. 2(b) and 80(c) to abate the appeals and remand the cases to the trial court ...," the First Court held only the Court of Criminal Appeals has authority to review such a decision. Adams, 860 S.W.2d at 739.
III.
DISCUSSION
Without citing a single relevant case in the body of its opinion,[4] the majority disposes of a rule of comity between our courts of appeals, decides in a footnote an important question of procedure concerning transferred cases, and remands this case to the Court of *94 Appeals for reconsideration in light of two irrelevant cases.
A. Rule 2(b)
Whether Tex.R.App. P. 2(b) provides authority for a court of appeals to suspend the time limitations of Rule 31(a)(1) is the subject of conflict between the courts of appeals. In Torres v. State, 804 S.W.2d 918 (Tex.App. El Paso 1990), the Eighth Court of Appeals held it may not abate an appeal and remand the cause for an out-of-time hearing under Rule 2(b) except pursuant to a bona fide point of error pending before that Court and a showing of good cause. Id., 804 S.W.2d at 919. On rehearing the Eighth Court again rejected such a practice, declining to "enlarge or extend [its] appellate jurisdiction...." Id., 804 S.W.2d at 920.
The Fourth Court of Appeals disagrees. In Harris v. State, 818 S.W.2d 231 (Tex. App.San Antonio 1991), the defendant requested the Court of Appeals abate his appeal and remand the case to the trial court to allow him an "out-of-time motion for new trial based on newly discovered evidence."[5]Id., 818 S.W.2d at 232. The Court first noted that once it acquired jurisdiction, "that jurisdiction embraces everything in the case and every question arising which can be determined in the case...." Ibid., quoting Garcia v. Dial, 596 S.W.2d 524, 528 (Tex.Cr. App.1980). Were the court of appeals to grant or deny a motion for new trial, then it would exceed the limits of its authority. But, in expressly rejecting Torres, the Fourth Court held the abatement of an appeal with a remand to conduct a hearing on an out-of-time motion for new trial does not extend its jurisdiction. Harris, 818 S.W.2d at 233. Therefore, the Fourth Court held that, once good cause is shown, it may suspend the time requirements of Tex.R.App. P. 31(a)(1) under Rule 2(b) and remand the cause for a hearing on an out-of-time motion for new trial. Id., 818 S.W.2d at 233-235. See also, Tuffiash v. State, 878 S.W.2d 197, 198-201 (Tex.App. San Antonio 1994). Other courts of appeals agree. Hilton v. State, 870 S.W.2d 209, 210 (Tex.App.Beaumont 1994); and, Cox v. State, 797 S.W.2d 958, 959 (Tex.App.Houston [1st Dist.] 1990).[6]
We have never ruled specifically on this issue. In State ex rel. Cobb v. Godfrey, 739 S.W.2d 47 (Tex.Cr.App.1987), the trial judge orally granted a motion for new trial, but did not sign an order granting the new trial until after the time period specified by Tex.R.App. P. 31(a)(1) elapsed. Id., 739 S.W.2d at 48. The State brought an original proceeding asking this Court to dismiss the trial judge's order and prohibit a new trial. Ibid. We held that, under the Rules of Appellate Procedure, the motion for new trial was denied when it was not granted in writing within the time specified in Rule 31(a)(1). Although the defendant requested that we suspend the time requirements pursuant to Rule 2(b), we declined, holding he failed to demonstrate good cause to do so. Id., 739 S.W.2d at 49.
Therefore, the applicability of Rule 2(b) to out-of-time motions for new trial is not only an issue upon which the courts of appeals are in conflict, but involves an important question of state law which has not been, but should be, settled by this Court. See, Tex.R.App. P. 200(c)(1) and (2).
Instead of addressing the Rule 2(b) issue, the majority chooses to remand this case to the First Court of Appeals "to decide whether the trial court had lawful jurisdiction to convene a hearing on the out-of-time motions for new trial." Without citation to authority, the majority believes "[t]his was a question the [First] Court of Appeals had authority to answer." However, to address this question, the First Court of Appeals will be required to review the decision of the Sixth Court of Appeals, an act clearly outside the constitutional *95 jurisdiction of the First Court of Appeals. Tex. Const. art. V, § 6. Indeed, the authority to review a decision of a court of appeals is vested solely in this Court.[7] Tex. Const. art. V, § 5.[8]
Thus, the majority opinion does not aid in the jurisprudence of the State and provides no guidance to the courts of appeals on an issue which has engendered conflict for more than five years. Even worse, the majority encourages the intermediate courts of appeals to ignore comity and openly review holdings from courts of co-extensive jurisdiction.
B. TRANSFERRED CASES
The majority, again without citation to controlling authority, holds "it was correct to send the State's notice of appeal from the ... order granting a new trial to the ... [First] Court of Appeals in Houston." Ante, 930 S.W.2d at 90. This would generally be the case. Tex.Gov't Code Ann. §§ 22.201(b) and 22.02(h). However, the Supreme Court initially transferred these cases to the Sixth Court of Appeals. Tex.Gov't Code Ann. § 73.001. And, while the majority would apparently hold the Sixth Court of Appeals only acquired jurisdiction of appellees' claims which arose from their convictions, I am not so sure. Under Tex.Gov't Code Ann. § 73.002(a) the Sixth Court of Appeals acquired jurisdiction over the "case."[9] And the plain meaning of "case" would seem to encompass all the issues attendant to a particular criminal indictment.[10] And absent our holding that a plain meaning construction is ambiguous, or would lead to absurd consequences, we are constrained to apply the statute as written. Boykin v. State, 818 S.W.2d 782 (Tex.Cr.App.1991).
It is further important to note that the State first invoked the jurisdiction of the Sixth Court of Appeals when it originally sought a writ of mandamus from that Court. Since Harris County is not within the jurisdiction of the Sixth Court of Appeals, Tex. Gov't Code Ann. § 22.201(g), the only jurisdiction the Sixth Court of Appeals could have had with regard to the mandamus proceeding must have been conferred when the Supreme Court transferred appellees' appeals to that Court. In other words the State originally argued the Sixth Court of Appeals' jurisdiction was broad enough to encompass all other actions which arose from the cases on appeal. It is only after the State received an "unfavorable" ruling that it began to challenge the jurisdiction of the Sixth Court of Appeals.
C. BATES AND GARZA
The majority reverses this case and remands it to the First Court of Appeals to reconsider the State's point of error. Ante, 930 S.W.2d at 91-92. In a footnote the majority states "[w]e note that the court of appeals did not have the benefit of State v. Bates, 889 S.W.2d 306 (Tex.Cr.App.1994), and Garza v. State, 896 S.W.2d 192 (Tex.Cr. App.1995), which were decided subsequent to their decision." Ante, 930 S.W.2d at 92, n. 6. While such a statement is undoubtedly correct, the majority fails to explain what relevance, if any, either case bears to the instant case. I submit neither case is relevant.
*96 Bates was convicted and timely filed a motion for new trial. On the same day the trial judge granted Bates' motion "as to punishment only." Some six months later Bates filed a "Motion Regarding Conduct of Trial" alleging the trial court was without authority to grant a new trial as to punishment only. The trial judge agreed and entered an order which had the effect of granting Bates a new trial "on the whole case." Bates, 889 S.W.2d at 307-308. We held the subsequent order was untimely and the trial court was without jurisdiction to enter the subsequent order. Id., 889 S.W.2d at 310.
Bates has no application to the instant case. There is no doubt the Sixth Court of Appeals was correct to grant the State's petition for a writ of mandamus when the trial judge initially convened a hearing on appellees' out-of-time motions for new trial. However, Bates does not address whether, pursuant to Rule 2(b) the Sixth Court of Appeals may properly suspend the requirements of Rule 31(a)(1), abate the appeal and remand to the trial court for such a hearing.
In Garza, the Court of Appeals affirmed the judgment of the trial court and denied Garza's motion for rehearing. Garza, 896 S.W.2d at 193. Garza filed a petition for discretionary review and, thirty-two days later, the Court of Appeals withdrew its opinion and issued a new opinion granting relief. Ibid. The State contended the Court of Appeals was without authority to withdraw its opinion after fifteen days from the date Garza's petition for discretionary review was filed. Id., 896 S.W.2d at 194. See, Tex. R.App. P. 101. We agreed, holding "the courts of appeals have no authority to suspend the operation of a rule of appellate procedure in order to create jurisdiction in the court of appeals where no jurisdiction exists." Ibid.
Garza is easily distinguished because neither party challenges the authority of either the First Court of Appeals or the Sixth Court of Appeals to release their opinions in this case. And it does not follow that the use of Rule 2(b) to create jurisdiction in the Court of Appeals when it is properly in the Court of Criminal Appeals would limit the Court of Appeals' authority to apply Rule 2(b) to entirely different factual situations. Garza, like Bates, is irrelevant to the issues before this Court.
IV.
CONCLUSION
A conflict between the courts of appeals exists with respect to their authority to abate an appeal and remand for an out-of-time motion for new trial. Further, in a criminal justice system where cases are often transferred between courts of appeals, the majority opinion provides no guidance on when jurisdiction on transferred cases begins and ends. This case presents an opportunity to provide guidance to the bench and bar on these important issues. Instead, the majority ducks the issues and institutes a new type of review which ignores the Rules of Appellate Procedure and the principles of comity. And it does so with no legal analysis. To such a cavalier attitude toward our responsibilities as the highest criminal court in this State I must dissent.
OVERSTREET, J., joins this opinion.
CLINTON, Judge, Dissenting on Denial of Appellee's Motion for Rehearing on State's Petition for Discretionary Review.
On original submission Judge Baird appropriately criticized the majority for its ipse dixit ruling that the Houston First Court of Appeals "had authority" to decide whether the trial court had jurisdiction to conduct an out-of-time motion for new trial hearing. The majority on original submission never addressed the First Court's concern that for it to rule on the jurisdictional question would encroach upon the judgment of a sister court of co-ordinate jurisdictionsomething only this Court has authority to do in the criminal context. See Cleveland v. Ward, 116 Tex. 1, 285 S.W. 1063 (1926). The Court's opinion on original submission was rendered utterly without guiding principle.
The Texarkana Court of Appeals purported to abate the appeal and send it back to the trial court to conduct an out-of-time motion for new trial hearing. State ex rel. *97 Holmes v. Shaver, 824 S.W.2d 285, 289 (Tex. App.Texarkana 1992). Leaving aside the question whether the Texarkana Court can properly retain appellate jurisdiction while at the same time re-confering authority on the trial court to "rehear" (and presumably rule again on) a motion for new trial, it is clear that the Texarkana Court of Appeals did not intend to relinquish its appellate jurisdiction over the cause. The Texarkana Court subsequently dismissed the appeal as moot only because the State's notice of appeal was not timely filed there. Instead, the clerk of the trial court mistakenly filed it in the First Court of Appeals. But because at that time appeal of the cause was already pending in Texarkana, a court of co-ordinate jurisdiction, the First Court did not even have the authority to take it up. See Cleveland v. Ward, supra.
Had the appeal from the trial court's purported order granting a new trial been filed where it should have been, in the Texarkana Court, that court would undoubtedly have ruled that its opinion on mandamus had already essentially disposed of the question of the trial court's authority to rule on the out-of-time motion for new trial. See State ex rel. Holmes v. Shaver, supra. After all, this Court had refused to entertain the State's mandamus petition asking us to undo the Texarkana Court's remand. The propriety of that remand should have been determined at that time by this Courtnot by now requiring another court of appeals to second-guess the judgment of its sister courtsomething the First Court of Appeals rightly perceived it lacks authority to do.
The Court should grant rehearing in this matter and straighten out the mess. Because it does not, I dissent.
NOTES
[1] In both cases, the State urged the trial court to sentence each appellee to an unprobated prison term and to issue a "written order directing that all identifiable proceeds of the thefts in the crimes proved in the instant indictments, be returned to their proven rightful owner, the Mental Health Mental Retardation Authority of Harris County." Instead, the trial court chose to sentence each appellee to probation and ordered them to pay restitution equal to the amount which the State proved that they stole from M.H.M.R.A. The trial court ordered appellee Adams to pay $514,396.00 in restitution. The trial court ordered appellee Chambers to pay $2,125,000.00 in restitution.
[2] The State also sought discretionary review from the Houston Court of Appeals' decision which held the trial court did not abuse its discretion when it granted appellee's motions for new trial based upon newly discovered or newly available evidence. Though we granted review on this ground, our disposition of the State's other grounds for review renders this issue moot. We are not approving or disapproving of the decision of the Court of Appeals on this issue.
[3] TEX.R.APP.P. Rule 2. Relationship to Jurisdiction and Suspension sets out:
"(a) Relationship to Jurisdiction. These rules shall not be construed to expand or limit the jurisdiction of the courts of appeals, the Court of Criminal Appeals or the Supreme Court as established by law."
"(b) Suspension of Rules in Criminal Matters. Except as otherwise provided in these rules, in the interest of expediting a decision or for other good cause shown, a court of appeals or the Court of Criminal Appeals may suspend requirements and provisions of any rule in a particular case on application of a party or on its own motion and may order proceedings in accordance with its direction. Provided, however, that nothing in this rule shall be construed to allow any court to suspend requirements or provisions of the Code of Criminal Procedure."
[4] Appellees argued that Williams, one of their indicted co-conspirators, was acquitted by instructed verdict in his trial which took place subsequent to appellees' convictions. Appellees contended Williams was now available to testify.
[5] It was proper for the clerk of the trial court to send the State's notice of appeal, from the February 26, 1992 order granting a new trial, to the First Court of Appeals in Houston.
Harris County lies within the jurisdictional boundaries of the First and Fourteenth Court of Appeals districts. TEX.GOV'T.CODE ANN. §§ 22.201(b) & (o). The individual courts of appeals have jurisdiction over all of the cases, criminal and civil, in which the district and county courts of their district have original or appellate jurisdiction. TEX. CONST. art. V, § 6. When a notice of appeal is given to the trial court, the clerk of that court "shall immediately send one copy to the clerk of the appropriate court of appeals." TEX.R.APP.P. 40(b)(1).
Even though the Supreme Court transferred the appellees' original appeals of their criminal convictions to the Texarkana Court of Appeals on June 24, 1991, see TEX.GOV'T.CODE ANN. §§ 73.001 & 73.002, the Texarkana Court of Appeals did not retain jurisdiction over the State's appeal of the trial courts second order (on February 26, 1992) granting a new trial.
On March 31, 1992, the Texarkana Court of Appeals dismissed the appellee's original notice of appeal as moot. When the State sought to appeal the granting of a new trial, they argued to the First Court of Appeals only that the trial court lacked jurisdiction to issue that order.
Pursuant to the rules set out above, the clerk of the trial court was correct to send the State's notice of appeal from the February 26, 1992 order granting a new trial to the First Court of Appeals in Houston. Since the Texarkana Court of Appeals had dismissed the appellee's original notice of appeal as moot, they no longer had jurisdiction of the dispute. We conclude it was proper for the First Court of Appeals to review the trial court's second decision to grant a new trial.
[6] We note that the court of appeals did not have the benefit of State v. Bates, 889 S.W.2d 306 (Tex.Cr.App.1994), and Garza v. State, 896 S.W.2d 192 (Tex.Cr.App.1995), which were decided subsequent to their decision.
The dissent asserts these two cases are irrelevant to the disposition of this cause. We respectfully disagree.
In Garza v. State, the issue did not involve out-of-time motions for new trial. However, it did involve a court of appeals suspending the operation of a Rule of Appellate Procedure in order to create jurisdiction where it would otherwise not exist. It involved the interpretation of the interplay between Rules 2(a) and 2(b) of the Rules of Appellate Procedure. Garza, at 193-194. In reversing the actions of the Court of Appeals, this Court concluded "the courts of appeals have no authority to suspend the operation of a rule of appellate procedure in order to create jurisdiction in the court of appeals where no jurisdiction exists." Garza, at 194. In the instant case, the First Court of Appeals was being asked if jurisdiction could be created in the trial court after the rules of appellate procedure mandated that it no longer existed. Garza may not have dealt with the rules governing motions for new trial, but its holdings are relevant to the disposition of the instant cause.
State v. Bates, although not discussing Rules 2(a) and 2(b), involved the question of whether a trial court can reclaim jurisdiction of a cause after the Rules of Appellate Procedure mandated that cause had passed beyond its jurisdiction. State v. Bates, 889 S.W.2d, at 310-311.
[1] Appellees were sentenced to ten years confinement, probated.
[2] Tex.R.App. P. 2(b) provides:
Suspension of Rules in Criminal Matters. Except as otherwise provided in these rules, in the interest of expediting a decision or for other good cause shown, a court of appeals or the Court of Criminal Appeals may suspend requirements and provisions of any rule in a particular case on application of a party or on its own motion and may order proceedings in accordance with its direction. Provided, however, that nothing in this rule shall be construed to allow any court to suspend requirements or provisions of the Code of Criminal Procedure.
Tex.R.App. P. 80(c) provides:
Other Orders. In addition, the court of appeals may make any other appropriate order, as the law and the nature of the case may require.
Tex.R.App. P. 31(a)(1) provides:
(a) Time to File and Amend.
(1) To File. A motion for new trial if filed may be filed prior to, or shall be filed within 30 days after, date sentence is imposed or suspended in open court.
[3] The Sixth Court of Appeals later dismissed appellee's original appeals as moot.
[4] Excepting citation to the Courts of Appeals opinions below.
[5] The Court of Appeals noted that claims of newly discovered evidence are not generally cognizable by habeas corpus. Id., 818 S.W.2d at 233; and, Ex parte Binder, 660 S.W.2d 103 (Tex.Cr. App.1983). But see, State ex rel Holmes v. Court of Appeals, 885 S.W.2d 389 (Tex.Cr.App.1994) (Claims of newly discovered evidence may be cognizable by habeas corpus.).
[6] The majority holds the First Court of Appeals had the authority to decide whether the trial court had lawful jurisdiction to convene a hearing on the out-of-time motions for new trial. Ante, at 91-92. This issue has already been resolved by the First Court of Appeals in Cox, 797 S.W.2d 958.
[7] Even had the First Court of Appeals authority to review the decision of the Sixth Court of Appeals, it should properly refuse to do so under the principles of comity.
[8] Tex. Const. art. I, § 5 provides in part:
... [T]he Court of Criminal Appeals may, on its own motion, review a decision of a Court of Appeals in a criminal case as provided by law. Discretionary review by the Court of Criminal Appeals is not a matter of right, but of sound judicial discretion.
[9] The majority is incorrect in stating the clerk of the trial court was correct to send the State's notice of Appeal to the First Court of Appeals "[s]ince the [Sixth] Court of Appeals had dismissed the appellees' original notice of appeal as moot, they no longer had jurisdiction of the dispute." Ante, 930 S.W.2d at 90. The State's notice of appeal in this case was filed on February 26, 1992. The Sixth Court of Appeals did not dismiss appellees' appeals until March 31, 1992.
[10] The definition of "case" includes:
... A judicial proceeding for the determination of a controversy between parties wherein rights are enforced or protected, or wrongs are prevented or redressed, any proceeding judicial in its nature.
BLACK'S LAW DICTIONARY 215 (6th ed. 1995).
|
33 F.3d 61
NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.In re Ardas YANIK, Debtor.Julian AYRS, Appellant,v.Ardas YANIK; Lawrence A. Diamant, Chapter 7 Trustee, Appellees.
No. 93-56150.
United States Court of Appeals, Ninth Circuit.
Submitted Aug. 3, 1994.*Decided Aug. 10, 1994.
Before: WALLACE, Chief Judge, HUG and RYMER, Circuit Judges.
1
MEMORANDUM**
2
Creditor Julian Ayrs appeals pro se the Bankruptcy Appellate Panel's ("BAP") dismissal of his appeal from the bankruptcy court's order denying his motion for a stay pending appeal. The BAP found Ayrs's appeal moot and dismissed for lack of jurisdiction. We have jurisdiction pursuant to 28 U.S.C. Sec. 158(d), and we affirm.
3
We review de novo a lowe court's decision on subject-matter jurisdiction, including questions of mootness. Sample v. Johnson, 771 F.2d 1335, 1338 (9th Cir.1985), cert. denied, 475 U.S. 1019 (1986). "A moot action is one where the issues are no longer live or the parties lack a legally cognizable interest in the outcome." Id.
4
In a separate action, creditor Ayrs appealed to the BAP the bankruptcy court's order upholding debtor Yanik's homestead exemption and granting Yanik's motion to avoid Ayrs's judicial lien on his residence. Ayrs sought a stay of that order in the bankruptcy court pending the appeal. The bankruptcy court denied the stay finding that Ayrs had failed to show a likelihood of success on the merits. Ayrs appealed the denial of the stay to the BAP which dismissed the appeal for lack of jurisdiction. Ayrs timely appealed to this court.
5
The BAP considered Ayrs's appeal from the order upholding the homestead exemption together with Ayrs's appeal from the denial of the stay. As to the former, the BAP affirmed in part the bankruptcy court's order, and remanded in part. It found that although the bankruptcy court correctly upheld debtor Yanik's homestead exemption on his residence, it was unclear from the record as to whether Ayrs's lien attached to that residence. The BAP explained that if Ayrs's lien did not attach to Yanik's homesteaded residence, Yanik could not lawfully avoid the lien. It therefore remanded to the bankruptcy court for clarification on whether Ayrs's lien attached to Yanik's Northridge residence. The BAP then dismissed as moot Ayrs's motion for a stay pending appeal of the bankruptcy court's decision. The BAP found that by remanding the bankruptcy court's order for clarification, it "effectively removed the legal effect" of that order. Accordingly, the BAP concluded that because the order sought to be stayed was no longer in effect, Ayrs's motion for a stay pending appeal of that order presented no case or controversy.
6
We find no error in the BAP's reasoning. Because the BAP's remand effectively vacated the bankruptcy court's decision, there was no order to be stayed pending appeal. Accordingly, the BAP properly dismissed Ayrs's appeal as moot. See Sample, 771 F.2d at 1338.
7
AFFIRMED.
*
The panel unanimously finds this case suitable for decision without oral argument. Fed.R.App.P. 34(a); 9th Cir.R. 34-4
**
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3
|
626 F.Supp. 699 (1985)
M-F-G CORPORATION, an Illinois corporation, Plaintiff,
v.
EMRA CORPORATION, a California corporation, Dion, Inc., a California corporation, Robert Parsons and Julie Parsons, as individuals, Defendants.
No. 84 C 10846.
United States District Court, N.D. Illinois, E.D.
December 12, 1985.
*700 Jerome F. Fallon, John W. Chestnut, Tilton, Fallon, Lungmus & Chestnut, Chicago, Ill., for plaintiff.
William Van Santen, John Mortimer, Chicago, Ill., Bruce W. Schwab, George Schwab, Townsend & Townsend, San Francisco, Cal., for defendants.
MEMORANDUM OPINION AND ORDER
WILLIAM T. HART, District Judge.
FACTS
Plaintiff M-F-G Corporation ("MFG") is an Illinois corporation in the business of selling beauty and barber supplies primarily to the hair care industry. MFG sells a wide variety of products (approximately 1,500 items according to its 1984 10-K report to the SEC) through intermediaries such as barber supply houses and cosmetology and barber schools. Certain hair cutting scissors and replacement blades are sold by MFG under the trademark "SUPERCUT" (see Fig. 1 in Appendix). The word "SUPERCUT" was originally registered by MFG as a trademark on the Supplemental Register in 1954. In 1975 MFG obtained registration No. 1,005,242 on the Principal Register for that same word.
Defendant EMRA Corporation ("EMRA") is a California corporation and owns or franchises several hundred haircutting shops featuring the name "SUPERCUTS" (see Fig. 2 in Appendix). EMRA opened the first such shop in 1975. EMRA also sells shampoo and conditioner to its customers which bear the name "SUPERCUTS." In 1983 one of EMRA's distributors on the West Coast imported 1,210 pairs of scissors bearing the EMRA "SUPERCUTS" logo, some of which were used at the EMRA training center and some of which were sold to various "SUPERCUTS" shops.
Defendant Dion, Inc., is a California corporation involved in the operation of the "SUPERCUTS" shops. Defendants Robert and Julie Parsons are individuals doing business in Illinois under the name "SUPERCUTS." For purposes of these motions all defendants will be referred to collectively as EMRA.
MFG filed suit against defendants alleging violations of MFG's rights under the following theories: (1) trademark infringement under the Lanham Act, 15 U.S.C. § 1051 et seq.; (2) violation of MFG's common law rights in its trademark; (3) unfair competition; (4) false designation of origin under the Lanham Act; (5) dilution of the mark in violation of the Illinois Anti-Dilution Statute, Ill.Rev.Stat. ch. 140, § 22; and (6) deceptive trade practices in violation of the Illinois Deceptive Trade Practices Act, Ill.Rev.Stat. ch. 121½, §§ 312-313. MFG seeks injunctive relief and damages, as well as costs and fees.
EMRA asserts the affirmative defenses of laches, estoppel, acquiescence, and unclean hands. EMRA also asserts, as affirmative defenses, that MFG's mark is a weak mark unknown to the general public and that EMRA adopted and continuously used the "SUPERCUTS" mark since prior to MFG's registration. EMRA also counterclaims, *701 alleging unfair competition on the part of MFG in bringing the lawsuit and seeking declaratory relief.[1]
Now EMRA has moved for summary judgment pursuant to Federal Rule of Civil Procedure 56 as to all issues presented in the complaint and Count III of the counterclaim, which seeks declaratory relief. MFG has moved for partial summary judgment on the question of whether EMRA infringed MFG's trademark by using haircutting shears bearing the word "SUPERCUTS."
DISCUSSION
The Seventh Circuit has stated the standards for summary judgment:
Rule 56 of the Federal Rules of Civil Procedure provides that summary judgment shall be granted if the record shows that `there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' It is clear that the party moving for summary judgment has the burden of establishing that there is no genuine issue of material fact.... `For the purpose of determining whether any material fact remains disputed, "the inferences to be drawn from the underlying facts ... must be viewed in the light most favorable to the party opposing the motion."'
Korf v. Ball State University, 726 F.2d 1222, 1226 (7th Cir.1984). However, the non-movant may not merely rely on conclusory statements to withstand summary judgment. In responding to a motion for summary judgment, the non-movant must set forth specific facts in affidavits or otherwise show that there are genuine issues that must be decided at trial. Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir.), cert. denied, 464 U.S. 960, 104 S.Ct. 392, 78 L.Ed.2d 336 (1983). Courts will not strain to find a genuine issue where none exists. Kirk v. Home Indemnity Co., 431 F.2d 554, 559-60 (7th Cir.1970); Victory Pipe Craftsmen, Inc. v. Faberge, Inc., 582 F.Supp. 551, 554 (N.D.Ill.1984).
I. Trademark Infringement and EMRA's Activities Other Than the Use of Scissors
Defendants contend that EMRA's activities other than the use of scissors marked "SUPERCUTS" (which will be considered separately in part II, infra) do not infringe MFG's trademark. They argue that MFG's mark is weak and therefore has a narrow scope of protection, and that there is no likelihood of confusion between MFG's "SUPERCUT" scissors and blades and EMRA's use of the "SUPERCUTS" mark.
Section 32 of the Lanham Act, 15 U.S.C. § 1114, provides, in relevant part:
(1) Any person who shall, without the consent of the [trademark] registrant
(a) use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered mark in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive ... shall be liable in a civil action by the registrant....
The central issue presented is whether EMRA's use of "SUPERCUTS" is likely to cause confusion. Likelihood of confusion is an issue of fact. Union Carbide Corp. v. Ever-Ready, Inc., 531 F.2d 366 (7th Cir.), cert. denied, 429 U.S. 830, 97 S.Ct. 91, 50 L.Ed.2d 94 (1976). "In determining whether likelihood of confusion exists, courts consider such factors as the type of trademark in issue, the similarity of design, similarity of products, identity of retail outlets and purchasers, identity of advertising media utilized, defendants intent, and actual confusion." Wesley-Jessen Div. of Schering Corp. v. Bausch & Lomb, Inc., 698 F.2d 862, 866 (7th Cir.1983); Union Carbide Corp., 531 F.2d at 381-82.
The first factor, "type of trademark," is by far the most complex in a legal sense. Trademarks have been classified as "weak" or "strong" and also as being "distinctive" or not distinctive. See, e.g., Telemed Corp. v. Tel-Med, Inc., 588 *702 F.2d 213, 219-20 (7th Cir.1978). In Telemed, The Seventh Circuit explained the importance of these classifications:
In essence, the distinctiveness and popularity of the trademark will determine its relative strength or weakness and will accordingly define the scope of protection to be accorded the mark against the confusing similarity of others. A mark is strong if it is conspicuously distinctive; it is distinctive if the public has already been educated to accept it as the hallmark of a particular source. Then too, a mark can be distinctive either because it is unique, that is, distinctive in itself, because it has been the subject of wide and intensive advertisement, or because of a combination of both.
Telemed, 588 F.2d at 219; Westward Coach Manufacturing Co. v. Ford Motor Co., 388 F.2d 627, 634 (7th Cir.), cert. denied, 392 U.S. 927, 88 S.Ct. 2286, 20 L.Ed.2d 1386 (1968); 3 R. Callman, Unfair Competition and Trademarks, § 82.1 at 1503-04 (2d ed.). The weaker the mark, the less the likelihood of confusion, and therefore the narrower the scope of protection. Telemed, 588 F.2d at 219. This protection may be limited to similar goods similarly marketed. Id. Only a strong mark will be protected against infringement arising out of its use in connection with noncompeting goods. Id.; Westward Coach, 388 F.2d at 634; 3 Callman, supra, § 82.1.
Under Telemed, a mark is "conspicuously distinctive" and therefore "strong"
1) because it is "unique" and therefore distinctive in itself,
2) because it has been the subject of wide and intensive advertisement, or
3) because of a combination of both.
The "intrinsic" strength of a trademark is determined by placing it along a spectrum in which trademarks are classified as (1) generic or "common descriptive," (2) "merely descriptive," (3) suggestive, or (4) arbitrary or fanciful. Miller Brewing Co. v. G. Heileman Brewing Co., 561 F.2d 75, 79 (7th Cir.1977), cert. denied, 434 U.S. 1025, 98 S.Ct. 751, 54 L.Ed.2d 772 (1978). MFG contends that "SUPERCUT" as applied to scissors is "suggestive" while EMRA argues that it is "merely descriptive." A "merely descriptive" term "specifically describes a characteristic or ingredient of an article" while a "suggestive" term "suggests rather than describes an ingredient or characteristic of the goods and requires the observer or listener to use imagination and perception to determine the nature of the goods." Id. A merely descriptive mark is inherently much weaker than a suggestive mark and less deserving of protection. Telemed, supra, 588 F.2d at 217.
The "SUPERCUT" trademark is merely descriptive. Webster's Third New International Dictionary defines the prefix "super" as "over and above: higher in quantity, quality, or degree" and the adjective "super" as "of a superfine grade or quality" or "of great worth, value, excellence, or superiority." Webster's at 2292. When followed by the word "cut," signifying both the operation of the scissors and the result it produces, the word "SUPERCUT" describes a scissors that produces a high or superior quality cut or that cuts in a superior fashion.
MFG argues that the word is not descriptive because "cut" is not synonymous with "scissors" or "shear." But similar trademarks have been found to be merely descriptive. See, e.g., E.F. Drew & Co. v. Pam Industries, Inc., 299 F.2d 777 (7th Cir.1962) ("Dri-Fri" for vegetable oil for cooking); In re Sheaffer Pen Co., 158 F.2d 390, 34 CCPA 771 (1946) ("Fineline" for mechanical pencils and lead refills); In re Colonial Refining & Chemical Co., 196 U.S.P.Q. 46 (T.T.A.B.1977) ("Sure Grip" for a nonskid coating); Andrew J. McPartland, Inc. v. Montgomery Ward & Co., 164 F.2d 603, 35 CCPA 802 (1947), cert. denied, 333 U.S. 875, 68 S.Ct. 904, 92 L.Ed. 1151 (1948) ("Quick Start" for electric storage batteries).
The Seventh Circuit has identified as "perhaps the best statement of [this] distinction" to be the following:
*703 "[I]f the mark imparts information directly, it is descriptive. If it stands for an idea which requires some operation of the imagination to connect it with the goods, it is suggestive."
Union Carbide, supra, 531 F.2d at 379 (quoting A. Seidel, S. Dalroff, and E. Gonda, Trademark Law and Practice § 4.06 at 77 (1963)). It takes no imagination to understand that "SUPERCUT," as applied to scissors, describes a scissors of high quality.
Neither has "SUPERCUT" become a strong and distinctive mark because of wide and intensive advertising on the part of MFG. While MFG spends a substantial amount each year on advertising, this advertising is directed toward all of its hundreds of products, whereas only a few of these products are "SUPERCUT" scissors and blades. Even if the court accepts MFG's representations on the percentage of total advertising directed toward "SUPERCUT" products to be true, as it must for purposes of this motion, this represents but a small percentage of MFG's total advertising.
MFG emphasizes that it has been selling "SUPERCUT" scissors for thirty years. But duration is significant only when an owner "can point to a long period of time during which his mark was used on a great quantity of articles, as symbolic of his business." Telemed, supra, 588 F.2d at 219. MFG has used "SUPERCUT" on very few of its products. It markets scissors under other trademarks as well. It has stated in its 10-K form that "none [of its 1,500 products] is significant in itself." Clearly "SUPERCUT" is not symbolic of MFG's business in the way that so many trademarks are.
Trademarks are also considered weak if they are used on a variety of other products by other companies. Victory Pipe Craftsmen, Inc. v. Faberge, Inc., 582 F.Supp. 551, 557 (N.D.Ill.1984) (finding the trademark "Cellini" to be weak because it has been used extensively in connection with a wide range of goods); see also Telemed, supra, 588 F.2d at 220 (finding the mark "Telemed" entitled to narrow protection because "tele" and "med" were both extensively used for a variety of business and service names). The prefix "super" has been used for over one hundred marks registered in the area of cutting, hand tools and sidearms, including three registrations for "super-cut" and registrations for "supercutter," "super-snips," and "super-shear."
MFG argues that the incontestable status of its "SUPERCUT" mark renders it distinctive as a matter of law and that it can no longer be found to be weak. However, Park 'N Fly, Inc. v. Dollar Park and Fly, Inc., ___ U.S. ___, 105 S.Ct. 658, 83 L.Ed.2d 582 (1985), cited by MFG, held only that the validity of an incontestable trademark cannot be challenged as merely descriptive. But the validity of MFG's mark is not at issue only the scope of its protection. "Incontestability does not broaden a trademark in the sense that it allows a registrant to claim rights over a greater range of products than he would otherwise be entitled to claim." Union Carbide, supra, 531 F.2d at 377.
Moreover, several of the other factors listed in Wesley-Jessen and Union Carbide also support the conclusion that EMRA's activities do not create a likelihood of confusion and that there is no genuine issue as to this material fact. There is no identity of retail outlets whatsoever. All of EMRA's services and products are sold through the shops owned or franchised by EMRA. MFG sells its products through supply houses or beauty and barber schools. There is no evidence of any overlapping.
Similarly, there is no identity of purchasers. EMRA sells its services and products to the general public. MFG sells its products to hair care purveyors. These are clearly different markets. MFG argues that EMRA actually sells its products to the owners of the franchised "SUPERCUTS" stores, who are themselves hair care purveyors, and that when analyzed at the proper level of the distribution chain the purchasers are the same. However, *704 the general public is the proper set of EMRA purchasers for purposes of this analysis. The franchised shops are merely a part of EMRA's distribution chain, just as the wholesale distributors and supply houses are for MFG. Wesley-Jessen v. Bausch & Lomb, Inc., 698 F.2d 862 (7th Cir.1983), cited by MFG, is inapplicable. In Wesley-Jessen, both parties manufactured contact lenses and sold them to eye care professionals for sale to the public. There was no other relationship between the parties and their customers than sellers and buyers.
Neither is there any identity of advertising media. EMRA advertises through TV, radio, billboards, and other mass market media directed toward the general public. MFG advertises in beauty and barber trade journals, with direct mailings to the beauty and barber industry, and through its catalog, also directed to the hair care industry. While the parties dispute the amounts spent on advertising, the relevant criteria here is the type of advertising.
Most significant is the total absence of any evidence of actual confusion. MFG contends that this result is faulty because EMRA has allegedly failed to conduct a thorough investigation of its franchisees on this point. But MFG has presented no evidence of its own. Nothing has precluded MFG, a company that has been supplying the hair care industry for thirty years, from surveying that industry on its own or from presenting evidence of actual confusion that has come to its attention during the ten years that EMRA has been using the "SUPERCUTS" trademark. The fact that these two nationwide firms have been coexisting for many years, and that MFG has presented no evidence of actual confusion shows that such confusion is not a factor. See FS Services, Inc. v. Custom Farm Services, Inc., 325 F.Supp. 153 (N.D. Ill.1970), aff'd, 471 F.2d 671 (7th Cir.1972).
MFG argues that EMRA learned of MFG's "SUPERCUT" trademark in 1979 and continued to operate and expand under its "SUPERCUTS" label and that this is evidence of EMRA's evil intent. But the court finds this to be of little weight. EMRA submits sworn statements that it did not know of MFG's trademark in 1975 when it began its business. MFG produces no evidence to refute that. Therefore the court concludes in the absence of other evidence that EMRA innocently adopted its "SUPERCUTS" name when it began operations.
It is true that the trademarks themselves are similar to the extent that they use virtually the same word. However, even the significance of that fact is mitigated by the different styles of these trademarks. See Telemed Corp. v. Tel-Med, Inc., 588 F.2d 213, 220 (7th Cir.1978). MFG's "SUPERCUT" is in block print on the package and small block print on the scissors themselves (see Fig. 1), while EMRA's trademark is written in a more stylized form (see Fig. 2).
Finally, MFG argues that the products are similar because they are all related to hair care. While it is true that scissors, shampoo, and haircuts are all within some universe of hair care products and services, they are not, of themselves, particularly similar in the way, for example, that scissors and replacement blades are or that shampoo and conditioner are.[2]
In light of the weak and descriptive nature of the "SUPERCUT" trademark, the absence of any actual confusion, and the absence of any identity between purchasers, *705 retail outlets, and advertising media, the court concludes that there is no likelihood of confusion. Whatever similarity exists between the trademarks and the products is insignificant in light of these other factors and fails to create a genuine issue of fact as to the likelihood of confusion.
The court finds support for this result in Westward Coach Manufacturing Co. v. Ford Motor Co., 388 F.2d 627 (7th Cir.), cert. denied, 392 U.S. 927, 88 S.Ct. 2286, 20 L.Ed.2d 1386 (1968).[3] In Westward Coach, the Seventh Circuit affirmed the granting of summary judgment in favor of the defendant, Ford Motor Co. The plaintiff manufactured and sold campers and trailers under the trademark "Mustang" that were designed for mounting on pick-up trucks and for towing. In 1967 Ford began selling its "Mustang" automobile and the plaintiff brought an action for infringement. The court found that the mark "Mustang" was a weak mark because it was a noun of common usage used in connection with a variety of products and was federally registered as a trademark numerous times; that the plaintiff's trademark was limited to the trailer industry; that the plaintiff's trailers did not compete with Ford's sports cars; and that there was no likelihood of confusion. This was true even though the trademarks were virtually identical (both consisted of the word "Mustang" together with a symbol of a horse) and the products were related in the same general way as the products in the present case. Therefore, the court finds that defendants' motion for summary judgment should be granted on Count I as to defendants' activities other than the use of "SUPERCUTS" scissors.
In Count II, MFG alleges that EMRA has violated its common law trademark rights. The same principles applied above would govern the court's analysis in determining whether there is a genuine issue as to any material fact under Illinois law. Victory Pipe Craftsmen, Inc. v. Faberge, Inc., 582 F.Supp. 551, 559 (N.D.Ill.1984). Therefore, for the reasons stated above as to Count I, the court finds that EMRA is entitled to summary judgment on Count II as to the same "non-scissors" activities.
II. Trademark Infringement and EMRA'S Use of Scissors Marked "SUPERCUTS"
The use by EMRA of scissors marked "SUPERCUTS" clearly presents a different question than EMRA's other activities. These scissors are arguably within the scope of protection afforded MFG's trademark. However, EMRA argues that its use of these scissors was short-lived and discontinued and did not damage MFG. Therefore, EMRA argues, even assuming that its use of these scissors did infringe MFG's mark, there is no reason for the court to grant injunctive relief or damages.
"It is within the discretion of the trial court to grant or deny an injunction against conduct which has ceased and is not likely to recur." Schutt Mfg. Co. v. Riddell, Inc., 673 F.2d 202, 207 (7th Cir. 1982). In Schutt the district court had ruled that because the defendant in that trademark and unfair competition case "did not threaten to continue in the conduct complained of and in fact had discontinued that conduct more than a year prior to the commencement of [the] action the request for equitable relief was moot." Id. at 206.
In the present case EMRA authorized the purchase of 1,210 pairs of scissors bearing the "SUPERCUTS" logo for use in "SUPERCUTS" shops and at EMRA's training center in 1983. These scissors were provided through School Distributors, a division of West Coast Beauty Supply Co., which distributes products to "SUPERCUTS" *706 shops in the western states. The distributor distributed the entire supply of scissors to the EMRA shops and training center in 1983. The distributor declares that it has no intention of reordering such scissors. EMRA asserts that these scissors have since worn out and have been replaced and there is no intention of reordering.
MFG argues that there is a continuing likelihood of infringement through EMRA's reordering of such scissors. The only evidence that MFG provides to support this assertion, however, is a statement by MFG's president, Wilford Gallinat, that "a supplier to EMRA" has contacted MFG for submission of a quotation for scissors bearing the mark "SUPERCUTS" for sale to EMRA. This evidence would, of course, have substantially more value if the supplier were named and there was direct evidence of its intentions. Moreover, while a supplier to EMRA may intend to sell such scissors to EMRA, one cannot infer, without more, that EMRA has any knowledge of this or that it intends to cooperate by buying.
Under the circumstances, the court finds that EMRA's use of "SUPERCUTS" scissors was a temporary and discontinued practice and that there is no genuine issue of fact as to whether this practice continues. Therefore the court will follow the example of this court in Schutt and refuse to grant injunctive relief.
As to the award of damages, "a party seeking such relief is required to show not only the likelihood of such confusion, but must demonstrate that it has been damaged by actual consumer reliance on the misleading statements." Schutt, supra, 673 F.2d at 206. Therefore, assuming that EMRA's use of these scissors infringed MFG's trademark, MFG would have to prove that it was damaged by actual consumer reliance. But the scissors marked "SUPERCUTS" were not sold by the EMRA shops; they were used by the employees in the "SUPERCUTS" shops and by those being trained in the "SUPERCUTS" training center. These individuals, involved as they were in a non-market relationship with the "SUPERCUTS" organization, were not confused by the meaning of the label on the scissors they were using. These individuals understood that the mark was related to the organization for which they worked and not another company with a similar trademark. The court finds, in the absence of any evidence of such confusion, that MFG was not damaged by this practice.
Therefore the court finds that summary judgment should be granted in favor of the defendants on Counts I and II as to EMRA's temporary and discontinued use of "SUPERCUTS" scissors. Together with the result in Part I, supra, this requires granting summary judgment in favor of the defendants as to Counts I and II in their entirety.
III. Counts III-VI
Count IV of the complaint alleges a violation of section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), for false designation of origin. Recovery under 15 U.S.C. § 1125(a) requires plaintiff to establish that defendants have created a likelihood of confusion as to the origin of their products. Hooker v. Columbia Pictures Industries, 551 F.Supp. 1060 (N.D.Ill.1982). Under both 15 U.S.C. § 1114 and 15 U.S.C. § 1125, the same test is applied to determine whether a particular activity violates the Lanham Act: likelihood of confusion. Invicta Plastics (USA) Ltd. v. Mego. Corp., 523 F.Supp. 619, 622 (S.D.N.Y.1981). Therefore, for the reasons stated in Parts I and II, supra, defendants' motion for summary judgment is granted as to Count IV.
Count III alleges a violation of common law unfair competition. Under Illinois law, unfair competition is a broader concept than trademark infringement in that it allows consideration of the whole product, rather than just the trademark, when evaluating the likelihood of confusion. Thompson v. Spring-Green Lawn Care, 126 Ill. App.3d 99, 466 N.E.2d 1004, 1015, 81 Ill. Dec. 202, 213 (1st Dist.1984). However, a finding of unfair competition still requires *707 that likelihood of confusion exists as to the source of plaintiff's goods. Id. Since likelihood of confusion does not exist on the basis of the parties' trademarks, and since nothing else about their products and services increases the likelihood of confusion, the court concludes that no such requisite likelihood exists and that summary judgment should be granted for defendants as to Count III.
Count V alleges a violation of the Illinois Anti-Dilution Act, Ill.Rev.Stat. ch. 140, § 22. An action for dilution requires that plaintiff show his mark to be a strong mark which has acquired a widespread reputation through much effort or costly and extensive advertising and which has a distinctiveness or secondary meaning. Thompson, supra, 466 N.E.2d at 1015, 81 Ill.Dec. at 213. As discussed in Part I, supra, MFG's mark is not a strong mark. Therefore summary judgment should be granted for defendants as to Count V.
Count VI alleges a violation of the Illinois Deceptive Trade Practices Act, Ill.Rev.Stat. ch. 121½, §§ 312-313. Plaintiff alleges that defendants have violated this statute by causing a likelihood of confusion as to the source of their goods and services with respect to plaintiff's mark and products. "Likelihood of confusion" has the same meaning under the Deceptive Trade Practices Act as it has in trademark infringement cases. Hooker v. Columbia Pictures Industries, 551 F.Supp. 1060, 1064 (N.D.Ill.1982). Therefore summary judgment must be granted for defendants as to Count VI.
IV. Declaratory Relief
Finally, defendants seek summary judgment as to Count III of their counterclaims, which seeks declarations regarding noninfringement. The findings and conclusions set forth above support a declaration that as to its products other than scissors defendants have not infringed plaintiff's trademark. Declaratory judgment is denied as to the infringement of plaintiff's trademark on its scissor's product.
IT IS THEREFORE ORDERED that:
(1) Defendants' motion for summary judgment as to Counts I-VI of the complaint is granted and the complaint is dismissed.
(2) Plaintiff's motion for partial summary judgment is denied.
(3) Defendants' motion for summary declaratory judgment as to Count III of the counterclaim is granted in part and denied in part as set forth in the court's opinion.
(4) Count I of the counterclaim is dismissed with the consent of the defendants.
*708 APPENDIX
*709
NOTES
[1] EMRA's counterclaim based on abuse of process was dismissed. Order of May 10, 1985.
[2] MFG also argues that its "SUPERCUT" trademark is protected under the Doctrine of Natural Expansion for any goods or services which purchasers might reasonably expect it to expand to in the normal expansion of its business under the mark. But MFG does not suggest that it might expand into haircutting services and the court finds no support for the suggestion that MFG would expand into shampoo and other products under its "SUPERCUT" trademark for two reasons: (1) MFG has never expanded its "SUPERCUT" mark beyond scissors and blades in the thirty years it has been using it (or at least there is no evidence of this) and (2) MFG does currently sell a complete line of other hair care products under dozens of other trademarks. Obviously MFG has long believed that different products are best identified by different trademarks tailored to their particular properties.
[3] MFG argues that Westward Coach is inapplicable because it is based on Indiana law. However, Westward Coach has frequently been cited in cases involving both federal and Illinois trademark law, thus indicating the applicability of its analysis and result. See, e.g., Telemed Corp., supra, 588 F.2d at 219 (citing Westward Coach as clarifying the significance of strong and weak marks in a federal trademark case); Victory Pipe Craftsmen, Inc. v. Faberge, Inc., 582 F.Supp. 551 (N.D.Ill.1984) (relying on Westward Coach in granting summary judgment in a case involving both federal and Illinois law).
|
770 So.2d 382 (2000)
Damien G. VICTORIAN
v.
Richard L. STALDER, Secretary, Louisiana Department of Corrections, et al.
No. 99 CA 2260.
Court of Appeal of Louisiana, First Circuit.
July 14, 2000.
Damien G. Victorian, DeQuincy, Pro Se PlaintiffAppellant.
William L. Kline, Baton Rouge, for Defendant Appellee Richard Stalder and Priscilla Pitre.
Before: SHORTESS, C.J., CARTER, FOIL, GONZALES, WHIPPLE, FOGG, PARRO, FITZSIMMONS, KUHN, GUIDRY, WEIMER, PETTIGREW, and CLAIBORNE,[1] JJ.
FOGG, J.
By this appeal, an inmate challenges a district court judgment dismissing with prejudice his suit for judicial review of an adverse decision of the Department of Public Safety and Corrections (DPSC) on a disciplinary report. For the following reasons, we affirm.
*383 FACTS AND PROCEDURAL HISTORY
In 1991, Damien G. Victorian was convicted of distribution of cocaine and remanded to the custody of the DPSC.[2] On September 15, 1995, he was released on parole. He subsequently absconded parole supervision, and a warrant for his arrest was issued. On October 29, 1996, Victorian was apprehended and transported to the Jennings City Jail. On November 6, 1996, he formally waived his right to a final revocation hearing and pleaded guilty to violating the conditions of parole. His parole then was revoked, effective October 29, 1996. On May 5, 1997, while awaiting transfer to a DPSC facility, Victorian escaped from the Jennings City Jail.[3] He was apprehended the following day and transferred to Phelps Correctional Center, where he presently is incarcerated, on June 16, 1997.
On June 19, 1997, a disciplinary report was written against Victorian, alleging he violated a disciplinary rule prohibiting escape when he escaped from the Jennings City Jail. At the disciplinary hearing, Victorian pleaded guilty. The Disciplinary Board sentenced him to a custody change from medium to maximum security/working cellblock and loss of thirty days good time and also referred him to "Special Court." The special court later modified Victorian's original sentence to "loss of all [good time] earned prior to the escape" pursuant to LSA-R.S. 15:571.4 B(1); this included good time earned by him prior to release on parole in 1995.
Victorian filed a request for administrative remedy, which was denied by the DPSC. Then, on July 22, 1998, he brought this suit, seeking judicial review by the Nineteenth Judicial District Court.[4] The district court subsequently entered judgment adopting the recommendation of the commissioner and dismissing Victorian's suit with prejudice. He now appeals.
STANDARD OF REVIEW
In considering the issues raised herein, we discovered a conflict in the law of this circuit with respect to the application of the Corrections Administrative Remedy Procedure (CARP), LSA-R.S. 15:1171 et seq., to prison disciplinary actions. The conflict is reflected in the following jurisprudence.
In the case of Giles v. Cain, 98-0212 (La.App. 1 Cir. 4/19/99), 734 So.2d 109, a prisoner was sentenced to a custody change to extended lockdown after being found guilty of constituting a threat to security. In reviewing the case, we applied the CARP stating, "LSA-R.S. 15:1171-1177 provide the statutory authority for the administrative review procedure established and followed by the penal institution.... This procedure is designed to receive, hear, and dispose of `any and all complaints and grievances by adult or juvenile offenders against the state, the governor, the department or any officials or employees thereof ...' and includes appeals of disciplinary actions." Giles, 98-0212, p. 6, 734 So.2d at 113; see also Rochon v. Whitley, 96-0835, pp. 5-6 (La. App. 1 Cir. 2/14/97), 691 So.2d 189, 192.
Subsequently, on June 25, 1999, we rendered three opinions that dealt with the issue of whether or not the CARP applies to appeals of disciplinary actions. In Johnson v. Department of Corrections, 97-1891 (La.App. 1 Cir. 6/25/99), 738 So.2d *384 1165, a prisoner appealed a disciplinary action which consisted of the loss of telephone and canteen privileges. Therein, we determined that LSA-R.S. 49:964 of the Administrative Procedures Act (APA), applies to appeals of disciplinary actions stating, "La. R.S. 15:1171(B) specifically states that `the adult and juvenile offender disciplinary process, promulgated and effective prior to June 30, 1989,' is included as part of the exclusive procedures of the CARP. Therefore, agency and judicial review of disciplinary matters was not changed by the enactment of the CARP and is still performed in accordance with the APA...." Johnson, 97-1891, p. 4, 738 So.2d at 1167. In Hunter v. Stalder, 98-2326 (La. App. 1 Cir 6/25/99), 738 So.2d 1169, a case in which the disciplinary action consisted of the revocation of accrued good time, we again held that the APA, rather than the CARP, provides the proper path of judicial review for prison disciplinary matters. However, in Washington v. Louisiana State Penitentiary, 98-1310 (La.App. 1 Cir. 6/25/99), 740 So.2d 761, a case in which a prisoner was found guilty of defiance and aggravated disobedience and sentenced to a loss of four weeks of telephone privileges and thirty days of good time, we stated that LSA-R.S. 15:1171-1177 provide the statutory authority for the administrative review procedure designed to hear all complaints and grievances by prisoners, including appeals of disciplinary actions.
Considering this conflict, we overrule Johnson and Hunter because the holdings in those cases are contrary to the express language of LSA-R.S. 15:1171(B), which provides, in its entirety, as follows:
The department or sheriff may also adopt, in accordance with the Administrative Procedure Act, administrative remedy procedures for receiving, hearing, and disposing of any and all complaints and grievances by adult or juvenile offenders against the state, the governor, the department or any officials or employees thereof, the contractor operating a private prison facility or any of its employees, shareholders, directors, officers, or agents, or a sheriff, his deputies, or employees, which arise while an offender is within the custody or under the supervision of the department, a contractor operating a private prison facility, or a sheriff. Such complaints and grievances include but are not limited to any and all claims seeking monetary, injunctive, declaratory, or any other form of relief authorized by law and by way of illustration includes actions pertaining to conditions of confinement, personal injuries, medical malpractice, time computations, even though urged as a writ of habeas corpus, or challenges to rules, regulations, policies, or statutes. Such administrative procedures, when promulgated, shall provide the exclusive remedy available to the offender for complaints or grievances governed thereby insofar as federal law allows. All such procedures, including the adult and juvenile offender disciplinary process, promulgated and effective prior to June 30, 1989, shall be deemed to be the exclusive remedy for complaints and grievances to which they apply insofar as federal law allows.
(Emphasis added). The current version of the Disciplinary Rules for Adult Prisoners was adopted by the DPSC, effective February 15, 1993, and published in the Louisiana Register, Vol. 19, No. 5, pp. 648-659. See Rivera v. State, 98-0507 (La.App. 1 Cir. 12/28/98), 727 So.2d 609, writ denied, 99-0289 (La.3/26/99), 740 So.2d 617. Therefore, the above statutory language clearly places appeals of such disciplinary actions under the provisions of the CARP. The conclusion in the Johnson and Hunter cases that judicial review of disciplinary matters is still performed in accordance with the APA is erroneous.
Inmates aggrieved by a decision rendered by the DPSC may seek judicial review pursuant to LSA-R.S. 15:1177. The standard of review is set forth in LSA-R.S. 15:1177 A, as amended by Acts 1997, *385 No. 1216, § 1, effective July 15, 1997, as follows:
(9) The court may reverse or modify the decision only if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:
(a) In violation of constitutional or statutory provisions.
(b) In excess of the statutory authority of the agency.
(c) Made upon unlawful procedure.
(d) Affected by other error of law.
(e) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.
(f) Manifestly erroneous in view of the reliable, probative and substantial evidence on the whole record. In the application of the rule, where the agency has the opportunity to judge the credibility of witnesses by firsthand observation of demeanor on the witness stand and the reviewing court does not, due regard shall be given to the agency's determination of credibility issues.
ANALYSIS
The statutory authority for forfeiture of diminution of sentence, or loss of good time, is found in LSA-R.S. 15:571.4 which provides, in pertinent part:
B. (1) An inmate who is sentenced to the custody of the Department of Public Safety and Corrections and who commits a simple or aggravated escape from any correctional facility or from the lawful custody of any law enforcement officer or officer of the department may forfeit all good time earned on that portion of his sentence served prior to his escape.
(Emphasis added). In the instant case, Victorian complains that the special court's sentence of loss of all good time earned prior to the escape, which included good time earned prior to his release on parole in 1995, was erroneous. He contends that the underscored language above only authorizes forfeiture of good time earned by him from October 29, 1996, the date of his parole revocation, through May 5, 1997, the date of his escape. After careful consideration, we disagree.
When an inmate commits simple or aggravated escape, LSA-R.S. 15:571.4 B(1) provides for forfeiture of "all good time earned on that portion of his sentence served prior to his escape." This loss is not limited to good time earned following a revocation of parole, as Victorian suggests. Rather, it includes all good time earned on a sentence served prior to escape. Therefore, the special court correctly sentenced Victorian to loss of all good time earned prior to the escape under LSA-R.S. 15:571.4 B(1).
Victorian also complains that the special court's sentence constituted imposition of a third penalty, in violation of the Disciplinary Rules for Adult Prisoners, which permit the imposition of only one or two listed penalties for escape, defined as a Schedule B violation. Nevertheless, we find that the special court's sentence of loss of all good time earned prior to escape rendered moot the earlier sentence of loss of thirty days good time. Therefore, the sentence of the special court did not constitute a third penalty.
DECREE
For the foregoing reasons, we expressly overrule the cases of Johnson and Hunter to the extent they conflict with the above analysis. Furthermore, we conclude that the DPSC's decision to deny Victorian administrative relief was neither manifestly erroneous nor arbitrary and capricious. Therefore, the judgment of the district court is affirmed, at appellant's cost.
AFFIRMED.
PARRO and WEIMER, JJ., concur.
PETTIGREW and FITZSIMMONS, JJ., concur in the result only.
*386 GONZALES, J., concurs and assigns additional reasons.
KUHN, J., concurs for the reasons assigned by GONZALES, J.
GONZALES, J., Concurring.
I concur with the majority opinion because the standard of review applicable to this prisoner suit is the same whether conducted pursuant to the Louisiana Administrative Procedure Act (APA) or under the Corrections Administrative Remedy Procedure Act (CARP). I further agree that the result is correct on the merits, because Victorian failed to show a loss of good time in excess of that provided by the applicable rule.
STANDARD OF REVIEW
Regarding judicial review of prisoner suits, the APA (La. R.S. 49:950 et seq.) and CARP (La. R.S. 15:1171 et seq.) have always worked together. CARP provides that the administrative remedy procedures adopted pursuant to its terms, including the adult and juvenile offender disciplinary process, promulgated and effective prior to June 30, 1989, "shall be deemed to be the exclusive remedy for complaints and grievances to which they apply insofar as federal law allows." La. R.S. 15:1171(B). This "exclusive remedy" provided by CARP was enacted to force prisoners to file their grievances within an administrative process before resorting to the courts for relief. However, the use of the phrase "exclusive remedy" was not intended to preclude the applicability of the APA to prisoner claims; to the contrary, this "exclusive remedy" provided by CARP included judicial review under the terms of the APA, because former La. R.S. 15:1177(A) provided that the judicial review of CARP claims would be conducted "in the manner provided by R.S. 49:964 [the APA]." Although La. R.S. 15:1177(A) has been amended to delete the reference to La. R.S. 49:964, the following discussion will demonstrate that the judicial review available to Victorian is the same under the APA or under CARP.
The "exclusive remedy" language in these Title 15 statutes means CARP's administrative procedures, rather than the more general APA procedures, are used at the administrative level. As to the procedure for judicial review, CARP has its own statute, as do many other agencies, which statute takes precedence over the more general APA. That does not mean that the rest of the APA cannot apply to procedural rules for CARP cases. If we remove the APA as the procedural authority, there only remains the even more general Code of Civil Procedure. Louisiana Revised Statute 15:1177 is clearly a statute by which the legislature provides for appellate review in the district court. Nothing in the statutes of the agency or in the Code of Civil Procedure provides for review by appeal in the appropriate court of appeal. However, Section 965 of the APA does provide for a second appeal of right to the appropriate court of appeal. Without relying on this section, the petitioner's only avenue of second appellate review would be by discretionary writs. The majority does not address this issue. It is noted only with the statement "He appeals". The Code of Civil Procedure provides, in part, "An appeal may be taken from a final judgment rendered in causes in which appeals are given by law...." La. C.C.P. art. 2083(A). Louisiana Revised Statute 15:1177(A) provides authority for an appeal to the district court; only the APA gives, by law, review by appeal to the appropriate court of appeal.
Until amended in 1997, La. R.S. 15:1177 provided that judicial review of CARP claims was to be conducted pursuant to the APA. Former Louisiana Revised Statute 15:1177(A) read, in part:
Any offender who is aggrieved by an adverse decision by the Department of Public Safety and Corrections rendered pursuant to any administrative remedy procedures ... may, within thirty days after receipt of the decision, seek judicial *387 review of the decision ... in the Nineteenth Judicial District Court ... in the manner provided by R.S. 49:964 [the APA].
Louisiana Revised Statute 49:964 is the judicial review section of the APA. Until amended in 1997, La. R.S. 49:964(G) read:
The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:
(1) In violation of constitutional or statutory provisions;
(2) In excess of the statutory authority of the agency;
(3) Made upon unlawful procedure;
(4) Affected by other error of law;
(5) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion; or
(6) Manifestly erroneous in view of the reliable, probative, and substantial evidence on the whole record. In the application of the rule, where the agency has the opportunity to judge the credibility of witnesses by firsthand observation of demeanor on the witness stand and the reviewing court does not, due regard shall be given to the agency's determination of credibility issues.
Louisiana Revised Statute 15:1177 was amended by 1997 La. Acts No. 1216 and became effective August 15, 1997. This amendment deleted from La. R.S. 15:1177(A) the words "in the manner provided by R.S. 49:964" and replaced those words with some of the text of La. R.S. 49:964(G). In this same act, the legislature excluded the applicability of the judicial review provisions of the APA to actions filed under CARP, by amending La. R.S. 49:964(A) to provide that, "[e]xcept as provided in [La. R.S.] 15:1171 through 15:1177, a person who is aggrieved by a final decision or order in an adjudication proceeding is entitled to judicial review under this Chapter [the APA]...." (Emphasis added.)[1]
This was probably unnecessary in view of the jurisprudence discussed below. However, regarding the standard of review in prisoner cases, La. R.S. 15:1177(A) now reads, in part:
(8) The court may affirm the decision of the agency or remand the case for further proceedings, or order that additional evidence be taken.
(9) The court may reverse or modify the decision only if substantial rights of the appellant have been prejudiced because *388 the administrative findings, inferences, conclusions, or decisions are:
(a) In violation of constitutional or statutory provisions.
(b) In excess of the statutory authority of the agency.
(c) Made upon unlawful procedure.
(d) Affected by other error of law.
(e) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.
(f) Manifestly erroneous in view of the reliable, probative and substantial evidence on the whole record. In the application of the rule, where the agency has the opportunity to judge the credibility of witnesses by firsthand observation of demeanor on the witness stand and the reviewing court does not, due regard shall be given to the agency's determination of credibility issues.
A simple comparison of the language in former La. R.S. 49:964 (to which former La. R.S. 15:1177 referred) with the new language inserted into La. R.S. 15:1177 shows that they are nearly identical as to the standard of review.[2] The time period for filing a petition for review under both statutes is likewise identical, i.e., thirty days. La. R.S. 49:964(B); La. R.S. 15:1177(A)(1). The reviewing court under both statutes, when the Department of Public Safety and Corrections is a defendant, is also the same, namely the Nineteenth Judicial District Court. La. R.S. 49:964(B); La. R.S. 15:1177(A). If there is a distinction between the standard of review of prisoner suits under CARP, as opposed to review under the APA, it is one with almost no difference.[3]
There are other similarities between the two judicial review statutes. Both have standing requirements (CARP"Any offender... aggrieved by an adverse decision"; APA"...a person... aggrieved by a final decision or order"); both limit review to the record; both provide for authority by the reviewing court to stay enforcement of the agency decision; both provide for a remand for additional evidence; and both provide for the taking of evidence in cases of alleged irregularities in procedure before the agency.
The most serious issue, and one not discussed in the majority opinion, is the effect of the deletion of the reference to La. R.S. 49:964 in the new La. R.S. 15:1177 on the definition of terms. Is the deletion of the reference to La. R.S. 49:964 intended to also preclude the applicability of other sections of the APA, particularly La. R.S. 49:951, to actions filed under CARP, and thus broaden the scope of review of prisoner cases?
*389 In determining the applicability of laws, the more specific governs over the more general. In the Interest of A.C., 93-1125 (La.1/27/94), 643 So.2d 719, 730, cert. denied, 515 U.S. 1128, 115 S.Ct. 2291, 132 L.Ed.2d 292 (1995). With regard to administrative agencies, the more specific laws are those which govern the agency. These specific laws govern over the more general laws of the APA or of the Louisiana Code of Civil Procedure. See Corbello v. Sutton, 446 So.2d 301, 303 (La.1984); State, Louisiana Riverboat Gaming Commission v. Louisiana State Police Riverboat Gaming Enforcement Division, 95-2355 (La.App. 1 Cir. 8/21/96), 694 So.2d 316, 321. Where agency laws are silent, however, it is the function of the APA to fill in the gaps and to provide rules of procedure. Liberty Mutual Insurance Company v. Louisiana Insurance Rating Commission, 96-0793 (La.App. 1 Cir. 2/14/97), 696 So.2d 1021, 1027, writ denied, 97-2069 (La.12/19/97), 706 So.2d 451.
In this case, there is no question that La. R.S. 15:1177 is controlling on the standard of review. See La. R.S. 15:1177(D). However, since there is no conflict between La. R.S. 15:1177 and La. R.S. 49:964 as far as definitions are concerned, it is arguable that the definitional section of the APA is still applicable to "fill in the gaps" in actions filed under CARP. The definitional section of the APA, La. R.S. 49:951, has always played a major role in the judicial interpretations of the APA. The jurisprudence shows that the very precise and limiting definitions of La. R.S. 49:951 have greatly affected the scope of review under the APA.
Under the APA, appellate review has historically been limited to a "final decision or order in an adjudication proceeding." The first case which demonstrates the limiting nature of the definition of the words "decision or order" was First National Bank of Abbeville v. Sehrt, 246 So.2d 382 (La.App. 1 Cir.), writ refused, 258 La. 909, 248 So.2d 334 (1971) (so far as the scope of the APA's applicability). In that case, this court determined that the definitions governing the opportunity for a hearing after reasonable notice make the APA applicable only when a hearing is presently provided by law or if a constitutional right is at issue. First National Bank of Abbeville, 246 So.2d at 384. This court held that an existing bank had no constitutional right to prevent another bank from being certified by the State Banking Commission.[4] Later, in Delta Bank & Trust Company v. Lassiter, 383 So.2d 330, 333 (La. 1980), the Louisiana Supreme Court explained the import of the words "decision or order" as follows:
[T]he Administrative Procedures Act provides for a hearing only in an adjudication. An adjudication is a proceeding resulting in an order or decision. A decision or order is, for purposes of the act, a disposition required by constitution or statute to be made only after notice and a hearing. Therefore, unless there is some provision in the constitution or statutes requiring a hearing, an agency disposition is not a "decision" or "order" as defined for purposes of the act. And unless a proceeding results in a decision or order, it is not an adjudication as defined in the act. It is apparent, then, that an adjudication for purposes of the act means an agency proceeding that results in a disposition that is required to be made (by constitution or statute) after notice is given and a hearing is held. Unless some statute or the constitution requires a hearing and notice, an agency action is not an adjudication for purposes of the act. Since the act provides for hearings only if there is an adjudication, it follows that unless a hearing is required by some statute or the constitution, the provision of the act as to hearings does not apply.
*390 This analysis of the words "decision or order" has been repeatedly followed by this court in numerous cases. See Government Computer Sales, Inc. v. State, Division of Administration, 98-0224 (La.App. 1 Cir. 9/25/98), 720 So.2d 53 (an unsuccessful bidder on a state contract is not entitled to a hearing before the Division of Administrative Law to consider the bidder's protest of the award of the state contract to the lowest bidder); Jones v. Southern University and A & M College System, Board of Supervisors, 96-1430 (La.App. 1 Cir. 5/9/97), 693 So.2d 1265 (a university's failure to comply with its own procedures in evaluating a tenure application, its failure to hold a hearing before making a decision on a professor's tenure application, and its failure to provide a means of appeal from a denial of tenure do not constitute a "decision or order" within the meaning of the APA); Parochial Employees' Retirement System of Louisiana v. Caddo Parish Commission, Etc., 95-0243 (La.App. 1 Cir. 3/15/96), 676 So.2d 105, writ denied, 96-0955 (La.5/31/96), 673 So.2d 1031 (an agency's decision to file a declaratory judgment action to have an ordinance declared in contravention of the constitution and state statutes is not a "decision or order" within the meaning of the APA); Boeing Company v. La. Department of Economic Development, 94-0971 (La.App. 1 Cir. 6/23/95), 657 So.2d 652 (the denial of an application for exemption from the payment of ad valorem taxes is not an adjudication); Matter of Carline Tank Services, Inc., 626 So.2d 358, rehearing denied, 627 So.2d 669 (La.App. 1 Cir. 1993) (a third party which opposed DEQ's grant on an air emission permit for a barge cleaning operation did not have the right to judicial review of the validity of the permit since DEQ's action was not a decision or order).
The first sentence of La. R.S. 15:1177(A) states that "[a]ny offender who is aggrieved by an adverse decision by the Department of Public Safety and Corrections... may ... seek judicial review of the decision...." (Emphasis added.) It is my position that the term "decision" in the first sentence of La. R.S. 15:1177(A) means "decision or order" as defined by the APA. If La. R.S. 15:1177(A) is so interpreted, only those prisoner claims which fit the definition of "decision or order" would be subject to judicial review.[5] That is, only in instances where some statute provides for a hearing on the record after notice, or if the claim being asserted is a constitutional claim, would the Nineteenth Judicial District Court have subject matter jurisdiction to review decisions of the Department of Public Safety and Corrections. Minor claims, such as the deprivation of canteen or telephone privileges, or other privileges, would be resolved by the prison authorities, with no judicial oversight. This would properly remove the courts from involvement in the day-to-day management of prisons, and afford appropriate deference and flexibility to state officials trying to manage a volatile environment.[6]See Sandin v. Conner, 515 U.S. 472, 115 S.Ct. 2293, 2299, 132 L.Ed.2d 418 (1995); see also Sanchez v. Hunt, 329 So.2d 691, 692 (La.1976). Additionally, this interpretation of La. R.S. 15:1177 would be consistent with the traditional view that Louisiana courts are to give great deference to prison administrators in the promulgation and enforcement of disciplinary measures. Only in extreme cases will courts interfere with the administration of prison regulations *391 or disciplinary procedures. Watts v. Phelps, 377 So.2d 1317, 1320 (La.App. 1 Cir.1979), writ denied, 380 So.2d 1210 (La. 1980).
Further evidence of the continuing trend to keep the judiciary out of the business of prison management is seen in recent prison reform legislation on a national and state level. Effective in 1996, the United States Congress passed the Prison Litigation Reform Act (PLRA). The PLRA amended 42 USCA § 1997(e) and requires the exhaustion of administrative remedies as a pre-condition to a prisoner suit in federal court. The United States Fifth Circuit Court of Appeals observed in Wendell v. Asher, 162 F.3d 887, 890 (5th Cir. 1998), that the purpose of the PLRA is to provide the federal courts some relief from frivolous prisoner litigation. In 1998, the Louisiana legislature adopted its own version of the PLRA.1998 La. First Ex.Sess. Acts No. 11. And before then, in 1997, the Louisiana legislature amended CARP to add La. R.S. 15:1178, which authorizes district courts to screen petitions for judicial review filed under La. R.S. 15:1177 to weed out any petition which is "frivolous" or "malicious," or which "fails to state a cause of action," or which "seeks monetary damages from a defendant who is immune from liability for monetary damages." La. R.S. 15:1178(B).
The clear and unmistakable purpose of all of these statutes is to restrict, rather than to expand, the scope of prisoner litigation. A determination that supports a restrictive interpretation of CARP comports with this legislative intent.
ON THE MERITS
Since Victorian's claim involves a liberty interest, namely, the computation of his good time, it is a decision required by the constitution to be heard on the record and after notice and is an adjudication within the meaning of the APA definition in La. R.S. 49:951(1). The analysis of the majority opinion on the validity of Victorian's loss of good time focuses only on La. R.S. 15:571.4(B)(1), as amended in 1992. If we looked at that statute alone, a forfeiture of all good time due to escape or parole violation can result since the 1992 amendment. The Department of Public Safety and Corrections takes the position that because La. R.S. 15:571.4(C) requires promulgation of rules and regulations for forfeiture of good time, the rules so promulgated govern disciplinary actions for escape over and beyond the statute. These rules cannot impose more severe sanctions than authorized by law. See Rivera v. State, 98-0507, 98-0508 (La.App. 1 Cir. 12/28/98), 727 So.2d 609, writ denied, 99-0289 (La.3/26/99), 740 So.2d 617. Rivera does not say that the regulations can be less severe; however, each case will turn on its own circumstances, depending upon the amount of accumulated good time leave.
In Victorian's case, as Commissioner Bergeron noted in his recommendation, "The defendants were requested to provide the court with the necessary proof that the escape rule of LSA-R.S. 15:571.4(B) had been promulgated into the adult rules so as to permit its imposition. These documents will be received as Defendants' Exhibit 3."
A close review of this exhibit mentioned shows that there has been no revision and promulgation of "Louisiana Administrative Code, Title 22, Part 1, Subchapter A, Section 333: Forfeiture of Good Time for Escape," since the 1992 amendment to La. R.S. 15:571.4(B)(1) relied on by the majority. The regulation provided in this record[7] tracked the old law when it said in part 4,
Action. The following actions may be imposed after the offender is found guilty of escape:
*392 a. Louisiana State Penitentiary
i. those found guilty of simple escape shall, forfeit not less than one month, nor more than two years' worth of earned good time;
. . . .
Pursuant to the requirement of publishing new rules in order to reflect the changes to La. R.S. 15:571.4(B), "Louisiana State Penitentiary" should be changed to "Department of Public Safety and Corrections" and "shall, forfeit not less than one month, nor more than two years' worth of earned good time" should be changed to "may forfeit all good time earned on that portion of his sentence served prior to his escape."
In conclusion, since there is no evidence in the record that Victorian lost more than two years of good time, the result reached is correct as far as can be determined from the record.
I respectfully concur.
NOTES
[1] Judge Ian W. Claiborne is serving as judge pro tempore by special appointment of the Louisiana Supreme Court.
[2] The DPSC's Master Record indicates Victorian also was convicted of simple burglary in 1988.
[3] According to Victorian's petition for judicial review, in August of 1997, he was convicted of simple escape in the Thirty-First Judicial District Court and sentenced to serve one year at hard labor.
[4] As an inmate suit, this case was assigned to a commissioner to conduct all proceedings and make a recommendation to the appropriate district court judge. This procedure is utilized by the Nineteenth Judicial District Court to accommodate the large volume of lawsuits filed by inmates for judicial review of decisions of the DPSC. See LSA-R.S. 13:713.
[1] The amendment to La. R.S. 49:964(A) stating that a person aggrieved by a final decision or order in an adjudication proceeding is entitled to judicial review under the APA, except as provided in La. R.S. 15:1171-1177, appears to remove the APA as the controlling law on review of CARP claims. However, in the same legislative session in which this amendment was made, the legislature also passed 1997 La. Acts No. 128, which added La. R.S. 49:964(G)(7) to the APA. This new subsection to La. R.S. 49:964 states, in part:
G. The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:
* * * *
(7) In cases covered by R.S. 15:1171 through 1177, manifestly erroneous in view of the reliable, probative, and substantial evidence on the whole record.... (Emphasis added.)
Why place a phrase in the APA about cases covered by La. R.S. 15:1171 through 1177 when the opening sentence of La. R.S. 49:964(A) seems to exclude these CARP claims from the APA? One thing is clear, the legislature intended to leave manifest error as the standard of review on fact issues for prisoner claims. If no case under CARP is controlled by the APA, this last sentence is totally unnecessary.
[2] Even if the APA and CARP did not exist, the standards of review set forth in these statutes existed in other statutes and in the jurisprudence.
[3] I note, however, that the judicial review provisions of CARP and the APA are no longer exactly the same, because La. R.S. 49:964(G)(6) was amended by 1997 La. Acts No. 128 as follows:
G. The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:
* * * *
(6) Not supported and sustainable by a preponderance of evidence as determined by the reviewing court. In the application of this rule, the court shall make its own determination and conclusions of fact by a preponderance of evidence based upon its own evaluation of the record reviewed in its entirety upon judicial review. In the application of the rule, where the agency has the opportunity to judge the credibility of witnesses by first-hand observation of demeanor on the witness stand and the reviewing court does not, due regard shall be given to the agency's determination of credibility issues.
By House Concurrent Resolution No. 89 of the 1997 regular session, La. R.S. 49:964(G)(6) (renumbered to La. R.S. 49:964(G)(7)) was suspended until 60 days after final adjournment of the 1998 regular session of the legislature. The 1998 Regular Session adjourned June 10, 1998.
[4] In his dissent, Judge Landry argued that such a narrow interpretation of the APA "renders the statute virtually meaningless." First National Bank of Abbeville, 246 So.2d at 386.
[5] Despite the fact that former La. R.S. 15:1177 referred only to the use of the judicial review section of the APA (La. R.S. 49:964), this court has also applied the definitions section of the APA (La. R.S. 49:951) in a prisoner case decided under former La. R.S. 15:1177. In Brown v. Phelps, 392 So.2d 103 (La.App. 1 Cir.1980), the APA's definition of "agency" was used to determine the proper parish within which a prisoner's suit should have been brought.
[6] I also note that the removal of judicial oversight over minor prison disciplinary matters would reduce the caseload on the already overcrowded docket of this court, as well as that of other courts.
[7] I take judicial notice of the regulation as it appears on the Louisiana Administrative Code web site, maintained by the Office of State Register, Division of Administration, which still did not reflect the amendment, and which conforms with the version in Defendants' Exhibit 3, as of the date this concurrence was written.
|
T.C. Memo. 2003-66
UNITED STATES TAX COURT
ESTATE OF NATALIE M. LEICHTER, DECEASED, STEVEN
LEICHTER, CO-SPECIAL ADMINISTRATOR AND JEFFREY L.
LEICHTER, CO-SPECIAL ADMINISTRATOR, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2192-00. Filed March 6, 2003.
Walter Joseph Tribbey III, for petitioner.
David R. Jojola, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
GERBER, Judge: Respondent determined a $344,635 Federal
estate tax deficiency for the Estate of Natalie M. Leichter (the
estate). This deficiency derives from respondent’s determination
that the fair market value of Harlee International, Inc., a
closely held corporation, was $2,718,358 instead of the
- 2 -
$2,091,750 reported as its fair market value on the estate’s tax
return. The sole issue for our consideration is the fair market
value of Harlee International, Inc., on October 23, 1995, the
date of decedent’s death.
FINDINGS OF FACT1
Decedent Natalie Leichter was a resident of Los Angeles,
California, at the time of her death on October 23, 1995.
Decedent’s spouse, Harvey A. Leichter, died approximately 3
months earlier during July 1995. Decedent died testate and was
survived by two sons, Jeffrey L. Leichter and Steven F. Leichter.
Steven Leichter resided in Walnut, California, at the time the
estate’s petition was filed. Among other things, the estate
included all of the outstanding common stock of Harlee
International, Inc. (Harlee).
At the time of decedent’s death, Harlee was a California
corporation which had elected S corporation status for Federal
tax purposes. Harlee had 20,000 shares outstanding and was a
wholesale distributor of futon frames. Harlee was founded in
1981 by Harvey Leichter. It began as a small importer and
distributor of industrial fasteners imported from Asia.
Initially, Harlee operated out of the Leichter residence. In the
mid-1980s, Harlee entered into the business of the wholesale
1
The parties’ stipulations of facts are incorporated herein
by this reference.
- 3 -
distribution of waterbed frames and vinyl liners. After a
decline in the waterbed market and approximately 1½ years before
his death, Harvey Leichter became involved in the re-emerging
futon market.
Through his overseas contacts, Harvey Leichter sought out
Asian companies that could manufacture futon frames according to
photographs and samples provided by Harlee. Harlee dealt
directly with representatives who, in turn, were responsible for
locating foreign companies and maintaining accounts with them.
Harlee did not have contractual relationships with the Asian
manufacturers. Shortly before decedent’s death, Harlee’s
contractual relationship with two representatives ended: One
manufacturer was taken over by Harlee’s competitor, and another
was closed as a result of embezzlement.
As of decedent’s date of death, Harlee was still in a period
of transition from the waterbed to the futon market. Harlee’s
product line consisted of approximately 60-percent futon-related
items and 40-percent waterbed-related items. Of Harlee’s futon
products line, nearly 10 percent were metal fastener and liner
products manufactured in Taiwan. The remaining 90 percent were
futon frames from three different manufacturers in Indonesia.
- 4 -
The use of Asian suppliers kept costs low but subjected
Harlee to concerns such as: (1) A 3-to-4 month order, or lead
time; (2) additional delays during the Asian rainy season; (3)
the possibility of political unrest that stopped and/or
substantially decreased production; and (4) approximately 20
percent defective inventory. For these reasons, Harlee
maintained at least 3 to 4 months of inventory at all times.
However, during two of Harlee’s biggest seasons, Christmas and
spring, which coincide with the Asian rainy season, inventory was
increased beyond the 3 to 4 months standard. Harlee was
increasing its inventory at the time of decedent’s death.
At the time of decedent’s death, Harlee conducted business
from leased premises in Corona, California. Because the building
had become too small for Harlee’s needs and the lease was about
to expire, Harlee leased new premises beginning on January 1,
1996.
Harlee was exposed to competition by similarly sized
companies on a national level. Its customer base consisted of
approximately 100 customers, including retail stores,
distributors and manufacturers. Although most of the customers
were retail stores, the distributors generated the largest amount
of revenue. Once a distributor became sufficiently large enough
to import products directly, it would cut out the middleman, such
as Harlee. Sometimes Harlee remained involved as an agent for
- 5 -
the distributors and received a 3- to 5-percent commission,
instead of the normal 30-percent profit. Due to a large
turnover, Harlee continually needed to, and did, generate new
customers.
Prior to his death in July 1995, Harvey Leichter was
Harlee’s president and primary salesman, generating 80 to 90
percent of all sales. Decedent was Harlee’s bookkeeper. Aside
from them, the management team consisted of James Woll, general
manager in charge of new product development; and James Seltzer,
assistant to the president. Altogether, Harlee had a workforce
consisting of 8 to 10 employees. Between Harvey Leichter’s death
in July 1995 and decedent’s death in October of that same year,
the workforce remained constant except that decedent became
president.
For the 4 years preceding decedent’s death (1991 through
1994), Harlee had total sales of $2,426,721, $1,896,895,
$2,778,872, and $3,894,587, respectively. In each of the 2 years
preceding death, Harlee’s sales increased more than 40 percent
from the prior year. For that same period, Harlee’s cost of
goods sold averaged in the mid-to-high 70-percent range in
relation to total sales, and its operating expenses averaged
approximately 18 percent of total sales. Harlee’s adjusted net
income for the 4 years preceding decedent’s death was generally
increasing, as follows: $40,194, $83,640, $77,570, and $113,191.
- 6 -
Similarly, for Federal tax purposes, Harlee reported generally
increasing amounts of ordinary income culminating in $163,121 for
its 1994 taxable year.
Steven Leichter worked for 13 years at Harlee until decedent
fired him in June 1994. Consequently, he was not involved with
Harlee for the approximately 12 to 15 months preceding his
parents’ deaths. Steven Leichter returned to Harlee shortly
after decedent’s death and assumed responsibility for the day-to-
day operations. Jeffrey Leichter resided in Detroit Lakes,
Minnesota, at the time of decedent’s death.
Jeffrey Leichter was nominated in decedent’s will to act as
her executor and, as such, was issued letters of special
administration on November 2, 1995. On the same date, the estate
filed a petition seeking to probate the March 21, 1995, will and
the October 16, 1995, First Codicil. In her First Codicil,
decedent disinherited her son, Steven Leichter. Consequently, a
dispute arose between the two sons concerning the distribution of
the estate. In particular the dispute concerned decedent’s
predeceased spouse’s estate and the First Restatement of the
January 12, 1991, Leichter Family Trust.
On March 6, 1996, a Settlement Agreement and Mutual Release
(Settlement Agreement) was filed with the probate court
reflecting that a settlement had been reached between Jeffrey and
- 7 -
Steven Leichter. Among other things, the Settlement Agreement
provided that
1.5 * * * the Trust shall distribute to
Steven * * *
a. One hundred percent (100%) of the
stock in Harlee * * * [20,000
shares];
b. the sum of $400,000.0 in
cash * * *
1.5 [sic.] Steven shall assign his interest
in * * * [decedent’s] Individual Retirement
Account to Jeffrey * * *
1.6 Steven shall also release any claims he
may have for any portion of * * *
[decedent’s] estate * * *.
On March 20, 1996, the Superior Court appointed Joseph D.
Bua as probate referee to appraise and inventory the estate. Mr.
Bua filed such appraisal and inventory of the estate with the
Superior Court on August 13, 1996. The filed documents reflected
that the Harlee stock was inventoried and appraised at
$2,261,713.00. Decedent’s Individual Retirement Account was
valued for Federal estate tax purposes at $2,240,966.
On October 31 and December 16, 1996, the estate filed with
the Superior Court a Waiver of First and Final Account and a
First Supplement to the Waiver of First and Final Account,
respectively. On December 17, 1996, the Superior Court ordered
that the outstanding stock in Harlee, appraised at $2,261,713,
was to be distributed to Steven Leichter. On December 23, 1996,
- 8 -
Steven Leichter acknowledged receipt of the distribution of the
Harlee stock.
On July 22, 1996, 1 day before the estate tax return was
due, the estate requested a 6-month extension until January 23,
1997. The request was granted, and the estate’s tax return was
timely filed. The return reflected that the unit value of the
20,000 shares of Harlee, which represented all of the issued and
outstanding stock, was $104.59, for a total value of $2,091,750.
Because the value of Harlee stock exceeded 35 percent of the
adjusted gross estate, the estate elected the section 6166(a)(1)2
benefit of paying $722,421 of estate tax in installments over 10
years.
The $2,091,750 reported value stems from an appraisal
report, dated November 15, 1995. It was prepared by Lawrence F.
Sherman of WIN Corporate Finance, Inc., who was hired by the
estate to value the business. In his valuation of Harlee
(Sherman Appraisal), Mr. Sherman relied on Harlee’s October 31,
1995, interim financial statement. This statement reflected that
a $1,253,021 note payable by Harlee to the Leichter Family Trust
had been converted to equity on or before decedent’s date of
death. The note payable had shown an annual interest rate of 10
2
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect as of the date of decedent’s
death, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
- 9 -
percent, which was payable monthly. If the interest was not
paid, the amount of interest became part of the principal and was
compounded. The note payable had been secured by a security
interest in substantially all of Harlee’s assets and had been
recorded by Harlee as a current liability.
Approximately 4 years later and during the examination of
the estate’s tax return, the estate’s attorneys arranged a
meeting with Mr. Sherman and senior management at Harlee to
review and discuss the Sherman Appraisal. One week later, Mr.
Sherman wrote a letter to one of the estate’s representatives
claiming that he had made an error on the Sherman Appraisal. He
explained that “During * * * [the] meeting * * * last week, new
information was presented to me that was not considered in * * *
[the Sherman Appraisal] in 1995.” Mr. Sherman stated that his
error resulted from a misunderstanding as to inventory policy and
existing liabilities.
A statutory notice of deficiency was issued to the estate on
December 6, 1999.
OPINION
We consider here the fair market value of a closely held
business and whether any discount is appropriate. The estate
reported Harlee’s fair market value at $2,091,750 based on an
appraisal that was attached to its estate tax return. Respondent
initially determined that the fair market value was $2,718,358 in
- 10 -
the statutory notice of deficiency. Based on its expert’s
report, respondent, for purposes of trial, contends that the fair
market value was $2,150,000. The estate, for purposes of trial,
contends that the appraisal relied upon for purposes of the
estate tax return was erroneous or flawed and that the fair
market value is, at most, $800,000. At trial, both sides to this
controversy offered witnesses supporting their respective
positions.
Property includable in a decedent’s gross estate is
generally included at its fair market value on the date of death.
Sec. 2031(a); sec. 20.2031-1(b), Estate Tax Regs. Fair market
value is a factual determination, and the trier of fact must
weigh all relevant evidence of value and draw appropriate
references. Commissioner v. Scottish Am. Inv. Co., 323 U.S. 119,
123-125 (1944); Helvering v. Natl. Grocery Co., 304 U.S. 282, 294
(1938); Symington v. Commissioner, 87 T.C. 892, 896 (1986).
To determine the value of an unlisted stock, an actual
arm’s-length sale of a similar stock within a reasonable time
before or after decedent’s date of death is indicative of its
fair market value. Ward v. Commissioner, 87 T.C. 78, 101 (1986).
In the absence of arm’s-length sales, fair market value
represents the price that a hypothetical willing buyer would pay
a hypothetical willing seller, both persons having reasonable
knowledge of all relevant facts and neither person compelled to
- 11 -
buy or sell. Estate of Hall v. Commissioner, 92 T.C. 312, 335
(1989). It is implicit that the buyer and seller would aim to
maximize profit and/or minimize cost in the setting of a
hypothetical sale. Estate of Watts v. Commissioner, 823 F.2d
483, 486 (11th Cir. 1987), affg. T.C. Memo. 1985-595; Estate of
Newhouse v. Commissioner, 94 T.C. 193, 218 (1990). Therefore, we
consider the view of both the hypothetical seller and buyer.
Kolom v. Commissioner, 644 F.2d 1282, 1288 (9th Cir. 1981), affg.
71 T.C. 235 (1978).
In this case, the estate reported Harlee’s value to be
$2,091,750 on its estate tax return. For purposes of this
controversy, the estate contends that the value is, at most, less
than one-half of the amount it reported. A valuation amount
reported on a taxpayer’s return is a deemed admission. Estate of
Hall v. Commissioner, supra at 337-338.
The estate argues that the Sherman Appraisal, upon which the
estate relied in filing its 1995 estate tax return, was
erroneous. Specifically, the estate contends that the appraisal
by Mr. Sherman: (1) Inferred, mistakenly, that he had interviewed
the decedent; (2) stated, alternatively in different paragraphs
on the same page, that the estate to be valued was of Mrs. Lee
Leichter or of Mr. Harvey Leichter; (3) reported that decedent’s
date of death was October 18, 1995, when it was October 23, 1995;
(4) determined that the working capital was excessive without
- 12 -
considering the nature of the business; and (5) did not take into
account $90,000 of liabilities.
We note that decedent and her husband died within a short
time of each other. Furthermore, most of the errors complained
of by the estate are orthographic. While they might reflect that
Mr. Sherman’s appraisal needed proofreading, they do not show
that the value is erroneous.
As for the posited errors which appear to be more
substantive in nature, again, they do not show that the value,
itself, is erroneous. The purported $90,000 in liabilities was
unknown and unforeseeable at the time of decedent’s death and
cannot be used for valuation purposes. See, e.g., Estate of
Busch v. Commissioner, T.C. Memo. 2000-3. Furthermore, despite
the estate’s claim, it does not appear that Mr. Sherman
overstated by $900,000 the amount of excess working capital. In
fact, his valuation of excess working capital appears reasonable
and was approximately $100,000 lower than that of respondent’s
expert.
Contrary to the estate’s contentions, the record is replete
with evidence that the value reported on the estate tax return
was correct. For instance, in probate litigation between the
decedent’s two sons, Jeffrey and Steven Leichter settled the
dispute based upon a $2,261,713 value of Harlee, determined by a
probate referee, who was an independent party appointed by the
- 13 -
court. Moreover, respondent’s expert arrived at a value that was
a mere $60,000 or 3 percent more than reported on the estate tax
return.
In reaching our holding on the fair market value of Harlee,
we consider the expert witnesses’ reports. It is within this
Court’s discretion to evaluate the cogency of their conclusions
and opinions. Sammons v. Commissioner, 838 F.2d 330, 333 (9th
Cir. 1988), affg. on this point and revg. on another ground T.C.
Memo. 1986-318. This Court evaluates opinions of experts in
light of each expert’s demonstrated qualifications and the
evidence in the record. Estate of Davis v. Commissioner, 110
T.C. 530, 538 (1998) (and cases cited therein). Accordingly,
this Court may accept or reject all or part of an expert’s
opinion. Id.
For purposes of supporting a substantially lower value than
reported, the estate offered two experts, one valuing Harlee at
$863,000 and the other at $400,000. Respondent offered one
expert, who valued Harlee at $2,150,000. While neither party
offered Mr. Sherman, who valued Harlee at $2,091,750 for purposes
of the estate tax return, the Sherman Appraisal itself is part of
the record.
Mr. Burdette Garvin was hired by the estate for litigation
purposes and opined that the value of Harlee was $863,000 as of
October 23, 1995. Although Mr. Garvin seemed to have working
- 14 -
knowledge of the market for this type of business, his appraisal
approach and methodology are weak in several respects. As an
example, for adjusted book value, Mr. Garvin improperly included
the $1,254,408 Note Payable. As of decedent’s date of death,
that Note Payable had already been converted to equity.3
Consequently, it was not a liability of Harlee, and Mr. Garvin’s
adjusted book value should have been substantially larger.
In arriving at book value, Mr. Garvin increased other
noncurrent liabilities by approximately $1,400,000 from October
31 to December 31, 1995. Mr. Garvin attributes this increase to
something he denominates as “negative goodwill”. Negative
goodwill has been defined as a phenomenon which occurs when the
purchase price of a business is less than its book value. See
Adventist Living Ctrs., Inc. v. Bowen, 686 F. Supp. 680 (N.D.
Ill. 1988), affd. 881 F.2d 1417 (7th Cir. 1989). In that regard,
Mr. Garvin had already discounted Harlee’s assets substantially
for “soft” inventory and doubtful accounts. Moreover, he
provided no viable reason for further reductions for “negative
goodwill”.
Mr. Garvin employed established valuation methodologies:
Discounted earnings method, guideline company method, and
industry market ratios method. However, he duplicated the
3
While this point was conceded by the estate on brief, the
estate did not address the change in book and adjusted book value
amounts.
- 15 -
discounts applied. For instance, he discounted for the loss of
Harvey Leichter in all three methods and after weighing all
three, he discounted again for lack of marketability. We found
this to be an attempt to discount for the same reasons he
discounted the values initially. For that reason among others,
we question whether his report can be relied upon.
Significantly, Mr. Garvin fails to explain his reasons for
not including a pure liquidation analysis as part of his report.
In effect, Mr. Garvin is opining that Harlee is worth
substantially less than its liquidation value. He fails to
explain why the hypothetical seller would choose not to liquidate
when he concludes that the going concern value is less than the
value of its assets.4
Mr. John McCallum was hired by the estate for litigation
purposes and opined that the value of Harlee was $400,000 as of
December 31, 1995. In reviewing Mr. McCallum’s report, we find
that his conclusions and analysis are brief and cursory in
nature. For instance, while acknowledging in the appraisal that
his date of valuation was 2 months after decedent’s date of
death, Mr. McCallum merely states that “this date is
appropriate.” Mr. McCallum’s “Observations as to Conditions” of
Harlee is less than 10 sentences. Mr. McCallum provides no
4
The estate points out that Steven Leichter wanted to
continue the family business and felt an obligation to the
employees. However, we can only consider the motivations of a
hypothetical seller or buyer, not those of Steven Leichter.
- 16 -
explanation of the Leichters’ role at Harlee in concluding that a
15-percent discount should be applied for the lack of continuity
of management. We accord no weight to Mr. McCallum’s report
because of the lack of adequate explanations in support of his
conclusions.
Mr. John Thomson was hired by respondent for litigation
purposes, and he opined that Harlee’s value was $2,150,000 as of
October 23, 1995–-an amount less than respondent’s original
determination of $2,718,358. Primarily, Mr. Thomson used two
methods in arriving at his value. Through the market approach,
he compared Harlee to five publicly traded firms, discounted the
value of Harlee to match more accurately the comparables to the
subject and added both a 15-percent control premium and an excess
working capital value of $900,000. Through the income method,
Mr. Thomson forecasted Harlee’s sales for the subsequent 5 years
and used a net discounted cashflow method to value those sales at
present value. In so doing, Mr. Thomson looked at Harlee’s
previous 5 years of operation and then discounted the future
cashflow by 17 percent.
Mr. Thomson’s methodology was within reasonable range and
his conclusions were adequately supported by the facts in the
record. Mr. Thomson’s $2,150,000 value was in harmony with the
$2,261,713 value arrived at by the probate referee and the
$2,091,750 value reported by the estate on its estate tax return.
- 17 -
However, we did find some weakness in his approach; i.e., the
fact that he chose guideline companies that, even in his own
opinion, were not similar to Harlee.
In arguing for a lower value of Harlee, the estate
continually attempted to shift our focus to the rate of return
expected by a hypothetical buyer of Harlee. However, we cannot,
overlook the fact that a hypothetical seller would not sell
Harlee valued as a going concern if a substantially larger amount
could be realized by means of Harlee’s liquidation. Further,
Harlee had an established record of past earnings which belies
the estate’s position.
We hold that the includable value of Harlee on October 23,
1995, was $2,091,750, the value reported on the Estate of Natalie
Leichter’s estate tax return.
To reflect the foregoing,
Decision will be entered
under Rule 155.
|
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 14a0247p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
LABORERS’ LOCAL 265 PENSION FUND; PLUMBERS ┐
and PIPEFITTERS LOCAL NO. 572 PENSION FUND, │
Plaintiffs-Appellants, │
│ No. 13-6486
v. │
>
│
iSHARES TRUST et al., │
Defendants-Appellees. │
┘
Appeal from the United States District Court
for the Middle District of Tennessee at Nashville.
No. 3:13-cv-00046—Aleta Arthur Trauger, District Judge.
Argued: July 30, 2014
Decided and Filed: September 30, 2014
Before: BOGGS, CLAY, and GILMAN, Circuit Judges.
_________________
COUNSEL
ARGUED: C. Mark Pickrell, THE PICKRELL LAW GROUP, P.C., Nashville, Tennessee, for
Appellants. Seth M. Schwartz, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, New
York, New York, for Appellees. ON BRIEF: C. Mark Pickrell, William G. Brown, THE
PICKRELL LAW GROUP, P.C., Nashville, Tennessee, James G. Stranch, III, J. Gerard Stranch
IV, Michael G. Stewart, Michael J. Wall, BRANSTETTER, STRANCH & JENNINGS, PLLC,
Nashville, Tennessee, Jenny L. Dixon, ROBBINS ARROYO LLP, San Diego, California, for
Appellants. Seth M. Schwartz, Jeremy A. Berman, SKADDEN, ARPS, SLATE, MEAGHER &
FLOM LLP, New York, New York, John R. Jacobson, Milton S. McGee, III, RILEY
WARNOCK & JACOBSON, PLC, Nashville, Tennessee, Bruce H. Schneider, STROOCK &
STROOCK & LAVAN LLP, New York, New York, for Appellees.
1
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 2
_________________
OPINION
_________________
RONALD LEE GILMAN, Circuit Judge. An affiliate of the investment advisor for
iShares mutual fund functions as a middleman between iShares and those who seek to borrow
iShares’s securities holdings, charging a fee of 35% for all net revenue received by iShares from
such lending activity. The plaintiff shareholders challenge this fee as excessive under the
Investment Company Act of 1940 (ICA), 15 U.S.C. § 80a-1 et seq. Their complaint was
dismissed by the district court for failure to state a claim. For the reasons set forth below, we
AFFIRM the judgment of the district court.
I. BACKGROUND
A. Factual background
Securities lending promotes market efficiency and liquidity by making securities readily
available to a variety of borrowers, including short-sellers. The Second Circuit has described the
practice as follows:
Securities lending is an important and significant business that describes the
market practice whereby securities are temporarily transferred by one party (the
lender) to another (the borrower). The borrower is obliged to return the securities
to the lender, either on demand, or at the end of any agreed term. For the period
of the loan the lender is secured by acceptable assets delivered by the borrower to
the lender as collateral. Typically, the collateral—which, in the United States,
often takes the form of cash—is valued at 102% [to] 105% of the market value of
the loaned securities. The borrower of securities may be motivated by any
number of factors, including the desire to cover a short position, to sell the
borrowed securities in hopes of buying them back at a lower price before
returning them to the lender, or to gain tax advantages associated with the
temporary transfer of ownership of the securities.
United States v. Zangari, 677 F.3d 86, 88 (2d Cir. 2012) (internal citations, footnotes, and
quotation marks omitted).
The plaintiffs in this case are two pension funds that are shareholders in exchange-traded
funds issued by iShares, Inc. and iShares Trust (collectively iShares). iShares, as part of its
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 3
mutual-fund operations, lends its securities holdings to various borrowers. This lending activity
generates substantial revenue for iShares because borrowers must post cash collateral and pay
interest on their loans. BlackRock, Inc., which is not named as a defendant, is the corporate
parent of iShares. Defendant BlackRock Institutional Trust Company, N.A. (BTC), a wholly
owned subsidiary of BlackRock, serves as iShares’s lending agent. BTC functions as a
middleman between iShares and those who seek to borrow iShares’s securities holdings. In
exchange for its services as lending agent, BTC receives 35% of all securities-lending net
revenue. The parties refer to this percentage as the “lending fee.”
Defendant BlackRock Fund Advisors (BFA) is a wholly owned subsidiary of BTC. BFA
is the investment adviser for iShares and manages the funds’ portfolios pursuant to an
investment-advisory agreement. Under this agreement, BFA receives a separate fee that is not at
issue in this case.
The plaintiffs allege, among other things, that BFA and BTC violated Section 36(a) and
Section 36(b) of the ICA, 15 U.S.C. § 80a-35(a), (b), by charging an excessive lending fee.
According to the plaintiffs, the fee charged by BTC bears no relationship to the actual services
rendered.
B. Procedural background
The plaintiffs filed suit in federal district court against BFA, BTC, individual iShares
directors, and several nominal defendants in January 2013. In response, the defendants moved
under Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the complaint for failure
to state a claim. The district court granted the defendants’ motion and dismissed the complaint
in August 2013. Although the district court granted the plaintiffs leave to amend their complaint,
the plaintiffs instead filed this appeal following the entry of a final judgment.
The plaintiffs do not object to the practice of securities lending in general, but they do
object to the 35% lending fee that BTC charges. They specifically allege that:
66. BFA, acting as investment adviser to iShares and the Funds, has retained
BTC, its parent company, to manage the lending of securities owned by iShares
ETF’s, including the Funds.
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 4
...
70. BTC’s securities lending fees with respect to the Funds are set out in an
Amended and Restated Securities Lending Agreement with iShares, Inc. and
iShares Trust, among other entities. That agreement provides that BTC shall be
provided a fee of 35% of the “net amount earned on securities lending activities.”
This 35% fee is, standing alone, disproportionally large and far higher than would
be negotiated with all unaffiliated agent[s] in an arms length transaction.
...
73. These securities lending fees charged to iShares investors are
disproportionately large—“about three times more than what is typical in the
industry.”
(Verif. Compl. ¶¶ 66, 70, 73)
The plaintiffs’ verified complaint contains three counts. In the first count, the plaintiffs
assert derivative claims under Section 36(b) of the ICA against BFA, BTC, and the individual
iShares directors. They allege that BTC’s 35% lending fee is excessive and bears no relationship
to the actual services rendered.
In the second count, the plaintiffs assert a claim under Section 47(b) of the ICA. They
allege that the contracts “obligating iShares or any Fund to pay BTC or BFA or affiliates fees
arising out of securities lending transactions . . . were performed in violation of the [ICA] and are
therefore unenforceable.” The plaintiffs contend that the contracts were made in “violation of at
least four provisions of the [ICA]—Sections 17(d), 17(e), 36(a) and 36(b).” They do not,
however, appeal the district court’s dismissal of this count.
In the third count, the plaintiffs assert a derivative claim under Section 36(a) of the ICA
against BFA, BTC, and the individual iShares directors. They allege that the defendants
breached their fiduciary duties to the shareholders by “using investor assets for the benefit of
their hedge funds and short-selling operations, without compensating investors in line with
compensation that would have been paid based on arm’s length transactions.”
In response, the defendants argued that (1) the Section 36(b) claim is barred by the terms
of a 2002 exemption order issued by the Securities and Exchange Commission (SEC) to
BlackRock’s predecessor-in-interest in which the SEC permitted the securities-lending
operations at issue here, and (2) Section 36(a) of the ICA does not provide an implied private
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 5
right of action. The district court, after agreeing with both of the defendants’ arguments,
dismissed the complaint for failure to state a claim. Although the dismissal was without
prejudice, the plaintiffs chose not to amend their complaint. The district court then entered a
final judgment against the plaintiffs in October 2013. This timely appeal followed.
II. ANALYSIS
A. Standard of review
We review de novo a district court’s decision to grant a motion to dismiss for failure to
state a claim. Lambert v. Hartman, 517 F.3d 433, 438–39 (6th Cir. 2008). In reviewing the
grant of such a motion, we construe the complaint in the light most favorable to the plaintiff and
accept all factual allegations as true. Id. at 439. “To survive a motion to dismiss, a complaint
must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)).
B. The district court did not err in dismissing the Section 36(b) claim
The plaintiffs first contend that the district court erred in dismissing their Section
36(b) claim against BFA. They frame the relevant issue on appeal as whether “Section 36(b)
provides a remedy against the investment adviser, BFA, for excessive compensation paid to both
it and its affiliate, BTC.” The plaintiffs argue that Section 36(b) permits a lawsuit against an
investment adviser for excessive compensation even where (as is the case here) the SEC has
blessed the securities-lending operations of an affiliated lending agent (BTC).
Section 36(b) of the ICA provides as follows:
For the purposes of this subsection, the investment adviser of a registered
investment company shall be deemed to have a fiduciary duty with respect to the
receipt of compensation for services, or of payments of a material nature, paid by
such registered investment company, or by the security holders thereof, to such
investment adviser or any affiliated person of such investment adviser. An action
may be brought under this subsection by the Commission, or by a security holder
of such registered investment company on behalf of such company, against such
investment adviser, or any affiliated person of such investment adviser, or any
other person enumerated in subsection (a) of this section who has a fiduciary duty
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 6
concerning such compensation or payments, for breach of fiduciary duty in
respect of such compensation or payments paid by such registered investment
company or by the security holders thereof to such investment adviser or person.
15 U.S.C. § 80a-35(b).
Closely related to Section 36(b) of the ICA is Section 17, which imposes broad
restrictions on transactions between registered investment companies and their affiliates. See
id. § 80a-17(a) (listing prohibited transactions); see also id. § 80a-17(d) (prohibiting certain joint
transactions among affiliates). The defendants do not dispute that BFA and BTC are affiliates
under the ICA. A subsection of Section 36(b), however, contains a carve-out provision, which
states that “[t]his subsection shall not apply to compensation or payments made in connection
with transactions subject to section 80a-17 of this title [i.e., Section 17 of the ICA], or rules,
regulations, or orders thereunder.” Id. § 80a-35(b)(4).
As relevant here, the SEC has the authority to issue exemption orders under the ICA.
15 U.S.C. § 80a-6(c). In 2002, BlackRock’s predecessor-in-interest received such an order from
the SEC. The exemption order permits iShares to “pay an affiliated lending agent, and the
lending agent to accept, fees based on a share of the revenues generated from securities lending
transactions and to lend portfolio securities to affiliated broker-dealers.” In re Maxim Series
Fund, Inc., Investment Company Act Release No. 25878, 2002 SEC LEXIS 3327 (Dec. 27,
2002).
In their briefs, the plaintiffs acknowledge the existence of the 2002 exemption order.
They nevertheless contend that their Section 36(b) claim against BFA remains unaffected by the
order because BTC’s compensation as the lending agent should be imputed to BFA “for purposes
of deciding whether BFA [breached] its fiduciary duty” as iShares’s investment adviser. In
essence, the plaintiffs’ argument is that BTC’s lending fee should be aggregated with BFA’s
separate investment-advisory fee in order to determine whether BFA violated its fiduciary duty
by receiving excessive compensation.
The Second Circuit has rejected a similar argument regarding the aggregation of separate
fees. In Meyer v. Oppenheimer Management Corp., 895 F.2d 861 (2d Cir. 1990), an individual
shareholder filed a derivative suit under the ICA against a money-market mutual fund and its
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 7
investment adviser, alleging that the adviser’s fees and the distribution fees received by the
adviser’s affiliates were excessive. The plaintiff specifically argued that the adviser’s fees and
the distribution fees should be aggregated for the purpose of analyzing his Section 36(b) claim.
In rejecting the plaintiff’s aggregation argument, the Meyer court explained that
Section 36(b) of the Act imposes a fiduciary duty on investment advisers and
affiliated persons regarding the receipt of compensation for services, or of
payments of a material nature. An advisory fee violates Section 36(b) if it is so
disproportionately large that it bears no reasonable relationship to the services
rendered and could not have been the product of arm’s-length bargaining.
. . . [W]e [have] stated that [a] claim that payments made under Rule 12b–1
[which permits the use of fund assets to compensate brokers for the brokers’ sale
and distribution-related expenses] are excessive when combined with advisory
fees, where both payments are made to affiliated persons of an investment
adviser, is cognizable under [S]ection 36(b). This statement stands only for the
proposition that the costs of 12b–1 plans involving such affiliates as well as
advisory fees are subject to review under Section 36(b). Were such review not
available, investment advisers might be able to extract additional compensation
for advisory services by excessive distributions under a 12b–1 plan. The statement
does not, however, stand for the additional proposition that 12b–1 payments to an
adviser’s affiliates are to be aggregated with advisory fees to determine the merits
of a Section 36(b) claim. The two kinds of payments are for entirely different
services, namely advice on the one hand and sales and distribution on the other.
If the fee for each service viewed separately is not excessive in relation to the
service rendered, then the sum of the two is also permissible.
Id. at 866 (emphasis added) (internal citations and quotation marks omitted).
The logic of Meyer applies with equal force to the present case. BTC receives a fee of
35% in exchange for its services as lending agent. The allegations in the complaint focus on this
lending fee. Nowhere in the complaint do the plaintiffs protest the separate fee that BFA
receives pursuant to its investment-advisory agreement with iShares. The plaintiffs have
therefore forfeited their aggregation argument. See Owens Corning v. Nat’l Union Fire Ins. Co.,
257 F.3d 484, 493 n.4 (6th Cir. 2001) (holding that allegations made for the first time on appeal
are forfeited unless plain error exists). And even if the complaint had contained specific
allegations protesting BFA’s investment-advisory fee, that fee is altogether separate from the
lending fee charged by BTC and thus provides no logical basis for aggregating the two. See
Meyer, 895 F.2d at 866.
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 8
None of the plaintiffs’ arguments to the contrary are persuasive. First, the plaintiffs point
to the legislative history of Section 36(b)(4) in support of their contention that BTC’s lending-fee
compensation should be aggregated with BFA’s investment-advisory fee in determining whether
BFA violated Section 36(b). The plaintiffs then cite cases that have characterized certain
portions of Section 36(b) as ambiguous, thereby making inquiry into the legislative history of
Section 36(b) appropriate. See Jones v. Harris Assocs. L.P., 559 U.S. 335, 345 (2010)
(characterizing the phrase “fiduciary duty with respect to the receipt of compensation” as
ambiguous); Fogel v. Chesnutt, 668 F.2d 100, 112 (2d Cir. 1981) (same).
But even if certain portions of Section 36(b) are ambiguous, this does not mean that the
relevant carve-out provision in Section 36(b)(4) is ambiguous. The carve-out provides that
Section 36(b) “shall not apply to compensation or payments made in connection with
transactions subject to section 80a-17 of this title, or rules, regulations, or orders thereunder.”
15 U.S.C. § 80a-35(b)(4). Because the SEC’s 2002 exemption order authorizes transactions that
would otherwise be prohibited by Section 17, the carve-out provision in Section 36(b)(4) is
triggered and the plaintiffs’ Section 36(b) claim must fail. There is accordingly no need to
examine the legislative history. See Roberts v. Hamer, 655 F.3d 578, 583 (6th Cir. 2011) (“If the
words are plain, they give meaning to the act, and it is neither the duty nor the privilege of the
courts to enter speculative fields in search of a different meaning.”) (internal quotation marks
omitted).
In any event, the legislative history of Section 36(b)(4) is of little help to the plaintiffs.
They principally rely on then-SEC Chairman Hamer Budge’s congressional-hearing testimony
that “any amounts received from whatever source by an investment adviser, its affiliates and
other persons . . . in transactions subject to section 17 or 22 could, of course, be taken into
account in determining whether the advisory fees meet the standards of section 36(b).” But the
complaint is focused on BTC’s lending fee, not on BFA’s investment-advisory fee. And, as
explained above, these separate fees may not be aggregated in a single Section 36(b) claim. The
plaintiffs’ reliance on former Chairman Budge’s testimony also suffers from the fact that such
testimony is typically accorded little weight. See Pub. Citizen v. Farm Credit Admin., 938 F.2d
290, 292 (D.C. Cir. 1991) (per curiam) (noting that the “testimony of witnesses before
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 9
congressional committees prior to passage of legislation is generally weak evidence of legislative
intent”).
Section 36(b)(3) of the ICA further undermines the plaintiffs’ argument. That section
provides in relevant part that “[n]o such action shall be brought or maintained against any person
other than the recipient of such compensation or payments.” 15 U.S.C. § 80a-35(b)(3). Because
BFA is not the “recipient” of the 35% lending fee, the plain text of Section 36(b)(3) strongly
suggests that no action may be brought against BFA on the basis of the fee charged by BTC.
Finally, the plaintiffs argue that the SEC has adopted their position that “compensation
earned by an investment adviser or affiliate from securities lending . . . is governed by the
fiduciary duty set out in Section 36(b) even where the SEC has permitted the securities lending
operations in question.” The plaintiffs cite in support a 1995 no-action letter in which the SEC’s
Division of Investment Management staff declined to recommend any enforcement action under
Section 17 of the ICA against an investment company that wished to compensate its affiliate for
services that the affiliate would provide in connection with a securities-lending program. See
Norwest Bank Minn., N.A., SEC No-Action Letter, 1995 WL 329622 (May 25, 1995). In the
letter, the SEC staff opined that “[S]ection 36(b) of the Investment Company Act expressly
places a fiduciary duty on investment advisers with respect to any compensation paid to affiliated
persons of the adviser.” Id. at *4 n.14.
The Norwest no-action letter, however, is distinguishable because the investment
company seeking nonenforcement assurances from the SEC staff in Norwest did not already
possess an exemption order from the SEC expressly permitting the securities-lending operations.
Nor was the carve-out provision of Section 36(b)(4) at issue in the Norwest no-action letter.
Compare id. at *5 (providing nonenforcement assurances rather than an exemption order
pursuant to Section 36(b)(4)), with In re Maxim Series Fund, Inc., Investment Company Act
Release No. 25878, 2002 SEC LEXIS 3327, at *3 (Dec. 27, 2002) (granting the requested
exemptions under Section 17 and approving the securities-lending operations).
And the SEC, contrary to the plaintiffs’ representations at oral argument, retains in all
instances the authority to enforce Section 36(b) and ensure compliance with its exemption
orders. See 15 U.S.C. § 80a-35(b) (explaining that an “action may be brought under [Section
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 10
36(b)] by the Commission”); id. § 80a-41 (containing the general enforcement provision of the
ICA that authorizes the SEC to investigate and bring actions to enjoin violations of the ICA).
For all of these reasons, the district court did not err in dismissing the plaintiffs’ Section 36(b)
claim against BFA.
C. The district court did not err in dismissing the Section 36(a) claim
We now turn to the issue of whether Section 36(a) of the ICA provides an implied private
right of action. This is an issue of first impression in the Sixth Circuit. See M.J. Whitman & Co.,
Inc. Pension Plan v. Am. Fin. Enters., Inc., 552 F. Supp. 17, 22 (S.D. Ohio 1982) (holding that
no implied private right of action exists under Section 36(a) of the ICA), aff’d on other grounds,
725 F.2d 394 (6th Cir. 1984). Other circuits are split on this issue, although all circuits that have
considered it in the wake of Alexander v. Sandoval, 532 U.S. 275 (2001), have held that an
implied private right of action does not exist. Compare Bellikoff v. Eaton Vance Corp., 481 F.3d
110, 114 (2d Cir. 2007) (per curiam) (holding that Section 36(a) of the ICA does not provide an
implied private right of action), with Moses v. Burgin, 445 F.2d 369, 373 (1st Cir. 1971) (holding
that the pre-1970 version of Section 36 of the ICA provides an implied private right of action).
Section 36(a) reads as follows:
The Commission is authorized to bring an action in the proper district court of the
United States, or in the United States court of any territory or other place subject
to the jurisdiction of the United States, alleging that a person who is, or at the time
of the alleged misconduct was, serving or acting in one or more of the following
capacities has engaged within five years of the commencement of the action or is
about to engage in any act or practice constituting a breach of fiduciary duty
involving personal misconduct in respect of any registered investment company
for which such person so serves or acts, or at the time of the alleged misconduct,
so served or acted—
(1) as officer, director, member of any advisory board, investment adviser, or
depositor; or
(2) as principal underwriter, if such registered company is an open-end company,
unit investment trust, or face-amount certificate company.
If such allegations are established, the court may enjoin such persons from acting
in any or all such capacities either permanently or temporarily and award such
injunctive or other relief against such person as may be reasonable and
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 11
appropriate in the circumstances, having due regard to the protection of investors
and to the effectuation of the policies declared in section 80a–1(b) of this title.
15 U.S.C. § 80a-35(a) (emphasis added).
The plaintiffs argue that the text and structure of the ICA, along with its legislative
history, compel the conclusion that an implied private right of action exists under Section 36(a).
But as the Sixth Circuit recently explained:
A private right of action is the right of an individual to bring suit to remedy or
prevent an injury that results from another party’s actual or threatened violation of
a legal requirement. The fact that a federal statute has been violated and some
person harmed does not automatically give rise to a private cause of action in
favor of that person. Private rights of action to enforce federal law must be
created by Congress. Congress may create a private right of action expressly or
by implication. The judicial task is to interpret the statute Congress has passed to
determine whether it displays an intent to create not just a private right but also a
private remedy.
....
. . . [T]he Supreme Court [has] set forth four factors for evaluating whether a
statute implicitly creates a private right of action: (1) whether the plaintiff is one
of the class for whose especial benefit the statute was enacted; (2) whether there is
any indication of legislative intent, explicit or implicit, either to create such a
remedy or to deny one; (3) whether it is consistent with the underlying purposes
of the legislative scheme to imply such a remedy for the plaintiff; and (4) whether
the cause of action is 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. The Court has since clarified that these factors
are not entitled to equal weight. The central inquiry is whether Congress intended
to create a private right of action. Unless this congressional intent can be inferred
from the language of the statute, the statutory structure, or some other source, the
essential predicate for implication of a private remedy simply does not exist.
. . . The question [of] whether Congress intended to create a private right of action
[is] definitively answered in the negative where a statute by its terms grants no
private rights to any identifiable class. For a statute to create such private rights,
its text must be phrased in terms of the persons benefited. Statutes that focus on
the person regulated rather than the individuals protected create no implication of
an intent to confer rights on a particular class of persons.
Mik v. Fed. Home Loan Mortg. Corp., 743 F.3d 149, 158–59 (6th Cir. 2014) (internal citations
and quotation marks omitted) (some alterations omitted).
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 12
The threshold question is thus whether the text or the structure of the ICA indicates an
intent by Congress to create an implied private right of action under Section 36(a). Starting with
the first sentence of Section 36(a) (“The Commission is authorized to bring an action . . . .”), we
believe that the presumptive answer is “No.” This conclusion is bolstered by the language in
Section 42 that “empower[s] the Securities and Exchange Commission to enforce all ICA
provisions.” Santomenno ex rel. John Hancock Trust v. John Hancock Life Ins. Co., 677 F.3d
178, 186 (3d Cir. 2012) (citing 15 U.S.C. § 80a-41).
The Supreme Court, moreover, has explained that the “express provision of one method
of enforcing a substantive rule suggests that Congress intended to preclude others.” Alexander
v. Sandoval, 532 U.S. 275, 290 (2001). This principle is fully applicable to the ICA, which was
amended in 1970 to add Section 36(b)’s private right of action. See 15 U.S.C. § 80a-35. The
creation of an express private right of action in Section 36(b) strongly implies the absence of
such a right in Section 36(a). See Touche Ross & Co. v. Redington, 442 U.S. 560, 572 (1979)
(“Obviously, then, when Congress wished to provide a private damage remedy, it knew how to
do so and did so expressly.”); see also Olmsted v. Pruco Life Ins. Co. of N.J., 283 F.3d 429, 433
(2d Cir. 2002) (“Congress’s explicit provision of a private right of action to enforce one section
of a statute suggests that omission of an explicit private right to enforce other sections was
intentional.”).
Nor does the text of Section 36(a) contain any rights-creating language. It instead
focuses on the “person[s] regulated rather than the individuals protected.” See Sandoval,
532 U.S. at 289; see also Bellikoff v. Eaton Vance Corp., 481 F.3d 110, 116 (2d Cir. 2007)
(per curiam) (noting the absence of any rights-creating language in Section 36(a) of the ICA). In
sum, neither the text nor the structure of the ICA demonstrates an intent by Congress to provide
an implied private right of action under Section 36(a).
We find the plaintiffs’ arguments to the contrary unpersuasive. First, although the
plaintiffs invoke the broad remedial purposes of the ICA, generalized references to the remedial
purposes must yield to the unambiguous text and structure of a statute. See Touche Ross & Co.,
442 U.S. at 578 (explaining that even if a statute was enacted with a broad remedial purpose, this
fact “will not justify reading a provision ‘more broadly than [the statute’s] language and the
No. 13-6486 Laborers’ Local 265 Pension Fund et al. v. iShares Trust et al. Page 13
statutory scheme reasonably permit’”). The plaintiffs also point to the legislative history
surrounding the 1970 and 1980 amendments to the ICA, but the legislative history of a statute is
irrelevant where “neither the text nor the statutory structure indicate that Congress intended to
provide a private right of action.” Mik, 743 F.3d at 160; see also Bellikoff, 481 F.3d at 117
(declining to accord weight to the legislative history of the ICA and explaining that the “analysis
ends . . . because the text and the structure of the ICA reveal no ambiguity about Congress’s
intention to preclude private rights of action”); Olmsted, 283 F.3d at 435 (“Where the text of a
statute is unambiguous, judicial inquiry is complete . . . .”) (internal quotation marks omitted).
Finally, even if we were to consider the legislative history of the 1970 and 1980
amendments to the ICA, this would not save the plaintiffs’ argument. For starters, the 1970
amendments to the ICA created an express private right of action under Section 36(b), which
counsels against finding an implied private right of action in Section 36(a). The 1980
amendments to the ICA, moreover, dealt with business-development companies and had nothing
to do with private rights of action. See Bancroft Convertible Fund, Inc. v. Zico Inv. Holdings
Inc., 825 F.2d 731, 735 (3d Cir. 1987) (discussing the 1980 amendments to the ICA).
Furthermore, the post-enactment legislative history relied upon by the plaintiffs has little
probative value because a post-enactment legislative body has no special insight regarding the
intent of a past legislative body. See Penn. Med. Soc. v. Snider, 29 F.3d 886, 898 (3d Cir. 1994)
(“Post-enactment legislative history is not a reliable source for guidance.”); Cont’l Can Co. v.
Chicago Truck Drivers, Helpers & Warehouse Workers Union (Ind.) Pension Fund, 916 F.2d
1154, 1157 (7th Cir. 1990) (observing that “‘subsequent legislative history’ [is] an oxymoron”
and that “the legislative history of a bill is valuable only to the extent it shows genesis and
evolution”).
III. CONCLUSION
For all of the reasons set forth above, we AFFIRM the judgment of the district court.
|
768 F.2d 1352
*U.S.v.De Briceno
84-5983
United States Court of Appeals,Eleventh Circuit.
7/19/85
1
S.D.Fla.
AFFIRMED
2
---------------
* Fed.R.App.P. 34(a); 11th Cir.R. 23.
|
608 F.2d 524
U. S.v.Chandler
No. 79-5041
United States Court of Appeals, Fifth Circuit
11/19/79
N.D.Ga., 604 F.2d 972
|
Monroy v Lexington Operating Partners, LLC (2020 NY Slip Op 00584)
Monroy v Lexington Operating Partners, LLC
2020 NY Slip Op 00584
Decided on January 29, 2020
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 January 29, 2020
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
WILLIAM F. MASTRO, J.P.
JOHN M. LEVENTHAL
COLLEEN D. DUFFY
VALERIE BRATHWAITE NELSON, JJ.
2018-12280
(Index No. 6773/12)
[*1]Guillermo Monroy, respondent,
vLexington Operating Partners, LLC, et al., appellants (and a third-party action).
Gallo Vitucci Klar LLP, New York, NY (Jessica A. Clark and Kimberly A. Ricciardi of counsel), for appellants.
Fastman Law Group, P.C. (Chirico Law PLLC, Brooklyn, NY [Vincent Chirico], of counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the defendants appeal from an order of the Supreme Court, Queens County (Chereé A. Buggs, J.), dated July 16, 2018. The order, insofar as appealed from, denied that branch of the defendants' motion which was for summary judgment dismissing the amended complaint.
ORDERED that the order is affirmed insofar as appealed from, with costs.
On March 8, 2011, at approximately 7:30 p.m., the plaintiff, employed by third-party defendant Mulligan Security Corp., was working as a security guard in a building located at 450 Lexington Avenue, in Manhattan. At that time the building was allegedly owned and operated by the defendant Lexington Operating Partners, LLC (hereinafter Lexington). During his shift on the date of the subject accident, the plaintiff took the freight elevator to the sixth floor of the building, and immediately after exiting the freight elevator slipped and fell. At the time the plaintiff fell, the floor in that area was in the process of being stripped and waxed by employees of the defendant ABM Building Maintenance (hereinafter ABM), a contractor hired by Lexington.
The plaintiff commenced the instant action against Lexington and ABM to recover damages for personal injuries, alleging, among other things, that they were negligent in maintaining the premises and in creating a dangerous condition. After joinder of issue in the main action, the defendants moved for, among other things, summary judgment dismissing the amended complaint based upon surveillance videotape of the accident. The Supreme Court denied their motion, and the defendants appeal.
The surveillance videotape shows that an employee of ABM moved a warning sign from directly in front of the freight elevator to the right side of the freight elevator, and then proceeded to mop the floor directly in front of the freight elevator. The plaintiff then exited the freight elevator and slipped and fell to the ground. The plaintiff testified at his deposition that he did not hear any warning or see any warning sign before he slipped and fell. Viewing the evidence in the light most favorable to the plaintiff (see Bravo v Vargas, 113 AD3d 579), the defendants failed [*2]to establish their prima facie entitlement to judgment as a matter of law.
ABM failed to establish, prima facie, that it did not create the alleged hazardous condition (see Bruce v Edgewater Indus. Park, LLC, 169 AD3d 753, 754; Christian v 709 Brighton Beach, LLC, 167 AD3d 704, 705), and Lexington failed to establish, as a matter of law, that it could not be responsible for ABM's alleged negligence pursuant to its nondelegable duty to keep the premises safe (see Pesante v Vertical Indus. Dev. Corp., 29 NY3d 983; Horowitz v 763 E. Assoc., LLC, 125 AD3d 808, 810). Neither Lexington nor ABM established their prima facie entitlement to judgment as a matter of law on the question of whether they provided adequate warnings of the wet condition of the floor prior to the subject accident.
Further, contrary to their contentions, the defendants did not establish, prima facie, that the floor's wet condition, which consisted of freshly placed stripping solution, was open and obvious and not inherently dangerous (cf. Ramsey v Mt. Vernon Bd. of Educ., 32 AD3d 1007, 1008).
Since the defendants failed to establish their prima facie entitlement to judgment as a matter of law, we agree with the Supreme Court's determination denying that branch of their motion which was for summary judgment dismissing the amended complaint without regard to the sufficiency of the plaintiff's opposition papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).
MASTRO, J.P., LEVENTHAL, DUFFY and BRATHWAITE NELSON, JJ., concur.
ENTER:
Aprilanne Agostino
Clerk of the Court
|
Order Michigan Supreme Court
Lansing, Michigan
February 6, 2015 Robert P. Young, Jr.,
Chief Justice
150006 & (11) Stephen J. Markman
Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
David F. Viviano
PEOPLE OF THE STATE OF MICHIGAN, Richard H. Bernstein,
Plaintiff-Appellee, Justices
v SC: 150006
COA: 322521
Macomb CC: 2011-004463-FH
CODY JASON-CHRISTOPHER PATTON, 2011-003714-FH
Defendant-Appellant.
_________________________________________/
On order of the Court, the motion to add a new issue is GRANTED. The
application for leave to appeal the July 25, 2014 order of the Court of Appeals is
considered and, pursuant to MCR 7.302(H)(1), in lieu of granting leave to appeal, we
REMAND this case to the Macomb Circuit Court to provide the defendant the
opportunity to withdraw his plea, for the reason that the trial court failed to adhere to the
court’s sentence evaluation provided at the plea hearing or to allow the defendant to
withdraw his plea. People v Cobbs, 443 Mich 276 (1993); MCR 6.302(C)(3). We are
not persuaded that the standards set forth in People v Hill, 221 Mich App 391, 398
(1997), require reassigning the case to a different judge. We further ORDER the trial
court to determine, in accordance with Administrative Order 2003-03, whether the
defendant is indigent and, if so, to appoint counsel to represent him in connection with
the remand proceedings. In all other respects, leave to appeal is DENIED, because we
are not persuaded that the remaining questions presented should be reviewed by this
Court.
We do not retain jurisdiction.
I, Larry S. Royster, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
February 6, 2015
t0203
Clerk
|
319 F.2d 606
Howard G. ZEYHER, Plaintiff-Appellant,v.S.S. & S. MANUFACTURING COMPANY, Inc., Defendant-Appellee.Howard G. ZEYHER, Plaintiff-Appellant,v.The JASPER CORPORATION, Defendant-Appellee.
Nos. 13954-13955.
United States Court of Appeals Seventh Circuit.
June 28, 1963.
Thomas M. Merrill, Jr., Frederick C. Fiechter, Jr., Warren M. Ballard, Philadelphia, Pa., F. Wesley Bowers, Butt, Bowers & Angermeier, Evansville, Ind., for appellant.
Fred P. Bamberger, Evansville, Ind.; Bamberger, Foreman Oswald & Hahn, Evansville, Ind., of counsel, for appellee.
Before HASTINGS, C.J., and DUFFY and KILEY, JJ.
KILEY, Circuit Judge.
1
These diversity suits depend upon an alleged breach of a sales commission contract. They were consolidated for trial, without a jury, which resulted in findings and judgments for defendants. Plaintiff has appealed.
2
The alleged contract was made in Indiana by plaintiff and S.S. & S. Manufacturing Company, Inc. on August 27, 1959, for a term of three years during which plaintiff undertook to serve S.S. & S. as a sales engineer in selling its cabinets to the radio, television, and high fidelity industry. On October 28, 1960, the directors of Jasper Corporation agreed to acquire all of the stock of S.S. & S. On November 15, 1960, S.S. & S. notified plaintiff that the 'contract' would not be honored by its new owner, the Jasper Corporation. These suits followed, charging S.S. & S. with breach of the 'contract' and Jasper with the tort of inducing the breach.
No. 13954
3
The District Court concluded the 'contract'1 lacked mutuality, certainty, and consideration; and that it was invalid and unenforceable. The conclusion rested on findings that the 'contract' did not bind plaintiff to secure any orders, nor to sell a minimum or maximum of S.S. & S. products; did not provide for a reasonably certain way of determining the sales price or prices of S.S. & S. products; did not bind S.S. & S. to accept any orders submitted by plaintiff; and did not provide a formula for determining when, if any, an obligation to accept an order would arise.
4
Plaintiff does not specifically challenge the findings. He claims the District Court's conclusion is erroneous, and argues that S.S. & S. received all it bargained for and that consequently there was consideration. This argument assumes a 'bargain' and that 'plaintiff was to procure orders' from Warwick. Plaintiff begs the questions in the case.
5
The courts in Indiana 'will not' find uncertainty in contracts if logical construction can find certainty, but to be valid and enforceable the contract must be reasonably definite and certain. International Shoe Co. v. Lacy, 114 Ind.App. 641, 53 N.E.2d 636 (1944). There the Appellate Court of Indiana en banc found that neither party could compel the other to perform and cited a decision of this court, Jordan v. Buick Motor Co., 75 F.2d 447 (7th Cir.1935), to support its decision that the alleged contract before it lacked certainty. This court, in Jordan, found the agreement too indefinite in that it failed, among other things, to specify the number of cars or models which were to be ordered or delivered, and the cost price or terms of payment.
6
We think these cases support the conclusion of the District Court, drawn from its unchallenged findings, that the alleged contract was invalid and unenforceable for lack of certainty and mutuality, and we hold that the conclusion is not erroneous. We find no obligation which either party can legally enforce against the other.
7
W. P. Iverson & Co. v. Dunham Mfg. Co., 18 Ill.App.2d 404, 152 N.E.2d 615 (1958), cited by plaintiff, was a 'malicious interference' case, in which the court decided initially that the alleged contract was valid and enforceable. The court found that though the contract did not express a specific amount of goods on which commission was to be paid, there was a provision that if Iverson & Co. did not sell at least $150,000 in any 'anniversary year,' the contract could be cancelled. The court thought that this implied enough specificity.2 There is no such provision in the 'contract' before us.
8
In Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 118 N.E. 214 (1917), the court implied consideration where defendant gave an exclusive agency, and unless the agent 'gave his efforts, she could never get anything.' That is not true of S.S. & S. because plaintiff did not have an exclusive agency. We do not find in the case at bar the facts which in Lady Duff-Gordon impelled the court to conclude that the transaction there 'was instinct with obligation.'
9
The claim in Eastern Paper & Box Co. v. Herz Mfg. Corp., 323 Mass. 138, 80 N.E.2d 484 (1948), was for damages for completed sales under an oral contract and not as here for damages for sales that might have been made by plaintiff. Moreover, in contrast to the case at bar, the plaintiff there promised to secure the United Drug business for defendant. In Mandel v. Liebman, 303 N.Y. 88, 100 N.E.2d 149 (1951), the court implied a 'requirement' that plaintiff perform services. The contract there was 'similar in most respects to contracts in current and general use in the entertainment industry.' None of these cases militates against the District Court's conclusion in the case at bar.
10
Finally, we see no merit in the contention of plaintiff that his performance under the 'contract' obviated whatever lack of certainty or mutuality may have existed when the 'contract' was made. This argument presupposes a valid contract. We have decided the District Court's conclusion that the 'contract' was invalid is not erroneous. The case of Rubin v. Dairyman's League Co-op. Ass'n, 284 N.Y. 32, 29 N.E.2d 458 (1940) is not helpful to plaintiff. There the trial court had adopted a jury's finding that the contract was made and the decision was that the Co-op was bound to pay commissions for sales made before the contract was terminated because plaintiff had performed and the Co-op had accepted the benefits of his performance. Here plaintiff makes no claim for commission on orders he procured which defendant accepted.
11
We think that plaintiff's actions for S.S. & S. could not render the 'contract' valid since it was, from the beginning, invalid and unenforceable. Red Wing Shoe v. Shepherd Safety Shoe Corp., 164 F.2d 415, 418 (7th Cir.1947). What transpired under the 'contract' was 'a series of fully executed orders, each complete within itself.' 164 F.2d 415, at 419.
12
We do not reach the question of damages raised by plaintiff.
13
The judgment is affirmed.
No. 13955
14
The District Court found that Jasper had neither ratified nor accepted the 'contract' between plaintiff and S.S. & S., and that Jasper's purposes in acquiring control of S.S. & S. were neither to terminate the 'contract' nor to cause damage to plaintiff. The court concluded Jasper had not induced or coerced the breach of a valid and enforceable contract between plaintiff and S.S. & S., and that plaintiff was not entitled to recover damages from Jasper for any alleged wrong done him.
15
It follows from our decision in No. 13954 that the District Court's findings in this tort action, dependent upon breach of the 'contract,' are not clearly erroneous and its conclusions are not erroneous.
16
The judgment is affirmed.
1
The 'contract,' in the form of a letter dated August 27, 1959, from the President of S.S. & S. Manufacturing Company, Inc., to Mr. Howard G. Zeyher, reads as follows:
'S.S. & S. Manufacturing Company, Inc., does hereby employ you as Sales Engineer for the sale of its products * * * for a period of three (3) years, upon the following terms and conditions:
'1. All orders received from * * * Warwick Manufacturing Corporation, will be * * * paid on the following basis:
'3% Of Net Sales, less carton costs, F.O.B. Evansville, Indiana, until sales reach $500,000.00.
'2. All commission shall be subject to payment by the customer.
'3. All quotations and commitments which shall be binding upon the S.S. & S. Manufacturing Company, Inc., must be on orders accepted in writing by the S.S. & S. * * * Each quotation shall clearly state the price, terms and conditions of sale.'
The letter was signed by the President of S.S. & S., and, after the word 'Accepted,' signed by plaintiff.
2
In addition, there were mutual promises in Iverson
|
197 A.2d 850 (1964)
Willie D. HEARD, Appellant,
v.
UNITED STATES, Appellee.
No. 3367.
District of Columbia Court of Appeals.
Argued January 27, 1964.
Decided February 28, 1964.
Rehearing Denied March 26, 1964.
Milton Conn, Washington, D. C., for appellant.
Martin R. Hoffmann, Asst. U. S. Atty., with whom David C. Acheson, U. S. Atty., and Frank Q. Nebeker and Gerald Gilbert, Asst. U. S. Attys., were on the brief, for appellee.
Before HOOD, Chief Judge, and QUINN and MYERS, Associate Judges.
QUINN, Associate Judge.
Appellant was convicted of carrying a deadly weapon without a license in violation of our Code Section 22-3204. He contends that the weapon was seized pursuant to an arrest made without probable cause and therefore the trial court erred in denying his motion to suppress the evidence.
About 2 a. m. on the morning of April 19, 1963, appellant was seen by two police officers entering an automobile in the 100 block of Eye Street, N. W. The officers were then proceeding under a housebreaking *851 lookout for a Negro male, on foot, wearing a blue shirt. The housebreaking had occurred in the immediate vicinity (the 800 block of First Street, N. W.), and the officers had turned on the flashing red light of the police cruiser. One of the officers noted that appellant was wearing a blue shirt. As the police cruiser approached, appellant drove his car from the parking space toward the intersection of First and Eye Streets, N. W. At the corner he began making a U-turn which prevented the police cruiser from continuing through the intersection. The officers stopped and ordered appellant to step out of his car. As he emerged they noticed a bulge in his right front pocket. A subsequent search revealed a loaded revolver. Appellant was then taken to police headquarters where he was charged with making a U-turn at a controlled intersection. He was subsequently absolved from any participation in the housebreaking.
In determining whether there was probable cause to arrest appellant, we must look to the evidence upon which the police officers acted at the time the arrest was made. Gatlin v. United States, D.C.Cir., 326 F.2d 666 (1963).[1] As Judge Prettyman has said:
"The sum total of the reams that have been written on the subject is that a peace officer may arrest without a warrant when he has reasonable grounds, in light of the circumstances of the moment as viewed through his eyes, for belief that a felony has been committed and that the person before him committed it. We require police officers to be reasonable; we too must be reasonable." Bell v. United States, 102 U.S.App.D.C. 383, 388, 254 F.2d 82, 87 (1957), cert. denied, 358 U.S. 885, 79 S.Ct. 126, 3 L.Ed.2d 113 (1958).
At trial and upon oral argument the government urged that the officers had probable cause to arrest appellant for a traffic violation committed within their view (the U-turn). The officers' testimony, however, reveals that appellant was arrested in connection with the reported housebreaking. The question before us is whether they had probable cause to arrest appellant for that offense.
Appellant has argued that the case at bar is indistinguishable from Gatlin v. United States, supra. There Judge Wright, speaking for the majority, found:
"* * * The only evidence on which the arrest was predicated was the fact that there was a robbery, that one of the robbers was a Negro wearing a trench coat, that a Negro man fled from a taxi, and that Gatlin, a Negro man, was observed walking down the street a mile and a half from the robbery wearing a trench coat. This is not the type of evidence which would justify deprivation of liberty. * * *" (At pages 670-671 of 326 F.2d.)
While the lookout here is similar to the one which was struck down in Gatlin, the issue presented is how a reasonable, cautious and prudent peace officer would view these circumstances. We are dealing with probabilities, and probabilities deduced from a set of circumstances taken in combination, not singly. Bell v. United States, supra, 102 U.S.App.D.C. at 388, 254 F.2d at 87. We think the case at bar is distinguishable and presents a factual situation more closely resembling that in Ellis v. United States, 105 U.S.App.D.C. 86, 264 F.2d 372 (1959), cert. denied 359 U.S. 998, 79 S.Ct. 1129, 3 L.Ed.2d 986; Bell v. United States, supra, and Teresi v. United States, D.C.App., 187 A.2d 492 (1963).
Here we have two police officers proceeding under a housebreaking lookout for a Negro male, on foot, wearing a *852 blue shirt.[2] The hour is 2 a. m. and as they approach the immediate vicinity of the housebreaking they see appellant, a Negro male, wearing a blue shirt, on foot, entering an automobile.[3] With the red light of the police cruiser already flashing, the officers follow appellant to the first intersection where he attempts to make a U-turn. Instead he blocks their further passage. Under these circumstances, what should the officers have done? Let appellant complete the U-turn and disappear in the dark of night? We think their duty required otherwise. We hold the arrest was legal.
In Brinegar v. United States, 338 U.S. 160, 176, 69 S.Ct. 1302, 1311, 93 L.Ed. 1879 (1949), Mr. Justice Rutledge stated:
"These long-prevailing standards [for the determination of guilt] seek to safeguard citizens from rash and unreasonable interferences with privacy and from unfounded charges of crime. They also seek to give fair leeway for enforcing the law in the community's protection. Because many situations which confront officers in the course of executing their duties are more or less ambiguous, room must be allowed for some mistakes on their part. But the mistakes must be those of reasonable men, acting on facts leading sensibly to their conclusions of probability. The rule of probable cause is a practical, nontechnical conception affording the best compromise that has been found for accommodating these often opposing interests. Requiring more would unduly hamper law enforcement. To allow less would be to leave law-abiding citizens at the mercy of the officers' whim or caprice."
We think that reasonable, cautious and prudent police officers had probable cause to arrest appellant under the circumstances here presented. To hold otherwise would sacrifice the community's protection in the name of individual liberty. It would not, in the words of Mr. Justice Rutledge, seek to "accommodat[e] these often opposing interests."
Affirmed.
NOTES
[1] The arrest was complete when appellant was ordered to step out of his car.
[2] At this point the resemblance with Gatlin ends.
[3] In Gatlin the suspect was arrested almost two hours after the lookout was received and at a spot a mile and a half from the place where the robbery occurred.
|
185 Ariz. 80 (1995)
912 P.2d 1309
PREMIER FINANCIAL SERVICES, Judgment Creditor-Appellee,
v.
CITIBANK (ARIZONA) and Jacque Rosholm, Garnishees-Appellants.
No. 1 CA-CV 93-0096.
Court of Appeals of Arizona, Division 1, Department D.
July 27, 1995.
Review Denied March 19, 1996.
*82 Gammage & Burnham, P.L.L.C. by Kevin J. Blakley, Ellen Harris Hoff, Phoenix, for judgment creditor-appellee.
Burch & Cracchiolo, P.A. by Andrew Abraham, Jack Daniel Klausner, Phoenix, for garnishee-appellant Citibank.
Francis P. Smith, Phoenix, for garnishee-appellant Rosholm.
OPINION
CONTRERAS, Judge.
Southwest Savings and Loan Association, F.A. ("Southwest") obtained a judgment on a garnishment for $86,461.40 against garnishees Citibank of Arizona ("Citibank") and Jacque Rosholm. This judgment satisfied a previously obtained deficiency judgment by Southwest against Jacque's parents, Harry and Margie Rosholm, in which the trial court had found that certain funds held by Jacque Rosholm had been fraudulently conveyed to her by her parents. The trial court also concluded that Citibank had been put on notice regarding the questionable ownership of the funds. Accordingly, it entered judgment against Citibank because the bank had paid over the funds to Jacque, its then account holder of record, rather than holding the funds until the court determined who was entitled to the funds. Both Jacque Rosholm and Citibank appeal the garnishment judgment *83 obtained against them by Southwest.[1] Jacque raises the following issues on appeal: (1) whether the evidence on the issue of fraudulent conveyance was sufficient to support the judgment against her; (2) whether the trial court erred in denying her motion to reopen the hearing to produce additional evidence; and (3) whether the trial court abused its discretion in rejecting a stipulation of the parties that Jacque had paid Citibank's attorney's fees.
The sole issue Citibank raises in its appeal is whether the trial court erred in concluding that Citibank was liable for failing to hold the funds in question. We affirm the trial court's judgment against Jacque Rosholm but reverse the judgment against Citibank.
I. FACTS AND PROCEDURAL HISTORY
The underlying cause of action involved the judicial foreclosure of a deed of trust Southwest had received from Harry and Margie Rosholm for refinancing purposes. In a formal judgment filed April 4, 1991, the trial court entered a decision on the debt, ordered foreclosure and sale of the refinanced property, and allowed a deficiency judgment for any amount not satisfied from the sale proceeds.
The garnishment proceedings that are the subject of this appeal stem from Southwest's attempts to collect the deficiency judgment. Southwest initially served a writ of garnishment on Citibank in November of 1991. At that time, Citibank informed Southwest's attorneys that Harry and Margie Rosholm had recently closed their accounts. Southwest then dismissed the garnishment and subpoenaed Citibank's records for Harry and Margie Rosholm. These records established that a $100,000 certificate of deposit had been maintained in the names of Harry and Margie Rosholm from July of 1987 until February 5, 1991, immediately prior to the time that the trial court had made its ruling to allow a deficiency judgment against the Rosholms. These Citibank records did not reveal, however, what had happened to the certificate of deposit.
Southwest's attorney called to inquire as to what had happened to the certificate of deposit. A Citibank employee, Jackie Janic, responded that it still had the certificate. Southwest then filed another garnishment proceeding against Citibank. After receiving the second writ of garnishment, Ms. Janic called Southwest's attorney and confirmed that it was holding the certificate of deposit. Ms. Janic called back later and stated that Harry and Margie Rosholm were merely contingent beneficiaries on the certificate of deposit and that the trustee who had held the present rights to the account was someone else. Ms. Janic declined to tell Southwest the name of the trustee on the certificate.
Southwest subsequently refused to dismiss the garnishment and required Citibank to file an answer. After Citibank answered that it was not indebted to Harry and Margie Rosholm, Southwest filed its objection on April 10, 1991 and requested a hearing. Southwest discovered that Citibank had voided the original certificate of deposit on February 5, 1991 and reissued it as a trust account, listing Jacque Rosholm as trustee for beneficiaries Harry and Margie Rosholm. Then, on April 13, 1992, while the writ of garnishment against Citibank was still pending, Jacque requested that Citibank allow her to withdraw all the money from the certificate of deposit. Jacque's withdrawal of the funds occurred a few months short of the five-year maturity date and, therefore, she incurred a penalty of almost $2,000 for the early withdrawal.
Southwest also obtained a writ of garnishment against Jacque Rosholm and attempted to serve her. On April 9, 1992, believing that he had spotted Jacque and that she was trying to evade service of process, a process server left the papers at the back door of her *84 veterinary clinic and called out that he was serving her. Although the woman served was not Jacque, the papers which had been served eventually came to Jacque's attention. On April 17, 1992, she filed an answer to the writ of garnishment, avowing that she was not indebted to her parents, the judgment debtors. In her answer, Jacque did not question the sufficiency of service upon her and indicated that she had been served on April 13, 1992.
Southwest filed an objection to Jacque's answer and requested a consolidated hearing for the two garnishment proceedings. This request was granted by the trial court. Southwest deposed Jacque two days before the hearing. Jacque sought no continuance of the hearing and proceeded representing herself.
At the hearing, Jacque presented her own testimony and that of her father, attempting to establish that the money in the certificate of deposit was rightfully hers and had not been fraudulently conveyed to her by her parents. She testified that the money in the certificate was money that she had given to her parents in 1984, when she was diagnosed with cancer. She stated that she had wanted her parents to be able to make use of the money both on her behalf and after her death and thought this would be easier if the money was in their name. She also contended that the later change in the designation on the account had nothing to do with the pending lawsuit against her parents. Instead, the change had been made both because her parents were moving and she needed to have easy access to the money, and because she had recently learned that she could achieve the result of making the money accessible to her parents at her death by setting the account up as a trust account. Additionally, Jacque testified that she had loaned her parents in excess of $100,000 over the past few years, and the evidence demonstrated that the designation of the certificate in her name was a repayment of that debt.
At the hearing, Jacque also sought to counter any impression that her withdrawal of the money in the certificate was in response to the writ of garnishment against her. Jacque presented testimony evidencing that she had mistakenly stated that she had become aware of the garnishment on April 13, 1992, because she had not actually seen the service of process until at least a couple of days later.
Jacque further denied that she had known about the writ of garnishment when she withdrew the funds. She argued that there was no proof, even if she had received the writ on April 13, 1992, that she had received it before she took the money out of the bank account. Finally, Jacque attempted to prove at the hearing that she had cashed in the certificate of deposit despite the substantial penalty fee because she required the money to complete a real estate transaction.
The trial court concluded that Southwest had met its burden of proving the elements of a fraudulent conveyance pursuant to Ariz. Rev. Stat. Ann. ("A.R.S.") section 44-1004 by clear and satisfactory evidence. The court also found that the money deposited in the certificate of deposit in July of 1987 had belonged to the judgment debtors, Harry and Margie Rosholm, and that the transfer to Jacque had been made with actual intent to hinder, delay or defraud Southwest in violation of the statute.
In making this determination, the trial court relied upon the following "badges of fraud":[2]
The transfer was to Judgment Debtors' daughter. Although "insider" as used in A.R.S. § 44-1004(B)(1) is not defined, Jacque Rosholm as Judgment Debtors' daughter *85 certainly is the equivalent of an "insider" as that term is commonly used.
Judgment Debtors had been sued prior to the transfer.
The transfer occurred shortly before the trial court ruled on the parties' motions for summary judgment.
The transfer rendered Judgment Debtors presumptively insolvent. See A.R.S. § 44-1002(B).
On the same day Jacque Rosholm had received notice of the service of the writ of garnishment, the funds were withdrawn and placed beyond the reach of Judgment Creditor. In withdrawing the funds prior to maturity of the CD account, a substantial penalty was incurred.
Thus, the court found that the evidence presented by Jacque and her father was "insufficient to overcome this inference [established by the `badges of fraud'] of actual intent to defraud, hinder or delay creditors."
As to Citibank, the trial court found that its receipt of information from Southwest's attorney, that the funds had potentially been fraudulently transferred by the judgment debtors, Harry and Margie Rosholm to their daughter, made Citibank liable for failing to hold the funds until the court could decide who was entitled to them.
Before the trial court entered a formal judgment, Jacque obtained counsel and filed a motion to reopen the hearing and attached copies of additional documents that she sought to present. The trial court denied the motion to reopen and entered final judgment.
Sometime after the notices of appeal were filed, the parties submitted a new form of judgment to the trial court that they stipulated should be entered nunc pro tunc. The new judgment ordered Jacque to pay Citibank's attorney's fees, a matter which had not been considered previously by the trial court. Although the trial court apparently signed the new form of judgment and entered it nunc pro tunc, it stated in its order dated October 29, 1992 that the "[s]igning of the proposed form of Judgment will be held in abeyance until after the court has ruled on what amount, if any, in attorney's fees to award Judgment Creditor against Garnishee Citibank."
II. JACQUE ROSHOLM'S APPEAL
A. Sufficiency of Evidence of Fraudulent Conveyance
Jacque Rosholm argues on appeal that the evidence presented in this case was insufficient to prove a fraudulent conveyance. We disagree. This Court must view the evidence in a light most favorable to supporting the trial court's judgment. Yano v. Yano, 144 Ariz. 382, 384, 697 P.2d 1132, 1134 (App. 1985). It is not our prerogative to weigh the evidence and determine the credibility of witnesses; that role belongs to the trial court. Imperial Litho/Graphics v. M.J. Enterprises, 152 Ariz. 68, 72, 730 P.2d 245, 249 (App. 1986). Moreover, the trial court must also draw a distinction between clear and convincing evidence and evidence that merely preponderates. Webber v. Smith, 129 Ariz. 495, 498, 632 P.2d 998, 1001 (App. 1981). Thus, we will not disturb a judgment if there is evidence to support it. Yano, 144 Ariz. at 384, 697 P.2d at 1134.
Jacque Rosholm correctly points out that fraud is never presumed, but must be proven by clear and satisfactory evidence. Transamerica Ins. Co. v. Trout, 145 Ariz. 355, 360, 701 P.2d 851, 856 (App. 1985); Kingsbury v. Christy, 21 Ariz. 559, 562, 192 P. 1114, 1115 (1920). Direct proof of fraud, however, is not required. A party can meet its burden of proof by showing circumstantial evidence through which fraud may reasonably be inferred. Ollason v. Glasscock, 26 Ariz. 193, 202, 224 P. 284, 287 (1924).
It is apparent from an examination of the record in this case that there were several "badges of fraud" casting suspicion about whether a fraudulent conveyance had taken place. Although Citibank held a $100,000 certificate of deposit in the names of Harry and Margie Rosholm for a number of years, *86 the Rosholms changed the name on the certificate after a lawsuit was filed against them and while a motion for summary judgment was pending against them.
Further, the name that the Rosholms placed on the certificate was that of their daughter Jacque. Jacque left the certificate untouched until Southwest attempted to garnish those funds. Additionally, Jacque's withdrawal of the funds at that time occurred shortly before the expiration date of the certificate, thereby requiring her to incur a substantial penalty for early withdrawal. Finally, the trial court found that, once Jacque withdrew the funds in the certificate, the elder Rosholms were rendered insolvent.
Although Jacque Rosholm maintains that she was entitled to a presumption of honesty concerning the transaction between her parents and herself, we conclude that the "badges of fraud" shown to exist in this case have overcome this presumption. See Sheehan v. Pima County, 135 Ariz. 235, 238, 660 P.2d 486, 489 (App. 1982) ("[A] presumption disappears entirely upon the introduction of any contradicting evidence....").
Jacque also argues that the trial court erred in finding that the "badges of fraud" created a presumption of fraud, thus improperly shifting the burden of proof to her. We disagree and find that the trial court fully complied with the procedure described in Torosian, 82 Ariz. at 312, 313 P.2d at 388. The court inferred fraud from the circumstances absent sufficient explanation to dispel that inference.
Finally, Jacque seems to argue that the testimony presented by both herself and Harry Rosholm regarding ownership of the funds was sufficient to dispel the inference of fraud. We do not agree; a trial court is not bound to accept even the uncontradicted evidence of a disinterested party. In re Wainola's Estate, 79 Ariz. 342, 346, 289 P.2d 692, 695 (1955). Thus, the trial court did not err in concluding that the transfer of the certificate of deposit to Jacque was a fraudulent conveyance.
B. Denial of Motion to Reopen Hearing
Jacque next contends that the trial court abused its discretion in refusing to grant her Motion to Reopen to allow her to produce new documentary evidence consisting mainly of checks that she had written to her father. Jacque maintains that this evidence corroborated her testimony that the funds in the Citibank certificate of deposit belonged to her.
Jacque originally argued that a new hearing was necessary because: (1) She had had insufficient time to prepare; (2) the documents for which she had searched were hidden in a voluminous array of materials; (3) she had not understood the issues until her deposition two days before the hearing; and (4) she had not been able to hire an attorney on the short notice provided her.
The trial court denied the Motion to Reopen, concluding that the reasons given were insufficient to undercut the finality of the judicial proceeding. The court also found that the record demonstrated that Jacque had adequate notice of the hearing pursuant to statutory requirements. The transcript of the hearing revealed that she had been aware of the issues when she came to the hearing. The trial court noted that Jacque never stated that she wanted to obtain counsel, nor did she request a continuance either to obtain counsel or to prepare for the hearing.
On appeal, Jacque argues that, because the new evidence that she sought to present addresses the core issue of whether the money in the certificate had always belonged to her, equity requires that she be allowed to present it to assure a judgment on the merits. We are not persuaded. First, Jacque did not argue to the trial court, as she is now contending on appeal, that it could grant relief pursuant to Rule 59(b) of the Arizona Rules of Civil Procedure, even when no grounds for relief pursuant to 59(a) were shown. We cannot consider issues and theories that were not presented to the court below. Richter v. Dairy Queen of Southern *87 Arizona, Inc., 131 Ariz. 595, 596, 643 P.2d 508, 509 (App. 1982).
Second, copies of the documents that Jacque sought to submit were attached to her Motion to Reopen and consisted mainly of checks written by her to her father between 1979 and 1985. This evidence does not show the reason that these checks were written, nor is it consistent with the argument advanced at the hearing that Jacque had turned her money over to her father in 1984. We conclude that the trial court correctly refused to reopen the hearing to allow this evidence.
C. Failure to Award Attorney's Fees in Judgment Nunc Pro Tunc
Finally, Jacque objects to the trial court's deletion of language included in the form of judgment nunc pro tunc, stating that Jacque has already paid Citibank's attorney's fees. Jacque believes that this provision must be included in a formal judgment in order for her to receive reimbursement if she prevails in this appeal. We find that Jacque is not entitled to relief on this issue because she has not prevailed on appeal.
Additionally, assuming that the trial court had jurisdiction to sign and enter the judgment nunc pro tunc, it could not have used a nunc pro tunc judgment to require Jacque to pay Citibank's attorney's fees because the trial court had not yet considered that issue when it made the rulings from which Jacque now appeals. See Wood's Pharmacy v. Kenton, 50 Ariz. 53, 56, 68 P.2d 705, 706 (1937) ("`[T]he office of a nunc pro tunc order is to record now for then what actually did occur.'"). We acquire no jurisdiction to review rulings unless they are contained in the notice of appeal. Lee v. Lee, 133 Ariz. 118, 124, 649 P.2d 997, 1003 (App. 1982).
III. CITIBANK'S APPEAL
Next, we turn to Citibank's request that we find that the trial court erred in ruling that the telephone call from Southwest's attorney alleging a possible fraudulent conversion was sufficient to require Citibank to hold the funds in the account until the trial court decided who was entitled to them. The trial court's ruling was one of law, and this Court is not bound by the trial court's decision on a matter of law. Arizona Bd. of Regents v. Phoenix Newspapers, Inc., 167 Ariz. 254, 257, 806 P.2d 348, 351 (1991).
In making its decision that Citibank, the garnishee, was liable for failing to hold the funds, the trial court did not do so on the basis that the Rosholms were beneficiaries of the trust account. A garnishee is not liable unless it owes a clear, ascertainable debt to its judgment debtors, a debt not contingent upon other events. Able Distrib. Co., Inc. v. James Lampe, Gen. Contractor, 160 Ariz. 399, 402, 773 P.2d 504, 507 (App. 1989). By contrast, in the present case, the trust was revocable. Hence, any debt owed by the garnishee to the elder Rosholms would have been contingent upon Jacque's death.
After rejecting the argument that a judgment creditor may garnish the interests of a contingent beneficiary, the trial court nevertheless found Citibank liable because of the information it received alleging that the elder Rosholms had fraudulently conveyed the certificate of deposit to Jacque and, therefore, were still the real owners. The trial court stated its reasoning as follows:
But for the information received by Ms. Janic from counsel for Judgment Creditor after service of the writ and prior to the withdrawal of the funds in the CD account, the Court would agree with Citibank's position. However, upon Ms. Janic's receipt of the information from Mr. Blakley that the funds may have been fraudulently transferred by Judgment Debtors, the Court is of the opinion that Citibank was put in the same position as the bank in Valley Bank and Trust Company v. Parthum, 47 Ariz. 496, 56 P.2d 1342, rehearing 48 Ariz. 87, 59 P.2d 335 (1936). In that case, the Arizona Supreme Court held that where a garnishee-bank is put on notice *88 that the funds in an account in the name of a third-party may belong to the judgment debtor, the garnishee-bank has a duty to hold the account until the court decides whose account it is. Failure to do so may result in liability for the garnishee-bank to the judgment creditor if it is determined that the judgment debtor had an interest in the released funds.
We conclude that the trial court incorrectly applied the holding of Parthum to this case. It should be noted that the legal principle underlying the Parthum opinion is, that "if the garnishee has actual knowledge, or has knowledge of facts putting him upon notice, that the title to property is in defendant, although apparently in another, he cannot be excused because of failure to retain it." Parthum, 47 Ariz. at 500, 56 P.2d at 1343 (emphasis added). The Parthum Court specified that the garnishee would be liable for not retaining funds if the garnishee had actual knowledge or knowledge of facts seeming to show that ownership of the property "is" in the defendant. Parthum does not impose liability merely where a party alleges that the judgment debtor "may" be the owner.
Specifically, in Parthum, the trial court presented the garnishee with a writ of garnishment stating that funds in a third party's account actually belonged to the judgment debtor. By contrast, the writ of garnishment in this case provided no similar information. Citibank had only orally expressed suppositions and accusations by Southwest's counsel that he suspected the funds in Jacque's account belonged to her parents, the judgment debtors. Although Citibank's records revealed that these allegations were possibly true, they were no more certain than that. This does not amount to actual notice or knowledge by Citibank.
Finally, we believe that Parthum is no longer the law pursuant to the Arizona Legislature's passage of the adverse claimant statute, A.R.S. section 6-233. Subsection (A) of this section provides that:
Notice to a bank of an adverse claim is not sufficient to require the bank to refuse to honor the order of any person to whose credit the account stands or who has prior authority on the books of the bank to operate the account, nor is such notice sufficient to require the bank to recognize the adverse claimant in any respect, unless the bank is directed to do so by a lawful order of the court in the United States. In the absence of such court order the bank may refuse to honor the order on the account by any person.
Id. The purpose of A.R.S. section 6-233 is to protect a bank against liability to its depositor should the depositor refuse to honor his order and against liability to the adverse claimant should the claim prove valid. Arizona Bank v. Wells Fargo Bank, N.A., 148 Ariz. 136, 139, 713 P.2d 337, 340 (App. 1985).
We see no reason why a judgment creditor seeking to garnish the funds of a judgment debtor in the bank account of a third person would not be governed by the adverse claimant statute. Additionally, we note that other courts have reached this result. E.g., Staley v. Brown, 244 Miss. 825, 146 So.2d 739, 742 (1962) ("[A] judgment creditor seeking to garnishee funds of a judgment debtor in the bank account of a third person is governed by the adverse claimant statute."); Phil Grossmayer Co. v. Campbell, 214 Or. 265, 328 P.2d 320, 325 (1958) (Adverse claimant statute "is applicable in all cases when `an adverse claim to a deposit' is made.").
We also find support for our decision in two Arizona cases that deal with whether a trustee is liable for disbursal of monies payable under a trust agreement where there is an adverse claim to the trust proceeds. In Burch & Cracchiolo, P.A. v. Pugliani, 144 Ariz. 281, 697 P.2d 674 (1985), the Arizona Supreme Court held that the mere filing of a complaint alleging a conflicting claim to prevent the disbursal of a trust is "too much remedy for too little wrong." 144 Ariz. at 288, 697 P.2d at 681. The Burch Court further stated that garnishment was a method that the lawyers could have used to halt the disbursal of the trust. Id. If no *89 judgment has been entered, however, a writ cannot be issued until the judgment creditor provides a bond payable to the judgment debtor in the amount of the debt claimed to cover any damages, where the judgment creditor fails to show that he is entitled to the funds he is attempting to garnish. Similarly, we believe that the bond requirements are applicable here because Southwest did not obtain a judgment against Jacque Rosholm prior to the garnishment of her certificate of deposit.
In the later case of Wilcox v. Waldman, 154 Ariz. 532, 744 P.2d 444 (App. 1987), this Court concluded that exceptions exist to the rule stated in Burch. Id. at 537, 744 P.2d at 449. We pointed out that a trustee would be liable for paying out funds under a trust agreement if the trust was facially invalid or if the trustee knew that the trust was invalid for reasons including fraud. Id. The Wilcox Court emphasized once again, however, that the mere filing of a complaint challenging the validity of a trust would not cause the trustee to have reasonable doubt as to the validity of the trust so as to subject the trustee to liability for payments made. Id.
We conclude that what is said in Burch and Wilcox concerning the duties of the trustee should apply equally in the garnishment situation to a garnishee unless the garnishee is itself the recipient of the fraudulent conveyance. Mere allegations that a fraudulent conveyance has occurred are insufficient to make the garnishee liable for failing to withhold the funds. The garnishee must either have personal knowledge of the fraud or have knowledge of facts from which a reasonable person would conclude that the fraud has occurred.
This decision is not inconsistent with the provisions of A.R.S. section 44-1007(A)(1). That statute allows garnishment to be employed against a fraudulent transferee or the recipient of a fraudulent obligation. Id.
IV. ATTORNEY'S FEES ON APPEAL
A.R.S. section 12-1580(E) provides that a prevailing party may be awarded reasonable attorney's fees. Id. We award attorney's fees to each of the prevailing parties to this appeal in an amount to be determined upon compliance with the requirements of Rule 21(c), Arizona Rules of Civil Appellate Procedure. We award Citibank its attorney's fees against Southwest's receiver, Premier Financial Services, and we award the receiver its attorney's fees against Jacque Rosholm.
V. CONCLUSION
We affirm the judgment against Jacque Rosholm and reverse the judgment against Citibank.
GERBER, P.J., and VOSS, J., concur.
NOTES
[1] Southwest has been replaced as appellee in this appeal by its receiver, which is currently Premier Financial Services.
[2] "Badges of fraud" are "`facts which throw suspicion on a transaction, and which call for an explanation.'" Although they "`do not of themselves or per se constitute fraud, ... they are facts having a tenancy [sic] to show the existence of fraud, ... [and] their value as evidence is relative and not absolute.'" Further, "`[w]hen ... several are found in the same transaction, strong, clear evidence will be required to repel the conclusion of fraudulent intent.'" Torosian v. Paulos, 82 Ariz. 304, 312, 313 P.2d 382, 390 (1957) (quoting Humbird v. Arnet, 99 Mont. 499, 44 P.2d 756, 761 (Mont. 1935)).
|
51 F.3d 282
NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.Rosa Lillian SANTOS, Petitioner,v.IMMIGRATION & NATURALIZATION SERVICE, Respondent.
No. 93-70788.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted Feb. 15, 1995.Decided April 3, 1995.
Before: HUG, FARRIS, and POOLE, Circuit Judges.
1
MEMORANDUM*
2
Petitioner, Rosa Lillian Santos, a Nicaraguan citizen, timely appealed a Board of Immigration Appeals ruling affirming a decision of the immigration judge that found her deportable. We affirm the denial of Mrs. Santos's application for asylum and withholding of deportation and the grant of voluntary deportation.
3
We understand Mrs. Santos's challenge to the conclusion that her testimony supporting her asylum claim was not credible. She has given plausible explanations for the acknowledged conflicts in the record. She failed, however, to sustain the heavy burden that was hers to carry. Even if we are satisfied that her explanations are accurate, we do not substitute our judgment for that of the BIA. To reverse, we must find that a reasonable factfinder would have to believe her testimony. See INS v. Elias-Zacarias, 112 S.Ct. 812, 815 (1992). The question is one of substantial evidence, not whether two inconsistent conclusions may be drawn from the evidence. See Consolo v. Federal Maritime Comm'n, 383 U.S. 607, 620 (1966).
4
The proper inquiry was established in Elias-Zacarias, 112 S.Ct. at 817:
5
[T]o obtain judicial reversal of the BIA's determination, [the alien] must show that the evidence he presented was so compelling that no reasonable factfinder could fail to find the requisite fear of persecution.
6
We have carefully reviewed the record. We conclude that the question is a close one, but we can not say, upon this record, that a contrary result is compelled.
7
We AFFIRM the judgment of the Board of Immigration Appeals and dismiss the petition for review.
*
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3
|
466 F.Supp. 1364 (1979)
John S. ROSKO, Plaintiff,
v.
Clinton L. PAGANO, Individually and as Superintendent of the New Jersey Division of State Police, Defendant.
Civ. No. 79-302.
United States District Court, D. New Jersey.
March 14, 1979.
*1365 Mason, Griffin & Pierson, Princeton, N. J. by Donald M. Altman, Russell W. Annich, Jr., Princeton, N. J., for plaintiff.
John J. Degnan, Atty. Gen. of N. J. by Michael R. Cole, Deputy Atty. Gen., Trenton, N. J., for defendant.
OPINION
CLARKSON S. FISHER, Chief Judge.
The extent to which a federal court may intrude into the internal disciplinary functions of the New Jersey Division of State Police (the Division) by way of the Civil Rights Act is the keynote of this case. The trial of this action on the merits was advanced and consolidated with the hearing on the application for preliminary injunctive relief, pursuant to Fed.R.Civ.P. 65(a)(2). The following are the findings of fact and conclusions of law mandated by Fed.R.Civ.P. 52(a).
The Division exists within the Department of Law and Public Safety, which is under the control of the Attorney General, and part of the Executive Branch of New Jersey Government. N.J.S.A. 52:17B-1 et seq. Defendant is Superintendent of the Division and holds the rank of Colonel. Plaintiff is a Lieutenant of State Police with twenty-six years service. On June 15, 1978, pursuant to Article II, § 2 of State Police Rules and Regulations, (Regs.), plaintiff was suspended without pay or benefits pending the filing of administrative disciplinary charges against him. On August 3, 1978, formal charges were preferred against Rosko to which he pleaded not guilty. Those charges[1] allege in substance that he *1366 wrongfully obtained and distributed a copy of the background investigation of Joseph Lordi (the Report), which the State Police had conducted in mid-1977 at the direction of the Attorney General.
The Governor had ordered the Attorney General to make an inquiry into Lordi's fitness to serve as Chairman of the Casino Control Committee. See N.J.S.A. 5:12-52(d) (1978 Supp.)[2] Following the investigation, the Governor announced the nomination of Lordi to chair the Committee.
As the State Senate was obliged to advise and consent with respect to the nomination, the Senate Judiciary Committee held hearings in July 1977. Senator Parker, a member of the Judiciary Committee, explained that although they were aware of the existence of the Report, members of the Judiciary Committee were not permitted to see that document.[3] Except for a limited number of authorized Division personnel, only the Attorney General and the Governor were supposed to have access to the Report.
During the Lordi hearings, defendant was questioned about the contents of the Report. Pagano had not been summoned to the hearings but just happened by in connection with another inquiry. In response to Parker's questions, defendant told the Judiciary Committee that there was nothing in the Report which, in his judgment, would disqualify Lordi. The nomination eventually was reported out of Committee and Lordi was confirmed by the Senate on July 25, 1977.
Subsequently Senator Parker became concerned with the accuracy of Pagano's testimony before the Judiciary Committee, because of the news media's attention to the Lordi nomination. Especially important in this regard was an article authored by John McLaughlin which appeared in the October 21, 1977 issue of the New York Daily News. The McLaughlin piece described certain aspects of the Lordi Report in a detail which indicated intimate knowledge of its contents, and inferentially impugned the propriety of Lordi holding the sensitive post. I have not read the Report, but defendant concedes the fundamental accuracy of the media treatment of it. McLaughlin's article piqued the curiosity of others besides Senator Parker. Shortly after the story appeared, the State Police undertook an intensive investigation into the source of the leak of the Report. It is as a result of that investigation, which employed the State Grand Jury and which could have led to criminal charges, that plaintiff stands accused before the Division.[4]
In a proceeding before Honorable George Y. Schoch, Assignment Judge of Mercer County, Rosko testified under oath that he secured a copy of the Lordi Report from a fellow officer sometime in July or August of 1977. Plaintiff also admitted that he gave a copy of the Report to State Senator Raymond Bateman on September 7, 1977, in *1367 a meeting at Bateman's home. Senator Bateman was then the Republican gubernatorial candidate, and was also a member of the Senate Judiciary Committee. Rosko did not request and was not promised any political favor by Bateman in exchange for the Report; in fact, at that time the Senator did not even know Rosko's name. The Report eventually made its way to the media through the Bateman organization, without Bateman's knowledge.
Senator Parker insisted that if he had been made aware at the Judiciary Committee hearing of the information which the McLaughlin article said the Lordi Report contained, he would have voted against the nomination. One could certainly speculate that full disclosure of the contents of the Report may have had similar effects on enough Judiciary Committee members so as to defeat Lordi's nomination. Senator Parker's vociferous criticism of Pagano's alleged failure to fully explain the Report to the Judiciary Committee was reported in the newspapers on at least two separate occasions. In the October 27, 1977 issue of the Trenton Times, Parker is reported to have claimed that Pagano deliberately misled the Judiciary Committee. In the December 12, 1978 issue of the Trenton Times, Parker is said to have stated that when he questioned defendant about Lordi, defendant failed to explain the substance of the Report. Parker testified as to the truth of his statements and that he in fact made them. Pagano was aware of the media attention given these unfavorable comments.
It is appropriate at this point to outline the operation of a State Police General Disciplinary Hearing, which plaintiff would have undergone on February 12, 1979 but for temporary restraining orders entered February 5. The Division member charged is entitled to legal counsel; he may call witnesses in his behalf and cross examine opposition witnesses; and he can secure Division records relevant to the charges at least five days in advance of the hearing. The Superintendent or his designee, who must be a Commissioned Officer of higher rank than the trooper charged, sits as Hearing Officer in the matter. All proceedings are to be tape recorded, unless the member makes arrangements to bear the cost of a certified shorthand reporter. Although hearings are generally closed, the parties have agreed that the hearing in Rosko's case may be open to the public.
The rules of evidence do not apply; instead, all relevant evidence is admissible. The Hearing Officer should recognize the rules of privilege, and may take judicial notice of certain facts. The parties have the right to examine and contest the material to be noticed.
When the Hearing Officer is the Superintendent's designee, he shall file his recommended report and decision containing findings of fact, conclusions of law, and suggested discipline within forty-five days of conclusion of the hearing. The parties then have twenty days to file written objections to the recommendations, or may request permission to present argument to the Superintendent. Within forty-five days after expiration of the twenty day period, or forty-five days after conclusion of the hearing, if it is conducted by the Superintendent, the Superintendent shall render final judgment in the matter. The decision must include findings of fact, conclusions of law, and the discipline to be imposed. Possible sanctions range from reduction in rank or grade to suspension from duty with forfeiture of pay and benefits to outright dismissal.
Although defendant appointed Lieutenant Colonel Quinn as Hearing Officer in this matter, there is a question whether Quinn's impending retirement will allow him to serve. Quinn has ruled that he will not consider issues of constitutional dimension in the hearing; however, much of Rosko's defense is based on the First Amendment. N.J.Court Rule 2:2-4 allows interlocutory appeals from the Hearing Officer's interim rulings, while R. 2:2-3(a) grants Rosko the right to appeal to the Superior Court, Appellate Division, from an adverse final decision.
A story appeared in the January 5, 1979 issue of the Newark Star Ledger, in which *1368 Pagano is quoted as saying that plaintiff's reason for giving Bateman the Report was to
help him (Rosko) get a political leg up. He hoped to get an edge where no one has a right to.
The reporter who wrote the story testified to the accuracy of the quotation. Defendant admitted that the article accurately reflected a portion of his conversation with the reporter, but claimed that the quote is merely a paraphrase. A key element of Rosko's defense is that he acted in good faith and mainly in the public interest in attempting to bring to the attention of the Judiciary Committee all of the facts bearing on the propriety of the Lordi appointment. Defendant testified that he has no preconceived notion of either plaintiff's total motivation for dissemination, or of Rosko's guilt or innocence. Since the fact of dissemination has been admitted, the viability of Rosko's good faith defense as a factor mitigating punishment is crucial. Plaintiff is naturally concerned that the person who will make the final decision in his disciplinary matter has publicly expressed an opinion adverse to a critical part of his defense prior to commencement of the hearing.
Plaintiff has suggested that the investigation into the source of the leak and the subsequent disciplinary proceeding were brought to harass him, and in retaliation for his exercise of First Amendment rights. Despite Senator Bateman's characterization of the investigation as "overkill", this is not borne out by the facts. There is no proof that the investigation was initiated and carried out for any purpose other than to uncover a serious security leak within the Division. Nor is there any proof that disciplinary charges were brought for any reason other than to punish a breach of Division Regulations.
A related matter is presently pending in the Appellate Division of Superior Court. Plaintiff was given certain Division records, including a copy of the Report, for use in connection with his defense. On August 21, 1978 defendant obtained a Protective Order from Judge Schoch which restrained plaintiff from distributing any Division documents beyond the scope of his need for them in the disciplinary hearing. Plaintiff's motion to modify that order was denied, and the propriety of the Protective Order is the subject of the pending appeal. An issue on that appeal is whether the Report is a public record within the meaning of the Right to Know Law, N.J.S.A. 47:1A-2 (1978 Supp.).[5] That same issue has a great deal of relevance to plaintiff's First Amendment claim in this Court.
Upon reading the verified complaint the Court ordered defendant to show cause on February 5, 1979 why a preliminary injunction should not issue restraining the commencement of the disciplinary hearing scheduled for February 12. I heard argument on February 5 and entered two successive ten day orders temporarily restraining the conduct of the hearing until after proofs could be presented.
This action is brought pursuant to 42 U.S.C. § 1983 and 28 U.S.C. § 2201. I have jurisdiction under 28 U.S.C. § 1343(3), notwithstanding *1369 defendant's suggestion to the contrary. Plaintiff seeks declaratory and injunctive relief:
(a) restraining defendant from proceeding with the disciplinary hearing;
(b) declaring the State Police Regulations governing the administrative disciplinary process unconstitutional as applied to plaintiff's conduct;
(c) ordering his suspension terminated and reimbursing withheld pay and benefits; and
(d) restraining defendant from impeding plaintiff in his exercise of the right of free expression.
Plaintiff relies on two distinct but related theories. First, he asserts that Pagano's control over the Hearing Officer and his position as ultimate arbiter preclude plaintiff's receiving a fair and impartial hearing, and so denies him due process of law. Second, Rosko contends that he lawfully exercised his First Amendment rights of free expression and to petition elected representatives for redress of grievances, in making a copy of the Report available to Senator Bateman. Plaintiff insists this First Amendment right is buttressed by a concomitant right to act in the public interest to ensure the appointment of only qualified persons to offices of public trust. Since, in plaintiff's estimation, the Report called into question Lordi's fitness to serve as Chairman of the Casino Control Committee, Rosko felt duty bound to bring the derogatory information to the attention of an individual in a position to attempt to rectify the situation.
Only when an independent source of subject matter jurisdiction exists is it permissible to proceed contemporaneously under the Declaratory Judgment Act, 28 U.S.C. § 2201 (1978 Supp.). Ordinarily where a litigant seeks declaratory and injunctive relief, the propriety of the issuance of each remedy must be considered separately. Zwickler v. Koota, 389 U.S. 241, 254, 88 S.Ct. 391, 19 L.Ed.2d 444 (1967). However, where there is a pending state proceeding which would be disrupted by an injunction
the same equitable principles relevant to the propriety of an injunction must be taken into consideration . . . in determining whether to issue a declaratory judgment.
Samuels v. Mackell, 401 U.S. 66, 73, 91 S.Ct. 764, 768, 27 L.Ed.2d 688 (1971).
Defendant contends that notions of equity, comity and federalism require me to abstain from interfering in the pending State Police disciplinary proceeding, under Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), or Railroad Commission v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941). Defendant concedes that the right to a fair and impartial tribunal is a basic requirement of due process, e. g. Goldberg v. Kelly, 397 U.S. 254, 271, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), but asserts that plaintiff has not overcome the presumption of the decision-maker's honesty and integrity. See Hortonville Dist. v. Hortonville Education Assn., 426 U.S. 482, 497, 96 S.Ct. 2308, 49 L.Ed.2d 1 (1976).
Younger abstention presupposes an opportunity for plaintiff to present his federal claims to a competent state tribunal. Gibson v. Berryhill, 411 U.S. 564, 577, 93 S.Ct. 1689, 36 L.Ed.2d 488 (1973). One of the principal reasons for abstention, that the states should be allowed to provide a forum for presentation of constitutional issues, evaporates in a situation where the decision-maker is biased or the probability of bias "is too high to be constitutionally tolerable." Withrow v. Larkin, 421 U.S. 35, 47, 95 S.Ct. 1456, 1464, 43 L.Ed.2d 712 (1975).
Under Division Regulations defendant may either hear the matter himself or designate one of his subordinates as Hearing Officer. In any event, Pagano is the ultimate decision-maker. I acknowledge that in order for the Division to function smoothly, internal disciplinary procedures should be under the control of the Superintendent. But in the context of this case it is constitutionally impermissible for either *1370 defendant or his designee to conduct the Rosko disciplinary hearing, or for defendant to sit in final administrative judgment.
Pagano has admitted that he feels that a partial, if not the major factor influencing plaintiff's decision to circulate the Report was the possibility of personal gain. However, a central element of plaintiff's defense to the disciplinary proceeding will be his good faith belief that he was acting in the public interest. I cannot permit defendant, or a subordinate subject to his influence, to have the initial factfinding responsibility in the matter of Rosko's discipline. The risk of unfairness because of defendant's admitted predisposition is just too great. This risk does not appreciably lessen even if his designee, and not Pagano, sits as Hearing Officer, because of the reality of command influence in a paramilitary organization like the Division. An impartial arbiter from outside the Division must sit as Hearing Officer in this case. In order to expedite the installation of an unbiased decision-maker, and pursuant to N.J.S.A. 52:14F-8 (1978 N.J. Session Law Service, No. 3), defendant is directed to request the Director of the Office of Administrative Law to assign a judge to preside over the Rosko hearing. Nor may Pagano issue the final decision upon the Administrative Law Judge's (ALJ) report and recommendation, since merely interposing an ALJ does not sufficiently insulate Rosko's right to due process of law. Although the ALJ will be able to fully and fairly develop the factual record free from adverse influence, and probably will be better suited than a Division member to form conclusions of law, see N.J.S.A. 52:14F-5(l), these procedural protections may very well be rendered nugatory if Pagano is left to exercise the ultimate decisional authority. To avoid any inherent problem here discussed Pagano will be replaced in the decision-making role in the disciplinary process. Since the Division is part of the Department of Law and Public Safety, the Attorney General appears to be the person best suited to fill Pagano's role in the context of this case. In the final analysis, this solution accommodates plaintiff's constitutional rights without ignoring the need for centralization of Division disciplinary functions.
Apart from the above facial bias on the part of defendant, another reason impels me to require the appointment of a Hearing Officer from without the Division. Defendant has been the target of personal abuse or criticism because of the conduct of the party whose guilt he (or his designee) must decide. See Withrow v. Larkin, 421 U.S. at 47, 95 S.Ct. 1456. The sharp rebukes levelled at Pagano by Senator Parker were addressed to what Parker perceived as Pagano's failure to be candid under questioning about the contents of the Report. Rosko gave the Report to Bateman, and from there it made its way to the news media; Parker's reaction was provoked by the media attention. Although the disparagement did not flow directly from Rosko, defendant knows that it was causally related to Rosko's conduct in disseminating the Report. It is that conduct which forms the basis of the charges against plaintiff. That defendant has been personally stung as a result of the very action upon which he now sits in judgment creates too great a risk that he, or his subordinate, will lack that "calm detachment necessary for fair adjudication." Mayberry v. Pennsylvania, 400 U.S. 455, 465, 91 S.Ct. 499, 505, 27 L.Ed.2d 532 (1971). In this regard, one cannot overlook the possibility that apart from the "command influence" exerted by Pagano, the judgment of a Division member sitting as Hearing Officer could be improperly affected by his resentment at the unfavorable publicity received by the State Police in connection with this case. Assignment of an ALJ avoids those problems.
In sum, my reaction to plaintiff's claim that he will be denied due process by continuation of the disciplinary proceedings is limited to insuring that deprivation does not occur. If defendant refuses to install an ALJ, I will permanently enjoin the hearing, order plaintiff restored to active status, and require payment of benefits and salary from the date of his original suspension.
Once the threat to Rosko's constitutional right to due process is removed, I must *1371 decide whether to proceed to judgment on the merits. Plaintiff challenges the constitutionality of a state rule[6] and seeks to have state officers enjoined from enforcing it. However, a proceeding has already been instituted in the state system to enforce the challenged rule against the federal plaintiff. If plaintiff could tender and have his federal claim decided in the state proceeding then abstention is proper, absent a showing of bad faith or harassment in bringing the state action, flagrant unconstitutionality of the state rule or statute, or other extraordinary circumstances. Trainor v. Hernandez, 431 U.S. 434, 441-42, 97 S.Ct. 1911, 52 L.Ed.2d 486 (1977); Juidice v. Vail, 430 U.S. 327, 334, 97 S.Ct. 1211, 51 L.Ed.2d 376 (1977); Younger v. Harris, supra.
Application of the principles underlying abstention has been expanded beyond state criminal prosecutions, to reach a civil suit against "those in charge of an executive branch of an agency of state or local governments." Rizzo v. Goode, 423 U.S. 362, 380, 96 S.Ct. 598, 608, 46 L.Ed.2d 561 (1976). Classification of the state action as civil or criminal is no longer of controlling significance, Johnson v. Kelly, 583 F.2d 1242, 1248 (3d Cir. 1978). Rather, the strength of the State's interest in unrestrained performance of a legitimate governmental function as a means of effectuating its policy has been identified as the central consideration in an analysis of the propriety of abstention. Trainor, 431 U.S. at 444, 97 S.Ct. 1911; id., at 448, 97 S.Ct. 1911 (Blackmun, J., concurring); New Jersey Education Association v. Burke, 579 F.2d 764, 768 (3d Cir.), cert. denied, ___ U.S. ___, 99 S.Ct. 252, 58 L.Ed.2d 239 (1978); see Gipson v. New Jersey Supreme Court, 558 F.2d 701, 703-04 (3d Cir. 1977). As a natural corollary to the requirement that the State's interest be substantial, abstention is improper unless the state proceeding has been initiated by the state itself, Johnson v. Kelly, 583 F.2d at 1249.
The State's interest in the conduct of Rosko's administrative disciplinary hearing is sufficiently weighty to require abstention. The charges flow from the executive branch of the State, through the Division, and are for all intents and purposes brought by the State. Furthermore, the State had the option of proceeding criminally as well as civilly, and in fact plaintiff admits that the investigation of the leak was conducted with a view toward securing a criminal indictment against the persons responsible.
To promote the autonomy of the Division, the Legislature has delegated to the Superintendent the power to make rules to govern the State Police, N.J.S.A. 53:1-10. For the Division to function smoothly, the Superintendent must have the ability, without untoward interference, to punish those who violate those rules. A disciplinary hearing brought pursuant to Regulations, with adequate procedural protections, fosters departmental morale and discipline and reinforces the objective legitimacy of the Division's role in State government. The State's concern in the effective operation of its premiere law enforcement agency is on the same level as the interests respected in Trainor, Juidice and Huffman v. Pursue, Ltd., 420 U.S. 592, 95 S.Ct. 1200, 43 L.Ed.2d 482 (1975), reh. denied 421 U.S. 971, 95 S.Ct. 1969, 44 L.Ed.2d 463 (1975).
Other reasons justifying further intervention are not present here. Plaintiff has not shown that the disciplinary proceeding was instituted in bad faith, or without a reasonable chance to obtain conviction, see Perez v. Ledesma, 401 U.S. 82, 91 S.Ct. 674, 27 L.Ed.2d 701 (1971). Although the investigation and disciplinary process may have inconvenienced plaintiff, there is no showing of harassment. N.J.S.A. 53:1-10 and the Rules and Regulations promulgated pursuant thereto are not flagrantly unconstitutional; indeed, they are attacked in their application to plaintiff. No other extraordinary circumstances exist to support a further exercise of this Court's injunctive power.
*1372 Plaintiff conceded at trial that he will be able to raise his First Amendment claims in a state forum during the course of adjudication of the charges.[7] That plaintiff will have an opportunity to raise federal constitutional claims in the state proceeding is sufficient in determining whether to abstain. Juidice v. Vail, 430 U.S. at 337, 97 S.Ct. 1211; Gibson v. Berryhill, 411 U.S. at 577, 93 S.Ct. 1689. Since my limited intrusion into the state system ensures the credibility of the initial forum, I must refrain from further interference.
An alternative reason for my reluctance to reach the merits of plaintiff's First Amendment claim is the principle of restraint which takes its name from Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941). There are three prerequisites to application of this doctrine: (1) uncertain issues of state law underlying the federal constitutional claim; (2) a state court decision on those issues would "obviate the need for or substantially narrow the scope of the adjudication of the constitutional claims;" and (3) "an erroneous decision of state law by the federal court would be disruptive of important state policies." D'Iorio v. County of Delaware, 592 F.2d 681 at 686, (3d Cir. 1978). Once the three prerequisites are found to exist, abstention is generally proper. D'Iorio, at 692.
The first element of the formula is present, since the key question underlying plaintiff's First Amendment claim here is that of the Report's confidential status. Plaintiff admits in his brief that the classification of the Report as confidential vel non is the issue pending on appeal from Judge Schoch's protective order. That these issues are uncertain is clear from analysis of the relevant state statutory and case law.
The Casino Control Act mandates an "inquiry" into a prospective nominee's background. N.J.S.A. 5:12-52(d). Whether the Lordi Report is included within the meaning of "inquiry" has not been decided by any state court. The Report's status as an "inquiry" is in turn crucial to whether it is a "public record" under the Right to Know Law, N.J.S.A. 47:1A-2 (1978 Supp.) so as to take this case beyond the authority of Nero v. Hyland, 76 N.J. 213, 220, 386 A.2d 846 (1978).[8] If the Report is not a public record, plaintiff's First Amendment theory may be fatally undercut, see United States v. Marchetti, 466 F.2d 1309, 1317 (4th Cir.), cert. denied, 409 U.S. 1063, 93 S.Ct. 553, 34 L.Ed.2d 516 (1972); Knopf v. Colby, 509 F.2d 1362, 1370 (4th Cir.), cert. denied, 421 U.S. 992, 95 S.Ct. 1999, 44 L.Ed.2d 482 (1975), reh. denied, 422 U.S. 1049, 95 S.Ct. 2669, 45 L.Ed.2d 702 (1975),[9] thus satisfying the second prong of the test.
Were I to proceed to decide the status of the Report, it would impact on the important areas of the scope of state government executive privilege, and the role of the Attorney *1373 General and of the State Police in policy-making and intelligence gathering. Construction of the Casino Control Act and the Right to Know Law are matters for the state courts.
The parties shall submit an order of judgment, consented to as to form, and consistent with this opinion, within ten days.
NOTES
[1] The events material to the charges occurred from the late Spring through the Fall of 1977. The Division revised its Regs. effective August 1, 1977, so there are two separate sets of charges against Rosko. The first, under Regs. in effect prior to August 1, 1977, charges violation of section 19, paragraph 23, which provides
No member . . . shall demean himself in any disorderly or neglectful manner, or to the prejudice of good order and discipline, or in a manner to bring discredit upon the Department.
The second set under new Regs. charges (1) violation of Article XIII, § 22, which provides
No member shall induce or attempt to induce any other member to violate any section of this Article.
In addition to a violation of this Article being cause for discipline of a member, it should be recognized by every member that the inducing or attempt to induce any member to violate this Article by another member or any other person, will subject such member or person to prosecution as a disorderly person; (2) violation of Article XIII, § 19(c), which provides
A member shall:
c. Not disseminate, distribute or supply to any unauthorized member or any other person, an original, copy or abstract of any Division document, unless specifically authorized by competent Division authority;
(3) violation of Article VI, § 2(a) and (c), which provides
No member shall:
a. Act or behave in an official capacity to the personal discredit of the member or to the discredit of the Division.
c. Act or behave in any capacity to the detriment of good order and discipline of the Division.
[2] The Casino Control Act states
Appointments to the Commission shall be made by the Governor with the advice and consent of the Senate. Prior to nomination, the Governor shall cause an inquiry to be conducted by the Attorney General into the nominee's background, with particular regard to the nominee's financial stability, integrity, and responsibility and his reputation for good character, honesty and integrity.
N.J.S.A. 5:12-52(d).
[3] A rule change proposed by Senator Parker, which would have made State Police background investigations of candidates for public office available to the Judiciary Committee, was voted down by the Senate.
[4] As of this writing, criminal charges have not been filed against the principals assertedly responsible for the distribution of the Report.
[5] That statute reads in pertinent part:
Except as otherwise provided in this act or by any other statute, resolution of either or both houses of the Legislature, executive order of the Governor, rule of court, any Federal law, regulation or order, or by any regulation promulgated under the authority of any statute or executive order of the Governor, all records which are required by law to be made, maintained or kept on file by any board, body, agency, department, commission or official of the State or of any political subdivision thereof or by any public board, body, commission or authority created pursuant to law by the State or any of its political subdivisions, or by any official acting for or on behalf thereof (each of which is hereinafter referred to as the "custodian" thereof) shall, for the purposes of this act, be deemed to be public records. Every citizen of this State, during the regular business hours maintained by the custodian of any such records, shall have the right to inspect such records. Every citizen of this State shall also have the right, during such regular business hours and under the supervision of a representative of the custodian, to copy such records by hand, and shall also have the right to purchase copies of such records.
Public records are to be "readily accessible" to State citizens. N.J.S.A. 47:1A-1 (1978 Supp.)
[6] The Division Rules and Regulations were promulgated by the Superintendent pursuant to N.J.S.A. 53:1-10, and were approved by Governor Byrne.
[7] Installation of an ALJ should allow constitutional issues to be raised and decided at the initial hearing. Even if the hearing judge does not consider constitutional claims, those issues should be noted and factual presentations relevant to them should be made to ensure an adequate record for appellate review. "In this way both the integrity of the administrative system and . . . [plaintiff's] . . . right to a judicial determination of constitutional issues will be preserved." Paterson Redevelopment Agency v. Schulman, 78 N.J. 378, 388, 396 A.2d 573, 578 (1979).
[8] Nero held that character investigations made at the behest of the Governor in connection with a contemplated nomination are not public records. 76 N.J. at 220, 386 A.2d 846. In that case, however, the Governor was not directed to make an inquiry by statute. I also hesitate to determine whether either New Jersey Governor Executive Order 48, providing for restrictions on distribution of Division records, or Art. 13 § 19 of Division Regs., except the Report from the ambit of the Right to Know Law.
[9] Plaintiff swore to uphold Division Rules and Regulations when he became a member. Article 13, ¶ 19 of the Regulations establishes the confidentiality of Division documents, and proscribes their distribution to any unauthorized person. In an analogous context, the Fourth Circuit has indicated an ex-C.I.A. agent may relinquish his First Amendment right to disseminate confidential Agency information acquired during the course of employment, where the agent entered into a valid secrecy agreement. Knopf, 509 F.2d at 1370.
|
FILED
NOT FOR PUBLICATION FEB 27 2015
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
ABBY JO OVITSKY, No. 13-55221
Plaintiff - Appellant, D.C. No. 2:11-cv-10142-DMG-
JCG
v.
STATE OF CALIFORNIA MEMORANDUM*
DEPARTMENT OF FAIR
EMPLOYMENT AND HOUSING,
Defendant,
and
K12.COM, DBA California Virtual
Academy, DBA Cava, DBA Delaware
K12, Inc., DBA K12, Inc., DBA
Washington Virtual Academy, in
Washington State, DBA WAVA; et al.,
Defendants - Appellees.
Appeal from the United States District Court
for the Central District of California
Dolly M. Gee, District Judge, Presiding
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Submitted February 17, 2015**
Before: O’SCANNLAIN, LEAVY, and FERNANDEZ, Circuit Judges.
Abby Jo Ovitsky appeals pro se from the district court’s judgment
dismissing her action alleging violation of the Americans with Disabilities Act
(“ADA”) and various state law claims. We have jurisdiction under 28 U.S.C.
§ 1291. We review de novo a dismissal for lack of standing, Canatella v.
California, 304 F.3d 843, 852 (9th Cir. 2002), and we affirm.
The district court properly dismissed Ovitsky’s claim for injunctive relief
under the ADA because Ovitsky failed to allege a “real and immediate threat of
repeated injury in the future.” Chapman v. Pier 1 Imps. (U.S.) Inc., 631 F.3d 939,
946, 949 (9th Cir. 2011) (en banc) (citation and internal quotation marks omitted).
We do not consider matters not specifically and distinctly raised and argued
in the opening brief. See Padgett v. Wright, 587 F.3d 983, 985 n.2 (9th Cir. 2009)
(per curiam).
AFFIRMED.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2). Accordingly, the requests for
oral argument are denied.
2 13-55221
|
REVISED JANUARY 16, 2008 United States Court of Appeals
Fifth Circuit
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE FIFTH CIRCUIT December 17, 2007
Charles R. Fulbruge III
No. 07-30348 Clerk
UNITED DISASTER RESPONSE, LLC,
Plaintiff-
Counter Defendant-
Appellee,
v.
OMNI PINNACLE, LLC,
Defendant-
Cross Claimant-
Counter Claimant-
Appellee,
v.
ST. TAMMANY PARISH,
Defendant-
Cross Defendant-
Appellant.
Appeal from the United States District Court
for the Eastern District of Louisiana
No. 2:06-CV-6075
No. 07-30348
Before REAVLEY, SMITH, and GARZA, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
Omni Pinnacle, LLC (“Omni”), contracted with St. Tammany Parish to
perform post-hurricane repairs. Omni subcontracted with United Disaster Re-
sponse, LLC (“United”). Alleging that additional payment was due, United sued
Omni and the parish, and Omni counterclaimed against United and cross-
claimed against the Parish. Citing the Eleventh Amendment, Louisiana state
law, and a choice-of-forum clause in the contract, the parish moved to dismiss.
The district court rejected the parish’s arguments. We affirm in part and dis-
miss in part.
I.
The parish entered into a contract with Omni to help with repairs after a
storm or other disaster. Omni then subcontracted with United. After hurri-
canes Katrina and Rita, the Parish called OmniSSand, by extension, UnitedSS
into action.
Because of a disagreement about the work provided, the parish made only
partial payment to Omni, which in turn only partially paid United. Invoking
diversity jurisdiction under 28 U.S.C. § 1332, United sued Omni and the parish
for full payment; Omni counterclaimed against United and cross-claimed against
the parish.
In response to United’s and Omni’s claims, the parish filed a Federal Rule
of Civil Procedure 12(b) motion to dismiss. The parish argued that it had im-
munity under the Eleventh Amendment and Louisiana law and that the contract
contains, by reference, a mandatory choice-of-forum clause stating that “[t]he
22nd Judicial District Court for the Parish of St. Tammany shall be the court of
original jurisdiction of any litigation originated under this contract.”
2
No. 07-30348
The district court denied the motion, ruling that the parish is not an “arm
of the state” and that the choice-of-forum clause is not exclusive. The court did
not address the state law argument. The parish appeals, basing appellate juris-
diction on the collateral order doctrine. See Cohen v. Beneficial Indus. Loan
Corp., 337 U.S. 541 (1949).
II.
We review questions of immunity de novo. United States v. Texas Tech
Univ., 171 F.3d 279, 288 (5th Cir. 1999). We do the same for constructions of
choice-of-forum clauses. Afram Carriers, Inc. v. Moeykens, 145 F.3d 298, 301
(5th Cir. 1998).
III.
We first confront whether the district court erred in failing expressly to
apply the six-prong test of Delahoussaye v. City of New Iberia, 937 F.2d 144, 147
(5th Cir. 1991).1 The parish argues that under Flores v. Cameron County, 92
F.3d 258, 268 (5th Cir. 1996), the court was required to apply Delahoussaye be-
cause “analogies between like entities cannot replace consideration of the six rel-
evant factors.” The district court did not err. This is not a case with such extra-
ordinary circumstances that we can find that the parish is an “arm of the state”
1
Because “[t]here is no bright-line test for determining whether a political entity is an
‘arm of the State’ for purposes of Eleventh Amendment immunity,” Vogt v. Bd. of Commr’s Or-
leans Levee Dist., 294 F.3d 684, 689 (5th Cir. 2002), in Delahoussaye, 937 F.2d at 147, we held
that courts should consider six factors:
(1) whether the state statutes and case law characterize the agency as an arm
of the state; (2) the source of funds for the entity; (3) the degree of local
autonomy the entity enjoys; (4) whether the entity is concerned primarily with
local, as opposed to statewide, problems; (5) whether the entity has authority to
sue and be sued in its own name; and (6) whether the entity has the right to
hold and use property.
3
No. 07-30348
notwithstanding the holding in County of Lincoln v. Luning, 133 U.S. 529, 530
(1889), that “the Eleventh Amendment limits . . . jurisdiction only as to suits
against a state” and not against counties and parishes.
We addressed this issue at length in Crane v. Texas, 759 F.2d 412 (5th
Cir.), amended in part on denial of rehearing, 766 F.2d 193 (5th Cir. 1985), not-
ing that the Supreme Court has repeatedly stated “that the Eleventh Amend-
ment does not apply to counties and similar municipal corporations.” Id. at 415
(internal citations and quotations omitted). We went so far as to characterize
the Court’s statements to be “unambiguous” and listed at length the “abundance
of authority holding the Eleventh Amendment inapplicable to counties . . . .” Id.
at 416 (internal citations omitted). Holding that these “authorities . . . establish
without question that Eleventh Amendment immunity does not, as a general
rule, extend to counties,” we further stated that “no exception should be made
to this rule without convincing evidence distinguishing the county in question
from counties generally.” Id. at 417. In deciding whether this “convincing”
showing could be made, we noted that “the most crucial factor . . . is whether the
funds to defray any award would be derived from the state treasury,” id. (inter-
nal citations and quotations omitted), but even then we took special care to em-
phasize the need for “payment of the judgment . . . to be made directly from the
state treasury,” id. (internal citations and quotations omitted). This is a de-
manding standard.2
Though the district court should have more pellucidly explained why the
parish was not entitled to immunity, the court was not mistaken in denying the
motion to dismiss: The parish cannot show with “convincing evidence” that it is
2
It is so demanding, in fact, that the parish cites no case in which a county or parish
was held to be an arm of the state. Given this dearth of supportive caselaw, it is not surprising
that “[i]t is settled law that the parishes are not protected from suit by the eleventh amend-
ment.” United States v. St. Bernard Parish, 756 F.2d 1116, 1126 (5th Cir. 1985).
4
No. 07-30348
distinguishable from parishes or “counties generally.”
The parish properly concedes some of the Delahoussaye factors. For in-
stance, the parish can sue and be sued in its own name and can hold and use
property. Likewise, Louisiana law does not characterize the parish as an arm
of the state.3
For Delahoussaye factors three and four, the factors relating to the parish’s
autonomy and scope of authority, the parish attempts to create a special4 rule
for hurricanes: Where a hurricane or another wide-scale disaster is involved, the
parish is entitled to Eleventh Amendment immunity because of the Louisiana
Homeland Security and Emergency Assistance and Disaster Act, LSA-R.S.
§§ 29:721 et seq. The act states that “[e]ach political subdivision . . . shall be
within the jurisdiction of and served by the Governor’s Office of Homeland
Security and Emergency Preparedness . . . and by a parish homeland security
and emergency preparedness agency responsible for emergenc[ies]. . . .,” id.
§ 29:727(A), and requires each parish’s office of homeland security and emergen-
cy preparedness to coordinate with federal and state agencies, id. § 29:729-
(B)(11). The act also requires that parishes prepare emergency plans for various
3
The parish, a “political subdivision” under Louisiana law, only indirectly concedes this
factor, but
[t]he statutory classification of . . . “political subdivisions” is significant. Our de-
cision in Cozzo [v. Tangipahoa Parish Council, 279 F.3d 273, 281-82 (5th Cir.
2002] suggests that “political subdivision” . . . and “arm of the state” are mutual-
ly exclusive. While this may not be a hard-and-fast rule, virtually every other
government entity classified as a political subdivision has been denied Eleventh
Amendment immunity . . . . Moreover, political subdivisions are not part of any
department within the executive branch of government. In every recent case in
which a Louisiana political entity has been held to be an “arm of the state,” the
state agency being sued was part of a department within the executive branch.
Vogt, 294 F.3d at 692.
4
The parish acknowledges that it “generally enjoys independent management of Parish
affairs.”
5
No. 07-30348
threats. Id. § 29:729.
The parish’s argument is unconvincing. Merely requiring the parish and
the state to cooperate does not transform the parish into the state, and the par-
ish offers no cases to support the contrary conclusion. The degree of state intru-
sion into the parish’s autonomy is not dramatic. The act explains that “[t]he par-
ish office of homeland security and emergency preparedness under the parish
president, shall be responsible for homeland security and emergency prepared-
ness in the parish,” id. § 29:729(A); “[e]ach parish office of homeland security
and emergency preparedness . . . shall have a director . . . [who] shall serve at
the pleasure of the parish president,” id. § 29:728(A); and the director “shall
have direct responsibility for the organization, administration, and operation of
such local organization for homeland security and emergency preparedness,”
with the governor merely having “general direction and control,” id. § 29:728(C).
The act does not make the parish an arm of the state.
The parish’s argument that it is concerned with statewide problems under
the fourth Delahoussaye factor suffers from additional flaws. In Vogt, 294 F.3d
at 695, a case concerning a levee district, we stated that “[l]imited territorial
boundaries suggest that an agency is not an arm of the state” and “most entities
that are entitled to Eleventh Amendment immunity have statewide jurisdiction.”
The parish obviously has a limited territorial boundary. Vogt forecloses another
of the parish’s arguments, that somehow its efforts facilitate statewide recovery
and thus render the it an arm of the state: “The levee board’s counter-argument
is that the levee district is concerned with a statewide problemSSfloodingSSand
that the nature of the problem outweighs the narrow geographic boundaries of
the levee district. However, primary education and law enforcement are also
statewide concerns, yet school boards and sheriffs are not arms of the state.” Id.
Thus, the parish’s only real hope is the second Delahoussaye factor: the
source of funds used. The parish argues that because all of its hurricane recov-
6
No. 07-30348
ery funds come from the federal government, channeled through the state, it is
an arm of the state. But this is incorrect. There is no formal requirement for
Louisiana to pay a judgment to Omni or United, if such a judgment is rendered.
The state may choose to reimburse the parish, but that is not enough. Vogt, 294
F.3d at 693.
As we explained in Vogt, under Louisiana statutory and constitutional law
the state has no duty to indemnify any judgment against its political subdivi-
sions, including parishes. Id. “Although the legislature has the authority to ap-
propriate funds to pay a judgment against a [political subdivision], the legisla-
ture certainly has no legal obligation to do so. Thus, no legal liability arises
against the state in the event of a judgment against [a political subdivision] or
its officers.” Id. Such a “request” for “state money [to] be appropriated to pay
the judgment [is] too speculative for Eleventh Amendment analysis.” Id.5
IV.
The parish contends that Louisiana law protects it from suit in a federal
court sitting in diversity.6 A Louisiana statute provides that “[n]o suit against
5
In Vogt, 294 F.3d at 693, we did note that “[w]e have left open the possibility that a
state entity could show that the legislatureSSeven where it is not obliged to do soSSregularly
appropriates money to pay judgments against the entity.” The parish does not argue that
there is a regular practice of the state’s paying the parish’s judgments, so we need not consider
that question.
6
Though the collateral order doctrine gives us jurisdiction to consider the parish’s Elev-
enth Amendment claims, see e.g., P.R. Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506
U.S. 139, 147 (1993) (“We hold that States and state entities that claim to be ‘arms of the
State’ may take advantage of the collateral order doctrine to appeal a district court order de-
nying a claim of Eleventh Amendment immunity.”), we must decide whether the doctrine also
gives us jurisdiction over this state law argument, which, though similar to Eleventh Amend-
ment immunity, is not identical to it. Under Cohen, there is collateral jurisdiction if the inter-
locutory order conclusively determines the disputed question, resolves an important issue sepa-
rate from the merits, and cannot be effectively reviewed on appeal from a final judgment. The
reasoning of Puerto Rico Aqueduct, 506 U.S. at 144, applies here: If “a State and its ‘arms’ are,
in effect, immune from suit in federal court, it follows that the elements of the . . . collateral
(continued...)
7
No. 07-30348
the state or a state agency or political subdivision shall be instituted in any court
other than a Louisiana state court.” LSA-R.S. § 13:5106(A). From this, the
parish argues that it cannot be sued in federal court.
The parish’s contention is nearly frivolous. We have already addressed the
same issue involving the same statute. In In re Allied-Signal, Inc., 919 F.2d 277
(5th Cir. 1990), we decided “whether a political subdivision, which pursuant to
state statute [i.e. § 13:5106(A)] may be only sued in the state courts of Louisiana,
and which, we assume, does not enjoy Eleventh Amendment immunity, may be
sued in federal district court under diversity of citizenship jurisdiction.” Id. at
278.
Notwithstanding Erie,7 we held that such suits can be brought in federal
court.8 “[P]olitical subdivisions that have waived common law immunity, but
that do not enjoy Eleventh Amendment immunity under federal law, can be sued
in federal courts under diversity jurisdiction without regard to state statutory
provisions to the contrary.” Id. at 280 n.4 (citing Chicot County v. Sherwood, 148
U.S. 529, 533-34 (1893)).9 Allied-Signal is on point here.10
6
(...continued)
order doctrine are satisfied.” Therefore, we have jurisdiction over this question.
7
Erie R.R. v. Tompkins, 304 U.S. 64 (1938).
8
It is “clear . . . that governmental units not covered by the Eleventh Amendment are
suable in federal court, even in actions based solely on diversity jurisdiction. Thus, even when
a state creates governmental units that it wishes to be immune from suit in federal court, a
federal court may disregard the state’s wishes.” 13 CHARLES ALAN WRIGHT & ARTHUR R.
MILLER, FEDERAL PRACTICE AND PROCEDURE § 3524 (2d ed. 1987), at 213-14. See also Mark-
ham v. City of Newport News, 292 F.2d 711, 718 (4th Cir. 1961) (“It would be quite foreign to
the Erie doctrine . . . to apply a state statute in such a way as to deny all relief in a federal
court to a nonresident plaintiff on a cause of action which, clearly, the state courts could recog-
nize and enforce. Erie requires that the federal court grant or withhold relief as the state
courts would. It does not require relegation of the diversity jurisdiction to the mercies of the
legislatures of fifty separate states.”).
9
See also N.Y. Life Ins. Co. v. Plaquemines Parish Comm’n Council, No. 91-0909, 1991
WL 161512, at *2 (E.D. La. Aug. 13, 1991) (“The fault with Plaquemine Parish’s argument is
(continued...)
8
No. 07-30348
V.
The parish’s final argument is that the district court misconstrued the con-
tract’s choice-of-forum clause, which the parish argues allows suit to be brought
only in the parish’s 22nd Judicial District Court. Because, however, this is an
interlocutory appeal, we do not have jurisdiction to consider the issue.
Under 28 U.S.C. § 1291, unless one of the limited exceptions to the final
judgment rule applies, we can review only “final decisions.” One such exception
is the collateral order doctrine. The parish attempts to invoke that exception as
a basis for appellate review of the choice-of-forum determination.11
Precedent, however, forecloses the parish’s argument. In Louisiana Ice
Cream Distributors, Inc. v. Carvel Corp., 821 F.2d 1031 1032 (5th Cir. 1987), we
considered a contract with a choice-of-forum clause stating “that ‘New York shall
be a forum where any cause of action arising under this Agreement may be insti-
tuted.’” Id. at 1032. There, plaintiff sued in the Eastern District of Louisiana.
The defendant unsuccessfully moved under Federal Rule of Civil Procedure
12(b)(3) to dismiss for improper venue.
9
(...continued)
that it never had Eleventh Amendment immunity . . . . Plaquemines Parish is a ‘political sub-
division’ of the State of Louisiana. Plaquemines Parish is not an arm of the state immune from
suit in federal court under the Eleventh Amendment. Therefore, Plaquemines Parish may be
sued in federal court under diversity jurisdiction notwithstanding State statutory provisions,
such as § 13:5106(A), that purport to limit the waiver of common law immunity to state court
actions.”).
10
The Parish puts far too much weight on the fact that Allied-Signal involved a petition
for writ of mandamus. The district court in Allied-Signal remanded to state court, after remov-
al, “expressly and affirmatively bas[ing] its decision to remand on 13:5106(A).” Allied Signal,
919 F.2d at 280. We granted mandamus “to correct [the] district court’s remand order and [to]
require it to entertain an action when it has been expressly and incorrectly remanded.” Id. at
281. Thus, we directly ruled on the merits of § 13:5106(A).
11
Likely realizing that its collateral order doctrine argument is flawed, the parish asse-
rts in its reply brief that this court has pendent appellate jurisdiction over the denial of the mo-
tion to dismiss on the choice-of-forum clause. That argument is waived. Cinel v. Connick, 15
F.3d 1338, 1345 (5th Cir. 1994) (“An appellant abandons all issues not raised and argued in
its initial brief.”).
9
No. 07-30348
On interlocutory appeal, we held that “[t]he denial of a motion to dismiss
for improper venue is not a final order under 28 U.S.C. § 1291. Rather, it is an
interlocutory order which is not subject to immediate appeal.” Id. We likewise
held that the matter did not “fall[] within the ambit of the collateral order doc-
trine.” Id.
The facts in Louisiana Ice Cream are for all relevant purposes identical to
those here. Therefore, we lack jurisdiction to review this aspect of the district
court’s decision, so that portion of this appeal is dismissed.12
The order denying the motion to dismiss is AFFIRMED, and the appeal of
the order regarding the choice-of-forum clause is DISMISSED.
12
After the district court ruled in this case, another judge in the same district, in Top
Branch Tree Serv. & Landscaping, Inc. v. Omni Pinacle, LLC, No. 06-3723, 2007 WL 1234976
(E.D. La. Apr. 26, 2007), dismissed a similar claim against the parish based on the same choice
-of-forum clause. The Parish argues that Top Branch should have collateral estoppelSSmistak-
enly labeled res judicataSSeffect here. That is incorrect. Because our jurisdiction under the
collateral order doctrine is “extraordinarily limited,” Anchor Hocking v. Willamette Indus., Inc.,
694 F.2d 1041, 1042 (5th Cir. 1983), and because collateral estoppel is a nonjurisdictional affir-
mative defense, 18 JAMES WM. MOORE ET AL., MOORE’S FEDERAL PRACTICE § 132.05[8](a) (3d
ed. 1999), we do not have jurisdiction to address the collateral estoppel effectSSif anySSof Top
Branch.
10
|
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
November 16, 2007
No. 06-10788 Charles R. Fulbruge III
Clerk
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
BRETT GARRETT,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 4:06-CR-20-2
Before JONES, Chief Judge, and STEWART and CLEMENT, Circuit Judges.
PER CURIAM:*
Brett Garrett appeals his sentence of twenty-seven months of
imprisonment following his guilty-plea conviction for stealing explosive
materials in interstate commerce and aiding and abetting the theft of explosive
materials in interstate commerce, in violation of 18 U.S.C. §§ 844(k) & 2.
Garrett argues that his sentence is unreasonable because the district court
failed to consider whether his sentence resulted in an unwarranted sentencing
disparity between him and his co-defendant, Bryan Newsom, in violation of 18
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
No. 06-10788
U.S.C. § 3553(a)(6). We review sentences for “unreasonableness.” United States
v. Mares, 402 F.3d 511, 518 (5th Cir. 2005). A sentence imposed within the
advisory guideline range is given great deference, and this Court will infer that
the sentencing court considered all the factors under § 3553(a). Id. at 519-20.
Garrett does not challenge the calculation of the guidelines range; he
argues that his sentence is not reasonable because the district court failed to
properly consider all the necessary § 3553(a) factors. His contention is not
supported by the record, as it is clear that the district court evaluated the
requisite factors under § 3553(a).
Garrett also argues that the district court erred by imposing a sentence on
him that was incommensurately harsh relative to the sentence received by
Newsom. Garrett asserts that Newsom’s sentence was substantially less severe,
and therefore, the sentences were improperly disparate. Because Garrett and
Newsom were not similarly situated, it was reasonable for the district court to
impose different sentences. See United States v. Duhon, 440 F.3d 711, 720-21
(5th Cir. 2006), petition for cert. filed (May 18, 2006) (No. 05-11144). Moreover,
Garrett has not demonstrated that the sentence he received was more severe
than similarly-situated defendants nationwide. Id.; see also 18 U.S.C. §
3553(a)(6). Garrett’s disparity argument furthermore is attenuated by the fact
that Newsom actually received a harsher sentence than Garrett did.
Garrett may not join in the briefs and arguments of his co-appellants.
FED. R. APP. P. 28(i); United States v. Harris, 932 F.3d 1529, 1533 (5th Cir.
1991).
It is ordered that this appeal be SEVERED from No. 06-10822.
AFFIRMED.
2
|
619 F.Supp. 542 (1985)
NORDIC BANK PLC, Plaintiff,
v.
The TREND GROUP, LTD., Lease Trend Company, William Klein, Chase Manhattan Bank, N.A., First National Bank of Louisville, Provident National Bank, the Connecticut Bank and Trust Co., N.A., General Motors Acceptance Corporation, Ultra Funding Corporation, Northeastern Bank of Pennsylvania, Ford Motor Credit Company and Citibank, N.A., Defendants.
The TREND GROUP LTD., formerly Conn-Trend Leasing Corporation and Lease Trend Corp., Lease Trend Company, formerly Flourtown Leasing, Inc., Serv Trend, N.V. and Moss Vend, Ltd., Plaintiffs,
v.
NORDIC BANK PLC LONDON, Nordic American Banking Corporation, Svenska Handelsbanken, Den Norske Creditbank, Copenhagen Handelsbank A/S, Kansallis Osake Pankki, Jan E.H.M. Ekman, John Sclater, John R. Nelson, Michael S. Mathews, Hans Ostergaard, Erling Naper, Olli Kaila, Nordic Finance Limited, Nordic Leasing Limited, and Stewart G. Smith, Defendants.
No. 83 Civ. 9107 (GLG).
United States District Court, S.D. New York.
September 17, 1985.
*543 *544 *545 *546 *547 Kraver & Martin, New York City, for plaintiffs; Richard M. Kraver, Lewis S. Fischbein, of counsel.
Butler, Fitzgerald & Potter, P.C., New York City, for defendants Nordic Bank PLC, Nordic American Banking Corp., Svenska Handelsbanken, Kansallis Osake Pankki, Jan E.H.M. Ekman, Olli Kaila, John Sclater, John R. Nelson, Michael S. Mathews, Nordic Finance Limited, Nordic Leasing Limited, Stewart G. Smith; Stuart Potter, Susan A. Glover, Joyce H. Young, of counsel.
Davis, Polk & Wardwell, New York City, for defendants Copenhagen Handelsbank A/S, Den Norske Creditbank, Hans Ostergaard, and Erling Naper; Richard E. Nolan, Christian J. Mixter, Julia L. Brickell, of counsel.
OPINION
GOETTEL, District Judge:
On December 5, 1983, Nordic Bank PLC London ("NBL"), a London bank, brought an action ("the Nordic action") in the United States District Court for the Eastern District of Pennsylvania naming the Trend Group Limited ("Trend"), Lease Trend Company ("Lease Trend"), William H. Klein and nine financial institutions as defendants. The action sought to cut off the security interests that the nine financial institutions allegedly had in automobile and equipment leases pledged to NBL by Trend and to recover monetary damages that arose from Trend's alleged default on certain promissory notes assigned to NBL.
On December 6, 1983, Trend, Lease Trend, and two of their affiliates, Serv Trend, N.V. ("Serv Trend") and Moss Vend Limited ("Moss Vend"), filed a fourteen count complaint in this Court against the plaintiff in the earlier action and against various related parties ("the Trend action").[1] On December 15, 1983, the Nordic action was transferred to this Court. The Nordic and Trend actions were subsequently consolidated.
On February 22, 1984, all of the defendants in the Trend action moved to dismiss that action. Before the motions could be heard, the Trend plaintiffs filed an amended complaint adding several counts and restating others. This complaint alleges seventeen causes of action. Seven arise under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-65 (1982). The complaint also states separate claims under the Bank Holding Company Act of 1970, 12 U.S.C. § 1972(1) (1982) ("BHCA") and under Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 (1982). The remaining counts in the complaint state common law claims.
After the filing of the amended complaint in the Trend action, the parties to that action stipulated to extend the defendants' time to move or to answer for several months. As expected, the defendants again moved to dismiss a variety of claims on both substantive and jurisdictional grounds. Those motions are now before us.
I. Background
A. The Parties
Trend is a Delaware corporation that has its principal place of business in Valley *548 Forge, Pennsylvania. On July 11, 1978, Trend purchased the assets and name of Flourtown Leasing Company, which became Lease Trend. Plaintiff, Serv Trend, another wholly owned subsidiary of Trend, is a limited liability company organized under the laws of the Netherlands Antilles. Plaintiff, Moss Vend, is Trend's nominee in the United Kingdom.
Defendant, Nordic American Banking Corporation ("NABC"), is an investment company organized under Article 12 of the Banking Law of the State of New York, N.Y. Banking Law §§ 507-20 (McKinney 1971). Until August 31, 1979, NABC was wholly owned by defendant, Svenska Handelsbanken ("SHB"), a Swedish bank. On or about September 1, 1979, SHB sold 75% of its stock in NABC in equal shares to defendants Den Norske Creditbank ("DnC"), the largest commercial bank in Norway; Copenhagen Handelsbanken A/S ("CHB"), one of the largest banks in Denmark; and Kansallis Osake Pankki ("KOP"), a Finnish bank. Until approximately August 15, 1983, SHB, DnC, CHB, and KOP were also equal owners of defendant NBL, an international bank with its principal place of business in London, England. On August 15, 1983, DnC obtained control over all of the voting securities of NBL. NBL owns all of the stock of defendants Nordic Leasing Limited ("NLL") and Nordic Finance Limited ("NFL"), British limited liability corporations engaged in the equipment leasing business.
The complaint also names a number of individual defendants. These include Jan E.H.M. Ekman ("Ekman"), president of SHB and a Swedish citizen; Hans Christian Ostergaard ("Ostergaard"), a Danish citizen who, until December 31, 1980, was managing director of CHB; Erling Naper, ("Naper"), general manager of DnC and a Norwegian citizen; and Olli Kaila ("Kaila"), a Finnish citizen and a former executive vice-president of KOP. Commencing in September 1979, these four individuals served as directors of NABC. Ekman was Chairman of the Board until April 20, 1983. Naper and Ekman remain directors. Ostergaard resigned from the Board on April 3, 1981; Kaila did so in April 1983. John R. Nelson ("Nelson") and Michael S. Mathews ("Mathews"), NABC's president and the senior vice president, respectively, are also named as defendants. John R. Sclater ("Sclater"), a British citizen who is NBL's managing director and Steward G. Smith ("Smith"), its associate director, are similarly named.
B. The Allegations of the Amended Complaint
The amended Trend complaint relates the following claimed pertinent facts.
1. The Flourtown Loans
On July 3, 1978, NABC loaned Trend $800,000 so that Trend could purchase the assets of the Flourtown Leasing Company ("Flourtown"), an automobile and equipment leasing company. On October 25, 1978, NABC loaned Trend an additional $600,000 for use as working capital. Between November 15, 1978 and May 10, 1979, NABC made nine loans aggregating $8,250,000 to Trend (or Flourtown) to finance automobile and equipment leases. NABC allegedly made several representations to Trend regarding these so-called "Flourtown Loans." NABC allegedly represented that Trend would only have to pay interest on the loans. Payments of principal would be due when the collateral was sold unless substituted collateral was pledged. NABC would charge interest at its prime rate, the rate charged its most credit-worthy customers. NABC also allegedly represented that its charter and the laws of New York authorized such loans and that the interest charges were lawful under New York law. Trend charges that each of these representations was false and known to be so when made.
In exchange for each Flourtown loan, Trend signed a full recourse, demand promissory note. On or about the time that NABC issued the last of the loans, it superseded the demand notes with partial recourse notes. NABC backdated these instruments *549 to the dates of the original demand notes. The partial recourse notes obligated the lessees of the leases securing the loans. Trend asserts that NABC altered the structure of the loans so that it could represent that it had loaned funds to a variety of lessees instead of to Trend. In that way, NABC could avoid violating New York state's bank lending limits.
2. The Northern Telecom Portfolios
Beginning in March 1979, NABC financed Trend's purchase of several portfolios of operating leases from Data 100, a subsidiary of the Northern Telecom corporation ("Northern Telecom"). Trend completed the purchase of the first and second portfolios on March 20, and May 5, 1979, respectively. Although Trend signed full recourse demand instruments in exchange for the loans from NABC that financed these purchases, NABC allegedly represented that the loans would be partial recourse like the Flourtown loans.
On June 20, 1979, NABC agreed to finance Trend's purchase of an additional $30 million of Northern Telecom operating leases. In reliance on these assurances, Trend agreed to purchase at least $30 million of additional operating leases from Northern Telecom. In September 1979, SHB, NABC, NBL, and Trend met in Stockholm, Sweden, to discuss their continuing relationship. At those meetings, SHB, NABC, and NBL represented to Trend that they would organize a syndicate to finance Trend's purchase of $40 million of Northern Telecom operating leases, instead of the $30 million they had originally agreed to finance. NABC firmly committed to this undertaking. The syndication was to finance Trend's purchase of eight Northern Telecom lease portfolios. NABC, with the assistance of SHB and NBL, eventually supplied the financing for four such portfolios. However, portfolios numbered 7-10, valued at $22 million, which Trend had committed to purchase from Northern Telecom, remained to be financed.
During a meeting at NABC's offices in New York City on December 3, 1979, Nelson represented to Trend that if Trend agreed to waive NABC's firm commitment to complete the $40 million syndication, NABC would exercise its "best efforts" to complete the syndication and would attempt to enlist NBL's assistance in that endeavor. In reliance on these and other related representations, Trend waived NABC's firm commitment. Trend alleges that Nelson's representations were materially false and misleading. Immediately after Trend agreed, on December 8, 1979, to waive NABC's firm commitment, Trend notified NABC that it would be unable to fund the four remaining Northern Telecom portfolios before December 31, 1979.
Trend eventually funded Portfolio No. 7 itself, and resold numbers 8 and 9 to Northern Telecom.
At the September 1979 meeting, SHB also represented that SHB, NABC, and NBL would form a syndicate to finance the purchase of an additional $15 million in operating leases on equipment located outside of the United States. According to Trend, these representations were also materially false and misleading.
Of the four remaining Northern Telecom portfolios, Trend funded one itself, and resold two to Northern Telecom. In mid-December 1979, NBL allegedly agreed to fund the fourth remaining portfolio, numbered 10 ("Portfolio 10"), by year end. That portfolio was composed of United Kingdom operating leases that NABC had previously committed to fund.
In late December 1979, Trend allegedly incorporated Moss Vend, Inc. to act as its United Kingdom vehicle for financing Portfolio 10. In reliance on NBL's representations that financing for the purchase was imminent and under pressure from Northern Telecom to consummate the purchase, Trend caused Moss Vend to purchase that portfolio from Data 100 on December 31, 1979. NBL did not provide the promised financing. Instead, it demanded and received a number of concessions from Trend. On January 11, 1980, Trend acceded to NBL's demand that NFL, a subsidiary of NBL, purchase Portfolio 10. As *550 part of the same transaction, Trend agreed to convert SHB's firm commitment to organize a syndicate to provide $15 million in financing for European leases to a commitment to use its best efforts to provide such financing. In addition, at NBL's behest, Moss Vend executed a demand promissory note guaranteed by Trend in favor of NBL for the purchase price of the equipment. On June 27, 1980, Moss Vend finally sold Portfolio 10 to NFL, but not before Trend had agreed to pay 14,000 British pounds a month to NBL and to forego substantial tax benefits.
Beginning in January 1981, NABC, NBL, and their parent companies determined to improve their financial position vis-a-vis their relationship with Trend. For over a year, they attempted to reach a settlement with Trend that would realign and provide greater security for their outstanding loans. These efforts collapsed in March 1981, and on March 24, 1981, NABC demanded payment from Trend on all of its outstanding loans. NABC based its demands on the demand instruments that Trend had assertedly been superseded by partial recourse notes. See supra p. 549. Together with NBL and SHB, NABC also threatened to force Trend into bankruptcy, to notify its business associates, and to interfere with its relationship with Northern Telecom. In exchange for NABC's agreement to abstain from foreclosing on its demand notes which Trend continued to insist were invalidly substituted for the partial recourse notes Trend agreed to repay the Flourtown loans in full, and to repay loans made on portfolios 1-6 over a five year period. Trend also received an option to repurchase Portfolio 10. Trend agreed to a variety of other concessions. See infra pp. 552-53. On June 8, 1981, Trend consummated the settlement agreement with NABC. On that day, NBL purchased the Flourtown loans from NABC. In connection with that purchase, NABC endorsed, negotiated, and delivered demand promissory notes evincing those loans to NBL. In order to pay off the $23 million it owed NABC, Trend resold operating leases worth $35 million to Northern Telecom and received $30 million in return. Trend also obtained a $6 million letter of credit to guarantee repayment of the Flourtown loans and executed a new $3 million note in favor of NBL in exchange of the extinction of a similar obligation in favor of NABC.
C. The Amended Complaint
The aforementioned allegations are the basis for the seven RICO claims in the amended complaint. The first of these claims charges that NABC knowingly misrepresented the nature of the original Flourtown loans to Trend. NABC's undisclosed intention to switch back and forth between its full and partial recourse notes is at the heart of this claim. This claim also charges that NABC knowingly mistated its intentions to charge Trend its "prime" rate of interest on the Flourtown loans and to comply with New York's banking laws.
The second RICO claim concerns NBL's alleged promise to pursue the $40 million syndication on a best efforts basis. According to Trend, NBL never intended to keep this promise. The third RICO count is quite similar. It alleges that SHB misrepresented its intention to arrange a syndicate to finance Trend's purchase of Northern Telecom's European lease portfolios.
The fourth RICO claim charges that NBL misrepresented its intention to finance the purchase of Portfolio 10 on the same terms as Trend's other Northern Telecom portfolios.
The fifth RICO claim charges NBL and NABC with fraudulently conspiring to cause Trend to agree to realign its obligations under the Flourtown loans from a partial recourse to a full recourse basis. The sixth RICO claim charges NABC, NBL, SHB, and their affiliates with extortionate conduct in extracting concessions from Trend during the spring of 1981. The final RICO claim alleges that NABC knowingly misstated its intention to charge Trend interest on the Flourtown loans at its "prime" rate. The thirteenth claim of *551 the amended complaint reasserts all but the sixth RICO claim as claims for common law fraud.
The eighth and ninth claims of the amended complaint attempt to assert claims under the Bank Holding Company Act and the Sherman Antitrust Act. Both assert that NABC unlawfully tied its agreement to stay enforcement of its demand for immediate repayment of the Flourtown and Northern Telecom loans to a variety of onerous economic conditions.
The tenth and eleventh claims seek rescission of Trend's sale of Portfolio 10 to NBL and of the agreements between Trend, NABC, and NBL signed during the spring of 1981 that realigned and stiffened Trend's obligations. The twelfth claim alleges that economic duress was improperly utilized to extract those concessions.
The fourteenth and sixteenth claims allege that SHB, NABC, and NBL tortiously interfered with Trend's contractual relationships with Northern Telecom, its subsidiaries, and affiliates (the fourteenth claim) and with Trend's subsidiaries and affiliates (the sixteenth count). The seventeenth count repleads the seventh RICO claim, the so-called "prime rate fraud," as a breach of contract claim. The fifteenth claim asserts that NBL breached its agreement to provide Trend an option to repurchase Portfolio 10.[2]
II. Discussion: The Substantive Motions
Before the Court are a veritable cornucopia of motions. The defendants move to dismiss the RICO, BHCA, Sherman Act, economic duress, tortious interference, and breach of contract claims for failure to state a claim on which relief can be granted. In the alternative, they move to dismiss several of the common law claims for lack of subject matter jurisdiction. DnC and CHB and their associated officers move for summary judgment on the fraud claims against them. The defendants also attack the pleadings as vague and inadequate, and demand that the entire amended complaint be repled. Finally, DnC, KOP, CHB, Naper, Kaila, Ostergaard, Ekman, Sclater, and Smith move to dismiss the action for lack of personal jurisdiction.
A. The RICO Counts
The defendants originally moved to dismiss each of the complaint's RICO counts. They asserted that the plaintiffs had not shown a distinct "racketeering injury" as required by Sedima S.P.R.L. v. Imrex Co., 741 F.2d 482 (2d Cir.1984), rev'd, ___ U.S. ___, 105 S.Ct. 3275, 87 *552 L.Ed.2d 346 (1985), and Bankers Trust Co. v. Rhoades, 741 F.2d 511 (2d Cir.1984), vacated, ___ U.S. ___, 105 S.Ct. 3550, 87 L.Ed.2d 673 (1985). They also maintained that the plaintiffs had failed to establish another prerequisite to a civil RICO suit, a prior criminal conviction. See Sedima S.P.R.L. v. Imrex Co., supra, 741 F.2d at 496-504. Recently, the Supreme Court struck down both of these requirements. In Sedima S.P.R.L. v. Imrex Co., ___ U.S. ___, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), the Court found "no support in the statute's history, its language, or considerations of policy for a requirement that a private treble damages action under § 1964(c) can proceed only against a defendant who has already been criminally convicted." Id. at 3284. It also held that "[t]here is no room in the statutory language for an additional, amorphous racketeering injury requirement." Id. The Supreme Court's decision leaves the defendants with no substantive basis on which to rest a Rule 12(b)(6) motion to dismiss the RICO claims.[3] We therefore deem withdrawn the defendants' motion to dismiss those claims for failure to state a claim on which relief can be granted.[4]
B. The Bank Holding Company Act (BHCA) Claim
The eighth claim in the amended complaint alleges that NABC violated those anti-tying provisions of the BHCA that provide.
(1) A bank shall not in any manner extend credit, lease or sell property of any kind, or furnish any service, or fix or vary the consideration for any of the foregoing, on the condition or requirement
(B) that the customer shall obtain some additional credit, property, or service from a bank holding company of such bank, or from any other subsidiary of such bank holding company;
(C) that the customer provide some additional credit, property, or service to such bank, other than those related to and usually provided in connection with a loan, discount, deposit, or trust service;
(D) that the customer provide some additional credit, property, or service to a bank holding company of such bank, or to any other subsidiary of such bank holding company....
12 U.S.C. § 1972(1)(B)-(D) (1982).[5] A successful plaintiff under BHCA § 1972(B)-(D) must allege and prove that a bank, a bank holding company, or its subsidiary (1) extended credit; (2) on the condition or requirement; (3) that its customer obtain or provide some additional credit, property or service.[6]
*553 The thrust of Trend's[7] BHCA tying claim is that NABC conditioned its forbearance in collecting on its outstanding demand notes on the purchase by Trend of additional credit from NABC and NBL and on Trend's provision of various services to NBL and NABC. NBL and KOP, DnC, CHB, and SHB (collectively "the Nordic defendants") are alleged to have conspired with NABC to set up this tying arrangement. NABC allegedly forced Trend to obtain a $3 million loan from NBL in violation of § 1972(1)(b). NABC also allegedly required Trend to guarantee debts to NBL, to pay $175,000 in consulting fees and $110,000 in legal fees that NABC and NBL had incurred, and to provide $750,000 in substitute collateral to NBL. Trend also alleges that it signed an option to purchase Portfolio 10 at NABC's behest and endorsed certain of the Flourtown loans to NBL at NABC's behest, all in violation of § 1972(1)(d). Finally, Trend alleges that NABC violated § 1972(1)(c) by conditioning its forbearance on Trend's agreement to repay all of its outstanding loans to NABC, whether full or partial recourse, to shift the situs of the loans to NBL, to provide NABC with $6,000,000 in letters of credit, and to provide releases to NABC with respect to some of the Flourtown loans and the Northern Telecom transactions.
The defendants contend that Trend's pleadings do not assert any of the three prerequisites to a BHCA tying claim. We cannot agree. The papers before us establish that NABC "extended credit" within the meaning of the Act. Moreover, an issue of fact remains as to whether that extension was conditioned on Trend's agreeing to NABC's demands. The plaintiffs' claim is, however, flawed because most of the products, services, and consideration upon which NABC allegedly conditioned its forbearance cannot be the basis of a tying claim under the BHCA. Only Trend's claim that NABC tied its forbearance to Trend's agreement to guarantee two loans states a claim under the BHCA. Trend's other BHCA tying claims must be dismissed.[8]
1. Condition or Requirement
The defendants' argument that NABC did not "condition or require" its forbearance is easily disposed of. The parties have supplied contradictory affidavits regarding the extent of any coercion. Compare affidavit of William Johnson ¶ 17 ("It was Trend's decision and choice to turn to NBL to finance the Flourtown loans.") with affidavit of Jeffrey K. Rafsky ¶¶ 25, 44 ("Johnson contends that we freely chose to borrow from NBL to refinance certain of the Flourtown loans. This is blatantly untrue.... NABC did insist that the refinancing be done by NBL and no one else.... We did not `choose' to borrow from NBL."). Except in one instance, the issue of whether NABC conditioned or required its forbearance cannot be resolved at this stage in the litigation.
The one exception is Trend's allegation that NABC forced it to sign an option agreement. This contention is absurd. An option agreement would provide Trend with a choice. It could either exercise the option or leave it be. Even at this early stage of the litigation, a claim that a litigant was coerced into signing an option agreement merits dismissal.
2. Extension of Credit
The defendants assert that NABC did not "extend credit" to Trend when it stayed enforcement of its demands for immediate *554 repayment of the Flourtown loans. They contend that the BHCA's anti-tying provisions apply only when a bank makes its original loan, and not when the bank forbears from collecting on an existing loan. Although some of the BHCA's sparse legislative history supports the defendants' position, the underlying purpose of the anti-tying provisions and the entirety of the federal case law are to the contrary.
a. The Legislative History
"In 1956, Congress enacted the Bank Holding Company Act to provide for the regulation of the activities and acquisitions of companies controlling 25 percent or more of the stock of two or more banks." S.Rep. No. 1084, 91st Cong., 2d Sess. 1, reprinted in, 1970 U.S.Code Cong. & Ad. News 5519, 5520 [hereinafter "S.Rep."]. The anti-tying provisions in the Bank Holding Company Act Amendments of 1970, 12 U.S.C. §§ 1841-43, 1849, 1850, 1971-78 (1982), "prohibit anti-competitive practices which require bank customers to accept or provide some other service or product or refrain from dealing with other parties in order to obtain the bank product or service they desire." Id. at 5535. They thereby "provide specific statutory assurance that the use of economic power of a bank [will] not lead to a lessening of competition or unfair competitive practices...." Id. The anti-tying provisions were not, however, intended to interfere with or impede "appropriate traditional banking activities," id., through which banks safeguard the value of their investment.
Nowhere does the legislative history or the language of the BHCA define the term "extension of credit." That term must be construed to accord with the underlying purpose of the anti-tying provisions. A particular practice should be considered an "extension of credit" if it manifests the improper use of economic leverage that the Act seeks to prevent. A bank's forbearance on the collection of a loan is such a practice. A bank can as easily tie the purchase of products or additional credit to its forbearance as it can to the purchase of a new loan.
Forbearance constitutes an extension of credit in a technical sense as well. By staying its demand for repayment, a bank continues to provide credit for the period of the stay.
The defendants cite the following passage from the legislative history as support for their position.
The language of the bill makes clear that the availability to a potential customer of any credit, property, or service of a bank may not be conditioned upon that customer's use of any other credit, property, or service offered by the bank, the bank holding company or its subsidiary or by a business operated by one or more of the persons controlling the bank; upon the provision by such customer of any other credit, property, or service to the bank, the bank holding company or its subsidiary or to a business operated by one or more of the persons controlling the bank; or that the potential customer shall not obtain some other credit, property, or service from a competitor of the bank, the bank holding company or any other subsidiary, or from a competitor of a business operated by one or more of the individuals controlling the bank.
The purpose of this provision is to prohibit anti-competitive practices which require bank customers to accept or provide some other service or product or refrain from dealing with other parties in order to obtain the bank product or service they desire.
S.Rep. at 5535 (emphasis added). The defendants assert that the reference to "potential" customers indicates an intention to limit the reach of the anti-tying provisions. The second paragraph's reference to "bank customers," without mention of the word "potential," clarifies the first paragraph. Every customer, new or old, with whom the bank wishes to do additional business, is a potential customer. Logic suggests that Congress did not intend to forbid tying arrangements in certain first-time loan transactions and not in other transactions. *555 Rather Congress intended to reach improper tying arrangements in all of their manifestations.
b. Case Law Precedents
Three federal courts have considered the meaning of the term "extension of credit" in the BHCA. In Freidco v. Farmers Bank, 499 F.Supp. 995 (D.Del.1980), one court concluded that a bank that had agreed to defer the payment of past-due obligations had "extended credit." According to that court,
[a]n agreement to ... defer payment of an obligation is within the commonly accepted understanding of an extension of credit and an interpretation of the Act which would place such agreements beyond its scope would tend to frustrate the Congressional purpose. The potential for misuse of economic power by banks is at least as great when the customer is negotiating a "workout" and considering alternative means of refinancing as when a new loan is being sought.
Friedco v. Farmers Bank, 499 F.Supp. 995, 1001 (D.Del.1980) (footnote omitted) [hereinafter cited as "Friedco"]. In Parsons Steel, Inc. v. First Alabama Bank, 679 F.2d 242 (11th Cir.1982), the financially troubled plaintiff corporation alleged that the defendant bank, which had refinanced a loan to the plaintiff, had violated the BHCA's anti-tying provisions. The court characterized the issue before it as whether "a bank's requirement that financial control of an enterprise be placed in new hands when necessary to protect its investment before extending further credit [violated the BHCA's anti-tying provisions]." Id. at 244 (emphasis added). In framing the issue, the court implicitly held that the defendant had "extended credit" when it refinanced the loan. A situation nearly identical to the one sub judice confronted the Fifth Circuit in Swerdloff v. Miami National Bank, 584 F.2d 54 (5th Cir.1978). There, the Miami National Bank required two of the debtor corporation's stockholders to transfer 51 percent of their stock to another entity. In exchange, the bank agreed to forebear from collecting on its loan to the corporation. In denying the defendant's summary judgment motion, the court implicitly held that such forebearance constituted an "extension of credit." These precedents unanimously support our conclusion that NABC "extended credit" to Trend when it agreed to forebear on its demand that Trend immediately repay any outstanding loans.
The lone federal authority cited by the defendants on this point, Anderson v. Pamlico Chemical Co., 470 F.Supp. 12 (E.D.N.C.1977), is inapposite. In that decision, the court held that the readjustment of a debt was not an "extension of credit" within the meaning of § 24-11 of the North Carolina Retail Installment Sales Act, Chapter 25A, N.C.Gen.Stat. § 24-11. Relying on decisions of the North Carolina Supreme Court, the Court narrowly construed the North Carolina statute. That decision cannot influence our interpretation of the BHCA, a different federal statute with a broad legislative purpose.
Both the legislative history and judicial precedents counsel the same conclusion. By forbearing from collecting on its outstanding loans, NABC "extended credit" to Trend within the meaning of the BHCA. Unlike the "extension of credit" requirement, the requirement that there be some additional credit, property or service to which the extension is tied has been narrowly construed. To that requirement we now turn.
3. Additional Credit, Property, or Service
Both the language of the anti-tying provisions and the interpretation placed on that language by the courts limit the types of arrangements that the BHCA forbids. These limitations mandate the dismissal of the greater part of the BHCA claims in Trend's complaint. Nevertheless, Trend has stated a cause of action against NABC for allegedly tying the provision of two additional guarantees to its forbearance.
*556 a. The Plain Language
The plain language of section 1972 forecloses several of Trend's BHCA claims. For example, the section's requirement that an extension of credit be conditioned on the purchase or provision of some additional credit defeats Trend's claim with respect to the $3 million loan that NABC allegedly forced Trend to obtain from NBL. Both parties agree that this was not a provision of new credit but rather a replacement for part of Trend's outstanding debt to NABC.
Another of section 1972's unambiguous requirements is that the tied credit, service, or property be provided to or obtained from a bank, its holding company, or a subsidiary of that holding company. Several of the ties identified by Trend are not of this sort. The alleged requirements that Trend pay NABC's legal fees and NBL's consulting fees fall victim to this infirmity. Neither NABC nor NBL provided these services to Trend, and Trend did not obtain these services. Instead, NABC and NBL obtained the services, then allegedly coerced Trend into footing the bill. Such an arrangement may be coercive, improper, and perhaps unlawful, but it is not proscribed by the BHCA.
Likewise, the BHCA provides no recourse to Trend on its complaints regarding the alteration of certain obligations from partial to full recourse, the provision of certain releases, and the shifting of the situs of certain loans. NABC may have forced these changes in the terms of Trend's outstanding obligations, but the BHCA does not address such changes. It addresses the tying together of additional credit, property, or services to the extension of credit. It does not forbid changes in the terms upon which the credit is extended.
b. Traditional Banking Practices
It is now established federal law that the BHCA's anti-tying provisions do not interfere with appropriate traditional banking practices.[9]B.C. Recreational Industries v. First National Bank, N.A., 639 F.2d 828, 832 (1st Cir.1981); McCoy v. Franklin Savings Association and Mortgage Management Co., 636 F.2d 172, 175 (7th Cir.1980), Clark v. United Bank, 480 F.2d 235, 238 (10th Cir.), cert. denied, 414 U.S. 1004, 94 S.Ct. 360, 38 L.Ed.2d 240 (1973). A bank's attempt to protect its investment by requiring that a borrower purchase or provide something usually provided in connection with a loan does not violate the BHCA. A bank may require a debtor in a precarious financial position to employ a full-time business advisor designated by the bank, B.C. Recreational Industries v. First National Bank, supra, 639 F.2d at 832, to release financial control to an individual designated by the lender, Tose v. First Pennsylvania Bank, N.A., *557 648 F.2d 879, 897 (3d Cir.) cert. denied, 454 U.S. 893, 102 S.Ct. 390, 70 L.Ed.2d 208 (1981), or to maintain interest-free deposits with the lender, Clark v. United Bank, supra, 480 F.2d at 238.[10]
Several aspects of the transaction at issue constituted traditional banking practices that are exempt from the BHCA's anti-tying provisions. NABC's alleged demand that Trend substitute $750,000 in new collateral for leases that NBL deemed uncreditworthy is exempt as is NABC's alleged demand that Trend agree to provide collateral equal to 120 percent of the value of any outstanding loans. See Freidco, supra, 499 F.Supp. at 1002 (requirement that customer provide additional collateral to secure a loan did not violate BHCA). Likewise, NABC did not violate the BHCA when it required Trend to provide it with a $6 million dollar letter of credit in order to ensure repayment of its outstanding loans. This requirement was well within the bounds of ordinary banking practice.
c. The Tampa Transportation and Valley Dairy Guarantees.
The aspect of the transaction at issue that gives us the most pause is the alleged requirement that Trend guarantee $250 thousand in loans to NABC. NABC allegedly forced Trend to guarantee $100 thousand of Tampa Transportation's indebtedness to NABC and to guarantee all of the obligations that Valley Dairy had incurred with NABC. Although it may later appear that these guarantees were simply designed to preserve the value of NABC's investment, the court cannot now say that this was the case and that Trend has not stated a claim under section 1972 of the BHCA with regard to these guarantees.
Costner v. Blount National Bank, 578 F.2d 1192 (6th Cir.1978), addressed a similar arrangement. The plaintiff, Costner, obtained a $420,000 personal loan for the purpose of buying back the outstanding stock of an automobile dealership in which he held a majority interest. The agreement required his corporation to sell a substantial share of its retail commercial automobile installment paper to the bank. Costner asserted that this aspect of the loan agreement violated the BHCA. On appeal, the bank conceded that the condition violated section 1972. The court impliedly agreed. The alleged requirement that Trend guarantee several loans for which it was not already responsible constituted a similar imposition on Trend unrelated to NABC's extension of credit. Costner supports our current view that the plaintiffs have stated a BHCA claim.
4. The Claims Against NBL and the Nordic Defendants
Trend attempts to implicate NBL, CHB, DnC, KOP, and SHB [the latter four banks are referred to hereinafter as "the Nordic defendants"] as conspirators in NABC's tying scheme. Although the Court cannot now rule out a conspiracy, we cannot permit the BHCA claims against these defendants to go forward. The anti-tying provisions of the BHCA prohibit conduct by banks, which the Act defines as "institution[s] organized under the laws of the United States, any State of the United States, [or any territory]." 12 U.S.C. § 1841 (1982). Although two of the defendant banks operate in the United States, those operations are unrelated to the ties alleged herein. In these circumstances, no *558 claim may be brought against any of the defendant banks under the BHCA; all such claims are dismissed.
C. The Sherman Act Claim
The ninth claim in the amended complaint charges NABC, NBL, and the Nordic defendants with engaging in an illegal tying arrangement, a per se violation of section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 (1982). The identical facts form the basis of Trend's antitrust and BHCA claims. Neither the pleadings nor the numerous affidavits that accompany them contain facts sufficient to constitute a claim under section 1 of the Sherman Act.[11]
A plaintiff must allege and prove four elements to state a per se tying claim under the antitrust laws. These are: (i) separate tying and tied products; (ii) evidence of actual coercion by the seller that forced the buyer to accept the tied product; (iii) sufficient economic power in the tying product market to restrain trade in the market for the tied product; and (iv) involvement of a not insubstantial amount of interstate commerce in the tied product market. Konik v. Champlain Valley Physicians Hospital Medical Center, 733 F.2d 1007, 1017 (2d Cir.1984). "[A] tie-in analysis begins with the question of separability the requirement that the tying and tied products be different, or, stated simply, that the forced purchase be of a second distinct commodity." American Manufacturers Mutual Insurance Co. v. American Broadcasting-Paramount Theatres, Inc., 388 F.2d 272, 280 (2d Cir.1967). In Jefferson Parish Hospital v. Hyde, 466 U.S. 2, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984) [hereinafter "Jefferson Parish"], the Supreme Court reiterated that "a tying arrangement cannot exist unless two separate product markets have been linked." Id. at 1562-63.
The requirement that two distinguishable product markets be involved follows from the underlying rationale of the rule against tying. The definitional question depends on whether the arrangement may have the type of competitive consequences addressed by the rule. The answer to the question whether petitioners have utilized a tying arrangement must be based on whether there is a possibility that the economic effect of the arrangement is that condemned by the rule against tying that petitioners have foreclosed competition on the merits in a product market distinct from the market for the tying item.
Id. at 1563.
Over the course of the tortured practice on this motion, the plaintiffs have stubbornly attempted to identify separate tying and tied product markets. Their efforts have failed. Initially, the plaintiffs stated, "[t]he tying product alleged, the forebearance or [sic] further extension of credit on the Flourtown loans by NABC, ... is distinct from the tyed [sic] product, the taking of a loan from NBL in the amount of $3,199,394.33, together with assuming certain obligations to NBL and fees owing by it." Plaintiffs' Memorandum in Opposition at 67. This statement identified one tying product, the forebearance on extension of credit, and two sets of tied products, the $3 million loan from NBL and the other obligations and fees that form the basis of Trend's BHCA claim, see supra pp. 552-53.
No one disputes that when NBL extended the new, $3 million loan to Trend, that loan in fact substituted for part of NABC's original Flourtown loans to Trend. If, indeed, the tying product impacted on any market (there is no market for "forbearance"), that market was the market for the kind of credit that the Flourtown loans constituted.[12] Trend attempted to address *559 this defect in its tying claim by supplying a belated affidavit characterizing the market for the tied product as the automobile resale market. Affidavit of Steven P. Rogers, March 29, 1985 at ¶ 11. This assertion cannot alter our holding. However characterized, the initial Flourtown loans and the $3 million loan that NBL eventually assumed impacted on the same credit market. NABC forebore in collecting on its demand instruments. The later loan was also a demand instrument. Both loans looked to Trend, not to the lessees, as obligor. Whatever their character, they involved the same market for credit. One could not be tied to the other.
Trend's claim that NABC tied "additional obligations and fees," complaint ¶ 318, to its forbearance is also defective. Trend asserts that it would not have assumed these "additional obligations and fees" had NABC not forced it to do so. According to the Supreme Court,
when a purchaser is "forced" to buy a product he would not have otherwise bought even from another seller in the tied product market, there can be no adverse impact on competition because no portion of the market which would otherwise have been available to other sellers has been foreclosed.
Jefferson Parish, supra, 104 S.Ct. at 1560. This language dooms the second aspect of Trend's antitrust tying claim. Moreover, Trend cannot state a claim involving the second set of tied products because it has not, and cannot, identify a market for any of these "additional" products. None is, in fact, a product.
Trend's antitrust tying claims fail for other reasons. Trend has not identified a tying product. Rather, NABC is alleged to have conditioned its forbearance on purchases from NBL. Although the BHCA prohibits the use of forbearance as a means of coercion, see supra pp. 554-56, we have not been cited to any authority that classifies forbearance as a tying product within the meaning of the anti-trust laws. The "single purchaser rule" articulated in Jefferson Parish also dooms Trend's anti-trust claim. According to that rule, "[i]f only a single purchaser [is] `forced' with respect to the purchase of a tied item, the resultant impact on competition [is] not ... sufficient to warrant the concern of anti-trust law." Jefferson Parish, supra, 104 S.Ct. at 1560. Trend, a single purchaser, was allegedly forced to purchase various tied items. The harm done to it in that capacity is not cognizable under the anti-trust laws.
The general rule that summary judgment should be used sparingly in antitrust cases does not mean that summary judgment should never be used in such cases. Awarding of summary judgment in antitrust cases in which there was "no genuine issue as to any material fact," has found approval in the Supreme Court and in this circuit.... Summary judgment is particularly appropriate where, as in the instant case, there has already been extensive discovery.
Of course, in order to prevail on their motion for summary judgment, the defendants, as the moving party, must show there is "no genuine issue as to any material fact" and that they are "entitled to judgment as a matter of law."
Reisner v. General Motors Corp., 511 F.Supp. 1167, 1174 (S.D.N.Y.1981), aff'd, 671 F.2d 91 (2d Cir.), cert. denied, 459 U.S. 858, 103 S.Ct. 130, 74 L.Ed.2d 112 (1982) (citations omitted). The moving defendants have met this difficult burden[13] and are *560 entitled to summary judgment on the ninth count of the amended complaint.[14]
D. Business Compulsion Duress
The twelfth cause of action purports to state a claim against NABC and NBL for "business compulsion duress." It alleges that NABC and NBL unlawfully pressured Trend to accept the concessions that underlie the tying claims, see supra pp. 552-53. NABC and NBL contend that, under New York law, one of the essential elements of such a claim is that the victim's actions be "precipitated solely by duress and without hope of personal gain." United States v. Wallace & Wallace Fuel Oil Co., 540 F.Supp. 419, 430 (S.D.N.Y.1982). They then argue that, since Trend received an option to buy back Portfolio 10 in exchange for its concessions, it cannot state a claim for duress.
The defendants mischaracterize New York's law of "business compulsion duress." Despite the "without hope of personal gain" language in United States v. Wallace & Wallace Fuel Oil Co., supra, the overwhelming majority of courts apply a different standard in duress cases. The majority view is that a claim for rescission and damages lies when a party is compelled to agree to a contract term or terms because a wrongful threat by another party precludes the exercise of its free will.[15]805 Third Avenue Co. v. M.W. Realty Associates, 58 N.Y.2d 447, 448 N.E.2d 445, 447, 461 N.Y.S.2d 778, 780 (1983); Austin Instrument, Inc. v. Loral Corp., 29 N.Y.2d 124, 272 N.E.2d 533, 536, 324 N.Y.S.2d 22, 25 (1971); Podmore v. Our Lady of Victory Infant Home, 82 A.D.2d 48, 442 N.Y. S.2d 334 (4th Dep't 1981). Judge Edelstein applied this standard in an analogous case, Citibank, N.A. v. Real Coffee Trading Co. N.V., 566 F.Supp. 1158 (S.D.N.Y.1983). There, he held that a borrower could state a claim for business compulsion duress against a bank that had allegedly extracted certain concessions in exchange for forbearing on an allegedly improper demand for payment. Sound policy also favors the "free will" formulation. Under the Wallace & Wallace test, the presence of token consideration precludes a duress claim. But it does not preclude duress. A raw deal is a raw deal, whether it includes some or no benefit to the party of whom advantage is taken. The better approach, the free will test, examines the transaction in its entirety.
The plaintiffs have pled every element of a claim for business compulsion duress. They have alleged that NABC wrongfully threatened them with foreclosure and then exchanged its forbearance in return for valuable consideration. Trend alleges that it was in no position to litigate the propriety of the threat since, without NBL and NABC's cooperation, it could not resell the Northern Telecom portfolios. Trend has thus alleged facts that, if proven, would indicate that it was compelled to act against its free will. The motion to dismiss the twelfth cause of action is denied.
E. Tortious Interference with Contractual Relations
The amended complaint's fourteenth and sixteenth claims are for tortious interference with contractual relations. The named defendants move to dismiss both of these counts for failure to state a claim on which relief can be granted. It is the settled law of New York and of the courts of this district that four elements comprise a claim of tortious interference with contractual relations. These are (1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant's knowledge of the contract; (3) the defendant's intentional procurement of a breach of the contract by the third party; *561 and (4) damages caused by the breach." Strobl v. New York Mercantile Exchange, 561 F.Supp. 379, 386 (S.D.N.Y.1983) (MacMahon, J.); Martin Ice Cream Co. v. Chipwich, Inc., 554 F.Supp. 933, 945 (S.D. N.Y.1983); Hammerhead Enterprises, Inc. v. Brezenoff, 551 F.Supp. 1360 (S.D.N. Y.1982), aff'd, 707 F.2d 33 (2d Cir.1983), cert. denied, 464 U.S. 892, 104 S.Ct. 237, 78 L.Ed.2d 228 (1984); Israel v. Wood Dolson Co., 1 N.Y.2d 116, 134 N.E.2d 97, 101, 151 N.Y.S.2d 1, 5 (1956); Bryce v. Wilde, 39 A.D.2d 291, 333 N.Y.S.2d 614, 616 (3d Dep't 1972), aff'd, 31 N.Y.2d 882, 292 N.E.2d 320, 340 N.Y.S.2d 185 (1972). In the one case that applied a different test, Judge MacMahon stated,
It is not necessary, as plaintiff erroneously argues, to allege a breach of contract in order to state a valid claim for interference with contractual relations. The tort extends to cases in which performance of the contract is rendered more difficult or a party's enjoyment of the contract's benefits is lessened by the wrongdoer's actions. In New York, "an unlawful interference with a person in the performance of his contract with a third party is just as much a legal wrong as is an unlawful inducement of a breach of that contract by the third party."
Goodall v. Columbia Ventures, Inc., 374 F.Supp. 1324, 1332 (S.D.N.Y.1974) (footnotes omitted). Not only is the wealth of recent authority to the contrary, but Judge MacMahon himself has recently adhered to the current formulation. See Strobl v. New York Mercantile Exchange, supra.
The fourteenth claim asserts that NABC, together with SHB, Ekman, Nelson, and Mathews, tortiously interfered with Trend's relationship with Northern Telecom. The complaint fails to allege several of the elements necessary to state a claim for tortious interference with contractual relations. Although paragraph 355 of the complaint vaguely alludes to Northern Telecom's contractual commitment to provide Trend with $40 million in operating portfolios, nowhere does the complaint allege whether or how Northern Telecom breached that commitment, or whether and how any of the named defendants procured a breach of that commitment.
The amended complaint's sixteenth cause of action alleges that from December 1983, to date, NBL, NLL and NFL tortiously interfered with Trend's relationship with Moss Vend. Although the amended complaint refers to the Trend-Moss Vend relationship, it does not refer to a contract. Moreover, the amended complaint does not allege or otherwise indicate that the defendants knew of any Trend-Moss Vend contract. The fourteenth and sixteenth claims must be dismissed for failure to state a claim on which relief can be granted.
F. The Breach of Contract Claims
Trend's fifteenth and seventeenth claims are for breach of contract. The named defendants move to dismiss both of these counts for failure to state a claim on which relief can be granted. They also move for summary judgment on the latter.
The elements of a claim for breach of contract are (1) a contract; (2) performance of the contract by one party; (3) breach of the contract by the other; and (4) damages. See Stratton Group, Ltd. v. Sprayregen, 458 F.Supp. 1216 (S.D.N.Y. 1978). Each element need not be separately pled. All that is necessary is "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R.Civ.P. 8(a)(2).
1. The Fifteenth Claim: The Option Agreement and "Side Letters"
A close reading of Trend's opposition papers reveals that the fifteenth count alleges not one but three breach of contract claims. The first, alleging breach of the Portfolio 10 option agreement, fails to state a claim for relief. Trend asserts that NBL breached the option agreement when it unilaterally modified that agreement by inserting additional terms and conditions that undermined the consideration bargained *562 for by Trend. Plaintiffs' Memorandum of Law in Opposition at 96. This contention cannot form the basis for a successful breach of contract claim. It bears only on the terms of the agreement. Nowhere does Trend allege any facts that indicate if or how NBL breached the option agreement.
Trend also alleges that NBL, NLL, and NFL breached certain "side letter" agreements. The amended complaint's only reference to these "side letters," complaint ¶ 369, which are appended thereto as exhibit O, is a bald allusion to their breach. That conclusory allegation provides insufficient notice of the facts underlying a breach of contract claim. It is no answer to assert, as Trend does, that it is "disingenuous for NBL, NLL, and NFL to claim ... that they are unaware what terms are claimed to have been breached." Plaintiffs' Memorandum in Opposition at 95-96. Litigation should not be a guessing game.
That part of the fifteenth claim that alleges a breach of the option agreement must be dismissed for failure to state a claim upon which relief can be granted. The remainder of that count is dismissed as inadequately pled. Since this is Trend's first attempt at pleading such claims, the plaintiffs may replead their "side-letter" claims within 30 days.[16]
2. The Seventeenth Claim: The Prime Rate Breach
By the seventeenth claim in its amended complaint, Trend seeks to recover damages from NABC for breaching various agreements to charge Trend the "prime" rate of interest charged NABC's best and most creditworthy customers. NABC moves for summary judgment on this claim. According to NABC, the operative demand instruments governing its loans to Trend provided that NABC would charge Trend interest at NABC's "base rate," a higher rate than its "prime rate." NABC asserts that it always charged Trend interest at this rate. Johnson Affidavit ¶¶ 21-30. Trend's story differs. It argues that the operative partial recourse notes are silent with respect to the applicable rate of interest. According to Trend, these notes provided for interest payments at NABC's "best rate," the rate charged its most substantial commercial borrowers. Amico Affidavit ¶ 21. See also Rafsky Affidavit ¶ 12 ("The operative provisions regarding interest on the Flourtown loans are those `prime rate' or `best rate' representations made by NABC's officers...."). The Court cannot now determine which interest rate provisions governed the loans that are the subject of Count 17.[17] Even if the Court could adopt NABC's assertion that its "base rate" was applicable in all cases, summary judgment would be inappropriate because NABC has not conclusively established that it charged NABC the "base rate." NABC's motion for summary judgment on the seventeenth claim is, therefore, denied.[18]
G. The Pleadings
The defendants also ask the Court to require the plaintiffs to file a second amended complaint that separately states each claim of common law fraud and otherwise complies with Fed.R.Civ.P. 8. We *563 construe this entreaty as a motion pursuant to Fed.R.Civ.P. 12(e) for a more definite statement.
The amended complaint is a prolix narrative that often defies comprehension. Unfortunately, the Court's every effort to encourage the plaintiffs to clearly and concisely present their claims and arguments in this action has met with little success. Nevertheless, at the risk of further frustration, the Court will try once again to promote clarity.
In the Court's view, the plaintiffs have pleaded their fraud claims in an incorrect manner. They should plead their common law fraud claims as separate counts. Since they need not plead each fraud claim as a separate RICO claim, but must rather plead a "pattern of racketeering activity" composed of two or more predicate acts, they may plead the RICO claim as a single claim (or as multiple claims, if necessary in order to differentiate among defendants). The pleadings should include the necessary allegations concerning use of the wires (wire fraud).
Wherever possible, the defendants should endeavor to simplify and clarify the remainder of their pleadings. They should plead separate counts separately. However, they may not plead new counts nor may they replead counts that the Court has dismissed. Any new or previously dismissed claims will be dismissed sua sponte. The repleaded complaint should facilitate the defendants' answer, the Court's understanding, and the parties' discovery, and should comply with all other directives in this opinion.
III. Discussion: The Motions to Dismiss for Lack of Jurisdiction
Many of the defendants move to dismiss the claims against them pursuant to Fed.R. Civ.P. 12(b)(2) for lack of personal jurisdiction. These defendants include three of the Nordic banks; DnC, CHB, and KOP, and their respective officer defendants; Naper, Ostergaard, and Kaila. Although SHB does not challenge the Court's in personam jurisdiction, its president, Jan Ekman, does. Stewart Smith and John Sclater, both English citizens and NBL's associate director and managing director, respectively, also challenge the Court's jurisdiction.
The burden of establishing jurisdiction over a defendant, by a preponderance of the evidence, is upon the plaintiff. Until an evidentiary hearing is held, however, the plaintiff need make only a prima facie showing that jurisdiction exists, and this remains true notwithstanding a controverting presentation by the moving party. In the absence of an evidentiary hearing on the jurisdictional allegations, or a trial on the merits, all pleadings and affidavits are construed in the light most favorable to the plaintiff, and where doubts exist, they are resolved in the plaintiff's favor.
Hoffritz For Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985) (citations omitted).[19] In deciding these pretrial motions to dismiss for lack of personal jurisdiction, we have considerable procedural leeway. *564 Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981). In exercising this flexibility, we permitted substantial discovery on the jurisdictional issues raised by these motions. The affected parties have proferred numerous affidavits, documents, and depositions to support their positions. However, we have foregone an evidentiary hearing.
Since the complaint fails to state a claim under the Sherman Act and under the BHCA against any of the moving defendants, RICO is the only federal statute that might authorize the Court to exercise personal jurisdiction over the movants. In addition, the law of New York the state in which this Court sits supplies another possible basis for the assertion of personal jurisdiction over the moving defendants. Arrowsmith v. United Press International, 320 F.2d 219 (2d Cir.1963). None of these bases, however, avails the plaintiffs. The actions against the moving defendants must be dismissed.
A. Jurisdiction Under RICO
Section 1965 of RICO, 18 U.S.C. § 1965(b) (1982), authorizes nationwide service of process in civil RICO actions. See H.Rep. No. 91-1549, 1970 U.S.Code Cong. & Admin.News 4007, 4034 ("[Section 1965(b)] provides nationwide service of process on parties, if the ends of justice require it, in actions under section 1964."). These service provisions have consistently been construed as extending the courts' jurisdiction over civil RICO actions to the limits of due process. Lopez v. Richards, 594 F.Supp. 488, 493 (S.D.Miss.1984); Soltex Polymer Corp. v. Fortex Industries, Inc., 590 F.Supp. 1453, 1458 (E.D.N.Y. 1984); Bernstein v. IDT Corp., 582 F.Supp. 1079, 1087-88 (D.Del.1984); Hodgdon v. Needham-Skyles Oil Co., 556 F.Supp. 75, 77 (D.D.C.1982).[20] "Although RICO authorizes nationwide service of process, it does not, by its very language, authorize service in a foreign country." Id. (and authorities cited therein). Since effective service is a prerequisite to the exercise of jurisdiction, any foreign party against whom a RICO claim is asserted must be served with process in this country. The plaintiffs have not served Ekman, Kaila, Ostergaard, Naper, Smith, Sclater, CHB, or KOP here.[21] The Court cannot exercise personal jurisdiction over these foreign parties under RICO.
On April 1, 1985, the plaintiffs attempted to serve DnC at its office in Houston, Texas. That service was both untimely well after the 120 day period after filing of the complaint within which service may be made, Fed.R.Civ.P. 12(h) and defective, in that the original complaint was served. After an amended complaint has been filed, service of the superseded original complaint is inappropriate. Phillips v. Murchison, 194 F.Supp. 620, 622 (S.D.N.Y.1961). "Where service of process is insufficient, `[t]he courts have broad discretion to dismiss the action or to retain the case but quash the service that has been made on defendant....'" Montalbano v. Easco Hand Tools, Inc., 766 F.2d 737, 740 (2d Cir.1985) (quoting 5 C. Wright & A. Miller, Federal Practice and Procedure § 1354, at 585 (1969)). Accordingly, the RICO action against DnC is dismissed. RICO will not supply a basis for exercising jurisdiction over any of the moving defendants.
*565 B. Jurisdiction Under New York Law
The remaining bases of jurisdiction are CPLR § 301, N.Y.Civ.Prac. § 301 (McKinney 1972), which incorporates the common law bases of jurisdiction into the Civil Practice Law, and CPLR § 302, N.Y.Civ.Prac. Law § 302 (McKinney 1972), New York's long arm statute.
1. The Corporate Defendants
a. CPLR § 301: Doing Business
"A non-resident defendant ... subject[s] itself to the personal jurisdiction of a New York court [under CPLR § 301] ... if it does business in this State." Pneuma-Flo Systems, Inc. v. Universal Machinery Corp., 454 F.Supp. 858, 862 (S.D.N.Y.1978). "The test, though not `precise' is a `simple pragmatic one': is the aggregate of the corporation's activities in the State such that it may be said to be `present' in the State `not occasionally or causally, but with a fair measure of permanence and continuity....?'" Laufer v. Ostrow, 55 N.Y.2d 305, 434 N.E.2d 692, 694, 449 N.Y.S.2d 456, 458 (1982) (citations omitted). The plaintiffs contend that DnC, CHB and KOP are doing business in New York within the meaning of CPLR § 301.
DnC, KOP, and CHB exhibit few of the classic indicia of doing business in New York. They are not licensed to conduct business in the state, maintain no local office, possess no New York property, and do not have local telephone numbers. See Pneuma-Flo Systems, Inc. v. Universal Machinery Corp., supra, 454 F.Supp. at 861 (listing classic indicia). The plaintiffs, nevertheless, contend that the moving defendants' sales of large quantities of commercial paper through New York agents and their collective ownership of the stock of two New York corporations each support a finding that the three Nordic defendants are doing business in New York within the meaning of CPLR § 301.
The plaintiffs seek to attribute to each defendant the contacts of the New York corporations in which they hold an interest. CHB, KOP, and DnC each own 25% of NABC's stock. Collectively, the three also control 75% of Commercial Funding, Inc., a New York company engaged in equipment financing. However, we may only ascribe the New York contacts of NABC or Commercial Funding, Inc. to KOP, DnC, and CHB if the former are shown to be mere departments or agencies of the latter. Bialet v. Racal-Milgo, Inc., 545 F.Supp. 25, 31-32 (S.D.N.Y.1982); Blount v. Peerless Chemicals (P.R.) Inc., 216 F.Supp. 612, 615 (E.D.N.Y.1962), aff'd, 316 F.2d 695 (2d Cir.), cert. denied, 375 U.S. 831, 84 S.Ct. 76, 11 L.Ed.2d 62 (1963). A subsidiary relationship or common stock ownership is a threshold minimum to such a finding. Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120 (2d Cir.1984); Grove Valve & Regulator Co. v. Iranian Oil Services, Ltd., 87 F.R.D. 93, 95 (S.D.N.Y.1980). Because ownership of NABC is divided among four different foreign banks, the identity of interests that these precedents require is manifestly lacking. Although there is some evidence to suggest that, by virtue of their common ownership, KOP, DnC, and CHB exercised some extremely limited control over NABC, any influence falls far short of the necessary finding that the control was "so complete that [NABC was], in fact, merely a department...." Delagi v. Volkswagenwerk AG, 29 N.Y.2d 426, 278 N.E.2d 895, 898, 899, 328 N.Y.S.2d 653, 656, 657 (1972).[22]
CHB, DnC, and KOP have each marketed in excess of $100 million of commercial paper through New York brokerage firms. The plaintiffs contend that *566 such sales bring the moving defendants within the ambit of CPLR § 301. No New York case has addressed the question of whether a non-residents' marketing of commercial paper through New York agents constitutes the doing of business in this state. Somewhat analogous cases hold that a company does not "do business" by listing its stock on a New York exchange. Gilson v. Pittsburgh Forgings Co., 284 F.Supp. 569, 570-71 (S.D.N.Y.1968); Sunrise Lumber Co. v. Homer D. Biery Lumber Co., 195 A.D. 170, 173, 185 N.Y.S. 711, 713 (2d Dep't 1921); Joseph Walker & Sons v. Lehigh Coal and Navigation Co., 8 Misc.2d 1005, 1006, 167 N.Y.S.2d 632, 633-34 (Sup.Ct.N.Y.County 1957). In this instance, the sale of commercial paper is an essential aspect of the Nordic defendants' business. Thus, their sales are somewhat more significant than the contacts in the aforementioned cases. On the other hand, the notes are not sold directly by the Nordic defendants to the public. Rather, the banks sell them to New York commercial paper dealers who then reoffer them to United States investors. The Nordic banks' contacts with New York in this regard are limited, sporadic, and not so substantial and continuous as to support a finding that the banks are doing business here.[23]
Assuming, arguendo, that the sale of commercial paper constitutes "doing business," the Supreme Court's decision in Helicopteros Nacionales v. Hall, 466 U.S. 408, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984), forecloses the exercise of personal jurisdiction on this basis. In the Helicopteros case, the Court considered whether Texas could constitutionally assert personal jurisdiction over a foreign company that had purchased 80% of its helicopter fleet, and all of its spare parts and accessories from a Texas company. The defendant had no other cognizable contacts with Texas. Id. at 1871. The Court found Helicopteros' Texas transactions insufficient to warrant the exercise of jurisdiction over "a nonresident corporation in a cause of action not related to those purchase transactions." Id. at 1874 (footnote omitted). As in Helicopteros, DnC, CHB, and KOP lack the traditional indicia of doing business in New York. Their commercial papers sales are, if anything, less important than the purchases in Helicopteros and constitutionally insufficient to support the exercise of jurisdiction over a cause of action not arising out of that sale.
b. CPLR § 302
New York's long arm statute, N.Y.Civ. Prac.Law § 302(a) (McKinney 1972), vests the courts of the state of New York with "personal jurisdiction over any nondomiciliary ... who, in person or through an agent ... (1) transacts any business within the state, (2) commits a tortious act within the state, and (3) commits a tortious act without the state causing injury within the state" as to any cause of action arising out of such act or transaction.[24] The plaintiffs contend that KOP, DnC, and CHB are subject to this Court's jurisdiction under all *567 three sections of the New York long arm statute.
i. Transaction of Business
The attendance of a corporation's director representatives at board meetings in New York constitutes the transaction of business by the corporation. See General Reinsurance Corp. v. Plymouth Mutual Life Insurance Co., 280 F.Supp. 66, 70-71 & n. 4 (S.D.N.Y.1968) (indicating that attendance of corporate officers at a board meeting in New York would subject the corporation to jurisdiction under CPLR § 302(a)(1)); Streifer v. Cabol Enterprises Ltd., 35 Misc.2d 1049, 231 N.Y.S.2d 750, 751 (Sup.Ct. Ulster County 1962), aff'd, 19 A.D.2d 948, 245 N.Y.S.2d 337 (3d Dep't 1963) (board of directors meeting in New York constituted "transacting business"); Pomeroy v. Hocking Valley Railway Co., 218 N.Y. 530, 535, 113 N.E. 504 (1916) (same). The plaintiffs thus correctly assert that DnC, KOP, and CHB transacted business in New York when their officers each attended two NABC board meetings there in their capacity as director representatives of CHB, DnC, and KOP.[25]
However, the jurisdictionally significant evidence provided by the plaintiff does not satisfy a fundamental requirement of CPLR § 301(a)(1): that the cause of action asserted must arise out of the defendant's activities in New York. Frummer v. Hilton Hotels International, Inc., 19 N.Y.2d 533, 227 N.E.2d 851, 281 N.Y. S.2d 41, cert. denied, 389 U.S. 923, 88 S.Ct. 241, 19 L.Ed.2d 266 (1967). The plaintiffs have not shown that the remaining counts in the amended complaint against the defendant corporations arose from DnC, CHB, or KOP's only New York business transactions, their attendance at NABC board meetings there.
The redacted minutes[26] of the first of the two New York board meetings on October 3, 1980, describe a presentation by Lewis Eisner, a consultant hired to assist NABC in its dealings with Trend. Some of the board members questioned Eisner about the strategy that might be appropriate in dealings with Trend. Eisner responded that cooperation appeared best. At the close of the meeting, the board asked that it be kept informed of Eisner's progress. The redacted minutes of the April 3, 1981, NABC board meeting in New York indicate that an NABC officer described the proposed settlement to the board. That was the extent of the discussion of Trend at that meeting. This tendered proof respecting the two New York meetings reveals little connection between the two meetings and the three fraud claims alleged against the moving defendants. The nature of the original Flourtown loans and the rate of interest on all of the loans to Trend the underpinnings of the first and seventh causes of action were not discussed. The only discussion relating to the realignment of the Flourtown loans the basis of the fifth count was a progress report. No action was taken or authorized in that matter. Thus, the first, fifth, and seventh causes of action do not arise out of the defendants' New York transactions. The Court cannot premise jurisdiction over the moving defendants on CPLR § 302(a)(1).
ii. CPLR 302(a)(2)
CPLR § 302(a)(2) subjects those committing tortious acts within the state to the jurisdiction of the New York courts. The defendants only New York acts occurred at the two New York board meetings. The discussion above makes clear that the plaintiffs have failed to show that the defendants committed any act, let alone a tortious act, at those meetings. At most, the defendants, through their representatives, passively inquired about the Trend situation. CPLR § 302(a)(2) does not subject *568 the moving defendant corporations to this Court's personal jurisdiction.
iii. CPLR § 302(a)(3)
The third section of the New York long arm statute permits a court to exercise jurisdiction over a party who "commits a tortious act without the state causing injury to person or property within the state...." N.Y.Civ.Prac.Law § 302(a)(3) (McKinney 1972). Although DnC, CHB, and KOP took actions outside of New York that related to Trend, the plaintiffs have provided no evidence indicating that any of those acts were tortious.
The plaintiffs present the following facts. On November 19, 1980, Kaila, Naper, and Ostergaard attended a meeting of the NABC board in London, England. At that meeting, John Nelson, NABC's president, distributed a written status report concerning the Trend account. Nelson also discussed the Trend situation. The directors voiced concern about the documentation of the Flourtown loans and requested a report on the problem. They also authorized two studies: an analysis of the adequacy of the collateral underlying the Flourtown loans and a study by Eisner. Earlier, Ostergaard and Naper had each sent several telexes to NABC in New York that related to the Trend situation. In these telexes, Ostergaard expressed concern about the Trend loans, asked to be kept informed about the situation, and offered some thoughts on the manner in which Eisner might be paid. In two telexes, dated September 28, 1979, and October 29, 1979, Naper expressed his thoughts about several of the Northern Telecom portfolio transactions. In deposition testimony, Naper and Ostergaard both recall discussing Trend with the other. Neither recalls acting to Trend's benefit or to its detriment. Other memoranda and communications brought to our attention simply indicate that Ekman and NABC's executives kept the moving defendants informed.
The allegations in the amended complaint do not augment the plaintiffs' factual showing. The conclusory, undocumented allegations that the moving defendants and their officers participated in the alleged frauds, see, e.g., amended complaint ¶¶ 52, 56, 261, 289, cannot suffice on this motion. The complaint also alleges that during the October 3, 1980 board meeting Ekman, Ostergaard, Naper, Kaila, and others approved the so-called "realignment fraud." The minutes of that meeting belie that assertion. See supra pp. 567-568. Although, we accept, for purposes of this motion, the allegation in paragraph 188 of the amended complaint that Ostergaard and Naper telephoned Nelson and Mathews to express their opposition to certain transactions, the insufficiency of the combined weight of the evidence of tortious conduct remains apparent.
None of the documented allegations establishes prima facie the tortious conduct, namely fraud, that the complaint alleges against the moving defendant corporations. The elements of a fraud claim in New York are representation of a material fact, falsity of that representation, scienter, reliance, and damages. W. Prosser, Handbook of the Law of Torts § 105, at 685-86 (4th ed. 1971); see Jo Ann Homes at Bellmore, Inc. v. Dworetz, 25 N.Y.2d 112, 119, 250 N.E.2d 214, 217, 302 N.Y.S.2d 799, 803 (1969). The plaintiffs have utterly failed to establish prima facie that the moving defendants made or caused to be made a single false representation or otherwise intentionally participated in any tortious conduct.[27] CPLR § 302(a)(3) cannot supply the basis for the exercise of jurisdiction over the moving defendant corporations. The claims in the complaint against DnC, CHB, and KOP are dismissed for lack of personal jurisdiction.[28]
*569 2. The Individual Defendants
Since the Court is without jurisdiction over DnC, CHB, and KOP, it, a fortiori, lacks jurisdiction over Naper, Ostergaard, and Kalia, those through whom the corporate defendants allegedly acted. In addition, New York's "fiduciary shield doctrine" shields these individuals and the other moving defendants, Smith and Sclater, from this Court's jurisdiction under the New York long arm statute.[29]
The courts of this circuit have consistently held that New York long arm jurisdiction cannot be asserted over an individual defendant based upon acts performed by that person in his capacity as a corporate official. Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 902 (2d Cir.1981); Lancer Products, Inc. v. Rally Accessories, Inc., 597 F.Supp. 440, 442 (E.D.N.Y. 1984); Goshen Litho, Inc. v. Kohls, 582 F.Supp. 1561, 1565 (S.D.N.Y.1983). The New York cases have adopted this doctrine. See Laufer v. Ostrow, supra, 449 N.Y.S.2d at 460-61, 434 N.E.2d at 696-97; Sheldon v. Kimberly-Clark Corp., 105 A.D.2d 273, 482 N.Y.S.2d 867, 869 (2d Dep't 1984); Laurenzano v. Goldman, 96 A.D.2d 852, 465 N.Y.S.2d 779, 780 (2d Dep't 1983). The courts apply it to all three subsections of the New York longarm statute. See Goshen Litho, Inc. v. Kohls, supra, 582 F.Supp. at 1565 (doctrine applies when personal jurisdiction asserted under § 302(a)(1)); Lancer Products, Inc. v. Rally Accessories, Inc., supra, 597 F.Supp. at 442 (same with § 302(a)(2)); Sheldon v. Kimberly-Clark Corp., supra, 482 N.Y.S.2d at 869 (doctrine applies in context of sections a(1), (2), and (3)).
All of the actions of the moving defendants upon which the plaintiffs urge us to premise jurisdiction occurred in those individuals' capacity as officers of their respective banks. Such contacts cannot subject them to this Court's jurisdiction under the New York long arm statute.[30]
It matters not that some of the individual defendants (Ekman, Sclater, and Smith) are alleged to have acted in New York through their agents or in conspiracy with such agents. An agent's act may subject an individual to this Court's jurisdiction, see Collateral Factors Corp. v. Meyers, 39 A.D.2d 27, 330 N.Y.S.2d 833, 835 (1st Dep't 1972), as may those of a co-conspirator, see Grove Press, Inc. v. Angleton, 649 F.2d 121 (2d Cir.1981). Underlying the agency and conspiracy theories of jurisdiction is the premise that the acts of an agent (or co-conspirator) may be attributed to a principal. The fiduciary shield doctrine which shields corporate officers from their own actions, should also protect those deemed to have acted through others.
In denouncing the fiduciary shield doctrine, Judge McLaughlin has commented, "What policy is served by immunizing a corporate officer who acts in the interest of his corporate master other than a vague sense of unfairness eludes this writer." *570 J. McLaughlin, Practice Commentaries, N.Y.Civ.Prac.Law § 301, C302:3 (McKinney 1972). The unfairness to which Judge McLaughlin refers is that inherent in subjecting individuals whose only relevant contacts arise from activities undertaken not for their own benefit but for the benefit of employers to the jurisdiction of the New York courts. The Court can discern no reason for protecting some and not others from this perceived unfairness. A corporate official who never enters the state should be no more susceptible to this Court's process than one who often visits. A corporate official who himself commits a tortious act outside of the state should be no less susceptible to jurisdiction than one who does so through someone else.
The fiduciary shield doctrine prevents the Court from exercising its jurisdiction over any of the individual defendants moving to dismiss for lack of jurisdiction. Their motions to dismiss the claims against them are granted.
IV. Conclusion
The defendants' motion to dismiss the RICO claims is deemed withdrawn. Their motion to dismiss the eighth claim is granted in part and denied in part. The motion to dismiss the ninth claim in the amended complaint is granted. The motion to dismiss the twelfth claim is denied. The motions to dismiss the fourteenth and sixteenth claims are granted. The motion to dismiss the fifteenth claim is granted. The motion for summary judgment on the seventeenth claim is denied. The plaintiffs are ordered to replead their amended complaint within thirty days in accordance with the instructions herein. The motions of DnC, KOP, CHB, Ekman, Kaila, Ostergaard, Naper, Smith, and Schlater to dismiss the actions against them for lack of personal jurisdiction are granted. In light of the disposition of the aforementioned motions, the Court need not consider the other motions before it.
SO ORDERED.
NOTES
[1] On January 20, 1984, this Court entered an order granting NBL's motion for a preliminary injunction and consolidating the Trend action with the Nordic action. This order also granted Trend's motion for summary judgment on NBL's claims against five of the nine financial institutions named as defendants in NBL's first amended complaint. The actions against the four other banking defendants have since been disposed of.
[2] The complaint names at least two defendants on all but one count. The following chart, which counsel for some of the defendants supplied the Court, lists each count and the defendants who are named on that count.
Count Nature of Claim Defendants Charged
First RICO NABC, SHB, CHB, KOP,
DnC, Ekman, Ostergaard,
Kaila, Naper, Nelson
Second RICO NABC, Nelson, Mathews
Third RICO Ekman, SHB
Fourth RICO NBL, NLL, NFL, Smith
Fifth RICO NABC, NBL, NFL, NLL,
SHB, CHB, KOP, DnC,
Ekman, Ostergaard, Kaila,
Naper, Nelson, Mathews,
Sclater, Smith
Sixth RICO NABC, NBL, SHB,
Ekman, Sclater, Nelson,
Mathews
Seventh RICO NABC, SHB, CHB, DnC,
KOP, Ekman, Ostergaard,
Kaila, Naper, Nelson
Eight BHCA NABC, NBL, SHB, DnC,
CHB, KOP
Ninth Sherman Act NABC, NBL, SHB, DnC,
CHB, KOP
Tenth Rescission NBL, NLL, NFL
Eleventh Rescission "NBL and NABC or any
of their affiliates or subsidiaries"
Twelfth Duress NABC, NBL
Thirteenth Common law fraud "Defendants"
Fourteenth Tortious interference SHB, NABC, Ekman, Nelson,
with contract Mathews
Fifteenth Breach of contract NBL, NLL, NFL
Sixteenth Tortious interference NBL, NLL, NFL
with relationship
with Hunter
& Moss Vend
Seventeenth Breach of contract NABC
[3] We note in passing that the plaintiffs appear to have stated a claim under RICO as it has been interpreted recently by the Supreme Court. "A violation of § 1962(c), the section on which [Trend] relies, requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sedima, S.P.R.L. v. Imrex Co., ___ U.S. ___, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985) (footnote omitted). The complaint alleges at least five acts of "racketeering activity." See 18 U.S.C. § 1961(1) (1982). "A pattern of racketeering activity" is composed of two or more such acts. The definitions of "conduct" and "enterprise" appear to be satisfied as well. Id.
[4] The plaintiffs' motion to dismiss the civil RICO claims without prejudice is also deemed withdrawn. The resuscitation of the RICO claims effectively disposes of the defendants' motion to dismiss the common law claims in the complaint for lack of subject matter jurisdiction. This Court has pendent jurisdiction over those claims, which arise out of the same "common nucleus of operative facts" as the RICO claims. United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966).
[5] Subsection (B) prohibits traditional tie-in arrangements. Subsections (C) and (D) prohibit reciprocal arrangements whereby a customer provides a bank with something of value in exchange for the bank's product or service. Another subsection prohibits exclusive dealing arrangements. 12 U.S.C. § 1972(1)(E) (1982).
[6] Trend and Lease Trend brought their BHCA claim pursuant to section 1975 of that act which authorizes suits by "any person injured in his business or property by reason of anything forbidden in section 1972." 12 U.S.C. § 1975 (1982).
[7] Apparently, at some point, Trend and Lease Trend were joint obligors on the Flourtown loans. Consequently, they are named jointly in those counts charging fraud and other improper conduct with respect to those loans. In the interest of simplicity and brevity, the Court will refer to Trend and Lease Trend jointly as "Trend." From time to time, the Court will also address them as the plaintiffs.
[8] Both parties buttressed their arguments on this motion with affirmations, affidavits, and other materials outside the pleadings. Consequently, we treat this as a motion for summary judgment pursuant to Fed.R.Civ.P. 56.
[9] The defendants do not discuss the traditional banking practices defense. Instead, they assert that the plaintiffs must establish an "anti-competitive effect" in order to state a claim under the BHCA's anti-tying provisions. This terminology is confusing. The term "anti-competitive" derives from the BHCA's legislative history, see S.Rep. No. 1084, 91st Cong., 2d Sess. 1, reprinted in, 1970 U.S.Code Cong. & Ad.News 5519, 5535 [hereinafter "S.Rep."] ("The purpose of the provision is to prohibit anti-competitive practices...."), and from opinions construing the BHCA, see, e.g., Rae v. Union Bank, 725 F.2d 478, 480 (9th Cir.1984) ("The plaintiff must show an anti-competitive tying arrangement."). This language notwithstanding, the BHCA does not require a plaintiff to prove that the arrangement in question had an anti-competitive effect. Instead, the BHCA establishes a per se rule obviating the need for a specific inquiry into the anti-competitive effect of the prohibited tie. Costner v. Blount National Bank, 578 F.2d 1192, 1194 (6th Cir.1978); Parsons Steel, Inc. v. First Alabama Bank, 679 F.2d 242, 244-45 (11th Cir. 1982); Naegele, The Anti-Tying Provision: Its Potential Is Still There, 100 Banking L.J. 138, 143 (1983) ("In contrast to the general antitrust laws, Section 1972 imposes treble damage liability without a showing that the bank, bank holding company or its subsidiary has sufficient economic power in the market for the tying product to impose a tying arrangement."). See also S.Rep. at 5558 (Supplementary Views of Edward W. Brooke). ("[T]ying arrangements involving a bank are made unlawful by [the BHCA] without any showing of specific adverse effects on competition or other restraints of trade and without any showing of some degree of bank dominance or control over the tying product or service.")
[10] The plaintiffs contend that these cases, which concern alleged violations of section 1972(1)(C), are inapposite because most of the claims herein arise under subsections (B) and (D). No doubt these subsections differ in effect. While (B) and (D) prohibit a bank from tying the extension of credit to property or services offered by a bank holding company or to a subsidiary of that company, subsection (C) prohibits a bank from tying two or more products or services together. However, except for one phrase in subsection (C) that permits banks to tie together certain products and services, the language of the three subsections is identical. Moreover, the same policies underlie each subsection. The cited cases are among the only authority construing section 1972(1) and are persuasive with regard to each of that section's subsections.
[11] Given the presence of affidavits and other matters outside of the pleadings, the Court treats this motion to dismiss as one for summary judgment. See supra note 8.
[12] The plaintiffs cite Bass v. Boston Five Cent Savings Bank, 478 F.Supp. 741, 746-47 (D.Mass. 1979) and Stavrides v. Mellon National Bank & Trust Co., 353 F.Supp. 1072, 1076 (W.D.Pa.), aff'd, 487 F.2d 953 (3d Cir.1973), to support their contention that the tying and tied markets differ. Those cases refused to dismiss Sherman Act claims alleging that a bank improperly tied the provision of mortgage financing to the maintenance of an escrow account. The tying and tied products identified herein are hardly so distinct.
[13] In its last set of sur-reply papers, Trend suggested that should its per se claim fail it could, nevertheless, state a claim under a "rule of reason" analysis. Every plaintiff who asserts a tying claim, whether per se or rule of reason, must establish the existence of distinct tying and tied products. Jefferson Parish Hospital v. Hyde, 466 U.S. 2, 104 S.Ct. 1551, 1567, 80 L.Ed.2d 2 (1984). Because the plaintiffs have failed in this regard, their rule of reason claim cannot survive.
[14] Since whether Trend was coerced to accept the realignment is not dispositive on either the BHCA, see supra pp. 553-54, or antitrust claims, the plaintiffs are not entitled to a stay of our decision on those issues pending further discovery on the issues of coercion.
[15] Even if the law were that stated in United States v. Wallace and Wallace Fuel Oil Co., 540 F.Supp. 419, 430 (S.D.N.Y.1982), an issue of fact would remain as to whether Trend could have hoped to gain anything from the option agreement.
[16] The defendants objected to the breach of contract claims on the ground that the plaintiffs' performance is not pled. Rule 9(c) of the Federal Rules of Civil Procedure provides that "[i]n pleading the performance or occurrence of conditions precedent, it is sufficient to aver generally that all conditions precedent have been performed or have occurred." Fed.R.Civ.P. 9(c). The remaining breach of contract claims should be repled to include this general allegation, if truthful.
[17] The affidavit of William Johnson supplies NABC's entire argument on the seventeenth count. Johnson became an NABC employee in June 1979, after most of the loan agreements that are the subject of the seventeenth count had been consummated. Johnson has no first-hand familiarity with those loans and cannot competently discuss NABC's intent respecting their provisions.
[18] We note also that the seventeenth count adequately pleads a breach of contract claim. NABC's objections to this count based on the adequacy of the pleadings are meritless. See supra p. 561.
[19] This standard appears at odds with Judge Winter's statement in Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117 (2d Cir.1984) [hereinafter "Beech Aircraft Corp."]. There, Judge Winter wrote:
[A] plaintiff must demonstrate by a preponderance of the evidence that in personam jurisdiction exists. It is true that, when the issue is decided initially on the pleadings and without discovery, the plaintiff need show only a prima facie case. However, if that initial decision is contested, the plaintiff must then prove, following discovery, either at a pre-trial hearing or at trial, that jurisdiction exists by a preponderance of the evidence. Given that the district court permitted substantial discovery, VW must now be held to the preponderance burden.
Id. at 120 (citations omitted). If, indeed, this statement is inconsistent with that in Hoffritz For Cutlery, Inc. v. Amajac, Ltd., the Court chooses to follow the latter which is both more recent and consistent with a long line of Second Circuit and Southern District pronouncements regarding the manner of resolving the issue of personal jurisdiction. Although personal jurisdiction must eventually be established by a preponderance of the evidence, the Court has discretion in determining when to require such a showing.
[20] The courts have long held that the Sherman Antitrust Act's nationwide service provisions, 15 U.S.C. § 78aa (1982), extend the courts' personal jurisdiction to the boundaries of the United States, the due process clause being the only constraint. See, e.g., Mariash v. Morrill, 496 F.2d 1138, 1142-43 (2d Cir.1974). The Court's interpretation of RICO's similar provisions, see H.Rep. at 4034 ("Section 1965 contains broad provisions regarding venue and process, which are modeled on present antitrust legislation."), is consistent with these precedents.
[21] The parties do not appear to question the fact that Ekman, Kaila, Ostergaard, Naper, CHB, and KOP have not been served with process in this country. However, the papers do not indicate whether Smith or Sclater were ever served in the United States. If the plaintiffs can establish that they were timely and properly served in this country, the Court will assess its jurisdiction over the two NBL officials.
[22] According to the plaintiffs, "The Second Circuit ... articulated another theory of jurisdiction over CHB, DnC and KOP based on their close relationship to NABC" in Beech Aircraft Corp. Plaintiffs' Memorandum in Opposition at 147. This statement mischaracterizes that opinion, which merely summarized the law pertaining to jurisdiction over parents doing business in New York through their subsidiaries. The plaintiffs seek leave to depose NABC on the "new" issues raised by the Beech Aircraft Corp. decision. Since, however, the issues are not new, the request is denied.
[23] DnC and CHB have also underwritten several multi-million dollar securities offerings and have designated New York brokerage firms to represent them in connection with these offerings. These infrequent forays into investment banking were neither substantial nor continuous enough to establish the corporate defendants' presence in New York.
[24] The long arm statute reads, in pertinent part, As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any noncomiciliary, ... who in person or through an agent:
1. transacts any business within the state; or
2. commits a tortious act within the state ...; or
3. commits a tortious act within the state causing injury to person or property within the state ..., if he
(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or
(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce....
N.Y.Civ.Prac.Law § 302(a) (McKinney 1972).
[25] In his affidavit, Ostergaard indicates that he attended the second meeting only to submit his resignation and otherwise played no role there. Ostergaard Affidavit at ¶ 3.
[26] NABC's counsel redacted the minutes of its board meetings to exclude references to discussions pertaining to matters other than Trend. Naper Affidavit ¶ 3.
[27] Although the amended complaint alleges tortious conduct other than fraud, the moving defendants are not named in any of the counts alleging such conduct.
[28] To the extent that the complaint attempts to assert claims other than fraud against DnC, CHB, and KOP, those claims are dismissed as well. These defendants' jurisdictionally significant contacts relate only to the fraud claims in the amended complaint.
CHB and DnC originally moved for summary judgment on the RICO and fraud claims against them. The Court need not consider these motions, since the claims have been disposed of on jurisdictional grounds. The plaintiffs' motion ordering a continuance of the summary judgment motions pending further discovery is also rendered moot.
[29] The plaintiffs do not assert that the individual defendants are doing business in New York.
[30] In Calder v. Jones, 465 U.S. 1482, 104 S.Ct. 1482, 1485 n. 5, 79 L.Ed.2d 804 (1984), and in Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 104 S.Ct. 1473, 1478 n. 4, 79 L.Ed.2d 790 (1984), the Supreme Court held that the fiduciary shield doctrine is not grounded in the due process clauses of the first or fourteenth amendments. The doctrine is thus inapplicable in an action brought under RICO or another federal statute that extends jurisdiction to the limits of due process. Soltex Polymer Corp. v. Fortex Industries, Inc., 590 F.Supp. 1453, 1458 (E.D.N.Y. 1984) (McLaughlin, J.). However, it remains a gloss on the New York long arm statute, which does not extend that far. See Photo Promotions Associates v. Household International, Inc., 584 F.Supp. 1238, 1248 (S.D.N.Y.1984) (Weinfeld, J.) (decided one month after Calder and Keeton and applying fiduciary shield doctrine).
|
957 F.2d 870
Slaybackv.Comr. of IRS*
NO. 90-3766
United States Court of Appeals,Eleventh Circuit.
Feb 27, 1992
1
Appeal From: M.D.Fla.
2
AFFIRMED.
*
Fed.R.App.P. 34(a); 11th Cir.R. 34-3
|
Order entered March 19, 2014
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-13-01733-CV
B.W.D., Appellant
V.
JAMES W. TURNAGE AND FORENSIC DNA & DRUG TESTING SERVICES, INC.,
Appellees
On Appeal from the County Court at Law No. 5
Dallas County, Texas
Trial Court Cause No. CC-12-04012-E
ORDER
We GRANT appellant’s March 17, 2014 motion to file amended brief and ORDER the
brief be filed no later than March 28, 2014. Appellees shall file their brief no later than thirty
days after the filing of appellant’s amended brief.
/s/ ELIZABETH LANG-MIERS
JUSTICE
|
Filed 7/17/14
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
Conservatorship of the Person of G.H. H038826
(Santa Clara County
Super. Ct. No. 1-78 MH025600)
SANTA CLARA COUNTY PUBLIC
GUARDIAN’S OFFICE,
Plaintiff and Respondents,
v.
G.H.,
Defendant and Appellant.
G.H. appeals from an order reappointing a conservator of his person under the
Lanterman-Petris-Short (LPS) Act (Welf. & Inst. Code, § 5000 et seq.). His appeal calls
upon us to address the question of whether the trial court can impose a terminating
sanction, pursuant to Code of Civil Procedure section 2032.410, against a proposed LPS
conservatee in the absence of a court order requiring a mental examination of the
proposed conservatee.1
1
After the parties completed briefing in this matter, G.H.’s counsel informed this
court that G.H. died on April 19, 2014. His death during the pendency of the appeal
abates all further proceedings in the case. (People v. Her (2013) 216 Cal.App.4th 977,
979, fn 1.) However, we exercise our inherent authority to retain the appeal for issuance
of an opinion because it raises an important issue of public interest that is likely to recur
in other cases. (See, e.g., People v. Nottoli (2011) 199 Cal.App.4th 531, 535, fn 3.)
BACKGROUND
In 1998, the Santa Clara County Superior Court established a conservatorship over
G.H.’s person pursuant to the LPS Act. Since that time, G.H. has been under continuous
conservatorship.
On March 27, 2012, the Santa Clara County Public Guardian (hereafter “Public
Guardian”) filed a petition to be reappointed G.H.’s conservator under the LPS Act. The
petition alleged that G.H remained gravely disabled as a result of mental disorder.
G.H.’s counsel requested that the matter be set for an evidentiary hearing. The
trial court set the evidentiary hearing for May 9, 2012.
On May 9, 2012, G.H. was not present in court. The Public Guardian explained
that G.H. had refused to submit to a mental examination with the Public Guardian’s
doctor, and that it did not intend to transport G.H to court unless G.H. submitted to the
mental examination. G.H.’s counsel requested that the evidentiary hearing on the
reappointment petition be continued, and he also requested that G.H be transported to
court for the evidentiary hearing. The Public Guardian asserted that G.H.’s failure to
submit to a mental examination was a discovery violation, that the appropriate sanction
for such a discovery violation was to deny G.H. an evidentiary hearing, and that there
would thus be no need to transport G.H. to court if he failed to submit to a mental
examination. G.H.’s counsel argued that G.H. had a right to a “contested hearing . . .
regardless of whether he agree[d] to see the doctor.” The court issued the following
ruling: “I’m going to make two orders. The first is I will continue this evidentiary
hearing to May 23[] . . . . I will further order that if [G.H.] does not meet with the doctor
prior to that hearing, then there’s no obligation to transport him at that time . . . .”
On May 23, 2012, G.H. was absent from court. The Public Guardian explained
that G.H. had again refused to submit to a mental examination with the Public Guardian’s
doctor. The Public Guardian requested that the court grant the reappointment petition
2
without an evidentiary hearing as a sanction for G.H.’s failure to submit to the mental
examination. G.H.’s counsel argued that G.H. had a right to a trial and a right to be
present in court, regardless of whether G.H. cooperated with the Public Guardian’s
doctor. The court granted a continuance so that the parties could file written briefing.
G.H. filed a “Brief Regarding Right to Trial on Petition to Reestablish
Conservatorship.” G.H.’s brief argued that G.H. had a “due process right to an
evidentiary hearing on the issue of whether he continue[d] to be gravely disabled.” The
brief also argued that G.H. had “no obligation” to “cooperate with or even speak to
witnesses who [were] retained by the opposition.” The Public Guardian filed an
“Opposition Brief Regarding Right to Trial on Petition to Reestablish Conservatorship.”
The Public Guardian’s brief argued that G.H.’s failure to submit to a mental examination
with the Public Guardian’s doctor warranted “the imposition of an issue/evidence
sanction, pursuant to [Code of Civil Procedure] § 2032.410, barring [G.H] from
contesting [the Public Guardian’s] evidence.”
The court issued a ruling on the briefs at a hearing on July 25, 2012. G.H. was not
present at the hearing. The court granted the Public Guardian’s request for a discovery
sanction and granted the reappointment petition. The court filed a written order that
explained the ruling. The written order noted that G.H.’s failure to submit to a mental
examination with the Public Guardian’s doctor authorized the court to impose an
evidence sanction or a terminating sanction pursuant to Code of Civil Procedure
section 2032.410. The written order concluded: “Therefore, whether termed an evidence
or a terminating sanction, [G.H.], as a consequence of his repeated non-compliance, has
forsaken his right to an evidentiary hearing and the re-appointment Petition is granted
based upon the physician’s declarations that accompanied the Petition’s filing.”
3
On August 2, 2012, the court issued an order reappointing the Public Guardian as
conservator of G.H.’s person. The order specified that the conservatorship would expire
one year from April 15, 2012.
G.H. filed a timely appeal on March 7, 2013. On July 5, 2013, the Public
Guardian filed a “Motion for Judicial Notice, Motion for Consideration of Additional
Evidence Under Code of Civil Procedure Section 909, and Motion to Dismiss the
Appeal.” On July 22, 2013, G.H. filed a “Motion for Judicial Notice and Opposition to
Respondent’s Motion to Dismiss Appeal.”2
DISCUSSION
G.H. contends that the order reappointing the Public Guardian as conservator of
his person must be reversed because it was the product of an improper sanction.
Specifically, he asserts that the trial court erred in issuing a terminating sanction pursuant
to Code of Civil Procedure section 2032.4103 because there was no court order requiring
him to submit to a mental examination.
The Public Guardian moves to dismiss the appeal on the ground of mootness. The
Public Guardian asserts that the appeal is moot because the conservatorship that is the
subject of G.H.’s appeal has expired and a new petition for reappointment of the
conservator has been granted.
We will not dismiss the appeal as moot, and we will consider the merits of the
appeal. Given that there was no court order requiring G.H. to submit to a mental
examination, we conclude that the trial court abused its discretion in issuing a terminating
2
We grant the Public Guardian’s request for judicial notice, and we also grant
G.H.’s request for judicial notice. We deny the Public Guardian’s request to consider
additional evidence.
3
Subsequent unspecified statutory references are to the Code of Civil Procedure.
4
sanction pursuant to section 2032.410, and we will reverse the order reappointing the
Public Guardian as conservator of G.H.’s person.4
Mootness
We decline to dismiss the appeal as moot. G.H.’s appeal presents a significant
issue that could evade appellate review if we declined to consider it. “ ‘Because a
conservatorship is relatively brief (one year) in comparison with the appellate process, we
find it likely that this issue . . . is one capable of recurring, yet of evading review because
of mootness.’ ” (In re Conservatorship of Joseph W. (2011) 199 Cal.App.4th 953, 961.)
“Because procedures for reestablishment of conservatorships ‘are of great public interest’
and a reestablishment issue ‘could perpetually evade appellate scrutiny’ [citation], we
exercise our discretion to consider, and address the merits of, this appeal.” (Ibid.)
Standard of Review
We review the trial court’s imposition of a discovery sanction under the abuse of
discretion standard. (Doe v. U.S. Swimming, Inc. (2011) 200 Cal.App.4th 1424, 1435.)
“ ‘ “Action that transgresses the confines of the applicable principles of law is outside the
scope of discretion and we call such action an ‘abuse’ of discretion.” ’ ” (Miyamoto v.
Department of Motor Vehicles (2009) 176 Cal.App.4th 1210, 1218-1219.)
The Trial Court Abused its Discretion in Imposing the Terminating Sanction
LPS proceedings “are civil, not criminal, and the civil trial procedural rules are the
ones which apply.” (In re Conservatorship and Estate of George H. (2008) 169
Cal.App.4th 157, 162.) Thus, we do not question the trial court’s conclusion that it
possessed authority, under section 2032.410, to impose a discovery sanction in an LPS
4
G.H. also contends that reversal of the reappointment order is required because
he was denied his due process right to a trial and his due process right to be present at the
proceedings. We will not address these arguments given our conclusion that the
reappointment order must be reversed due to the improper terminating sanction.
5
proceeding such as this one. The issue here is whether the trial court properly exercised
its authority within the confines of section 2032.410.
Section 2032.410 states, in pertinent part: “If a party is required to submit to a
physical or mental examination under Articles 2 (commencing with Section 2032.210) or
3 (commencing with Section 2032.310) . . . , but fails to do so, the court, on motion of the
party entitled to the examination, may make those orders that are just, including the
imposition of an issue sanction, an evidence sanction, or a terminating sanction . . . .” As
explained below, a review of the relevant statutory provisions and the record
demonstrates that G.H. was not required to submit to a mental examination, and that the
trial court therefore erred in sanctioning G.H. pursuant to section 2032.410.
Section 2032.020 provides that any party “may obtain discovery . . . by means of
a physical or mental examination . . . in any action in which the mental or physical
condition . . . is in controversy in the action.” (§ 2032.020, subd. (a).) Section 2032.310,
subdivision (a) specifies that “the party shall obtain leave of court” to obtain discovery by
means of a mental examination. Section 2032.310, subdivision (b) provides that a
“motion for an examination under subdivision (a) shall specify the time, place, manner,
conditions, scope, and nature of the examination, as well as the identity and the specialty,
if any, of the person or persons who will perform the examination.”
Section 2032.320, subdivision (a) states: “The court shall grant a motion for a
physical or mental examination under Section 2032.310 only for good cause shown.”
Section 2032.320, subdivision (d) provides: “An order granting a physical or mental
examination shall specify the person or persons who may perform the examination, as
well as the time, place, manner, diagnostic tests and procedures, conditions, scope, and
nature of the examination.”
The foregoing statutory provisions establish that a party must submit to mental
examination only upon court order. Here, the record shows that the trial court never
6
issued an order that required G.H. to submit to a mental examination. Indeed, the Public
Guardian never even filed a motion seeking such a court order. Although the trial court
ruled that G.H. need not be brought to court if he declined to submit to a mental
examination, this ruling in no way constituted an order requiring G.H. to submit to a
mental examination. (See § 2032.320, subd. (d) [an order granting a mental examination
“shall specify . . . the time, place, manner, . . . conditions, scope, and nature of the
examination, as well as the identity and the specialty, if any, of the person or persons who
will perform the examination”].) Section 2032.410 specifies that the trial court may issue
a sanction for failure to submit to a mental examination only if the sanctioned party is
“required to submit to a . . . mental examination.” (§ 2032.410, italics added.) Thus,
because the trial court never issued an order requiring G.H. to submit to a mental
examination, the trial court abused its discretion in sanctioning G.H. for his refusal to
submit to a mental examination. (See generally Lee v. Lee (2009) 175 Cal.App.4th 1553,
1559 [in order to impose a nonmonetary sanction, “[t]here must be a failure to comply
with a court order”].)
The Public Guardian contends that the improper sanction does not necessitate
reversal of the order reappointing it conservator of G.H.’s person. Specifically, the
Public Guardian asserts that the sanction was not a terminating sanction, but instead a
mere evidence sanction that did not impact the trial court’s decision to grant the
reappointment petition. This argument is unpersuasive. An evidence sanction prohibits a
party “from introducing designated matters in evidence.” (§ 2023.030, subd. (c).) Here,
the sanction did not merely prohibit G.H. from introducing particular items into evidence.
Rather, the sanction terminated the matter in the Public Guardian’s favor: the written
sanction order specified that “[G.H.], as a consequence of his repeated non-compliance,
has forsaken his right to an evidentiary hearing and the re-appointment Petition is
granted.” We therefore must conclude that the sanction was a terminating sanction and
7
not an evidence sanction. Because the trial court erroneously imposed this terminating
sanction against G.H., we must reverse the order reappointing the Public Guardian as
conservator of G.H.’s person.
DISPOSITION
The order reappointing the Public Guardian as conservator of G.H.’s person is
reversed.
______________________________________
RUSHING, P.J.
WE CONCUR:
____________________________________
PREMO, J.
____________________________________
ELIA, J.
8
Trial Court: Santa Clara County Superior Court
Superior Court No.: 1-78 MH025600
Trial Judge: The Honorable
Thomas W. Cain
Attorneys for Defendant and Appellant Julia Freis
G.H.: under appointment by the Court
of Appeal for Appellant
Attorneys for Plaintiff and Respondent Orry P. Korb,
Santa Clara County Public Guardians Office: County Counsel
John S. Posthauer,
Deputy County Counsel
Mark Gonzalez,
Lead Deputy County Counsel
Santa Clara County Public Guardians Office v. G.H.
H038826
9
|
511 F.2d 1401
*Thomasv.Thomas
74-3343
UNITED STATES COURT OF APPEALS Fifth Circuit
4/8/75
1
S.D.Fla.
AFFIRMED
2
---------------
* Summary Calendar case; Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of N
|
413 F.2d 409
UNITED STATES of America, Appellee,v.David L. WASHINGTON, Appellant.
No. 22449.
United States Court of Appeals District of Columbia Circuit.
Submitted February 13, 1969.
Decided May 19, 1969.
Mr. Brian C. Elmer (appointed by this court) submitted on the brief, for appellant.
Mr. Thomas C. Green, Asst. U. S. Atty., with whom Messrs. David G. Bress, U. S. Atty., and Frank Q. Nebeker, Asst. U. S. Atty., were on the brief, submitted on the brief, for appellee.
Before FAHY, Senior Circuit Judge, and BURGER and TAMM, Circuit Judges.
BURGER, Circuit Judge:
1
The Government consented to reversal to allow a new trial and we give substantial deference to the position of the Government in these circumstances. However, a suggestion by the Government is just that; it is this Court's responsibility to decide. We are unable to accept the suggestion that a new trial is the only remedy; that cannot be known until the District Court has had an opportunity to consider what was not presented at or before trial on the identification issue. Moreover, the trial judge will now have the benefit of the intervening cases decided by this Court.
2
In aid of remand we turn to Appellant's contention that the trial court erred in refusing to give Appellant's requested instruction on the identification issue. Although the Government thought it would be unnecessary for this Court to reach this question, the brief of the United States states:
3
Nevertheless it should be noted that trial counsel did not object to the court's ruling on his proposed instruction, and unless the alleged deficiency amounts to plain error affecting substantial rights, appellant would not be entitled to relief on this ground. Howard v. United States, 128 U.S.App. D.C. 336, 389 F.2d 287 (1967). The language of the requested instruction is clearly not supported by the evidence adduced at trial and goes far beyond any statement of an evidentiary theory offered by appellant. Moreover, the obvious argumentative conclusions in the instruction were fully alluded to by defense counsel in his closing summation. The identity instruction as actually given below (Tr. 238) adequately fulfilled the requirements of the pertinent guidelines set forth by this Court in Jones v. United States, 124 U.S.App.D.C. 83, 88, 361 F.2d 537, 542 (1966).
4
Brief for Appellee, page 10 n. 8.
5
The Government's brief correctly states the controlling rule and hence we limit the scope of the remand solely to the propriety of the identification procedures under United States v. Wade, 388 U.S. 218, 87 S.Ct. 1926, 18 L.Ed.2d 1149 (1967), and exclude from consideration the instruction issue.
6
We cannot agree with the dissent that Macklin v. United States, 133 U.S. App.D.C. 139. 409 F.2d 174 (decided February 18, 1969) requires reversal. Macklin was decided after the trial in the instant case was concluded. We hold that Macklin does not apply retroactively.1
7
The case is remanded for proceedings consistent with this opinion.
8
Remanded.
Notes:
1
Our holding as to non-retroactivity rests, of course, on two factors which we deem controlling: (1)Macklin resulted in an affirmance; thus the language now relied upon by Judge Fahy was not applied retroactively to the defendant in Macklin; (2) the identification area has been decidedly marked by a spirit of non-retroactivity, see Stovall v. Denno, 388 U.S. 293, 87 S.Ct. 1967, 18 L.Ed.2d 1199 (1967). The reasons, obviously, were to avoid a large scale breakdown in criminal dockets already overloaded to the breaking point.
FAHY, Senior Circuit Judge (dissenting):
9
The United States has consented to reversal and a new trial because of noncompliance by the District Court with the requirements of United States v. Wade, 388 U.S. 218, 87 S.Ct. 1926, 18 L.Ed.2d 1149; Gilbert v. California, 388 U.S. 263, 87 S.Ct. 1951, 18 L.Ed.2d 1178, and Stovall v. Denno, 388 U.S. 293, 87 S.Ct. 1967, 18 L.Ed.2d 1199. Notwithstanding this the court remands the case for a hearing on the identification issue, the question of a new trial to be determined by the District Court, depending upon the result of the hearing.
10
The case was submitted to us on the briefs without oral argument. After submission we suggested to the parties the possible desirability of oral argument, but we were advised by each that argument was not desired. This indicates the United States remains of the view a new trial should be granted; and I think it likely appellant's counsel assumes the court would accept this confession of error by the United States, though we are not bound to do so.
11
The case arose and was tried after the Wade, Gilbert and Stovall cases; yet appellant was not afforded counsel or the right to counsel at the pretrial "line-up" identification. The United States in its brief properly points out that the District Courts "were without pronouncements from this Court [of Appeals] on the implementation of the procedures outlined in" the Supreme Court opinions, and concedes error, stating:
12
[W]e feel the interest of justice will best be served by permitting another hearing where both counsel and the court will have the benefit of the intervening clarification which has recently come to this area. Cf. Franklin v. United States, 117 U.S.App.D.C. 331, 335, 330 F.2d 205 (1964).
13
* * * * * *
14
WHEREFORE, it is respectfully submitted that the judgment of the District Court be reversed and the case remanded for a new trial.
15
The position of the United States Attorney, conscientiously taken in a case of possibly mistaken identification, I think should be accepted by the court.
16
As to the merits in other respects, since submission of the case our court has upheld the need for a special instruction on identification, when requested, in such a case. Macklin v. United States, 133 U.S.App.D.C. 139, 409 F.2d 174, decided February 18, 1969. Appellant requested such an instruction. Though it need not have been given in the language requested, the Macklin case, aside from the Wade issue upon the basis of which the United States consents to reversal, seems also to require reversal. We said in Macklin:
17
We think that now, after the Supreme Court has focused on identification problems in its 1967 Wade-Gilbert-Stovall trilogy, it is even more imperative that trial courts include, as a matter of routine, an identification instruction. In cases where identification is a major issue the judge should not rely on defense counsel to request so important a charge. In this regard, we note that the manual Criminal Jury Instructions For The District Of Columbia (1966) published by the Bar Association of the District of Columbia contains a charge on mistaken identity. A charge such as this might well be given, supplemented by observations on identification evidence as discussed in Wade, Gilbert and Stovall.
18
133 U.S.App.D.C. 139, at 143, 409 F.2d 174, at 178.
19
A new trial which would follow our acceptance of the position of the United States would obviate the problem of an identification instruction under Macklin, for at the retrial such an instruction could be given. This would raise no problem about the retroactivity of Macklin.1
20
I accordingly dissent from the refusal of the court to grant a new trial as agreed by the United States in the interest of justice.
Notes:
1
The Government indicated that the instruction issue "need not be reached since appellant is entitled to a new trial. * * *"
|
453 S.W.2d 84 (1969)
Cale P. HAUN, Complainant-Appellee,
v.
GUARANTY SECURITY INSURANCE COMPANY and Hartford Fire Insurance Company, Defendants-Appellants.
Court of Appeals of Tennessee, Middle Section.
September 26, 1969.
Rehearing Denied October 31, 1969.
Certiorari Denied April 6, 1970.
*85 William Waller, of Waller, Lansden, Dortch & Davis, and Boult, Hunt, Cummings & Conners, Nashville, for complainant-appellee.
Dan E. McGugin, of Watkins, McGugin, Stewart, Finch & McNeilly, and David M. Keeble, of Hooker, Keeble, Dodson & Harris, Nashville, for defendants-appellants.
Certiorari Denied by Supreme Court April 6, 1970.
OPINION
PURYEAR, Judge.
This suit was originally filed by Cale P. Haun, who died while it was pending and it was revived by the executors of his will.
The defendants-appellants are successors in interest to Northwestern Fire and Marine Insurance Company, to which we will *86 sometimes refer in this opinion as "Northwestern."
There is very little controversy about the determinative facts of the case and the issues presented upon this appeal are largely composed of questions regarding the legal conclusions based upon such facts.
The evidence in the record establishes the relevant facts of the case to be briefly, as follows:
On and prior to November 7, 1956, Haun was owner of a certain river Towboat named "John Luchow." Haun was also owner of Tennessee Towing Company, which was later liquidated, with the result that Haun became liable for its obligations. Haun and members of his family owned, either directly or indirectly, at least two other businesses, the insurance on all of which was usually carried by companies represented by the insurance agencies of C.M. Hunt Company and Richards, Scott and Lyle, of Nashville, Tennessee.
A policy covering the "John Luchow" was R.P.I. 13622 naming West Tennessee Limestone Company as assured and it was issued by Northwestern as insurer for the period from October 1, 1956 to October 1, 1957. The letters "R.P.I." stand for "River Protection and Indemnity."
This policy, R.P.I. 13622, was issued as a renewal of R.P.I. 13604. Since one of the main issues involved in this appeal is the extent of the obligations of the insurer under said policy, the pertinent provisions will be quoted and discussed later.
The schedule attached and made a part thereof showed the limits of liability on the John Luchow to be $51,500.00, subject to a provision that the first $250.00 of loss was deductible.
On or about November 7, 1956, the Luchow was delivered to Nashville Bridge Company for installation of a new engine and remodeling and it remained in the Bridge Company's floating dock for that purpose until on or about December 21st or 22nd of 1956.
Although it was customary for the members of a vessel's crew not to remain on the vessel while it was docked for the purpose of having work done thereon by an independent contractor, such as Nashville Bridge Company, Haun desired to provide work on the vessel for such of the crew members thereof as desired to work during the period of repowering and remodeling of the vessel. Therefore, Haun arranged with Nashville Bridge Company to let these crew members do certain odd jobs that would have otherwise been done by Nashville Bridge Company's employees.
This work included cleaning and repainting surfaces that were made accessible by reason of the remodeling which was being done.
Some of the crew of the vessel went home, one of them quit and others stayed in Nashville to do the work which Haun had arranged with Nashville Bridge Company for them to do. Tennessee Towing Company, which was one of the businesses owned by Haun at the time, kept these crew members on the same payroll at the same weekly wages but instead of working normal six hour shifts with twenty days on duty and ten days off duty they would only work on day shifts and no one was on duty at night.
At the time the Luchow was delivered to Nashville Bridge Company, the Hunt Agency and Richards, Scott and Lyle were notified that it was being docked for the purpose of repowering and remodeling. This is a customary procedure when a vessel is docked for a period of time.
Upon being notified of such repowering and remodeling, the two above mentioned agencies suspended the coverage of R.P.I. 13622 and another policy not pertinent to this appeal and substituted in lieu thereof a builders' risk insurance certificate, *87 which provided for property damage coverage only and did not provide any protection to Haun for loss that might occur as a result of negligent injury to any of the crew members.
Although Haun knew some changes in the insurance coverage were made at the time, he and the Hunt Agency have insisted at all times that neither he nor Hunt ever intended to suspend the coverage which he had against loss or damage by reason of negligent injury to any of the members of the Luchow crew. A member of the vessel's crew at the time it was docked at Nashville Bridge Company was one Clyde Keymon.
The work done by Nashville Bridge Company took approximately forty-four days. During that period of time, O.E. Brown, who was the captain of the vessel, remained in charge of those crew members who elected to stay in Nashville and do the day work and he assigned certain tasks to them.
Keymon did some work on the vessel between November 10 and November 14th, 1956, on which latter date he and another man left Nashvile to take another boat called the "Big Boy" to Helena, Arkansas. They arrived there on December 7th, on which date Keymon proceeded to return to his home at Milan, Tennessee. He later returned to Nashville and did some work on the vessel on both December 21 and 22, on the latter of which dates he went back to Milan because his wife was sick. He subsequently rejoined the vessel at Smithland, Tennessee. On January 11, 1957, at Savannah, Tennessee, Keymon left the vessel and went home sick and later entered the United States Public Health Hospital in Memphis, Tennessee, known as the Marine Hospital.
By endorsement effective January 8, 1957, the indemnity coverage of R.P.I. Policy 13622 was reinstated and increased to a maximum of $112,000.00.
On or about January 10, 1958, Keymon filed suit against Haun and Tennessee Towing Company in the United States District Court at Nashville, alleging in his complaint, that while the John Luchow was at Nashville to be repowered and remodelled, it was discovered upon removal of the old engine that the wall and floors or hold were covered with an accumulation of grease and dirt; that he was ordered by Brown to clean the engine room and hold, using a substance known as Oakite; that in doing this work, his trousers became wet with Oakite solution; that he began to feel a stinging and burning sensation in the area of his groin and his private parts, as a result of having his clothes thus saturated with said strong chemical solution and that as a result thereof he sustained severe and disabling permanent injury.
In Keymon's suit against Haun and the Tennessee Towing Company, he sought recovery of damages against them on the grounds of negligence in failing to provide him with protective clothes or to warn him of the danger of using Oakite and also sought recovery against Haun, the owner of the vessel, on the ground of unseaworthiness.
Keymon subsequently filed an amendment to his complaint seeking additional recovery for maintenance and cure but this is not pertinent to the issues raised on this appeal.
The trial of the Keymon case in the United States District Court finally resulted in a judgment in his favor for $78,700.00, based upon negligence and unseaworthiness, and $4,300.00 for maintenance and cure, or a total of $83,000.00. The judgment was later affirmed by the United States Sixth Circuit Court of Appeals, and was paid by Haun, 296 F.2d 785.
As soon as Haun became aware that Keymon was making a claim against him, he notified the Hunt Agency of the pendency of such claim and when suit was *88 filed in United States District Court, he sent a copy of the complaint to the Hunt Agency.
By that time, the defendants, Guaranty Security Insurancy Company and Hartford Fire Insurance Company, had become successors in interest to Northwestern Fire and Marine Insurance Company.
It is admitted in the answer filed by the defendants that there was an agreement whereby Hartford reinsured Northwestern and therefore, if there is any liability in this case, it is the liability of Hartford only and therefore, Hartford Fire Insurance Company is the real defendant in this case.
When Hartford received notice that suit had been filed by Keymon, it retained Mr. John L. Quinlan, a New York attorney, and Mr. Norman Minick, a Nashville attorney, to investigate the matter.
This preliminary investigation, which took about four or five days, was made by Mr. Minick and when he made his report, Hartford denied liability upon the grounds that Haun and Tennessee Towing Company were not named assureds and that the River Protection and Indemnity policy was not in effect at the time of the alleged injury to Keymon.
Upon Hartford denying coverage, Mr. Quinlan and Mr. Minick withdrew from the case, and Haun employed the law firm of Waller, Lansden and Davis of Nashville, Tennessee, to represent him in United States District Court.
These attorneys retained by Haun were in complete charge of conducting his defense to the Keymon suit, although within a few days after Mr. Quinlan withdrew from the case, he was again retained by Hartford to advise and assist Haun's attorneys in defending the Keymon suit in United States District Court.
The case was tried in District Court beginning on July 25, 1960 and was concluded on July 29, 1960, resulting in a verdict and judgment in favor of Keymon, against Haun and Tennessee Towing Company for $83,000.00 as aforesaid.
On February 7, 1961, Haun wrote the Hunt Agency the following letter:
"February 7, 1961
C.M. Hunt Company
Nashville Trust Building
Nashville, Tennessee
Re: Towboat John Luchow-Northwestern
Fire & Marine Insurance
Company RPI 13622
Gentlemen:
On November 26, 1960 you furnished our attorney Mr. Waller, certain information from which it is my understanding that on January 15, 1957, an endorsement was countersigned by C.M. Hunt Company, effective November 11, 1956, cancelling the John Luchow from the schedule of the above policy, in consideration of a return premium of $457.15, and that subsequently an endorsement was countersigned February 8, 1957 returning the John Luchow to the schedule for an additional premium of $816.26, effective January 8, 1957. The limit of liability commencing January 8, 1957 was $112,000. You have subsequently informed Mr. Waller that if the effective date had been November 11, 1956 instead of January 8, 1957, an additional premium would have been due in the amount of $176.81. We figure that interest on this amount at 6% would amount to $55.75, and we are accordingly now handing you our check for $232.56 to include both premium and interest thereon for this protection during the period November 11, 1956 to January 8, 1957.
*89 We ask that the endorsement in question be revised so as to substitute November 11, 1956 for January 8, 1957, and also so as to name specifically Tennessee Towing Company as an insured, as in indemnity insurance Company of North America Policy W.C. 49212.
Tennessee Towing Company and I, as the owner of the John Luchow and the capital stock of Tennessee Towing Company, intended, as you and your underwriter know, that we be given full protection against claims of employees for personal injuries while the vessel was being repowered and remodeled at Nashville Bridge Company and while certain members of the crew were doing day work on the vessel, such as cleaning the engine room. We feel that you were entirely correct to cover these men with compensation insurance during this period, but the cancellation of the P & I coverage and the failure to make the additional coverage effective November 11, 1956 instead of January 8, 1957 were evidently due to some mistake on the part of you or your underwriter.
As you know, a judgment against Tennessee Towing Company and me, individually, has been rendered in the United States District Court for the Middle District of Tennessee in the amount of $83,000 and costs, in favor of Clyde Keymon, one of the employees above referred to, on the ground that during the period when the vessel was at the Nashville Bridge Company for repowering and remodelling, he continued to be a seaman within the Jones Act; that the vessel was unseaworthy; and that his employer was guilty of negligence. We have appealed to the Court of Appeals for the Sixth Circuit. It will be necessary for a supersedeas bond to be filed or some other arrangement in lieu thereof, and on February 2, 1961, you informed Mr. Waller and me that your underwriter would not furnish this bond. That being the case, it is assumed that it adheres to the position previously taken, that it has no liability in the matter.
We were completely in your hands and feel that a court of equity would, under the circumstances, reform the endorsement in question so as to make it effective November 11, 1956. Hence we are enclosing the aforesaid check in the hope that your underwriter will reconsider and do so voluntarily and give you the necessary authority to countersign the revised endorsement. Falling such voluntary action, we will take such legal action as may be necessary.
Even without the reformation of the aforesaid endorsement, it is our contention that your underwriter is in any event liable to the extent of $51,500, which you informed Mr. Waller was the coverage applicable to the John Luchow prior to the January 15, 1957 endorsement cancelling the John Luchow from the schedule. We have heretofore offered to reimburse you with any portion of the premium which was erroneously refunded to us on account of this cancellation, and this offer is hereby renewed. We also call to your attention that according to the testimony of the plaintiff, Clyde Keymon, Oakite was furnished him for use in cleaning the hold before the engine was removed. He testified that he used it three or four days before leaving Nashville on the Big Boy on November 14, 1956. Presumably no work was done on November 11, which was Sunday, or November 12, which was a holiday, and the payroll record shows that Keymon was absent both of those days. That being the case, the Oakite was, according to his testimony, furnished prior to November 11, so that the negligence on which the verdict was predicated, requiring him to use Oakite without giving proper warning and instructions, occurred prior to November 11. Hence your underwriter is responsible to the extent of $51,500 without regard to the endorsement of January 15, 1957.
*90 As you have been previously informed, all papers of ours in connection with this matter had been lost or misplaced and we were not aware of the details and dates above mentioned until you furnished them to Mr. Waller on November 26, 1960.
Yours very truly,
Cale P. Haun
CPH:km
Enclosure: Check 232.56
cc: Waller, Davis & Lansden
Richard, Scott & Lyle
Northwestern Fire & Marine Insurance Company
Mr. John L. Quinlan."
(Collective Ex. 7, Dep. of M.T. White)
After the foregoing letter was written, Haun filed suit in Chancery Court at Nashville to have R.P.I. Policy 13622 reformed. Thereafter, considerable correspondence ensued between the Hunt Agency, Richards, Scott and Lyle, and the defendant, Hartford. As a result of this correspondence and also some oral discussions, the specific details of which need not be recited, Mr. H.W. Magenheimer, claims manager for Hartford, wrote the following letter to Haun, dated September 20, 1961:
"September 20, 1961
AIR MAIL
Mr. Cale P. Haun
West Tennessee Limestone Company
Wilson-Bates Building
3813 Hillsboro Road
Nashville, Tennesee
Dear Mr. Haun:
Re: M/V `Luchow'
Personal Injury Claim
Clyde Keymon
Our File 57-5602
We refer to your letter of August 25, received on August 28, during the writer's absence from the office, relative to the above case.
This is to confirm your understanding that our letter to you of August 18 is an unqualified agreement on the part of Hartford Fire Insurance Company, for and on behalf of the Northwestern Fire & Marine Insurance Company (now Guaranty Securities Insurance Company) that both you and the Tennessee Towing Co. were assureds under the Northwestern Fire & Marine Insurance Co. Policy No. RPI 13622.
So there may not be any misunderstanding now or in the future, we should like to reiterate what the writer had said to you during his visit to Nashville in the presence of others and which we confirmed in our letter of August 18, that the underwriters on behalf of the Company mentioned above shall respond for loss, if any, subject to all of the terms and conditions of Policy No. RPI 13622 to the extent of the policy limits, namely, $51,500.
*91 We trust that with these assurances you will now direct Mr. Waller to take appropriate action to dismiss the now pending suit against the Northwestern Fire & Marine Insurance Co. and/or Guaranty Securities Insurance Co., identified under rule No. 83087[*].
It is the writer's understanding that the Appeal Case will be argued next month and we sincerely wish that Messrs. Waller's and Quinlan's arguments will prevail. If time permits the writer would like to attend the arguments because of the importance of the issues involved.
With kindest personal regards.
Sincerely,
/s/ Henry Magenheimer
Claims Manager
HWM:ca
cc: Richards, Scott & Lyle
Nashville 3, Tenn.
Att: Mr. John W. Barker."
(Collective Ex. 8 to Dep. M.T. White)
We consider this letter to be an unqualified agreement to indemnify Haun to the extent of $51,500.00 and not merely an offer to compromise, as insisted by the defendants.
The foregoing letter was written by Magenheimer in reply to Haun's letter of August 25, 1961, to Magenheimer as follows:
"Mr. H.W. Magenheimer
Claims Manager
Hartford Fire Insurance Company Group
Metropolitan Marine Department
123 William Street
New York 38, New York
Re: M/V `Luchow'
Personal Injury Claim
Clyde Keymon
Your File 57-5602
Dear Mr. Magenheimer:
I am glad to have your letter of August 18, 1961, which I understand to be an unqualified agreement on the part of Hartford Fire Insurance Co., for and on behalf of Northwestern Fire & Marine Insurance Company (now Guaranty Securities Insurance Company), that Tennessee Towing Company and I were assureds under Northwestern Fire & Marine Insurance Company Policy No. RPI 13622 (erroneously referred to in your letter as No. RPI 13604). Unless you promptly advise me that this understanding is incorrect, I will instruct Mr. Waller to dismiss, without prejudice, at our cost, the suit in the Chancery Court at Nashville against Guaranty Securities Insurance Company (Rule No. 83087), in which one of the prayers for relief is that said policy No. RPI 13622 be reformed so as to specifically name Cale P. Haun and Tennessee Towing Company as assureds.
*92 I share your hope that the Court of Appeals will reverse the District Court's judgment in the Keymon case, and I also hope that if the case is remanded for a new trial a compromise can be effected within the original policy limits of $51,500. If not, you understand, of course, that we reserve our right to contend that Guaranty Securities Insurance Company and/or Hartford Fire Insurance Co. are fully liable, for the reasons set forth in the aforesaid Chancery Court suit. I am sure you also understand that if the Keymon litigation is prolonged it may be necessary to reinstate the Chancery Court suit to avoid the running of the statute of limitations.
Thank you very much indeed for your invitation to call on Mr. Draper or you when I am in Hartford or New York.
Sincerely yours,
Cale P. Haun
CPH:mb
cc: Mr. William Waller Sr.
Mr. Billy Hunt."
(Collective Ex. 8 Dep. M.T. White)
While Haun was pleased to receive assurance of coverage to the extent of $51,500.00, he still maintained that the defendants should be liable for the full amount of any judgment against him.
The judgment of the United States District Court against Haun and Tennessee Towing Company was later affirmed by the United States Circuit Court of Appeals and the total amount of such judgment and interest thereon was paid by Haun on March 27, 1962. At the time said judgment was paid it amounted to $91,196.25, which included interest.
On or about April 3, 1962, Haun made demand on the defendants for the payment of said sum of $91,196.25, together with costs and expense of litigation.
In reply to this demand by Haun, Hartford's New York counsel mailed him a draft for $51,250.00 on or about April 20, 1962. Haun refused to accept this draft and his counsel returned it to Hartford's New York counsel on or about April 24, 1962.
Thereafter, on May 7, 1962, the instant suit was filed in Chancery Court and thereafter tried before the Chancellor upon depositions and exhibits, as a result of which trial the Chancellor awarded the complainant a recovery against the defendants for (1) the total amount of the United States District Court's judgment plus interest and costs, (2) the attorneys fees and expenses expended by Haun in defense of the Keymon suit and (3) twenty-five per cent statutory penalty.
This made a total of $155,590.60, for which latter amount the Chancellor awarded a decree in favor of complainant and against defendants, together with costs.
From the foregoing decree of the Chancellor the defendants have prayed and perfected their appeal to this Court and assigned errors as follows:
"1. The learned Chancellor erred in finding and/or holding that the complainant had, or was entitled to have, coverage against loss growing out of injury to the crew members of the `Luchow' at the time Keymon sustained his injury.
2. The learned Chancellor erred in holding that the defendant by its letter to Mr. Haun dated September 20, 1961 (quoted on page 11 of the lower Court's *93 Opinion), constituted an enforceable contractual agreement upon which the complainant can recover any amount in this litigation. That letter was an offer of compromise after the judgment had been obtained against the complainant in the Keymon case and the said offer was rejected, and therefore cannot be the basis of any liability in favor of the complainant against this defendant.
3. The learned Chancellor erred in finding and holding the defendant liable on any contractual basis and/or liable for any bad faith on the basis of statements made either in the letter of C.M. Hunt Company to Richards, Scott & Lyle dated February 3, 1958, written subsequent to the institution of the Keymon suit in the District Court in Nashville, and/or the letter from an employee of Richards, Scott & Lyle to defendant dated April 21, 1961, written many months after the Keymon judgment, which were nothing more nor less than an exchange of views between representatives of the defendant, and the defendant, and not in any way contemporaneous with the facts complained of by the complainant upon which the liability of the defendant is asserted.
4. The learned Chancellor erred in failing to hold that in no event could the defendant's liability exceed $25,000.00, inasmuch as the complainant could have settled the Keymon case for that amount and failed to do so even though defendant insurance company approved it and urged it.
5. The learned Chancellor erred in failing to hold that the River Policy upon which the alleged coverage was based, as an `indemnity policy', under the terms of which the defendant was not legally obligated to provide a defense for the assured, even if coverage existed, and therefore the defendant could not be held liable in excess of the face amount of said policy because of `bad faith' or breach of a contractual duty in failing to provide such legal defense.
6. The learned Chancellor erred in failing to hold that the defendant could not be found guilty of `bad faith' or a failure in its `contractual duty' in failing to provide for a defense of the Keymon case in the Trial Court, inasmuch as, at the time suit was instituted and tried, neither defendant in said Keymon case was a named assured in the River Policy involved.
7. The learned Chancellor erred in holding that the Statutory penalty of twenty-five percent was applicable in this case.
8. The learned Chancellor erred in holding that the defendant was liable for the amount of the Keymon judgment plus interest and cost.
9. The learned Chancellor erred in holding that the defendant was liable for attorney's fees and expenses expended by the complainant in the defense of the Keymon case.
10. Complainant is judicially estopped to assert an alleged subjective intent for defendant's River Policy to cover the crew while the Luchow was at the Bridge Co., it being repugnant to his sworn testimony in the Keymon trial that he intended for them to be covered by his Longshoremen's policy written by INA, and the Chancellor erred in failing to so hold."
We will not discuss these assignments separately, but we have considered all of them and reached the following conclusions:
The first question which we must determine to our own satisfaction is whether or not RPI Policy 13622 is an indemnity policy or a policy of liability insurance. In this connection, we note that the letters "RPI" preceding the policy number designate it as a "River Protection and Indemnity Policy."
*94 In the case of Finley v. U.S. Casualty Co., 113 Tenn. 592, 83 S.W. 2 (1904), the Supreme Court of this State had occasion to consider an indemnity policy and said:
"There are some parts of the policy copied in this opinion that are apparently, on first consideration, out of harmony with the view that the contract was intended as one of indemnity merely against loss from liability for damages, rather than against liability simply. We refer to the second and third paragraphs, under the caption `General Agreements.' Similar terms were referred to in Fenton v. Fidelity & Casualty Co., supra, [36 Or. 283, 56 P. 1096] as indicating that the contract was one simply against liability. This construction is very suggestive, and, if the clauses referred to stood alone, it would be difficult to assign any other meaning to them. However, they are qualified and controlled by the seventh special agreement. When construed along with the latter provision, the following is observed to be the meaning: While the company is bound to reimburse the assured for loss actually sustained and paid by him in satisfaction of a judgment recovered against him by an employe, yet, in order to make sure, as far as possible, there shall be no recovery as a basis on which to subsequently establish a claim, the company reserves the right to defend the litigation; also to supervise any settlement that may be made, and to have a free hand in negotiating settlements of a claim made against the assured. As stated, if these provisions that is, the second and third general agreements stood alone, they would furnish strong reasons for construing the contract as one against liability; but, from what has just been stated, it is perceived that they have a proper place in a contract against loss from liability for damages, in the way of enabling the company to minimize the loss.
When we consider that the provisions in the outset of the policy is `to indemnify against loss * * * from * * * liability for damages, and that in the seventh general agreement is provided `that no action shall lie against the company as respects any loss under this policy, unless it shall be brought by the assured himself to reimburse him for loss actually sustained and paid by him in satisfaction of a judgment,' etc., we think there can be no doubt that this policy must be construed as one belonging to the class of policies furnishing indemnity against loss from liability for damages, rather than as being a contract insuring against liability simply."
Finley v. U.S. Cas. Co., supra, pp. 602, 603, 604, 83 S.W. p. 4.
While Finley v. Casualty Company is an old case (1904) it does not appear to have been overruled and therefore, it is still the law in this State and we conceive it to be our duty to follow the opinion in that case in deciding whether or not the policy in the instant case is one of liability or indemnity.
This rule of construction was followed in the later case of Teters v. Gass, 156 Tenn. 127, 299 S.W. 788 (1927). The language of the contract in the instant case is perhaps even more clearly that of indemnity against loss only, than that found in the contract under consideration in Finley v. Casualty Co., supra. There it read "against loss from common law or statutory liability for damages," etc. Here it reads: "such sums as the assured * * shall have become legally liable to pay and shall have paid. * * *" The words italicized by us indicate a purpose to emphasize the restriction to indemnity only.
The policy under consideration here provides for payment up to the amount of the policy limits of "such sums as the assured, as owner of the (as per schedule) shall become legally liable to pay and shall have paid on account of: Loss of life of, or injury to, or illness of, any person; *95 Hospital, medical or other expenses necessarily and reasonably incurred in respect of loss of life of, injury to, or illness of any member of the crew of the vessel named herein."
(Ex. 1 to 17, Barker's testimony)
The policy does not provide that the insurer shall be required to represent the insured in any suit filed against the insured, but it contains instead the following provision:
"This Company shall have the option of naming the attorneys who shall represent the assured in the prosecution or defense of any litigation or negotiations between the assured and third parties concerning any claim covered by this policy, and shall have the direction of such litigation or negotiation."
We have examined the case of Cayard v. Robertson & Hobbs, 123 Tenn. 382, 131 S.W. 864 (1910), cited by complainant's counsel and find it has no application to the instant case.
Therefore, we have concluded that the policy upon which recovery is sought here is one of indemnity rather than one insuring against liability.
In several Tennessee cases, recovery has been awarded in favor of the insured and against the insurer for amounts in excess of policy limits of liability insurance policies. Southern Fire & Gas Co. v. Norris, 35 Tenn. App. 657, 250 S.W.2d 785 (1952); Tennessee Farmers Mutual Ins. Co. v. Hammond, 43 Tenn. App. 62, 306 S.W.2d 13 (1957).
However, it appears that recovery in such cases for amounts in excess of policy limits has been grounded upon the principles that an insurer assuming under its policy to control litigation against the insured must act in good faith and with reasonable diligence and caution; that the relationship between such an insured and his insurer under a liability policy is one of trust calling for reciprocity of action in that the insured owes the duty of full cooperation and the insurer owes the duty of exercising good faith and diligence in protecting the interest of its insured.
Since the policy under consideration here is one of indemnity and not a policy of liability insurance, such as the standard policy of liability insurance issued to owners and operators of motor vehicles, no obligation arises on the part of the insurance company under such an indemnity policy to defend the suit against the insured and no relationship of trust arises requiring the insurer to exercise any function in protecting the interest of its insured, except to reimburse the insured for loss sustained and paid by the insured, provided such loss is covered by the terms of the policy of indemnity.
In the instant case, counsel selected by the insured had control of the litigation and the negotiations for settlement and therefore, no obligation rested upon the insurer to protect the insured against such loss, other than to indemnify and reimburse him upon payment of such loss.
It is argued that under the language of the policy, the insurer had the direction of the litigation and negotiations and reference is made to the following language of the policy: "and shall have the direction of such litigation or negotiations."
However, this language is part of a single sentence, which we have heretofore quoted in its entirety. The language is not ambiguous and it simply means that if the insurer exercises its option of naming the attorneys who shall represent the insured in the litigation or negotiations between the insured and third parties concerning any claim covered by the policy, then in that event, the insurer shall have the direction of such litigation or negotiations.
There is also some competent evidence in the record as to the customary practice in handling claims arising under Marine Indemnity policies such as that under consideration here. Mr. Quinlan qualified as an *96 expert on marine insurance and he testified as follows:
"Q. You mean it's the usage and custom to leave it up to the insured to defend his own case, handle his own case, defend it and then apply to the company for indemnification?
A. The assured selects his own counsel. The insurer probably is aware of whom he is selecting. If the assured selects counsel to represent him that is knowledgeable in marine and defense work, the insurer doesn't do a thing, but if the assured picks some relative or friend or someone whom he'd like to earn a fee, who knows nothing about marine, the insurance company will say, `We want you to retain so and so.' The insurance company won't retain the counsel. They will tell the assured to retain certain counsel as its counsel. They have the option of naming the counsel that the assured shall retain. If our firm or one of the big marine defense firms in the city is named, none of the insurance companies ever exercises the option.
Q. So then it is the practice, usage and custom to give full effect to the policy language and leave it to the insured to defend the claim against him, to settle it or if he tries it and loses it, in either event then to call upon the company for a reimbursement and indemnifification?
A. At that point. When the matter is all concluded, then the assured makes up a statement which would contain all expenses that he has expended, what he may have paid in settlement or by way of settlement or by way of counsel fee amount like and submit it to the company for reimbursement."
(Dep. of John L. Quinlan, pp. 47, 48)
Mr. Richard M. Noack, also qualified as an expert on marine insurance and he testified as follows:
"Q. But now as a claim agent, briefly what did you do for the steamship company?
A. I settled all major claims, personal injuries, cargo collision, mail, anything that came along that looked like a claim plus safety work, a knowledge of the insurance arrangements that the company had.
Q. Even where the company was insured, would you settle the claims and call upon the company to reimburse or indemnify you?
A. Yes, we settled the claims in the first instance just as if we were uninsured unless the amounts for insurance I would get approval to lay the groundwork for recovery claim against them.
Q. Was that unusual with you or was that then the established practice and usage in the marine industry?
A. I would say it was general practice."
(Dep. Richard M. Noack, pp. 101, 102)
Therefore, we have concluded that it was error for the Chancellor to enter a decree against the defendants for the entire amount of the judgment obtained against Haun in United States District Court, together with expense of litigation.
Each party insists that the other had an opportunity to settle the Keymon case for $25,000.00, but after considering the evidence in the record on this aspect of the case, about the only conclusions we can reach from such evidence are as follows:
(1) That at one time, Keymon's counsel said they would be willing to recommend that their client settle his claim for $25,000.00 and, (2) there was some discussion between Mr. Quinlan and a representative of another insurance company that carried Haun's Longshoremen's insurance about settling the Keymon case for $25,000.00 with each insurer paying one-half of such amount, provided it could be settled, but the other insurer refused to participate in such proposed settlement.
There is no evidence that Keymon's counsel ever recommended to him that he *97 settle for $25,000.00 or that he ever agreed to settle for that amount or for any specific amount.
Consequently, we have concluded there is no merit in the contention of either of the parties that the other had the opportunity to settle the Keymon case for $25,000.00.
Defendants insist that the complainant is judicially estopped to assert that it was his intention for the River Protection Indemnity Policy to cover the Luchow crew while the vessel was docked at the Nashville Bridge Company and counsel refer to certain testimony of Haun in the trial of the Keymon case in United States District Court.
We have considered this testimony and when it is considered by us in the light of all the facts and circumstances of the case and the evidence which was presented upon the trial of this case in the Chancery Court, we do not conclude that Haun, by his testimony in the trial of the Keymon case, estopped himself to claim coverage under the River Protection and Indemnity Policy.
As we have heretofore said, we consider the letter written by Magenheimer to Haun on September 20, 1961, which is hereinbefore quoted in its entirety, to be an unqualified agreement to indemnify Haun and therefore, the defendant is liable to complainant for the full amount of the policy limits of $51,500.00 after subtracting the deductible amount of $250.00 from such policy limits.
However, we do not agree with the Chancellor's conclusion that the complainant is entitled to recover a statutory penalty under the terms and provisions of T.C.A. § 56-1105 which is as follows:
"56-1105. Additional liability upon insurers for failure to pay promptly insurance losses when refusal is not in good faith. A. The insurance companies of this state, and foreign insurance companies and other persons doing an insurance business in this state, in all cases when a loss occurs and they refuse to pay the same within sixty (60) days after a demand shall have been made by the holder of the policy on which said loss occurred, shall be liable to pay the holder of said policy, in addition to the loss and interest thereon, a sum not exceeding twenty-five per cent (25%) on the liability for said loss; provided, that it shall be made to appear to the court or jury trying the case that the refusal to pay said loss was not in good faith, and that such failure to pay inflicted additional expense, loss, or injury upon the holder of said policy; and, provided, further, that such additional liability within the limit prescribed shall in the discretion of the court or jury trying the case, be measured by the additional expense, loss, and injury thus entailed.
B. In any action against an unauthorized foreign or alien insurer upon a contract of insurance issued or delivered in this state to a resident thereof or to a corporation authorized to do business therein, if the insurer has failed for thirty (30) days after demand prior to the commencement of the action to make payment in accordance with the terms of the contract, and it appears to the court that such refusal was vexatious and without reasonable cause, the court may allow to the plaintiff a reasonable attorney fee and include such fee in any judgment that may be rendered in such action. Such fee shall not exceed twelve and one-half per cent (12 1/2%) of the amount which the court or jury finds the plaintiff is entitled to recover against the insurer, but in no event shall such fee be less than twenty-five dollars ($25.00). Failure of an insurer to defend any such action shall be deemed prima facie evidence that its failure to make payment was vexatious and without reasonable cause."
It will be noted that under the provisions of subsection "A" of this Section an essential prerequisite to imposition of the penalty is the provision that "in all cases when a loss occurs and they refuse to pay the same *98 within sixty (60) days after a demand shall have been made by the holder of the policy on which said loss occurred."
This sub-section obviously has no application to the facts of the instant case since, within less than thirty days after Haun made demand upon the defendant to pay the judgment in the Keymon case, defendants' counsel sent him a draft in the amount of $51,250.00, which, in our opinion, constituted the entire obligation of the defendant to Haun at that time.
Haun refused to accept this draft and returned it and therefore, the complainant is in no position to seek recovery of the twenty-five per cent penalty.
Neither is sub-section "B" of the foregoing Code Section applicable so as to invoke imposition of a twelve and one-half per cent penalty, because of the fact that the defendant offered to pay Haun within less than thirty days after demand for payment.
Consequently, we hold that it was error for the Chancellor to award a recovery of any penalty under T.C.A. § 56-1105.
After a consideration of all of the facts and circumstances appearing in the evidence in this case and the legal authorities cited by counsel for the respective parties, we have concluded that the Chancellor's decree should be modified and a judgment should be entered here in favor of complainant and against the defendant, Hartford, for the sum of $51,250.00 together with interest from March 27, 1962, which is the date upon which Haun paid the judgment rendered against him in the Keymon case.
Assignments of error numbered one, two, four and ten are overruled. Assignments numbered five, six, seven, eight and nine are sustained. That portion of assignment numbered three wherein the defendant insists that the Chancellor erred in finding and holding the defendant liable on any contractual basis is overruled, but that portion of such assignment three insisting that the Chancellor erred in holding the defendant liable for lack of good faith is sustained.
A judgment will be rendered here for the sum of $51,250.00 plus interest in the amount of $23,062.50, thus making a total of $74,312.50, for which judgment will be rendered here in favor of complainant and against defendant Hartford Fire Insurance Company, together with all costs incurred in the Chancery Court.
The costs of this appeal will be borne equally by the parties, that is the complainant will pay one-half thereof and the defendant Hartford Fire Insurance Company, will pay the other one-half thereof.
SHRIVER, P.J., and TODD, J., concur.
OPINION ON PETITION TO REHEAR
PURYEAR, Judge.
The defendant has filed a very earnest petition to rehear in which it insists that it should be relieved of the burden of paying interest on $51,250.00 of the amount awarded to complainant, since this amount was tendered to complainant on April 20, 1962, which was less than thirty days after Haun paid the judgment rendered against him by the United States District Court and affirmed by the Circuit Court of Appeals.
It is correct, as we stated in our original opinion, that on or about April 20, 1962, defendant's counsel sent Haun a draft for $51,250.00, which was returned by him to the defendant. However, Haun was demanding payment of $91,196.25 plus attorneys' fees and other costs and this demand was well known to defendant at the time it sent such draft to Haun.
The draft sent to him by defendant contained language, on the reverse side thereof, *99 which would make the acceptance and indorsement of such draft a full and complete release of Haun's entire demand. Therefore, the tender was conditional.
At no time thereafter did the defendant make an unconditional tender of said sum of $51,250.00 and neither did the defendant tender or offer to pay said sum into Court after suit was filed.
Generally speaking, a tender, in order to be effective, must be absolute and unconditional. Vol. 86, C.J.S. Tender § 32, pp. 573, 574; Sinard v. Harris, 2 Higgins 486.
In Ingold v. Phoenix Assur. Co., 230 N.C. 142, 52 S.E.2d 366, 8 A.L.R.2d 1439 (1949), the Supreme Court of North Carolina said:
"It is the universal rule that in order to constitute a valid and effectual tender of money admitted to be due, the party who makes it must allege and show that since the refusal to accept the money he has always been ready to pay the same, and must bring the amount of the tender into court."
Supra, 52 S.E.2d at p. 370, 8 A.L.R.2d at p. 1444.
Defendant cites Gracy v. Potts, 63 Tenn. 395, in support of its insistence that it was not necessary to tender said sum of $51,250.00 into Court, but that question was apparently not raised in that case, because it is not discussed in the opinion.
Also in that case the tender made before suit was unconditional and was made in confederate money in 1862, at which time no objection was made to this currency. The tender was refused because plaintiff was in the army and did not need the money. When suit was brought in 1865 for United States money it would have been idle ceremony to keep the original tender alive by paying confederate currency into Court, because it was worthless. So Gracy v. Potts, supra, is not controlling.
Defendant also cites Tenn. Farmers Mutual Ins. Co. v. Cherry Admr. (1963), 213 Tenn. 391, 374 S.W.2d 371, to which we referred in our original opinion.
We stated in our original opinion that the Cherry case was not applicable to the instant case. After reconsidering that case we do not consider the holding therein as supporting the defendant's insistence that it is not liable for interest.
The holding in Pennsylvania Lumbermens Mut. Fire Ins. Co. v. Holt, (1949), 32 Tenn. App. 559, 223 S.W.2d 203, seems to settle the question of defendant's liability for interest in this case. The opinion in Holt, supra, applied to three consolidated cases, which involved liability of the defendant, Pennsylvania Lumbermens Mut. Fire Ins. Company to the plaintiffs, Thomas M. Holt and Mrs. E.L. Holt, upon three contracts of fire insurance. One of the questions raised therein was liability of the insurance company for interest. In disposing of that question, this Court, in an opinion by the late Judge Howell, said:
"The defendant also insists that it is not liable for interest. It claims a tender before the suit was filed and filed a plea of tender and paid that amount into court with its plea. We find that this tender was not unconditional in that the amount was tendered in full settlement of the liability of the defendants under all the contracts sued upon. This tender was not sufficient to avoid liability for interest. In the case of Phoenix Ins. Co. v. Jordan et al., 28 Tenn. App. 11 on page 29, 184 S.W.2d 721, on page 728, in an opinion by Hickerson, Judge, this Court said:
`There remains only the question of the allowance of interest. Code, Section 7305 provides: "Demands bearing interest. All bonds, notes, bills of exchange, and liquidated and settled accounts, *100 signed by the debtor, shall bear interest from the time they become due, unless it is expressed that interest is not to accrue until a specific time therein mentioned."
`Under this section courts are compelled to allow interest in all cases which come within its terms. Nickey Bros. v. Lonsdale Mfg. Co., 149 Tenn. 391, 258 S.W. 776. In People's Bank & Trust Company v. United States Fidelity & Guaranty Company, 156 Tenn. 517, 3 S.W.2d 163, 164, our Supreme Court said: "A policy of life insurance falls within this section and bears interest from the time it becomes due and payable. The allowance of interest is imperative. Knights of Pythias v. Allen, 104 Tenn. 623, 58 S.W. 241. Fire insurance policies, accident insurance policies, and other insurance contracts proper would come under this section of the Code."'"
The $51,250.00 was due immediately after Haun paid the judgment and during all of this period of time from April 20, 1962, until the present date, the defendant has retained the use of said sum of money, whereas, if it had been paid into Court within a reasonable time after suit was instituted, such sum would have been earning interest, which interest would have been awarded to complainant upon final termination of the litigation.
It is indeed surprising, in these days of high interest rates, that the defendant would complain about paying six percent interest on this sum of money which it has been permitted to retain all of this time.
After carefully considering said petition to rehear, the brief and argument filed in support thereof, and the authorities cited, the petition is respectfully denied.
SHRIVER, P.J., and TODD, J., concur.
NOTES
[*] This reference is to the suit in Chancery to reform the policy and does not refer to the instant case.
|
660 P.2d 1284 (1983)
The PEOPLE of the State of Colorado, Plaintiff-Appellant,
v.
John Otis TURNER, Defendant-Appellee.
No. 82SA554.
Supreme Court of Colorado, En Banc.
March 28, 1983.
*1285 Paul Q. Beacom, Dist. Atty., Steven L. Bernard, Chief Trial Deputy, Brighton, for plaintiff-appellant.
Richard B. Deutsch, Denver, for defendant-appellee.
NEIGHBORS, Justice.
This is an interlocutory appeal of the trial court's ruling suppressing evidence seized pursuant to a search warrant. We affirm in part and reverse in part the order of suppression.
During the month of February 1981, police officers in the Lakewood Department of Public Safety received information from a "previously reliable source" that a number of persons, including the defendant, were involved in illegally manufacturing, selling, and distributing methamphetamine. On March 17, 1982, more than one year later, Agent Albert Keller from the Lakewood Department of Public Safety drove past the defendant's residence located at 2264 Elmira Street in Aurora, Colorado. Agent Keller observed the defendant standing outside his residence in the company of a person known to him as Oral Ray Van-Hook, III. Agent Keller knew both the defendant and VanHook from prior police contacts involving illegal drug activities. For reasons that are unclear from the record, *1286 surveillance of the defendant's residence began sometime prior to 9:00 p.m. on March 17, 1982. Special Agent Patrick Fagan of the Drug Enforcement Administration was one of the officers assigned to assist in the surveillance of the defendant's house.
At approximately 9:00 p.m., Agent Keller was awakened at home. He was asked to begin drafting an affidavit in support of a request for a search warrant. Agent Keller went to a sub-office used by the Lakewood Department of Public Safety located at 1605 Yarrow Street in Lakewood, Colorado where he arrived at approximately 9:20 p.m.
Agents Fagan and Keller were informed by surveillance officers that numerous persons and vehicles were observed coming and going from the Elmira Street residence. The officers believed that the unusual level of activity was consistent with drug dealing. Agent Fagan recognized one of the vehicles parked in front of the residence as belonging to Michael Allison. Fagan was familiar with Allison as a "known and convicted methamphetamine trafficker."
At approximately 9:50 p.m., Agent Fagan walked down the alley behind the Elmira Street house. As he walked past the unattached two-story garage located to the rear of the Elmira Street residence, he smelled a very distinct odor, which he associated with the manufacture of methamphetamine, emanating from the garage. He saw that one of the windows was encased in plastic. From his training and experience, Agent Fagan knew that plastic is placed in windows to prevent the odors associated with the manufacture of methamphetamine from escaping. Agent Fagan relayed this information to Agent Keller.
At approximately 10:00 p.m., Allison left the residence in his vehicle. The police made the decision to arrest Allison because they believed that a methamphetamine laboratory was located in the garage and that Allison may have been removing evidence or contraband from the premises. Uniformed officers from the Aurora Police Department stopped Allison several blocks from the Elmira Street location, after he was out of the sight of persons present in the house. Allison and his vehicle were searched by the police who found no evidence of illegal drug activity. However, Allison was arrested on a warrant issued by the Aurora Municipal Court for failure to appear on a traffic charge. The officers believed that no one in the Elmira Street house had observed either the arrest of Allison or the ongoing surveillance.
After Allison was arrested, Agents Keller and Fagan and other officers decided that the surveillance officers should enter the house and the garage and secure the premises until Agent Keller could complete the affidavit and obtain the search warrant. The officers testified that the only reason they entered the garage and the house was because they feared that if Allison did not return, the occupants of the house might be alerted to Allison's arrest and then remove evidence from the house and garage.
The officers entered the house and garage shortly after 10:00 p.m. They arrested the occupants, including the defendant who was in the garage. According to statements made by respective counsel during their arguments on the motion to suppress evidence, drugs and money were seized from the defendant's pockets incident to his arrest.
In order to insure that no one was on the second floor of the garage, Special Agent Dick Barter from the Drug Enforcement Administration climbed a ladder up to that floor. He observed glassware, laboratory equipment, and chemicals which he knew were used in the manufacture of methamphetamine.
Agent Keller completed the affidavit and took it to a judge who issued the search warrant shortly after midnight. At approximately 1:00 a.m., the officers searched the house and garage at 2264 Elmira Street and seized items as evidence.
The defendant filed a motion to suppress the evidence. At the conclusion of the hearing held on November 10, 1982, the trial court denied the motion, finding that *1287 there were exigent circumstances justifying the warrantless entry into the house and that the affidavit established probable cause to support the search warrant which was issued. However, the trial judge reversed his earlier ruling on November 12, 1982, and entered a written order granting the defendant's motion to suppress all the evidence seized from the Elmira Street property. The court found there were no exigent circumstances justifying the warrantless entry by the police into the house or the garage. It is from this order of suppression that the People have appealed.
I.
There are two searches involved in this case. The first search occurred on March 17, 1982, when the police entered the house and garage without a warrant to secure both premises until a search warrant could be obtained. The second search of the house and garage occurred on March 18, 1982, when the police searched the premises pursuant to a search warrant.
A warrantless search is presumed to violate the constitutional provisions forbidding unreasonable searches.[1]Chimel v. California, 395 U.S. 752, 89 S.Ct. 2034, 23 L.Ed.2d 685 (1969); People v. Casias, 193 Colo. 66, 563 P.2d 926 (1977). The burden of proof is always upon the People to establish that the search falls within the limits of a well-recognized exception to the warrant requirement. People v. Williams, 200 Colo. 187, 613 P.2d 879 (1980). Exigent circumstances necessitating immediate police action justify warrantless searches and seizures. Michigan v. Tyler, 436 U.S. 499, 98 S.Ct. 1942, 56 L.Ed.2d 486 (1978); People v. Barndt, 199 Colo. 51, 604 P.2d 1173 (1980). Absent exigent circumstances, an arrest in a suspect's home must be pursuant to an arrest warrant. Payton v. New York, 445 U.S. 573, 100 S.Ct. 1371, 63 L.Ed.2d 639 (1980); McCall v. People, 623 P.2d 397 (Colo.1981); People v. Williams, supra. The prosecution must establish the existence of both probable cause and exigent circumstances to justify a warrantless entry, arrest, and search. People v. Bustam, 641 P.2d 968 (Colo.1982).
A.
It is undisputed that the police entered the residence and garage located at 2264 Elmira Street without a warrant and arrested and searched the defendant. The first issue presented is whether there was probable cause to believe that a crime was occurring on the premises. In People v. Thompson, 185 Colo. 208, 523 P.2d 128 (1974), we stated:
"An officer has probable cause when the facts and circumstances within his knowledgeor upon which he has reasonably trustworthy informationare sufficient to warrant a reasonably prudent man in believing that the person to be searched or arrested has committed or is committing an offense."
185 Colo. at 212, 523 P.2d 128. In applying the test to the facts in this case, we agree with the finding of the trial court that probable cause existed to believe that crimes were being committed in the residence and in the garage. The facts which establish probable cause are these: (1) the presence of persons known to the police to be involved in methamphetamine traffic; (2) the unusual number of persons seen coming and going from the residence; (3) the presence of an odor associated with the manufacture of methamphetamine emanating from the garage; and (4) the presence of plastic around the window to prevent the odor from escaping.
The trial court found that no exigent circumstances existed justifying the warrantless entry. We agree.
The threat of immediate destruction or removal of evidence is an exigent circumstance justifying a warrantless search. People v. Bustam, supra; People v. Gomez, 632 P.2d 586 (Colo.1981), cert. denied, 455 U.S. 943, 102 S.Ct. 1439, 71 L.Ed.2d 655 (1982); McCall v. People, supra. However, the People must demonstrate an *1288 articulable basis on the part of the police to justify a reasonable belief that evidence is about to be removed or destroyed. United States v. McLaughlin, 525 F.2d 517 (9th Cir.1975), cert. denied, 427 U.S. 904, 96 S.Ct. 3190, 49 L.Ed.2d 1198 (1976); State v. Dorson, 62 Hawaii 377, 615 P.2d 740 (1980). To justify a warrantless entry and seizure on the basis of destruction of evidence, the perceived danger must be real and immediate. The question is whether there is a real or substantial likelihood that the contraband or known evidence on the premises might be removed or destroyed before a warrant could be obtained. The mere fact that the evidence is of a type that is easily destroyed, does not, in and of itself, constitute an exigent circumstance. Vale v. Louisiana, 399 U.S. 30, 90 S.Ct. 1969, 26 L.Ed.2d 409 (1970).
The People contend that this case is controlled by our decision in People v. Bustam, supra. We disagree. The facts in this case are distinguishable. In Bustam, a drug buyer was overheard by the police to say that he would return promptly to the defendant's apartment. The drug buyer was arrested. In this case there is nothing but the vaguest suspicion by the officers that Allison's failure to return to the Elmira Street residence would alert the defendant to Allison's arrest and result in the removal or destruction of evidence. Nor does this case involve the situation where the defendant and his confederates observed the police watching them engage in criminal conduct. People v. Gomez, supra. Accordingly, we decline to extend the Bustam rationale to this case. We, therefore, conclude that the warrantless entry by the police into the defendant's residence and garage when no exigent circumstances existed constituted an unreasonable search in violation of the defendant's constitutional rights under the United States and Colorado Constitutions.
B.
Although the testimony does not clearly establish that the defendant was searched incident to his arrest following the warrantless entry by the police into the garage, the arguments of counsel indicate such was the case. It is, therefore, necessary to resolve the issue in this appeal.
No extensive discussion is required. The police officers were unlawfully in the garage when they arrested the defendant because no exigent circumstances were present. The defendant was illegally arrested. Therefore, any evidence seized from him must be suppressed. Mapp v. Ohio, 367 U.S. 643, 81 S.Ct. 1684, 6 L.Ed.2d 1081 (1961).
II.
We now turn to a discussion of the issues raised by the search of the defendant's house and garage pursuant to the search warrant. In analyzing a case in which there was an initial illegal search by the police followed by a search pursuant to a warrant, the court must determine whether the second search was tainted by the illegality of the first search. If there is clear and convincing evidence that the second search was conducted pursuant to a warrant based on information obtained before the illegal warrantless search, then the evidence would have been derived from a source independent of the initial illegality and should not be suppressed. E.g. United States v. Crews, 445 U.S. 463, 100 S.Ct. 1244, 63 L.Ed.2d 537 (1980); Harrison v. United States, 392 U.S. 219, 88 S.Ct. 2008, 20 L.Ed.2d 1047 (1968); Wong Sun v. United States, 371 U.S. 471, 83 S.Ct. 407, 9 L.Ed.2d 441 (1963); People v. Barndt, supra; People v. Hannah, 183 Colo. 9, 514 P.2d 320 (1973). Therefore, we are required to determine whether the sufficiency of the affidavit[2] submitted in support of the request for the warrant which authorized the search of the defendant's house and garage clearly and convincingly establishes an independent basis for the second search.[3]
*1289 The parties agree that paragraph 1 of the affidavit does not meet the requirements of either prong of the Aguilar[4]-Spinelli[5] test because the reliable source is not identified. First, the alleged facts which caused the informant to conclude that criminal activity was taking place are not set forth in the affidavit. Second, the facts stated in the affidavit do not establish that the informant is reliable. The mere assertion of reliability is insufficient. People v. Aragon, 187 Colo. 206, 529 P.2d 644 (1974). At the hearing on the motion to suppress evidence, Agent Keller identified the informant as Susan Sutton. However, the sufficiency of the affidavit must be determined from its four corners. Spinelli v. United States, supra; People v. Padilla, 182 Colo. 101, 511 P.2d 480 (1973); People v. Goggin, 177 Colo. 19, 492 P.2d 618 (1972). The People may not supplement the contents of a warrant by presenting evidence at the hearing on the motion to suppress. People v. Brethauer, 174 Colo. 29, 482 P.2d 369 (1971). Therefore, paragraph 1 may not be considered in determining the sufficiency of the affidavit.
The first portion of paragraph 2 of the warrant is based on the police officer-affiant's personal observations. A common sense reading of the remainder of paragraph 2 leads a reasonable person to conclude that the information contained in the affidavit is taken from police records. United States v. Ventresca, 380 U.S. 102, 85 S.Ct. 741, 13 L.Ed.2d 684 (1965); People v. Lindholm, 197 Colo. 270, 591 P.2d 1032 (1979); People v. Whisenhunt, 173 Colo. 109, 476 P.2d 997 (1970). While some of the information is inaccurate, it nonetheless establishes that two of the three named individuals are suspected by the police of being connected with illegal activity involving methamphetamine.
The source of the information contained in paragraphs 3 through 7 is not identified. At the hearing on the motion to suppress, Agent Keller testified that the information was provided to him by surveillance officers as he monitored their conversations on the evening of March 17, 1982. A common sense reading of those paragraphs clearly indicates that fellow officers provided the information to Agent Keller. People v. Henry, 631 P.2d 1122 (Colo.1981); People v. Quintana, 183 Colo. 81, 514 P.2d 1325 (1973).
A different problem is presented by the last sentence of paragraph 7. That information was obtained directly as a result of the first search which we have found to be in violation of the defendant's constitutional rights. Therefore, the last sentence of paragraph 7 may not be considered in determining the sufficiency of the affidavit.
The remaining statements in the affidavit contain the facts enumerated in Section I.A. of our opinion which we have determined rise to the level of probable cause. See People v. Hampton, 196 Colo. 466, 587 P.2d 275 (1978); People v. Malone, 175 Colo. 31, 485 P.2d 499 (1971). Therefore, the affidavit establishes probable cause for the second search.
One additional issue remains to be decided. The record does not contain the return and inventory of the items seized pursuant to the warrant. Nor is there any testimony as to what evidence was seized. Presumably, the glassware, laboratory equipment, and chemicals observed in plain view by Agent Barter were among the items seized. As required by our decision in People v. Barndt, supra, any evidence found in plain view during the initial illegal entry must be suppressed because the police were not lawfully and legitimately on the premises.[6]Coolidge v. New Hampshire, 403 U.S. *1290 443, 91 S.Ct. 2022, 29 L.Ed.2d 564 (1971); People v. Gurule, 196 Colo. 562, 593 P.2d 319 (1978). However, evidence discovered for the first time during the search conducted pursuant to the warrant was properly obtained in compliance with constitutional requirements.
III.
The order of suppression entered by the trial court is affirmed in part and reversed in part.
APPENDIX A
"Agent Albert D. Keller, Lakewood Department of Public Safety
(Affiant)
being first duly sworn, upon his oath relates the following facts:[*]
[1]
During the month of February, 1981, your affiant received information from a previously reliable source who identified numerous persons involved in the illegal manufacture sales or distribution of methamphetamine, a controlled substance. Some of the persons identified are John Otis Turner, Oral Ray VanHook III and Michael Allison.
[2]
On March 17, 1982, at approximately 1300 hours, your affiant drove past the residence of John Otis Turner, 2264 Elmira Street, Aurora, Adams County, Colorado. Your affiant observed a subject recognized by your affiant as Oral Ray VanHook III. Van-Hook was standing in front of the residence with a subject recognized as John Turner. The following information is known about the aforementioned subjects:
1) Turner, John Otis
DOB: 1-18-52
FBI#: 639968K3
Address: 2264 Elmira Street, Aurora,
Colorado
SSN: XXX-XX-XXXX
Described as a white male, 5-10 tall, 160 pounds, brown hair and brown eyes Criminal History: On February 23, 1978, Turner was arrested at his home, 2264 Elmira St. Aurora, Colorado by the Aurora Police Department. Turner was charged with manufacturing methamphetamine, a controlled substance. Turner has been arrested on two other occasions for drug violations.
2) VanHook, Oral Ray III
DOB: 3-13-47
FBI#: 706528N
Address: Unknown
Described as a white male, 6-1 tall, 200 pounds, brown hair, blue eyes Criminal History: Ray VanHook's arrest record dates back to December 18, 1970, when he was arrested for burglary and theft. His record consists of numerous thefts, assault with a deadly weapon, criminal extortion, felony menacing and escape from the Colorado State Penintentiary [sic].
Additional: Ray VanHook is married to Linda Marie VanHook, DOB: 10-15-46. Linda VanHook has prior arrests for conspiracy and sale of methamphetamine. Ray VanHook was in the company of Linda VanHook during narcotic transactions.
3) Allison, Michael Arthur
DOB: 9-11-53
Address: 2325½ West Warren Avenue,
Englewood, Colorado
FBI#: 41956J2
Described as a white male, 6-3 tall, 195 pounds, blond hair and blue eyes
Criminal History: Allison has numerous arrests dating back to 1971. He has numerous prior charges of possession, use and sales of methamphetamine. On April 16, 1980, charges were filed in Arapahoe District Court against Mike Allison for manufacturing methamphetamine.
*1291 [3]
During the evening hours of March 17, 1982, Agents of the Lakewood Department of Public Safety and the United States Drug Enforcement Administration (DEA) established surveillance in the area of 2264 Elmira Street, Aurora, Colorado. The agents observed a 1979 Pick-up truck, white and green in color, displaying Colorado Recreational Truck license phates [sic] PH-3996, parked in front of the house. The Colorado Department of Revenue lists the above license plate to Michael A. Allison, 4700 South Kalamath Street, Englewood, Colorado.
[4]
At approximately 2130 hours, Special Agent Keith Clements of the Drug Enforcement Administration and Detective John Howe of the Aurora Police Department walked through the alley behind 2264 Elmira Street. The officers observed plastic covering the windows of a two story garage located behind the house. Special Agent Keith Clements smelled a strong chemical odor of methamphetamine. From your affiants [sic] prior training and experience and based on being a narcotics violations investigator for the past 4½ years, your affiant knows that covering windows with plastic is a method used by manufacturers of illegal methamphetamine to reduce the odors eminating [sic] from clandestine laboratories.
[5]
At approximately 2150 hours, Special Agent Patrick Fagan of the Drug Enforcement Administration walked through the alley behind 2264 Elmira Street. Agent Fagan has been working in the clandestine laboratory group out of the Denver, Colorado office of the Drug Enforcement Administration for approximately six years. Agent Fagan is a qualified expert witness in Federal District Court for the smell of methamphetamine during its manufacturing processes. Agent Fagan concurred with the suspicions of Special Agent Clements that in fact the odors being emitted from the garage behind 2264 Elmira Street, were in fact methamphetamine in the process of being manufactured.
[6]
While the agents maintained surveillance on the residence, numerous vehicles arrived and departed. Occupants of those vehicles went into 2264 Elmira Street and departed the area. A volume of activity to and from a location coincides with established patterns for drug dealing.
[7]
At approximately 2200 hours, March 17, 1982, Lakewood Agent Bob Forrest observed Michael Allison leave the residence at 2264 Elmira Street and enter his 1979 Chevrolet truck. Agents of the Drug Enforcement Administration and officers of the Aurora Police Department initiated a stop on Allison's vehicle at East 25th avenue [sic] and Elmira Street. Michael Allison was detained as additional units secured the residence and occupants at 2264 Elmira Street pending issuance of a search warrant. Michael Allison and his vehicle returned to 2264 Elmira Street. While securing subjects at the house and detached garage, agents observed numerous items of laboratory equipment and glassware and chemicals consistent with the illegal manufacture of methamphetamine.
[8]
Your affiant respectfully requests the issuance of a search warrant for 2264 Elmira Street, City of Aurora, County of Adams, State of Colorado AND a 1979 Chevrolet Pick-up truck, white and green in color, displaying Colorado Recreational Truck license plates PH-3996, located on Elmira Street in front of 2264 Elmira Street City of Aurora, County of Adams, State of Colorado. Material evidence will be found and used in a subsequent prosecution in this state for violations of the Colorado Controlled Substances Act as set forth in section 18-18-105, CRS 1973, as amended."
NOTES
[1] U.S. Const. amend. IV; Colo. Const. art. II, sec. 7.
[2] The body of the affidavit appears as Appendix A to this opinion.
[3] This case does not involve an initial "pretext" entry or search. Nor has the defendant made such an argument. The police entered the premises based on a colorable claim that exigent circumstances existed. A judicial determination that there were, in fact, no exigent circumstances does not per se taint a subsequent search and/or seizure conducted pursuant to a warrant.
[4] Aguilar v. Texas, 378 U.S. 108, 84 S.Ct. 1509, 12 L.Ed.2d 723 (1964).
[5] Spinelli v. United States, 393 U.S. 410, 89 S.Ct. 584, 21 L.Ed.2d 637 (1969).
[6] The trial court will be required to hold a further evidentiary hearing to determine which items of evidence should be suppressed in accordance with this opinion.
[*] Describe the property to be seized in specific detail. Describe the premises or vehicle to be seized in specific detail. Establish facts to show the property is seizable under Rule 41, and 16-3-301.
|
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|
537 U.S. 905
RODRIGUEZv.TRISTAN.
No. 02-5280.
Supreme Court of United States.
October 7, 2002.
1
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT.
2
C. A. 9th Cir. Certiorari denied. Reported below: 18 Fed. Appx. 564.
|
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